New Gulf gas finds serve strategic purpose

Over the past year, huge gas discoveries were made in Bahrain, the UAE and Saudi Arabia. In April last year, Bahrain announced discoveries estimated at 80 billion barrels of oil and 20 trillion cubic feet of gas, while this month, the UAE announced a new gas field with reserves estimated at 80 trillion cubic feet.

And just last week, Saudi Arabia came up with the Jafurah field, with reserves estimated at 200 trillion cubic feet. These discoveries will not only lead to significant economic outcomes, but will result in strategic repercussions on the global energy industry. It will also affect the nature of relations among countries of the region, especially if the three Gulf states coordinate with each another, as their projected scale of the finds add up to 300 trillion Cubic feet.

This will be added to 400 trillion cubic feet previously discovered in Saudi Arabia, the UAE and Bahrain, which means their collective reserves are in the order of 700 trillion.

Self sufficiency

Additionally, these discoveries will help the three states meet their full domestic need for gas, especially for their petrochemical industries, aluminum, mining, electric power production, water desalination, or household uses.

The new fields will also be a major source of natural gas in the world, which will make them on par with major exporters such as Qatar and Iran. This rivalry will intensify, depending on the strategies the competing parties will follow. Qatar, for example, has advanced infrastructure and large production capacity to export high-cost liquefied gas, but its weak point lies in its inability to extend pipelines to export low-cost gas due to its geographical situation and its tense relations with neighbours.

As for Iran, it has the advantage of exporting through pipes, but suffers from weak investments, international boycott, and expansionist ambitions, which stand as barriers in the way to success.

Leverage the geography

On the other hand, the UAE, Saudi Arabia, and Bahrain enjoy unlimited potential and can lead the industry if they develop a joint strategy for coordination. The three combined have an ideal geographical situation, where gas pipelines can be easily extended across the Sea of Oman to India and Pakistan, and to other Asian countries, including China, which is the main consumer and importer of oil and gas in the world.

Similar pipelines can also be extended across the Red Sea to Egypt, which in turn has large sources of gas and platforms to liquefy it, and then export to Europe. Bahrain also has a good infrastructure for gas liquefaction, as it has already built a plant at a cost of $800 million.

A gas pipeline can also be laid down from the three countries to Oman and Kuwait, which recently signed an agreement with Qatar to import liquefied gas at a great cost. The two countries would be better off if they import gas via pipelines through Saudi Arabia. Other pipelines can also be extended to Iraq.

This strategic approach will prove successful if the UAE, Saudi Arabia and Bahrain coordinate to establish a gas network that would later include Kuwait and Oman. In this respect, having state-of-the-art infrastructure will have a decisive role to play in regional competition, which would reflect on economic and political power balance in the region.

It will greatly reduce the financial capabilities of Qatar and Iran, which have long been used for nondevelopment purposes and to finance foreign agendas. Doing so will eventually enhance the security of the region.

- Mohammed Al Asoomi is a specialist in UAE and GCC economic and social affairs.