The past few years have seen the UAE embark on a massive, multi-billion dollar program of investment in its natural gas sector including a shift toward natural gas-fired power plants and the transformation of the Taweelah commercial district into a natural gas-based industrial zone. An ambitious plan, the Dolphin Project, to interconnect the natural gas grids of Qatar, the UAE, and Oman, also is underway. Most of the UAEs increased natural gas needs in the next decade are to be satisified with imported natural gas from Qatar. Much of the natural gas development in the UAE itself involves the extraction of natural gas liquids (NGLs) and reinjection of the gas to maintain pressure in oilfields.

The second phase of the UAEs $1 billion onshore natural gas development program (OGD-2) at the Habshan complex located directly over the Bab oil and natural gas field was completed in early 2001. This second phase included the construction of four trains to process 1 bcf/d of natural gas, 300-500 tons per day (t/d) of natural gas liquids (NGLs), 35,000-55,000 t/d of condensate and up to 2,100 t/d of sulphur.  Additional capacity expansion is underway in the third phase, OGD-3, and will involve the construction of two additional natural gas processing plants.  Bechtel was awarded the initial engineering and design work for OGD-3 in May 2002, which was completed in 2003. The U.S.-based engineering firm Foster Wheeler was awarded a project management contract for OGD-3 in January 2005, and several other contracts have been awarded since then for various aspects of construction. OGD-3 is scheduled for completion in early 2008. Dubais natural gas consumption has been gowing by nearly 10 percent annually due to expansion of the emirates industrial sector, a switch to natural gas by its power plants, and the need for an enhanced oil recovery (EOR) system based on natural gas injections for its mature oilfields. Dubai natural gas demand will average 810 Mmcf/d in 2005, with major swings between summer and winter consumption patterns. Until mid-2001, Dubais entire natural gas supply came entirely from fellow UAE member Sharjah. BP operates three fields and the 800-Mmcf/d Sajaa processing facility in conjunction with the Sharjah government.  In May 2001, a pipeline from the Maqta area of Abu Dhabi to Dubai commenced operations, initially delivering 200 Mmcf/d of natural gas.  The capacity of the pipeline was raised to 800 Mmcf/d in a project completed in 2004. The Dolphin Project aims to develop links between the natural gas infrastructures of Qatar, the UAE, and Oman. It will allow the export of non-associated natural gas from Qatars massive offshore North Dome field. A Statement of Principles for the project was signed in March 1999 between the UAE Offsets Group (UOG) and Qatar Petroleum.  The two firms signed a natural gas sales agreement in March 2001, with natural gas supplies expected to start in late 2006. Estimated to cost $8-$10 billion over the next decade, the project will begin as a subsea pipeline from Ras Laffan in Qatar to a landfall in Abu Dhabi, which will then be extended to Dubai and northern Oman. It will start at 48 inches in diameter, narrowing to 30 inches by the time it reaches Oman. In its initial phase, the pipeline is to carry 3 Bcf/d of Qatari natural gas to the UAE and Oman, accounting for nearly 10 percent of total world natural gas supplies shipped by pipeline.

In October 1999, UOG and ADNOC issued a joint declaration dividing up natural gas distribution between them. Natural gas from the Dolphin Project will be the exclusive supply for natural gas-fired power plants, except in the Western Region of Abu Dhabi, and will also supply natural gas for ADNOC contracts with Dubai. Natural gas from the Dolphin Project will use the ADNOC distribution network until the project develops its own network. In March 2000, UOG signed a contract with two foreign firms, TotalFinaElf and Enron, after securing purchase agreements with Abu Dhabi, Dubai, and Oman.  In May 2001, however, Enron announced that it was backing out of the project, and selling its 24.5 percent stake back to UOG.  UOG sold this share to Occidental Petroleum in June 2002 after receiving bids from several foreign companies. Upstream development in Qatar began in 2003, financing for the subsea pipeline was concluded in late 2004, and initial deliveries of natural gas to the UAE are expected to begin in the first quarter of 2007. After several years of delays, Dubai signed a binding natural gas sales contract with Dolphin Energy in May 2005. Oman already has a natural gas pipeline to Fujairah in the UAE, and until supplies from Qatar become available, Fujairah is importing natural gas from Oman, under a contract held by Dolphin Energy. Supplies of 135 Mmcf/d of Omani natural gas commenced in January 2004 -- the first natural gas transmission across national borders on the Arabian Peninsula. Eventually, Qatari natural gas will be supplied to Fujairah, and the direction of the pipeline will be reversed by 2008, allowing for Omani imports of Qatari natural gas.