Gas-hungry Dubai importing LNG, eyes role as hub

Bob Tippee
Editor

The romance between Dubai and natural gas gained intensity last year when the go-go emirate became the Persian Gulf’s second importer of LNG.

Even before it became a glitzy tourist destination with a construction boom that hit heavy weather in the financial collapse of 2007-08, Dubai had outsize gas needs. In an early diversification move, the government built one of the world’s largest aluminum smelters, which began operation in January 1980. The complex craves electricity, most fueled by gas.

Now, says a report by Siamak Adibi of FACTS Global Energy, the emirate meets its gas demand of about 1.5 bscfd with pipeline imports from Qater, Abu Dhabi, and Sharjah. It’s also importing LNG via a floating storage and regasification vessel with peak capacity of 400 MMscfd at Jebel Ali.

The gulf’s other LNG importer is Kuwait, which uses a floating system to handle summertime demand peaks.

Dubai produces gas offshore but reinjects it into oil fields well into decline. The only gas available for domestic use comes from Margham gas field, which soon will revert to storage.

Dubai’s imports from Sharjah come via a 93-km pipeline from offshore Mubarak gas field. Imports through a land pipeline from Sharjah’s onshore fields are now negligible.

The financial crisis rocked Dubai but only slowed development and associated growth in the need for power: to an expected average of 8-10%/year through 2015 from 12%/year in 2005-09. Despite governmental flirtations with coal and solar power, gas will remain the main energy source.

Adibi expects Dubai to become a gas hub, importing LNG and exporting gas through existing pipelines to northern emirates. “Dubai also sees itself as setting up a potential market price for LNG through its spot purchases and perhaps at a later time float a paper contract for gas on the Dubai Mercantile Exchange,” the analyst says.

For a little oil producer with boundless ambitions, this should prove no more challenging than, say, building professional-quality golf courses in the Middle Eastern desert.

(Online Jan. 21, 2011; author’s e-mail: bobt@ogjonline.com)

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