Middle East gas finds change the dynamics [NGW Magazine]

Abu Dhabi’s national oil company, Adnoc, has just found an 80 trillion ft³ shallow onshore gas-field straddling the border with Dubai. It is the first major gas find for Dubai, the UAE’s biggest gas consumer and a major regional importer. Although the discovery was trumped not long after by a Saudi giant (see below), the field still has huge potential for the UAE.

Along with existing projects and other new finds, the field will bring the UAE closer to its goal of self-sufficiency and probably provide a surplus for export as well – ending Dubai’s need for pipeline imports from Qatar and LNG deliveries.

Adnoc said the discovery was made in a 5,000 km² area between the Saih Al Sidirah coastal development in Abu Dhabi and Jebel Ali in Dubai, after drilling more than 10 onshore exploration and appraisal wells. Adnoc will develop the field jointly with the Dubai Supply Authority (Dusup), the UAE’s gas supplier. Both standard and unconventional drilling techniques will be used to extract the gas, according to Adnoc. 

Dubai produces almost no gas of its own, and this is the first time Adnoc has explored for hydrocarbon resources in Dubai. With 94% of the UAE’s proven reserves, Abu Dhabi has the main say in upstream policy in the UAE.

Unsurprisingly, the find has been earmarked to supply Dubai’s domestic market, although with Adnoc already pressing ahead with a wide range of projects aimed at boosting domestic gas production (see below), it may face competition from other sources.

Dubai’s limited offshore volumes are reinjected to lift oil output, while gas production at its onshore Margham field has been halted.

UAE gas demand growth – mostly in the commercial hub of Dubai – has been strong over recent years but it is likely to recede thanks to recent major solar developments in Dubai and Abu Dhabi, along with new nuclear and even coal-fired power plants. This is likely to leave more gas for export once the fields are developed, which may require an expansion in Abu Dhabi’s 5.8mn metric tons (mt)/y LNG export capacity.

Import decline to accelerate

The UAE had already been progressing towards a goal of gas self-sufficiency by 2030, and the new field should accelerate this. After rising in the first half of the last decade, net UAE gas imports fell to a four-year low of 11.9bn m³ in 2018 as domestic output rose. This included a record 18.2bn m³ of pipeline imports from Qatar to Dubai through the Dolphin pipeline (owned by Dolphin Energy, a joint venture between Abu Dhabi’s Mubadala, Occidental Petroleum and Total). Over recent years, the UAE, along with its allies in the Gulf Cooperation Council, has been in a political dispute with Qatar, although pipeline gas flows have continued without interruption.

Dubai also imported 1bn m³ of LNG through a 10bn m³/yr (7.2mn mt/yr) floating storage and regasification unit in 2018. This was down sharply from 3.46bn m³ in 2017. This 10% use in 2018 is likely to have risen with last year’s cheap LNG, and with a drop in Qatari pipeline gas to offset that.

Dubai imports the remainder of its needs and the vast majority – the UAE produced 64.7bn m³ of gas in 2018, compared with a total demand of 76.6bn m³ – from neighbouring Abu Dhabi, which also exported 6.7bn m³ as LNG.

Abu Dhabi has long been an exporter of LNG and the new find means export volumes may rise. The emirate’s first export plant – among the first ever – was built in 1977 on Das Island, and operated by Adgas. The plant takes associated gas from the Umm Shaif, Lower Zakum and Bunduq oil fields. The UAE’s National Gas Shipping Company (NGSCO) handles all shipments from Das Island, with a fleet of eight LNG carriers. About 85% of the LNG produced at Das Island is destined for Japan as fuel for Tepco gas-fired power plants, although these long-term contracts are up for renewal. Tepco is now co-owner of Jera, along with Chubu Electric.

Other recent discoveries and upstream gas projects

The giant Jebel Ali find was the UAE’s second major gas discovery this year, with Eni and the UAE’s Sharjah National Oil Corp (SNOC) also having discovered gas (and condensate) in the emirate of Sharjah. SNOC said it was the first onshore Sharjah discovery in 37 years, with the well achieving flow rates of up to 5 mn ft³/d of lean gas and associated condensate.

The two new fields will be added to existing gas development plans, which involve extracting sour gas and gas caps in Abu Dhabi’s giant oilfields, along with freeing up associated gas from reinjection and developing substantial unconventional reserves – as part of its 2030 self-sufficiency drive. Adnoc, which produces the majority of gas in the UAE, is active with the help of international partners under long-term production-sharing agreements (PSAs) – in contrast to neighbouring Saudi Arabia.

These include tie-ups with Wintershall Dea and Eni to develop the Ghasha ultra-sour gas concession, where a key development contract was awarded in early February. The project is expected to produce over 1.5bn ft³/d by around 2025. In addition, Adnoc is working on three projects: boosting production from its Shah sour gas field from about 1.3bn ft³/d to 1.5bn ft³/d through a joint venture with US Occidental; developing the sour gas fields at Bab and Bu Hasa; and the extraction of 1bn ft³/d of unconventional gas from the Ruwais-Diyab concession by 2030. In its latest licensing rounds, the UAE offered deep gas and unconventional opportunities.

Shallow gas, as found at Jebel Ali, can be difficult to develop as its proximity to the surface often means there is less pressure in the reservoir. But it comes with advantages too: “The shallow nature of the find will mean that development costs will be much lower than some of Abu Dhabi’s sour gas resources,” said energy consultancy Wood McKenzie. “A discovery of this scale will be a clear priority for development... longer term, the field is likely to play a pivotal role in the UAE’s gas market and could lead to additional gas exports from the country.”  

Mideast Gulf glut?

As well as the increased UAE gas supply, neighbouring Saudi Arabia says it also plans to boost gas production and initiate exports shortly, which (along with expansion plans in Qatar and elsewhere) could leave the Mideast awash with gas.

Most prominent among its projects is the Jafurah field, Saudi Arabia's largest unconventional, non-associated gas field, with an estimated 200 trillion ft³ of resources. The developer to be, Saudi Aramco, said late February the field would serve as a valuable feedstock for the country's growing petrochemical and metal industries. First gas is expected in early 2024, with output seen rising to 2.2bn ft³/day by 2036. It will also flow around 550,000 barrels/day of liquids.

Another plan, possibly now on ice following the Jafurah discovery is the 11 trillion ft³ offshore Dorra gas field in the Partitioned Neutral Zone it shares with Kuwait. The two resolved a five-year dispute in the area late last year. Dorra may also reduce Kuwait’s needs for gas imports which come as LNG, -- although Kuwait signed a new long-term deal last month with Qatar/Shell for 1mn t/yr -- while freeing up other Saudi gas for export. The field could even support its own LNG export project.

A few months before the new Jebel Ali find was announced, the UAE increased its proven conventional gas reserves by 58 trillion ft³ to 273 trillion ft³ (along with 160 trillion ft³ of unconventional reserves). The latest discoveries and the moves in Saudi Arabia are likely to lead to further increases in gas reserves in the region. The Kingdom has also said in light of Jebel Ali that gas exports were being considered. But with such ample supply entering an already well supplied market that is itself facing a major challenge from low cost solar, the situation may keep prices depressed and make it uneconomic to produce much of that additional gas.