UAE, Oman Spearhead Gulf's Gas Golden Age

Natural gas in the Mideast Gulf region is enjoying a renaissance, with producers accelerating plans that should redefine industry benchmarks. The jewel in the crown is Qatar’s 32 million ton per year North Field East expansion, the single biggest project in LNG industry history. Saudi Aramco’s planned $110 billion Jafurah shale gas megaproject is also paradigm busting, and not only due to its ultra-low-cost tradition. And while other regional neighbors such as the United Arab Emirates (UAE) and Oman might not have projects on such a scale, they can also claim major gas progress.

It is easy to forget that just a decade ago, the region could be considered the sick man of the global gas industry. Oman was looking at shutting in LNG capacity due to feedstock shortages, Kuwaiti summers were beset by rolling power blackouts, Saudi crude burn trajectory was out of control, and the UAE was looking at importing LNG.

Today, Abu Dhabi can justifiably claim to be spearheading this regional gas boom and is fast-tracking plans for a new 9.6 million ton/yr LNG export terminal, expected to start by end-2026. Three things have enabled this turnaround. Firstly, an easing of subsidies helped curb runaway demand growth. The introduction of renewables and nuclear power, with some 4.8 gigawatts of nuclear being installed, has also been transformational for gas balances. And lastly, a big push for unconventional gas should see more than 3.5 billion cubic feet per day of new raw gas coming from shale and ultra-sour resources.

Unconventional resources are substantially higher cost than traditional output. But associated sulfur and liquids “can lower the costs substantially ... sour gas is still quite competitive in the UAE”, according to consultancy FGE’s Siamak Adibi. Abu Dhabi National Oil Co.'s (Adnoc) 1.5 Bcf/d Ghasha sour gas project will produce 75,000 b/d of crude, 61,000 b/d of condensate, 5,400 tons/d of natural gas liquids (NGLs), and 8,600 tons/d of sulfur. While Jafurah is targeting some 630,000 b/d of condensate and NGLs, in addition to 418,000 cubic feet per day of ethane.

Greener Gas

Just last week, Adnoc called for expressions of interest for the main engineering, procurement and construction contract for Fujairah LNG. When complete, this should see Abu Dhabi catapulted above Oman to become the region’s No. 2 exporter. And unlike its existing 5.8 million tons/yr of high-sulfur LNG output from Das Island, Fujairah LNG will not have the same constraint, enabling it to be sold west and help Europe wean itself off dependency on Russian supply. Fujairah is set to run on low-carbon nuclear power and Adnoc is also looking at a major carbon capture and storage project for its new unconventional supply, which would enable the superchilled fuel to be marketed as genuine "Green LNG."

Beyond 2030, the UAE is the region’s big wild card. A contract for some 2 Bcf/d of Qatari gas imported through the Dolphin pipeline expires in 2032, which was expected not to be renewed. But with relations with Doha on the mend, there are now strong reasons to believe a compromise can be found. This would allow for a bigger LNG project at Fujairah or other uses in the UAE. If the contract is not renewed, it could be used domestically in Qatar.

Furthermore, a gas exploration drive is bearing fruit in the UAE. Last week, Italian major Eni announced it had found an additional 1 trillion-1.5 trillion cubic feet of in-place resources at Offshore Block 2, making a total of 2.5 trillion-3.5 trillion of conventional gas discovered there. Even if the find is followed up by further discoveries, this won’t necessarily translate into more exports as Abu Dhabi also has ambitions in both blue hydrogen and petrochemicals.

Oman Rising

Oman is also bullish about its prospects, with new gas largely from BP’s 1.5 Bcf/d Khazzan project. This allows for a 10% debottlenecking of LNG capacity to 11.4 million tons/yr. Further upstream expansion looms, with sources saying Muscat is considering establishing by year’s end a new company mandated to manage the state’s upstream gas interest.

In the meantime, Muscat faces a major task renegotiating all its current sales contracts which expire in 2025. Theoretically Omani LNG flows could also be realigned westward. But there has been a lot of turnover in the sector over the past year, with a new energy minister and the ministry’s LNG team relatively inexperienced. “What I am hearing they are asking retirees to help negotiate the new contracts,” a source says.