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Shifting sands: MENA region ramps up its LNG imports

Fri 18 Aug 2017 by Karen Thomas

Shifting sands: MENA region ramps up its LNG imports
Dubai-based DUSUP imports LNG via the FSRU Explorer

Although the Middle East and North Africa (MENA) region is a gas-exporting giant, its growing population and economic expansion have created one of the fastest-growing LNG-import markets. 

Traditionally an exporter of gas, the Middle East is emerging as one of the most interesting LNG-import markets to watch.

Data from the International Gas Union suggest that the Middle East and North Africa (MENA) region imported some 22 million tonnes (mt) of LNG last year. And between them, five regional exporters – Qatar, Algeria, the UAE, Oman and Egypt – sent out nearly 103mt over the same 12 months.

In the last couple of years, the gap between regional exports and imports has narrowed.

Yemen’s civil war has halted production at the 7.2 mta Balhaf LNG plant since April 2015. Meanwhile, Egypt is ramping up its imports, having chartered two floating storage and regasification units (FSRUs) to 2021 to compensate for dwindling production that has seen its LNG exports slow to a trickle.

Jordan took delivery of its first LNG cargoes in 2015, having chartered the 160,000m³ FSRU Golar Eskimo. Long-time LNG buyer Turkey is ramping up its imports, having taken delivery of the 145,130m³ FSRU Neptune at the end of last year.

Now, Turkey-based Botaş is about to take delivery of the country’s second chartered FSRU. Reports this summer suggested that the state-owned pipeline and energy-trading firm has negotiated a short-term contract to charter Mitsui OSK’s Hull 2419, at 263,000m³ the world’s largest FSRU.  LNG World Shipping has invited MOL to confirm those reports.

New importers

Forecasts from the International Energy Agency (IEA) put the Middle East second only to China in terms of growth in LNG demand, accounting for a fifth of this rise in global need to 2022.

In Bahrain, construction has started on an LNG terminal, at Hidd on the north of the island, that will use a floating storage unit (FSU) to import up to 6 mta, starting in 2019. Bahrain LNG is a joint venture between Teekay LNG, Gulf Investment Corp, Samsung C&T and Oil & Gas Holding Co (nogaholding).

Bahrain LNG comprises the 174,000m³ FSU newbuilding Hull 2461, under construction at Daewoo Shipbuilding & Marine Engineeering, and an offshore LNG-receiving jetty, a breakwater, a regasification platform, a subsea pipeline, an onshore pipeline, a gas-receiving unit and a nitrogen production plant. It should receive its first cargoes by summer 2019.

The United Arab Emirates has been ramping up its LNG imports and is home to three FSRUs. Dubai charters Excelerate’s 150,900m³ Explorer and the 125,000m³ Golar Freeze. Abu Dhabi joined the LNG-import club last year, chartering the 138,000m³ FSRU Excelerate.

Abu Dhabi exported some 5.6mt of LNG last year, but Dubai alone took in some 2.9mt. .

Now Sharjah plans to import up to 4 mta of LNG to meet growing demand for gas in the UAE’s northern emirates.

The emirate wants to source additional gas for power generation. Sharjah National Oil Co (SNOC) formed a joint venture earlier this year with trading company Uniper to charter an FSRU to be based at the port of Hamriyah. The gas will supply three Sharjah Electricity and Water Authority (SEWA) power stations.

Kuwait will replace Golar Igloo with a land-based regasification plant to handle up to 22 mta. The Al Zour terminal will be the first onshore import terminal in the Arab world, due to open in 2021. 

Other regional governments have new LNG-import plans. Morocco wants to build an LNG-import terminal at Jorf Lasfar near Jedida to receive 2 mta, to shore up its security of gas supply. The country relies on imported oil for more than 60 per cent of its energy needs, against 16.5 per cent from natural gas. It also wants to stop relying on neighbouring Algeria for natural gas.

Domestic energy demand is growing. Morocco expects to consume an annual 65 TWh by 2025 – an increase of more than 6 per cent over 2016. Ministry of energy estimates suggest that the kingdom will need some 5 billion m³ of natural gas to meet that demand.

Three years ago, Morocco approved an LNG national development plan that centres on Jorf Lasfar, a US$4.6 billion project comprising a jetty, regasification units and high-pressure gas-transmission pipes. Phase one will focus on gas to power and the second on gas for industrial use.

The project has gathered momentum in recent months. Beleaguered Qatar is positioning itself to supply the LNG to the project, having signed a memorandum of understanding to co-operate with Morocco to supply the kingdom with oil and gas. LNG imported through Jorf Lasfar should meet 13 per cent of the country’s energy needs by 2025.

Export prospects

The 2015 closure of Yemen’s Balhaf LNG project is not the only supply threat facing LNG exports from the Middle East and North Africa. Algeria faces the twin pressures of dwindling gas reserves and growing home-grown demand.

Former energy minister Nordine Ait-Laoussine warned recently that the country will switch from exporter to net importer within two decades. The Oxford Institute of Energy Studies predicts that come 2030, Algeria will have just 15bcm/y available for export.

Despite these challenges, Middle East LNG exports may not yet have peaked.

Qatar confirmed in July its plan to increase its LNG production by nearly a third, to 100 mta by 2024, lifting its moratorium on tapping the vast North Field that it shares with Iran.

Last year, Qatar was the world’s largest producer of LNG, delivering 77.2mt. New expansion could shore up Qatar’s leadership, pulling ahead of fast-growing rivals Australia and the US. Qatar is adjusting to new liquidity in the global LNG markets by moving downstream, seeking to control the LNG supply chain.

Qatari shipowner Nakilat is working with Höegh LNG to tap growing demand for FSRUs. And Qatar Petroleum-owned Wave LNG Solutions has signed a bunker-supply partnership deal with Shell.

Hours before Qatar announced its plan to ramp up production, Total and National Iranian Oil Co unveiled a US$5 billion plan to develop phase 11 of the South Pars gas field under a 20-year production and development contract.

Iran, emerging from a decade of western sanctions, is ramping up its oil and gas production to underpin reconstruction and investment in infrastructure. However, the deal announced with Total makes no mention of LNG.

IEA head of gas, coal and power markets Peter Fraser tells LNG World Shipping that Iran’s priority is to meet its domestic gas demand. “We really don’t expect Iran to do much, in terms of LNG exports, at least for the next five years,” he says. “In the medium term, the LNG market is already well supplied.”

Longer term, a second wave of Middle East LNG exports is increasingly likely. Untapped LNG-export opportunities lie in the eastern Mediterranean, in the Tamar, Aphrodite, Leviathan and Zohr offshore gas fields.

Egypt’s plan to become self-sufficient in energy by 2021 – and to resume its LNG exports – seems ambitious. But with industry experts predicting an LNG supply crunch in the mid-2020s, Egypt, its eastern Mediterranean neighbours, Qatar and Iran are well-placed to meet future demand.

 

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