Mention energy from the Middle East and most people automatically think of crude oil production. But today, geopolitics and supply challenges have put an increased focus on global natural gas resources.
Consequently, energy developments in the Middle East are shifting toward natural gas production and export, driven by an increasing international appetite for gas supply and questions about longer-term oil demand.
Right now, the bottom line is that natural gas looks like a long-term growth industry and crude oil doesn’t.
Opportunity in European Supply Interruption
And the Middle East region contains huge gas reserves, including the world’s largest gas field, the South Pars/North Dome Field in the Persian Gulf, owned jointly by Iran and Qatar. Those countries and Saudi Arabia are three of the global top six nations in proven gas reserves.
Yet in recent lists of the world’s leading natural gas exporters, only Qatar ranks in the Top Ten. Iran places 16th and Oman 22nd.
In fact, Middle Eastern countries have slipped in the rankings of top global liquefied natural gas producers and exporters in recent years, largely because of dramatic production capacity growth in the United States and continued capacity additions in Australia, which was at one time the world’s largest LNG exporter.
Europe’s problems acquiring natural gas during the Russia-Ukraine war have thrown that reality into sharp relief.
Because of supply interruptions and efforts to curtail gas purchases from Russia, European Union members are struggling to fill gas storage to an agreed-upon 80 percent by Nov. 1, according to Rystad Energy in Oslo.
“Countries that are typically more reliant on Russian pipeline gas such as Germany and Italy have set higher targets before the winter, with Germany aiming for 75 percent by September, 85 percent by October and 95 percent by November. Meanwhile, Italy has set a target for 90 percent by November,” Rystad analyst Lu Ming Pang noted.
“EU countries have agreed to voluntarily cut gas demand by 15 percent to meet storage targets with reduced flows through the Nord Stream 1” pipeline carrying gas from Russia, he said.
That cut went into effect on Aug. 9 and “could be made binding in the event of a supply emergency, with possible exceptions for countries where a reduction in gas demand might not be optimal,” Rystad added.
Meanwhile, European gas agencies have avoided signing additional LNG contracts with Russian sellers and are seeking long-term contracts for non-Russian gas, said industry consultancy Wood Mackenzie.
That has opened up an opportunity for natural gas supply from the Middle East, where producers hope to set aside gas for export, increase gas production and add LNG export infrastructure.
Earlier this year, the International Energy Agency issued the report “How producers in the Middle East and North Africa can free up more natural gas for exports,” written by analysts Ali Al-Saffar and Brent Wanner.
Producers in the Middle East and North Africa recently accounted for about 50 percent of oil exports and 15 percent of natural gas exports worldwide, and could play an important role in averting global energy shortages in the future, the report noted.
Countries in this region have several options to increase exports of oil and gas, the analysts said:
First, “they can invest in additional upstream capacity and output, which could start producing in a few years’ time.”
Second, “they can prioritize efforts to eliminate gas flaring and methane leaks, which could increase gas supplies by almost 20 billion cubic meters much more quickly.”
And third, “they can also free up supply by rationalizing their own consumption, starting with the power sector.”
Shifting fuel from electricity production to exports would have other advantages because the region’s heavy dependence on fossil fuels makes the emissions intensity of its power generation almost a quarter higher than the global average, the report found.
Today, oil and gas account for close to 95 percent of electricity generation in the Middle East and North Africa.
“Thermal plants in the region consume over 290 billion cubic meters of gas, or more than one-third of its gas production, and 1.75 million barrels a day of oil,” the authors said.
Replacing low-efficiency, gas-fired power plants with more efficient combined-cycle generation could enable those producer economies to generate an additional $50 billion (U.S.) a year in gas exports at a price of $30 per million Btu, according to the report.
New Interest in Unconventionals
Growing gas demand has also helped spur new interest in unconventional resources in the Middle East, including development work by Saudi Aramco and Abu Dhabi National Oil Co.
Saudi Arabia hopes to produce up to 2 billion cubic feet per day of gas by 2030 from the Jafurah field, its largest unconventional, non-oil associated gas field with reserves estimated at 200 trillion cubic feet.
ADNOC’s unconventional gas program includes drilling at its Ghasha concession, the world’s largest offshore sour gas development. Production from that project is expected to begin in 2025 with a target of at least 1.5 billion cubic feet per day of gas by 2030.
An AAPG Geosciences Technology Workshop, “Source Rocks of the Middle East: A World-Class Resource for Unconventional?,” is scheduled Sept. 26-28 in Manama, Bahrain. It reflects the new interest in local unconventional resources as distinct from U.S. unconventional development.
The event description notes the workshop “is based and focused on the geology of the source rocks more than hydraulic fracturing.” Another key distinguisher is that it is dedicated to “improving the understanding of regional source rocks rather than sharing the North American experience.”
Qatar has launched the world’s largest LNG project, its North Field East Project, designed to increase the country’s LNG production capacity from 77 to 110 million tons per year at a cost of about $30 billion. Production is expected to begin in the fourth quarter of 2025.
State energy company QatarEnergy also plans a second expansion phase, the North Field South Project, which will further increase LNG production capacity from 110 to 126 million tons per year, with a projected completion date in 2027.
The Fujairah LNG project in the United Arab Emirates will include two 4.8 million metric tons per year LNG trains and an export terminal, increasing ADNOC’s production capacity by 9.6 million metric tons per year in the 2026-28 timeframe. McDermott International has been appointed design contractor.
In April, ADNOC announced it had signed of a contract with a Chinese shipyard for the construction of two 175,000 cubic meter LNG vessels to join its fleet in 2025. The new vessels will be considerably larger that the company’s existing LNG transporters.
ADNOC also is investing heavily in developing its offshore gas resource. In late July, the company announced a second discovery of natural gas in the initial exploration well in Abu Dhabi’s Offshore Block 2 exploration concession, operated by Eni.
That deeper-reservoir find was estimated at 1.0-1.5 Tcf of gas, bringing total projected gas in place from the discovery well to 2.5-3.5 Tcf.
LNG expansion developments in the Middle East have put the region in a competitive race with the United States’ LNG export capabilties.
According to the U.S. Energy Information Agency, with two new LNG liquefaction trains at Sabine Pass and Calcasieu Pass in Louisiana going into service, the United States will have the world’s largest LNG export capacity, surpassing Australia and Qatar.