Dubai looks to Qatar for natural gas

Dubai may start importing up to 37 billion cubic feet per year of natural gas from Qatar as early as September.

Dubai may start importing up to 37 billion cubic feet per year of natural gas from Qatar as early as September. Qatargas 4, a liquefied natural gas (LNG) joint venture between Qatar Petroleum and Royal Dutch Shell, has decided to ship half the plant's planned output to China and Dubai instead of North America, Gerrit-Jan Smitskamp, Shell's regional vice president for finance, said yesterday in Doha.

About 40 per cent of the LNG from the project would go to China, and about 10 per cent to Dubai, where market conditions for gas exporters are more favourable than in the US and Canada. The 7.8 million tonne per year facility is scheduled to start producing the fuel in September. It is one of six plants with identical capacity that currently rank as the largest of their kind in the world. They are slated to more than double Qatar's annual LNG export capacity to 77 million tonnes by the end of this year from about 31 million tonnes in 2008.

Dubai is building a floating LNG regasification terminal to receive supplies of the fuel, consisting of gas that is supercooled so it can be loaded on to tankers. The emirate has been seeking cheaper and cleaner alternatives to the diesel that it currently burns to generate more than 30 per cent of its electricity supply. In 2008, Dubai signed a preliminary 15-year deal with Shell to receive up to 1.5 million tonnes per year of LNG, equivalent to 72 billion cu ft per year of gas. The fuel was to be delivered throughout the summer, when electricity demand peaks in the Gulf. Initial plans called for the deliveries to start this summer.

The project was delayed, however, by the global economic crisis and logistics difficulties with building the receiving terminal. It may also have been scaled back. Last November, the executive vice president of Shell Qatar, Andy Brown, said the company had agreed to supply just 650,000 tonnes per year of LNG to Dubai. At the time, the shipments were projected to start in 2011. Last summer, Kuwait started seasonal LNG imports under a similar agreement, after grappling with electricity shortages and summer power cuts in recent years. The first cargo came from Shell's LNG joint venture with Gazprom on Sakhalin Island, off the Pacific coast of Russia.

Dubai's gas reserves are insufficient to supply growing demand for fuel from its power and industrial sectors. Previously, the emirate made up the shortfall by importing gas from Abu Dhabi. In recent years, however, Abu Dhabi, which produces most of the UAE's total oil and gas output, has also faced a gas shortage. It has been importing gas by pipeline from Qatar since late 2007.