Kuwait has signed a 15-year deal with Royal Dutch Shell Plc for liquefied natural gas, locking in supplies as its neighbors in the oil-rich Gulf also look to import the fossil fuel.
The United Arab Emirates and Kuwait are the only importers of LNG in the region, with Bahrain joining the pair in 2019, Bloomberg reported. Saudi Arabia is looking at acquiring natural gas assets from Russia to East Africa and the U.S.
The oil producer trio pumps roughly half of OPEC’s output, but use growing quantities of that crude in power generation, losing out on export revenue.
Now these countries are looking to import more natural gas for power needs and for feedstock for petrochemical plants, Bloomberg reported.
“The big issue for Kuwait is they burn a lot of oil, most of their power generated is from oil, and so importing LNG for them is cheaper and frees up oil for export,” Robin Mills, CEO of Dubai-based Qamar Energy, told Bloomberg.
Kuwait Petroleum Corp.’s (KPC’s) sales purchasing agreement with Shell International Trading Middle East Ltd. will start in 2020, the companies said. Shell has supplied Kuwait with LNG since 2010, and declined to disclose the volumes in the new contract, Kallanish Energy learns.
While KPC is working to boost domestic gas production, and the country is negotiating a pipeline deal with Iraq, there is a “pressing requirement” to secure supplies in the meantime, they said.
Kuwait imported 3.49 million metric tons of LNG in 2016, according to the International Group of Liquefied Natural Gas Importers, Bloomberg reported.
Saudi Arabia, OPEC’s biggest crude producer, diverts tens of millions of barrels of crude annually into its power generation plants. It doesn’t produce enough gas to supply its power plants. Most the gas it does pump goes to its fast-growing petrochemicals industry.
Kuwait is planning petrochemical projects in the U.S., Canada and Bahrain, and will start offshore drilling for oil and gas in March, KPC CEO Nizar al-Adsani said in October.