UAE gas grid could save oil

Emirates face gas-price shocks that might largely be avoided if the UAE developed a national gas grid.

An integrated UAE gas grid could help the nation burn less oil for power generation and help gas importers negotiate better deals.

Those could be compelling reasons for the federal Energy Ministry to take up the gas-grid cause, leading what could be the Emirates' next strategic energy project, said Khalid al Awadi, a gas transport expert based in Sharjah.

"The Energy Ministry should look to this," he said on the sidelines of a Middle East pipeline conference in Abu Dhabi. "Some of the old, cheap gas contracts will expire soon and then there will be a [price] shock."

Dubai was paying as much as US$20 (Dh73.46) per million British thermal units (mbtu) for imports of liquefied natural gas this summer under a deal with Royal Dutch Shell, Mr al Awadi told the conference.

Some Ras al Khaimah industrial users were paying $9 per mbtu for pipeline gas supplies from Abu Dhabi or Qatar, he added.

At the same time, most industrial and commercial customers in Abu Dhabi continued to pay a subsidised price of about $1.50 per mbtu for gas.

Gas purchasers in emirates other than Abu Dhabi, which has most of the UAE's reserves, are poorly positioned to negotiate individual gas supply deals due to their isolation and lack of options. As a result, many are paying well above the average world market price for gas.

"They need the marketing clout and huge gas inventories of a national gas network behind them," Mr al Awadi said.

If the seven gas distributors now operating in the UAE integrated their operations, the resulting network would be capable of delivering 11 billion cubic feet per day of gas to customers across the Emirates, he estimated. That is more than five times the gas volumes Abu Dhabi's Dolphin Energy imports from Qatar for distribution to gas users in the Emirates and Oman. The Dolphin supplies account for about 30 per cent of UAE gas consumption.

"The current installed pipeline capacity in the UAE could easily take us to 2020," Mr al Awadi said.

Furthermore, excess capacity on the proposed national pipeline grid could be used to store gas. Inventories could be built up during winter and drawn down in summer, when electricity generation peaks in the Gulf because of air-conditioning requirements.

Some emirates have experienced frequent summer power cuts in recent years because of electricity shortages related to heavy demand. The situation has been worsened by the high cost of diesel imported as a back-up fuel for power generation.