A recent report by Chatham House claims that the Gulf gas market is not working efficiently with all GCC countries apart from Qatar facing significant gas shortages.
“Price neither properly reflects costs nor rewards sustainable use, and a lack of price benchmark inhibits policy and investment choices to address the problems this is causing,” Chatham House report said, adding that “most of the gas pricing in the GCC exemplifies bad pricing”.
The reason for this, the report says, is low gas pricing which limits foreign investment in the Gulf’s upstream gas sector despite ample reserves of the commodity in the region.
Unlike oil, which has a set international price, gas is mostly traded in regional markets rather than an international market and lacks an international or regional price.
This has meant that most foreign players are not participants in natural gas production, even though they are keen to invest in the oil sector.
“Most of the Gulf countries are gas-rich but prone to shortages,” says the report.
Many Gulf Arab states now import the product as a short-term solution to meet growing domestic demand, increasing power consumption and support growth in the industrial sector.
The UAE, which holds the 7th biggest gas reserve in the world, and Kuwait with its 63 trillion cubic feet of natural gas, mainly import the comodity to meet growing domestic demand. However, in recent years the two countries have been investing in exploiting their home reserves.Â
Saudi Arabia and Oman have also been looking at ways to tap into the resource on domestic ground.Â
