FEATURE: ADNOC’s new Fujairah LNG challenge seeks to capitalize on world thirst for power

Japan’s INPEX will think about taking part: CEO

Mission consists of two trains of 4.8 mil mt/yr every

Gasoline costs have soared to file highs

The UAE Port of Fujairah’s rising profile as an power hub is ready for an additional increase, with Abu Dhabi Nationwide Oil Co.’s plans to construct a 9.6 million mt/yr LNG plant within the jap emirate.

The challenge, at present within the design section, is predicted to be full between 2026 and 2028, sources advised S&P International Commodity Insights – not in time to ease the present fuel crunch, because the world scours for brand spanking new provides to switch Russian volumes.

However analysts say it might be well-poised to seize rising demand for the gas, if excessive costs don’t set long-term consumption again and environmental rules in Europe don’t shut off that market.

Fujairah, which is already the world’s third largest oil bunkering hub, is hoping to profit from the challenge, with new stakeholders anticipated to be attracted.

The power, which is able to embrace two 4.8 million mt/yr trains, will elevate ADNOC’s LNG manufacturing capability to fifteen.6 million mt/yr, giving neighboring Qatar – at present the world’s largest LNG exporter – a formidable regional rival.

ADNOC, which declined to touch upon the challenge, owns a 70% stake within the ADNOC LNG three way partnership, which has a present capability to provide 6 million mt/yr at Das Island within the Persian Gulf.

Different shareholders in ADNOC LNG are Mitsui & Co. with a 15% stake, BP with 10% and Whole with 5%

ADNOC is in talks with these companions to participate within the Fujairah facility, sources mentioned, and Japan’s INPEX intends to think about taking part, its CEO advised S&P International.

ADNOC’s new challenge comes at a time when the world’s demand for LNG is excessive as Russia restricts piped fuel provides to Europe and nations across the globe search fuel as a transition gas to switch dirtier crude.

Gasoline costs in Europe and Asia have soared to file highs in 2022 as Europe wrestles with Asia over LNG cargoes in a decent market.

The JKM spot LNG value for supply into northeast Asia hit a file $84.76/MMBtu in March and was final assessed at $41.65/MMBtu July 4, in keeping with Platts assessments from S&P International.

Asia locations

ADNOC has historically despatched its LNG to Asia and up till 2018 equipped round 90% of its volumes to Japan beneath long-term agreements however has sought since to diversify its buyer base by signing multi-year contracts.

Including Europe as a possible new vacation spot for ADNOC’s LNG will rely on a number of components, together with the flexibility to lock in long-term contracts.

The vacation spot for LNG “will rely on which events wish to signal contracts for the LNG (most definitely Asia), the state of the worldwide LNG market and costs when the plant comes on stream,” mentioned Jonathan Stern, a analysis fellow on the Oxford Institute for Vitality Research.

Nevertheless, he added, “will probably be troublesome for European firms to make long-term commitments due to their emission targets.”

Since 2019, India has been the UAE’s prime LNG buyer, based mostly on Kpler transport knowledge.

Platts Analytics, in a June 13 report, famous that none of ADNOC LNG’s time period prospects despatched any cargoes to Europe, regardless of profitable LNG spot costs. The final time ADNOC LNG despatched any volumes to Europe was in June 2009, it mentioned.

Nevertheless, as demand destruction from excessive LNG costs seeps into Asia, Europe could turn into a extra enticing vacation spot.

“Europe’s want to switch 160+ Bcm of Russian fuel will create big want for extra LNG within the medium time period,” mentioned Robin Mills, CEO of Qamar Vitality. “Sellers can identify their phrases in the mean time and patrons are realizing the hazard of publicity to risky and doubtlessly very excessive spot costs. The query is what ‘long run’ means for European patrons given their decarbonization targets, 10 years or longer?”

Platts Analytics has revised its Indian LNG demand forecast down a mean of almost 10 billion cu m/d from 2022 by way of 2025 on the again of upper costs anticipated throughout this era.

“South Asia, as soon as considered one of many key drivers of worldwide demand within the medium time period, might disappoint to the draw back amid lingering elevated spot costs and restricted cowl by long-term contracts,” Platts Analytics mentioned in an April 29 report.

New fuel

The enlargement of ADNOC’s LNG capability comes as new fuel developments are set to extend alongside its enlargement of oil manufacturing capability to five million b/d by 2030 from about 4 million b/d at present, which is able to yield increased related fuel.

ADNOC had introduced in December an increase in nationwide fuel reserves of 16 Tcf, bringing the UAE’s fuel reserves base to 289 Tcf.

The situation of Fujairah for the brand new LNG manufacturing may also be of added worth to ADNOC, given the getting older amenities at Das Island, positioned far offshore. The truth that Fujairah lies outdoors the problematic Strait of Hormuz within the Persian Gulf reduces its geopolitical threat profile.

“For the UAE this [project] is essential and should exchange the Das Island plant in future, as that plant is now very previous relationship from the late Nineteen Seventies,” mentioned Stern.

Fujairah may also acquire from the rising variety of LNG tankers that may name on the port, which is contemplating including LNG bunkering providers, its managing director, Captain Mousa Murad, mentioned.

“Fujairah may also profit that accessible fuel will appeal to industrial firms that may use fuel as a substitute of, for instance, diesel to arrange initiatives,” mentioned Murad.