Gulf gas shortage a problem for electricity generation
Gulf gas shortage a problem for electricity generation
So why is it that Kuwait — along with neighboring OPEC powers Saudi Arabia and the UAE— is left wanting for gas when the region houses around 30 percent of the world’s resources?
For decades, gas was overlooked while these producers went all out to exploit their vast oil reserves. Political feuds and low local gas prices also slowed development of this clean-burning fuel and held up purchases from nearby Qatar, the world’s top exporter of liquefied natural gas (LNG).
Galloping demand from a population and industrial boom is forcing gradual change, although many billions will be needed to tap the region’s gas. Much of that gas is low in quality and high in sulphur, making it expensive and difficult to extract.
“Most Middle East crude producers are now realizing the economic and environmental benefits of increasing gas production — and, in the near term, gas imports — for their rising power demand,” said Kelli Maleckar of energy consultancy IHS.
Kuwait and the UAE have done just that — boosting their reliance on imported gas to meet power demand, especially in summer when consumption to power air conditioning goes through the roof. Saudi Arabia does not import gas.
Domestic political issues have long delayed Kuwait’s negotiations with oil majors to help tap its gas reserves could also derail its purchases: it has signed a $3 billion five-year LNG deal with BP and a $12 billion six-year LNG deal with Shell.
After pressure from Kuwaiti lawmakers, an investigation was launched in 2011 into a gas service agreement with Shell.
“Even though Kuwait has signed these (Shell and BP) deals, there is always that risk that a parliamentarian is going to come and say ‘you know what, I would actually like to question this deal’,” said Eman Ebed Alkadi of consultancy Eurasia Group.
Kuwait also signed a short-term gas deal with Qatar last month, but it is unlikely to depend on Doha in the long term due to a political rift over Doha’s support for Islamists, analysts say.
A long-discussed regional pipeline network would meanwhile go a long way toward solving supply problems, but it has also been hampered by political disputes.
Demand for gas in the Gulf Cooperation Council (GCC) states is likely to rise more than 50 percent, from 256 billion cubic meters (bcm) in 2011 to 400 bcm in 2030, according to IHS.
Objections by top oil exporter Saudi Arabia had halted a plan for Qatar to pipe gas to Kuwait in the past. Many GCC members have long-running border disputes with each other.
Riyadh also opposed Qatar’s pumping gas to the UAE, but the Dolphin Energy project went ahead regardless. It now carries about 2 billion cubic feet of gas per day to the UAE and Oman.
The UAE has exported LNG since the late 1970s, but soaring domestic demand and sluggish progress with its own production have turned it into a net gas importer over the last five years.
In the longer term, Iraq, which invaded Kuwait in 1990, could also provide supply for the region. For now, however, it faces its own acute power shortage.
And Iran, which holds the world’s largest gas reserves, is unlikely to provide a quick supply fix even if it reaches a deal with world powers over its nuclear program and sanctions are lifted.
“(Iran) faces a number of obstacles, among which is a crowded market place of suppliers, neighbors unwilling to pay a higher price for its gas, and its own national financial and operational hurdles,” said Valerie Marcel of Chatham House.
In anticipation of rapidly rising consumption, Saudi Arabia is exploring unconventional gas — “a game changer in our upstream production strategy”, according to Saudi Aramco.
It expects natural gas demand to almost double by 2030 from 2011 levels of 3.5 trillion cubic feet per year.
Saudi Arabia burns a significant amount of its crude to generate electricity and analysts warn that rising consumption will erode the amount available for export.
Petroleum and Mineral Resources Minister Ali Al-Naimi has estimated unconventional gas reserves at over 600 trillion cubic feet — more than double its proven conventional reserves.
“This means that resources in the kingdom are not the problem, but rather how to discover, develop and produce such resources,” said Sadad Al-Husseini, a former top executive at Aramco.
Pompeo says China is engaging in ‘predatory economics 101’
- He said China’s recent claims of “openness and globalization” are “a joke.”
DETROIT: China is engaging in “predatory economics 101” and an “unprecedented level of larceny” of intellectual property, Secretary of State Mike Pompeo told a business audience Monday.
Pompeo made the remarks at the Detroit Economic Club as global markets reacted to trade tensions between the US and China. Both nations started putting trade tariffs in motion that are set to take effect July 6.
He said China’s recent claims of “openness and globalization” are “a joke.” He added that China is a “predatory economic government” that is “long overdue in being tackled,” matters that include IP theft and Chinese steel and aluminum flooding the US market.
“Everyone knows ... China is the main perpetrator,” he said. “It’s an unprecedented level of larceny.”
“Just ask yourself: Would China have allowed America to do to it what China has done to America?” he said later. “This is predatory economics 101.”
The Chinese Embassy in Washington did not immediately respond to a request for comment.
Pompeo raised the trade issue directly with China last week, when he met in Beijing with President Xi Jinping and others.
“I reminded him that’s not fair competition,” Pompeo said.
President Donald Trump has announced a 25 percent tariff on up to $50 billion in Chinese imports. China is retaliating by raising import duties on $34 billion worth of American goods, including soybeans, electric cars and whiskey. Trump also has slapped tariffs on steel and aluminum imports from Canada, Mexico and European allies.
Wall Street has viewed the escalating trade tensions with wariness, fearful they could strangle the economic growth achieved during Trump’s watch. Gary Cohn, Trump’s former top economic adviser, said last week that a “tariff battle” could result in price inflation and consumer debt — “historic ingredients for an economic slowdown.”
Pompeo on Monday described US actions as “economic diplomacy,” which, when done right, strengthens national security and international alliances, he added.
“We use American power, economic might and influence as a tool of economic policy,” he said. “We do our best to call out unfair economic behaviors as well.”