LNG

Kuwait Integrated Petroleum Industries Co. (KIPIC) said all construction has formally been completed at the onshore LNG import terminal at Al-Zour, the largest in the Middle East, and constructed to provide fuel and power to the refining and petrochemicals industries.

A South Korean consortium comprising Hyundai Engineering Co., Hyundai Engineering & Construction Co. and Korea Gas Corp, also confirmed that the project had been executed.

The Hyundai-led consortium won the construction project valued at $2.9 billion back in 2016 from KIPIC, an affiliate of state-run Kuwait Petroleum Corp.

While the terminal was developed by KIPIC, it is owned by national oil and gas company KPC.

The Kuwait terminal is located about 90 kilometres southeast of Kuwait City and about 16km from Kuwait’s border with Saudi Arabia.

It consists of a regasification facility capable of liquefying 130,000 cubic metres of gas per day and eight LNG storage tanks, with four in the first phase, and each with 225,000 cubic metres of capacity.

A statement noted that Hyundai Engineering was in charge of the overall management of the project including design, licensing and the construction of core facilities.

Hyundai E&C was responsible for the building of the LNG storage tanks and reclamation of 7 million cubic metres of land from the sea.

Kogas, the owner of four LNG import terminals in South Korea, conducted test runs through July 2021 when the first commissioning cargo was delivered and since then has run operational training.

World-class facility

The Korean consortium said they shortened the construction period by more than six months even under the restrictions of the Covid-19 pandemic.

“Through the successful completion of this project, we have proved our world-class LNG plant construction and technological capabilities,” said a Hyundai Engineering statement.

Hyundai Engineering added that the LNG facility would provide the Middle East country with a stable gas network to respond to the rising call for energy diversification.

Kuwait already has a 15-year contract with QatarEnergy to buy 3 million tonnes per annum of LNG for the Al Zour facility.

Energy company KPC additionally plans to buy another 3.5 MTPA from the open market or through short-time contracts.

Until recently, Kuwait has imported LNG via a floating storage and regasification unit (FSRU) at the dockside of Kuwait’s Mina Al-Ahmadi port. The FSRU has been in operation since 2009.

Oil exporter Kuwait is also focussing on ramping up its own natural gas production as part of its economic growth strategy through to 2040.

The use of LNG in the Middle East is forecast to expand by around 50 percent through 2025, with most of the increase coming from Kuwaiti demand.

Kuwait’s domestic natural gas requirements are increasing in line with other Middle East nations and it is already receiving additional deliveries from suppliers such as the US exporters on the Gulf Coast of Louisiana and Texas.

The expansion in infrastructure comes as Kuwait and its neighbour, the United Arab Emirates, are listed 20th and 29th respectively in the list of 42 destinations for shipments from US exporters.

The Gulf Arab economies are among the world’s biggest oil consumers on a per capita basis, in part because of the heavy use of crude in their electricity grids.

Analysts note that the state of Kuwait, like the other Gulf Cooperation Council members, is embarking on an ambitious path of economic growth fuelled by more domestic natural gas use and less oil utilization.

Several of Kuwait’s neighbours are also trying to phase out oil from their power markets, including the UAE and Saudi Arabia. They are also turning to renewable projects and hydrogen development.

At the same time they must focus on building up their petrochemical and oil exports industries to monetize their resource heritage for the good of their citizens.

The World Bank said the six members of the Gulf Cooperation Council, including LNG exporters Qatar, Oman and the United Arab Emirates are bouncing back to positive growth from the double blow of Covid-19 and the energy slump, showing the economic resilience of oil and gas.

Qatar has signed a new long-term sale and purchase agreement with Royal Dutch Shell to deliver 1 million tonnes per annum of liquefied natural gas to the neighbouring Gulf state of  Kuwait starting in 2020.

This accord between Qatargas and Shell for the supply of LNG to Kuwait follows the recent pact signed between Qatar Petroleum and Kuwait Petroleum Corp. 

