The UAE changes energy strategy

23 January 2013

Unconventional reserves are crucial to the country’s long-term plan to diversify its economy

At the end of the 20th century, gas supply issues were not high on the agenda for governments in the Middle East – a region with over a third of the world’s proved reserves of natural gas. In the Gulf’s oil exporting states, associated gas from crude production was a surplus and helped rapid industrial development and population growth. But many countries have run out of easy options to increase gas-pumping capacity.

In the US, technological advances have facilitated a boom in unconventional production in the form of shale gas, fuelling a new resurgence in American industry. US manufacturers have reportedly announced more than $90bn-worth of investments to take advantage of low-cost gas opportunities from petrochemicals and fuel to fertiliser and steel.

The UAE and Oman for decades enjoyed cheap gas, but are now following the US’ lead in developing challenging and alternative reserves to secure long-term industrial growth. The UAE, which is developing the Shah sour gas field and looking at three other sour projects, will not oversee a US-style energy revolution.

Abu Dhabi’s sour gas reserves are significantly more costly to extract than North American shale gas and do not have the potential to transform the UAE into a major gas exporter in the coming years. For the UAE, alternative gas plays are simply essential to helping it meet domestic industrialisation targets.

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