Shell, Qatar to supply LNG to Dubai from 2010

By Simon Webb

ROME (Reuters) - Royal Dutch Shell (RDSa.L) and QatarGas plan to begin supplying liquefied natural gas (LNG) to Dubai in the peak demand summer period from 2010 after signing deals with the emirate, a Shell executive said on Sunday.

Shell aims to supply around 1.5 million tonnes of LNG a year, said Martin Trachsel, Shell's vice-president for gas and power in the Gulf.

Some of the gas will come from Qatar, and some from elsewhere in Shell's portfolio, he told Reuters by telephone.

The supply deal extends for about 15 years.

"We are delighted to be assisting Dubai in this project and we believe it will offer cost-competitive and clean energy supply for Dubai for many years to come," Trachsel said.

Dubai, one of seven states in the United Arab Emirates, is harnessing the region's windfall from record oil prices to develop tourism, trade and financial services.

Demand for power and water in the emirate is surging by more than 20 percent a year, driven by rapid economic and population growth, Dubai Electricity and Water Authority (Dewa) said in November.

Dubai Supply Authority (Dusup), a government entity which owns the emirate's gas pipeline network and has the sole rights to supply gas users, is building a floating LNG regasification facility at Jebel Ali port, it said in a statement on Sunday.

Under the plans an existing LNG carrier will be converted into a floating storage and regasification unit with capacity of 3 million tonnes a year, the equivalent of 400 million cubic standard feet of gas per day.

Shell will advise Dusup on the vessel's installation.

DOLPHIN

LNG is natural gas cooled to liquid form so it can be loaded on special tankers. The liquid is then delivered to receiving terminals where it is regasified and pumped into onshore pipelines.

London-based MEED magazine reported on April 11 Dusup had invited contractors to qualify for the construction of a terminal to import LNG from Qatar, Egypt and Asia at Jebel Ali.

The terminal would be ready by the first quarter of 2010, MEED said without citing a source.

The UAE sits on the world's fifth-largest gas reserves but has not developed them quickly enough to meet rising gas demand as its economy expands.