Global Energy Review

Middle Eastern Gas: An under-used Resource?

A Report by Dr Paul McDonald
Consulting Editor, Oil and Energy Trends

Contents

List of Tables

Introduction

Nine countries in the Middle East–Iran, Qatar, Saudi Arabia, UAE, Iraq, Egypt, Kuwait, Oman and Yemen–contain 42% of the world’s proven reserves of natural gas. At the same time, they account for only 12% of global gas production.

This suggests considerable under-use of the region’s gas reserves. Gas has very much taken second-place to oil in most Middle Eastern countries’ economic policy. A good deal of the gas is actually produced in association with oil. Gas production rates are therefore primarily determined by depletion policy for oil, and are in several instances subject to particular restraints brought about by the requirements on OPEC countries to control oil production in response to agreements on oil production quotas. Iraq’s oil and gas production are subject to high levels of violence.

Gas is used within the nine countries for a variety of purposes. Methane is primarily used for power generation and desalination. Ethane is an important petrochemical feedstock in some cases, particularly Saudi Arabia. Heavier gases are processed for their NGL content.

Of the nine countries considered here, only five–Iran, Qatar, UAE, Egypt and Oman–export gas. In the case of Iran, exports are more or less balanced by an equal volume of imports. Iran, Qatar and Egypt have plans to increase their exports substantially. Yemen plans to begin exporting LNG by the end of the decade. Little change is likely in terms of net trade in Saudi Arabia, Iraq or Kuwait in the next few years, though Kuwait is likely to become an importer of gas.

Reserves & Production

International Comparisons

This study considers the nine largest Middle Eastern countries in terms of their proven reserves of natural gas. The nine countries are:

* References throughout to these two countries include their half share in each case of the Neutral Zone.

Table 1
Middle East: Proven Gas Reserves, 2007
Country Reserves Reserves remaining
((trillion cf)) ((years))
Iran 974 >100
Qatar 911 >100
Saudi Arabia 240 92
UAE 214 >100
Iraq 112 >100
Egypt 59 37
Kuwait 55 >100
Oman 30 34
Yemen 17 >100
Total 2,612 >100
Totals rounded
Source: (Reserves) Oil & Gas Journal
(Other) GER estimate

Their total reserves are estimated at 2,612 trillion cf (see Table 1), which represents 42% of the world’s total proven reserves. They include the country with the world’s second-largest total–Iran–along with the third-, fourth- and fifth-largest countries.

Of the ten largest countries in terms of reserves, the Middle East has a total of five (see Table 2). Their production, by contrast, is modest in relation to the size of their reserves. With a combined output of 34.9 bn cfd, they account for just 12% of global gas production.

Table 2
Principal Gas Producers by Reserves, 2007
Country Reserves World Ranking
((trillion cf))
Russia 1,680 1
Iran 974 2
Qatar 911 3
Saudi Arabia 240 4
UAE 215 5
US 204 6
Nigeria 182 7
Algeria 162 8
Venezuela 152 9
Iraq 112 10
Source: Oil & Gas Journal

In terms of world ranking, only two Middle Eastern countries make it into the list of ten leading producers: Iran, at number four, and Saudi Arabia, which is the ninth-largest (see Table 3). The largest both in terms of reserves and production is Russia. Iranian production is just 17% of that of Russia, whilst the Saudi total is no more than 12% of the Russian total.

Table 3
Principal Gas Producers by Production, 2006
Country Reserves World Ranking
((bn cfd))
Russia 59.2 1
US 50.7 2
Canada 18.1 3
Iran 10.2 4
Norway 8.5 5
Algeria 8.2 6
Great Britain 7.7 7
Indonesia 7.2 8
Saudi Arabia 7.1 9
Turkmenistan 6.0 10
Source: BP Statistical Review of World Energy, 2007

Reserves

Whilst the Middle East’s reserves on paper appear large, there is little by way of independent verification of the numbers stated. In many cases, reserves lie wholly or principally in the hands of national oil companies that are not given to transparency when it comes to reserve assessments. There is a further problem in some cases insofar as reserve details are considered to be a state secret. In Qatar, UAE, Egypt, Oman and Yemen, there is a considerable degree of outside involvement in the gas industry, which makes it easier to obtain independent verification of reserve levels.

