Sharjah revives historic gas identity as it becomes UAE's newest LNG import terminal
Sharjah’s pioneering gas industry has evolved beyond recognition since drilling on the Emirate’s Sajaa-1 well commenced in 1980, heralding the largest gas field discovery in the Northern Emirates to date. Fast forward around three decades and Sharjah is reviving its pioneering heritage.
It is good timing for gas-hungry UAE industry and retail markets. Sharjah National Oil Corporation’s (SNOC) deal with the Sharjah Electricity and Water Authority (SEWA) for a full Gas Sales Agreement (GSA) targeting the supply of natural gas for power generation in Sharjah in May of this year follows the company’s MOU to form a joint venture with Uniper in October last year to import Liquefied Natural Gas (LNG) into the Emirate’s Hamriyah Port. Sharjah benefits from its strategic position in the centre of the country’s seven Emirates, as well as its extensive gas infrastructure. This, combined with the collaborative deals signed in the last eight months, means that the joint venture between SNOC and Uniper can provide an uninterruptible supply of gas to Sharjah and across the UAE.
Hatem Al Mosa, SNOC’s Chief Executive Officer, and John Roper, Managing Director and Head of Middle East for Uniper Global Commodities, explain the key elements of Sharjah’s potential.
What are the fundamentals of the two agreements that SNOC recently signed?
H Al Mosa: The MOU to form a joint venture between SNOC and Uniper organises for the importation of LNG into the Hamriyah Port and will supply natural gas to the three power stations operated by SEWA and to other gas users. First gas deliveries to SEWA from the 10-year GSA will be in early 2019. Some of the gas will flow directly from the Hamriyah Port receiving jetty into the SEWA ‘Hamriyah’ power station. Additional gas will flow to SNOC’s Sajaa Gas Field complex and will supply the other SEWA power stations. The Import Project will have a capacity of three to four million tonnes LNG per annum (mmtpa) and a send out capacity range of 500 to 1000 million standard cubic feet per day (MMscfd).
Why does this matter?
John Roper: Over the last ten years, the market for natural gas has been a sellers’ market, especially following the Fukushima nuclear disaster in 2011 in Japan, where Japan’s increased need for LNG inflated prices significantly. This was also a time of high oil prices in which Sharjah lacked a long-term energy supply contract.
Hatem Al Mosa: The Emirate had to rely on an expensive, unpredictable commodities market. This resulted in SEWA selling power for less than its cost of production. The timing is now right for the SNOC deal with Uniper and SEWA, as Sharjah will have a guaranteed gas supply at attractive prices in order to support its demand. The SEWA agreement is a major milestone, and provides the required critical mass in terms of gas demand for the project to move forward. The provision of natural gas supplies landing directly into Sharjah will enhance the reliability and security of power production to all of SEWA’s residential and industrial customers. This is exciting in terms of potential economic growth.
Why was Sharjah’s Hamriyah Port selected to receive the LNG?
H Al Mosa: The Hamriyah Port is the only location in the Northern Emirates with already existing infrastructure and connectivity capable of sending more than one billion Standard Cubic Feet per Day (Bscfd) efficiently into the market. In addition, the Sharjah Ports Authority has been instrumental in supporting the development of the Hamriyah Port to facilitate this strategic gas Import Project. It is in the immediate vicinity of SEWA’s Hamriyah Power Station and FEWA’s Zora Power Station. It is also connected via a 48” pipeline to the Sajaa Gas Hub with a capacity of more than 1 Bscfd. All pipelines in the Northern Emirates converge at Sajaa, giving it the ability to transfer this gas to anywhere in the UAE. These pipelines are owned by SNOC, SEWA, Emarat, Dana Gas, DUSUP and Dolphin. It will also allow immediate gas supply to an expanding industrial base at Hamriyah Free Zone.
What is SNOC’s ultimate goal?
Hatem Al Mosa: Historically the Sajaa Asset, owned by SNOC, was the main supplier of gas to the six Northern Emirates. This made Sajaa the Gas Pipeline Hub in the Northern Emirates. With this new LNG project, SNOC will again be able to utilise its vast experience and infra-structure to close the gap between the gas supply and demand in Sharjah and the Northern Emirates.
SNOC looks forward to cooperate with all other gas suppliers and consumers, both local and Federal, to achieve the synergies that best serve the interest and growth of UAE as a whole. We do not see this as a competing project with the existing gas business, but rather complementing the big picture.
With the availability of a new independent point of entry for gas to the UAE, we see this as a strategic project for the energy security of the country. We look forward to working with the Ministry of Energy and other major gas suppliers and consumers to contribute towards a robust long term energy plan for the country.
Is gas storage on the cards?
H Al Mosa: Gas storage has been on the Sajaa Asset agenda since 2003. SNOC owns the ideal size reservoir for such a project, which is located in close proximity to its gas complex. However, the historic chronic shortage of gas prevented it from becoming a reality.
The LNG import project will provide the required volumes to start this project, which allows storing excess gas in the winter for its production in summer to satisfy the summer peak demand. It also provides a readily available strategic reserve to respond to unexpected operational or market problems. The project requires significant capital investment. SNOC plans to implement the project in phases, with a target start date of the first phase in 2021. Currently, SNOC is conducting a gas storage pilot test using existing infrastructure to optimise the final project design.
What about Uniper’s role in the project and the potential synergies and capabilities they bring?
J Roper: Uniper is a global energy company that provides energy products and services, builds, owns and manages LNG and Power Generation assets and facilities, as well as Gas Storage facilities and has global expertise in supply and trading of physical and financial LNG contracts either from its own global portfolio or from international third parties.
For the Sharjah LNG Import Project, Uniper, as owner’s engineer for SNOC, will ensure the timely commissioning of the project. Uniper will build on its local UAE knowledge after successfully modifying the Italian FSRU Toscana vessel with Dubai Dry Docks in 2016. Uniper’s remit will include the design and construction of the Sharjah LNG Import facility. Uniper will ensure competitive and reliable shipping solutions for the project. Uniper will also be responsible for the sourcing and supply of competitively priced LNG over the 10 year term of the project to ensure uninterruptible supplies of gas to projected customers.