Oman expects to see shipping conditions in the Red Sea to improve following the Gaza ceasefire agreement, Mohsin Hamed al-Hadhrami, the undersecretary of energy and minerals at Oman’s Ministry of Energy and Minerals, told S&P Global Commodity Insights on Jan. 29.
“Things are improving, and we expect things to improve going forward,” Hadhrami said on the sidelines of the 43rd JCCP International Symposium in Tokyo.
“Hopefully, the geopolitical tension will subside with an agreement,” he said. “Of course, we are hopeful and working hard to make sure that the political tension eases and a peaceful outcome is reached.”
With the commencement of the Israel-Hamas ceasefire deal Jan. 19, the Iran-backed Houthi rebels pledged to cease attacking ships passing through the Red Sea, except for those flagged in Israel or wholly owned by Israeli companies or individuals.
While Oman’s LNG supply has not been disrupted at the Bab al-Mandab and the Suez Canal shipping because most of its supply is bound for Asia, the energy ministry is closely monitoring ships carrying its oil products, Hadhrami said.
“I think every company and every business will try to avoid the longer and most expensive routes,” he said. “That’s natural, and it will impact the final product cost.”
“But we are not really particularly in the ministry concerned today,” he said, referring to insurance and other costs.
In the wake of Houthi attacks on ships in the Red Sea since November 2023, Oman’s state energy company OQ, an important supplier of distillates to Europe, had to divert westbound oil product shipments away from the Red Sea.
The Red Sea and its adjoining waters continue to be designated as high risk for moving merchant ships under the guidelines provided by the Joint War Committee of Lloyd’s of London, maritime insurance sources said Jan. 29.
Any change in insurance values and cargo routes at the ground level will take more time and the proposed meeting next week between heads of government of the US and Israel in Washington DC will provide fresh geopolitical leads for underwriters, they said.
Tanker rates continue to plummet and the Long Range II, or LR2 freight on the Persian Gulf-UKC route on Jan. 28 was assessed by Platts at $3.75 million via the Cape of Good Hope, down 15% since the ceasefire deal was announced, according to the Commodity Insights data. The route via Suez Canal enjoys a $300,000 discount to that rate compared with a $200,000 discount before the ceasefire, the data show.
Green hydrogen
Oman plans to announce its third auction for green hydrogen projects by March as it looks to add one more LNG train in the country.
The country aims to produce 1.4 million mt/year of green hydrogen by 2030, and US-based KBR was awarded late last year a front-end engineering design contract for the addition of a fourth train at the Qalhat LNG complex in Oman.
“The appetite for green hydrogen this year is not the same as last year,” Hadhrami said. “We are going with one more round of auction this year because there is still some base interest from the industry to go ahead,” he said. “We are still in discussion with the industry.”
Asked about the size of green hydrogen capacity to be offered in the upcoming auction, Hadhrami said: “It will be similar to the previous size, maybe a little bit smaller,” adding that it is still under evaluation.
“So it’s going to be around one or two blocks that we would offer,” he said adding that the country would decide on the size and some of the metrics based on the feedback from the industry.
“We are still keeping I would say, a listening ear to the industry.”
Although Oman had planned to start green hydrogen production by around 2028, Hadhrami said it would now be difficult to start by then as things like financing, consortiums, agreements and evaluations take time.
“But so far, the majority of projects are according to the plans they submitted after signature,” he said, referring to the 1.4 million mt/year green hydrogen production by 2030.
“I think 2030 is challenging, but potentially even partially it could be positive.”
LNG train
In its efforts toward energy sustainability, Oman intends to continue investing in all sources of energy, including investments in upstream oil and natural gas production, as well as for solar, wind and geothermal power generation, Hadhrami said.
As part of such efforts, Oman is also “developing the gas market, whether it’s domestically or in globally through LNG,” with the country considering adding a LNG train in the current decade, Hadhrami said.
“We are still evaluating the project’s details,” he said of the potential LNG train. “That volume will depend on the numbers that we see from the investors, whether the upstream numbers and whether there is, of course, appetite on the external market.
“If we don’t have enough volumes, we’ll probably scrap it,” he said. “If we have enough volumes, we’ll go forward.”
Asked whether there is any interest from Japan, Hadhrami said: “Absolutely, yes.”
Oman currently has three trains with a production capacity of 11.4 million mt/year over three trains in Qalhat near Sur.
Source: Platts
