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Discussion session (the natural gas industry, its developments - its challenges - its future prospects)

14-05-2024

- Sheikha Tamader Khaled Al-Ahmad Al-Jaber Al-Sabah: Kuwait has achieved tremendous economic and environmental benefits since the inauguration of liquefied gas import facilities in the Al-Zour region and their full operation. The liquefied gas project meets Kuwait’s current and future clean energy needs by providing optimal fuel for power generation plants - Reducing emissions of environmentally polluting gases and improving air quality through the use of liquefied natural gas, which is considered an environmentally friendly energy source. - Eng. Wael Hamed Abdel Moati: The liquefied natural gas industry is a billion-dollar industry, and the liquefaction stage is the highest in cost and requires large reserves. The development of the commercial structure of liquefied gas projects added flexibility in sales contracts with buyers - OAPEC: More than 730 ships transport liquefied natural gas from 20 producing countries to various markets. Arab companies account for about 12% of the total tonnage of the liquefied natural gas shipping fleet Kuwait is the largest market in the region and the port of Al-Zour imported 6.5 million tons during the year 2023. The Public Relations and Petroleum Media Department at the Ministry of Oil, in cooperation with the Organization of Arab Petroleum Exporting Countries (OAPEC), organized a discussion panel this morning, Tuesday, May 14, 2024, in the Oil Sector Theater Complex, entitled “The Liquefied Natural Gas Industry: Its Developments, Challenges, and Future Prospects,” in which a representative of the Organization was present. OAPEC engineer Wael Hamid Abdel Moati, gas industries expert, was attended by a number of technical and economic affairs employees at the Ministry of Oil, guests from the Environment Public Authority, the Ministry of Electricity, Water, and Renewable Energy, the Kuwait Institute for Scientific Research, male and female students of the College of Engineering and Petroleum (Kuwait University), and media professionals. At the beginning of the discussion session, Director of Public Relations and Petroleum Media at the Ministry of Oil, Sheikha Tamader Khaled Al-Ahmad Al-Jaber Al-Sabah, said that Kuwait has achieved tremendous economic and environmental benefits since the inauguration of liquefied gas import facilities in the Al-Zour region and their full operation. Sheikha Tamader Khaled Al-Ahmad Al-Jaber Al-Sabah reviewed the economic benefits of operating liquefied gas import facilities in saving huge sums of money from the consumption of liquid fuel in power generation plants and in return expanding natural gas. As for the environmental benefits, they are represented in reducing emissions of polluting gases to the environment and improving air quality through the use of Liquefied natural gas is an environmentally friendly energy source. She indicated that the liquefied gas project meets Kuwait's current and future needs for clean energy, by providing optimal fuel for power generation plants, especially in the summer and at peak times, and for the local market as well. She pointed out that the gas import facilities in Al-Zour are considered the largest in the world in terms of storage capacity and were built in one phase, as the project consists of 8 tanks with a capacity of each tank 225 thousand cubic meters. In addition, engineer Wael Hamid Abdel Moati, an expert in gas industries from the Organization of Gas Industries (OAPEC), said that the liquefied natural gas industry includes four stages: extracting the gas, liquefying it, transporting it via tankers, and re-evaporating (gasification) in the importing market. The liquefaction stage is the highest in costs, as it alone represents about 50% of the total investment costs required to implement an integrated project. The cost of establishing a single liquefaction station may reach 30 billion dollars, so it requires sufficient natural gas reserves sufficient to operate for at least 20 to 30 years. , with long-term contracts concluded with potential buyers to ensure annual cash flows to cover the billion-dollar cost and to continue making a profit while the project is running. The development of the commercial structure has led to greater flexibility in sales contracts. Engineer Wael also touched on the development in the commercial structure of liquefied gas projects, including the toll model followed by American companies, according to which the company that owns the liquefaction project is a “different entity” from the gas producing company, and its role is limited to collecting fees in exchange for providing the liquefaction service, which is what It is a shift in the traditional pattern that has dominated the industry for decades. The American model made it possible to separate the cost of liquefaction from the cost of the gas itself, and buyers can now refuse to receive the shipment if necessary, while bearing a fixed fee in the range of $3-3.5/million British thermal units instead of bearing the cost of the entire shipment as is done in traditional sales contracts. He also clarified that long-term contracts are no longer 20 and 25 years as it was previously, but rather have become around 15 years (with some exceptions), with flexibility in determining the place of delivery. The global fleet for transporting liquefied natural gas Regarding the liquefied natural gas transport fleet, he explained that it includes more than 730 ships transporting gas from 21 exporting countries, which has allowed it to attract new markets that can be reached by gas tankers, pointing out that Arab companies own about 12% of the total tonnage of the global fleet, and are candidates. To rise with the receipt of new ships under construction contracted by some Arab countries such as the UAE and the State of Qatar. It also accounts for 28% of the volume of global liquefied gas exports, with a total exceeding 112 million tons in 2023. Reasons for the growing global demand for liquefied natural gas Eng Wael said that there are several factors that contributed to supporting the liquefied gas trade, including the desire of importing countries to diversify their sources of imports and avoid relying on a single source to achieve their energy security, the competitiveness of gas with coal from the environmental as well as economic dimensions at times, and the seasonality of demand in some markets that need To import gas during peak periods such as summer in the Gulf region and winter in the European market, as well as to feed markets with poor gas infrastructure, explaining that the number of imported markets reached 50 markets in 2023. In this context, the gas expert at OAPEC explained that the Arab region was also one of the emerging markets in importing gas to cover demand at peak times, compensate for the decline in local production, or replace liquid fuel, including the State of Kuwait, which began importing gas in 2009. To replace liquid petroleum products in the electricity sector to reduce expenses and save fuel consumption due to the increased efficiency of gas-powered stations. He explained that "Al-Zour Port", which began operating in July 2021, is the unique project of its kind in the Middle East and North Africa region, with a gasification capacity equivalent to 3 billion cubic feet per day. This project enabled Kuwait to diversify its sources of gas supplies by importing liquefied natural gas from several destinations under long-term and immediate contracts. During the year 2023, Al-Zour Port received about 6.5 million tons from the State of Qatar, the United States, Nigeria, Mozambique, and the Sultanate of Oman. According to OAPEC estimates, the equivalent of about 850 million cubic feet per day. In conclusion, the presentation concluded that the industry has developed significantly over the course of six decades, allowing producing countries to exploit their gas resources, and importing countries to import gas from any destination, with increased flexibility in contracts in terms of duration, delivery destinations, and delivery conditions.