GAS AND POWER: Parts of Middle East face gas shortage

• Date: 01 April 2018
• DOI: http://doi.org/10.1111/oet.12563
• Published date: 01 April 2018

GAS AND POWER

Parts of Middle East face gas shortage

Despite having the world’s largest concentration of gas

reserves across the region, parts of the Middle East are short

of gas and are having to import it. Moreover, instead of

importing gas from the gas-long countries nearby, the coun-

tries that are short of gas are going to the other side of the

world to secure supplies. The reasons for this bizarre state of

affairs may be found partly in previous policies of some

Middle Eastern countries not to make full use of their large

gas reserves; and partly in the contemporary policies of the

Persian Gulf region and the strained relations between the

gas-short countries of the region and the 2 countries with the

most gas: Qatar and Iran.

1|GAS NEGLECTED

For many years, Saudi Arabia, Iraq, UAE, and Kuwait

neglected the development of their gas reserves, giving pri-

ority to oil instead, despite having some of the largest proven

gas reserves anywhere in the world. Their combined reserves

of 717 tcf make up some 10% of the global total of proven

gas reserves (see Table 1).

The result of this neglect is that the 4 countries are

unable to satisfy their growing demand for natural gas; and

whereas they might be expected to import it by pipeline from

their 2 gas-long neighbors, Iran and Qatar, which each indi-

vidually have larger gas reserves than the combined reserves

of the 4, they are instead going for the much more expensive

option of importing liquefied natural gas (LNG) from pro-

ducers much further away.

2|SAUDIS SEEKING LNG

Saudi Arabia has belatedly begun to give more attention to

its large, untapped gas reserves; but the planned growth in

demand for gas for power generation, petrochemicals and

other industrial uses is outstripping the kingdom’s ability to

bring new gas developments on-stream quickly enough,

making it necessary to import gas: probably as early as

2020. The search for potential suppliers has included US and

Russian LNG. Early in 2017, talks were held with Qatar for

supplies by pipeline, but these came to an end in June when

Saudi Arabia imposed a trade embargo on the emirate.

The main use of gas in Saudi Arabia is for power genera-

tion and water desalination. As well as using gas to meet the

expected growth in electricity demand, the Saudis want to

reduce and eventually eliminate the need to generate power

by burning oil. In addition to using heavy fuel oil Saudi Ara-

bia’s power plants use large amounts of crude oil. Last

year’s crude burn was about 458 000 bpd with a further

516 000 bpd of heavy fuel oil.

The original plan was to substitute the oil with gas from

domestic production by raisin g production from 12 bn cfd

in 2016 to 17.8 bn cfd in 2020 and to 23 bn cfd shortly after

2050. Despite the addition of 2 bn cfd from 2 offshore gas-

fields in mid-2016, Saudi Arabia has not been adding new

capacity quickly enough and looks set to miss its 2020 target

and will almost certainly need to import by then. The only

option is LNG imports if the oil burn is not to be increased

then. Saudi Arabia has no permanent LNG regasification ter-

minals and would almost certainly not be able to add any by

2020, leaving floating LNG storage and regasification units

(FSRUs) as the only other option.

3|IRAQ RUNNING SHORT

Iraq is in the same position as Saudi Arabia in wanting to

reduce its oil burn in power stations and replace it with gas.

For some years, Iraq has been trying to monetize its huge

reserves (see Table 1) notably in the 1990s. Under its Gas

Plan, there was to be a large increase in production, not

only to fuel power stations but to create new gas-based

industries and even to export gas. US sanctions against

Saddam Hussain’s government effectively made it impossi-

ble to realize these plans. In recent years, there has been an

attempt to revive the country’s earlier gas plans and there

was even talk of exporting LNG, but progress has been

slow and LNG exports are firmly off the agenda for several

years.

At present, Iraq has to import gas from Iran via a pipe-

line opened last June, which is supplying about 500 mn

cfd. Iraq has been able to increase domestic gas supplies in

DOI: 10.1111/oet.12563

Oil and Energy Trends. 2018;43:7–8. wileyonlinelibrary.com/journal/oet © 2018 John Wiley & Sons Ltd 7