Dubai Pioneers Massive LNG Storage and Market Service Hub

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Researched by Industrial Info Resources (Sugar Land, Texas). A major storage facility in Dubai will allow core LNG suppliers and buyers to capture value by storing and trading across different months. This will enable them to factor in seasonal price variations, which are a key element in global LNG pricing.

The Dubai Multi Commodities Centre (DMCC) Techno Park and LNG Impel, a 100% subsidiary of Canadian Galveston LNG, are to develop a $1 billion facility with a total LNG storage capacity of 40 to 65 billion cubic feet. The hub will also provide additional services such as LNG loans and LNG quality blending, and may eventually offer financial derivatives centered on LNG and shipping.

“The launch of this facility will offer greater flexibility to both buyers and sellers and will release them from being tied to strict and inflexible supply schedules over long periods of time. The Dubai-based storage facility will enable core LNG suppliers and buyers to capture value by storing and trading across different months. 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,” said Tilak K Doshi, Executive Director of Energy at DMCC.

An ‘open season’ bidding process for storage capacity at the hub, which is operated by DMCC and Impel, will start with an initial non-binding bid round on August 28, 2006. Interested parties may register their interest and request further information about the hub from LNG Impel. At the end of the open bid process, Impel will select bidders whose non-binding bids meet the project’s economic criteria followed by negotiations leading to customers signing a terminal use agreement for long-term capacity.

The initial customers will be offered the opportunity to participate in the ownership of the storage hub of which LNG Impel will retain 51%. Equity in later expansions of the hub will not be offered to new customers. Customer demand will set the final date for operations at the hub, which could start by 2010.

The announcement of the project follows the signing of a Memorandum of Understanding (MoU) in June by LNG Impel and DMCC. The Techno Park will have a core focus built around oil and gas, energy and alternative energy, and water desalination projects. It follows DMCC’s objective to make Dubai the energy hub of the Middle East, playing a key role as a promoter of commodity trade and the requisite infrastructure.

Thom Dawson, President of LNG Impel, said, ” We are very pleased and excited about the Dubai LNG storage hub, which will help meet the demands of the industry as LNG transitions into a globally-traded commodity. It will provide industry participants with choices and options not accessible to them before.”

DMCC was created in 2002 as a strategic initiative of the Dubai government to establish a commodity marketplace. Resident companies are offered benefits under a free zone status including a 50-year tax holiday, 100% business ownership and a secure and regulated environment. The company holds a Standard & Poor’s ‘A’ rating.

LNG Impel is focused on the development of LNG infrastructure and trading and is the parent company of Kitimat LNG, which is developing an LNG regasification and receiving facility to be constructed on Canada’s Pacific northwest coast. The terminal will offer Pacific Basin suppliers shorter shipping times to North America and access to the largest natural gas market in the world. The company has offices in Barbados, London and Dubai.

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