Overseas shale gas, threat or boon for Gulf gas exporters?
Depending on the position of Gulf gas exporters, shale gas could be either a threat or opportunity. Whichever it is, the nation must be prepared to reform a long-standing business model.
Margin structures that Gulf countries such as Qatar have enjoyed in the export of gas to regions like Asia may not be sustainable as unconventional gas resources are developed globally, at least according to a top energy sector chief executive officer. Such an outcome would trigger a rethink of how Qatar accounts for and prices each part of the gas export supply chain if it wished to remain competitive.
“The Gulf continues to have strong output in oil and gas, while elsewhere, unconventional gas sources are being developed at an increased pace,” Harry Bradbury, chairman and CEO of Five-Quarter Energy, told The Edge in June.
“Not only is there the prospect of the United States (US) becoming self-sufficient through shale gas, other countries are following suit, and may expand the total gas budget by exploiting not just shale, but coal,” he said. These include countries which were not previously well endowed with
“Gulf states should encourage manufacturing businesses rather than assuming a continuance of raw gas supply.” - Harry Bradbury, Five-Quarter Energy.
“In these circumstances,” Bradbury continued, “the issue could be that the margin structures which the Gulf has enjoyed in its export of gas to regions like Asia may not be sustainable. And it is unlikely that similar margin structures could be used in satisfying regional demand in the MENA.”
Shale gas is among the most important developments in global energy economics for decades. According to the International Energy Agency’s (IEA) 2013 medium-term gas market report published in June. The supply picture in 2012 underlined significant contrasts among regions, as the US contributed single-handedly to almost half of the globe’s incremental gas supply. Qatar’s gas production growth was the fifth largest. “The Gulf will face increased competitive pressures not on availability of resource, furthered Bradbury, but on revenue generation, in circumstances where sufficient countries and regions in the supply chain conclude that it is in their best interest to develop their indigenous resources.”
Bradbury was responding to questions a fortnight after speaking at the London Business School’s (LBS) Energy Insights Forum in Dubai, United Arab Emirates, in early June. At the forum, executives from the Middle East’s energy and recruitment sectors said the region would become “an exporter of talent” as a result of the global shale gas revolution. The statement challenged the assumption that US shale gas exports should purely be seen as a threat to Qatar, instead presenting the rapid development of the industry as an opportunity, provided that individuals and companies position themselves to take advantage.
“The region will become an exporter of talent,” Danny Leinders, senior client partner at recruitment firm Korn Ferry International said. “We will now move talent from the region into North America as the demand for energy expertise grows over there.”
The Middle East is expected to witness some of the largest energy demand growth in the world in coming years. Population growth and economic diversification could see domestic demand double over the next decade, which could also be cause
Bradbury said that the Middle East should first address what is happening locally before being concerned about America, which has entered what some believe to be a long-term manufacturing renaissance on the back of its cheap
gas boom. “There is an argument that Gulf states should do more to encourage and grow manufacturing businesses rather than assuming a continuance of just raw gas supply,” Bradbury closed.