A new project in Sharjah is set to establish the largest liquefied natural gas (LNG) import terminal in the UAE to help meet growing demand for natural gas in the Northern Emirates.
The scheme is a joint project by state-owned Sharjah National Oil Corporation (SNOC) and German energy company Uniper. The two groups signed a memorandum of understanding (MoU) in October 2016 with the aim of jointly developing a project to receive the first gas imports to the emirate in early 2019.
SNOC also has plans to establish major new gas storage project at the site of the companys Sajaa gas field to start operation in 2021, SNOCs CEO Hatem al-Mosa revealed in a new interview.
Sharjah has been a producer of gas since 1980 when the Sajaa-1 onshore well was drilled, but demand from the Sharjah and the Northern Emirates growing population has long since outstripped its ability meet consumption with local supply.
The LNG terminal will give SNOC an opportunity to use existing pipeline infrastructure as well as its historical knowhow to utilise future import volumes.
The floating storage and regasification unit (FSRU) at Hamiriyah Port is set to be the third LNG import terminal in the UAE following the startup of the Jebel Ali, Dubai, operation in 2010, and the new FSRU installed in Ruwais, Abu Dhabi, in 2016.
According to Al-Mosa, the Sharjah terminal will have an import capacity of 3-4 million tonnes a year (t/y) of LNG and a send-out capacity of 500-1,000 million cubic feet a day (cf/d). This makes it larger than the Dubai terminal (nearly 400 million cf/d) and at least as big as the Abu Dhabi operation (500 million cf/d).
Despite having significant gas reserves, the UAE has been a net importer of gas since 2007 as its rapidly-expanding population and industrial footprint overtook its domestic production capacity. The UAEs efforts to meet growing demand has led to pipeline imports from Qatar, LNG imports and the development of high-sulphur sour gas reservoirs.
Over the last ten years, the market for natural gas has been a sellers market, especially following the Fukushima nuclear disaster in 2011 in Japan, where Japans increased need for LNG inflated prices significantly. This was also a time of high oil prices in which Sharjah lacked a long-term energy supply contract, explains John Roper, managing director and head of Middle East for Uniper Global Commodities.
Al-Mosa adds: Sharjah had to rely on an expensive, unpredictable commodities market. This resulted in Sharjah Electricity & Water Authority (SEWA) selling power for less than its cost of production. The timing is now right for the SNOC deal with Uniper and SEWA, as Sharjah will have a guaranteed gas supply at attractive prices in order to support its demand.
Al-Mosa said that the provision of gas directly into Hamriyah Port in Sharjah will enhance reliability and security of power production to all of SEWAs residential and industrial customers.
In May, SNOC signed a 10-year gas sales agreement (GSA) with SEWA for the supply of gas for three power stations operated by SEWA in Sharjah. Some of the gas will flow from Hamriyah Port directly into the Hamriyah power station, while additional gas will flow to SNOCs Sajaa gas field complex and will supply the other SEWA power stations.
Hamriyah is connected via pipelines to the Sajaa gas field with a capacity of more than 1 billion cf/d. All pipelines in the northern emirates converge at Sajaa, with lines owned by several companies including SNOC, SEWA, Emarat, Dana Gas, Dubai Supply Authority (Dusup) and Dolphin Energy.
Historically the Sajaa Asset, owned by SNOC, was the main supplier of gas to the six northern emirates. This made Sajaa the gas pipeline hub in the northern emirates. With this new LNG project, SNOC will again be able to utilise its vast experience and infrastructure to close the gap between the gas supply and demand in Sharjah and the northern emirates, says Al-Mosa.
The LNG project will require SNOC to increase its gas storage capacity to store excess gas in the winter for its production in the summer to satisfy summer peak demand. Al-Mosa says that SNOC owns the ideal-sized reservoir for such a project at the Sajaa asset but due to the historical shortage of gas it has not been developed.
[The storage project] will also provide a readily available strategic reserve to respond to unexpected operational or market problems, says Al-Mosa.
The project requires significant capital investment. SNOC plans to implement the project in phases, with a target start date of the first phase in 2021. Currently, SNOC is conducting a gas storage pilot test using existing infrastructure to optimise the final project design, he adds.
SNOC looks forward to cooperate with all other gas suppliers and consumers, both local and federal, to achieve the synergies that best serve the interest and growth of UAE as a whole. We do not see this as a competing project with the existing gas business, but rather complementing the big picture, says Al-Mosa, adding that the new terminal will be a strategic project for energy for the whole country.