A little over a year after it was officially launched, the UAE Offsets Group's ambitious $8-10 billion Dolphin gas supply project is developing a more concrete shape.
The recent signature of an agreement to bring Enron Corp. and TotalFinaElf SA unit Elf Aquitaine on board as operators of the respective pipeline and upstream portions of the project was widely viewed as the most crucial watershed to date in an effort that seeks to create a pipeline supply infrastructure linking Persian Gulf gas supplies with the gas grids of the UAE, Qatar, Oman, and ultimately Pakistan.
Elf Middle East Vice-Pres. Gérard Sassus-Bourda considers the recent signature of a UAE Offsets Group (UOG) partnership agreement as one milestone in a process that began almost 20 months ago. The three-pronged 25-year, Dolphin project development agreement partnership was signed Mar. 1, 2000, by both Elf and Enron.
The Dolphin project aims to supply the UAE, and later Oman, with gas from Qatar's supergiant offshore North field. The project will include construction of a pipeline connecting Qatar, Abu Dhabi, and Dubai (with an additional one planned later for Oman) and construction of the infrastructure needed to process and to distribute the gas to end users.
UOG will have a 51% interest in Dolphin, with Elf and Enron each holding 24.5%. Enron will be the transportation operator and Elf the upstream operator.
Dolphin Program Director Hatem Fawzy said UOG now is focusing on converting initial memoranda of understanding into sales and purchase agreements with governments and agencies by the end of the year.
He hinted that more major energy companies are likely to link up with UOG on Dolphin on the downstream side. The scope of the Dolphin encompasses a wide spectrum of downstream projects, notably supplying gas to power plants, industrial customers, EOR project operators, and petrochemical plants.
Among the early MOU signees was Mobil Oil Qatar Corp. for the supply of 300-500 MMcfd of gas as the first step in the Dolphin project (OGJ, July 5, 1999, Newsletter). Mobil's commitment, however, represents only a small part of the project, delivering gas from its existing concession in North field; it does not entail a significant investment.
UOG also signed agreements to be the exclusive supplier of gas to the Abu Dhabi Water & Electricity Authority-except in the western region-to will supply all of the gas that Abu Dhabi National Oil Co. has committed to deliver to Dubai.
Pakistan also signed an MOU with UOG that paves the way for UOG to submit a firm proposal to supply and transmit 1.0-1.5 bcfd of gas to Pakistan.
Following the Pakistan agreement, Dubai joined Dolphin by signing an MOU under which it will purchase 200-700 MMcfd of gas and pursue opportunities for related downstream investment.
Elf view
For Sassus-Bourda, the project has already taken off for Elf through negotiations on the two North field blocks that the company will initially develop. Negotiations include what kind of contract will be signed, price of gas delivered, and technical conditions.
Elf proposes development of the blocks with onshore treatment of the gas and associated liquids produced through multiphase flow. Offshore installations will consist of unmanned wellhead platforms. Development of the field should start in 2002, and it is expected to be on stream in 2003, with first delivery to Abu Dhabi sometime in 2004-05.
Construction of the 800-km pipeline linking the production area to Abu Dhabi and field development will take place in parallel. At least two blocks will be developed in a first stage for initial gas production of 15 billion cu m/year. Sassus-Bourda said the investment over the next 5-6 years would range from $8 billion to $10 billion.
"Financing of the project," he said, "is still open. The matter will be treated when the final agreements with the governments for the delivery of the Qatari gas are secured. Traditionally, TotalFina and Elf finance projects out of their own capital. One could imagine a mix including also bank financing under the three-pronged partnership."
For TotalFinaElf, this is a very important project, insisted Sassus-Bourda, who was bullish about extending the project beyond Oman to Pakistan and India, countries with growing gas needs. He also said this project does not compete with TotalFinaElf's Iranian Sirri field development in the Persian Gulf: "Only small quantities of gas are being delivered to Dubai, about a tenth of the Dolphin quantities."
The Dolphin project also does not interfere with Totalfina's stakes in four LNG installations in the Middle East, he said, because that gas is directed to Japan and South Korea while Dolphin gas is geared to serving Persian Gulf countries' growing needs. "Conditions for the Dolphin project are now installed," he concluded, "and the proceedings now continue."
