With power shortages causing delays in development projects and threatening to hamper economic growth in the Northern Emirates, officials are now calling for a national energy distribution network.
Khalid Al Awadi, gas operations manager at the Emirates General Petroleum Company (Emarat), told delegates at a recent conference that a new strategy was needed to share resources in the United Arab Emirates (UAE) more efficiently.
"We have three pipeline networks in the country transporting gas to customers in their respective emirates," he said. "If these pipelines were connected at a national level, it would result in tremendous economic benefits."
According to Al Awadi, the Northern Emirates are currently wasting Dh800m ($218m) a year on fuel during peak summer months by burning diesel rather than natural gas. Al Awadi's plan would involve allowing the Northern Emirates to burn natural gas sourced from Abu Dhabi, while Abu Dhabi in turn would burn diesel from its own reserves.
"By doing this we can save energy that is going to waste," he said. "This constitutes the best use of natural resources."
The plan is not a new one. Al Awadi said it had been brought before the Ministry of Petroleum on two previous occasions.
"There is urgent need for a gas law in the country [...] along the lines of Europe, where different companies are selling the same commodity, like electricity," Al Awadi said.
Until recently, energy demand in the Northern Emirates has been fairly limited, and the prices of heavier fuels such as oil were low enough to limit the effect of any shortfall in gas. In the past year, however, the price of crude oil has doubled and a surge in industry in emirates such as Ras Al Khaimah and Sharjah has placed a strain on available resources.
The resulting pull on supply has led to reports of electricity shortages, with new real estate developments allegedly awaiting connection to the grid and industry running below capacity. The shortage in feedstock has also led to delays in new projects, with Imdad's planned $545m desalination plant in Umm Al Qawain on hold since March. The situation is likely to worsen as summer nears and residents throughout the UAE turn up their air conditioning to keep out the heat, leading to a peak in demand.
The UAE is currently facing a natural gas deficit of some 1.5bn cubic feet (bcf) per day, able to provide only about 4 bcf daily, while consumption is at 5.4 bcf and rising.
While the UAE has fairly substantial gas reserves of its own, estimated at around 214trn cubic feet, rapidly escalating costs are posing challenges. Moves to develop Abu Dhabi's Shah and Bab fields, first envisioned as costing $10bn, faced a setback when it was revealed that stripping the gas of its high sulphur content would bring the cost per thermal unit to around $5. By comparison, gas currently obtained through the Dolphin pipeline project with Qatar is around $1-$1.5 per thermal unit. Moreover, it has been suggested that after stripping the gas of sulphur, the Shah field may yield significantly less than the 1 bcf per day originally anticipated.
It is likely then that the UAE will, in the short term at least, continue to rely on neighbouring Qatar to meet its natural gas deficit. Regardless of where the feedstock is sourced though, it is clear that further infrastructure development will be necessary to meet demand. In this respect, Abu Dhabi Gas Industries (Gasco) this month announced plans to invest $25bn in two new gas processing plants and 10 pipelines.
The Northern Emirates will no doubt be hoping that, with such high levels of investment in physical infrastructure planned, there will be a push to address the regulatory framework and ensure gas is pumped in their direction.
