Enron and Elf have signed on with the United Arab Emirates Offsets Group (UOG) for the largest energy-related initiative ever undertaken. The three parties signed a Project Development Agreement (PDA) to undertake the implementation of the UOG's Dolphin initiative.
The Dolphin initiative is a project, which seeks to market and distribute gas from the supergiant North Field off Qatar in the Persian Gulf. The new initiative will strive to develop the backbone of Dolphin by delivering up to 3 bcf/d of gas by a new pipeline network, which originates in Qatar but links Abu Dhabi, Dubai, and Oman and will take gas or deliver it in each country.
Dolphin background
The Dolphin program was launched in March 1999 by the government-sponsored UOG. UOG was started in 1992 to generate wealth among the people of the UAE and assist with the global integration of its economy by the creation of commercially viable and sustainable ventures. This would be achieved through partnerships and strategic alliances between the domestic private sector and international businesses.
The UOG implemented Dolphin to stimulate industrial and business investment in the UAE and in each country that participates in the initiative. The whole of the project encompasses activity along the whole "gas value chain" from the development of gas fields to the creation of new industrial zones fueled by power generated by the gas piped from those fields.
The initial phase of the initiative will require an estimated investment of $8-10 billion over six to seven years implemented through partnerships between governments, public sector enterprises, and the private sector. In the past 11 months, the UOG has secured seven such partnership agreements, including the PDA with Enron and Elf.
PDA
According to the UOG, the PDA plans several other partnership opportunities for investment by other firms in new project financed gas businesses in all of the countries along the Dolphin route. These include:
- Upstream - the development of a block in Qatar's North Field as well as direct purchases from existing sources.
- Midstream - the construction of an 800-km pipeline from Qatar to an Abu Dhabi landfall and then on to Oman, together with onshore infrastructure and distribution systems.
- Downstream - potential gas-consuming initiatives including power generation, LPG, petrochemical production, fertilizer and ammonia, and other basic industries in each of the territories touched by Dolphin.
While all partners in the project will have involvement on all phases, Elf will focus primarily on upstream development and serve as upstream operator while Enron will focus primarily on pipeline development, gas marketing, and project risk management and server as transport operator.
Agreements
Concurrent with negotiations with Enron and Elf, the UOG was also in discussions with potential gas buyers in Abu Dhabi, Dubai, and Oman and suppliers in Qatar. The first action of the initiative will be to transform the UOG's preliminary agreements with such buyers and suppliers to allow for project-financeable contracts. These agreements include:
- March 1999 - The Dolphin initiative began with the signing of a preliminary agreement with Qatar General Petroleum Corporation.
- June 1999 - Further agreements with key bodies in the governments of Oman and Dubai were announced.
- June 1999 - A further agreement was signed with the key government agencies in Pakistan. This second phase of the initiative would potentially open the way for the sale of up to a further 1,500 MMcf/d of Dolphin gas.
- October 1999 - Abu Dhabi National Oil Company and UOG issued a joint declaration formally positioning Dolphin as a major provider of gas to Abu Dhabi and Dubai.
- November 1999 - An agreement with Abu Dhabi Water and Electricity Company, the Emirate's power generation company, was signed which will make Dolphin the company's exclusive supplier of gas.
The group also signed the first supply agree ment with a private sector company. A memorandum of understanding was signed with Mobil Oil Qatar enabling negotiations to begin on developing a long-term Supply and Purchase Agreement for Mobil's Enhanced Gas Utilization Project gas to Dolphin. This gas will be the first gas to flow through Dolphin. Volumes are estimated to be in the range of 300-500 MMcf/d. The agreement also provides for the negotiation of a detailed supply and purchase contract which will give Dolphin the option to participate in Mobil's Enhanced Gas Utilization Project to produce gas from Qatar's North Field.
Next step
Following the settling of the agreements, the group will then begin construction of the upstream facilities in Qatar and the pipeline system. The PDA expects the agreement to remain in effect for a minimum of 25 years. The first phase of the initiative is expected to take two to three years for the pipeline and longer for the full array of new industries.
The shares of the PDA will be split 51% to UOG and the remaining interest evenly divided between Enron and Elf - 24.5% each. In addition, the agreement envisions that, where deemed desirable, facilities will be project financed without recourse to the partners of government subsidies, and that other third
parties will be added as equity partners in Dolphin's downstream industrial ventures as they are created along the pipeline route.
The launching of the project is conditioned on the signature of all contracts defining the economy of the project such as the North Field contract and the price for the transfer of the gas. The group plans to have the negotiations finalized prior to the first investments before the end of the year, so that first gas can be delivered in 2003.
Dr. Amin Badr-El-Din, Chairman of the UOG, said, "With the expertise, resources, personnel, and commercial experience of our partners, we are now posed to make Dolphin a reality on a rapid timetable."
