The
natural gas shortage in the Middle East has again cast its shadow over the
ongoing crises in the Arabian Gulf region. While the region as a whole controls
more than 40% of global gas reserves, its countries, with the exception of
Algeria and Qatar, face a critical lack of supply.
The
combined gas reserves in the Gulf Cooperation Council (GCC) total about 1,500
Tcf, but much of it is associated gas and expensive to extract.
Because
it is dependent on the Dolphin gas pipeline that links it to Qatar, the UAE has
relatively limited immediate options to replace the 2 Bcf/d of gas it imports
if Qatar decides to cut off exports to that country. That is considered
unlikely to happen.
The
UAE also has an LNG import terminal in Dubai with a capacity of 3 mpta and
plans to build another terminal in Fujairah with a capacity of 9 mtpa. The
country also faces a deficit of 2 Bcf/d during the peak summer season. It is
estimated the UAE will need another 5 Bcf/d for extra power capacity by 2019.
The
UAE is having difficulty producing enough gas to meet domestic requirements,
though it holds about 5% of the world’s proven reserves. Much of it is
sulfur-laced sour gas, which is expensive to produce. Sour gas is highly
corrosive, and generally more challenging to process because of its high sulfur
content, which requires special handling and infrastructure.
The
UAE has already identified this issue and tapped the development of its sour
gas fields, one of the most challenging types of fields, which are mainly
located in Abu Dhabi. The sour gas prospect is estimated by analysts to contain
about 5 Tcf of gas and forecast to produce 1 Bcf/d, which would equate to about
18% of the UAE’s current demand.
“Tapping
into undeveloped gas reservoirs is part of ADNOC’s focused strategy to drive a
more sustainable and economic gas supply,” the director of upstream activities
at ADNOC, Abdul Munim al-Kindy told local media.
Production
costs of deep and mildly sour gas projects in the Gulf are between $5 per
million Btu (MMbut) and $6/MMbtu, but domestic sales prices range from 75 cents to $2, with negligible prices for
household, according to local analysts.
Amid
the soaring local gas consumption, the UAE decided to develop its sour gas
reserves and had already started up production from Shah gas field. For Shah,
selecting the right foreign partner wasn’t easy and included many setbacks.
Initially, ADNOC selected ConocoPhillips Co. (NYSE: COP) as a partner to
develop the project, but in April 2010, ConocoPhillips withdrew from the $10
billion development saying that it intended to shift its operational focus from
midstream and downstream activities to upstream work.
But
in January 2011, ADONC selected Occidental Petroleum Corp. (NYSE: OXY) as a
partner, and set up Al Hosn Gas, a joint venture between ADNOC and Oxy. The
project was successfully started up in early 2016. Shah produces a total of 1
billion cubic feet per day (Bcf/d), of which 500 million cubic feet per day
(MMcf/d) is delivered to the UAE’s gas grid, as well as producing 33,000 bbl/d
of petroleum condensates and 4.4 mtpa of natural gas liquids. Already, Al Hosn
has laid out plans to increase output by 50%.
Meanwhile,
Bab gas field, another sour gas field, witnessed setbacks as Shell announced in
early 2016 that it has pulled out of the $10 billion Bab sour gas project in
Abu Dhabi, citing “technical challenges” and the falling price of oil as key factors
in its decision. But despite the setbacks, ADNOC is determined to boost its gas
output.
In
early June, local media reports said that the company is considering
greenlighting another huge gas project which could meet nearly 20% of the UAE’s
gas demand by the end of the decade. The state oil company’s investment
committee is considering proposals for a $20 billion development of the Hail
and Ghasha, Delma, Nasr and Shuwaihat “ultra-sour” gasfields, which lie in
relatively shallow water southwest of Abu Dhabi.
Source: http://www.epmag.com
