Oman Plans Talks with BP and Shell to Secure New LNG Project

Oman’s plans for its next liquefied natural gas (LNG) production facility are dependent on securing private investments from some of the world’s largest energy companies. As an economy that relies heavily on oil and gas revenues, Oman views boosting LNG exports as crucial for enhancing its financial position, which has been under strain in recent years. However, the government has made it clear that it will not provide state funding for future LNG projects, and any new developments must be financially viable without government intervention.

To assess the level of interest, the Ministry of Energy and Minerals will initiate talks with major gas producers in Oman, including global energy giants such as BP Plc, Shell Plc, and TotalEnergies SE. These discussions are expected to take place in the first quarter of next year. Salim Al-Aufi, Oman’s Energy Minister, highlighted that the success of the project is contingent upon securing sufficient gas suppliers to commit to providing the necessary feedstock for the facility. “If we are unable to get enough gas suppliers participating, then the whole project will be canceled,” Al-Aufi said. “The whole project depends entirely on our ability to secure — without government intervention — the gas feedstock for the fourth LNG train. If we are unable to secure the feedstock, then we’ll call it a day.”

Oman’s public finances have been among the weakest in the Gulf region for some time. The COVID-19 pandemic severely impacted the country’s fiscal health, prompting Sultan Haitham bin Tariq, who assumed power in January 2020, to implement a range of measures to stabilize the nation’s economy. These steps have included reforming the fiscal system and improving government revenues. As a result, Oman has seen a steady recovery, and its credit rating has improved in recent years. Despite these positive developments, the government continues to prioritize financial sustainability, requiring that all major projects, including the LNG expansion, be self-financing.

Currently, Oman has majority ownership in its three operational LNG facilities, which also feature minority stakes held by international oil companies and large gas buyers. The proposed fourth LNG train, however, will only be open to companies that can commit to supplying gas to the plant. Al-Aufi emphasized this condition, saying, “Anyone who’s producing gas and thinks they can monetize it as LNG is welcome to talk to us. But if you’re not a gas producer and don’t have gas equity, then there’s no discussion at this stage.”

As the second-largest LNG exporter in the Middle East, Oman’s production still pales in comparison to that of regional leader Qatar, which dominates the global LNG market. The new facility would enable Oman to significantly increase its LNG exports, providing a much-needed boost to the country’s economic prospects. However, the project's success will depend on attracting sufficient private sector investment and securing the necessary gas supplies. With government funds off the table, Oman is placing its hopes on private energy companies to help secure the future of its LNG industry and its broader economic recovery. The discussions with BP, Shell, and TotalEnergies will be a crucial turning point in determining whether the project moves forward or is ultimately shelved.