MUSCAT, Jan 7 (Reuters) - Oman will double natural gasprices for some industrial consumers by 2015, with a rise of 33percent for 2013 alone, Oman's minister for financial affairstold Reuters on Monday in a rare Middle Eastern move to slashfuel subsidies. The Omani government and some major industrial consumershave agreed that gas prices will rise from $1.5 per millionBritish thermal units (mmbtu) in 2012 to $2/mmbtu in 2013,Darwish al-Balushi said. In 2014 prices will rise to $2.5, then hit $3 in 2015 withfurther rises expected in years beyond that, he said. Gas-hungry industry has flourished in the Middle East onfuel priced at a fraction of international levels but its futuregrowth is in doubt unless more sources can be developed. Omani gas production has risen sharply over the last decadeand the non-OPEC oil producer remains a net gas exporter. Butrampant demand growth at home means it must tap trickier andmore costly gas deposits to maintain exports of liquefiednatural gas while satisfying its own gas needs. Key to Oman's quest to boost production is the Khazzanproject. Developer BP has been haggling with thegovernment over how much it can sell any gas produced and thesales price increases announced for the next few years shouldhelp make BP's business case. Rock-bottom gas prices prevalent in the Middle East are aremnant of when gas was a plentiful by-product of the region'soil fields and Saudi consumers still only pay $0.75/mmbtu. According to industry estimates total upstream conventionalgas production costs are around $3/mmbtu, but the cost ofprojects like BP's tight gas project are thought to be muchhigher. Although some big gas users in the region fear that higherfeedstock prices could harm their competitiveness, even Oman'splan to double prices by 2015 should not make Omani industryuncompetitive on the global market. Thanks to an unmatched revolution in North American shalegas production, the price of gas for U.S. industrial userstumbled from highs of around $13 per mmbtu in 2008 to a recordlow of about $3 per mmbtu in April 2012, according to the U.S.Energy Information Administration (EIA). The slump in U.S. prices has worried many petrochemicalproducers in the Gulf, but U.S. prices have already reboundedand the EIA expects industrial consumers be paying over $5/mmbtuagain in 2013, far more than Omani industry will have to pay by2015. With the region's cheap gas now largely accounted for, SaudiArabia could follow Oman's lead on gas prices too this year,although the price rise is likely to be small to protect Saudiindustry's huge advantage, especially over competitors in Asiasome of which have to pay well over $10/mmbtu.
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