Sharjah National Oil Co. 1
The entrance to the Mahani gas well site operated by Sharjah National Oil Co.. Along with its Italian partner Eni, the Sharjah entity is scouting around for more finds. Image Credit: Gulf News Archive

Sharjah: After discovering its biggest gas find in 30 years, Sharjah is continuing explorations for potential other reservoirs, a top official confirmed.

It was in January that SNOC (Sharjah National Oil Company) made history when, along with Italian partner Eni, it discovered the ‘Mahani’ gas well – the first land discovery of natural gas in the emirate since the 1980s.

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The project will boost Sharjah’s domestic gas production, with the process of delineating and developing the discovery to “take a few years,” according to Hatem Al Mosa, CEO.

“There's diversity in [our] energy supply - Sharjah imports gas from more than one party. And we have our own production.”

The head of Sharjah’s largest energy company does not foresee a sharp increase in natural gas imports to the third-most populous emirate in the UAE.

Global energy giants are betting big on natural gas as a cleaner alternative to crude oil amid pressure from governments and environmental groups. Oil firms are also looking to limit their exposure to price volatility brought on by rising geopolitical tensions and a flood of new supply from non-traditional markets such as US, Canada, and Brazil.

Demand dive helped

Amidst all the turmoil in the global energy industry, Sharjah actually managed to save quite a bit as a consequence.

Natural gas prices - linked to crude contracts – also fell during this period, which in turn made imports cheaper for Sharjah. On a net basis, the emirate saved money because of the reduction in oil prices, Mosa said.

The emirate’s economy, however, suffered as a result of the nation-wide response to the COVID-19 outbreak. The city was “hit as hard as everybody else” because the UAE is essentially a net oil country, Mosa added.

Sharjah National Oil Co. 2
The mapping out of Sharjah's next big gas field. As and when these come into full production, the emirate can drastically cut down its import requirements. Image Credit: Gulf News Archive

More finds?

“We’re continuing our exploration effort to hopefully find more reservoirs in partnership with Eni,” the CEO said.

SNOC has a 30-year partnership deal with Eni, struck last year, to explore and develop onshore oil and gas fields in the emirate.

There's diversity in [our] energy supply - Sharjah imports gas from more than one party

- Hatem al Mosa of SNOC

No need for higher prices

OPEC and its allies had cut output by 9.7 million barrels per day since May. The current deal will see them ease the cuts to 7.7 million bpd from August until December.

Of late, market participants have questioned the OPEC move, as economies still feel the full burden of the pandemic sweep. Add to that fears over a virus resurgence in Europe and all this points to a continued slump in oil demand.

The partial return of curtailed OPEC+ oil output will create a new four-month supply glut of around 170 million barrels, forecasts suggest.

Despite the bearish mood, Mosa believes that OPEC+ has been successful in stabilizing oil markets. “We’ve seen a significant pickup in demand in China… and many other places in the world.”

OPEC and allies will naturally raise production to match the demand, but “the smart thing in this phase is not to go after higher prices.”

In the past, US shale producers had taken advantage of such oil price rallies to boost their own output, and in turn grabbing a bigger share of the global supply.

“They [Opec] played that game in the past, and they lost very badly to shale oil,” Mosa said.

Time for a comeback
With the recent slide in prices, fossil fuels have temporarily become more attractive than solar or wind.

Thanks to years of increasing mass production by the likes of China, the cost of renewable energy units have drastically reduced. Now, with COVID-19 paralyzing the global economy, concerns are rising about the industry’s ability to get back on track.

This is a “very temporary setback for renewables, I don't think it's going to be long lasting at all,” said Hatem Al Mosa of Sharjah National Oil Company. “Once COVID-19 is behind us, I would say that renewables will be again going at a much faster rate than conventional fossil fuel power.”