Massive gas discovery pushes UAE closer to self-sufficiency

The Jebel Ali discovery dovetails perfectly with the Emirates’ gas ambitions.
Friday 14/02/2020
A General view of the ADNOC headquarters (L) and Emirates Towers (R) in Abu Dhabi. (Reuters)
Moving into a new phase. A General view of the ADNOC headquarters (L) and Emirates Towers (R) in Abu Dhabi. (Reuters)

A massive natural gas discovery on the border of Abu Dhabi and Dubai is likely to speed up the United Arab Emirates’ aspirations for attaining gas self-sufficiency and to becoming a net gas exporter.

In reaching those targets, the United Arab Emirates could dispense with piped Qatari gas supplies that have been helping it meet its electricity needs for more than a decade.

The United Arab Emirates announced that Abu Dhabi state oil and gas firm Abu Dhabi National Oil Company (ADNOC) had discovered the Jebel Ali shallow gas field between Abu Dhabi and Dubai. With estimated gas reserves of 80 trillion cubic feet (tcf), the Jebel Ali field is the largest global gas discovery in 15 years and thought to be the fourth-largest gas discovery ever.

The discovery was the result of ADNOC’s first exploration efforts in Dubai and involved the state firm drilling exploration and appraisal wells. That the find involves shallow gas reserves is significant because the gas can be extracted relatively easily at low development costs.

ADNOC and Dubai Supply Authority (DUSUP) signed an agreement to jointly explore and develop Jebel Ali’s gas resources.

Gas from the field “will be supplied to DUSUP to support Dubai’s economic growth ambitions and enhance its energy security,” a statement from ADNOC said. DUSUP is responsible for delivering gas to fuel Dubai’s utilities and industrial facilities.

ADNOC said the agreement called for it and DUSUP “to deploy capital, technology and expertise to develop and produce shallow gas resources and to conduct exploration to assess further volumes and firm up development costs.”

The Jebel Ali discovery dovetails perfectly with the Emirates’ gas ambitions. In November 2018, the Abu Dhabi Supreme Petroleum Council greenlighted ADNOC’s 5-year (2019-23) growth plan and integrated gas strategy that called for $132 billion in capital expenditures to expand the company’s oil and gas production facilities.

That growth plan, Abu Dhabi Crown Prince Mohammed bin Zayed al-Nahyan said, included “its gas strategy to [enable ADNOC to] become self-sufficient and a net gas exporter.” The United Arab Emirates has said it intends to be gas self-sufficient by 2030 and have enough spare output to become a net gas exporter.

Recent discoveries in Abu Dhabi and Sharjah boosted the United Arab Emirates’ positioning in global rankings of oil and gas reserves. In November, the Emirates’ Supreme Petroleum Council announced that the seven-member federation’s oil reserves rose by 7 billion barrels to 105 billion barrels and its conventional gas reserves increased 58 tcf to 273 tcf.

“We are honoured to have enabled the UAE to move from the seventh- to the sixth-largest oil and gas reserves in both global rankings,” said UAE Minister of State and ADNOC CEO Sultan Ahmed al-Jaber.

The United Arab Emirates became a net gas importer in 2008 as it faced growing domestic power needs at the same time it was using gas to reinject into its oil fields to enhance crude output. The United Arab Emirates consumes approximately 7.4 billion cubic feet per day (bcf/d) of gas, requiring an estimated 30% of its gas demand to be met by imports. Dubai alone uses around 1.5 bcf/d, the majority of which is satisfied by liquefied natural gas (LNG) imports.

Much will depend on further appraisal of the Jebel Ali field to determine the full extent of the reserves and how much gas can be extracted. One estimate suggests that the field has the potential to satisfy the United Arab Emirates’ gas demand for 30 years. A rapid first development phase of the Jebel Ali gas field could free Dubai from its LNG imports by as early as 2025.

Development of Jebel Ali and other recent gas discoveries in Abu Dhabi and Sharjah will push the United Arab Emirates closer to gas self-sufficiency and could end Qatari piped gas supplies that it has been reliant upon for more than a decade. The United Arab Emirates has been receiving up to 2 bcf/d of Qatari gas through the Dolphin pipeline project since 2007.

Abu Dhabi sovereign wealth fund Mubadala Investment Company is a 51% stakeholder in Dolphin Energy, the joint venture that owns and operates the Dolphin pipeline carrying gas from Qatar’s North field to customers in the United Arab Emirates and Oman. US-based Occidental Petroleum Corporation and France’s Total both hold 24.5% shares in the joint venture.

Qatari gas has continued to flow through the Dolphin pipeline to the United Arab Emirates despite the two-and-a-half-year diplomatic and economic blockade that Abu Dhabi, Riyadh and others have imposed on Doha. The Dolphin supply contract is to expire in 2032 but the United Arab Emirates may well be swimming in its own gas by then and already drastically reduced Qatari supplies.