Exclusive: Oil & Gas Middle East talks gas with Dr. Datuk Abdul Rahim Hashim, President of the International Gas Union
At the end of 2011, amidst all the doom and gloom, one energy sector stood resolutely head and shoulders above the rest. The IEA, in a November report, heralded its Golden Era, and by any measure of optimism it had pretty much everyone excited. The fuel, of course, was gas.
And its easy to see why. The IEA numbers suggest that conventional recoverable resources are equivalent to more than 120 years of current global consumption, while total recoverable resources could sustain today’s production for over 250 years.
All of the world’s major regions have recoverable resources equal to at least 75 years of current consumption, but crucially, gas is a flexible and transportable fuel, and global infrastructure to produce, ship, pipe and trade is growing at an impressive rate.
However, in 2012 some roadblocks to the greater use of gas remain in place. Concerns over global gas trade dynamics in the face of unconventional gas production, local subsidies which skew natural price equilibriums and divert gas from its most economically viable customers, and fears over global economic growth could combine to reduce investor appetite.
Oil & Gas Middle East met with Dr. Datuk Abdul Rahim Hashim, President, International Gas Union and Malaysian Gas Association at the World Petroleum Congress in Doha to discuss the issues and opportunities facing the global gas community.
“Natural Gas has a key role in achieving a low carbon economy. The credentials of natural gas are indisputable. Supply security is no longer an issue with the abundance of both conventional and unconventional gas and globalisation of the LNG trade. Yet, natural gas faces challenges and obstacles in positioning itself as a key energy source, particularly in the policy arena.
As the spokesperson for the gas industry, IGU has initiated efforts towards advocating for natural gas, so that it will regain its appropriate policy voice, consistent with its merits and potential,” said Rahim.
Subsidised gas pricing, rapid growth in domestic demand and the need for gas reinjection, are causing concerns in the Middle East and Northern Africa, he told Oil & Gas Middle East.
“Despite Qatar being the world’s largest exporter of LNG, and Iran, Egypt and Saudi Arabia having significant gas reserves, there are still countries within the Middle East that are short of gas supply.
Whilst the region is concerned with meeting its domestic needs, pricing policies raise a number of considerable challenges where below market pricing is threatening the long-term security of gas supply in the region,” said Datuk Rahim.
The current policy of providing low priced gas is not usually sustainable in a situation of high demand and low supply.
In order to avoid the risk of shortages, gas prices must eventually rise towards global levels, which in turn should increase exploration and production activity and encourage investment and re-investment. “Another significant dimension is the geopolitical aspect.
The region has been engulfed with international conflicts, regional disputes and more recently internal uprising which have reduced the region’s ability to attract investment, affecting MENA’s supply and export potential.
The interplay between increasing demand, low pricing policy and geopolitics implies that the MENA region, with the exception of Qatar and Algeria, is unlikely to be able to make a major contribution to future global gas trade,” said Rahim.
Acknowledging the needs of Middle Eastern countries to build an industrial base and diversify local economies away from primary energy production, the IGU President said that while subsidising development, local countries should plan for a move away from preferential pricing in the long run.
“Our view is that subsidies stop us addressing some of the fundamental gas sector issues. Industrialisation is a reasonable goal and we have nothing against countries harnessing their natural advantages to build up a downstream industry, however, overtime these subsidies should rise to global market values,” he said.
He added that low-cost pricing for utilities distorted the market and had the knock-on effect of driving people away from energy conservation.
“These subsidies are detrimental to the economy because gains in one sector are being made at the detriment of another. In this case, the energy industry suffers. Also, the beneficiaries will suffer when the prices migrate to a more natural level because their businesses are not geared to operate in that fair price zone.”
Don’t Miss: World Gas Conference 2012
The 25th World Gas Conference (WGC2012) and exhibition will explore current and future trends and developments within the gas industry in the world. Organised by the International Gas Union every three years, WGC2012 will be held from 4-8 June 2012 in Kuala Lumpur, Malaysia.
The event, with the theme: “Gas: Sustaining Future Global Growth,” will provide a platform for discussion on gas supply and demand with new dynamics and commercial drivers. For more information: www.wgc2012.com
