Dubai: Sharjah National Oil Corporation has awarded the $40 million Moveyeid Gas Storage Surface Facility Project to Petrofac Facilities Management International Ltd.. This is the second such gas storage project in the UAE after Dubai's.
It will be completed next year. The project aims at self-sufficiency in gas production and the management of supply and demand within the domestic market. “The whole idea of gas storage project came from managing the huge seasonal variations in gas demand," said Hatem Al Mosa, CEO of SNOC.
"A storage facility would stabilise this. A strategic gas storage facility for Sharjah was also a key consideration to go ahead with this project.”
The project features a high-pressure compressor facility, a high-pressure pipeline and flow lines to four existing wells in Moveyeid Field. Additional project scope includes drilling horizontal legs in existing wells, and potentially drilling new wells in 2023.
Why go for gas storage now
Building a gas storage in Sharjah is not an all-new idea. SNOC had been in planning for a long time, to manage demand and supply factors linked Sharjah’s own production and consumption.
“The project will allow us to store excess gas in the winter to satisfy peak summer demand," the CEO said. "It will also provide a readily available strategic reserve to respond to unexpected operational or market issues where connectivity and proximity become most critical.”
Initially, the project was linked to the import of liquefied natural gas (LNG) for domestic consumption. However, the import-linked project was shelved following the recent gas discovery in Sharjah. The storage project will now focus on domestically produced gas for better and optimal demand and supply management.
“Gas storage has been on the Sajaa Asset agenda since 2003," the CEO said. "SNOC owns the ideal reservoir for such a project in terms of size, proximity to pipeline infrastructure, connectivity and composition. However, the historic chronic shortage of gas to provide the cushion gas prevented the project from becoming a reality at that time.”
New gas discovery
SNOC and its Italian partner Eni earlier this year announced the discovery of ‘Mahani’, an onshore gas field with a capacity of 50 million standard cubic feet per day. The new gas discovery, along with other recent discoveries in the emirate, prompted SNOC to go ahead with the storage project.
“We commissioned a study on the economic viability for storage, including technical feasibility," said Al Mosa. "With positive results from both we have commissioned and awarded the project and it will be ready next year with significant future expansion.”
Impact of COVID-19
SNOC and its partner Eni, said that the outbreak of coronavirus will not have any major impact on the project schedule and its viability. SNOC plans to implement the project in phases, with the surface facilities to be commissioned by the end of 2020 and drilling in 2023.
“We expect the impact of coronavirus to last for another two months and it will not have any material impact on the Mahani project schedule,” said Fuad Krekshi, Executive Vice-President - Middle East, Eni.
However, the Eni official added that economic impact of the outbreak combined with global oil and gas demand will have an impact on other projects it is currently assessing.
While the production from the Mahani field expected to start from the end of this year, SNOC said its existing gas production is not impacted by coronavirus. “COVID-19 will have some impact on our schedules, but we believe our target of starting production from Mahani is realistic," said Al Mosa.
Global demand, prices
Global oil and gas prices have been facing severe downward pressures following the outbreak and significant decline in global demand. Analysts expect demand and consequently prices to remain depressed for a long time.
Despite the grim demand scenario, SNOC said the project is not linked to the global market forces as it is targeted at committed demand from Sharjah, largely from power sector followed by industrial.
“We see minimum impact from the current market turmoil and price volatility. Our supplies are fully tied to Sharjah's market demand. Thus price has no impact, so is global demand on our project,” said Al Mosa.