OET ARCHIVE:

'Kuwait: Have its oil and gas prospects been exaggerated?', Focus Jan07

Iraq’s reserves are particularly difficult to assess owing to decades of war and neglect, beginning with the Iran-Iraq war of 1980-88 and followed by the imposition of UN sanctions on oil and gas technology investment after the invasion of Kuwait in 1990. Since the US-led invasion of 2003, Iraq has been in a state of armed insurrection in which oil and gas production facilities have been a major target. Given more than two-and-a-half decades of neglect of the gas industry, it is difficult to arrive at any realistic assessment of Iraq’s gas reserves.

Production

A good deal of the Middle East’s 34.9 bn cfd gas production (see Table 4) consists of associated gas. Output levels are therefore linked to those of oil. In the case of Iran, Qatar, Saudi Arabia, UAE and Kuwait, such levels are theoretically determined by OPEC agreements either to cut or increase oil production in pursuit of higher prices for oil exports. Iraq is also a member of OPEC, but is currently outside the oil quota system. Qatar’s production is similarly unaffected: in this case by the fact that its gas is non-associated gas from the offshore North Field.

Table 4
Middle East: Gas Production, 2006
Country Volume
(bn cfd)
Iran 10.2
Qatar 4.8
Saudi Arabia 7.1
UAE 4.6
Iraq 0.2
Egypt 4.3
Kuwait 1.2
Oman 2.4
Yemen 0.1
Total 34.9
Totals rounded
Source: (Iraq and Yemen) GER estimate
(Other) BP Statistical Review of World Energy, 2007 Figures apply to contract volumes only

Consumption & Exports

Consumption

Middle Eastern gas is mainly used for domestic purposes. Out of a total production of 34.9 bn cfd, some 28.6 bn cfd–amounting to 82% of the total–is consumed domestically. Iran has the largest gas consumption in the region, followed by Saudi Arabia (see Table 5).

Table 5
Middle East: Gas Consumption, 2006
Country Volume
(bn cfd)
Iran 10.6
Qatar 1.9
Saudi Arabia 7.1
UAE 4.0
Iraq 0.2
Egypt 2.8
Kuwait 1.2
Oman 1.1
Yemen 0.1
Total 28.6
NB: Totals rounded
Source: (Iraq and Yemen) GER estimate
(Other) BP Statistical Review of World Energy, 2007

Some of the gas is used to maintain pressure in oil reservoirs, through reinjection of the gas. In most countries, the heavier gases are an important source of natural gas liquids (NGL), especially propane and butane. Ethane is also recovered for petrochemical purposes, and has formed the foundation of a large petrochemical industry in Saudi Arabia. The other main uses for gas are electricity generation and desalination, where it provides an important substitute for oil.

OET ARCHIVE:

'Middle East set to benefit as petrochemical demand grows', Focus Aug05

'Condensate’s prospects boosted by shortage of light crude', Focus Nov05

Exports

Exports account for only 18% of Middle Eastern gas production, amounting to 6.3 bn cfd. Only four of the nine countries are net exporters (see Table 6). Two countries - Iran and UAE - also import gas.

Table 6
Middle East: : Net Trade in Gas, 2006
Country Volume
(bn cfd)
Iran -
Qatar 2.9
Saudi Arabia -
UAE 0.6
Iraq -
Egypt 1.5
Kuwait -
Oman 1.3
Yemen -
Total 6.3
NB: Totals rounded.
Source: Tables 4 & 5

Qatar is by far the largest exporter of gas. Its exports make up 48% of all the region’s exports. After Qatar come Egypt and Oman. Iran is only able to export gas by importing a similar quantity of gas from elsewhere (see Table 7).

Most of the region’s exports consist of LNG. The only pipeline trade is between Turkmenistan and Iran, Iran and Turkey, Oman and UAE, and Egypt and Jordan. The Turkmen gas is used by Iran to offset the export of its own gas to Turkey. There are plans for further export pipelines both within the Middle East and from the Middle East to Western Europe. In July 2007, Qatar opened a new pipeline from its North Field to the UAE. Kuwait has discussed pipeline imports from both Qatar and Iraq. For several years, Iraq has proposed the building of an export pipeline to Turkey.

