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  Gulf players secure future of LNG projects

  29 April 2024

  

   

  This package also includes: Region boosts LNG spending

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  Offtake agreements are crucial for producers of liquefied natural gas (LNG) to be able to reap long-term returns from their projects. 

  Traditionally, LNG has primarily been traded on the spot market, which, while beneficial to buyers, has left sellers with little profit.

  In order to justify the investments that they have committed to making on large-scale output expansion projects, Gulf LNG producers have been striving to strike long-term sales and purchase agreements (SPAs) with key customers around the world. 

  Scores of such supply deals have been struck by regional LNG producers in recent years – primarily by QatarEnergy, Oman LNG and Abu Dhabi National Oil Company (Adnoc) as they look to secure sustained returns on their project capital expenditure.

  Gulf LNG producers have been striving to strike long-term SPAs with key customers around the world

  Qatar LNG supply deals

  Qatar started delivering LNG to China in September 2009 and is estimated to have supplied approximately 80 million tonnes of LNG to the country to date.

  Qatar has worked to boost geopolitical and commercial relations with China, which is the world’s second-largest economy and one of the biggest markets for LNG consumption. The key long-term LNG SPAs that QatarEnergy has secured from Chinese companies, particularly since 2021, are a result of those improving bilateral relations.

  In March 2021, QatarEnergy won a 10-year contract with China’s Sinopec to supply 2 million tonnes a year (t/y) of LNG, with deliveries commencing in January 2022.

  QatarEnergy then signed a long-term SPA with CNOOC Gas & Power Trading & Marketing, a subsidiary of China National Offshore Oil Corporation (CNOOC), in October 2021. The deal involves supplying 3.5 million t/y of LNG to CNOOC over 15 years, starting in January 2022.

  Following that, in December 2021, QatarEnergy secured SPAs with two Chinese companies for the supply of 2 million t/y – 1 million t/y each to Guangdong Energy Group Natural Gas Company and S&T International, for periods of 10 and 15 years, respectively.

  QatarEnergy also signed another SPA with Sinopec in November 2022 for the supply of 4 million t/y of LNG from the North Field East (NFE) project for 27 years.

  In June 2023, QatarEnergy secured two major LNG supply deals with state-owned China National Petroleum Corporation (CNPC). The first deal is an SPA with CNPC to supply 4 million t/y of LNG for 27 years. As part of the second agreement, QatarEnergy transferred a 5% stake in its NFE LNG project to CNPC, which is the equivalent of one NFE train with a capacity of 8 million t/y.

  More recently, the Qatari state energy enterprise signed a major agreement with Sinopec to supply 3 million t/y of LNG for a period of 27 years. The LNG cargoes are to be sourced from QatarEnergy’s North Field South project. Under the terms of the agreement, QatarEnergy will also transfer a 5% interest to Sinopec in a joint venture company that owns the equivalent of
  6 million t/y of LNG production capacity in the North Field South project.

  Oman grows customer base

  Oman LNG has enjoyed significant success in some of the world’s largest LNG markets, winning deals with major consumers in those countries. Most recently, in April, the majority state-owned company secured three SPAs with Turkiye’s Botas Petroleum, Shell International Trading Middle East – the regional trading subsidiary of Shell – and Japan’s Jera. 

  Under these agreements, Oman LNG will deliver 1 million t/y, 1.6 million t/y and 800,000 t/y of LNG to its three customers, respectively.

  In addition, as well as having achieved the final investment decision on the Marsa LNG project in the sultanate with France’s TotalEnergies, Oman LNG has also signed an SPA with the French energy major to supply 800,000 t/y of LNG for a period of 10 years, starting in 2025. 

  Adnoc vies for market share

  Adnoc has yet to award final contracts for engineering, procurement and construction works on its planned Ruwais LNG terminal project in Abu Dhabi. However, the company has already secured SPAs for the supply of LNG from the project in the future.

  In March, Adnoc signed a heads of agreement with Germany’s SEFE Securing Energy for Europe for the supply of LNG that will primarily be sourced from its planned LNG export terminal in Ruwais. Adnoc will deliver 1 million t/y of LNG to SEFE Marketing & Trading Singapore, a subsidiary of the Berlin-headquartered SEFE, for a period of 15 years.

  The agreement with SEFE is the second long-term LNG supply agreement from the Ruwais LNG project. It followed the signing of a 15-year agreement with China’s ENN Natural Gas, which was inked in December 2023. Adnoc’s deliveries to ENN are expected to start in 2028, upon commencement of the facility’s commercial operations. 

   Region boosts LNG spending

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  Indrajit Sen
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  Region boosts LNG spending

  29 April 2024

  

   

  This package also includes: Gulf players secure future of LNG projects 

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  There has been a sharp rise in investment in projects aimed at expanding the production of liquefied natural gas (LNG) in the Gulf region since the start of this decade.

