Gas consumption in the GCC is expected to approach that of Northwestern Europe by 2030, due to a significant increase in demand for power and industrial uses, according to UK-based energy consultancy Wood Mackenzie.
In 2012, gas demand in the six-nation bloc was about 18 million cubic feet a day (cf/d), but this is forecast to rise about 56 per cent to 28 million cf/d by 2030. Gas demand in Northwestern Europe, which includes Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Switzerland and the UK, is expected to rise less than 5 per cent by 2030 to about 30 million cf/d.
Based on these forecasts, the GCC will have almost the same gas demand as Northwestern Europe in 2030, despite having less than a quarter of its population. The population of Northwestern Europe in 2030 is expected to reach 271 million, compared with just 60 million in the GCC.
Its not just in the power centre, its in the industrial sector as well, and a lot of that is being driven by very cheap prices, says Gavin Law, head of power and gas consulting at Wood Mackenzie. You could have a situation where per capita demand is considerably larger than it is in Northwestern Europe.
Demand for power in the GCC is expected to grow 70 per cent by 2030, while demand for non-power use is set to rise 43 per cent, according to Wood Mackenzie.
The vast majority of the GCCs non-associated gas reserves are located in Qatar, leaving the gas production in the other countries largely linked to oil production. The UAE is now developing sour gas reserves, but this will be technically difficult and expensive to commercialise.
It doesnt look like exploration is going to save the day, says Law. In the past five years in terms of gas reserves discovered, even in terms of exploration wells being drilled, its pretty lacklustre.
Data shows GCC discovery rates for the past five years are significantly lower than alternative global opportunities such as East Africa, East Mediterranean and Australia.
The gas crunch in the GCC has led to the construction of infrastructure for the import of higher-cost liquefied natural gas (LNG) in Kuwait, the UAE and Bahrain, and talks of LNG imports in Saudi Arabia. But LNG imports along with domestic unconventional and sour gas developments will increase the cost of gas in the GCC.
Low-cost indigenous gas has supported low domestic gas prices, says Law. However, a rising weighted average cost of gas will increase pressure on price reform and subsidies.