Gas terminal in Fujairah may cost over $350m: sources

A re-gasification terminal planned to be built in the UAE’s eastern emirate of Fujairah could cost more than $350 million but no investment decision has been reached yet, industry experts said on Wednesday.

Abu Dhabi decided to construct the Middle East’s first terminal of its kind in Fujairah to sidestep the Hormuz Strait if Iran carries out old threats to block the strategic waterway in case of an outbreak of hostilities with the United States, they said.

“With plans for this capacity, I believe the terminal could cost more than $350 million, depending on the technology involved and other factors, the costs could go up and reach $700-800 million but certainly they will not exceed $one billion,”an industry source told Emirates 24/7 at last week’s ADIPEC show.

 “I think Abu Dhabi selected Fujeirah to avert importing gas through Hormuz. This means that terminal will provide a reliable source of gas supplies for the UAE. Also Fujairah’s location is ideal for receiving gas tankers and the emirate is already a key shipping hub.”

The terminal will have a capacity to handle 1.2 billion cubic feet of gas per day and will be owned by the newly-created Emirates LNG, a joint venture between International Petroleum Investment Company (IPIC) and Mubadala Petroleum. Both companies are controlled by the Abu Dhabi government.

Mubadala owns 51 per cent of the Dolphin venture, which involves the import of nearly two billion cubic feet of natural gas per day from Qatar’s immense offshore North Field through a 360-km subsea pipeline extending to Taweela in Abu Dhabi.

An official at Mubadala Petroleum, speaking on condition of anonymity, said no “investment decision” has been reached yet by Emirates LNG on the terminal.

“We still don’t know how much investment will be involved in this project as the EPC contract has not been issued yet,” he said.

In a statement this week, Emirates LNG said the Front End Engineering Design (FEED) was undertaken by France’s Technip, adding that the EPC contract is under evaluation and will be awarded to one of the industry's leading contractors in the field.

It said the terminal would handle an equivalent of nine million tonnes of LNG per year and that it would be able to accommodate the largest LNG carriers with the ability to “access competitively priced LNG from any source around the world.”

“The strategic and vital terminal location at Fujairah has access points into the UAE gas network and is in close proximity to key power stations and desalination plants. The terminal will add yet another level of security and balance to the gas pipeline network.”

Sources said Abu Dhabi needs to import gas to meet the rapid increase in domestic demand because of high population growth, an economic upturn and an ongoing programme to rely more on gas as a cleaner source of energy.

They said the UAE is already a major gas power, controlling nearly 6.5 trillion cubic metres of natural gas reserves, but added that a large part of its produced gas is exported to Japan. “Abu Dhabi cannot cut the gas exports to Japan to meet its own demand because it is tied to Japanese clients by a long-term supply agreement and such exports constitute a good source of revenue,” one source said.

Abu Dhabi, the main oil producing emirate in the UAE, is already investing $billions to develop sour gas deposits at its giant Bab and Shah fields.

Official data showed the UAE, the second largest Arab economy, is also the second largest gas consumer in the region after Saudi Arabia although the country has one of the smallest populations in the Middle East.

From around three billion cubic metres (bcm) in 1980, gas consumption in the UAE rocketed to 41.3 bcm in 2005 and was projected to peak at 48.7 bcm in 2011, showed the figures by the Kuwaiti-based Organization of Arab Petroleum Exporting Countries (OAPEC), which groups 10 key Arab oil producers.

OAPEC gave no data for 2012-2013 but said gas consumption in the UAE would gain pace in the next period and exceed 50 bcm annually.
 

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