KAPSARC identifies 3 factors to enhance gas demand in GCC

By Rahul Vaimal, Associate Editor
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According to the International Energy Agency (IEA), the global COVID-19 pandemic would lead to a 32 percent decline in capital expenditure plans by major oil and gas firms in 2020 compared to 2019.

A new commentary by King Abdullah Petroleum Studies and Research Center (KAPSARC) highlights how cooperation can boost the use of natural gas in the GCC (Gulf Countries Cooperation).

Three variables that contribute to shaping the direction of gas demand in Saudi Arabia were described in the commentary by the authors Rami Shabaneh, Bertrand Rioux and Steve Griffiths in their paper “Can Cooperation Enhance Natural Gas Utilization in the GCC?”

The three factors are reforms of fuel prices, electricity tariffs, and the speed of using renewable energy. As the price of natural gas is much lower in the Gulf countries, the consumption is high. The national governments of GCC countries are maintaining a low price for natural energy products to promote industrialization, economic diversification away from oil, job creation, and welfare distribution.

KAPSARC’s commentary said, “Collectively, the GCC consumed 296 billion cubic meters (bcm) of natural gas in 2019, approximately as much as China in the same year. As a result, domestic demand averaged a compounded annual rate of about 5 percent between 2000 and 2019, almost double the global growth rate, leaving the region with the highest levels of per capita gas consumption globally.”

In the GCC, oil and gas practically account for all primary energy consumption. But oil has maintained an edge over gas in aggregate between 2000 and 2009 although the energy mix of each member country differed.

However, from 2010 onwards natural gas increased its share in the bloc, and by 2019 oil and gas shares almost converged to an even split, which saved more gas and allowed the electricity and industry sectors to move from oil to gas.

According to a 2019 report, the six GCC members together possess 1,379 trillion cubic feet (tcf) of natural gas reserves or around 20 percent of the total reserves of the planet. The barriers to the integration of the gas sector in the GCC were addressed in the recent report.

KAPSARC’s analysis mentioned, “Saudi Arabia produced 113.6 bcm of gas in 2019 and aims to double its output as it is expected to produce about 30 bcm/y by 2030 most of the Kingdom’s planned natural gas production will serve to meet the country’s future power demand, especially from its growing industrial and commercial sectors.”

The research also disclosed that the development of the gas network in the Gulf countries is a way to broaden and increase the productivity of the Gulf gas market by enhancing the capacity of surplus gas countries to liquidate their resources as well as exports to other Gulf countries, which in turn, benefit from low gas prices and improved energy protection.