Gas development in the UAE

Nov 07, 2001 01:00 AM

Gas is slowly becoming the favourite hydrocarbon resource with world's energy suppliers. More environmentally friendly than either oil or coal for power generation, gas is being used increasingly to power vehicles. The countries of the Gulf are coming to terms with this, although not quite as swiftly as most observers would like.
The region's largest gas project now underway is the $ 3.5 bn Dolphin project, that will -- in its initial phase -- produce and transport Qatari gas for the UAE market from early 2005. Qatar has the largest single gas deposit in the world (over 10 tcm) in its offshore North Field and UAE consumption is estimated to be growing at around 10 % per year, largely through added power generation.
The UAE Offsets Group (UOG) and French energy firm TotalFinaElf, which together own Dolphin Energy Limited (DEL), are due to sign the final development and production sharing agreement with Qatar in the very near future, the group announced on October 15th. More specifically, theQatari oil minister, Abdullah al-Attiyah, said on November 6th that he expected that it would be signed this month.

Among the Gulf-wide gas grids planned since the early 1990s, Dolphin is by far the most significant attempt to implement the general policy of gas distribution. It has been underway for over two years now, but has been delayed by the difficulties of securing cross-border agreements.
In May 2001 the US energy company Enron withdrew from DEL -- of which it had owned 24.5 % -- claiming that the project did not fit with its trading strategy, causing DEL a significant setback. Enron was to have built to 350 km undersea pipeline to transport 2 bn cfpd of gas from Qatar to the UAE.
Five international oil companies- BP, Conoco, ExxonMobil, Occidental and Shell- have been short listed by UOG to buy Enron's stake in the project. They are expected to submit their offers by the end of December and the successful applicant will be announced in early 2002. DEL has also said that it will soon selecta financial advisor. On October 22nd, UOG announced that it had received a total of eight bids for two front-end engineering and design (FEED) contracts, one for the upstream end and one for midstream.

The upstream production facilities at the Khuff formation of Qatar's huge North Field and the gas collection network and the processing plant as Ras Laffan is expected to cost DEL around $ 2 bn. The undersea pipeline to Abu Dhabi and Dubai -- and their respective receiving terminals -- will cost an additional $ 1.5 bn, with existing pipelines to be used to distribute the gas locally.
Technical bids have already been submitted for a pipeline to transport it between the Abu Dhabi and Dubai. All the companies bidding for the upstream and midstream projects -- France's Technip is the only one involved in bids for both contracts -- are foreign, largely from the US. The winner is scheduled to be announced in early December.
Much of the increase in demand for gas in the region -- around 7 % per year -- comes from its use in power generation. However, due to the lack of proper distribution systems, gas-rich countries such as Qatar cannot easily export their gas to neighbouring markets. This has led to an overall gas deficit in the GCC, expected to rise to 4.5 bn cfpd by 2005, according to Naji Abi-Aad of the Observatoire Mediterraneen de l'Energie.

As the Gulf countries have explored intra-Gulf distribution, led by the Dolphin project, they have also looked to increase their gas exports to other regions of the world and their processing facilities. Oman and Qatar have led the way in the GCC for increasing production in 2000 over 1999, by 56.6 % and 18.8 % respectively, according to the Oil and Gas Journal. The UAE pushed its production up by 4.7 % in 2000, producing 39.8 bn cm, almost twice the volume ten years ago. This is set to increase in the coming years, as Abu Dhabi Gas Liquefaction (ADGAS) announced in mid-October that it is to expand its facilities.
A new LPG facility will be built on Das Island, processing around 1 mm tpy, with plans to add a LNG plant at a later unspecified date. The company already operates three LNG trains with a combined capacity of around 5.4 mm tpy. Gas sales netted the UAE around $ 1.5 bn in 2000.

Source: UAE
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