Oman: Two LNG Companies Merge

The Sultanate’s liquefied natural gas industry entered a new era on September 1st assuming a bolder, more unified front with the fusion of the country’s only two liquefied natural gas companies, Oman LNG and Qalhat LNG, into one fully integrated entity.

Unanimously approved by the shareholders of both formerly distinct corporations, Sunday marked the first day of formal functioning of the new unified structure.

The integration capitalises on a number of existing operational efficiencies and potent synergies such as production and export from common facilities at the three-train plant in Sur, one source of gas supply in Petroleum Development Oman (PDO), same shipping provider in Oman Shipping Company (OSC) and almost similar destinations of liquefied natural gas cargoes. It will also take advantage of the combined knowledge of highly skilled workforce in the country’s LNG industry and offer greater flexibility to deploy a larger portfolio of cargoes and vessels in the global liquefied natural gas market.

The fusion could well bump up revenue accruing to the nation from LNG exports by reducing cost of operations and offering better management of swaps and diversions of cargoes while maintaining a reliable supply of LNG cargoes to long-term buyers. Enhanced customer focus and care is also a paramount feature of the integrated entity.

Analysts’ are forecasting rising demand for liquefied natural gas in the coming years (the global LNG demand is forecast to double 2012 levels by 2020). Further, natural gas is also expected to replace coal as the second most important source of energy by 2040.

The integration brings together the strengths of the two companies, positioning the new entity to leverage on supply opportunities expected to come with projected growth demand in the global LNG industry. While Oman LNG’s business has emphasized the sale of its cargoes through long-term sales and purchase agreements (SPAs), Qalhat LNG is an active and successful player in swaps and diversions of LNG cargoes as well as long-term SPAs.

“The successful integration of Oman LNG and Qalhat LNG which formally begins today marks the commencement of a new era for our nation’s LNG industry.” said Minister of Oil and Gas and Chairman of Oman LNG, Dr. Mohammed bin Hamad Al Rumhy.

“Both companies have a solid track record of achievements in terms of reliable supply of LNG to our valued customers, high revenue generation for the country, contribution to social development and Omanisation of staff. As one solid entity, all stakeholders in the value chain can be assured that even greater value will be generated from the operations in the industry . Oman now has one face for LNG exports to the world and this news has been well received by the global markets,” he added.

Oman’s liquefied natural gas industry has grown out of the vision of His Majesty Sultan Qaboos bin Said to diversify the country’s economy and has attracted high revenue by harnessing natural gas resources for export as liquefied natural gas. The country produced its first shipment of liquefied natural gas in 2000 after the first of an initial two-train plant began operations under Oman LNG, established by His Majesty’s Royal Decree in 1994. With a third train under Qalhat LNG, liquefied natural gas has played an even greater role in contributing to the national economy as the two companies have worked intensely with outstanding success to drive their organisations forward.

Many say that vision has largely been realised with liquefied natural gas now the second largest income earner for the Sultanate, after oil revenues.

Oman LNG’s successful operations led to the incorporation of Qalhat LNG which was established in 2003. Qalhat LNG’s single train made up the third train of a three-train operation with a total nameplate capacity of 10.4 metric tonnes per annum (mtpa) capacity. Qalhat LNG sent off its own first cargo of liquefied natural gas in December 2005.

“This is an exciting time for our country’s LNG industry and I am happy that this is happening after much careful and thorough planning, and consideration from shareholders of both companies. Both Qalhat and Oman LNG stakeholders will derive much more value from the unified, holistic front for liquefied natural gas exports in the new integrated company,” said Nasser bin Khamis Al Jashmi Under Secretary at the Ministry of Oil and Gas and Chairman of Qalhat LNG.

With key buyers in Asia and Europe, both companies have run efficiently and reliably since their respective start-up of operations and last year generated a combined pre-tax revenue of over US5 billion. At the end of July this year, a combined 1,619 cargoes of LNG have been exported from the country.

Beyond its direct contribution to revenue, the country’s two LNG companies have been pivotal to social development, executing a myriad of social investment initiatives that has triggered job creation and entrepreneurship, spread quality education and healthcare, encouraged women’s development and supported tourism, among others.

The integration promises a continuing strong and robust engagement with the community in Sur, home to the company’s plant operations. Sur has enjoyed many development initiatives executed as part of the LNG industry’s contribution to a better quality of life for people in the Sultanate.

“Day One of full integration between Oman LNG and Qalhat LNG is a milestone that heralds the preparedness of the country’s LNG industry to remain a key source of stable and reliable supply to all our customers in the gas market, a key source of revenue generation for Oman and its people and valuable contributor of sustainable growth to the many communities all across Oman that we serve through our many social investment programmes,” said Harib Al Kitani, Chief Executive Officer of Oman LNG, the operating name of the new entity.

“Today a new era has begun. An era of marching towards being the best at what we do combined with achieving excellence in every aspect of the LNG business. Staff of the two companies are excited to deliver what is expected and enhance our care and value to all our stakeholders,” he concluded.

The integrated company, Oman LNG, will operate from its two offices in Muscat: the Qalhat LNG property situated at Airports Heights, Ghala and the familiar Oman LNG building located in Shatti Al Qurum, from the first day of integration.

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LNG World News Staff, September 2, 2013; Image: Oman LNG