• Type General news
  • Date 28th November 2020

KAPSARC: Three factors contribute to shaping the gas demand path in Saudi Arabia

According to the IEA, the global pandemic of COVID-19 will lead to a fall in capital investment plans in 2020 by major oil and gas companies of 32% relative to 2019. KAPSARC’s new Commentary highlights how cooperation can enhance natural gas utilization in the GCC.

The Commentary, by the authors Rami Shabaneh, Bertrand Rioux and Steve Griffiths, identified three factors that contribute to shaping the path of gas demand in Saudi Arabia. These factors are: reforms of fuel prices, electricity tariffs, and the speed of using renewable energy, as natural gas prices in the Gulf countries are considered the lowest in the world, being organized by the relevant national governments to promote industrialization, economic diversification away from oil, job creation, and welfare distribution.

“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% between 2000 and 2019, almost double the global growth rate, leaving the region with the highest levels of per capita gas consumption globally,” KAPSARC’s Commentary said.

Oil and gas account for essentially all primary energy consumption in the GCC. While the energy mix of each member country has varied, in the aggregate oil had an edge over gas between 2000 and 2009. However, from 2010, natural gas has increased its share in the bloc, and by 2019 the shares of oil and gas almost converged to an even split, which caused more gas to be saved and allowed for a shift from oil to gas in the electricity and industry sectors.

The researchers’ analysis showed that together, the six GCC members hold 1,379 trillion cubic feet (tcf) of natural gas reserves, according to a 2019 estimate, or about 20% of the world’s total reserves. Our Commentary discussed the challenges in integration of the gas market in the GCC.

“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,” KAPSARC’s Commentary mentioned.

The Commentary also revealed that the integration of the gas network within the Gulf countries represents an opportunity to expand the Gulf market for gas and increase its efficiency, as it will increase the ability of countries that have surplus gas to liquidate their resources as exports within other Gulf countries, which in turn benefit from the low cost of gas and increased energy security.

This article originally appeared on Asharq Al-Awsat