Hosting the World Expo in 2020 will give Dubai the opportunity to demonstrate its exponential growth, both in the development of sustainable energy sources and in the introduction of measures to foster smarter, more efficient use of power and water. Key performance indicators for the emirate’s energy goals can be benchmarked in the next few years against three specific measures: its success in delivering a successful, sustainable World Expo 2020; its fulfilment of the goals set out in UAE Vision 2021 (the country’s long-term development strategy), including the reduction of the emirate’s carbon footprint and its desire to play a pioneering role in the development of energy-efficient technologies; and the transformation of the energy mix and demand-side management (DSM) in line with Dubai’s Integrated Energy Strategy (DIES) for 2030.
The final measure may be a decade and a half away, but Dubai’s rapid expansion, coupled with its relatively modest share of the UAE’s oil and gas reserves, is fuelling the pace of change.
Energy Share
With 97.8bn barrels of proven reserves, the UAE is sitting on 5.8% of the world’s crude oil, according to BP’s “Statistical Review of World Energy 2014”. BP predicts that given the 2013 reserves, the country’s oil supplies should last for 73.5 years. The UAE also has 3.3% of the world’s proven reserves of natural gas, or 215 trn cu feet (tcf). Of the seven emirates, Abu Dhabi has the lion’s share, 94%, of the oil and gas found in the UAE. Dubai has estimated crude oil reserves of 4bn barrels and 3.53 tcf of natural gas, representing 4% and 1.64% of total UAE reserves, respectively.
To compare these figures to countries in the West, Dubai’s crude oil reserves are 25% greater than the UK’s, and it has the same natural gas reserves as Germany and Italy combined. Dubai’s four offshore fields are Fateh, South-west Fateh, Falah and Rashid. Production is managed and regulated by Dubai Petroleum Establishment (DPE), the state oil company that was nationalised in 2007. DPE is working on the development of a new field, Al Jalila, but as of late 2014 production had yet to get under way.
New Gas
In October 2014, state news agency WAM reported DPE had made a discovery of gas in the Pre Khuff rock formation in its Fateh field. The discovery was made in its T-02 deep gas exploration well at a depth of 18,248 feet, the deepest well in Dubai to date, according to the agency. Initial tests show the gas, which flowed on a number of occasions, is largely methane with no hydrogen sulphide content. The initial reports suggest the discovery may be much more significant than the earlier T-01 well, which found significant levels of hydrogen sulphide and nitrogen at a depth of 17,397 feet in 1981, thereby making exploitation difficult and expensive. The WAM report said, “The new well has been wire-line logged to evaluate the potential of the formations and there are some 390 feet of gas-rich zones out of the 900 feet drilled and logged in the Pre Khuff.” The report added that drilling had been suspended to allow for long-term testing and potential later reentry. “Until the testing programme has been completed, potential reserves and possible production rates cannot be estimated accurately.”
Specialist equipment is being imported to conduct the tests, and DPE expects to be able to announce results by the summer of 2015.
Energy Consumption
Although the UAE is blessed with oil and gas wealth, the country is also one of the world’s largest energy consumers. According to BP figures, the UAE produced 3.6m barrels per day (bpd) of oil in 2013, an increase of 7.4% on 2012, when it produced 3.4m bpd. Daily crude oil production figures cited by the US Energy Information Administration (EIA) suggest a lower figure of 2.8m bpd for UAE crude oil production in 2012. According to BP, the UAE consumed 773,000 barrels of oil per day in 2013, up 4.2% on the previous year. The UAE is one of a few countries in the world where per capita consumption of oil was greater than 3 tonnes in 2013. In its 2013 report, the EIA estimated that the UAE exported more than 2.5m bpd of crude oil, mainly to Asia, but it noted the country relies heavily on petroleum and petroleum products to meet domestic demand for energy.
When it comes to natural gas, the UAE has been a net importer since 2008, when it consumed 2.1 tcf and exported 1.77 tcf. In 2013 the country consumed 2.41 tcf and exported 1.98 tcf.
According to the EIA, this tipping point was reached in 2008 for two reasons. The first was that between the years 2003 and 2012, approximately 26% of gross natural gas projection was re-injected into its oil fields as part of enhanced oil recovery (EOR) strategies, and the second factor was the growing demand for power from the UAE’s rapidly expanding grid, power that was supplied for the most part by gas-fired plants.
