SHARJAH, 30 December 2004 — The Gulf Cooperation Council (GCC) member states, which have proven gas deposits of 72 trillion cubic meters that represent 40 percent of the world’s known gas reserves, are set to invest heavily in the gas sector in the years ahead.
Current production in the GCC states does not exceed 245 billion cubic meters a year, or around 10 percent of the global gas output, according to a report in the Gulf Business magazine.
The report said the imbalance is going to be changed soon when several gas projects like the Dolphin Gas Project led by the UAE and several other gas projects in Saudi Arabia and Qatar are completed.
Currently, gas constitutes around 24 percent of the total energy demand, while oil accounts for 40 percent and coal the remaining 26 percent. However, by 2010, natural gas will climb to second place, surpassing coal.
Gulf Business did not give an estimate of the expected GCC investments in the gas sector.
According to independent expert studies, investments totaling $500 billion will be needed in the oil and gas sectors in the Gulf until 2030, which means annual investments of $18 billion. No split up between gas and oil is available.
Countries like Saudi Arabia and the UAE have already opened the door for foreign companies to invest in the gas, power generation and petrochemical industries.
According to the Organization of Arab Petroleum Exporting Countries (OAPEC), the UAE ranked fifth in the world in terms of proven natural gas reserves at the end of 2003 while it was the third biggest gas producer in the Arab region.
Gas reserves in the UAE are estimated at nearly six trillion cubic meters, the fifth largest after Russia, Iran, Qatar and Saudi Arabia, according to the report.
Its production of natural gas touched 54.6 billion cubic meters in 2002, the third largest after gas output in Algeria and Saudi Arabia.
In late September, the UAE and Qatar formalized an agreement to transport natural gas from Qatar to the UAE through a pipeline.
Dolphin also announced it would sell natural gas to the emirate of Ras Al-Khaimah in the UAE via a tie-in, near Qidfa in Fujairah with the existing Emarat pipeline network that serves the Northern Emirates.
The government of the emirate of Sharjah has set up a 400 million dirhams joint venture - Sajaa Gas - to develop gas with Crescent Petroleum and six prominent investors from the GCC states. A standalone gas plant will be set up to sweeten sour gas with capacity of 17 million cubic meters per day of gas.
Crescent Petroleum, a private compnay, is also planning to import gas from Iran for supplies to Sharjah and the Northern Emirates. According to Gulf Business, a contract has been already awarded to a Sharjah-based company to build an offshore platform and the project is moving ahead for bringing in gas. In liquefied natural gas (LNG), the UAE is the second largest producer in the Arab world after Qatar.
Qatar’s gas reserves are estimated at 25 trillion cubic meters and the country produces nearly 18 million tons of LNG per year. Qatar’s current output is set to more than quadruple to 77 million tons per year by 2011. Qatar’s still underdeveloped North Field is the world’s largest single natural gas reservoir.
Currently, Qatar exports some 75 percent of its LNG sales of 18 million tons per year to Asia. Qatar is launching an initial public offering (IPO) next month for the Qatar LNG Shipping Co., which will be the world’s largest shipping firm. Independent experts say that Qatar is set to become the world leader in the gas-to-liquid industry by 2010.
Qatar has signed several deals with ExxonMobil and Shell, worth a total of $17 billion to supply natural gas.
Saudi Arabia has also embarked on a massive program to tap its gas reserves and is optimistic about major gas discoveries by the global energy giants in its vast Empty Quarter desert. The South Rub Al Khali Company (SRAK), a new $2.5 billion joint venture between Saudi Arabia’s state-owned Aramco, the Royal Dutch Shell and France’s Total, is exploring for gas in the Rub Al Khali area.
The concession covers an area of nearly 210,000 square kilometers in the desert. Shell controls 40 percent in SRAK while the remaining stake is equally shared by Total and Aramco. The venture has been given five years for its exploration program, but the period is extendable under a deal signed last year, according to Gulf Business.
Another major concession was awarded this year to a consortium of Russian, Chinese, Italian and Spanish companies covering 120,000 square kilometers in the Rub Al Khali desert.
Saudi Arabia already has some six trillion cubic meters of natural gas but these reserves will increase substantially after expected new discoveries in Rub Al Khali.
Oman, another GCC member has also injected around $6 billion into an LNG project and is planning to lift its capacity by at least 50 percent to nine million tons. Kuwait also has some 2.5 trillion cubic meters of gas, much of the deposits being associated gas that has to be exploited.