Massive Gas Find Spurs UAE’s Pursuit of Self-Sufficiency
The Jebel Ali find promises reduced import bills, improved security of supply, and more gas to boost the economy but will require some clever technical and commercial work to make full use of it.
Over a decade ago, Dubai’s domestic gas production dwindled effectively to zero, leading to total dependence on imports for its large demand and a major overhaul of the emirate’s energy strategy. Yet it has just announced a massive gas find jointly with the neighboring emirate of Abu Dhabi. The discovery could be transformational – if the emirates can overcome the challenges of producing and marketing the gas.
The announcement came on February 3, with the signing of an agreement between the Abu Dhabi National Oil Company and the Dubai Supply Authority, Dubai’s monopoly gas supplier. They reported the discovery of 80 trillion cubic feet of gas in place in the area south of Jebel Ali port in Dubai, extending into Abu Dhabi territory. Before making the announcement, ADNOC drilled at least 10 appraisal wells, indicative of the field’s complexity. It constitutes a mixed conventional-unconventional reservoir, likely to require hydraulic fracturing for commercial production rates.
The field was quickly hailed by analysts as the third-largest in the Gulf (after the joint Qatari-Iranian North Field/South Pars, the world’s largest field, and Bab in Abu Dhabi), and the biggest worldwide gas find since 2005. However, this assessment is probably overoptimistic: It depends on the assumed recovery factor – how much of the gas in the reservoir can be commercially produced.
The Jebel Ali find is of shallow gas, which appears to be biogenic – i.e., formed by the bacterial decomposition of organic matter at low temperatures, not the more usual thermal maturation of hot and deeply buried source rocks. Biogenic gas is usually dry and sweet, consisting almost entirely of methane with no natural gas liquids or sulfur.
The reservoir seems to be the Gachsaran Formation of Miocene age, a thick sequence of shales, carbonate, and evaporite rocks, which is found throughout the Gulf region and considered as a seal to petroleum accumulations rather than a reservoir. Yet in eastern Abu Dhabi and Dubai, it has been newly assessed to contain gas resources. At its thickest in northeastern Abu Dhabi, it exceeds 1,000 meters in thickness, and ranges from 600 to 1,000 meters deep, shallower than the country’s traditional petroleum reservoirs at 3,000 meters or more. The find extends over 1,930 square miles, larger than the entire area of the emirate of Dubai, implying about 40 billion cubic feet of gas in place per square mile, comparable to the lower-quality parts of the famous Marcellus shale of the Northeastern United States. It has low permeability, meaning gas will flow from it only at low rates, unless techniques such as hydraulic fracturing are used.
Recovery factors from shale gas reservoirs – the amount of the gas in place that can be economically extracted – may be around 10% to 15%. That would allow 8 trillion to 12 trillion cubic feet to be recovered from the Jebel Ali find – not in the class of the Gulf’s biggest fields but still very significant. As a rough comparison, it equates to about 17 years of all Dubai’s gas consumption. It has the economic advantages of being onshore, shallow (lowering drilling costs), close to infrastructure, and proximal to major sites of gas consumption – the power generation and aluminum smelting complexes near Dubai’s Jebel Ali port and at Taweelah in Abu Dhabi.
Overall, despite having the world’s sixth-largest gas reserves (nearly all in Abu Dhabi), the United Arab Emirates is still a net importer because of high energy use per person and delays in developing its own, technically challenging fields.
Any Jebel Ali production would displace some imports into Dubai, although the details of how it is split between the two emirates need to be seen. Imports from Qatar have continued despite the UAE’s boycott, along with Saudi Arabia, Bahrain, and Egypt, of its neighbor since June 2017. The emirate also imports liquefied natural gas.
Concerns over security of supply, the high cost of imported LNG (until recent price declines), and lack of diversity in sources encouraged Dubai to unveil its Integrated Energy Strategy in 2011 and Clean Energy Strategy in November 2015. These target a 30% reduction in energy use versus “business as usual,” and a 2030 electricity generation mix of: 61% gas, 7% “clean” coal, 7% nuclear (imported from Abu Dhabi’s new reactors at Barakah), and 25% solar, derived mostly from the 5,000 megawatt Mohammed bin Rashid Al Maktoum Solar Park, intended to be the world’s largest single-site solar park. Dubai’s Hassyan coal plant should also begin operations this year.
In November 2018, ADNOC released its integrated gas strategy and has updated it since. The intention is for the UAE to become self-sufficient in gas, with Abu Dhabi developing: sour gas in partnership with Occidental, OMV, Eni, Wintershall, and Lukoil; gas caps on oil fields; and unconventional gas in a venture with Total. The use of carbon capture and storage will replace gas currently reinjected for enhanced oil recovery. The UAE’s first nuclear reactor, at Barakah in western Abu Dhabi, is set to start up imminently, and the newly reorganized Emirates Water and Electricity Company is tendering for its second large solar power plant. Finally, the neighboring emirate of Sharjah announced a new gas field in January, its first for three decades, which might eliminate its own need for planned LNG imports. All these initiatives are likely to lead to a significant drop in UAE gas import demand in the medium term.
The Jebel Ali gas has to compete economically with imported LNG, which has recently hit record low prices, although this will probably rebound somewhat. In 2032, the Dolphin pipeline contract will expire, and the new gas find gives the UAE leverage to negotiate with Qatar for a renewal at reasonable (though likely higher) prices or to end imports from its neighbor entirely. And even cheap gas supplies will struggle to compete in power generation with the extremely low cost of new solar – Dubai’s latest 900 megawatt installation was awarded in October 2019 at a near-world record 1.69 cents per kilowatt-hour.
Beyond that, the UAE faces the question of what to do with all this gas. Expansion of industry is planned, but the new unconventional and sour gas is not likely to be particularly cheap to produce. Major expansions of LNG exports are unlikely given relatively costly feedstock and the current depressed world market. The Jebel Ali find promises reduced import bills, improved security of supply, and more gas to boost the economy – but it will require some clever technical and commercial work to make full use of it.
The views represented herein are the author's or speaker's own and do not necessarily reflect the views of AGSI, its staff, or its board of directors.
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