A vital $3.5 billion project to supply Qatari gas to the United Arab Emirates has been dragged into a territorial dispute between Saudi Arabia and the UAE, but industry sources did not expect any lasting repercussions.
Riyadh told minority partners in the Dolphin Energy project, France's Total and US Occidental Petroleum, that it had reservations about the pipeline route, a source close to the situation told Reuters.
Dolphin said it has not received any objection from Saudi Arabia and that the line was near completion. "Dolphin Energy has not received any objection or protest from any country concerning the pipeline project that runs exclusively within the maritime areas of the states of the United Arab Emirates and Qatar," said a Dolphin statement.
"It is not the policy of Dolphin Energy to comment on correspondence between other parties," it added.
Analysts said Riyadh had apparently not dealt directly with the UAE, concerned the move would be seen to be aggressive by its Gulf Arab neighbour. Sources close to the project questioned the timing of the Saudi objection as the project was well under way.
"If Saudi Arabia wanted to act, they should have done it two years ago before the pipeline was under water," one industry source said. "They have absolutely no power to block it."
"I find it hard to believe the partners would have allowed construction work to go ahead without guarantees," said Valerie Marcel of the Royal Institute of International Affairs in London, adding that the project was "crucial" to Abu Dhabi.
"Basically, they're counting on it," she said. "Some people have suggested that even the Dolphin gas would not be enough to supply Abu Dhabi's needs."
There is a dispute between Saudi Arabia and the UAE over a 1974 border pact agreed, reached shortly after the formation of the UAE, under which it ceded a strip of land linking it and Qatar. Riyadh says it has sovereignty over the waters while the UAE says it has the maritime rights and wants to amend the pact. A Total spokeswoman declined to comment and no one was available at Occidental. Qatari oil officials declined comment while Saudi officials were not immediately available.
"There will probably be a lot of loud noises being made until a resolution is arrived at," another industry source said. "But it's not in anybody's interest to have a big diplomatic dispute and a damaging delay to commercial prospects."
The Dolphin gas grid project, in the works for nearly 10 years, is the first cross-border gas pipeline in the region and aims to take up to 3.5 billion cubic feet a day of natural gas to the UAE and then later to Oman.