ABU DHABI - Gas Pipeline & Dolphin Project.

Dolphin Energy Ltd. (DEL), registered in Jersey in July 2000, will supply Qatari gas to Abu Dhabi, Dubai, Oman and Pakistan. The main forces behind DEL are Crown Prince Shaikh Muhammad bin Zayed al-Nahyan and his full-brother Shaikh Hamdan who is chairman of DEL as well as a UAE deputy prime minister (see who's who in next week's Review). DEL is owned 51% by the powerful Mubadala Development Co. (MDC), 24.5% by Total and 24.5% by Occidental (Oxy) which joined the venture in June 2002. Oxy replaced Enron, the US firm which went bankrupt in late 2001.

It was Shaikh Hamdan bin Zayed who on Sept. 26, 2004, signed with Abdullah bin Hamad al-Attiyah, Qatar's second deputy premier and minister of energy & industry, the "International Pipeline Agreement" (IPA). This confirmed DEL as owner and operator of the 440-km, 48-inch marine pipeline from a processing plant at Ras Laffan, the closest Qatari shore from the North Field.

Now completed, the pipeline runs to a landfall at the Taweelah power generating centre on the coast of Abu Dhabi. Taweelah is also the point for a pipeline supplying Abu Dhabi gas to Dubai's Jebel Ali free zone.

DEL is embarked on a $3.5 bn project which has developed a part of Qatar's offshore North Field, where natural gas is being test-produced. This is to be pumped through the marine pipeline to the markets mentioned above. First gas is due in Abu Dhabi in mid-2007 at the rate of 2,000 MCF/day (2 BCF/d). This could rise to 3.2 BCF/d, with Oman and Pakistan to be markets next to the UAE.

However, the whole DEL project now is in suspense because of a territorial dispute between Qatar and Saudi Arabia, itself being the result of political tensions between Doha and Riyadh. In July 2006, the Saudi authorities wrote to Total indicating the marine pipeline's route passed through Saudi waters and that Riyadh would not allow this to operate unless and until the territorial dispute has been resolved between the two states. Abu Dhabi has been quiet about this issue, hoping a solution could be found before long.

In the UAE demand for natural gas is rising so rapidly that the union might have to import from other neighbouring countries in the long-term to meet its power needs, said DEL chief executive Ahmad Ali Sayegh in October 2004, who told a seminar on the sidelines of the Abu Dhabi International Petroleum Exhibition and Conference: "There has been a widely-held belief that the UAE's available gas reserves would last for several years to come. But it has been proven that the country cannot fully meet demand in the long run if we look at expansion plans underway at present".

Sayegh said the UAE's demand for gas will surge to 13.5 BCF/d by 2030, adding that most of the increase will come from the needs of power generation as the rapidly expanding country turns to industrialisation. One of the biggest gas importers is Dubai - expanding rapidly in all areas. Sayegh said Dubai's gas needs, growing by 5% per annum, will rise from 903 MCF/d in 2007 to 1.33 BCF/d 2015).

A 25-year SPA was signed in December 2001 by DEL and the state-owned Qatar Petroleum (QP), after a related upstream PSA was signed. DEL on Oct. 19, 2004, signed SPAs with ADWEA for the supply of 1 BCF/d from late 2006 and with the Abu Dhabi-financed Union Water & Electricity Co. (UWEC) of Fujairah for 150 MCF/d. DEL also has an SPA with the Dubai Supply Authority (Dusup). But the DEL project has been delayed pending a solution between Qatar and Saudi Arabia.

The SPAs with ADWEA, UWEC and others state that DEL will be the exclusive supplier of gas to the utilities. ADWEA's gas requirements are to increase from 700 MCF/d in 1999 to 1,300 MCF/day in 2008 and its gas supplier until mid-2007 is to be Gasco (see Gas Market Trends No. 2).