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
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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 Pares Losses on Tight Supply but Cloudy Demand Caps Gains

FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas US August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo
FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas US August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo
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Oil Pares Losses on Tight Supply but Cloudy Demand Caps Gains

FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas US August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo
FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas US August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo

Oil prices inched higher on Wednesday underpinned by signs of near-term supply tightness but held near their lowest in two weeks, a day after OPEC downgraded its forecast for global oil demand growth in 2024 and 2025.
Brent futures rose 14 cents, or 0.2%, to $72.03 a barrel by 0745 GMT, while US West Texas Intermediate (WTI) crude futures gained 13 cents, or 0.2%, at $68.25.
"Crude oil prices edged higher as tightness in the physical market offset bearish sentiment on demand. Buyers in the physical market have been particularly active, with any available cargoes being snapped up quickly," ANZ analysts said in a note.
But falling demand projections and weakness in major consumer China continued to weigh on market sentiment, said Reuters.
"We may expect prices to consolidate around current levels for longer," said Yeap Jun Rong, market strategist at IG, adding the recent attempt for a bounce was quickly sold into.
"The absence of a more direct fiscal stimulus out of China has been casting a shadow on oil demand outlook, coupled with the prospects of higher US oil production with a Trump presidency and looming OPEC+'s plans for an output raise," Yeap added.
In its monthly report on Tuesday, the Organization of Petroleum Exporting Countries (OPEC) said world oil demand would rise by 1.82 million barrels per day (bpd) in 2024, down from growth of 1.93 million bpd forecast last month, mostly due to weakness in China, the world's biggest oil importer.
Oil prices settled up 0.1% on Tuesday following the news, after falling by about 5% during the two previous sessions.
OPEC also cut its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd.
The International Energy Agency, which has a far lower view, is set to publish its updated forecast on Thursday.
"The re-election of former President Trump is unlikely to materially affect oil market fundamentals over the near term, in our view," Barclays analysts wrote.
"Drill, baby, drill: this is likely to underwhelm as a strategy to drive oil prices materially lower over the near term" given that the stock of approved permits actually rose under the Biden administration, the analysts said.
However, markets would still feel the effects of a supply disruption from Iran or a further escalation between Iran and Israel, according to Barclays.
Donald Trump's expected secretary of state pick, US Senator Marco Rubio, is known for his hardline stance on Iran, China and Cuba. Tighter enforcement of sanctions on Iran could disrupt global oil supply, while a tougher approach to China could further weaken oil demand in the world's largest consumer.
Two US central bankers said on Tuesday that interest rates are acting as a brake on inflation that is still above the 2% mark, suggesting that the Federal Reserve would be open to further interest rate cuts.
The Fed cut its policy rate last week by a quarter of a percentage point to the 4.50%-4.75% range. Interest rate cuts typically boost economic activity and energy demand.
US weekly inventory reports have been delayed by a day following Monday's Veterans Day holiday. The American Petroleum Institute industry group data is due at 4:30 p.m. EST (2130 GMT) on Wednesday.
Analysts polled by Reuters estimated on average that crude inventories rose by about 100,000 barrels in the week to Nov. 8.