68 J. KRANE
environmental goals or move away from fossil fuels, while civil society
pressure groups are generally banned. 31
Further, the UAE holds proven gas reserves of 6 trillion cubic meters
of natural gas, roughly 3% of the global total and enough to produce
at current rates for 90 years, according to BP. Even if domestic supply
became an issue, the UAE lies within pipeline distance of some of the
world’s largest natural gas fields that happen to be controlled by neighboring states. These include the North Field/South Pars Field of Qatar
and Iran; the Qeshm (Salakh and Gavarzin), Saru, Tabnak, Assaluyeh,
Kish, Sarkhun, and Sirri fields of Iran; and the North and South Kidan
fields of Saudi Arabia. All lie within a 250-mile radius of the UAE’s main
pipeline termini.
Examined from the perspective of a domestic electricity security standpoint, the state of natural gas supply looks more fraught.
First, the cost of producing gas in the UAE is rising. Marginal production costs for new fields were $3/mmbtu in 2015, rising to $7—the
highest in the GCC—by 2030. Costs for new sour gas projects in the
UAE were particularly high. Mills estimates a cost of $7–8/mmbtu for
one forthcoming offshore sour gas project. 32
Second, the UAE has since 2008 been a net importer of natural gas,
importing nearly 20 bcm in 2017, 33 nearly as much gas as the total
consumed in Kuwait that year. 34 The cost of imports is pushing up the
overall cost of electricity. Between 2007 and 2014, Dubai paid an average
$3.72 per mmbtu for fuels burned to generate power. 35
Third, the UAE may lie within cost-effective pipeline range of major
low-cost gas producers, including Iran and Qatar, but imports of gas
from those countries have only been partly successful. Diplomatic relations with both have worsened under the more assertive regional policies
of Mohammed bin Zayed al-Nahyan, the Abu Dhabi crown prince and
de facto UAE ruler. Qatar supplies gas to the UAE through the undersea
Dolphin Pipeline, but those imports eventually face the expiration in
2032 of the production sharing contract between the Dolphin Energy
consortium and the Qatari government.
Fourth, regional gas trading is hampered by long-running government
policies of fixing local prices below international benchmarks. Price levels
in the UAE’s six emirates vary widely, as do those in neighboring countries. These discrepancies could be overcome if the Gulf region developed
a pricing hub that encouraged cross-border gas trading at prices based on
an index that included futures pricing. But consumers in the GCC are
environmental goals or move away from fossil fuels, while civil society
pressure groups are generally banned. 31
Further, the UAE holds proven gas reserves of 6 trillion cubic meters
of natural gas, roughly 3% of the global total and enough to produce
at current rates for 90 years, according to BP. Even if domestic supply
became an issue, the UAE lies within pipeline distance of some of the
world’s largest natural gas fields that happen to be controlled by neighboring states. These include the North Field/South Pars Field of Qatar
and Iran; the Qeshm (Salakh and Gavarzin), Saru, Tabnak, Assaluyeh,
Kish, Sarkhun, and Sirri fields of Iran; and the North and South Kidan
fields of Saudi Arabia. All lie within a 250-mile radius of the UAE’s main
pipeline termini.
Examined from the perspective of a domestic electricity security standpoint, the state of natural gas supply looks more fraught.
First, the cost of producing gas in the UAE is rising. Marginal production costs for new fields were $3/mmbtu in 2015, rising to $7—the
highest in the GCC—by 2030. Costs for new sour gas projects in the
UAE were particularly high. Mills estimates a cost of $7–8/mmbtu for
one forthcoming offshore sour gas project. 32
Second, the UAE has since 2008 been a net importer of natural gas,
importing nearly 20 bcm in 2017, 33 nearly as much gas as the total
consumed in Kuwait that year. 34 The cost of imports is pushing up the
overall cost of electricity. Between 2007 and 2014, Dubai paid an average
$3.72 per mmbtu for fuels burned to generate power. 35
Third, the UAE may lie within cost-effective pipeline range of major
low-cost gas producers, including Iran and Qatar, but imports of gas
from those countries have only been partly successful. Diplomatic relations with both have worsened under the more assertive regional policies
of Mohammed bin Zayed al-Nahyan, the Abu Dhabi crown prince and
de facto UAE ruler. Qatar supplies gas to the UAE through the undersea
Dolphin Pipeline, but those imports eventually face the expiration in
2032 of the production sharing contract between the Dolphin Energy
consortium and the Qatari government.
Fourth, regional gas trading is hampered by long-running government
policies of fixing local prices below international benchmarks. Price levels
in the UAE’s six emirates vary widely, as do those in neighboring countries. These discrepancies could be overcome if the Gulf region developed
a pricing hub that encouraged cross-border gas trading at prices based on
an index that included futures pricing. But consumers in the GCC are