Friday, August 24, 2007

Oman offers India gas in exchange for coal

Oman has made an offer to trade India natural gas in exchange for coal.


“We have received a very interesting proposal from the Oman government, which has been forwarded to the power ministry by the ministry of external affairs, about their interest in a coal and gas swap around a month back,” said a senior government official familiar with the matter. “We are studying the proposal, which will be very beneficial for our present and future gas-based (power) generation capacity,” added the official, who did not wish to be identified.

If the Indian government says yes, the two countries will enter into a long-term contract where Oman provides India natural gas in exchange for a steady supply of coal.

Indian coal has a high-ash content, one reason why some domestic coal-based power plants mix it with higher quality coal that is imported. However, Oman wants Indian coal for this very reason. Fly ash is a key component in the manufacture of cement and Oman, currently going through an infrastructure and construction boom, needs as much of the building material as it can get.

In return, India will get natural gas, currently in short supply across the world, to run its power plants. Gas is also a key input for fertilizer plants. Several power plants in India that run on gas have had to shut down because of scarcity of the fuel. [link]
Interesting, but isn't Oman short of gas itself and looking to get supplies from Qatar through the Dolphin project and from Iran through the proposed pipeline across Hormuz?

7 comments:

Balqis said...

Maybe is part of some agreement with Dodsal India and the quantity of gas required is not huge, otherwise it would be difficult to understand also why Oman supplied UAE few years back.
If you are about to run completely out of gas, you know it in advance .
No ?

muscati said...

Oman isn't about to run out of gas. It's just that it is committed to long term sales contracts, supply to independent power producers in Oman, and industrial projects like the ones in Sohar, for most of its production. That's why last year they initially refused to guarantee supplies to Oman Cement Company's production expansion plans. Also some large petrochemical projects in Sohar had to be put on the shelf for lack of gas supplies until Project Dolphin gas arrives into Oman.

The problem is that Oman's gas production is tied to its oil production. Oil production is falling. Furthermore, gas reserves are measured as a ratio to oil reserves based on various factors. Oman's oil reserves turned to have been inflated by Shell. Hence, the gas reserves are obviously also inflated. The risk there is that Oman had probably oversold its gas production and might have sold future quantities of gas that might not exist.

There was a brief discussion about this on my blog earlier this year. Here's the link: Where did the gas go?

Al-Maawali said...

Wow, very informative. It almost sounds like you work for that industry, muscati.

Lirun said...

encouraging to hear that the proposed use of the coal is not energy generation but rather non polluting causes..

nice synergy..

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