Kuwait become net gas importer

Region Kuwait's first cargo of liquefied natural gas (LNG) has arrived at its terminal, making the oil-rich state a net importer of gas.

Kuwait's first cargo of liquefied natural gas (LNG) has arrived at its terminal, making the oil-rich state a net importer of gas. The country's decision to turn to LNG, a costly source of fuel, is a result of a severe gas supply crunch that has led to a shortage of electricity and made power cuts a fixture of summer months. Sohar LNG, an Oman-based gas carrier, was anchored at the site of Kuwait's floating gas terminal at Mina Ahmadi yesterday, according to ship-tracking data compiled by Bloomberg.

A spokeswoman at Kuwait Petroleum Company (KPC) could not confirm whether the ship was unloading its gas. Officials say LNG is an interim solution to plug the summer deficit, when consumption of gas at power stations spikes. Domestic supplies under development by Kuwait Oil Company (KOC) will eventually supplant the imports, the government said in June when it signed a supply contract. But imports could be necessary for years to come, given the difficulty Kuwait will face in raising domestic production, said Raja Kiwan, an analyst at PFC Energy, a US-based consultancy.

"The supply demand balance will not look significantly better in a few years' time," he said. LNG is a gas that is frozen and shrunk to 600th of its original size for transport by tanker, typically over long distances. But a regional shortage of pipeline gas has made Kuwait the second Gulf state to import LNG after Dubai signed a deal last year. KOC said it would gradually increase domestic output from its northern fields to eventually reach 1 billion cubic feet per day by 2015. Output was up by 175 million cubic feet by the end of last year, the firm said.

But this year, overall gas production has been reduced by OPEC production limits on crude oil, since the majority of the country's gas is pumped out of oil wells. Consumption statistics suggest the new gas output has had little impact: power stations substitute fuel oil for gas when supplies run short, and power plants have continued to burn the liquid fuel at the same rate as last year, Mr Kiwan said.

"You probably do have incremental gas supplies going into the power-generation sector, but clearly it's not sufficient," he said. KPC signed an LNG supply contract in June with Royal Dutch Shell, in which Shell would supply cargoes from its large network of liquefaction terminals. Kuwait has also pushed to sign a contract with Qatar, but the two sides remain divided over price. [e-mail]