Gas is the new oil for GCC countries
Gulf countries have pumped billions of dollars to develop their gas sector and are set to keep up spending within long-term plans to expand revenues and meet domestic and external demand.
Qatar, which controls the world’s largest gas resources after Russia and Iran, is spearheading such projects to become the dominant liquefied natural gas (LNG) exporter when it will pump in excess of 77 million tonnes within five years.
The gas projects, a turnaround in the region’s policy that had long neglected that sector, have already started to pay off in terms of additional revenue, attracting foreign capital and meeting local and foreign demand.
Three members of the six-nation Gulf Co-operation Council (GCC) – Qatar, the UAE and Oman – have become major gas exporters and their gas sales have largely boosted their revenues and gross domestic product.
Saudi Arabia, the dominant global oil power, has been locked in a costly drive to develop its gas reserves but its main focus is to face a steady growth in domestic demand rather than export.
Kuwait has sufficient gas resources but has not invested enough in this sector though it has spoken of development plans following new gas discoveries.
Bahrain, the most diversified GCC economy, has no gas but is looking forward to supplies from Qatar.
“The gas projects in some of the GCC countries have largely supported their economic diversification plans as they have brought additional revenues, boosted their GDP, created jobs and eased reliance on volatile oil export earnings,” Saeed Al Shaikh, senior economist at the Saudi Arabian National Commercial Bank, told Emirates Business.
“Look at what is happening in Qatar… it’s like a miracle… its LNG revenues have sharply increased in a short time and I think they will overshoot its oil revenues in the next years,” he said.
Qatar has pumped $60 billion (Dh220bn) into mega projects over the past decade to develop its mammoth North Field, the world’s largest single reservoir of non-associated natural gas.
From a negligible level, its exports of LNG increased to 25.1m tonnes in 2006 from 22.2m tonnes in 2005 and less than 10m tonnes in 1998. The exports are expected to peak at 29m tonnes by the end of 2007 and jump to more than 77m tonnes in 2012, when most of the LNG projects are completed.
Official figures showed LNG exports fetched Qatar a record QR43.1bn ($11.8bn) in 2006 and they are projected to exceed QR43.68bn this year and QR54.6bn in 2008. The revenues stood at just QR12.7bn in 2002 and below QR7.28bn in 1998.
“With increased LNG production and exports it is anticipated that LNG export revenues will match that of oil by 2010,” the government-controlled Qatar National Bank said this month.
Qatar has not specified the size of investments in future LNG projects but the state-owned Qatar Petroleum said early this year it had approved about QR104.7bn for the gas sector until 2012. The allocations are far higher than the QR28.3bn earmarked for the oil sector, which is also being developed to boost output capacity to more than one million barrels per day from 850,000 bpd at present.
In the UAE, the first Gulf country to set up LNG industries, gas revenues have steadily grown over the past 20 years as it pushed ahead with projects to expand the gas-related industry.
The UAE’s natural gas exports peaked at 47bn cubic metres in 2006 and were expected to have risen to 50bn cubic metres this year. They stood at about 46.4bn cubic metres in 2005 and 45.4bn cubic metres in 2004. Its LNG exports have also remained as high as 7.8bn cubic metres per year while natural gas liquids (NGL) exports peaked at 13.7bn cubic metres in 2006.
Figures by the UAE Central Bank showed total gas exports fetched the country a record Dh25.98bn in 2006 and the value is projected to remain above Dh25.7bn this year. The export value stood at Dh21.2bn in 2005 and just Dh7.34bn in 2000.
Oman has also reported a surge in gas revenues following the completion of a major expansion programme at its LNG plant in the southern port of Sur. The project boosted total investments in the LNG sector to more than $4bn and output capacity by 50 per cent to 10m tonnes.
Figures released by the Ministry of National Economy showed such projects, which also involved development of gas fields, boosted Oman’s gas earnings to a record OR613m ($1.59bn) in 2006 from OR393m in 2005 and only OR76m in 2002.
Gas revenues were projected in the 2007 budget at about OR550m but actual revenues are expected to exceed that level as the Sultanate is normally conservative in its budget assumptions. Buoyed by such projects, Oman is pursuing development plans in its hydrocarbon sector, approving a record OR400m for the gas sector in 2007 and OR575m for the oil sector.
In Kuwait, production from the recently discovered gas deposit is due to begin before the end of 2007 and can be of significant strategic importance, according to a semi-official report.
Although small in international terms, it will cover most of the projected increase in gas demand over the medium-term and allow more of the country’s oil to be diverted to the export market, thus providing a further boost to the public finances, said the report by the National Bank of Kuwait.
“We calculate that production may add an additional KD115m ($419m) to the government’s gross annual budget revenues in fiscal year 2008/2009, rising to more than KD650m in 2015. This is not huge, but equivalent to the government’s entire capital spending outlays (excluding land purchases) last year. Revenues could be higher if our assumption about future gas prices proves too conservative,” the report said.
Saudi Arabia, which has the fourth largest gas resources in the world, has been locked in a multi-billion dollar programme to develop those resources. But unlike its Gulf neighbours, it has focused on the domestic market given the relatively high demand and a steady growth in consumption.
Official figures showed the kingdom’s gas consumption peaked at 422,000 equivalent barrels per day (epbd) in 2006 and is projected to exceed 430,000 ebpd in 2007, the highest level in the Arab world. Demand was about 416,000 ebpd in 2005.
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