High domestic demand causes gas shortage


The UAE is suffering from a gas supply shortage of more than one billion cubic feet per day (bcfd) and the gap could be bridged only through nuclear power and rationalisation of consumption, a UAE official said yesterday.

Despite a steady increase in its production and plans to import gas from Qatar and other countries, domestic gas demand in the UAE has grown faster than supply and this has created a shortage that is covered through oil and natural gas liquids (NGLs), said Khaled Al Awadi, gas operations manager at state-owned Emirates General Petroleum Corporation (Emarat).

Speaking at a pipeline conference in Abu Dhabi, Awadi estimated current gas consumption in the UAE at around 5.5 bcfd and demand growth at nearly 13 per cent, one of the highest growth rates in the world. "A little more than four billion cubic feet are available for use and this means there is a supply shortage… this shortage is met through oil and NGLs," he told the two-day conference on Oil and Gas Pipelines in the Middle East.

"I know we are importing gas and there are plans to import more," he said, referring to the planned Iranian gas supplies to the UAE through Dana Gas project. "But these supplies will not cover the shortage and the only way to tackle this problem is to ensure efficient use of gas… plans by the UAE to use nuclear energy in power generation will also ease pressure on gas consumption."

Awadi's remarks represent the first outright official disclosure the UAE is suffering from a gas supply shortage and the gap could grow in the future given the rapid expansion in domestic use because of growth in many sectors.

Awadi said his figures on domestic gas consumption cover only power generation and industry as they do not include gas re-injection to boost oilfield recovery and Abu Dhabi's liquefied natural gas (LNG) projects, which produced close to six million tonnes last year.

"We do hope the introduction of nuclear power into the UAE will bridge part of that gap as it will be used mainly in power generation… this means we can divert some of the used gas to the industrial sector," he said.

"But I say again the best solution is to upgrade efficiency, or in other words rationalise consumption… I know we have projects to get gas from other countries and there are plans to import more but this will not be enough."

The UAE has the world's fifth largest gas reserves after Russia, Iran, Qatar and Saudi Arabia, estimated at nearly 214 trillion cubic feet. But a large part of them are associated with oil, making their treatment a costly process and entailing the UAE to raise crude production. To meet a surge in domestic demand, mainly for re-injection in oilfields to expand output capacity, the UAE has steadily expanded gas production over the past 20 years. From around 25 billion cubic metres in 1995, natural gas output swelled to nearly 35 bcm in 2000 and 47 bcm in 2006. It is projected to exceed 50 bcm this year and over 60 bcm in 2015.

Besides domestic production, the UAE is getting two billion cubic feet per day of Qatari gas through Dolphin pipeline and there are plans to get more than 500 million cubic feet per day from Iran.

Awadi said the rapid growth in gas consumption should prompt the government to issue a unified gas law to streamline this sector. He also proposed an integrated "high-pressure" gas supply network in the country. "This network could set the path for the proposed GCC gas network," he said.

"But it is imperative that the government enforce a unified federal gas law as we are facing different laws and different operators from one area to another… this is creating a lot of problems for us… we hope that the government will listen to us."

In a recent study, an analyst warned that electricity rate in the UAE could surge in the near future because of a steady rise in gas prices. Douglas Caskie, regional manager of the Scottish IPA Energy company, said higher gas prices mean an increase in the costs of electricity generation in the UAE and could also boost the costs of water output.