Qatar to supply more natural gas to the UAE
Qatar has agreed to supply more natural gas to the UAE via the Dolphin pipeline system, with the additional amount earmarked for Sharjah Electricity and Water Authority and Ras Al Khaimah.
The deal was signed in Doha yesterday by Qatar’s prime minister Sheikh Abdullah bin Nasser bin Khalifa Al Thani, and the Abu Dhabi National Oil Company chief executive and Minister of State Sultan Al Jaber.
The long-term sale and purchase agreement is between Qatar Petroleum and Dolphin Energy, although neither party was available to comment on the quantity or other terms of the deal.
The Dolphin pipeline has capacity to carry 2 billion cubic feet of gas per day, or about 25 per cent of the UAE’s daily consumption.
The UAE has been a net importer of natural gas for the past six years as demand has risen sharply, with most of the imported supply coming from Qatar.
The Dolphin network takes gas from Qatar’s huge North Field via a 364-kilometre pipeline to Abu Dhabi’s Taweelah power station, then runs up to the northern emirates, including Fujairah port, and on to Oman.
The UAE has more than 215 trillion cubic feet of natural gas reserves – the world’s seventh largest – but a large portion of the amount produced is used for re-injection into oilfields to maximise crude output. The deposits are mostly very “sour”, meaning they have a high concentration of hydrogen sulphide and are cumbersome and costly to produce.
Adnoc and Occidental Petroleum developed the Shah sour gasfield, the largest of its kind in the world, which came onstream early last year and is feeding in about 500 million cu ft a day, meeting about 10 per cent of last year’s domestic demand.
The UAE’s import needs have risen by more than 20 per cent over the past six years, to about 725 billion cu ft annually.
There had been plans in place for further development, but earlier this year Royal Dutch Shell pulled out of the US$10 billion project to develop the Bab sour gasfield in Abu Dhabi’s western region, citing costs.
Likewise, a project led by Abu Dhabi’s strategic investment company, International Petroleum Investment Company, to build a new liquefied natural gas (LNG) intake terminal at the port of Fujairah has not progressed amid the deep decline in international LNG prices and related services caused by a worldwide glut.
Last month, Abu Dhabi opted for the cheaper option of chartering a floating storage and regasification unit (FSRU) from Texas-based Excelerate to meet domestic gas demand.
While the terms were not disclosed by the companies, the huge waves of supply from projects in Australia, Papua New Guinea, the US and elsewhere have severely depressed prices and made gas a buyer’s market. Last year, worldwide gas trade was surpassed only by oil as the most actively traded commodity, and the surplus of supply over demand reached its highest in a decade, according to data from BP.
Although they have recovered a little since spring, Asian benchmark LNG prices are still down nearly 60 per cent in the past two years, standing at $5.4 per million British thermal unit, in August.
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