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Time to tap gas, oil-rich nations
told
By Meena S Janardhan
DUBAI - Oil-rich Arab countries should develop
their gas industry to take advantage of new energy
markets in Europe and Asia, not least because demand for
oil is growing by just 1.6 percent a year and is
increasingly shaped by worries about political
instability in the Middle East.
As it is,
fossil-fuel dependent nations in Europe and North
America are looking to reduce their economic
vulnerability to oil shocks in the Middle East due to
Arab-Israeli tensions. In the past decade, their
dependence on Middle East oil has fallen by about a
quarter.
The fears of instability in oil prices
if the United States attacks Iraq have once again
underscored the vulnerability of many countries in
recent months. "Increasingly, the 21st century will be
seen as the century of gas," Jeroen van der Veer,
president of Royal Dutch Petroleum, said to explain why
Middle Eastern countries need to reap the benefits of
the burgeoning gas industry as oil demand wanes.
While the Middle East is known for oil suppliers
like Saudi Arabia, which has the world's biggest oil
reserves, not as well known is the fact that the region
is home to 25.5 percent of the world's natural gas
resources.
Van de Veer's views echo the biennial
World Energy Outlook report, issued in September by the
Paris-based International Energy Agency (IEA). While
fossil fuels will continue to dominate the global energy
mix until 2030, "demand for natural gas will rise more
strongly than for any other fossil fuel," the report
says.
Unlike oil demand, primary gas consumption
will double between now and 2030. The share of gas in
world energy demand will increase from 23 percent to 28
percent. The problem is not just one of waning demand
for oil, but one of decreasing oil reserves in the
region and regular production cuts by the Organization
of Petroleum Exporting Countries (OPEC) to keep oil
prices in its preferred US$22 to $28 per barrel range.
Despite oil producers' efforts to keep their
income from oil up by controlling prices, industry
experts like Van der Veer say they also have to start
looking beyond oil as a way of fueling their economies.
"If Arab economies are to continue meeting the high
standards of living which their growing populations have
come to expect and demand, it is imperative that they
find new sources of revenue and new means of attracting
much-needed foreign investment," said Van der Veer.
"Gas, and most specifically gas-to-liquids, has enormous
potential to deliver new markets and new customers to
Middle East producers. Innovation, investment and
partnership between the energy industry and governments
now hold the key to future success."
Van der
Veer, who is also vice chairman of the committee of
managing directors of the Royal Dutch/Shell group of
companies, points to the example of the sultanate of
Oman, a non-OPEC member that is in the midst of a steady
decline in its oil production and hence its revenues.
"We are in a phase where we're moving to new modes and
sources of extraction," Shell announced last week,
referring to Oman's proven gas reserves of around 660
million cubic meters, with potential reserves more than
double that figure.
There is also growing demand
for gas as a cleaner fuel. Several European countries
have accelerated the adoption of fuel-efficient
technologies to improve air quality and reduce the
impact of greenhouse gas emissions on climate change.
"Gas is also often preferred to coal and oil for its
relatively benign environmental effects, especially its
lower carbon content," said the World Energy Outlook
report.
Russia, Norway and Algeria are the top
three gas suppliers to Europe, where the fuel's share of
the energy mix may rise to 60 percent by the end of the
decade. Currently, gas represents about 22 percent of
the European energy mix.
Moreover, "OPEC faces
the danger of losing its hold on the market because of
Russia's growing status as an oil producer and the
inclination of the United States - which is the largest
importer of crude from the Middle East - to opt for more
and more Russian, Caspian and African supplies," aid
Anwar Al Haidi, a researcher on renewable energy at the
United Arab Emirates Aarjah University.
Over the
past 10 years, North America and Europe have reduced
their dependence on Middle East oil by almost 25 percent
in a conscious effort to insulate themselves from the
threat of oil embargoes, arising mostly from
Arab-Israeli political volatility, Haidi said in an
interview. More than 70 percent of the total petroleum
exported by OPEC members, and almost two-thirds of all
Persian Gulf exports, went to industrialized countries
in 2000.
Given the new options available to the
West to offset any shortages in OPEC supplies, the
Middle East has to look at gas as a complementary energy
source to win back its influence in the fossil fuel
market, analysts say. In the Arab world itself, the
performance of the gas sector soared by around 10
percent to 40.7 trillion cubic meters at end-2001.
This increase was due mainly to a rise of more
than three trillion cubic meters in Qatar's reserves,
which stood at 14.6 trillion cubic meters at the end of
last year. Qatar has the third largest reserves of
natural gas in the world after Russia and Iran. Saudi
Arabia also has proven natural gas reserves of 6.6
trillion cubic meters.
Gas production is also
increasing as more Arab countries themselves are
switching from oil to gas. Others have pursued plans to
expand existing gas projects and build new ventures for
export purposes.
But Dr Ibrahim Abdul Hamid,
adviser to the UAE Ministry of Petroleum and Mineral
Resources, says it will take some time before gas gets
anywhere near being an income earner like crude oil.
While gas production is certain to benefit from
development programs in the years to come, the cost of
production and financing difficulties will delay that
process. "Hence gas complementing oil, both as a major
source of revenue and as an additional source of energy,
is a difficult and distant possibility," he said.
(Inter Press Service)
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