ADNOC puts diesel supply talks on hold

Abu Dhabi National Oil Company (ADNOC) paused negotiations about long-term diesel purchasing agreements, anticipating it may need the supplies to replace natural gas normally imported from Qatar, international media reported on Wednesday.

Qatar currently exports about 48.1 mcm (1.7 bcf) of gas per day to the UAE through the Dolphin Energy pipeline, a key source of power.

“(ADNOC) is still calculating its demand for local requirements,” an anonymous industry source told Reuters as US Secretary of State Rex Tillerson, on a visit to Saudi Arabia, stepped up efforts to mediate the conflict. The crisis started after Saudi Arabia, the UAE, Egypt and other countries imposed a partial blockade on Qatar last month, charging that it supports terrorism.

The 800,000-bpd Ruwais refinery was damaged in a fire earlier this year and its diesel production has decreased, which is another factor in ADNOC’s decision to postpone supply talks, Reuters reported.

Diesel produced by Ruwais July 2017-June 2018 may now reportedly be stored for domestic power generation rather than exported, though ADNOC said the contract talks were ongoing.

In October 2016, Qatar Petroleum and Dolphin Energy entered into a new long-term gas sale and purchase agreement, under which Qatar Petroleum was to deliver additional quantities of gas to Dolphin for export to the UAE through the existing 48-inch subsea pipeline. While the current crisis with its neighbours and their backers would be a reason trigger a force majeure clause in the agreement governing the Dolphin gas pipeline, Qatar said in June it would not cut supplies to the UAE.