In terms of the Middle East, the report focuses on the irony facing many Gulf States: While they sit on top of some of the world's most abundant natural gas reserves, they are struggling to find enough of this clean-burning resource to meet their growing electricity demand.
Together, the member nations of the Gulf Cooperation Council-Bahrain, Saudi Arabia, Kuwait, UAE, Qatar and Oman hold about 23 percent of global gas reserves. However, with the exception of Qatar, the GCC states are facing increasing gas shortages, according to Deloitte's 2011 Oil & Gas Reality Check report.
One factor is booming GDP growth. GCC economies are growing at a rate of about seven percent a year, which is spurring demand for both gas and electricity. Another factor is the strain of subsidies. Many Gulf states sell natural gas as well as electricity at highly subsidized rates. The United Arab Emirates offers a case in point. As recently outlined by the Petroleum Economist, production costs of deep and mildly sour gas projects in the Gulf are between $5-6/m btu, but domestic sales prices in the UAE range from $0.75-$2.00/m btu.
In the short-term, low prices resulting from subsidies are encouraging producers both at home and in neighboring countries to export their gas to Asia where it can command more than twice the price that it can within the Gulf region. This situation is creating immediate shortages, the only viable solution to which is costly liquefied natural gas imports from Europe. In the long-term the consequences could be even more severe. The low-price environment is constraining upstream investment as producers increasingly find development of gas fields to be uneconomical. The reality is that today's lack of infrastructure investment is likely to have supply repercussions for years to come.
"Although there is a high level of awareness among these countries as to the effects of subsidies, there is still a great amount of debate and uncertainty over how the issue should be tackled," said Mutasem Dajani, oil and gas partner at Deloitte in the Middle East. "Deloitte's Oil & Gas Reality Check is designed to act as a starting point for discussion of sustainable practices and solutions that can stimulate long-term growth."
This is the second year that the Deloitte Global Energy & Resources group has produced the Oil & Gas Reality Check. The report is developed using in-depth interviews with clients, energy industry analysts, and the Deloitte member firms' most senior energy practitioners.