Most of the UAE’s imported gas comes from its GCC neighbour Qatar, which has 871.5 tcf of natural gas reserves, 13.3% of the world’s total. The gas is transported through the undersea Dolphin pipeline from Qatar’s North field and comes into either Jebel Ali in Dubai or Abu Dhabi’s Taweelah power station, and from there travels to the other emirates and Oman. BP’s “Statistical Review of World Energy 2014” reported that Qatar exported 628.5bn cu feet of gas through the Dolphin pipeline in 2013.
According to the EIA, the pipeline currently has a capacity of 2bn cu feet (bcf) per day and transported 1.9 bcf per day in 2012, with 1.7 bcf going to the UAE and the remainder going to Oman. The EIA reports that Dolphin Energy plans to increase capacity to 3.2 bcf per day in 2015.
LNG
In addition to the natural gas it received from Qatar, Dubai has imported liquid natural gas (LNG) from around the world since 2010 using the Jebel Ali Import Terminal, via a floating storage regasification unit (FSRU), the Golar Freeze. This is an LNG tanker converted for this purpose and permanently moored at the terminal. LNG tankers berth alongside and discharge their LNG into the FSRU, which then warms the liquefied gas back into its gaseous state using seawater through a heat exchanger. This process, and the subsequent distribution of the gas, is managed by the Dubai Supply Authority (DUSUP). Golar Freeze has a storage capacity of 126,000 cu metres and has been leased to DUSUP until 2019. In September 2014, DUSUP announced it had entered into a 10-year charter agreement for a larger FRSU, capable of storing 151,000 cu metres, from Excelerate Energy. The new FRSU will be berthed in Jebel Ali from April 2015, while Golar Freeze is in dry dock. Later in 2015, the new vessel will be upgraded so that it is capable of a regasification capacity of 800m cu feet per day from 2016.
“This agreement is an important milestone in helping to ensure continued uninterrupted supply of natural gas to meet Dubai’s growing economy’s needs,” said Abdulla Abdul Karim, general manager of DUSUP, in a press release. “We will continue to deliver one of the greenest fuels to meet growing power generation and desalination needs.”
Abu Dhabi, on the other hand, is an LNG exporter and member of the Gas Exporting Countries Forum (GECF). According to the EIA, 95% of the UAE’s natural gas exports in 2012 were LNG cargoes bound for Japan under long-term contracts. The UAE’s natural gas reserves are sulphur-rich, or sour, and in the past the expense of separating the sulphur from the gas was prohibitive.
However, while the Dolphin pipeline has been a great example of cooperation and trade between GCC member countries, improvements in technology and an increase in overall demand (which grew by an annual average of 5.3% between 2003 and 2012, according to the EIA) make the process a potentially attractive alternative to continued reliance on gas imports from Qatar.
Energy Mix
The DIES 2030 strategy is based around reducing over-reliance on one source of energy, exploring sustainable alternatives and finding the cheapest fuel to supply its power plants. In 2010 Dubai’s energy mix was comprised of 99% gas and 1% diesel. DIES’ initial target was to cut out diesel altogether by 2020 and reduce the proportion of gas-fired plants to 85%, with clean coal and solar providing 14% and 1%, respectively.
Looking ahead to 2030, DIES planned to reduce the proportions of gas and coal to 71% and 12%, respectively, while the share of solar would rise to 5%, with the planned nuclear power station in Abu Dhabi accounting for the remaining 12% of Dubai’s power needs. However, in early January 2015, Dubai Electricity and Water Authority (DEWA) announced more ambitious targets for solar, expected to contribute 7% by 2020 and 15% by 2030.
“Our main concern is that the emirate is short of energy, and so we have to decide how to provide the energy and to maintain and diversify the supply,” Abdelrazaq Faris Al Faris, the chief economic counsellor of the Dubai Economic Council, told OBG. “As is the case with Qatar, this kind of external risk is present throughout the region. For the time being, Dubai is planning to secure a balanced energy mix, and it is a question of going further on that road.”
The agency responsible for steering through this transformation in the energy mix, and for driving energy efficiency savings, is the Dubai Supreme Council of Energy (DSCE), which was created in 2009. DSCE stakeholders include DPE, Dubai Municipality (DM), Emirates National Oil Company (ENOC), DEWA, Dubai Aluminium Company (DUBAL), DUSUP, Dubai Nuclear Energy Committee (DNEC), and the Roads and Transportation Authority (RTA).
ENOC
ENOC was formed in 1993 and now employs over 6000 people globally. Through a network of 30 subsidiaries, its services span the spectrum of the production chain, from refining, terminalling and storage to the operation of retail petrol stations and convenience stores. ENOC built Dubai’s first petroleum refinery in Jebel Ali Free Zone (JAFZA) in 1999 to process 120,000 bpd of condensate and light crude oil to yield products including jet fuel, diesel oil, fuel oil, naphtha and liquefied petroleum gas (LPG) for both local and export markets.
