GE Oil & Gas Signs $200 Million Service Agreement with Oman LNG

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Researched by Industrial Info Resources (Sugar Land, Texas)--Global oil and gas technology and services provider GE Oil and Gas (Florence, Italy), a subsidiary of General Electric Company (NYSE:GE) (Fairfield, Connecticut), has signed a $200 million contractual service agreement with Oman LNG LLC (Mina Al-Fahal, Oman). The contract, which is valid for a period of 16 years, calls for servicing of the 12 GE gas turbines at the Qalhat liquefied natural gas (LNG) complex. Under the terms of the contract, GE Oil and Gas will undertake complete servicing activities of all the turbines.

Of the 12 turbines, six are used to run three LNG trains, and the remaining six are used for power generation at the Qalhat LNG facility. The three LNG trains, one owned by Qalhat LNG SAOC (Al-Khuwair, Oman) and two by Oman LNG, are used to process and liquefy natural gas. The combined capacity of the trains is about 10 million tons per year. The gas turbines generate energy required to cool natural gas to minus 160 degrees centigrade. This temperature is optimal and economical for transportation of LNG to Europe and Asia. The CSA will ensure that the Qalhat LNG train operates and functions with full efficiency under the environmental regulations and guidelines.

The Qalhat LNG complex is situated on the eastern coast of the country, about 200 kilometers from Muscat and is one of Oman's largest industrial constructions. The Omani government is the principal stakeholder in the project with a 46.84% interest, while Mitsubishi Corporation (TYO:8058) (Tokyo, Japan) (3%), Oman LNG (36.8%), Osaka Gas Company (TYO:9532) (Osaka, Japan) (3%), Union Fenosa SA (MCE:UNF) (Madrid, Spain) (7.36%), and Itochu Corporation (TYO:8001) (Osaka) (3%) also hold stakes.

The 3.3 million-ton-per-year LNG train in the facility, owned by Qalhat LNG, is likely to be upgraded to a capacity of 3.7 million tons per year. The train also produces about 80,000 tons per year of condensate. The Saih Nihayda, Barik and Saih Rawl gas fields in central Oman supply about 3.8 trillion cubic feet of gas to this facility. Qalhat LNG has several long-term gas supply contracts, including a 15-year agreement to supply 800,000 tons per year of gas to Mitsubishi, a 20-year agreement with Union Fenosa to deliver 1.65 million tons per year of gas, and a 17-year agreement with Osaka Gas to supply 850,000 tons per year of natural gas.

The Omani government also owns a stake of 51% in Oman LNG, which operates two 3.3 million-ton-per-year LNG trains. Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) holds a stake of 30% in Oman LNG, while Partex Oil and Gas (Lisbon, Portugal) (2%), Itochu (0.92%), Mitsui & Company Limited (TYO:8031) (Tokyo) (2.77%), Korea LNG Limited (Surrey, United Kingdom) (5%), Total SA (NYSE:TOT) (Paris, France) (5.54%), and Mitsubishi (2.77%) also hold stakes. A pipeline, 48 inches in diameter with the capacity to carry 34 million cubic feet per day of gas, is also part of the infrastructure. In 2000, Oman LNG signed a 25-year contract to supply 4.1 million tons per year of natural gas to Korea Gas Corporation (SEO:036460) (KOGAS) (Gyeonggi, South Korea) and another 25-year agreement to supply 700,000 tons per year of natural gas to Osaka Gas.

Oman has been exploring options to develop the natural gas sector as a long-term economy booster and revenue generator. In January of this year, Petroleum Development Oman (PDO) (Muscat, Oman), selected Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi) to supply turbines of 126 megawatts (MW) for PDO's power plants. The $400 million, 6-year contract to design, manufacture, install and commission the turbines also includes provisions for extension of the contract by three years. The Omani government holds a stake of 60% in PDO, with Shell, Total and Partex holding stakes of 34%, 4% and 2%, respectively. BHEL has completed four engineering, procurement and construction contracts for PDO and has also supplied turbines and other components for more than 50% of PDO's total installed power generation capacity in Oman. BHEL has completed 12 large contracts in Oman during the past twelve years.

In a related development, Oman announced that its LNG output this year is expected to be steady at 80% of its total capacity, the same output that was achieved last year. The country has been facing challenges to meet domestic and export demand because of a shortage of gas supplies.

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