Low oil prices may hit development of Arab gas projects

Apr 02, 2002 02:00 AM

Developers may shy away from investing in gas projects if oil prices remain low despite the Arab world having estimated reserves of 40 tcm of gas, according to an expert. Another obstacle is the high transportation and infrastructure investments that need to be made due to the distance between the source and their markets.
"Low oil price levels inhibit the development of the gas industry, and attracting capital investment is influenced to a large degree by price levels," said Dr. Mukhtar Allababidi, director, technical affairs department of Kuwait-based Organisation of Arab Petroleum Exporting Countries (OAPEC).
Distance between the source and the main markets requires substantial investment in transportation and infrastructure, especially in the case of LNG.
"This is reflected in the price of gas to the end user, thus reducing its competitiveness vis-a-vis oil and coal. Although there is progress in reducing costs, more efforts in this field are required," Allababidi told a gas conference earlier.

Total proven gas reserves in Arab countries more than tripled over the past 25 years, increasing from about 9.2 tcm in 1970 to more than 40 tcm at the end of 2001. These reserves represent 25.5 % of the total world reserves. The main gas reserves are located in the Gulf with Qatar sitting on 35.9 % of total Arab reserves, Saudi Arabia (15.2 %), the UAE (14.7 %) and Iraq (7.6 %).
Undiscovered Arab gas resources have been estimated at about 44 tcm, representing around 108 % of proven reserves. The main potential is expected in Saudi Arabia, Iraq, Algeria, Qatar, Libya and Egypt.
"It is projected that both reserves and production will increase. While gas consumption in most of these countries is expected to increase, a surplus will still be available for export," he said.
"Arab countries themselves offer a good market for gas, and bilateral agreements are taking place leading to investments in connecting pipelines. Further studies are needed to identify the best ways to developsuch markets."

Allababidi pointed out that Arab gas reserves are essential for long-term European supply. They contribute to the diversity of Europe's energy supply, and are in competition with gas coming from Russia and other places.
"Middle East gas can be transported to Europe either by pipeline or by LNG carriers. However, current geopolitical, economic and technical circumstances place LNG in a better position to carry Middle East gas to Europe."
Important developments in the Arab gas sector include a sharp decrease in flaring and in some cases its complete elimination, a strong growth in domestic gas utilisation in power generation and residential use, a growth in gas exports in liquid form and in gaseous form via pipelines and an increase in gas separation and treatment capacities to produce natural gas liquids used as feedstock or exports.

Source: Gulf News Online
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