The refinery had a $850m upgrade in 2010 to install a reformer and hydrotreater that enables it to produce reformate with an octane rating of 102, and ultra-low sulphur naphtha. ENOC’s gas processing plant opened at Jebel Ali in 1977 and began producing LPG in 1980. It also provides dry gas offshore as fuel for DPE platforms. In March 1995, it began commercial production of methyl-tertiary butyl ether (MTBE), which is an additive for unleaded petrol.
New Horizons
In 2003 ENOC created Horizon Terminals, which now operates terminals in the UAE, Saudi Arabia, Singapore, South Korea, Djibouti and Morocco. At Jebel Ali, Horizon operates a bulk liquid chemical terminal with a capacity of 54,000 cu metres in 59 tanks, serving both import and re-export markets. Also in Jebel Ali, EPPCO International, a joint venture between Horizon and Chevron, handles petrol, diesel gasoil, fuel oil and asphalt.
With storage capacity of 936,755 cu metres in 55 tanks, the terminal is designed to service Dubai’s aviation requirements and it offers bunkering, re-export and strategic defence storage. In March 2014, the Texas company KBR announced it had been awarded the front-end engineering design (FEED) contract by ENOC’s processing subsidiary to update its condensate refinery at Jebel Ali. The upgrade will add jet and diesel hydrotreaters and an isomerisation unit, leading to the production of Euro V grade products including high-octane petrol, low-sulphur jet fuel and ultra-low-sulphur diesel. KBR did not say how much the contract was worth.
In 2012 Horizon Terminals awarded the $127m engineering, procurement and construction (EPC) contract for a 141,000-cu-metre storage terminal at Jebel Ali and a 60-km pipeline to carry aviation fuel from JAFZA to Dubai International Airport to Indian construction firm Punj Lloyd. Dubbed the Falcon Project, the pipeline was to include a branch-off point to serve the country’s newer airport, Al Maktoum International, with development planned for a second phase. The first phase of the construction was completed in mid-2014, and Horizon Terminals is reportedly considering moving forward with phase two, contingent upon the completion of the EPC phase of the refinery upgrade in 2015. In September 2013, a memorandum of understanding was signed by DSCE; Angola’s state-owned oil company, Sonangol; and Hong Kong’s New Bright International Development to build, own and operate a new refinery in Dubai. However, at time of writing, no further details of the scheme, such as capacity or location, have been announced.
Transmission Of Electricity
DEWA operates Dubai’s electricity grid, which in turn is integrated with the UAE national grid, and beyond that the GCC Interconnection Grid. In 2013 the number of 400-KV substations rose from 18 to 19, while 132-KV substations increased from 184 to 194, 33-KV substations fell from 135 to 129, and smaller 6.6-KV and 11-KV substations were up from 26,756 to 27,795. Installed capacity also increased, from 36,299 GWh in 2012 to 37,478 GWh in 2013.
Water Desalination
The UAE is the secondlargest producer of desalinated water in the world after Saudi Arabia. Dubai’s desalination plants supply 98.8% of demand, with the remainder needed drawn from groundwater. Co-generation plants are used to desalinate salt water and also burn natural gas to produce electricity.
Feedstock Estimates
DUSUP is responsible for procuring and supplying the energy needs of key utility and industrial companies in Dubai, including DEWA, DUBAL, Dugas, ENOC and DPE for power generation and desalination purposes. In 2008 DUSUP decided to convert its Margham gas plant, 55 km from the city of Dubai, into a storage facility, so that it could store gas there over the winter months and then supply it as required when consumption peaks in the summer months.
According to DUSUP, the Margham storage facility has enabled Dubai to reduce the amount of oil burned to generate electricity to zero, “other than for occasional operational reasons”. This suggests that, with the exception of occasional fall-back plans, Dubai has effectively increased its reliance on gas from 99% in 2010 to 100% at present, with the only exception being the 0.1% added to the grid by the country’s first solar-produced energy in 2014.
DEWA is responsible for generating power needed for electricity and desalination in Dubai and its gas-fired power stations in 2014 have an installed capacity of 9656 MW. Although continual efforts are being made to improve the efficiency of these plants, and 700 MW of capacity is to be added to its M Station by 2018, no construction of new gas-fired plants has been announced for the next five years. As such, it is possible to conclude that 10,356 MW is expected to account for 85% of total generation capacity by 2020, according to the original DIES projections. If that is the case, the total electricity to be generated by then will be 12,184 MW. On that basis, the 14% contribution anticipated from coal would equate to 1705 MW, while solar would be expected to generate 121.84 MW, equivalent to 1%.