  A capital expenditure of close to $38bn has been made by Middle East and North Africa hydrocarbons producers in the past 10 years, mainly on projects to increase LNG output capacity, according to data from regional projects tracker MEED Projects.

  Almost three quarters of that spending has taken place in the past four years, and predominantly in the GCC.

  The rise in the importance of natural gas, and therefore LNG, as an energy transition fuel has led to strong growth in its demand worldwide. Global trade in LNG reached 404 million tonnes in 2023, up from 397 million tonnes in 2022, with tight supplies of LNG constraining growth, energy major Shell said in a recent report.

  Global LNG demand is expected to rise by more than 50% by 2040, as industrial coal-to-gas switching gathers pace in China and countries in south and southeast Asia use more LNG to support their economic growth.

  Gulf players are keen to cater to this growing demand and dominate the global supply market, fuelling a wave of investment in large-scale production-boosting projects and terminal construction schemes. 

  The total LNG production capacity of the GCC is expected to reach an estimated 200 million tonnes a year (t/y) by 2030, cementing the region’s position as the world’s largest LNG supplier.

  Taking the lead

  Qatar has been jostling with the US and Australia for the title of world’s largest LNG provider for many years. Each of these three producers have clinched the top spot at different points, only to be unseated by one of the others again.

  However, when its North Field LNG expansion starts to come online later in this decade, Qatar will be able to consolidate its position as the world’s largest producer and exporter of LNG in the long term.

  State enterprise QatarEnergy is understood to have spent almost $30bn on the two phases of the North Field LNG expansion programme, North Field East and North Field South, which will increase its LNG production capacity from 77.5 million t/y to 126 million t/y by 2028. Engineering, procurement and construction (EPC) works on the two projects are making progress.

  QatarEnergy awarded the main EPC contracts in 2021 for the North Field East project, which is projected to increase LNG output to 110 million t/y by 2025. The main $13bn EPC package, which covers engineering, procurement, construction and installation of four LNG trains with capacities of 8 million t/y, was awarded to a consortium of Japan’s Chiyoda Corporation and France’s Technip Energies in February 2021.

  QatarEnergy awarded the $10bn main EPC contract for the North Field South LNG project, covering two large LNG processing trains, to a consortium of Technip Energies and Lebanon-based Consolidated Contractors Company in May 2023.

  When fully commissioned, the first two phases of the North Field LNG expansion programme will contribute a total supply capacity of 48 million t/y to the global LNG market.

  And Doha is not stopping there. QatarEnergy announced a third phase of its North Field LNG expansion programme in February. To be called North Field West, the project will further increase QatarEnergy’s LNG production capacity to 142 million t/y when it is commissioned by 2030.

  The North Field West project will have an LNG production capacity of 16 million t/y, which is expected to be achieved through two 8 million t/y LNG processing trains, based on the two earlier phases of QatarEnergy’s LNG expansion programme. The new project will draw feedstock for LNG production from the western zone of Qatar’s North Field offshore gas reserve.

  Muscat moves up

  Oman has been supplying LNG to customers, mainly in Asia, for many years. Majority state-owned Oman LNG operates three gas liquefaction trains at its site in Qalhat, with a nameplate capacity of 10.4 million t/y. Due to debottlenecking, the company’s complex now has a production capacity of about 11.4 million t/y.

  France’s TotalEnergies has also committed to becoming a major LNG supplier in the sultanate. In partnership with state energy holding conglomerate OQ, TotalEnergies has achieved final investment decision on a major LNG bunkering and export terminal in Oman’s northern city of Sohar.

  TotalEnergies is leading the Marsa LNG joint venture, which is developing the Sohar LNG terminal project. Marsa LNG was formed in December 2021 by TotalEnergies and OQ, with the partners owning 80% and 20% stakes, respectively.

  Marsa LNG plans to develop an integrated facility consisting of upstream units that will draw natural gas feedstock from TotalEnergies’ hydrocarbons concessions in Oman, particularly from the sultanate’s Blocks 10 and 11. 

  The joint venture is also planning an LNG bunkering terminal and storage units located in Sohar port, and a solar photovoltaic plant to power the LNG terminal.

  The Marsa LNG terminal will have a single train with the capacity to process about 1 million t/y of natural gas into LNG. The bunkering terminal will mainly supply LNG as a marine fuel to vessels. Marsa LNG has selected France’s Technip Energies to perform EPC works on the estimated $1bn project.

  Adnoc’s ambitions

  Abu Dhabi National Oil Company (Adnoc) has historically been one of the GCC’s smaller LNG producers. Adnoc Group subsidiary Adnoc Gas operates three large gas processing trains on Das Island. 

