- City Fajr Shuruq Duhr Asr Magrib Isha
- Dubai 05:28 06:47 12:13 15:10 17:33 18:51
The Middle East, which holds 40 per cent of the world’s natural gas reserves, has not been struggling to beef up its reserves despite undertaking multi-billion dollar projects.
National Iranian Tanker Company (NITC) data shows that the region’s booked reserves have increased by only 2 per cent from 2,600 trillion cubic feet (tcf) in 2009 to 2,653 tcf in 2010, while global natural gas reserves went up by nearly 6 per cent.
According to Ernst & Young, gas demand in the Middle East has been rising by about 7 per cent per year, outpacing the growth in regional gas production.
Domestic demand growth is fuelled by economic expansion, low gas prices, the switch from oil to gas for power generation and the injection of gas into oil reservoirs to enhance oil recovery.
The uncertainty could result in future supplies being inadequate to meet the projected growth in demand. Although global demand is forecast to grow by 1.5 per cent until 2030, actual growth will be influenced by a number of unpredictable factors – including political issues and economical trends.
This scenario is expected to put pressure on the region’s export policy. According to the US Energy Information Administration (EIA), several countries in the Middle East are experiencing domestic supply shortfalls due to growing demand in the electric power and industrial sectors.
The agency says natural gas consumption in the region was stimulated by increased economic activity, large investments in new infrastructure and domestic price subsidies.
Saudi Arabia for example has continuously failed to discover new gas reserves or bring them on-stream sufficiently leading to repeated power shortages during peak electricity demand seasons during much of the past decade.
The kingdom’s gas shortage situation was further compounded at the start of the global economic downturn in 2008 and the crash in oil prices, given that much of its gas production is associated with its oil production.
“Saudi Arabia has no plans to export gas, and instead has used gas to meet domestic demands in order to free up oil for export. Iran on the other hand has used gas to release oil for export,” Jamal Mayahi, technical and ship management director at NITC, said.
Although Iran has the world's second-largest natural gas after Russia and is currently the Middle East's largest natural gas producer, the Islamic republic is also the region's largest user of re-injected natural gas for enhanced oil recovery operations.
Several countries in the region have already opted to import natural gas in the form of LNG. Kuwait, for instance, started importing LNG in 2009 while Dubai plans to begin this year.
According to EIA, natural gas consumption in the Middle East will nearly double between 2007 and 2035, growing at an annual rate of 2.4 per cent, four times the OECD countries' growth rate of .6 per cent per year and 26 per cent higher than its fellow non-OECD countries growth rate of 1.9 per cent.
Consultancy firm Booz & Company projects this demand growth will exacerbate the gas shortage and forecasts that over the next five years, the shortage will become "more acute".
In a prolonged recession scenario, it said gas shortage is expected to increase from about 19 billion cubic metres (bcm) in 2009 to about 31 bcm in 2015 and in case of growth returning to pre-recessionary levels, the current shortage is expected to increase to more than 50 bcm in 2015.
In the meantime, the growing domestic and international demand continues to drive the region’s exploration and development investments in natural gas. Currently, Qatar (53), Oman (15) and UAE (8) have 76 LNG carriers with a total capacity of 13 million cubic metres.
“There is a great demand for gas in as countries have looked to diversify away from dependence on imported oil,” Mayahi said. “Countries such as Japan and Korea in have very limited natural gas and the Middle East now has the opportunity to cash in on these demands.”
About 41 per cent of the world’s remaining proven gas reserves are located in the region although 73 per cent of these reserves are concentrated in just two countries – Iran and Qatar.
But supply from these countries is constrained to meet the growing near-term demand.
In mid-December, Qatar marked another milestone, achieving its targeted liquefied natural gas (LNG) production capacity of 77 million tonnes a year, a level that was scheduled to be reached in 2012. Qatar is the world’s largest LNG producer and exporter but it has a moratorium on new North Field developments and exports sales agreements until 2014.
Outside of Iran and Qatar, a significant portion of the region’s gas reserves is in associated oil deposits and so gas production is not flexible. Much of the gas in the region is also sour, which makes it more difficult and costly to extract and process.
Kuwait, which currently produces around 32 million cubic metre, is looking to increase natural gas production from new and existing fields output to 127 million cubic metres a day to meet domestic demand.
However, while Kuwait is believed to have ample untapped domestic reserves, with estimates of some 1.7trn cubic metres, even the planned increase may not meet daily shortfalls.
Demand will rise from the present level of around 62 million cubic metre a day to 141 million cubic metre by 2030, more than double present consumption, and four times current local production.
Oxford Business Group reported that some of the projected increase in gas production will result from KPC’s plans to boost oil output by around 33 per cent by 2020, with the associated gas adding to the resources available to the utilities sector. However, the greatest increase will come from dedicated gas exploitation projects.
However, plans to better exploit gas reserves depend to some extent on striking an agreement with Iran over the development of the offshore Dorra field, which lies between the two neighbours, as well as Saudi Arabia, and is estimated to contain non-associated gas reserves of between 370 billion and 566 billion cubic metres.
“While Kuwait and Saudi Arabia reached a deal on their shared maritime border in 2000, no such treaty has been signed with Tehran,” OBG said. “The dispute between Kuwait and Iran has stretched over some five decades and does not appear much closer to resolution, though talks are continuing.”
In view of these challenges, analysts agree that domestic sales price, which is subsidised to varying degrees, may need to rise to cover the additional processing cost and investment required in gas infrastructure.
As a result, there is limited intra-regional infrastructure in place for the transportation of natural gas.
Follow Emirates 24|7 on Google News.