Looking ahead to 2030, and once again assuming Dubai continues to use its gas-fired power plants to full potential without capacity retirements, and that no new gas-fired capacity will be added, 10,356 MW would equate to 71% of a total installed capacity of 14,585 MW across all fuel types.
Solar, Nuclear & Coal
Projections place solar’s contribution at 5% of the total by that time, which, using 14,585 MW as a total, would equate to 729 MW of solar power. By 2030, nuclear and coal are expected to contribute 12% and that would equate to 1750 MW each. The new targets for solar recently announced by DEWA – 7% by 2020 and 15% by 2030 – will actually result in higher capacity figures, both for solar and overall.
The first 13-MW solar plant opened in 2014, and a further 200 MW, in the second phase of Mohammed bin Rashid Al Maktoum Solar Park, is anticipated by 2017, three years ahead of the DIES target. The solar park is expected to be completed by 2030 with a capacity of 2600 MW, according to DEWA – a significant improvement from the original DIES projection of 1000 MW. The DIES vision does not anticipate any input by 2020 from the Barakah nuclear plant under construction in Abu Dhabi. By contrast, according to plans being discussed in Abu Dhabi, construction is expected to be much faster. Mohammed Al Hammadi, the CEO of the Emirates Nuclear Energy Corporation, told local press in December 2014 that was on track. The Barakah power station will have four reactors, each with an installed capacity of 1400 MW, resulting in a total capacity of some 5600 MW. The four reactors are set to be introduced one at a time, beginning in 2017 and finishing in 2020. Assuming construction remains on schedule, a target of importing 1630 MW of power from the nuclear plants in Abu Dhabi by 2030 appears to be feasible.
The only source that would appear to fall short, based on this calculation of total generation capacity of 12,184 MW in 2020 and 14,585 MW in 2030, is clean coal. To meet the proportions suggested in DIES, coal would require 1706 MW of capacity by 2020 and 1750 MW by 2030. In fact, the plans drawn up for the clean coal plant are for 1200 MW of capacity. Despite this potential shortfall on clean coal, the recent increase in the solar target (7% by 2020) would ensure that the share of gas would be below the diversification target set by DIES for 2020.
New Plants
In September 2014, Reuters reported that Dubai had short-listed eight companies to build the 1200-MW Hassyan clean coal power plant. It was expected to cost $2bn to build and would come on-stream by 2021.
DEWA also selected in January 2015 as the independent power producer project for construction of phase two of Mohammed bin Rashid Al Maktoum Solar Park. Initially tendered for 100 MW, the competitiveness of the bids received resulted in the award of 200 MW capacity for the project.
Demand Side Management
While DEWA and DSCE are working on plans to increase the volume and variety of energy in Dubai, both bodies are playing a role in multi-agency DSM strategies. These strategies are designed to focus on different consumer segments. DEWA figures show that in 2013 commercial customers accounted for 48% of electricity usage, residents 28%, and industrial customers 7%. When it came to water consumption, residents consumed 59%, commercial customers 28% and industrial customers just under 3%.
In addition, strict building codes covering insulation and efficient use of energy for air conditioning and lighting are applied to all new buildings and a programme of retrofitting is taking place to ensure older buildings are made more energy efficient.
District cooling – using a central source to supply cooling to a number of buildings instead of multiple individual systems – is covered by the new green building regulations. All new systems must include a thermal energy storage equivalent to 20% of total capacity for the site, and individual customers must be given meters to measure usage (see analysis).
Energy Subsidy
Although consumers of electricity and water have seen their bills increase in the last few years, any decisions taken on wider energy subsidies, for instance on vehicle fuel, remain with the federal government. In its report in 2013, the IMF urged the UAE to re-examine the policy. The IMF argues energy subsidies reward the wealthy because the discount is passed on to everyone rather than to those most in need.
Outlook
In a region renowned for its hydrocarbons wealth and high levels of energy consumption, Dubai is leading the way in pursuing a more sustainable future. As a net importer of gas, the emirate feels the need to save fuel more keenly than some of its wealthier neighbours.
With a clear road map of reforms and a commitment to investing in new forms of energy generation, the emirate is also hoping to diversify the mix of fuels it relies upon for desalination and electricity generation and explore ways to benefit from another of its abundant natural commodities: sunshine.
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