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Wed 17 Mar 2010 09:21 PM

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Oman to keep gas output steady in coming years

Non OPEC member expects the market to recover in the next two years.

Oman LNG plans to keep its liquefied natural gas output steady at around 8 million tonnes a year for the foreseeable future but is ready to use its spare capacity to increase production if needed, the chief executive of Oman LNG said on Wednesday.

The non OPEC Gulf Arab country is unlikely to cut gas production further, despite sagging global gas prices, and Oman LNG expects the market to recover in the next two years.

Speaking to Reuters at the sidelines of a conference, Brian Buckley said: "I do not anticipate any change (in output) in the next couple of years, we have got 20 percent spare capacity and we are ready to move it fast."

Oman LNG accounts for two thirds of total gas production in the sultanate and exports all of its output as LNG, primarily to Asian countries like Japan and South Korea under long term contracts.

Buckley said: "In 2010, Korea has bounced back, they are in the market for more volume, Japan is coming not quite as robustly but still coming back slowly."

He added: "The big buyers are in Asia ... China is now emerging one as is India. It is a market that has potential."

Although gas prices have fallen globaly in the last year, Buckley said he felt no pressure to renegotiate contracts which run until 2024-2025.

He said: "It is a long term business, so the pressure actually to start renegotiating is not there at all."

Weak energy demand in the global economic downturn, combined with a surge of North American shale gas and LNG production in exporting countries like Qatar, has slashed spot LNG prices around the world.

On Tuesday, Algeria's Oil Minister Chakib Khelil said he would propose to gas exporting countries to cut spot supply in an effort to boost prices when they meet in Oran on April 19.

Buckley said he didn't see the need for Oman to restrict its production to support prices, adding in February strong local demand for gas meant Oman LNG was unlikely to have additional cargoes available for years anyway.

He added: "Our business is to make sure that the value of the LNG stays competitive and so far so good we have managed to achieve that."

Oman LNG is 51 percent owned by the government. Royal Dutch Shell owns 30 percent, while France's Total and Japan's Mitsui also have stakes. (Reuters)

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