Table 7
Middle East: International Trade in Gas (Contract Volumes), 2006
Country Volume
Exports Imports
(bn cfd)
Iran 0.6 0.6
Qatar 3.0 -
UAE 0.7 0.1
Egypt 1.6 -
Oman 1.3 -
Total 6.9 0.7
NB: Totals rounded
Actual deliveries may differ from contract volumes specified above
Source: Cedigaz; BP Statistical Review of World Energy, 2007

Iran and Egypt have ambitious plans for pipelines to Western Europe. The Iranian line would pass through Turkey en route to the west, whilst Egypt also proposes to link-up with one of various pipelines from Turkey to Europe. The Egyptian line would also supply gas to various parts of the Levant.

OET ARCHIVE:

‘Caspian: Plenty of pipelines, but where is the gas?’, Gas & Power, Jul07

The great majority of Middle Eastern exports go as LNG, making up 6.0 bn cfd out of 6.9 bn cfd of the region’s contracted export volumes: equivalent to 87% of the total (see Table 8). Qatar is the main exporter, accounting for half the region’s LNG trade. The Qataris have ambitious plans to increase their exports of liquefied gas, whilst Iran and Yemen plan to begin exporting it over the next few years. LNG is likely to continue to dominate the region’s gas exports for the foreseeable future.

Table 8
Middle East: International Gas Trade by Destination and Source, 2006
Country Volume Mode
(bn cfd)
EXPORTS
Iran
    Turkey 0.6 P/L
Total 0.6
Qatar
    Mexico <0.1 LNG
    Belgium <0.1 LNG
    Spain 0.5 LNG
    India 0.7 LNG
    Japan 1.0 LNG
    South Korea 0.9 LNG
    Total 3.0
UAE
    India <0.1 LNG
    Japan 0.7 LNG
    Total 0.7
Egypt
    Jordan 0.2 P/L
    USA 0.3 LNG
    Mexico <0.1 LNG
    Belgium <0.1 LNG
    France 0.2 LNG
    Greece <0.1 LNG
    Italy <0.1 LNG
    Spain 0.5 LNG
    Great Britain 0.1 LNG
    India 0.1 LNG
    Japan 0.1 LNG
    South Korea 0.1 LNG
    Taiwan <0.1 LNG
    Total 1.6
Oman
    UAE 0.1 P/L
    Spain 0.1 LNG
    India <0.1 LNG
    Japan 0.3 LNG
    South Korea 0.7 LNG
    Taiwan <0.1 LNG
    Total 1.3
Total Exports 6.9
IMPORTS
Iran
    Turkmenistan 0.6 P/L
    Total 0.6
UAE
    Oman 0.1 P/L
    Total 0.1
Total Imports 0.7
P/L = Pipeline
LNG = Liquefied Natural Gas
Totals rounded
Source: (Iraq and Yemen) GER estimate
(Other) BP Statistical Review of World Energy, 2007

Country Profiles

Iran

Iran is the Middle East’s most important gas producer in terms of both its reserves and production. Its reserves are the second-largest in the world. In global production terms, however, it is only fourth, lying well behind Russia (see Tables 2 & 3). Iran has a small volume of external trade (see Table 9), exporting to Turkey and importing from Turkmenistan. Both import and export volumes are prone to fluctuations and are often below contracted levels. Imports and exports should in theory more or less cancel one another out, but it is likely that Iran is probably a small net importer at present.

Table 9
Iran: Gas Profile
Reserves (2007) 974 trillion cf
Reserves:Production > 100:1
Gas Balance (2006)
(bn cfd)
Production 10.2
Consumption 10.2
Net Trade -
Source: Tables 1, 4 & 5

Outlook

The Iranian government intends to give gas greater emphasis in an attempt to counteract the growing pressure on its oil production. Output of oil is stagnating while consumption is growing rapidly, which is forcing Iran to import some oil products, notably gasoline. As well as substituting gas for oil in the burning market–for example, in power generation–Iran wants to expand its petrochemical sector by recovering more ethane from natural gas.

There are further plans to export more by pipeline and to begin exporting gas as LNG. Domestic demand nevertheless looks like absorbing much of the extra gas production, especially since it is supplied so cheaply to the home market. Some industrial users pay as little as 20¢ per mn BTU. Petrochemicals alone should more than double their consumption by 2015 to 1.8 bn cfd, compared with the present total of about 0.8 bn cfd. More gas will also be required for reinjection into Iran’s declining oil reservoirs.

