Dubai: Two Dubai-government backed companies and a Canadian LNG marketing firm yesterday announced plans to build a $1 billion LNG storage facility here, aiming to turn the booming emirate into a liquefied natural gas (LNG) trading hub.
The Dubai Multi Commodities Centre (DMCC), a commodities free zone, Techno Park, a unit of Jebel Ali Free Zone Authority, and Canada's LNG Impel (Impel) said they would develop the one of a kind LNG storage facility at Techno Park in the Jebel Ali Free Zone.
The facility will give customers the ability to store, trade and plan supplies of LNG and its capacity could range from 40 billion to 65 billion cubic feet, the companies said in a joint statement.
"Its key value proposition is that it will allow buyers and sellers great flexibility," Tilak Doshi, executive director for energy at DMCC, told Gulf News. "LNG trade right now is very inflexible. You have a fixed number of ships, travelling at a fixed time to particular place, carrying LNG between one seller and one buyer. A storage facility will give you flexibility to trade across time and across geographies."
The storage hub will enable LNG suppliers and buyers to store and trade across different months owing to substantial seasonal price variations in 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.
The statement said DMCC and Impel will invite preliminary bids for storage capacity from both consumers and producers at the Dubai LNG storage hub from August 28. Preliminary bidders will then be asked to submit firm offers for the storage capacity they need.
The final capacity of the storage facility will depend on overall customer interest with completion estimated in 2011.
All the major customers, along with the developers, will be offered share options in the projects.
"DMCC's objective is to make Dubai the energy hub of the Middle East, and this project is in keeping with our key role as a promoter of commodity trade and its requisite infrastructure," said Ahmad Bin Sulayem, DMCC's chief operating officer.
Dubai is close to the main LNG producing centres of Qatar, Oman and Abu Dhabi and is already a key regional blending centre for petrol. It could develop as a trading hub for LNG, as has Singapore with refined oil products.
Trade close to 6,668b cubic feet in 2005
Global trade in LNG was estimated at 6,667.76 billion cubic feet in 2005, of which Japan's imports made up 40.4 per cent and South Korea's 16 per cent.
More than 90 per cent of global trade in LNG is currently carried out through long-term supply contracts but the share of the spot market is expected to increase.
By Arif Sharif
© Gulf News 2006
