Abu Dhabi:  Abu Dhabi plans to build an import terminal for liquefied natural gas at Fujairah, a project that would enable vessels to supply the fuel without passing through the Strait of Hormuz.

Mubadala Development Co. is working on a project that would use floating LNG storage and a regasification unit, the company said in an emailed statement on Monday. The first supplies are expected in the next two to three years, it said.

Iran threatened earlier this year to close the Strait in response to sanctions that the US and Europe are imposing because of the Islamic republic's nuclear programme.

"The project would be outside the Strait, so that would give more supply security to ensure access to energy in the event of any incident in the Gulf," Robin Mills, an analyst at Manaar Energy Consulting in Dubai, said yesterday.

International Petroleum Investment Co. (Ipic), another fund run by the government, will also work on setting up the plant, four people with knowledge of the plan said. Ipic didn't respond to an e-mailed request for comment.

‘Elegant solution'

"Floating LNG plants are a very elegant solution" to fill the gap in energy supply for many Middle East oil producers, said Mills, a geologist who worked on Iran and the Middle East for a decade with Royal Dutch Shell.

"It makes sense because in this region many countries need LNG now and hope they'll be able to discover more gas in the future."

Offshore facilities can be moved once they are no longer needed and cost less to build than onshore sites. Middle Eastern oil producers such as Saudi Arabia and the UAE want additional gas supplies to make electricity and petrochemicals and as fuel for energy-intensive facilities such as smelters.

The UAE already imports gas from Qatar through the Dolphin Gas pipeline, a venture with Total and Occidental Petroleum Corp. The pipeline operates at about two-thirds of capacity because the UAE has been unable to buy additional fuel from Qatar, which has committed its supplies to other buyers.

The proposed Fujairah LNG terminal would be built in two phases, each having a capacity of 600 million standard cubic feet per day, one of the people said. The gas is needed to fuel industrial expansion in the UAE, the person said.

Dolphin Energy Ltd., 51 per cent-owned by Mubadala, pumps about 2 billion cubic feet a day of gas from Qatar to the UAE and then on to Oman.