UAE purchases gas from Dolphin pipeline at reduced rate

16 May 2008

The UAE is buying gas from Qatar’s cross-border Dolphin pipeline at a cut-price rate, helped by modest annual inflationary rises well below the double-digit increases elsewhere in the Gulf.

One senior Qatari energy official close to the developer, Dolphin Energy, tells MEED that UAE utilities including Dubai Supply Authority (Dusup) and Abu Dhabi Water & Electricity Company (Adwec) are paying just $1.25 a million BTUs of gas. That compares with a regional benchmark of about $5 a million BTUs and the international average of about $12 a million BTUs.

Shareholders involved with the project have never commented on the pricing or structure of the deal. “When the deal was first negotiated in 2001, prices were very different and no one was to foresee that by 2008 ,oil and gas prices would hit new records,” says the executive.

He adds that under the 25-year supply agreement UAE utilities and the Oman Oil Company have signed with Dolphin, there is an inflation clause linked to the contract, with prices rising by the “low single digits” each year over the course of the agreement.“At the time of the original agreement, prices and inflation were lower,” says the executive. “You would not see a deal like this in the current environment.”

In 2007, Qatar Petroleum charged Korean Gas Company (Kogas) about $11 a million BTUs for a 20-year liquefied natural gas deal between the two countries while Qatar Liquefied Gas Company (Qatargas) recently charged Japanese buyers up to $12 a million BTUs for gas.

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