Dubai: The massive gas discovery announced by the UAE authorities on Monday combined with recent oil and gas finds are expected to make the country energy self-sufficient while boosting the oil-GDP [gross domestic product] and external balances, according to economists and oil industry experts.
The economic impact of this discovery will largely depend on how quickly commercial production can begin.
The Jebel Ali reservoir located between the two emirates has 80 trillion cubic feet of gas resources. The new discovery, experts said is the largest in last 15 years. The last major discovery was in 2005, when the Galkynysh field was found in Turkmenistan - the world’s second-largest gas field.
“The new gas find is an important step towards energy self-sufficiency for the UAE that will certainly have positive long term impact on the economy. The size of the (gas) find is significant and the shallow nature of the reserves makes it easy to extract gas at substantially lower costs. The economic impact of this discovery will largely depend on how quickly commercial production can begin,” said Monica Malik, Chief Economist of Abu Dhabi Commercial Bank.
Analysts say the UAE is moving fast to become self-sufficient in gas supply by 2030, a step that would allow it to break its reliance on imports from Qatar.
“This is an important project on a grand scale that could help secure the UAE’s gas and electricity needs for years to come,” said Mohamed Elewa, Advisory Partner, Grant Thornton.
According to the official announcement, Abu Dhabi National Oil Co (Adnoc) will jointly develop the new reservoir with the Dubai Supply Authority (Dusup). Dubai-owned Dusup distributes gas in the emirate. Adnoc has already dug 10 wells as part of the initial works related to the project. The reservoir is within an area between Saih Al Sidirah and Jebel Ali.
In November last year the UAE had announced the discovery of major oil and natural gas reserves taking the country to the sixth spot in both global oil and gas reserves ranking, according to a recent statement by Abu Dhabi’s Supreme Petroleum Council (SPC).
The SPC, the highest governing body of the oil and gas industry in Abu Dhabi, said late last year that new reserves include 7 billion barrels of oil and 58 trillion cubic feet (1.64 trillion cubic meters) of conventional gas.
This contributed to the UAE moving to sixth spot - up by one - globally in terms of global oil and gas reserves, with a total reserves of 105 billion barrels of oil, 273 trillion cubic feet of conventional gas and 160 trillion cubic feet of standard non-conventional gas resources.
“The Jebel Ali reservoir has 80 trillion cubic feet of natural gas, making it the fourth-largest in the world, according to Bloomberg. It is unclear how long it will take to develop the field, but increasing natural gas production would boost hydrocarbon GDP, helping to mitigate the impact of oil production cuts,” said Khatija Haque - Head of MENA Research at Emirates NBD.
In addition to recent large discoveries, there have been smaller gas finds such as the one announced by Sharjah National Oil Corporation and its Italian partner ENI in late January this year at the Mahani field in Sharjah. The discovery of at Mahani-1 exploration well has a flow rates of up to 50 million standard cubic feet per day.
The Jebel Ali gas discovery is enormous by all standards, according to experts. The announced resources would make it the fourth-biggest gas field in the Middle East behind Qatar’s North Field and Iran’s South Pars and Abu Dhabi’s Bab field.
Analysts said the new gas discovery is a positive development for the UAE economy. However, it should be noted that it is not a short-term game changer.
“The new gas discovery marks a significant milestone for the UAE and its journey towards gas self-sufficiency. At the current juncture, technical recovery levels from the depository remain unclear and further appraisals are needed to provide quantifiable evaluations," said Ehsan Khoman, Head of MENA Research and Strategy at MUFG.
"Critically, market supply-demand fundamentals as well as gas price dynamics will be central in determining the commercial viability of extraction levels. What is clear however, is that this development will provide a further positive impetus to the UAE’s medium to long-term economic growth trajectory,” he added.