Region failing to boost gas supplies

The stuttering development of the Middle East’s gas industry has long been a source of frustration for energy-hungry consumers around the world.

Although the Gulf boasts four of the five largest gas reserves in the world, its potential to supply export markets has barely been tapped due to fast-rising domestic consumption and poor economic incentives for exploration.

Disappointing results from Saudi efforts to open up its major gas reserves, along with international reluctance to invest in sanctions-hit Iran and war-torn Iraq has left the region in a weak position.

Iran continues to punch far below its weight. Despite gas reserves of 982 trillion cubic feet, it can barely cover its domestic needs.

Qatar, the most obvious source of supply for international markets, says it does not want to commit to any further expansion of its export capacity before 2013. Algeria and Egypt have substantial reserves but they too limit the opportunities for international energy companies.

Across the region, gas subsidies for consumers and industrial users has further stifled investment in new production.

The International Energy Agency (IEA), which acts as an energy adviser to 27 of the largest oil-consuming nations, has put pressure on the region’s national oil companies by pointing out that gas demand is projected to grow more, in absolute terms, in the Middle East than anywhere else between now and 2030.

While in a best case scenario local gas supplies may yet meet this rise in demand, significant uncertainty remains over whether enough investment will be forthcoming.

This month, the IEA will tour the region to try to persuade governments to encourage more exploration and remove subsidies in an effort to spur fresh investment. But there is little reason to expect governments will change their policies.