Each year, the energy conference organised by Emirates Centre for Strategic Studies and Research (ECSSR) offers the latest developments in the industry and the challenges it faces, which directly affect the interests of oil and gas producers. The 19th edition, held recently in Abu Dhabi, focused on non-conventional fossil fuel (shale oil and gas), which is seen as representing the upcoming hydrocarbon revolution.
Therefore, the industry as a whole must be prepared to deal with the impact of non-conventional fossil fuel on oil and gas production. Many a study presented at the conference indicated the potential consequences of increased shale oil and gas production, and that this will not be limited to the future supply and pricing strategies. It will also go on to encompass strategic and geopolitical aspects on the changing landscape of political alliances.
The reshaping of this is clearly manifested in Washington’s exaggerated actions to woo Iran after reports indicating that the US would turn into an net exporter of crude oil in coming years and on the heels of it already being a major exporter of natural gas in recent years.
US shale gas is exported to European markets at $6 per unit compared with $8 for Qatari gas, which means that the rules of competition in the oil and gas market will change after the emergence of new players. This will require traditional producers to confront the changes to maintain their interests.
Technological advancements will reduce the gap in production costs between the conventional and shale oil fields, which will impact prices and lead to a fall below current levels, as had happened to gas prices dropping by 73 per cent since 2008.
As he inaugurated the energy conference, Dr. Jamal Sanad Al Suwaidi, director-general of ECSSR, said: “It is important for us to know what we have and what we want” by examining the latest developments in energy. At the time the US and Western Europe were trying to stay away from Gulf oil, while Asia has no option except rely on the Gulf, despite efforts, especially by China and India, to produce shale oil and gas within the next few years.
Besides China and India, there is Japan, the world’s largest importer of gas, and South Korea, which means Asian countries have become more concerned with the security and stability of the Gulf region than the US and Europe. This is because the importance assigned to the Gulf’s energy resources by these Asian importers, equal in significance to Western Europe’s arrangements with this region in the second half of the last century.
The Gulf is thus on the threshold of a new economic, political, security and strategic alliance, an integrated basket of international interests that are not subject to historical relations.
To know “what we have and what we want”, one of the important things is to speed up the establishment of a Gulf Centre for energy studies financed by the GCC.
The production of shale oil and gas, and the alternative sources of energy such as solar and wind power and estuaries, in addition to nuclear energy, are evolving rapidly. Technological advances will help remove many of the obstacles and lead to reduced production costs on an ongoing basis.
Although oil and gas remain the key drivers of growth in the region, it is vital for the GCC to give more attention to developments in the industry and come up with the right conclusions. These must be not be confined to research and development conducted by international organisations.
It has become even more necessary for the GCC to establish their own (R&D) research and development centres which can ensure the momentum of growth and find alternatives.
By Dr. Mohammad al-Asoomi
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