Gulf countries are doubling down on domestic natural gas investment as the US-Iran war sharpens their focus on energy security and reducing their reliance on imports.
Large scale projects worth around $50 billion have been signed off in states including Qatar, Saudi Arabia and the UAE so far this year.
These schemes are being “prioritised” by the region’s national energy companies as “critical for energy security”, analysts at consultancy Wood Mackenzie said.
They also appear to be “more resilient to geopolitical headwinds”, even as Gulf states face rising bills for defence spending and repairing damaged energy infrastructure as a result of the conflict.
Separate figures show the value of contract awards in the gas sector rose by 60 percent in the third quarter to $13.5 billion, compared with $8.4 billion in the same period of last year, according to Kuwait-based research group Kamco.
The drivers of investment “vary substantially by country” in the Gulf, said Menelaos Ydreos, secretary general of the International Gas Union.
Saudi Arabia will use gas produced at its huge projects including Jafurah and Dorra to replace the oil it currently burns for power.
It has already seen a 75 percent rise in gas-fired generation within the last decade, Ydreos adds.
Burning gas instead of oil also increases the amount of crude and refined products that the kingdom can export to overseas customers.
But in all Gulf Cooperation Council countries – which also includes Qatar, Bahrain, the UAE, Kuwait and Oman – there are efforts underway to tap domestic gas reserves.
This includes tapping into unconventional deposits, which are trickier to access and can require extraction methods such as fracking.
This will help GCC states to increase their energy independence, but will also help some countries decrease reliance on foreign imports, which have at times been compromised by disruption to shipping in the Arabian Gulf.
Kuwait for years has experienced blackouts and brownouts in its grid and has been forced to burn oil for power during the US-Iran war as gas shipments have been cut off, Ydreos adds.
The war is likely to “increase or accelerate some of the projects to make sure that they have internal sovereign security for gas without the need to import from anybody else”, said Sherif Foda, the chief executive of oilfield services provider NESR, which is developing the kingdom’s huge Jafurah gas project.
The chief executive of Saudi Arabia’s national energy company, Aramco, said at a conference earlier this month that the country would almost triple output by 2040.
Gas will also provide reliable baseload power alongside mammoth solar plants that can ensure electricity grids stay stable in countries such as Saudi Arabia, Foda added.
Renewable power can be intermittent and less reliable than other forms of generation, whereas gas can be hiked in line with demand.
It will also help Saudi Arabia and the UAE to power the swathes of energy-guzzling data centres they plan to build in the coming years, Foda said.
“Everybody needs to have internal gas for consumption,” he said.
“If I were in any of [the GCC countries’] shoes, I would do exactly the same, accelerating my programmes to invest more in gas because that’s for internal consumption, to replace burning crude, and to ensure that I’m ready, especially if I am going to go full on with AI and the large amount of power it will need.”
National targets
Bahrain: No announced production targets, gas exploration and development projects underway
Kuwait: Reduce reliance on gas imports; reach 2 billion cubic feet per day of non-associated gas production by 2040
Oman: Expand LNG export capacity from 11.4 million to 15.2 million tonnes annually by 2029 and develop LNG bunkering through Marsa, near Sohar in the north of the sultanate, by 2028
Qatar: Aiming to expand LNG production capacity by 85 percent to 142 million tonnes annually by 2030, although war damage threatens delays
Saudi Arabia: Increase gas production capacity by 80 percent from 2021 levels by 2030; expand domestic gas pipeline capacity by 3.15 billion cubic feet per day by 2028; develop international LNG investments
UAE: Become gas self-sufficient by 2030 and expand LNG exports