The Gulf states’ energy balance is rapidly changing due to multiple factors. These are related to approach — as the economies aim to diversify energy sources and expand use of clean and renewable energy — and to technological developments, which provide new opportunities to exploiting oil and gas resources.
Take for example the tremendous development in shale oil and gas extraction, which turned the US into a natural gas exporter and met its oil needs from domestic sources. These developments can contribute to changes in the structure of Gulf energy sources and the way they can cope through producing shale oil and gas available in the GCC countries, particularly in the UAE, Saudi Arabia and Oman.
In Saudi Arabia, shale gas production is scheduled to begin for the first time by the end of this month from the Jafurah basin to the north. The shale gas from there will supply the Waad Al Shimal project (“Northern Promise”) with necessary energy needs, particularly electric power.
The production at this giant field, which is as sizeable as the US Eagle Ford Shale oil, is set to meet Saudi Arabia’s growing needs by the end of this year, which will possibly turn the Kingdom into a natural gas exporter in future.
Such a discovery has indeed been an epoch-making change in Saudi Arabia’s energy balance, with the country becoming the fifth largest natural gas reserve in the world with 600 trillion square feet of gas, along with its traditional gas reserves associated with oil.
It is important to note that electric power production and the development of petrochemical industries rely heavily on gas as raw material. The shale gas production will certainly leave the door widely open to self-sufficiency and meeting future demand from domestic sources in the UAE and Saudi Arabia, as well as Oman, and perhaps Kuwait and Bahrain.
All necessary factors to produce shale gas are available in the five GCC countries, whereby high oil prices would provide the necessary funds. Preliminary studies reveal the existence of commercial quantities for producing shale gas.
In addition, technologies are now available and would be receive a boost if stakeholders cooperate with international companies to develop the production process.
Positive impact in the gulf
It is possible to attract capital through local shareholding companies or through private investors, especially in countries that may need investments, which will enhance the private sector’s contribution to the development process and support domestic financial markets.
It remains beyond question that shale gas production will coincide with similar production in many countries, including China, India and Brazil. This will result in a significant impact on the already crumbling prices of natural gas in international markets. Yet the impact will be positive on the five Gulf countries as it will provide them with new income sources that would contribute to increased revenues to finance state budgets and ratchet up investment spending. This is despite expectations for lower oil prices.
However, countries producing traditional natural gas, which constitute the main supply for international markets currently, such as Iran and Qatar will be negatively affected by the production of shale gas. The self-sufficiency in the five Gulf countries will stop — or reduce imports — and the possibility of one of the five becoming an exporter of shale gas will turn it into a rival in the regional and global gas market.
That’s why it is so important to explore and produce shale gas as soon as possible to meet demand, achieve self-sufficiency and provide stable and secure sources for the development of many related industries, especially petrochemicals, as well as enhance the independence of the energy sector.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.
