Dubai will become self-sufficient in petrol this year as demand declines and a major upgrade is completed at a refinery in Jebel Ali, an energy consultancy says. The refinery, owned by the Emirates National Oil Company (ENOC), operates at only 50 per cent to 60 per cent of its capacity of 120,000 barrels per day (bpd), forcing Dubai to import petrol at world market prices to close the supply deficit.
But the refinery's output will increase dramatically after the installation of equipment by the end of the year to treat feedstock that is "sour", or infused with hydrogen sulphide, said Raja Kiwan, an analyst at PFC Energy, a consultancy based in Washington. "Once completed, production of gasoline from the newly installed 36,000 bpd catalytic reformer will transform Dubai into a self-sufficient market," Mr Kiwan wrote in a report. "When fully operational, the plant's diesel yield should reach 15,000 bpd, or roughly 35 per cent of Dubai's entire market."
The new refining capacity should reduce costs for ENOC, which is owned by the Dubai Government but sells petrol at prices set by Federal law. When oil prices rise, as they did last summer, the company loses money on every gallon of petrol it sells. ENOC's refinery processes condensate, a light type of oil that is a by-product of natural gas extraction and is easily transformed into valuable products. But lacking the upgrade, the refinery has been able to process only so-called "sweet" condensates that have low sulphur content and are often unavailable on the local market.
Limited supplies of sweet condensates had held back output at the refinery, Saeed Khoory, the chief executive of ENOC, told Reuters last week. The upgrade, which was due to come on line at the start of the year, would now be running by year's end, Mr Khoory said. PFC said initial sour feedstock would probably come from the Kangan field in Iran, the North field in Qatar and the onshore Margham field in Dubai.
The increase in supply comes just as oil demand in Dubai is slowing. PFC expects demand in Dubai to fall by 5 per cent, or 2,000 bpd, this year because of the economic slowdown, but demand across the country to rise by 4 per cent, led by Abu Dhabi. As it expands its refining capacity, ENOC is contemplating increasing its investment in upstream oil and gas sources. On Thursday, Mr Khoory told Reuters he was "looking at opportunities in the Middle East, Africa, Turkmenistan and Kazakhstan".
"We are looking at various opportunities. We have to secure supplies for our condensates refinery," he said. The next day, the company disclosed it was contemplating taking full control of Dragon Oil, an oil and gas production company with operations in Turkmenistan and Yemen. ENOC owns 52 per cent of the company and said it was "currently considering an offer price that would represent a modest premium" to the stock's closing price of £3.38 on Wednesday. At that price, it would cost £829 million (Dh4.86bn) for ENOC to buy out the 48 per cent of outstanding shares.
* with Reuters email@example.com Easing the pain of quotas, b6