Interview: Hatem Al Mosa
How will the emirate maintain its energy security and reduce the gap between supply and demand?
HATEM AL MOSA: As Sharjah is an energy importer, lower prices globally have been beneficial for the emirate. Local demand for natural gas is expected to increase at around 4-6% annually for the next 10 years as the shortage of gas in recent years has constrained industrial growth. This is especially true of the energy-intensive industries, which have instead reduced consumption or switched to coal or diesel to generate power. Almost all local cement plants, for example, have converted to coal power due to the limited availability of natural gas.
Providing a stable supply of gas will guarantee Sharjah’s energy security by closing the current supply-demand gap and allowing it to manage local demand and reduce its vulnerability to external influences. Sharjah has historically been a natural gas hub, and we can utilise existing pipeline infrastructure converging at our Sajaa gas complex to regain a role as a major supplier locally. Our upcoming liquefied natural gas project will address demand for natural gas in both Sharjah and the Northern Emirates for the next 10 years, as long-term supply contracts will allow us to offer secure prices and supply guarantees for customers.
Although the economic feasibility of our project has been based on locked-in agreements with major consumers, including Sharjah Electricity and Water Authority, we are also targeting consumers in the industrial sector as Sharjah is the only emirate with a full gas network covering both industrial and domestic areas. Sharjah already has the largest non-oil industrial sector in the UAE, so more reliable supplies of natural gas will promote industrial growth.
How will external fluctuations affect local capital investment in the upstream and downstream sectors?
AL MOSA: Although the global decline in oil prices severely affected the energy sector and resulted in a slowdown in investment, the industry must eventually maintain a certain rate of investment to sustain established production levels. We have been in the first phase of recovery since the beginning of 2017, reviving investment in oil and gas, especially companies in the engineering, procurement and construction segment.
New exploration activities will take a minimum of two years to positively activate other sectors through construction and production, so we expect other service companies to see a recovery by 2019. This recovery is logical because an indefinite slump will reduce production levels and therefore lead to an increase in prices. Although the sustainability and duration of this recovery is difficult to predict, local producers are optimistic about a healthy level of investment going forward.
Near-term output cuts by global producers have been relatively successful and are likely to continue, and have been relatively successful in improving prices and encouraging investment. However, expectations of investment in oil and gas is also being affected by investment in other competing energy sources, particularly renewables, which are becoming cheaper, more abundant and more technologically advanced.
What measures are being taken to develop further reserves and improve production efficiency?
AL MOSA: We have been in expansion mode and are actively targeting increasing production through our onshore exploration project in Sharjah’s central region. The 3D seismic survey phase has been completed and we are now processing the data, with drilling expected in 2018. However, in terms of improvements in production efficiency, energy companies must always look to improve operational efficiencies to maximise production, regardless of pricing levels. As such, we have introduced some measures as key performance indicators. Our plant, for example, is still achieving high levels of propane recovery, and we are also addressing waste reduction through minimising flaring. We also monitor, measure and report our greenhouse gas emissions.
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