According to the latest annual BP Statistical Review, the Middle East accounts for about 45 per cent of proven global reserves of natural gas. Qatar and Iran alone sit on some 15 per cent each. But fast-growing populations are creating soaring demand for gas-guzzling power generation. Gas demand growth in Saudi Arabia, for example, is estimated at 7-9 per cent a year.

Competition for the region's low-cost gas feedstock is intensifying especially from new industry. The Gulf is expected to become ever more dominant in world production of both petrochemicals and aluminium thanks to the low and stable cost of gas feedstock. All but one of the GCC states now has existing or planned aluminium industries. And while gas prices charged by governments have gradually risen, there are no plans among major producers to impose international market rates. It was one area where Riyadh refused to budge during recently completed World Trade Organisation negotiations, in spite of fierce objections from the EU.

Doha offers an extreme example of the paradox. The country has an estimated 900 trillion cubic feet (tcf) of gas reserves. But a moratorium has been declared on new gas-based projects for the time being, while the state concentrates on meeting its target of 77 million tonnes a year of liquefied natural gas (LNG) production by 2010, builds up its gas-to-liquids (GTL) capability and expands its petrochemicals base. Rising engineering, procurement and construction (EPC) prices and the logistical headache of yet more development at Ras Laffan provide part of the explanation for the hiatus. But more important is the fear of killing the golden goose. A study, due for completion in 2007, has been commissioned into the behaviour of the North field, looking at the effect of the massive ramp-up in gas production on the reservoir.

The North field also highlights the changing perceptions towards gas. When it was first discovered in the 1970s, disappointment was expressed that the reservoir contained gas rather than oil. Indeed, it took more than a decade for development work to start. Today, the situation is very different. Non-associated gas is considered a precious and much-sought-after commodity. Regional licensing rounds are being launched aimed primarily at the discovery of gas. In late February, Egyptian Natural Gas Holding Company (EGAS) offered 12 blocks for exploration as part of its efforts to raise proven reserve levels to 100-120 tcf from about 67 tcf today. Saudi Arabia - also facing a seemingly illogical energy shortage which is putting a brake on the kingdom's mushrooming petrochemicals industry - is stepping up the search for gas in the Rub al-Khali (Empty Quarter) with the assistance of international oil companies (MEED 24:3:06, Cover Story).

High oil prices are driving exploitation of crude reserves previously considered uneconomic across the globe. The same is true of gas. Abu Dhabi has the world's fifth largest reserves, made up of both associated and non-associated gas. The emirate has in the past declined to develop non-associated reserves because of their high sulphur content and the consequent processing expense.

New possibilities

But as demand spirals and world prices rise, plans are changing. Abu Dhabi National Oil Company (ADNOC) recently started reappraising the Shah field, close to the border with Saudi Arabia. And while power and industrial requirements are rising fast, the emirate also exemplifies another tre