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Wed 18 Jul 2007 04:20 PM

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DMCC $2bn LNG plant will not be in Dubai

Dubai Multi Commodities Centre may build $2bn liquefied natural gas storage facility outside the emirate.

The state-run Dubai Multi Commodities Centre (DMCC) is considering sites other than Dubai for a planned $2 billion liquefied natural gas storage (LNG) facility, a senior official said on Wednesday.

DMCC said last year the facility, with capacity to store up to three million cubic metres of LNG, would be built in Dubai and used as a launchpad for an LNG derivatives market. The DMCC plans to develop storage with LNG Impel, a subsidiary of Canadian firm Galveston LNG.

"DMCC and LNG Impel are looking at some alternative sites; Fujairah is one of them," Tilak Doshi, DMCC executive director for energy, told Reuters.

The eastern emirate of Fujairah is one of the world's biggest ship refuelling ports. It is outside the Gulf, and locating the storage facility there would mean tankers do not have to pass the strategic shipping chokepoint of the Strait of Hormuz.

That would save transport costs, as shippers have to pay a war risk insurance premium for entering the Gulf.

"If it is built in Fujairah port we will avoid the Straits of Hormuz. But we have not taken any decision yet and we are still in talks with different parties," he said.

Construction of the LNG storage facility, which would comprise 15 tanks of 200,000 cubic metres each, will begin early 2008, Doshi said.

The first phase of the three-stage project would include nine tanks and would be completed by the end of 2011 and the rest is set for completion by 2013, he said.

The storage hub would allow customers to store and trade LNG and also provide LNG loans and LNG quality blending.

DMCC is aiming to select up to 10 companies to use the envisaged facilities on a long-term basis. Usage agreements will be signed for periods of at least 10 years.

LNG is gas chilled to its liquid state for shipping on specially-designed tankers.

Nearby Qatar is the world's largest exporter of LNG. The United Arab Emirates and Oman are also exporters, while Yemen is building an LNG plant and Iran has ambitious LNG plans.

Dubai, one of seven emirates in the UAE, is aiming to position itself as the hub for trading oil and gas in the Gulf, the world's largest oil exporting region.

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