Gulf States need to revamp domestic gas supply chain
The Gulf States, the world’s fastest growing demand centre for natural gas, will need to create greater incentives to drive investment in new gas supply by removing all government subsidies that fix domestic gas prices at very low levels, a Gulf Intelligence research paper reported.
The Gulf holds more than 40% of global gas reserves, much of it untapped, yet the volume of Liquefied Natural Gas (LNG) imports required by the region is quickly rising as domestic demand outpaces local pipeline supply.
Regional collaboration in identifying cost-effective and easy-to-implement strategies to create both an integrated gas import ecosystem, while still maximizing the revenues of a growing export market, must become a greater priority for the Gulf’s industry leaders, the GI whitepaper found.
“Figuring out the most economic and efficient route to leveraging their gas reserves will unlock a much-needed treasure chest that will propel the Gulf’s export ambitions, while helping meet soaring domestic demand, especially amid intensifying competition from the US and Australia,” said Marc Howson, senior managing editor of LNG at S&P Global Platts.
“On the supply side of the industry, we have this game changing event, which is large scale U.S. LNG exports bringing in huge amount of flexible LNG supply in terms of the destination,” he said.
Middle Eastern LNG exporters face a tougher check list moving forward with global consumers developing a growing preference for short term contracts – long term contracts have historically been the bread and butter of LNG deals – means LNG sellers now need a large portfolio and sufficient flexibility to supply a growing number of countries.
Meanwhile, the International Energy Agency (IEA) expects gas demand in the Middle East to nearly double by 2040, while BP’s latest Energy Outlook forecasts that the global LNG market will grow seven times faster than pipeline gas trade and will account for half of the world’s traded gas up to 2035, compared to today’s 32%.
In the last three years alone, LNG imports into the region grew by more than 380% against a backdrop of relatively stagnant activity in other major energy demand hubs.
“The Middle East needs a comprehensive and robust infrastructure network to build a world-standard gas hub and meet demand across the region,” said Hatem Al-Mosa, CEO, Sharjah National Oil Company (SNOC). “Most gas importing countries require a range of LNG sources for their own energy security, both to plug a deficit and to provide a safety net when other gas supplies are hindered,” he said.
Gulf Intelligence, a Dubai-based strategic communications and research firm, launched a research report today that tackled the critical question of how the Middle East could best transition from an LNG exporting region to now also fast becoming an import center.
The whitepaper was harvested from a Workshop that took place recently in Abu Dhabi where 50 key stakeholders from the GCC’s energy sector gathered to explore viable solutions on how to both facilitate an LNG import ecosystem in the Middle East while maximizing the value of the region’s LNG exports.