In July 2007, Iran agreed in principle to supply some 2.9 bn cfd of gas to the Nabucco pipeline, an EU-backed project to transport Central Asian gas to Europe. Nabucco is one of several planned gas pipelines from the Middle East and Central Asia to Western Europe. It is by no means clear from where Iran will source its proposed 2.9 bn cfd.

Iran has also proposed to deliver gas by pipeline to some of its Persian Gulf neighbours. A scheme to sell gas to the UAE ran into problems in 2007 when the two countries failed to agree a transfer price. Since then, Iran has offered to build a pipeline to Bahrain, but no firm agreement has been reached and Bahrain would almost certainly prefer to receive gas from Qatar or Saudi Arabia.

OET ARCHIVE:

'Plenty of pipelines, but where is the gas?', Gas & Power Jul07

Iran also plans three LNG projects capable of exporting a total of 5.5 bn cfd, with the first due on-stream in 2010. All of them are meant to use gas from the country’s giant South Pars field which is being developed in the Persian Gulf. The development of South Pars is being delayed, however, by rising costs and disputes between Iran and potential foreign investors. It is also proving difficult to sign-up buyers for the gas because of disagreements over price.

The main threat to LNG and other exports, however, is the rapid growth in domestic demand, especially if crude oil production continues to falter. South Pars, with its estimated reserves of 375 trillion cf, ought to be able to supply sufficient gas for both markets, but the development of the field is way behind schedule. Iran will be doing well to double its production by 2015, and the increase may well be less. The domestic market could easily absorb a doubling of gas production.

OET ARCHIVE:

‘Iran turns to natural gas’, Focus Jan 03

‘Middle East set to benefit as petrochemical demand grows’, Focus, Aug 05

‘Iran struggles to expand gas industry’, Focus, Aug 06

GER LINK:

‘Iran: An oil producer in trouble’

Hyper-links:

Qatar

Qatar is the largest exporter of LNG in the world, having overtaken the previous main exporter, Indonesia, in 2006. Its exports have risen sharply. Between 2005 and 2006, Qatar’s export contract volumes rose by 15%, to 3.0 bn cfd. Volumes have more than doubled since 2000, when they were 1.4 bn cfd. Actual exports–as distinct from contractual obligations–in 2006 are estimated at 2.9 bn cfd (see Table 10), making Qatar the Middle East’s largest exporter of gas.

Table 10
Qatar: Gas Profile
Reserves (2007) 91trillion cf
Reserves:Production > 100:1
Gas Balance (2006)
(bn cfd)
Production 4.8
Consumption 1.9
Net Trade 2.9
Source: Tables 1, 4 & 5

Qatar’s gas industry is based on its 900 trillion cf North Field, which is an extension of Iran’s South Pars field. The two fields represent the world’s largest concentration of non-associated gas. Like other nearby gas producers, Qatar has used its huge reserve to establish several gas-based industries, including petrochemicals and gas-to-liquids (GTL).

Outlook

Qatar has ambitious plans to increase its production and exports. Its immediate plans are centred on a scheme known as Qatargas II, a joint-venture between Qatar Petroleum (QP) and ExxonMobil. Qatargas II is the second of a four-phase project designed to raise the export capacity of the entire Qatargas venture from 1.4 bn cfd to 5.5 bn cfd by about 2010.

A second series of joint-ventures with QP, known as RasGas, is planning to raise its capacity from 2.1 bn cfd to 4.9 bn cfd by around 2011, which would give Qatar as a whole an export capacity in the region of 10.4 bn cfd in 2015. In addition to this, Qatar has plans to supply gas by pipeline to some of its neighbours. In July 2007, a new pipeline was opened to supply the UAE. Throughput is expected to reach 2.0 bn cfd in 2008 and subsequently to rise to 3.2 bn cfd. Discussions have also been held with Bahrain and Kuwait, though several issues need first to be settled. The proposed Kuwaiti pipeline, for example, is unable to proceed owing to Saudi Arabia’s refusal to allow the line to pass under its coastal waters.

Qatar, in any case, plans to give priority to LNG over pipeline exports. It is also reconsidering some of its plans to establish new gas-using industries at home, including several GTL plants.

