Back in September and December of last year, during meetings I was holding in the United Arab Emirates (UAE), local contacts discussed a huge new natural gas find.
It turns out that the Jebel Ali field and its more than 80 trillion cubic feet of shallow reserves is the largest gas discovery of the last fifteen years – since the Galkynysh field in Turkmenistan – and may well be the fourth- largest anywhere in the world.
As with all such finds, how much of the suggested reserves are exploitable remains to be seen. Some analysts in the region put that provisional figure at about 10 trillion cubic feet. If so, that still makes Jebel Ali a major development.
Well, earlier this month, Abu Dhabi and Dubai, the two best known and wealthiest of the seven emirates comprising the UAE, announced they will jointly develop Jebel Ali. That makes sense, given that these two have the funds and the field just happens to be right on the border between them.
More Than the Energy Balance Will Change Here
First, it is likely to alter the UAE’s approach to its energy policy with an impact to the balance between crude oil and natural gas. The Emirates have traditionally relied upon the export of oil for the bulk of central budgetary revenues. That, in turn, places heavy reliance on UAE support of Saudi Arabia in the design of OPEC policy.
That will hardly change in any profound way, at least initially. But Jebel Ali does provide Abu Dhabi (the seat of the UAE national government and its President, Sheikh Khalifa bin Zayed bin Sultan Al Nahyan) with some flexibility it simply did not have before the field was discovered.
There has been a rising move to a post-oil mentality among my Emirati energy colleagues, buttressed in no small way by the emergence of several large – and impressive – renewable energy projects. These have given visibility to a domestic interest in advancing a more diversified energy mix than has previously been the case in the country.
Initial drilling at Jebel Ali Source: middleeastmonitor.comYet it is the second dimension I find more intriguing. This one speaks to the political rift in the Persian Gulf and may well be the far more important for the region.
Currently, Dubai local market gas needs for electricity, heating (I can personally attest to the uncomfortable fact that it gets cold at night in the desert), industrial/commercial use, and even enhanced oi recovery (EOR) largely relies on the Dolphin Pipeline connection to the gigantic North Field in Qatar. About 2 billion cubic feet a day of Qatari gas moves to Dubai across Dolphin each day. The current agreements contract for gas imports through 2032.
Source: Abu Dhabi National Oil Company (ADNOC)However, the pipeline is also mired in an ongoing political dispute following the UAE blockade imposed against Qatar starting in 2017. This was in support of Saudi Arabia’s claim that Qatar has been supporting Iran and terrorist activities initiated by Tehran. The government of Qatar has consistently denied the charges.
I heard forceful and categorical denials during my sessions in Doha late last year. That there were also Iranians in the mix of my meetings with Qatari contacts at the time remained somewhat curious. Additionally, I have noted some rather clear indications that Qatari banks have been assisting Iranian export policies to circumvent U.S. sanctions.
That remains perhaps the most paradoxical of everything going on in the region, given the huge American military base – the headquarters of CENTCOM, the U.S. Central Command, no less – in Qatar.
The Emirates’ policy seems to prioritize in as expedited a way as possible that gas from Jebel Ali be used, as one contact put it, to “improve Dubai’s energy security.”
Others suggest the UAE may have an ulterior motive: Using Jebel Ali as leverage in a strategy to renegotiate pipeline terms with Qatar…
This Could Be the Emirates’ Stunning Endgame
According to an Emirati colleague, this latter suggestion may explain why Abu Dhabi, which is not dependent on gas from Qatar and has been a far more irascible opponent to Qatar than Dubai has, “is cooperating so strongly with Dubai in order to wean it off the Dolphin pipeline.”
The eventual impact of Jebel Ali may be more about negotiations and applying competitive pressure than about shuttering Dolphin-the pipeline, which also supplies Oman, remains a source of national prestige and regional influence for the UAE. The field, especially if it can provide above 10 trillion cubic feet, may be the primary tool in renegotiating prices from Qatar over Dolphin.
But as several UAE contacts have relayed to me, there may be an even more dramatic objective…
As I heard in my discussions last fall, some interesting infrastructure projects are under consideration. I visited three of the proposed locations for Emirati liquefied natural gas (LNG) import terminals – at Ras al-Khaimah, Fujairah, and Sharjah.
The new field may well directly impact all three, as well as the Dubai floating regasification terminal already in operation…and change the direction of the flow.
In other words, Jebel Ali could – in short order – turn the UAE into an LNG exporting nation, fundamentally altering the regional balance as well as its politics.
My experience in the region means we’ll have a front-row seat – and our pick of profit opportunities.
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