  At its Das Island terminal, Adnoc Gas has an LNG liquefaction and export capacity of about 6 million t/y. The facility’s first and second trains were commissioned in the 1970s and have a total combined output capacity of 2.9 million t/y. The third train came into operation in the mid-1990s and has a capacity of 3.2 million t/y.

  The LNG production and export capability of Adnoc Gas will receive a major boost when a new greenfield terminal that it has committed to developing in Ruwais, Abu Dhabi, comes online before the end of this decade.

  The planned LNG export terminal in Ruwais will have the capacity to produce about 9.6 million t/y of LNG from two processing trains, each with a capacity of 4.8 million t/y. The facility will ship LNG mainly to key Asian markets, such as Pakistan, India, China, South Korea and Japan.

  In March, Adnoc Group announced that it had issued a limited notice to proceed to a consortium of contractors for early EPC works on the Ruwais LNG terminal project. 

  The limited notice to proceed was given to a consortium led by Technip Energies, consisting of Japan-based JGC Corporation and Abu Dhabi-owned NMDC Energy.

  The overall value of the export terminal project is estimated to be more than $5bn. Adnoc is expected to issue the full EPC contract award for the Ruwais project in June this year.

   Gulf players secure future of LNG projects 

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  Indrajit Sen
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  Saudi Arabia extends Jubail-Buraydah IWTP deadline

  29 April 2024

  Saudi Water Partnership Company (SWPC) has extended the tender closing date for a contract to develop and operate Saudi Arabia's second independent water transmission pipeline (IWTP) project, which links Jubail and Buraydah.

  The state water offtaker now expects to receive bids by the end of June, instead of 28 March, according to a source familiar with the project.

  The planned Jubail-Buraydah IWTP is a 603-kilometre (km) pipeline, which can transmit 650,000 cubic metres of water a day.

  It is larger than the Rayis-Rabigh IWTP project, which a consortium including the local Alkhorayef Water & Power Technologies Company will develop and operate at a cost of SR7.78bn ($2bn).

  SWPC issued the request for proposals for the Jubail-Buraydah IWTP scheme to the prequalified bidders in October last year.

  MEED reported in February that at least three consortiums are forming to bid for a contract to develop Saudi Arabia's second independent water transmission pipeline (IWTP) project, which links Jubail and Buraydah.

  According to industry sources, the consortiums that are being formed include:

  • Ajlan & Bros / Alkhorayef Water & Power Technologies (local)
  • Lamar Holding (local) / Sinohydro (China)
  • Vision Invest (Local) / Taqa (UAE)

  MEED understands discussions are ongoing among other prequalified bidders to either join the consortiums or form separate ones. 

  The state water offtaker qualified 22 companies to bid for the contract in April 2022. They were:

  • Abdulaziz Alajlan Sons Company for Commercial & Real Estate Investment (Ajlan & Bros)
  • Abdullah Ibrahim Al Sayegh & Sons
  • Abu Dhabi National Energy Company (Taqa)
  • AliShar Contracting Company
  • Alkhorayef Water & Power Technologies
  • Al Sharif Group for Contracting
  • Bin Omairah Contracting Company
  • China Gezhouba Group Overseas Investment Company 
  • China Harbour Engineering Company 
  • China Railway Construction Corporation (International)
  • China State Construction Engineering Corporation
  • CNIC Corporation
  • Cobra Instalaciones y Servicios
  • Gulf Investment Corporation
  • Lamar Holding
  • Marubeni Corporation
  • Mowah Company
  • Mutlaq Al Ghowairi Company for Contracting
  • Nesma Company
  • Norinco International Cooperation
  • SICIM
  • Vision International Investment Company

  The transaction advisory team for the client comprises US/India’s Synergy Consulting as financial adviser and the local Amer Al Amr and Germany’s Fichtner Consulting as legal and technical advisers, respectively.

  SWPC’s obligations under the water transfer agreement will be guaranteed by a credit support agreement entered into by the Finance Ministry on behalf of the Saudi government.

  The project is part of the kingdom’s National Water Strategy 2030, which aims to reduce the water demand-supply gap and ensure desalinated water accounts for 90% of national urban supply to reduce reliance on non-renewable ground sources.

  SWPC’s Seven-Year Planning Statement calls for the development of eight IWTP projects by 2028.

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  Jennifer Aguinaldo
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  UAE rides high on non-oil boom

  26 April 2024

  Commentary
  John Bambridge
  Analysis editor

  The UAE has demonstrated remarkable economic resilience in recent years, with its non-oil sector bouncing back relatively quickly from Covid-19 and emerging as the real driving force behind the country’s growth. 

