As Qatar, the UAE and Oman formally inaugurated the cross-border Dolphin gas pipeline in mid-May, energy-hungry neighbours such as Kuwait and Bahrain could be forgiven for regretting their decision not to import Qatar gas when talks first started in the 1990s.

Qatar’s Energy Minister Abdullah bin Hamad al-Attiyah said at the inauguration ceremony that while he was pleased with the tripartite agreement, one of the original ideas was to create a Gulf-wide energy grid with gas supply pipelines to other GCC countries.

“It was a point of discussion in the 1990s,” he said. “But at that time, not many Gulf countries thought they would require additional gas. Some other states thought they did not need it.”

A decade on, and the UAE and Oman have started receiving much-needed supplies. About 1.65 billion cubic feet a day (cf/d) of gas has been allocated to UAE customers, with the balance, about 200,000 cf/d, set aside for Oman.

Al-Attiyah said that as an emerging producer in the 1990s, he could not wait for others to solve their regional or national problems. “We were already committed to supply Kuwait at that time but Kuwait and Qatar did not receive permission to use the water [and build the pipeline through Saudi water], so the project finished,” he said.

Gaining consent

The issue of Saudi consent also arose in 2006, when Riyadh wrote to companies involved in the Dolphin project claiming part of the pipeline ran through Saudi territorial waters and it therefore required Riyadh’s written consent.

Through the 360-kilometre sub-sea pipeline, Doha has secured another export outlet for the vast reserves of its North field gas reservoir, while the UAE has bolstered its gas supplies by one-third. The project was first conceived in 1998 by the government-owned UAE Offsets Group (UOG), out of which Mubadala Development Company was subsequently formed. While there was strong political will for linking the three countries through an energy grid, its passage was far from assured, with several other cross-border pipelines promoted by the US’ Arco and Sharjah-based Crescent Petroleum falling by the wayside.

Surging budget

In 2001, Dolphin Energy lost one of its original foreign shareholders when the US’ Enron Corporation decided to relinquish its stake, and was replaced by the US’ Occidental Petroleum. The budget has also surged from an initial $3bn to nearly $5bn, although that level of cost inflation has been modest compared with other energy projects in the region.

Despite these initial hiccups, the implementation of the pipeline has been mostly smooth since natural gas started flowing in July 2007.

Long-term customers for the gas, including Abu Dhabi Water & Electricity Authority (Adwea) and Dubai Supply Authority (Dusup), have signed 25-year contracts with Dolphin and are eager to receive more supplies, according to Adel al-Buainain, Qatar manager for Dolphin Energy. “Demand is high and we have a limited supply of 2 billion cf/d, and we have this long-term uninterruptible supply agreement to our customers,” Al-Buainain tells MEED.

Under Dolphin’s original deal with Qatar Petroleum, the sub-sea pipeline has a design capacity of 3.2 billion cf/d, meaning it can theoretically handle an extra 1.2 billion cf/d of gas under a second-phase programme.

The three shareholders – Mubadala Development Company (51 per cent), Total (24.5 per cent) and Occidental (24.5 per cent) – are anxious to agree the increase in output but concede the decision is ultimately tied to Qatar’s moratorium on exploration in the North field, where Dolphin currently receives its gas. “We still have capacity in the pipeline of 1.2 billion cf/d but we are not going to start any negotiation until QP says we can start talks,” says Al-Buainain.

High demand

He says there is little doubt the extra capacity can be filled. “We get requests from new buyers who want to buy gas from Dolphin, and we are also getting more requests from the existing buyers who are looking for more gas,” he says. “But of course, they [Qatar] have the right to do some analysis and to see whether the field or wells are capable of giving us more gas.”

The initial construction and commissioning phase for Dolphin involved the drilling of 24 offshore wells, but Al-Buainain says it is too early to know whether more drilling is needed. “That is all subject to a survey of whether these wells can produce more or whether we need to drill more,” he says.

Dolphin supplies of about 200 million cf/d were originally expected to be flowing to Oman by June, but have been delayed because of compression problems in the sultanate. “In August or September, we expect the gas to come to Oman,” Ahmed Al-Wahaibi, chief executive officer of Oman Oil Company, told MEED at the Dolphin ceremony. “There is an issue with the gas compression [and] it is on our side of the pipeline.”

According to Oman Gas Company, a compression station is under development at its Buraimi plant to facilitate the import of low-pressure gas from the UAE to Sohar.

Oman could do with the long-awaited supplies. According to its Oil & Gas Ministry, demand in the sultanate will reach 3.8 billion cf/d by 2010, well above planned supply of 2.6 billion cf/d. Al-Buainain says the gas is ready to flow from the UAE side and Dolphin has not been asked by the Omanis for any assistance on its compression problem. “This is something from within the Oman border so it is for them to sort out,” he says. “From our side, we are ready. The gas can start being exported at any time.”

In the interim, Dolphin has been selling the extra gas to the northern emirates of Ras al-Khaimah and Sharjah.

Al-Buainain also reveals that the pipeline has been used to receive surplus gas from QP’s other operations in the North field. “It is not just from the wells but sometimes it has been assigned to other natural gas users in Ras Laffan,” he says. “It has not been utilised, so QP talks to us and says ‘we have excess gas, can you take it and sell it?’ We buy it on a spot price and we send it up to the capacity we can afford.”

Ultimately, Al-Buainain says, the 1,100-strong team behind the pipeline are not looking to develop any future projects other than developing the potential existing capacity. “If we do the 1.2 billion-cf/d expansion here, we will hardly have enough people to manage this,” he adds. “We just have to wait to hear from QP, but we are very pleased with hitting the 2 billion-cf/d mark with no problems.”