For some time now, natural gas has become the fuel of choice not only for its excellent environmental qualities but for the advances in technology, which improved the efficiency of its use and especially in power generation.

Our region is not far away from this development as the natural gas industry in many countries has made great strides forward. But there is more to be done and recent news give us a mixed signal.

Let me start with the good news. It is expected that by the end of this year, the Shah Gas project, about 200 kilometres southwest of Abu Dhabi, will be ready for commissioning. This has been a long process since talk about the development of this field started in 2007. ConocoPhillips and later Shell pulled away from partnering Adnoc in developing this difficult gas field. While Adnoc always maintained that it will go ahead on its own if need be, it now partners Occidental Petroleum at a share of 40 per cent in the Abu Dhabi Gas Development Company Ltd. (Al Hosn Gas).

The difficulty in developing the Shas gas field is summarised by Saif Ahmad Al Ghafli, CEO of Al Hosn, when he said that “The remoteness of the site, the difficulties of extracting and handling such high levels of sourness, the attendant safety and environmental hazards all represented huge obstacles to overcome specially when much sweeter and more easily managed gas field were available.”

The gas contains about 23 per cent of corrosive and poisonous hydrogen sulphide. Although the field was discovered 40 years ago, technology was not available for handling such gas until recently. This makes the field the first of its kind at such a high level of sourness. The development required the highest technical standards, especially in material selection, environmental protection, control and safety.

The project of $10 billion (Dh36.7 billion) will process 10.3 billion cubic meters (bcm) a year of raw gas to produce about 5-bcm a year of dry natural gas, which will enhance the availability of gas in the whole UAE network that is dependent on 19-bcm a year of imported gas from Qatar and a small amount of LNG during the summer months. The project will also produce natural gas liquids and 10,000 tonnes a day of sulphur granules, which will be transported by railway to Ruwais for export.

Joint development

In contrast, Kuwait and Saudi Arabia have again deferred the development of the offshore Dorra gas field in spite of the need in both countries for substantial gas volumes. The Al Rai daily in Kuwait said recently that work at the field had been “halted due to differences on the route of the gas delivery to the two countries”, which share the field with Iran as well. The two countries have rightly agreed since 2000 for the joint development of the undisputed region of the field until an agreement is reached with Iran on the demarcation of the maritime border.

While Kuwait wants to take its share directly by pipeline, Saudi Arabia is of the opinion that the gas should be brought gas onshore to Khafji before each country takes its share.

This is not the first time the project has been halted for the same reason. But considering the need for gas in both countries for power generation and the need to reduce liquid fuels, they should strive to resolve this soon. The 220-bcm of recoverable reserves cannot be left untapped, especially with repeated Iranian threats that it will develop the field on its own and before reaching agreement on the border demarcation.

Drilling is still going on slowly and the front end engineering and design (FEED) for the project has been completed. But theer has been no tendering for engineering and construction yet. The project is supposed to supply 5.2-bcm a year each to Kuwait and Saudi Arabia at a time when they are using a lot of expensive liquid fuels in power generation. Kuwait is also importing LNG, especially to satisfy its demand in summer. Last year it imported about 2.2-bcm.

In the long run, Saudi Arabia plans to raise its gas production capacity to 165-bcm a year by 2020, while Kuwait aims close to 41-bcm a year by 2030. Both estimates include the expected production from the $1.5 billion Dorra development.

Since the Dorra field is in the domain of the Neutral Zone, bringing the gas to Khafji is within the spirit of the 1965 agreement between Saudi Arabia and Kuwait. Nevertheless, agreement on this should have in mind the losses to both if the development stops due to a perceived security of supply concern as some suggest.