“Gas demand in the Middle East has been rising by around 7 percent per annum and it has outpaced the growth in regional gas production. Domestic demand growth is fuelled by economic expansion, low gas prices, the switch from oil to gas for power generation and the injection of gas into oil reservoirs to enhance oil recovery. The use of gas as a fuel in power generation in the region is forecast to increase by an annual rate of 3.6 percent in the period to 2030,” it added.

“In the Middle East, rapid economic growth has resulted in the consumption of natural gas outpacing production while uncertainty over the level of future global gas demand is at its highest in decades,” said the report titled The Global Gas Challenge.

“This uncertainty could result in future supplies being inadequate to meet the projected growth in demand. Although global gas demand is forecast to grow by 1.5 percent per annum until 2030 by the International Energy Agency, actual growth will be influenced by a number of unpredictable factors.”

“While the energy strategies adopted by some countries in the Middle East may help improve their energy independence in the longer-term, in the short-term the region’s requirements will also have to be met by imported gas,” said David Barringer, oil and gas leader, Ernst & Young MENA.

“In the Middle East, there is tension between the requirement to supply domestic markets to fuel economic growth and the desire to achieve higher revenues via export sales agreements. About 41 percent of the world’s remaining proved (conventional) gas reserves are located in the region although 73 percent of these reserves are concentrated in just two countries: Iran and Qatar. Qatar is the world’s largest LNG producer and exporter but it has a moratorium on new North Field developments and export sales agreements until 2014,” the report said.

“Outside of Iran and Qatar, a significant proportion of the region’s gas reserves are in associated oil deposits, and so gas production is not flexible. Much of the gas in the region is also sour, which makes it more difficult and costly to extract and process,” the report said.

Domestic sales prices, which are subsidized to varying degrees, may need to rise to cover the additional processing costs and investment required in gas infrastructure. Price subsidies, political differences and more lucrative export opportunities have reduced the availability of gas produced in the Middle East for consumption in the region. As a result, there is limited intra-regional infrastructure in place for the transportation of natural gas.

“Saudi Arabia is looking to substantially increase gas production to meet growing domestic demand and Abu Dhabi has been actively looking at unconventional gas reserves. The emirate’s associated gas is increasingly being used for reinjection. Rapid economic development and high domestic power subsidies have prompted Abu Dhabi to take alternative measures to meet future demand.

“The formation of a gas exporter’s organization modeled on OPEC looks increasingly unlikely in the foreseeable future. Most gas demand growth is likely to occur in non-OECD countries, principally China, India and the Middle East, although there is much uncertainty around gas-demand growth in China and other Asian countries.”