Moody's rates LNG terminal credit-positive for UAE

The new terminal will add 12bn cubic meters to the UAE's import capacity.

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Moody's Investors Service said on Monday that the recent decision by state-owned entities in Abu Dhabi to build a new Fujairah LNG import terminal to bypass the Strait of Hormuz is credit-positive for the UAE.

Mubadala Development and the International Petroleum Investment, a pair of Abu Dhabi government investment vehicles, agreed to the JV ‘Emirates LNG’ project last week.

"The new terminal has positive economic and strategic implications for the United Arab Emirates," said Moody's.

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Imports of gas to the UAE currently come principally through the Dolphin Gas pipeline from Qatar, a project in which Mubadala already has a 51% stake.

Moody's said Qatar "faces significant opportunity cost in exporting natural gas to the UAE at a price lower than that of LNG," making a diversification of the UAE's gas imports a prudent move.

The new LNG import terminal will add 12bn cubic metres per year to the UAE's import capacity when it becomes operational in 2014.

"If traffic was disrupted, the UAE would be able to avoid the repercussions of power cuts on the non-oil economy and credit metrics would be less affected," said Moody's.