Cargoes of LNG are shipped at present to the dockside facility at Mina Al-Ahmadi in Kuwait. This terminal has been in operation since 2009.

However, the Gulf nation is building a second and larger onshore terminal close to a new refinery complex at Al-Zour, about 90 kilometres south of Kuwait City.

The new Kuwaiti terminal is being constructed  by a consortium led by Hyundai Engineering Co. of South Korea.

“These agreements demonstrate our commitment to Kuwait, which is a very important LNG market,” said the Qatari Minister of State for Energy Affairs, Saad bin Sherida al-Kaabi, who is also President and Chief Executive of Qatar Petroleum.

He added that the new SPA further underlined Qatargas’s position as the a market leader in LNG and demonstrated the company’s track-record of providing reliable LNG to the global market place.

The supplies will come from the Qatargas IV Train at Ras Laffan. This is a joint venture owned 70 percent by Qatar Petroleum and 30 percent by Shell.

Kuwait’s domestic natural gas demand is increasing in line with other Middle East nations and it is already receiving additional deliveries from new suppliers such as the US.

The expansion in infrastructure comes as Kuwait and its neighbour, the United Arab Emirates, are already among the top 20 destinations for shipments from US exporters such as Cheniere’s Energy’s Sabine Pass export plant in Louisiana.

The state of Kuwait, like the other Gulf Cooperation Council members is embarking on an ambitious path of economic growth.

This requires cleaner energy sources such as natural gas that will contribute to reducing emissions and improving local air quality, while also supplying energy for industry and domestic consumption.

The Dolphin Energy natural gas pipeline from Qatar to the United Arab Emirates experienced a major technical outage for several days last month and the Qataris reportedly made LNG supplies available to its neighour if needed and kept the impact to a minimum as a sign of improving relations.

The report by Qatari television quoting news agencies said the pipeline had now been fixed and pipeline gas supplies were flowing as normal.

The pipeline is 364 kilometres in length and supplies 2 billion cubic feet of natural gas per day from Qatar’s North Field to the UAE. The North Field is also the source of Qatar's annual LNG outut of 77 milliion tonnes per annum.

The Qatar-UAE pipleine is owned by Dolphin Energy, a subsidiary of the UAE oil and gas company, Mubadala Petroleum, and with minority stakes held by French major Total and Occidental Petroleum of the US.

“The pipeline encountered a major failure in Qatar’s territory in mid-April resulting in a shutdown of all of its facilities for several days,” said the Qatari TV report.

Analysts said the report was seen as Qatar saying to its Arab neighbours in the Gulf Cooperation Council (GCC) that it can be relied upon in a crisis and to meet contracts for energy supplies.

According to the report, the pipeline shutdown caused significant curtailment of gas supplies to the UAE for several days and Qatar Petroleum helped Dolphin Energy by supplying some repair materials and offering LNG supplies to make up for any shortages.

The GCC members are UAE, Bahrain, Kuwait, Oman, Qatar and Saudi Arabia. Since the dispute began no Qatari LNG cargoes were to be delivered to the UAE and Kuwait because of GCC transport sanctions against Qatar.

The embargo against Qatar was formally imposed in June 2017, though the Qataris said at the time they would not close the Dolphin pipeline, which would cause major disruptions to the UAE’s natural gas system.

The Kingdom of Bahrain said it would receive its commissioning cargo from Abu Dhabi National Oil Company when the facility becomes operational in 2019.

Major oil and gas exporters have weathered many upheavals but a renewed commitment to economic diversification and strategic priorities for LNG and natural gas will be vital to cope with the changing dynamics of shale and uncertainties over the pace of oil demand growth.

Bahrain is moving forward with development of its discovery of extensive tight oil reserves amounting to 200,000 barrels per day and deep natural gas resources of between 10 and 20 trillion cubic feet, though the Gulf kingdom still intends to become an LNG importer by 2019.