Page 6 - MEOG Week 46

MEOG Commentary MEOG
LnG intent
The deals came almost a year to the day since ADNOC and fellow Gulf NOC Saudi Aramco announced a second major international collab- oration at last year’s ADIPEC, pledging to co-op- erate on investment in the global LNG sector.
The neighbours both combine plentiful reserves of crude oil with a growing shortage of natural gas to meet local needs. Nonetheless, days later, the Emirati firm signed an agreement apparently guaranteeing the future of Abu Dha- bi’s own LNG export industry for the next two decades – a pledge born of ambitious plans to develop difficult domestic gas reserves.
ADNOC and Aramco signed a framework agreement to collaborate on investment in inter- national LNG development and trading, saying they would “jointly assess investment oppor- tunities across the LNG value chain that could unlock value and drive revenue growth for both companies” in a manner designed to “ensure that we are well-positioned to secure greater returns from global LNG growth by combining the tech- nological and operational expertise of two of the world’s leading national oil companies”.
The vague aspirational statement revealed no details of proposed projects. Unlike fellow GCC oil producers, ADNOC has historically had an almost-exclusively domestic operational focus. The company’s headline announcements at ADIPEC were concerned chiefly with the local upstream implications of the “integrated gas strategy” promulgated earlier in the month as part of a five-year business plan newly approved by the Supreme Petroleum Council.
Foreign upstream investment has typi- cally been the preserve of government-owned Mubadala Investment Co. – which signed an agreement on the same day to buy a stake in a second Egyptian gas field – and its two legacy companies.
however, Aramco officials have been
mooting international gas investment for more than a year – as attempts at domestic exploration and development of unconventional resources has failed to match initial expectations.
The kingdom’s Energy, Industry & Mineral resources Minister and Aramco chairman Khalid al-Falih confirmed late last year that the Saudi company was in discussions about the long-mooted acquisition of a stake of up to 30% in russia’s estimated $21bn Arctic LNG 2 pro- ject, under development by the local Novatek in northern Siberia.
The project, scheduled for completion in late 2023, comprises a three-train liquefaction plant producing around 19.8mn tpy for sale chiefly to Asian markets. A final investment decision is due in 2019.
Both countries are aiming to replace oil with gas for domestic purposes – in particular in power generation – to free up crude for export.
however, Abu Dhabi appears intent on pre- serving the emirate’s gas export industry over the long-term. Two days after the pact with Aramco, ADNOC signed a landmark deal with the con- glomerate’s ADNOC LNG subsidiary, guaran- teeing supply of the requisite gas feedstock until 2040.
The existing supply agreement expired at the end of the 1Q2019 and the new deal will give the partners the security to seek fresh buyers.
In August 2018, Japanese anchor customer JErA declined to renew an expiring 25-year deal to buy 4.3mn tpy and instead signed a three- year sales and purchase agreement for the annual supply of a mere 500,000 tonnes.
Announcing the new raw gas supply pact, ADNOC said that seven term contracts had been signed for a total of around 4.2mn tpy and that talks were under way with other potential customers.™
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Week 46 20•November•2019