Page 9 - MEOG Week 21

MEOG PIPelInes & transPort MEOG
Saudi suspends US LNG plans, puts Khafji on hold
saudI arabIa
IN the present uncertain economic environment Saudi Arabia has taken various steps to reduce its potential exposure.
Saudi Aramco’s shipping division Bahri has reportedly put on hold plans to charter up to 12 LNG tankers after Sempra Energy delayed its decision on whether to proceed with an LNG export project in Texas. Bahri issued an expres- sion of interest (EoI) last year to charter the ves- sels from 2025 in Saudi Aramco’s first foray into LNG as part of the state oil giant’s plan to become a major global player in the gas market.
In May last year, Aramco signed a 20-year agreement to buy LNG from Sempra Energy’s planned Port Arthur export terminal and also agreed to buy a 25% equity stake in the first phase of the multi-billion dollar project.
The agreement with Sempra LNG is a major step forward in Saudi Aramco’s long-term strat- egy to become a leading global LNG player.
With global demand for LNG expected to growbyaround4%peryear,andlikelytoexceed 500mn metric tonnes a year by 2035, we see significant opportunities in this market and we will continue to pursue strategic partnerships which enable us to meet rising global demand for LNG,” Amin Nasser, Saudi Aramco’s CEO, said back then.
However, all bets on the global demand for LNG were off when the coronavirus (COVId- 19) pandemic struck. LNG demand this year is likely to be much weaker than expected before the crisis.
Now that the financial investment decision (FId) has been delayed by at least a couple of quarters, Aramco has put earlier plans to char- ter up to 12 LNG tankers on hold, according to Reuters’ sources.
Sempra Energy, which initially targeted the FId for Q3 2020, said earlier this month that “given current market dynamics, a final invest- ment decision is now expected for the project in 2021.”
“The shipping requirement was meant for Port Arthur, so given the delay and also the cur- rent market, it makes sense to put the shipping on hold,” a source told Reuters.
Aramco declined to comment.
The Saudi state-owned company has been developing its own gas resources as well as eyeing assets in the US, Russia, Australia and Africa, the company’s chief executive officer and the Saudi energy minister have said.
The slump in LNG prices to record lows since the coronavirus struck may make financ- ing more difficult and Aramco might be more cautious about its gas investments in the future, one industry source said.
Khafji on hold
Meanwhile, Kuwait and Saudi Arabia have agreed to suspend oil output from the joint off- shore Al-Khafji field in June.
This will last for the month of June and fol- lows the output cut deal between OPEC and non-OPEC countries, state news agency KUNA reported, citing a Kuwaiti official. The news came a mere five months after its opening in december and is anticipated to remove 140,000 barrels per day (bpd) in output from the market.
“The joint executive committee of Al-Khafji Joint Operations decided to suspend production and close facilities,” Abdullah Al-Sumaiti, the acting CEO of Kuwait Gulf Oil Company, said in a statement.
Al-Sumaiti added that the decision fol- lowed an OPEC+ agreement last month to cut 9.7mn bpd for the months of May and June in an attempt to stop the steep decline in oil prices.
A source added: “There are simply no buyers. Thisiswhyeverybodyisvolunteeringcuts”.
The offshore Al-Khafji, together with the onshore Wafra field, makes up the countries’ shared Neutral Zone.
Another source was quoted as saying that the production was “now an OPEC question,” and that the field would be kept ready to resume pro- duction as soon as market conditions improve. They also said that the shutdown of Wafra was unlikely.
As of April, total production in the Neutral Zone was 260,000 bpd shared between Riyadh and Kuwait almost equally. According to the report, output from Wafra was 60,000 bpd for Kuwait and about 70,000 bpd for Saudi Ara- bia, which means that the closure of Al-Khafji will amount to roughly 130,000 bpd in cut production.
The shared Neutral Zone was long out of operations due to a political dispute. In decem- ber, Saudi Arabia and Kuwait agreed to restart it, with ownership shared between Saudi Arabia’s Aramco Gulf Operations Co. and Kuwait Gulf Oil Co., a unit of state-run Kuwait Petroleum Corp. (KPC).™
Week 21 27•May•2020 w w w . N E W S B A S E . c o m P9