Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, has acted decisively to increase his direct control over Dubai's energy sector. By creating an Energy Higher council, he has sent a message that not all is well with the emirate's power supply. For decades, the Government-owned Dubai Electricity and Water Authority (DEWA) and its predecessor, the Dubai Electric Company, have had the task of ensuring an adequate and reliable supply of electricity to Dubai's expanding industries and population.
According to the Government, DEWA has nearly 7,700 staff, but it has been scrambling for years to keep the lights on. Problems surfaced in 2007, when Dubai property developers said electricity shortages were slowing the emirate's construction boom. "Power and water supply is one of the biggest challenges facing Dubai's real estate sector. In a number of areas, the Government is playing catch-up," said Peter Riddoch, the chief executive of Damac Properties.
DEWA dismissed the claims as speculation. It said it had been supplying power reliably for years, proving it could meet the new challenges. As it turned out, bigger problems were around the corner for Dubai's property developers, and the global financial crisis, not power shortages, popped the real estate bubble. But the property bust has not solved Dubai's electricity woes. In April, DEWA held a press conference at which its chief executive, Dr Saeed al Tayer, disclosed that Dubai had consumed 13 per cent more electricity and water in January, and 17 per cent more in February, than in the same months in the previous year.
"Energy demand was higher than expected in the first quarter," he said with a degree of straight-faced understatement seldom achieved outside Britain. The utility was planning to add 3,000 megawatts of generating capacity by 2012, increasing Dubai's total power capacity by 43 per cent to 10,000mw, Dr al Tayer said. If he had stopped there, the assembled reporters might just have thought that DEWA had things under control. But Dr al Tayer went on to add that the utility intended to go ahead with a scheme to build a 2,000mw "hydrogen power plant" after completing what he was sure would be a successful feasibility study.
The trouble with that project was that it hinged on importing so-called syngas by tanker from offshore, most likely the US. Syngas, burnt in modern coal-fired power plants, is a mixture of hydrogen and carbon monoxide formed by treating coal with steam in the presence of a catalyst. Clean-burning hydrogen is its most valued fuel component. Burning the toxic carbon monoxide produces carbon dioxide, the notorious greenhouse gas. The hydrogen project's main promoter had another proposal to build a massive plant in the southern US state of Louisiana to produce syngas from big local deposits of low-grade lignite coal. However, plans for the US$5 billion (Dh18.36bn) facility were still on the drawing board, where they had sat for the previous four years.
Moreover, shipping liquid hydrogen across the world for fuel is unlikely to make economic sense. Hydrogen condenses at close to the ambient temperature of outer space, and refrigerating it to that point takes huge amounts of energy. Only recently has liquefying natural gas at a temperature more than 100 degrees higher become economically feasible. So much for DEWA's ambitious plan for boosting Dubai's electricity supply with a big clean-energy project.
Just like some of the emirate's other proposals for avoiding looming power shortages, such as importing electricity from Iran, the syngas scheme did not seem likely to pan out. But in any case, when push comes to shove, it does not matter how much generating capacity DEWA or the private sector builds if Dubai lacks fuel to drive the turbines. As in the UAE's other emirates, gas is the main fuel of Dubai power plants. Oil products such as diesel are substituted on the frequent occasions when there is not enough gas. But Dubai does not produce much of either fossil fuel, as its modest oil and gas reserves are considerably depleted and there have been no recent discoveries to replace them.
Mostly, the emirate relies on gas imported by pipeline from Abu Dhabi and Qatar. But with little prospect of increased volumes from either source, it also plans to import liquefied natural gas (LNG) from further afield, and is building a floating LNG receiving terminal off its coast. Some other Gulf states suffering their own power crunches have had the same idea. Kuwait received its first LNG cargo last month at a newly built facility. The gas originated in Russia and was shipped from a new LNG plant in eastern Siberia. Bahrain is also considering importing Russian gas.
Now is a good time for negotiating long-term LNG supply deals, because the world is unexpectedly glutted with the stuff. But the window will not stay open indefinitely. China, the fastest growing energy market, is already signing massive agreements to purchase big new supplies expected from Australia, and also has a deal with Qatar. Dubai needs to act now, and Sheikh Mohammed knows it. If the emirate fails to secure new fuel supplies, Dubai residents have only to look next door to Sharjah, as it recovers from recent power cuts, to glimpse a darker future.
tcarlisle@thenational.ae
