Dubai: The Middle East and North Africa (Mena) region needs a good energy policy that will both address the energy demand and supply issue, at the same time ensure that it is sustainable and protects the environment, energy officials and analysts, said.
Global demand for energy remains strong. Currently, the world consumes around 250 million barrels of oil equivalent per day - but almost half of this consumption is in the developed world. If the rest of the world were to move towards EU level of per capita energy consumption, global primary energy demand would more than double.
“To create a sustainable energy grid, the MENA countries need clear and good energy policies that will help the region offer sustainable energy with a good energy mix to power their economies,” Majid H. Jafar, Chief Executive Officer of Crescent Petroleum, said on Wednesday at a breakout session at the World Energy Forum.
Continued economic development and population growth are the key drivers of rising global energy consumption – especially in the developing world. A fifth of the world’s population remains without electricity. As we bring the so-called Bottom of the Pyramid into the modern global energy system, it will be critical, Jafar argues, in tackling poverty and promoting global stability.
Leonid Bokhanovskiy, Secretary General of Gas Exporting Countries’ Forum, said, “As much as $37.9 trillion will be needed between 2011 and 2035 in the global oil and gas sector to meet the projected demand, 25 per cent of which will be in gas development.”
Chris Faulkner, CEO of Breitling Oil and Gas, focused on the development of Shale Gas in the US, that is helping the US in meeting its energy needs while bringing down the prices of gas to $2 per mmbtu or $10 per barrel of oil equivalent.
“Shale gas is a game changer in the energy equation and will fulfil the energy needs of the future while meet the environmental concerns of the people – as it is clean, green and safe,” he said.
Energy demand in the Middle East jumped 500 per cent in the last 30 years, driven by economic growth. However, the Gulf region holds world’s 60 per cent of proven oil reserves and 40 per cent of gas reserves.
According to Arab Petroleum Investment Corporation, the Middle East will require $600 billion investment in oil and gas sector in the next few years. Saudi Arabia, UAE and Qatar are investing the bulk of this.
“The energy hungry region is currently consuming a large chunk of its own oil and gas production. There are indications that Saudi Arabia might absorb all its oil production within a decade to meet its own energy needs,” Jafar said.
“So, the region needs to develop the sustainable policies and tools to help not only their economies, but continue playing their role in meeting global energy demand.”
But he cautions against expecting overnight switch: transitions in global energy system take time. Coal took a century to replace biomass as the world’s primary fuel, and oil took 70 years to replace coal – all despite low costs and huge efficiency gains associated with these transitions, advantages that do not apply to renewables today.
Today it is the oil industry that needs to meet the challenges, he says. The world now needs to recreate the productive capacity of Saudi Arabia every two years. For the oil industry, this is largely insurmountable. But gas is starkly different: global gas resources could supply the world’s current needs for 250-plus years.
Moreover, he says, gas is affordable and relatively environmentally clean. The region most focussed on greenhouse gas emissions reductions in the world, the EU, is failing to meet its carbon targets as it increasingly chooses to burn coal over gas. Ironically, the region least interested in emissions reductions, the USA, has reduced its emissions to 20+ years lows and made the most material carbon emission reductions of any country in the world by switching from coal to gas in power generation. This is thanks in large part to cheap gas supplied from the shale gas revolution.
The Middle East, despite being at the very centre of global oil and gas production, remains highly inefficient in energy use – and inefficiency largely the result of an energy subsidy and price regulation regime which does not provide the price signals to ensure energy consumption is efficient and energy production is sufficient.
Finally, it is the private sector that can really help the MENA region, Jafar says. “Inter-country gas infrastructure and trade within the Gulf region is still limited but would bring huge benefits by ensuring that gas could be delivered to where it is needed most. The private sector is best placed to take the risks and make the investments necessary to deliver a regional gas grid,” he said.