OET ARCHIVE:

‘Doubts attend GTL’, Gas & Power, Sep06

‘Qatar move casts shadow over GTL’, Gas & Power Sep05

Hyper-links:

Saudi Arabia

Saudi Arabia is the second-largest gas producer in the Middle East, with an output of 7.1 bn cfd (see Table 11). The kingdom, however, has shown little interest in exporting gas, preferring instead to use its methane to generate electricity and desalinate water and its wet gas to make petrochemicals.

Most of Saudi Arabia’s gas production is of associated gas. Supplies are constrained as a result of OPEC restrictions on Saudi oil production. As a result, Saudi Aramco is searching for new reserves of non-associated gas. In an attempt to speed-up the process of finding more gas, the Saudi state company has invited international oil companies to take part, but foreign firms have been slow to sign upstream contracts following disputes over the requirement for some of them to finance downstream developments. Some major companies have criticized the rates of return as being too low.

Table 11
Saudi Arabia: Gas Profile
Reserves (2007) 240 trillion cf
Reserves:Production 92:1
Gas Balance (2006)
(bn cfd)
Production 7.1
Consumption 7.1
Net Trade -
Source: Tables 1, 4 & 5

Outlook

Saudi Arabia faces rapidly growing demand for its gas. In order to meet projected demand in 2015 production needs almost to double. Much of the extra demand is for ethane and other wet gases for petrochemical use, with power and desalination the other large sources of consumption. The key to meeting this extra demand lies with Saudi Aramco’s ability to find and develop large new discoveries in time. Meeting the expected growth in demand will be difficult and Saudi Arabia is unlikely to have any gas for export in 2015.

OET ARCHIVE:

‘Saudi Arabia may be about to revive stalled gas programme’, Gas & Power, Jun06

Hyper-links:

UAE

The UAE, like Saudi Arabia, is in the paradoxical position of having large gas reserves whilst at the same time facing a shortage of gas for domestic use. Unlike Saudi Arabia, UAE is a net exporter of gas (see Table 12).

Table 12
UAE: Gas Profile
Reserves (2007) 214 trillion cf
Reserves:Production > 100:1
Gas Balance (2006)
(bn cfd)
Production 4.6
Consumption 4.6
Net Trade 0.6
Source: Tables 1, 4 & 5

The UAE’s net trade in 2006 was made up of 0.7 bn cfd of LNG exports to India and Japan and 0.1 bn cfd of imports by pipeline from Oman. In July 2007, it began to import gas by pipeline from Qatar. Final volumes have not yet been agreed, but the line allows up to 2.0 bn cfd to be delivered once it is operating at capacity, with the possibility to raise this eventually to 3.2 bn cfd. Some of the line’s capacity is likely to be used to supply Qatari gas to Oman. Plans by the UAE to import nearly 0.2 bn cfd of gas from Iran have been suspended following disputes over gas pricing.

Outlook

Demand for gas is growing rapidly both in Abu Dhabi and Dubai, where the large amount of new building construction is adding to the already high demand for gas for industrial use. Abu Dhabi hopes to add some 3.0 bn cfd of gas production from a series of sour gas fields, but the need for imports is likely to grow strongly over the next few years.

OET ARCHIVE:

‘UAE’s production plans may prove over-ambitious’, Focus, Mar07

‘UAE faces delays on gas imports’, Gas & Power, Apr07

‘Delays threaten UAE’s gas programme’, Gas & Power, Apr06

Hyper-links:

Iraq

Iraq, like many of its neighbours, neglected its gas industry until comparatively recently. The first serious attempt to develop a large scale gas industry–complete with exports–occurred in the 1990s. By then, though, Iraq was subject to UN sanctions following its invasion of Kuwait, which precluded both upstream investment and the transfer of technology by foreign countries.

Production is now in the region of 0.2 bn cfd, compared with a previous peak of 1.9 bn cfd in 1979. Further, unknown quantities of gas are flared owing to the lack of sufficient gas-gathering capacity. Estimates of the amount now flared range up to 1.0 bn cfd. There is at present no external trade in gas (see Table 13).

Table 13
Iraq: Gas Profile
Reserves (2007) 112 trillion cf
Reserves:Production > 100:1
Gas Balance (2006)
(bn cfd)
Production 0.2
Consumption 0.2
Net Trade -
Source: Tables 1, 4 & 5

Outlook

Iraq would like to produce considerably more gas both for the home and export market. Domestic demand would mainly be for power generation. Exports have been proposed to Turkey and Kuwait. The first modest step in Iraq’s export trade could be a 0.2 bn cfd pipeline from the Rumailah field to Kuwait; but this, like so many Iraqi oil and gas schemes, must await the pacification of the country.

