UAE & Qatar Agree On Raising P/L Gas Supply To 3.2 BCF/D.

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The state-owned Qatar Petroleum and Abu Dhabi-controlled Dolphin Energy Ltd (DEL) are to sign a final agreement whereby the latter will increase its production and imports of North Field natural gas from 2 BCF to 3.2 BCF/day, with deliveries to begin in mid-2007. Ahmad Ali al-Sayegh, CEO of DEL, recently confirmed this and said: "We are in the final stages of construction [of the supply pipeline] and we expect first gas in the summer of 2007".

Talking to Gulf News on the sidelines of a petroleum conference in Abu Dhabi on Nov. 5, Sayegh said he was unaware of reported Saudi objections to a related pipeline project. It was reported recently that the route of the marine pipeline from Qatar to Abu Dhabi passed through offshore territory claimed by Saudi Arabia and that Riyadh objected to its use without a prior agreement settling the dispute.

Part of an integrated $3.8 bn E&P-midstream and downstream energy project, described as the largest of its kind in the Middle East, the 364-km marine pipeline from Ras Laffan in Qatar to the Taweelah power generating centre of Abu Dhabi will transport some 2 BCF/day of compressed and refined gas in the initial phase. Under a new agreement, this will increase to 3.2 BCF/day.

Total of France and Occidental Petroleum of the US each hold a 24.5% stake in Dolphin Energy Ltd, which owns the project. The majority 51% stake is held by the Abu Dhabi-owned Mubadala Development Co.

The flow of Qatari gas through the marine pipeline, mainly to Abu Dhabi and Dubai, will reach 2 BCM/day by the end of 2007. Gas will first go to contracted customers in Abu Dhabi, Dubai and the five other emirates that make up the UAE. From 2008, Oman will receive from DEL 200 MCF/day.

On Riyadh's position concerning the marine pipeline, Sayegh said: "We have not received any objection from Saudi Arabia. The project is progressing well".

Riyadh is reported to have written to one of the lenders to DEL objecting to the pipeline venture on the grounds that it will pass through its Gulf waters. Gulf New quoted "a Gulf industrial source familiar with the project" as saying the Saudi objection "could be understood in the context of the Saudi-UAE 'silent' dispute over the giant Shayba oilfield" in Rub' al-Khali (the Empty Quarter), the desert region which straddles the border between the two countries. The source said the two states were "currently engaged in talks at a high political level to sort out their differences".

DEL in July said the pipeline will only pass through the UAE and Qatari waters, adding that it received the necessary approval of authorities in both states. The pipeline has a capacity of 3.2 BCF/day, but additional gas requires a new agreement between DEL and QP.

Sayegh told Gulf News: "There is potential for many new customers, but there is not enough gas [from the Qatari side due to a moratorium on any gas to be extracted from the North Field in addition to a 25,000 BCF/day production limit and exceptions made to DEL for 1.2 BCF/day and to Bahrain for the export of 500 MCF/day]. Any further expansion requires a new agreement with the Qatari authorities"; and that will depend on a technical review of the North Field's reservoirs.

The Dolphin gas project also involves the transportation of raw natural gas from Qatar's North Field, the world's largest gas field, through an 80-km pipeline to Ras Laffan for processing. In January 2004, the first Del supplies of natural gas from Oman to the UAE were received by pipeline at a control station in Abu Dhabi's border region of al-Ain, marking the first ever cross-border gas transmission between Gulf Arab (GCC) states. The Omani supplies will in 2008 be replaced by Qatari gas to be supplied by DEL, with the flow of the pipeline from the sultanate to be reversed.

Need for natural gas in the UAE is forecast to grow rapidly to 6 BCF/day by 2020 and most of it will be used for power generation and water desalination plants. The UAE, with Abu Dhabi being a key member of both OPEC and OAPEC, holds the world's fifth-largest gas reserves, but a sizable portion of it is very sour gas in Abu Dhabi with a high concentration of sulphur which makes production and treatment relatively costly.

Sayegh told Gulf News: "The [DEL] export pipeline was completed in August this year, the production platforms are ready and the Taweelah reception facilities near Abu Dhabi are 90 per cent complete". In August, an offshore "tie-in" became the final link in the export pipeline laid from Qatar to Abu Dhabi, Sayegh said, adding: "When...[DEL's developed portion of the North Field] begins, the flow will be lower but it will be ramped up gradually month after month and by end-2007". Although initial capacity through the export pipe was only 2 BCF/day, the line has been designed and built to export 3.2 BCD/day, some 60% higher than the initial throughput. Sayegh said: "We are interested in further expansion but it requires another agreement with Qatar".

On the controversy about Saudi objections regarding the pipeline passing through what Riyadh regards as the kingdom's territorial waters, Sayegh repeated: "We have not received any official objection so far". Gulf News then quoted a "top source familiar with the region's energy sector" as saying Saudi Arabia's objection was a "political game" and will have no impact on the flow of Qatari gas to the UAE and Oman.