GCC: An Opportunity for Regional Gas Sector Integration

General view of the Natural Gas Liquids (NGL) facility in Saudi Aramco's Shaybah oilfield at the Empty Quarter in Saudi Arabia May 22, 2018. REUTERS/Ahmed Jadallah/File Photo
General view of the Natural Gas Liquids (NGL) facility in Saudi Aramco's Shaybah oilfield at the Empty Quarter in Saudi Arabia May 22, 2018. REUTERS/Ahmed Jadallah/File Photo
TT

GCC: An Opportunity for Regional Gas Sector Integration

General view of the Natural Gas Liquids (NGL) facility in Saudi Aramco's Shaybah oilfield at the Empty Quarter in Saudi Arabia May 22, 2018. REUTERS/Ahmed Jadallah/File Photo
General view of the Natural Gas Liquids (NGL) facility in Saudi Aramco's Shaybah oilfield at the Empty Quarter in Saudi Arabia May 22, 2018. REUTERS/Ahmed Jadallah/File Photo

A recent survey has revealed an opportunity for Gulf Cooperation Council (GCC) states to move to a regionally integrated gas market, which enhances efficiency and supports strategic goals in employment, consumption and investment.

Researchers in Saudi Arabia emphasized that the integration of the gas network within the Gulf countries represented an opportunity to expand the Gulf gas market and increase its efficiency. This means raising the ability of countries that have a surplus of gas to channel their resources as exports within other Gulf States, which in turn, would benefit from the low cost of gas and increase their energy security.

In comments to Asharq Al-Awsat, the King Abdullah Petroleum Studies and Research Center (KAPSARC) said that the countries of the GCC have consumed a combined 296 billion cubic meters of natural gas in 2019, which is equivalent to China’s consumption in the same year. The center noted that the Gulf region had the highest levels of gas consumption per capita in the world.

The opportunity for regional gas sector integration comes as the estimates of the International Energy Agency (IEA) showed that the Covid-19 pandemic would cause investments in the oil and gas sectors in 2020 to drop by 32 percent, compared to 2019.

The analysis prepared by KAPSARC researchers showed that the Gulf countries have 20 percent of the global natural gas reserves, estimated at 1.379 trillion cubic feet. They noted that the region had the right qualifications to move towards a regional integrated gas market.

KAPSARC pointed to three main factors that would contribute to shaping the demand on gas in Saudi Arabia: the continuous reforms of fuel prices, electricity tariffs, and the speed of using renewable energy.

The center noted that natural gas prices in the Gulf countries were the lowest in the world, as governments regulate them to promote industrialization and economic diversification away from oil, generate job opportunities and allow a fair access to prosperity.

“Saudi Arabia intends within its plans to develop unconventional gas, which is expected to contribute to the production of about 30 billion cubic meters annually by 2030,” the center underlined.



Oil Slips as Iran-Israel Conflict Enters Sixth Day

FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
TT

Oil Slips as Iran-Israel Conflict Enters Sixth Day

FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo

Oil prices fell on Wednesday, after a gain of 4% in the previous session, as markets weighed up the chance of supply disruptions from the Iran-Israel conflict and as they ponder a direct US involvement.

Brent crude futures fell 93 cents, or 1.2%, to $75.52 a barrel by 0918 GMT. US West Texas Intermediate crude futures fell 88 cents, also 1.2%, to $73.96 per barrel.

US President Trump warned on social media on Tuesday that US patience was wearing thin, and called for an "unconditional surrender" from Iran.

While he said there was no intention to kill Iran's leader Ali Khamenei "for now," his comments suggested a tougher stance toward Iran as he weighs whether to deepen US involvement.

A source familiar with internal discussions said one of the options Trump and his team are considering included joining Israel on strikes against Iranian nuclear sites.

A direct US involvement threatens to widen the confrontation further, putting energy infrastructure in the region at higher risk of attack, analysts say.

"The biggest fear for the oil market is the shutdown of the Strait of Hormuz," ING analysts said in a note.

"Almost a third of global seaborne oil trade moves through this chokepoint. A significant disruption to these flows would be enough to push prices to $120 [a barrel]," the bank added.

Iran is OPEC's third-largest producer, extracting about 3.3 million barrels per day (bpd) of crude oil.

Meanwhile, Iranian ambassador to the United Nations in Geneva Ali Bahreini said on Wednesday that Tehran has conveyed to Washington that it will respond firmly to the United States if it becomes directly involved in Israel's military campaign.

Markets are also looking ahead to a second day of US Federal Reserve discussions on Wednesday, in which the central bank is expected to leave its benchmark overnight interest rate in the range of 4.25% to 4.50%.

However, the conflict in the Middle East and the risk of slowing global growth could potentially push the Fed to cut rates by 25 basis points in July, sooner than the market's current expectation of September, said Tony Sycamore, market analyst with IG.

Lower interest rates generally boost economic growth and demand for oil.

Confounding the decision for the Fed, however, is the Middle East conflict's potential creation of a new source of inflation via surging oil prices.

US crude stocks fell by 10.1 million barrels in the week ended June 13, market sources told Reuters, citing American Petroleum Institute figures on Tuesday. Official Energy Information Administration data is due later on Wednesday.