The Emirates have an energy problem. It is not obvious to outsiders, who see in the Gulf a bottomless lake of hydrocarbons. Nevertheless, the tiny kingdoms that make up the United Arab Emirates are struggling with energy. It is not only Dubai, the ambitious city-statelet that is reinventing itself as the Singapore of the region, pumping the wallets of tourists and financiers as its oil wells run dry. The whole region needs more power and, above all, it needs more natural gas to generate the electricity that keeps the lights on, the water desalinated and the air chilled in the hothouse petrodollar economy. Like tigers chasing their tails, the Emirates are in a frantic dash for gas.
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It is also more expensive. A decade ago you could not give away gas, but today a power station in Dubai has to compete for resources. It can no longer simply suck in surplus fuel from neighbouring Abu Dhabi. Dubai’s stately rival in the race for nonoil income has the fifth-largest reserves in the world, of about 200 trillion cubic feet of gas under its feet, but, unlike the oil that made it rich, Abu Dhabi is struggling to turn its second natural legacy from wasted molecule into useful electrons. Much of Abu Dhabi’s gas is being pumped back into oil wells to keep the pressure up, but the vast untapped resource is waiting for development: sour gas, high in sulphur and an expensive technical problem. Instead, the gas-rich state is piping in supplies from Qatar, another Gulf rival, and the price is rising.
Bizarrely, the Emirates are competing for Qatari gas with buyers from as far away as Massachusetts and South Korea. The seaborne trade in liquefied natural gas has changed the energy equation for ever. Suddenly, the oil-rich states of the Middle East are experiencing bottlenecks, logistical problems and energy price inflation. The Gulf is on the cusp of a phenomenon that the West knows well: the beginnings of an energy shortage.
Economic growth at double-digit percentage rates has a cost. In 2005 Dubai suffered a blackout, and a series of price increases in diesel fuel caused shock and uproar last summer, although the cost per litre for people in the UAE remains a tiny fraction of what consumers pay in Europe and North America. The rulers in the UAE know that there is a problem, but there is no sign that they wish to curb the breakneck rate of economic expansion. Abu Dhabi’s response to the challenge of fossil-fuel scarcity is to emulate Dubai’s pursuit of tourist and service dollars, although Abu Dhabi says that it will add planning, a discipline lacking in Dubai’s rush to pave the desert with concrete.
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http://business.timesonline.co.uk/tol/business/columnists/article2773962.ece