OET ARCHIVE:

‘Violence threatens future levels of output in Iraq’, Focus, Dec05

‘Iraq’s oil sector struggles for survival’, Focus, Dec06

Hyper-links:

Egypt

Egypt’s gas industry has developed rapidly in recent years. Output has more than doubled since 2001. LNG exports began in 2005 and now amount to 1.5 bn cfd (see Table 14). Egypt has received considerable international investment and plans further expansion of its gas industry.

Table 14
Egypt: Gas Profile
Reserves (2007) 59 trillion cf
Reserves:Production 37:1
Gas Balance (2006)
(bn cfd)
Production 4.3
Consumption 2.8
Net Trade 1.5
Source: Tables 1, 4 & 5

Outlook

Expansion is being driven by exports. Egypt wants to double exports by 2011 and increase its proven reserves by 50%. Exploration is to be extended towards the Libyan border as part of a move to diversify away from the Nile Delta producing-region. There are plans for pipeline exports to the Levant and beyond. A line to Jordan already exists and there are plans for a 0.2 bn cfd line to Israel, which is due to begin operation in late 2007 or early 2008.

Hyper-links:

Kuwait

Kuwait produces 1.2 bn cfd of associated gas (see Table 15), the production of which is constrained by that of oil, which in turn is holding back the growth of demand. Attempts to import from Qatar, Iraq and Iran have all run into problems (see country entries above). The Kuwaitis have even–almost in desperation–considered imports of LNG.

Table 15
Kuwait: Gas Profile
Reserves (2007) 55 trillion cf
Reserves:Production > 100:1
Gas Balance (2006)
(bn cfd)
Production 1.2
Consumption 1.2
Net Trade -
Source: Tables 1, 4 & 5

Outlook

Kuwait’s efforts have been largely concentrated on securing short term import supplies rather than developing gas fields of its own. Large reserves of gas are said to exist in the north of the emirate, but plans to develop this area for both oil and gas have encountered substantial delays following objections within Kuwait to the involvement of foreign companies and uncertainties over government policy towards future gas developments.

OET ARCHIVE:

‘Kuwait: Have its oil and gas products been exaggerated?’, Focus, Jan07

Hyper-links:

Oman

Oman has used its gas production to establish both a pipeline LNG export trade and a domestic petrochemical industry. Its plans include the building of more petrochemical capacity. The main consumer, however is the power generation and desalination sector. LNG exports began in 2000 and have since reached just over 1.1 bn cfd (see Table 8) but may now be close to their peak.

Table 16
Oman: Gas Profile
Reserves (2007) 30 trillion cf
Reserves:Production 34:1
Gas Balance (2006)
(bn cfd)
Production 2.4
Consumption 1.1
Net Trade 1.3
Source: Tables 1, 4 & 5

Outlook

Production has been rising rapidly, but so has domestic demand, to the extent that Oman cannot supply both its home market and export business to the extent desired. Petrochemical plans are already being scaled back in order to ensure that LNG export contracts can be honoured. Exports to the UAE are also due to cease in 2008, when the pipeline will be reversed to enable Oman to import 0.1-0.2 bn cfd from Qatar via the UAE.

Hyper-links:

Yemen

Yemen hopes to join the ranks of LNG-exporting countries in late-2008 or early 2009, with the commissioning of the first phase of the Yemen LNG project. The project was first mooted in the 1990s, and exports were supposed to begin in 2000, but a series of delays followed, caused by failures to sign-up customers in Asia, uncertainties over gas supplies and problems over financing. Yemen LNG is now under construction and its first train is due to be commissioned in late 2008, followed by a second one in 2009. Domestic gas consumption may also rise after 2008 from its present low base (see Table 17).

Table 17
Yemen: Gas Profile
Reserves (2007) 17 trillion cf
Reserves:Production > 100:1
Gas Balance (2006)
(bn cfd)
Production 0.1
Consumption 0.1
Net Trade -
Source: Tables 1, 4 & 5

Outlook

LNG exports should have begun by early-2009. Once full deliveries are under way, these should reach 0.9 bn cfd. There may be scope to raise this figure slightly, but there is unlikely to be any major increase before 2015. Domestic consumption should record a modest rise. Large scale gas-based industrialization of the type seen in parts of the Persian Gulf looks unlikely.

