DEL sets out Dolphin details

22 March 2002

Dolphin Energy (DEL) is aiming to conclude gas sales agreements with customers in the UAE by September, DEL chairman Ahmed Ali al-Sayegh announced on 19 March. Speaking at the MEED Congress in Dubai, Al-Sayegh also confirmed that the five companies shortlisted for the post of midstream partner in DEL had been requested to submit two separate bids - covering a 20 per cent stake and a 24.5 per cent interest - by the 6 April deadline. Al-Sayegh was speaking a day after DEL announced that it was planning to build a gas pipeline from Al-Ain to Fujairah to supply gas feedstock to the Qidfa desalination project, which is under construction by Union Water & Electricity Company (UWEC- MEED 15:3:02).

In a comprehensive project update on the estimated $3,500 million pipeline, Al-Sayegh said that a joint management committee, headed by Qatari Energy & Industry Minister Abdulla bin Hamad al-Attiya, had now been set up between Qatar Petroleumand DEL to oversee the Qatari side of the project. He also said that the first appraisal well had been completed in Qatar's North field reservoir and that a second would be drilled soon.

On upcoming milestones, Al-Sayegh said that the most important would be the signing of emiri decrees in Qatar and Abu Dhabi. Due to be issued by the end of March, the first emiri decree would formally establish the DEL operating company in Qatar, while the second would formalise the establishment of the DEL holding company for the upstream and midstream works in Abu Dhabi.

The emiri decrees will be followed by the selection of a new midstream partner, expected by June, Al-Sayegh said. The five prospective bidders are Conoco, ExxonMobilCorporationand Occidental Petroleum Corporation, all of the US, the UK's BPand the Royal Dutch/Shell Group.

DEL is initially aiming to conclude gas sales agreements in the UAE with three customers. Abu Dhabi Water & Electricity Authority (ADWEA) is expected to take about 1,000 million cubic feet a day (cf/d), Dubai Supply Authority (Dusup) between 1,000 million and 1,500 million cf/d, and UWEC 150 million-160 million cf/d. Given that the pipeline will have a capacity of 3,200 million cf/d, further agreements are likely over the medium term. UWEC will require additional supplies for a planned expansion of its desalination plant. Al-Sayegh also said that there was the potential to supply a further 500 million cf/d of Dolphin gas to other customers in the federation.

Once the gas sales agreements have been signed, the focus on Dolphin will shift to the financing and engineering, procurement and construction (EPC) bidding. DEL is looking to finance the project through a 70:30 debt/equity package, with the debt expected from various sources. DEL's financial adviser , Credit Suisse First Boston, has been requested to look at four possible finance sources - a commercial loan, an Islamic loan, a bond, and export credits. During the summer, the financing information memorandum is due to be sent out to banks, with financial close scheduled for March 2003 (see Banking & Finance).

On the construction, Al-Sayegh said that DEL was looking at five separate EPC packages, although the final number could change. The five packages under consideration are: the upstream platforms in the North field; the process plant at Ras Laffan; the 440-kilometre subsea pipeline from Qatar to the UAE; receiving facilities in the UAE; and a gas distribution network in the federation.

Al-Sayegh stressed that wherever possible Dolphin will be looking to use existing gas infrastructure, a point underlined on 18 March, when DEL announced its plans to supply the UWEC desalination plant in Fujairah with Dolphin gas. Under the plan, DEL will transport gas from Taweelah - the Abu Dhabi landing point for Dolphin gas - through the existing 30-inch gas pipeline running via Maqta to Al-Ain, operated by Abu Dhabi National Oil Company (ADNOC). The gas will be then delivered at Al-Ain into a new 175-kilometre, 24-inch-diameter pipeline, to be built by DEL, to the UWEC plant at Qidfa.

The new pipeline, estimated to cost about $100 million, will be implemented on a fast-track basis so as to coincide with the commissioning of the desalination plant in mid 2003. DEL says the timescale is realistic, particularly since the gas pipeline will run parallel to the under-construction twin water pipeline connecting Qidfa to Al-Ain. The pipeline will have a maximum capacity of up to 500 million cf/d, but will initially run at 130 million cf/d, sufficient for the phase 1 Qidfa development. With Dolphin gas not due to arrive in the UAE until 2005, ADNOC will initially supply Qidfa with gas feedstock.

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