The oil producers of the Arabian Gulf have been criticized in the past by global energy bodies such as IMF and Paris-based International Energy Agency over subsidized use of energy at the domestic front.
The regional governments know that the subsidy model is not sustainable, and the GCC would see some dramatic policy changes in the near future.
The region, which holds some 60 per cent of the world’s known energy reserves, should introduce new legislation to cut domestic energy consumption in order to maintain supply obligations to international customers, said the Energy Minister of the United Arab Emirates.
“Given the trend we’re observing with Gulf countries emerging as major energy consumers, it is clear that the region has entered a new era,” Suhail Mohammed Al Mazrouei said at the 5th Gulf Intelligence U.A.E. Energy Forum in Abu Dhabi.
“It will now require new policies to manage and meet domestic energy demand, while at the same time ensuring our commitment to our customers across the world,” he said.
The demand for electricity in the UAE, which is almost exclusively generated from natural gas-fired power plants, is set to rise about nine per cent per annum through to 2020. Rising gas demand from power stations and industrial users such as petrochemical makers and steel manufacturers has turned the UAE into a net gas importer in the past decade, triggering multi-billion dollar investments into nuclear power and renewables.
The UAE Energy Forum, now in its fifth year, brought together the National and International energy industry operating in Abu Dhabi to discuss and debate critical topics impacting the sector through to 2020, including the Shale revolution, meeting Asian demand and the role women can play in solving the talent shortage in the energy industry.
The shale revolution in North America has led to a rapid increase in gas production and helped keep a lid on gas price growth, which in turn has provided a boost to industries such as chemicals that use natural gas as a feedstock. Shale gas production in the U.S. is rising rapidly and, according to the U.S. Energy Information Administration’s Annual Energy Outlook 2014, will jump by 56 per cent between 2012 and 2040, to 37.6 trillion cubic feet (Tcf).
The UAE’s top energy official rejected the view that shale would be a game-changer beyond the U.S., saying “the rise in the cost of production of shale oil and the environmental effects associated with it show that the production procedure may face significant challenges or be on a smaller scale, thus disqualifying it from competing with conventional oil production”.
In the wake of $10 oil in the late 1990s, we witnessed significant consolidation in the energy industry with a wave of M&A activity creating the super-majors and redefining the sector. In the wake of $100 oil over the past couple of years, we have witnessed a new transformation, less defined perhaps, but equally as dramatic, with such black swan transformational developments as Shale.
One such event could be the world’s biggest energy exporters becoming net importers. By 2030 annual energy consumption in the Middle East may increase fourfold to 900 million tons versus 1990 consumption levels, Dr. Rainer Seele, CEO of Wintershall Holding, told the Gulf Intelligence Forum. “These figures are impressive. But they also raise the question of how these countries will be able to meet their own energy requirements in the future without losing their position as the world’s most important export region for oil and gas,” he said.