  Despite slower oil activity due to the Opec+ oil production cuts and regional turmoil, the non-oil sector has continued to go from strength to strength and is enjoying a resurgent boom in its real estate sector, with levels of activity not seen since before the 2008 global financial crash.

  Among the other drivers of UAE non-oil growth are the country’s rapid expansion and rollout of free trade agreements, with it having signed comprehensive economic partnership deals with 12 countries to date. In the absence of much progress on GCC-wide trade agreements, Abu Dhabi is opening itself up to greater trade opportunities with other markets. 

  Another significant recent development was the UAE’s removal from the Financial Action Task Force’s ‘grey list’ in 2024, which has bolstered investor confidence and general business sentiment.

  On the projects side, there is a real estate and construction boom, with over $475bn-worth of private real estate developments and public building and housing programmes planned or under way. Transport schemes at the top of the agenda include the UAE-Oman rail scheme and a high-speed rail link connecting Abu Dhabi and Dubai.

  Also in the works is the $22bn Dubai Strategic Sewerage Tunnel project. Such a network would have served the city well in mid-April, when its infrastructure fared poorly against the hardest rainfall in 75 years.

  On the oil side of the economy, Abu Dhabi National Oil Company (Adnoc) remains committed to expanding its upstream operations and is expected to maintain robust spending on key projects in 2024. Close to $8bn-worth of combined midstream, downstream and petrochemicals contracts are also expected to be awarded this year.

  The conflict in Gaza poses an increasingly serious challenge to the region, however. The UAE has so far remained relatively quiescent on the conflict while concentrating on humanitarian operations. The country is clearly keen to retain the economic benefits that it has been enjoying since its normalisation of ties with Israel under the Abraham Accords.

  The newly kindled relationship is being tested, however, with the airstrike on the aid convoy of the World Central Kitchen drawing some of the harshest words from Abu Dhabi towards Tel Aviv to date. 

  The risk of rising escalation with Iran meanwhile could quickly quench the current exuberance of the UAE’s buoyant non-oil sector.

  

   

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  MEED's April 2024 special report on the UAE includes:

  > GVT & ECONOMY: Non-oil activity underpins UAE economy
  > BANKING: UAE banks seize the moment
  > UPSTREAM: Adnoc oil and gas project spending sees steep uptick
  > DOWNSTREAM: UAE builds its downstream and chemicals potential
  > POWER: UAE marks successful power project deliveries
  > WATER: Dubai tunnels project dominates UAE pipeline
  > DUBAI CONSTRUCTION: Dubai real estate boosts construction sector
  > ABU DHABI CONSTRUCTION: Abu Dhabi makes major construction investments

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  John Bambridge
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  Morocco seeks firms for 400MW wind schemes

  26 April 2024

  The Moroccan Agency for Sustainable Energy (Masen) has invited companies to prequalify for a contract to develop and operate new onshore wind farms.

  The 400MW Nassim Nord wind power programme includes two wind farms. The first is a 150MW extension to the existing Nassim Koudia Al Baida wind park, located in the Fahs Anjra and Mdiq-Fnideq provinces.

  The second scheme, called Nassim Dar Chaoui wind park, will be located in the provinces of Tangier and Tatouiane. It will have a capacity of approximately 250MW.

  According to an industry source, Masen expects to receive the prequalification submissions on 24 June.

  The project will be implemented under a 30-year power-purchase agreement between Masen and the project company that will include the successful bidder.

  Masen, either alone or with a Moroccan public entity, will take a 35% stake in both the project company and the operation and maintenance (O&M) company that will be formed for the project.

  Masen is expected to issue the request for proposals for the Nassim Nord wind projects in September.

  Owned by Masen and France's EDF Renewables, the Nassim Koudia Al Baida scheme is Morocco's first wind independent prower producer (IPP) project, which had an initial capacity of 50MW. In 2022, additional financing from the  European Bank for Reconstruction and Development (EBRD) and Climate Investment Fund (CTF) aimed to double the plant's capacity, 

  Noor Midelt 2 

  MEED reported on 25 April that Masen has invited prequalified developers and developer consortiums to bid for a contract to develop the second phase of its Noor Midelt solar independent power producer (IPP) programme.

  Located in central Morocco, the Noor Midelt 2 IPP consists of a 400MW solar photovoltaic (PV) power plant with battery storage of two hours.

  The client expects to receive bids for the contract by 8 July.

  2030 target

  Morocco has set a target for 52 per cent of its energy to be produced from clean energy sources by 2030, one of the most ambitious targets in the Middle East and North Africa region.

  Morocco aims to bring its renewable capacity to 10,000MW by 2030. Of the total, solar PV is expected to account for 4,500MW, wind for 4,200MW and hydroelectric for 1,300MW.

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  Jennifer Aguinaldo