On Friday, July 31, satellite images showed a liquefied natural gas tanker docked at Adnoc’s Das Island terminal, Bloomberg reported.
Other LNG ships have been detected entering and leaving the Gulf, despite the continuing risk. The national oil and gas company wants to keep crucial supplies moving to customers. But it has further ideas for making the most of its gas resources.
On July 21, Adnoc and its partners took the final investment decision on the $6.2 billion project to develop the gas cap of the Umm Shaif field. This giant field was the first oilfield found offshore Abu Dhabi, in 1958. The gas overlies the oil, making development a tricky matter – it has to be produced without compromising reservoir pressure or the recovery of the oil. The new project should yield 600 million cubic feet per day of gas.
Earlier, on June 28, Adnoc tendered for engineering work on the gas cap of Bab, one of its major onshore fields. A few days before that, BP, TotalEnergies, China National Petroleum Corporation, China’s Zhenhua Oil, Japan’s Inpex and South Korea’s GS Energies had joined the consortium. The Bab gas cap should produce 1.5 million cubic feet daily.
And on July 10, Adnoc launched a platform for global LNG marketing and trading, co-ordinating the activities of Adnoc Gas, Adnoc Trading, and international arm XRG.
Add to this the most important continuing project, the multi-stage development of the complex Ghasha, Hail and Dalma offshore fields, to produce 1.8 billion cubic feet of gas daily. Adnoc secured $11 billion in financing for this in December.
Also in progress is the development of the onshore Diyab unconventional gasfield, with a target of 1 billion cubic feet of daily production, a possible expansion of the Shah gasfield by 0.4 billion cfd, and the $5 billion “Rich Gas Development” to process 1.5 billion cfd of associated gas as Adnoc’s oil output rises. A final investment decision on Diyab is reportedly likely by the end of this year.
If all these go ahead, they would add a massive 6.8 billion cubic feet per day to national gas output, which the Energy Institute estimated at 5.67 billion cfd last year.
Critical to unlocking this gas was the decision by the UAE to quit Opec as of this May. The complex task in balancing oil output from Bab and Umm Shaif while producing the gas caps would be even more difficult if the UAE also had to take account of Opec's production restrictions. The rich gas project also depends on higher oil output.
The path ahead
So what is Adnoc going to do with all this gas? The nation wants to be capable of self-sufficiency in gas by 2030. It imports, in normal times, about 1.7 billion cubic feet per day from Qatar through the Dolphin pipeline. That contract expires in 2032 and, if renewed, it is not clear what the price will be. It will certainly be higher than the very attractive price secured in 2003.
Some gas is required to feed the large, new Ruwais LNG plant, which was intended to be completed by late 2028. It has tied up most of its output in long-term contracts, the latest signed with Inpex early last month. In a surprise move, it was reported in June that Adnoc would also build a new LNG export plant at Fujairah, outside the Strait of Hormuz.
Industrial schemes at Ruwais also continue to advance. The chief executive of fertiliser subsidiary Fertiglobe, Ahmed El Hoshy, notes that his company has rerouted its sales by road and rail to ports outside the Gulf. It managed to export 56 per cent of its UAE output in the second quarter. The Ta’ziz chemicals cluster has signed a range of agreements to produce essential basic materials, diversifying the country’s product mix and providing inputs for more sophisticated processes.
The success of the UAE’s nuclear and solar schemes will limit the requirement for gas in electricity generation. On the other hand, the rapid expansion of data centres will mean much faster power consumption growth. In November 2024, Adnoc Gas raised its estimate for gas demand growth to 6 per cent a year, from 2 per cent.
Extra gas is also going to fuel power generation for export, through the Gulf grid to Kuwait. The northernmost Gulf state is struggling after years of underinvestment, compounded by a lack of gas, as its oil production remains stranded, and by recent Iranian attacks on key electricity and water complexes.
What is the common factor in these new projects? They are all ways to monetise gas without being reliant on the Strait of Hormuz. Transmuted gas can flow out via Fujairah, through data cables, electricity lines, or on railcars and lorries. This is analogous to the new oil pipelines that will bypass the chokepoint.
Solid plastics, fertilisers and metals can be easily stored for a while if logistics are interrupted. Steel and aluminium plants require secure import of ores, which can be brought by the new Etihad Rail and Hafeet Rail lines from Fujairah or the Omani port of Sohar.
With the exception of liquefied natural gas (LNG) plants, they add domestic economic value beyond the export of raw materials. They build a local industrial ecosystem and enhance national skills.
Most of these plans were laid before the war ignited in February, before the impact of the closure of the Strait of Hormuz became clear. Hopefully, the waterway will soon reopen to normal commerce. But the knowledge and perception of threat will remain.
They are not perfect solutions to the regional dangers. Seaborne exports would almost always be cheaper and more convenient. Some bulk liquids, like methanol from a new plant at Ta’ziz, will be tricky to move overland. Undersea data cables are vulnerable to sabotage. And gas and industrial sites throughout the Gulf, including the critical Habshan gas plant in Abu Dhabi, and the aluminium smelter at Taweelah, have been damaged by Iranian attacks.
Nevertheless, the decision to move ahead on Umm Shaif and the other major gas projects – and the involvement of leading international companies – is a solid vote of confidence.
