Wednesday, July 12, 2006

Qatari Pipeline Across Saudi Arabia
Shouldn't Somebody Get The OK First??!!

Saudi Arabia plans to block a US$3.5 billion pipeline backed by Occidental Petroleum and Total SA that would carry Qatar natural gas to the United Arab Emirates, the Middle East's second-largest Arab economy. The undersea pipeline crosses Saudi territory and ``cannot be constructed without the agreement of the kingdom,'' according to a July 8 memo faxed by the Saudi government to the National Bank of Abu Dhabi, which is involved in financing the energy link. Saudi Arabia ``has not given its consent,'' the letter says.

The partners in the so-called Dolphin project have already started to lay pipe in the Persian Gulf between the U.A.E. and Qatar and have raised US$3.45 billion from lenders including ABN Amro Holding NV, Citigroup Inc. and HSBC Holdings Plc. The opposition threatens to reduce the U.A.E.'s ability to meet demand for power and curtail economic growth. Shouldn't somebody from the banks at least voiced the need to get approval from Saudi Arabia??? Obviously they all though that undersea is everybody's territory. Never assume, ... it makes an ass... out of ...

Gas from the Dolphin pipeline will be a critical lifeline for the United Arab Emirates and growth in the southern Gulf. This isn't the first time Saudi Arabia has intervened in regional energy projects. The kingdom's objection to Qatar exports of natural gas to Kuwait through a pipeline that would have gone through its waters helped derail the project. The U.A.E. plans to import 3.2 billion cubic feet of natural gas a day through the pipe. Gas demand in the nation may quadruple to 13.5 billion cubic feet a day over the next 25 years.

The venture is 51 percent owned by Abu Dhabi's government and 24.5 percent each by Los Angeles-based Occidental and Total of Paris. Saudi Arabia has criticized Qatar over its al Jazeera television channel for hosting critics of the Saudi government. The kingdom and the U.A.E. also have a disagreement over border demarcations, which were drawn up in 1974, giving the kingdom a greater share of the 17 billion-barrel Shaybah oil field that straddles the two neighboring countries. Saudi Arabia territorial claims over the area of Gulf that separates the U.A.E. with Qatar extend to Iranian waters. Installed power capacity in the U.A.E. needs to increase to 20,000 megawatts by 2020, up from 11,000 megawatts presently, according to General Electric Co. of Fairfield, Connecticut, the world's largest turbine maker.

Besides the historical differences, Saudi Arabia is alo very wary of the successes of U.A.E. in building blocks of "economic mini-cities" within Dubai. It shouldn't take long before U.A.E. completely overshadows the rest of the economies in the Middle East, and that's pretty tough for Saudi Arabia to swallow.

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