Dubai gas requirements currently stand at 885 million-965 million cubic feet a day (cf/d). Since June, its biggest supplier has been Abu Dhabi National Oil Company (ADNOC), which has been delivering an estimated 450 million-500 million cf/d through the 130-kilometre gas pipeline connecting Maqta in Abu Dhabi emirate to Jebel Ali. Sharjah, traditionally the emirate’s largest supplier, is delivering an estimated 220 million-250 million cf/d – about half the volume it was supplying in the mid-1990s. The remainder, about 215 million cf/d, is made up supplies from Dubai’s onshore Margham field.

Most of the gas is used for power generation by Dubai Electricity & Water Authority (DEWA). Demand for power in the emirate is surging however, rising by by 6-8 per cent a year prompting DEWA to embark on a major investment programme. In 2000, DEWA used a total of about 125 million million BTUs of gas as feedstock for power generation. By 2003, demand will be substantially higher with the commissioning of the 850-MW Jebel Ali K co-generation plant; two years later, Jebel Ali L is due to come on stream with capacity of 700 MW.

DEWA’s investment programme reflects growing demand for energy, particularly from the residential and commercial sectors, which consume 71 per cent of the total power generated. The government has announced plans to invest about $9,000 million in major infrastructure development, entertainment and commercial projects over the coming five years. Among the projects planned are the $3,000 million Palm Islands development, the estimated $1,650 million Dubai Festival City project, and the $2,500 million Dubai International Airport expansion.

At the same time, the emirate’s plans to develop industry are being handicapped by the lack of gas. A gas sale and purchase agreement has still to be signed between Dubai Supply Authority (Dusup) and India’s Southern Petrochemical Industries Corporation (SPIC) for SPIC’s proposed fertiliser plant in Jebel Ali. In late February, SPIC received a letter from Dusup detailing the authority’s commitment to supply 40,000 million BTUs a year of natural gas for 15 years. Nine months on, the contract has still to be signed.

Gas supply problems have also been cited as the main obstacle hindering Dubai Aluminium Company’s (Dubal’s) plans to expand its Jebel Ali smelter. Originally, Dubal had proposed a 350,000-tonne-a-year (t/y) expansion, in a scheme dubbed Heron. Now it appears to have lowered its sights, announcing in mid-November that it was looking at a 155,000-t/y expansion.

The expansion of generating and industrial capacity means the government-owned Dusup – which is responsible for procuring feedstock for DEWA – has had to take action to secure additional volumes of natural gas. The focus is on increasing supplies from indigenous sources, as well as securing new volumes from outside the UAE.

The Margham field, operated by the state-owned Margham Dubai Establishment (MDE), produces about 300 million cf/d of gas and 20,000 barrels a day (b/d) of condensate. Gas produced from the onshore field is piped to DEWA, while condensate is supplied to Emirates National Oil Company (ENOC) for its 120,000-b/d refinery at Jebel Ali.

To make up for the growing shortage, MDE has finalised plans to invest about $40 million-45 million in developing the gas and condensate-bearing structure at Margham. The project has long been on the government’s agenda and is now moving ahead. In early August, Canada’s VECO Engineering was appointed as project management consultant for the scheme and up to five companies are preparing to submit bids by early December for the engineering, procurement and construction (EPC) contract. The project involves installing facilities to maintain production and increase supplies of natural gas. The EPC package calls for the installation of a new control system for the operation of the gas-processing plant, a new inlet gas compressor, an additional slug catcher and modifications to the existing process train. MDE is also planning to carry out a 3-D seismic survey of the field.

The Margham development, targeted for completion in late 2003, will not be sufficient to meet Dubai’s demand for gas. ‘This [the Margham development] is a minor project aimed at maximising Dubai’s indigenous reserves. The supply of gas will still be small compared to the demand,’ says an official at an Abu Dhabi-based Western oil company.

The projected increase in demand has made Dusup look to other emirates for additional natural gas. ADNOC subsidiary Abu Dhabi Gas Industries Company (Gasco) is planning to double the throughput of the Maqta-Jebel Ali pipeline. Up to four international companies are expected to submit commercial bids by the end of this month for the front-end engineering and design (FEED) contract on the scheme. Construction work on the estimated $15 million-20 million project – for completion by early 2003 at the latest – will cover the installation of a compressor unit at Habshan in onshore Abu Dhabi, booster units at Maqta and modifications to the existing Jebel Ali gas recovery station.

Dusup has also sought out supplies further afield. In 1999, the authority signed a memorandum of understanding with Abu Dhabi-based UAE Offsets Group (UOG) for 200 million-700 million cf/d of Qatari gas to be supplied under the proposed $4,000 million Dolphin gas project. Industry analysts say a detailed gas sales agreement will be signed once Dusup and UOG agree on a price for the gas, which is due to start arriving in Dubai in 2004/05.

The Dubai government is also keeping another option open – piping gas from the Sirri fields in Iran. However, as one industry source points out: ‘Supplies of natural gas from Sirri have political implications and Dubai is aware of this aspect.’

Dusup is expected to come up with a long-term answer to the gas supply issue – but it needs to act quickly to prevent the emirate’s gas shortage from turning into a real threat to development.

Ashok Dutta