Overview
The United Arab Emirates (UAE) is a member of OPEC and one of the 10 largest oil producers in the world. It is also ranks within the top 20 gas producers, with output hitting 56 billion cubic metres in 2013.
Abu Dhabi holds the vast majority of the country’s oil and gas reserves. Dubai holds limited reserves, but has forged itself as the commercial and tourism capital. The other five emirates are smaller and poorer in resources.
Power demand across the UAE is growing rapidly in line with a growing population and rising living standards. Furthermore, subsidised gas and electricity prices encourage wasteful use of energy. The government pays AED 0.34/kWh ($0.09/kWh) to provide electricity, and consumers pay as little as AED 0.05 ($0.01) to purchase it.
Abu Dhabi, the largest of the seven emirates, has seen its gas demand rise by an average of 7.6% per year over the past five years. The emirate holds the vast majority of the UAE’s oil and gas reserves but faces a major gas shortage.
Abu Dhabi is focusing on developing complex and expensive sour gas projects to meet its demand and plans to bring online at least 56.64 million cubic metres per day (MMcm/d) of non-associated supply within the next few years.
Abu Dhabi National Oil Co. signed a $10 billion joint venture agreement in 2011 with United States-based Occidental Petroleum to develop the 5.7 trillion cubic metre Shah sour gas field near Habshan, while Shell was selected in 2013 to develop the $10 billion Bab sour gas project, 150 km southwest of Abu Dhabi city.
The emirate has also announced plans to start importing up to 9 mtpa of LNG. Mubadala Development and International Petroleum Investment – both run by the government – revealed plans to build an LNG plant in Fujairah. Dubai has already installed a 3 mtpa floating storage and regasification unit (FSRU) in the port of Jebel Ali.
Despite its growing gas shortage, Abu Dhabi continues to export LNG to Japanese power company Tepco via a facility on Das Island that has been in operation since 1977.
The UAE imports gas from Qatar via the Dolphin Pipeline, a joint venture between Mubadala, Total and Occidental. Dolphin Energy should complete an expansion of the project by the end of 2014 that will increase the pipeline’s capacity to 90.6 MMcm/d.
However, the JV has failed to secure additional gas supplies from Doha. Price remains a key sticking point in negotiations, since Qatar can sell LNG to Asia for $15-18/MMBtu, while Dolphin is only paying around $1.3/MMBtu.
In the longer-term, the UAE is investing heavily into alternative forms of energy, including building four nuclear power stations to provide baseload generation from 2017 to reduce its dependence on gas. By 2020, the country aims to generate 25% of its electricity from by nuclear and around 5-7% by renewables, with the rest from gas. Currently, 96% of its power is gas-fired.
Page updated: 24/09/2014