Dubai considers exporting LNG

The board of Dana Gas has been considering exporting liquified natural gas and other actions to help lift the Sharjah oil and gas producer's share price.

Dubai wants to initially establish a centre for receiving, storing and exporting natural gas in super-chilled liquid form.

Two years after receiving its first imports of liquefied natural gas (LNG), Dubai may seek to develop export capacity so it can become a trading and transportcentre for the fuel.

"We have begun to talk about how we might form a gas hub," said Paul Mason, the manager of the Dubai Supply Authority (Dusup), which is owned by the emirate's Government.

"We have the ability to import LNG but not the ability to export, so that might be the logical next step," he told the Dubai Global Energy Forum yesterday.

Dubai is already an oil trading centre, with the Dubai Mercantile Exchange (DME), launched in 2007, aiming to establish its Oman crude oil futures contract as a pricing benchmark for the Asian market. That is in spite of the emirate's dwindling crude oil output, which is understood to be less than 70,000 barrels a day.

Establishing a physical hub for receiving, storing and exporting natural gas, especially in the super-chilled liquid form that can be shipped overseas, would be an initial step towards establishing a market-based Asian pricing and trading centre for LNG and financial derivatives such as gas futures contracts.

Dusup has made a start by building a floating receiving facility for LNG imports and developing undersea gas storage in a tapped-out oilfield off the coast of Dubai.

The emirate's floating LNG "regasification" terminal, developed through the conversion of the Golar Freeze tanker, was installed in time to start receiving summer imports two years ago. The terminal was the first of its kind in the Middle East and among the first in the world.

Royal Dutch Shell, with which Dubai has signed a long-term contract for about 1 million tonnes a year of LNG supplies, advised Dusup on the project. The terminal has already made a big difference to Dubai's energy security by providing access to gas supplies from beyond the Gulf, which for political and logistical reasons are often more easily purchased than gas produced by neighbouring states.

Dubai has traditionally imported gas from Abu Dhabi. In 2007, as gas and power demand rose sharply across the UAE, it added gas imports from Qatar through the Dolphin pipeline network. The Dolphin consortium, based in Abu Dhabi, operates the Gulf's only international pipeline, which runs on the seabed from Qatar to the port of Taweelah, between the capital and Dubai.

"We have seen a huge increase in Dubai's peak power requirements, and for the foreseeable future have eliminated the need to burn liquids in response," Mr Mason said.

With crude above US$120 a barrel in London and the DME's Oman futures contract near $115, the gas import capacity is providing significant cost savings for Dubai, which would otherwise need to import more expensive diesel.

The emirate's annual LNG import capacity stands at 3 million tonnes, which could be increased by adapting the jetty to which the Golar Freeze is moored to serve as an onshore regasification plant.

The propulsion system of the converted tanker has been left intact, "so we can up anchors and move", said Mr Mason.