Hyper-links:

Outlook to 2015

Production

Middle Eastern production is 34.9 bn cfd. There are ambitious plans to increase this, but some plans may have to be scaled-back. Proposals for new pipelines, LNG export trains and upstream developments are likely to come under pressure from rising construction costs. Similar pressures are likely to affect potential end-users such as petrochemical plants, creating uncertainties over both demand and supply. In these circumstances, production may grow more slowly than is currently planned. In such circumstances, output may grow at the rate suggested in Table 18.

Table 18
Middle East: Gas Production, 2006 & 2015
Country Volume (bn cfd)
2006 2015 Change
Iran 10.2 20.0 9.8
Qatar 4.8 13.0 8.2
Saudi Arabia 7.1 12.0 4.9
UAE 4.6 7.6 3.0
Iraq 0.2 0.5 0.3
Egypt 4.3 6.5 2.2
Kuwait 1.2 1.8 0.6
Oman 2.4 3.6 1.2
Yemen 0.1 1.1 1.0
Total 34.9 66.1 31.2
Source: GER Forecast

Exports

Under the scenario presented under Table 18, current rates of domestic demand growth and existing plans to increase exports could not both be accommodated. Middle Eastern demand is now growing at 4-5% per annum. It would need to fall to 3% simply to allow exports to remain at their present level. Since exports are driving production developments in a number of important cases, like Qatar and Egypt, it is reasonable to assume some growth in exports between now and 2015. Domestic demand will therefore have to grow at something like half its present rate if exports are to rise, and the countries affected will have to substitute oil for gas in order to meet domestic demand for energy. Egypt has already found itself in this position; other countries will undoubtedly follow its example.

Export plans, however, will still need to be scaled down in some cases. Iran looks particularly vulnerable, especially in respect of its ambitious plans to build export pipelines capable of supplying gas to Western Europe and the Indian sub-continent. Egypt, too, will probably have to abandon plans to supply gas to Western Europe via a pipeline to Turkey. Without gas from Iran and Egypt, those promoting Turkey as an ‘energy corridor’ between the Middle East and Central Asia to Europe may also have to reconsider their plans.

Qatar and Egypt are likely to see their exports grow between now and 2015, and Yemen will join them as a net exporter of gas by 2009. UAE and Oman will also be exporting gas in 2015. The greatest uncertainty lies with Iraq. Without the pacification of the country there can be no real increase in gas production. The best that can be hoped for over the next few years is a modest increase in output. There could even be a small export trade with Kuwait. Proposals to supply Turkey and areas beyond, however, can remain no more than a dream for several years at the very least.

Latest Developments

Kuwait

OET ARCHIVE LINK: ‘Kuwait tries again to revive energy sector’, Focus, Jun 10

Previous

Yemen

OET ARCHIVE LINK: ‘Yemen faces uncertain gas future’, Gas & Power, Feb 10

UAE

OET ARCHIVE LINK: ‘UAE attempts to revive upstream expansion programme’, Focus, Jan 10

Kuwait

Kuwait has deferred plans yet again to increase its production capacity by 1 mn bpd to 4 mn bpd. The new target date is 2030: a delay of ten years.

The emirate is also conducting an investigation into the smuggling of diesel, which is on sale in Kuwait at subsidized prices, to Iraq where it fetches a much higher price.

Condensate Production

OET ARCHIVE LINK: ‘OPEC plans more condensate production’, Focus, Oct 09

Natural Gas

OET ARCHIVE LINK: ‘Gas market set to tighten on GCC demand’, Gas & Power, Sept 09

Gas Exports

OET ARCHIVE LINK: ‘EU seeks gas amid Iraqi confusion’, Focus, Aug 09

Oil Exports

Abu Dhabi says it will begin exporting crude via Fujairah in 2011, enabling it to avoid the Strait of Hormuz for up to 1.5 mn bpd of its exports.

Saudi Arabia

OET ARCHIVE LINK: ‘Blow for Saudi gas plans as Total withdraws’, Gas & Power, Apr08

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