ADNOC Gas aiming to desulfurize LNG output from projects by 2026: sources

ADNOC Gas, a unit of Abu Dhabi National Oil Co., is working on a desulphurization project to reduce the total sulfur content in its LNG production to below 1 mg/cu m by 2025-26, sources familiar with the matter told S&P Global Commodity Insights.

In a development that could potentially change calculations of fundamental demand and supply for the LNG industry, the desulfurization project would address concerns about high sulfur content, the sources added.

Total sulfur content in the majority of LNG cargoes loaded from ADNOC's Das Island terminal in the past year was in the 4-5 mg/cu m range, with a small percentage of cargoes containing sulfur levels outside this range, market sources said.

Higher sulfur content can be a challenge for LNG buyers as it leads to an accelerated pace of rusting and a greater release of toxic fumes.

Sources familiar with the matter said that after the desulfurization project, the sulfur content in the LNG sourced from ADNOC is expected to be below 1 mg/cu m.

Japanese power and gas utility companies typically purchase LNG cargoes with a very low sulfur content of less than 1 mg/cu m -- except for JERA, the country's largest buyer, market sources said.

A Middle East-based trader said that a combination of ethane greater than 10%, sulfur near or more than 5 mg/cu m and a higher gross heating value can sometimes restrict the tradeability of cargoes in the market due to contractual limits on these parameters.

The variability of sulfur content produced also creates a perceived operational risk for some buyers, market sources said.

Market sources added that currently, the LNG loaded from ADNOC has around 12% of ethane and a GHV of 1,138 Btu/Scf.

Lower sulfur content would likely improve the fungibility of Das Island cargoes in LNG trades, according to the sources, but buyers may still need to provide their consent.

Meanwhile, ADNOC is marketing its LNG for shipping in 2026 to Japanese buyers, market sources said.

"If sulfur is reduced and other [specifications] are the same, [and] when heating values match our requirements, we can consider taking it [ADNOC's LNG]," a source at a Japanese utility company said.

ADNOC previously signed a five-year LNG supply agreement with Japan Petroleum Exploration Co.(opens in a new tab), or Japex.

A source familiar with the matter told S&P Global that the deal was for about 250,000 mt/year of LNG, with deliveries starting in 2026. Another source familiar with the matter said the LNG supplied via the term contract would have undergone desulfurization.

Buyers have shown no concerns regarding the acceptability of rich gas with a high ethane and sulfur content, exceeding 5 mg/cu m. For instance, Indian importers have been willing to accept LNG cargoes with a sulfur content below 30 mg/cu m.

However, the high limits stated in many legacy LNG contracts are superfluous, as there are currently no LNG facilities known to produce more than 7 mg/cu m in total sulfur content.

ADNOC produces 6 million mt/year of LNG through its Das Island project, according to the company's website.

Its new Ruwais project is expected to come online later in the decade, which would add another 9 million mt/year of low-carbon LNG output. The project is designed with electric-powered processing facilities running on nuclear and renewable power, according to ADNOC's website.

For Platts JKM -- the benchmark price for LNG cargoes delivered to Northeast Asia -- standard specifications include a maximum sulfur content of 5 mg/cu m and a maximum ethane content of 10%, with a higher sulfur and ethane content subject to normalization in the assessment process.

India sources its LNG cargoes from a wide range of projects with standard specifications for the Platts West India Marker -- the price for LNG cargoes delivered to ports in India, Dubai and Kuwait -- not having maximum ethane and sulfur specifications presently.

Platts assessed the May JKM up 12.3 cents/MMBtu on the day at $9.582/MMBtu on April 8, data by S&P Global showed.