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Abu Dhabi Said to Delay Building Fujairah LNG-Import Plant

Source: Bloomberg 5/3/2016, Location: Middle East

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Abu Dhabi is indefinitely delaying construction of the first land-based facility for importing liquefied natural gas into the United Arab Emirates after it contracted a floating supply terminal, according to two people with knowledge of the situation.

EmiratesLNG LLC is looking at other options for the planned onshore facility in the U.A.E. port of Fujairah, including storing gas at the site, reloading it on ships for sale elsewhere and providing LNG as marine fuel, said the people, who asked not to be identified because the plans are confidential. EmiratesLNG is a joint venture of two Abu Dhabi government-owned investment companies, Mubadala Petroleum and International Petroleum Investment Corp. Neither company commented when contacted by Bloomberg.

Abu Dhabi, the largest emirate in the U.A.E., has the world’s seventh-largest reserves of both oil and gas. Even so, it’s among Middle Eastern oil producers seeking greater gas supply to run power plants and industries amid rising growth. Kuwait and Dubai, the U.A.E.’s second-largest emirate, both import LNG via floating terminals, and Oman is in talks to buy gas by pipeline from Iran. The U.A.E is also building four nuclear power plants, with the first to start next year.

“The U.A.E. is facing a crunch in gas supplies for power until the country’s nuclear plants come online,” Robin Mills, chief executive officer at consultant Qamar Energy in Dubai, said Wednesday by phone. “The floating terminal will help bridge the gap. They’re casting around for options for EmiratesLNG to see if it still makes sense.”

Excess Capacity
EmiratesLNG plans to build an onshore facility in Fujairah capable of importing 9 million tons of gas a year. Using the plant to store or resell LNG cargoes would allow Abu Dhabi to make use of any excess capacity, according to the two people. EmiratesLNG was planned for completion in 2018.

Abu Dhabi National Oil Co. will boost the emirate’s gas purchases by hiring a vessel known as a floating storage and regasification unit, which will begin importing LNG later this year, the people said. The vessel will be based at Ruwais, an industrial town on the Persian Gulf coast that also has an oil refinery and crude-loading port.

Abu Dhabi injects most of its own gas into oil wells to maintain pressure to force crude out of the deposits, Energy Minister Suhail Al-Mazrouei said in an interview with The Oil & Gas Year publication in 2015. The country must buy gas as fuel for power plants and has been a net importer since 2008, when Qatar began supplying it by pipeline.

Fujairah, which is an emirate as well as a port, is the only sheikhdom on the Gulf of Oman, which lies outside the Strait of Hormuz. The Strait at the mouth of the Persian Gulf is the world’s most important choke point for crude exports, with about 17 million barrels of oil passing through it daily, according to the U.S. Energy Information Administration.

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