On changes in Sharjah’s energy landscape
What potential is there to diversify the UAE’s energy mix?
JAFAR: The diversification of UAE’s domestic energy mix is a strategic long-term objective and the government is looking to add further sources – including renewable energy and nuclear power – to current supplies. By 2050 the UAE has outlined its objective to combine natural gas and renewables, each representing 40% of production capacity with the remainder supplied from alternative sources including nuclear power and other fossil fuels.
To this end, the country has led pioneering high-profile energy projects, particularly in solar and nuclear power. Recently the UAE broke records for the lowest solar project bids, with unit costs for solar generation being significantly reduced due to the region’s high rate of solar irradiation and available space for new developments.
Although there remains a misperception that natural gas and renewable energies are mutually exclusive – and that the promotion of clean energies will result in reduced demand for hydrocarbons – they will be complementary because the storage, efficiency and intermittency of renewable energy still need to be addressed.
This intermittency of renewables – particularly wind and solar power – means we will continue to require gas-fired electricity generation to underpin the country’s high base load. Oil and natural gas will continue to be an important part of the domestic energy mix, with the latter playing a particularly important role in electricity generation.
New imports of natural gas, including the potential delivery of liquefied natural gas into Sharjah and the agreement for supplies through the Dolphin Pipeline will lead to even further diversification of regional suppliers. It will also result in a new pricing reality as Sharjah and other local consumers become connected to global hydrocarbon markets.
What improvements are being made to Sharjah’s energy infrastructure?
JAFAR: Historically, Sharjah has acted as a natural gas hub for the Northern Emirates and has benefitted from a well-established, comprehensive network of existing pipelines and production infrastructure. To date, this has included the Emarat network, the Sajaa Concession, gas processing facilities, and liquid extraction and sweetening plants.
In order to optimise energy generation and distribution, the Sharjah Electricity and Water Authority (SEWA) actively promoted new projects and are now looking at private sector solutions to encourage more efficient energy generation. For example, for their gas-fired turbines, SEWA is including measures to introduce combined-cycle technology rather than single-cycle generation.
Although Sharjah and the Northern Emirates have previously relied on the government for investment and supply, there is an increasing realisation that both further diversification of supplies and different models of generation will be required to meet growing demand, especially from the private sector.
What effect have changing external conditions had on capital investment in upstream production?
JAFAR: Although oil prices remain at around half of their peak, they have now more than doubled since the lows of 2016 and appear to be stabilising, and even gradually improving, after a period of intense volatility. This gradual recovery means producers are now entering an attractive period for investment and the Organisation of the Petroleum Exporting Countries (OPEC) unprecedented cooperation with non-OPEC countries – concerning output levels – continues to hold and will help maintain prices and restore investor confidence.
The Middle East continues to have considerable conventional oil and gas reserves available for development, and this provides an opportunity to help achieve regional and global emission reduction targets by replacing coal with natural gas. It also offers a comparative advantage for regional consumers.
Although the government in Sharjah has previously relied on the private sector for this investment, the challenge for many other regional economies is the historical dependence on the state for investment in the upstream sector, with state budgets continuing to strain under economic challenges such as lower hydrocarbon revenues partnered with rising populations.
Private-sector companies can expand their role in the energy sector by providing the investment and technology necessary to tap the new reserves that continue to be essential in the maintenance and growth of current production levels. Businesses must also understand the changing demands of the local economy in terms of energy generation and growth projections so they may better respond to market requirements.