x Abu Dhabi, UAEWednesday 26 July 2017

Dubai aims to spend to cut its gas bill

Dubai is hoping to buy overseas energy assets in an attempt to reduce its bill for importing gas.

Visitors at Dolphin Energy's booth during ADIPEC 2008. Dubai receives some of its gas from Doha through the Dolphin pipeline. Jaime Puebla / The National
Visitors at Dolphin Energy's booth during ADIPEC 2008. Dubai receives some of its gas from Doha through the Dolphin pipeline. Jaime Puebla / The National

Dubai is hoping to buy overseas energy assets in an attempt to reduce its bill for importing gas.

The emirate relies heavily on imports to meet its energy needs and is paying a high price for liquefied natural gas (LNG) bought at fluctuating prices on the international markets.

"We are looking at how we can really secure the supply in the long run through different sources and options," said Nejib Zaafrani, the chief executive of the Dubai Supreme Council of Energy (DSCE).

"If you have assets, you reduce your exposure to market prices," he added.

However, he declined to elaborate on what energy assets Dubai might be buying.

Power generation in the emirate is based around natural gas. About 99 per cent of all electricity is produced by power plants fuelled by LNG.

The DSCE expects that proportion to drop as plans for a large-scale solar park are implemented. But even that, along with the possible construction of a coal-fired power station and potential imports of electricity generated in Abu Dhabi's nuclear reactors, would not reduce the share of gas in the energy mix to below 71 per cent, according to the council's long-term plans.

The enduring reliance on gas has prompted the DCSE to consider ways to lock in the supply.

"We are looking at all the options within the UAE, within the region and then beyond the region," said Mr Zaafrani.

"The decision will most likely take place before the end of the year."

Dubai receives some of its gas from Doha, one of the world's biggest exporters, through the Dolphin pipeline, which connects Qatar's enormous North Field with Taweelah in Abu Dhabi.

The gas flowing into the UAE from Qatar's abundant reservoirs is cheap, as the price is locked in at 2007 levels.

However, Dubai is forced to import extra LNG from the international market during the summer months, when the searing heat drives up electricity consumption, fuelling increased imports.

This exposes the emirate to the vagaries of the international gas market.

LNG imported into the region is sold at Asia-Pacific prices, which have climbed since Japan replaced its nuclear power with gas-based generation in the wake of last year's disaster at the Fukushima nuclear plant.

The Dubai Electricity and Water Authority (Dewa) passes on the additional costs of LNG imports to consumers, who are already smarting from a string of tariff increases, with a fuel surcharge.

But then, Dubai is not the only emirate having to turn to the international markets for additional gas.

Burdened with a soaring increase in demand for electricity, Abu Dhabi is deploying a floating regasification terminal in Fujairah and the LNG import facility will become operational in 2014.

Adding the Fujairah terminal to an existing facility in Dubai positions the UAE as a potential gas trading hub able to establish a price for LNG sold into the region, Mr Zaafrani believes.

"The opportunity is there in the longer run because there is no gas price for the Middle East yet," he said.

fneuhof@thenational.ae

twitter: Follow and share our breaking business news. Follow us

iPad users can read the digital edition of business section as it was printed via our e-reader app. Click here