Exploiting the Emirates’ vast natural gas reserves is a key piece of the UAE’s economic diversification strategy. Global demand for natural gas is expected to continue to rise dramatically; while […]
Exploiting the Emirates’ vast natural gas reserves is a key piece of the UAE’s economic diversification strategy. Global demand for natural gas is expected to continue to rise dramatically; while some conservative estimates place the increase in natural gas demand at 48% by 2040, the Ministry of Energy estimates demand to grow as much as 70% by 2040. Abu Dhabi is adjusting its economic strategy accordingly, as at 215 trillion cubic feet, the UAE contains the seventh-largest proven gas reserves in the world, with the 95% of those reserves located in Abu Dhabi.
Despite the massive amount of gas reserves, the UAE became a net importer of natural gas in 2008, with most of this gas coming from Qatar through the Dolphin Pipeline. The UAE is one of the top-five energy consumers per capita, with 80% of its power generated from natural gas. Additionally, 30% of the natural gas harvested in the UAE is re-injected into the country’s oil fields to maintain the reservoir pressure needed to extract crude petroleum most efficiently.
The issue is not that the UAE does not have enough natural gas, but that many of the gas reserves have been largely inaccessible due to the highly sulfurous sour gas that sits below the desert sand. These gas heavy sour gas fields often require huge investments and safety risks that often make them financially unfeasible. However, advancements in technology have made these types of projects seem much more appealing. Shah Gas Development (SGD) Project, a joint venture by Abu Dhabi National Oil Company (60%) and Occidental Petroleum (40%), began unlocking the enormous energy potential hidden in the Shah Arab reservoir in 2011. Run by ADNOC subsidiary Al Hosn Gas, the SDP Project is the largest operation of its kind in the world, producing 1 billion scf of raw gas per day.
For Phase I of the SGD Project, developers initially planned on investing USD17 billion to produce the gathering system, the processing plant, pipelines, and the sulfur granulation system. However, recent developments allowed the facilities to be created for only USD10 billion. These innovations make the expansion of sour gas more feasible than ever before.
ADNOC is already spearheading new projects to replicate its success at new sour gas fields, notably the Bab sour gas field southwest of Abu Dhabi, as well as the Hail and Ghasha offshore fields to the northwest of the capital. The 30-year project at the Bab field is expected to produce over 500 million scf per day of usable gas. However, the gas locked beneath the Bab field is dry and even more heavily sour than at the Shah reservoir, making it more difficult to bring that gas to market. These challenges played a part in Royal Dutch Shell withdrawing from its partnership with ADNOC on the USD10 billion investment in 2016.
Given the ever-quickening demand for gas, it is unlikely that the UAE will slow down in its pursuit of new sour gas projects and the technologies that make it possible to harness otherwise impractical resources. On the future of sour gas, Al Hosn Gas CEO Saif Alghefli said, “With the success of Al Hosn Gas, a slew of projects are lined up within the UAE and there appears to be a healthy competition to see who can first deliver the next major gas project. I see a healthy environment that is not only bringing huge investments to the gas sector, but also the latest technology, while generating employment opportunities.“