Abu Dhabi - Gas Pipeline & Sales To Dubai.

The governments of Dubai and Abu Dhabi signed a final agreement on Feb. 17, 1998 for ADNOC to supply 24 MCM/day of natural gas to the Jebel Ali free zone. This will come from the second phase of developing the Khuff reservoirs at Umm Shaif and Abu Al Bukhoosh, to be completed in late 2000 or early 2001, which is expected to raise Abu Dhabi's offshore gas production by over 800 MCF/day (see Gas Market Trends No. 2). Dubai has almost 4 bn barrels of oil but has no gas. It currently gets its gas from Sharjah, supplied by Amoco which operates the Sajaa field and other fields in that UAE emirate. The ADNOC gas to Jebel Ali will be pumped by a pipeline, to run 120 km offshore and onshore from Abu Al Bukhoosh. The price will be lower than the $1.25/m BTU delivered price which Dubai pays to Amoco Sharjah for Sajaa gas. It has been rumoured that the delivered price would be $0.80/m BTU. This is said to be 5 cents/m BTU lower than the $0.85/m BTU price offered by Arco for gas to be piped undersea from Qatar to Jebel Ali. (Dubai has received gas supply offers from other sources - apart from the offer of Arco, which is developing a Khuff structure in Qatar and operates a small gas/condensate field onshore in Dubai. Early in 1996, Total proposed to sell Dubai 3 MCM/day of associated gas from Iran's Sirri oilfields, offshore near Dubai's declining fields, which the French company is developing with one field put on stream in late October 1998. Total proposed to build a marine pipeline to Jebel Ali as well as supply Dubai's fields for reinjection. Amoco has offered to supply Dubai with Omani gas to be piped to Jebel Ali. It has proposed to supply other UAE emirates as well. Abu Dhabi has offered a cheaper price mainly to undercut Total's proposal, because of the dispute between the UAE and Iran over the strategic islands of Abu Musa, Greater Tunb and Lesser Tunb. Iran has occupied the islands since late 1992). ADNOC is to award contracts for two 185-km, 42-inch pipelines to link the two fields with the Taweelah power generating centre, a coastal strip some 50 km north of Abu Dhabi city, and Jebel Ali. The line's offshore section would supply Taweelah's power plants for Abu Dhabi's consumption. There are plans to build a gas processing facility at Taweelah to treat Khuff gas before it is delivered to the local power plants and pumped to Dubai. The two pipelines' total capacity is proposed to be about 800 MCF/day. The second pipeline will run along the coast from Taweelah to Jebel Ali, about 40 km south of Dubai. Both pipelines could cost around $160m. The feasibility study for the two pipelines was done by Technip. The main problem to be faced by the winning contractor in building the two pipelines is the presence of large salty marshes along the coast, where the pipe is to be laid. Another problem is the cycle of tidal waves, which could delay construction work. The contractor would have to use high quality external coating for the pipes to prevent quick corrosion. In view of these and other problems, ADNOC is considering an alternative system whereby the gas from Abu Bukhoosh would be piped to its onshore Habshan processing zone and from there to Dubai. Dubai's demand for gas is expected to rise from 1,350 MCF/day to more than 2,500 MCF/day in 2001 and to over 3,500 MCF by 2005/6. This is due to a large expansion in its industrial sector and a switch to gas by Dubai's power stations and other economic facilities. Another consumer of gas is Dubai's state-controlled aluminium smelter (Dubal), whose capacity has been expanded by 50% to 375,000 t/y.