Gas supply drives energy revolution

25 July 2008
Gulf utilities need to find alternative energy sources as they do not have enough gas to fire their power plants.

Renewable and alternative energy projects are gaining popularity across the Middle East as decision makers turn their attention to energy security. While environmental concerns have prompted interest in ‘green’ energy schemes elsewhere in the world, they are not the main driver in the Middle East.

In a region that has to date relied exclusively on oil and gas as feedstock for its power plants, renewable resources provide a way to diversify away from hydrocarbons and, as such, are a welcome means of increasing energy security.

Plans to develop alternative energy schemes such as nuclear and coal-fired power plants follow the same logic.

But while it is possible to argue in favour of alternative energy projects on the grounds that oil and gas reserves will eventually run out, this is not a pressing concern.

The real reason that the Gulf’s utilities are so keen on finding new sources of energy is that the structure of the market in the region means they do not have enough gas to fire their power plants.

Producers have no incentive to sell their gas on the domestic market when they can secure much higher prices elsewhere.

But local utilities, accustomed to heavily subsidised prices for feedstock, are unwilling to pay international prices.

In this context, it is no wonder that alternative energy projects are increasingly attractive and, for as long as global prices remain high, that will remain the case.

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