x Abu Dhabi, UAEThursday 27 July 2017

A united front will help region take on 'magnificent seven'

Thirty nine years after it was founded, the UAE faces two challenges on the energy front.

Thirty nine years after it was founded, the UAE faces two challenges on the energy front.

As Nejib Zaafrani, the secretary general and chief executive of the Dubai Supreme Council of Energy, astutely observed last week, the MENA countries need to co-operate to satisfy their future energy demands in an environmentally acceptable way.

And, as well as working with its neighbours, the UAE needs to strengthen its internal energy policy.

It was clear to all in 1971 that Abu Dhabi's vast hydrocarbon wealth would be crucial in cementing the union of the seven emirates that make up the UAE, supported by Dubai's oil earnings and diversified economy.

To their great credit, Abu Dhabi's and Dubai's leaders spent generously to build federal links and develop the less wealthy emirates. It was always recognised, though, from Article 23 of the Constitution, that the individual emirates would maintain sovereignty over their natural resources.

That principle will undoubtedly remain. But, more than ever, Abu Dhabi is now the energy heavyweight of the nation. While its oil and gas production continues to rise steadily, that of Dubai, Sharjah and Ras al Khaimah is modest and in decline; little reserves of note have been found in the other emirates.

Indeed, all the emirates bar Abu Dhabi are now net energy importers. This demands completely different thinking: instead of acting like Kuwait, they now need to emulate Singapore, with an emphasis on efficiency, energy security and integration into the global energy economy.

There are key issues for Federal energy policy. As a priority, with Sharjah suffering routine summer blackouts and new buildings in Ras al Khaimah standing empty for lack of power, the electricity problems of the Northern Emirates need solving.

The recent completion of a section of the Dolphin gas pipeline from Taweelah in Abu Dhabi to Fujairah to feed a new 2,000 megawatt power station is an important step. Further expansion of the country's gas grid is essential, as well as the construction of storage facilities to balance demand between summer and winter.

Acquiring new gas supplies is challenging, given the moratorium on further developments in Qatar and continuing political and commercial problems with Iran. As far as possible, the emirates should work together on these initiatives, recognising that the days of ultra-cheap Gulf gas are over.

With Dubai now a liquefied natural gas (LNG) importer, there is scope for joint purchasing and perhaps acquisition of equity stakes in LNG projects, a strategy pursued with success by Japan, South Korea and China. The same is true if coal becomes a major part of the energy scene.

And as well as a gas grid, the emirates need to collaborate on a carbon dioxide network to dispose of the emissions responsible for global warming safely underground. In the long term, this is crucial for maintaining Abu Dhabi's hydrocarbons as a viable source of world energy, while defending Dubai's tourist image.

Nuclear power should not be an initiative limited to Abu Dhabi. It is even more appropriate for the other emirates, given their lack of gas supplies. But there is no need for all to work on it independently. Saturday's announcement by the US consultancies Lightbridge and Exelon that they would help all six GCC nations develop a civil nuclear power strategy is very welcome.

A more integrated energy strategy can play to the UAE's geographic advantages. The new oil pipeline from Abu Dhabi's Habshan field to Fujairah is an excellent example of diversifying export routes.

Siting new desalination plants in Fujairah, with its deepwater access to the Indian Ocean, reduces the risk of an oil spill or other accident in the Gulf fouling existing facilities. It also ameliorates the environmental impact of discharging hot, saline effluent into the Gulf's shallow waters. Furthermore, the east coast is a good location for nuclear plants and LNG or coal import hubs.

On the commercial side, the emirates should also consider how well yesterday's model serves today's needs. In a relatively small country, with only one major hydrocarbon producer, there are effectively five national oil companies and four state electricity utilities.

While this situation will probably continue, the utilities in particular all face very similar challenges and can benefit from sharing resources. Liberalisation of the property and financial industries has proved successful; now it may be time to make more use of private capital and expertise, domestic and foreign, in the energy sector.

All the GCC countries have similar climates and economies, much more so than different US states or European nations.

With a relatively small regional research base, certainly not on the scale of California's Silicon Valley or the UK's Cambridge Cluster, studies into alternative energy and energy efficiency will be much more effective if carried out collaboratively. As well as the GCC, other MENA countries such as Jordan, Egypt, Algeria and Morocco have valuable experience to share.

This leads us to the "magnificent seven" issues to be pursued at countrywide and regional levels: solar power; nuclear power; carbon capture and storage; a wider gas grid; architecture suited to desert climates; a gradual removal of energy subsidies; and proactive climate diplomacy. The UAE still has some luxury of time in solving its energy challenges; an appropriate celebration of its anniversary would be to redouble its collective efforts.

Robin M Mills is an energy economist based in Dubai and author of The Myth of the Oil Crisis and Capturing Carbon