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They are countries so rich in oil and gas that they would never want for fuel to drive their booming economies and the lavish lifestyles of their rulers.
Now, however, in a role reversal that makes selling sand to Saudi Arabia look like a sensible business transaction, the oil-rich Gulf states are planning to import coal.
An acute shortage of natural gas has led to the city states of the United Arab Emirates seeking alternative fuels to keep the air cool, the lights on and the water running.
Abu Dhabi is working with Suez, the French utility company, on a nuclear power project but coal is emerging as the best quick fix to avert blackouts as the world’s biggest hydrocarbon exporters struggle to cope with high prices for oil and natural gas, infrastructure weakness and a development boom. Some of the world’s biggest oil exporters may soon find themselves reliant on imported fuel from a leading coal exporter, such as South Africa.
As a result, Taqa, Abu Dhabi’s national energy company, plans to take a half share in a proposed £500 million coal-fired power plant, while Dubai Electricity and Water Authority (DEWA) hopes to start work on a clean-coal project this year.
Oman Power and Water Procurement Company indicated in December that a planned 700-megawatt power and water desalination plant may need to be fuelled by coal instead of natural gas.
The dramatic transformation is taking place because, for the first time, the Gulf states are beginning to feel the burden of the soaring cost of fossil fuels. In March Dubai introduced an electricity pricing system that increased tariffs for heavy users. The new tariffs apply only to foreign businesses, expatriates and foreign-owned businesses. Emiratis are exempt.
The sudden gas shortage has caught the Gulf states by surprise at a time when demand for power and water desalination is increasing annually at double-digit percentage rates. Investment in infrastructure has lagged behind the region’s population expansion and construction boom. Anecdotes abound of apartment complexes left empty because there is not enough capacity in the local electricity grid.
According to Wood Mackenzie, the energy consultancy, the UAE’s demand for gas will double within a decade if power consumption continues to grow. Dubai’s peak power consumption rose by 15 per cent last year, according to DEWA’s statistics.
“Demand for natural gas is rising at 12 per cent per annum. In the summer the UAE is burning liquid fuel [fuel oil and diesel] for peak power generation,” said Peter Barker-Homek, Taqa’s chief executive. “Should there be alternatives [to burning oil], such as coal and nuclear? Probably, yes. If you have a product worth $120 per barrel, you want to sell it. The question about coal is always the environment. It is definitely cheaper than using crude oil.”
Last summer Abu Dhabi’s oil output fell by 600,000 barrels per day as natural gas was diverted from injection into oil wells to power stations to meet peak demand for electricity.
The Emirate has substantial reserves of gas but much of this is earmarked for injection into wells to maintain pressure and to improve oil output. With the crude oil price reaching $125 (£64) per barrel, the diversion of gas into local power stations is a huge cost to the country.
Meanwhile, the price of natural gas in the Gulf has soared amid shortages and increased global demand. Local gas resources in the Emirates have dwindled, and Abu Dhabi and Dubai are already importing gas by pipeline from Qatar.
Iran, which holds some of the world’s biggest gas reserves, is another option, but relations between the Western-friendly Emirates and Iran are uneasy. A project led by Dana Gas, a private sector company based in the Middle East, to bring Iranian fuel across the Gulf to Sharjah has been locked in pricing disputes.
In a desperate attempt to avert power and water shortages in the summer, Dubai entered into a 15-year contract with Royal Dutch Shell last month to supply liquefied natural gas in the summer period from 2010. However, this is an expensive fuel, and the Emirates have built their economies on gas at almost nil cost.
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Sheik Mohamed obviously has a better understanding of the non-doms mentality than Mr Brown has.
john, woodbridge,
Strange how people on this forum are blaming oil producers for high oil prices, which are actually based on several factors.. i.e. weak dollar, higher global demand, financial markets turmoil meaning investors are speculating on commodities (including food and oil) and of course government tax.
A. Khan, London,
We shouldn't laugh. We almost ran out of water a couple of years ago.
Frank Upton, Solihull,
how about charging them more for food (they can't grow their own), cars (they can't make their own), books (they can't write their own) and oil exploration services (they can't find their own). In fact what are they good at except making suicide bombs ?
wui, andover,
Charge them $124/kg of coal - see how they like it!
Paul, London,
Coal exporting countries should charge these people the absolute Earth per tonne for coal and see how they like it!
AB FOSSER, Brisbane, Australia
About five thousand pounds a ton sounds about right.
Cromwell, Leeds, England
Prices rise and fall in all commodities , thats just life . We could take the same attitude that you have Nork to those who have increased the rice .
The largest consumers in the UAE are non nationals who are all trying to get a piece of the pie, including many nationals from your neck of the wood
Ahmed's Mum , Ras alkhaimah, UAE
''In March Dubai introduced an electricity pricing system that increased tariffs for heavy users. The new tariffs apply only to foreign businesses, expatriates and foreign-owned businesses. Emiratis are exempt.''
Enough said about how overrated Dubai is! a total rip off!
Andreas , Nottingham, UK
Ironic, to say the least.
Gopal, Houston, USA
What an opportunity to form a Coal based cartel, and screw them, just as they are screwing us, with oil prices.
Nordickoala, Birkdale, Australia