Dubai LNG storage facility boosts energy hub hopes

The planned LNG depot is a giant leap to an LNG derivatives market based in the UAE, not in Qatar

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By  Nicholas Wilson Published  September 5, 2006

Dubai’s Techno Park and Dubai Multi Commodities Centre (DMCC) announced last month that they are working with LNG Impel to develop a massive liquefied natural gas (LNG) storage facility in the emirate. “This project is a signal achievement for DMCC’s objective to make Dubai the energy hub of the Middle East, and is in keeping with our key role as a promoter of commodity trade and its requisite infrastructure,” said Ahmed bin Sulayem, chief operating officer of DMCC. While Dubai forges ahead with its projects, Qatar, which has plans to built an energy commodities exchange, has not yet given a date for when its proposed exchange will be open, or what kind of energy contracts it will sell. Dubai LNG Storage Hub, the first of its kind in the world, will be located at Techno Park in Dubai, in the United Arab Emirates (UAE). It is expected to have a total storage capacity ranging from 40 to 65 billion cubic feet (bcf). The storage hub will offer customers the ability to store, trade and plan supplies of LNG, in addition to providing other services such as LNG loans and LNG quality blending. Over time, it will also offer financial derivatives around LNG and shipping. It is the emirate’s latest step, since founding DMCC in 2002, to turn the region into an energy hub. The announcement follows the signing of a memorandum of understanding between LNG Impel and the DMCC in June 2006 to jointly pursue this project. Bin Sulayem said: “We plan to work closely with LNG Impel and Techno Park to ensure that all stakeholders will be able to leverage the facilities offered by Dubai LNG Storage Hub to their best advantage.” “Techno Park, with its core focus built around oil, gas, energy and alternative energy and water desalination projects, presents the ideal location of choice for such a venture,” said Salma Hareb, CEO of Economic Zones World where Techno Park is located. “We are committed to the successful implementation of such innovative projects, which will greatly enhance and strengthen Dubai’s role in regional energy distribution.” Commenting on the joint venture project, Thom Dawson, President of LNG Impel, said: “We are very pleased and excited about the Dubai LNG Storage Hub which will help meet the demands of the industry as LNG transitions into a globally traded commodity. It will provide industry participants with choices and options not accessible to them before.” According to Abdelkader Elrahal, managing director of LNG Impel Middle East, “Dubai is ideally positioned to host this storage facility as it is centrally located between the natural gas rich supply area of the Middle East and the demand driven global markets”. Dubai also offers a business climate and a host of services that are unparalleled in the Middle East. “The launch of this facility would offer greater flexibility to both buyers and sellers, and would release them from being tied to strict and inflexible supply schedules over long periods of time,” said Tilak Doshi, executive director for energy at DMCC. “The Dubai-based storage facility will enable core LNG suppliers and buyers to capture value by storing and trading across different months, as seasonal price variations are a key attribute of global LNG pricing. It will also allow a multiplicity of buyers, sellers and traders to arbitrage across several regions, and support derivatives trading as a spot market emerges around the storage facility,” he added. He said about the possibility of Dubai Gold and Commodities Exchange selling the derivatives, “This is further down the road, and not yet decided.” The exchange was the first such marketplace in the Middle East. At the time Oil&Gas Middle East went to press, DMCC and Impel were due to begin bidding process for storage capacity at the Dubai LNG Storage Hub.

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