Global Investment House – Kuwait - GCC Natural Gas Sector Report - The world gas reserves increased at a CAGR of 1.9% during 1996-2007 according to British Petroleum. By the end of 2007, natural gas reserves of the world stood at 6,448.3Tcf, showing a growth of 0.7% over 2006 gas reserves. Going forward, we expect gas reserves will increase at a CAGR of 0.7% to 6,622.4Tcf during 2008-11 with a domination of Middle-East region. In 2007 gas reserves in the Middle-East region stood at 2,628Tcf followed by Europe.
In 2007, Russia remained with the highest bulk of gas reserves, recorded at 1,677.0 Tcf which accounted for 26.0% of total gas reserves. Furthermore, Iran and Qatar remained with gas reserves of 1,006.4Tcf and 907.3 Tcf, respectively in 2007. By 2008, we expect that the reserves size in these two countries will increase to 1,020 Tcf and 919.6 Tcf, respectively, based on their developmental and exploration plans to meet their local demand and maintain their international status.
Top Ten Gas Reserves – by Countries (Reserves in Tcf)
Countries 2007E % Share 2008E % Share
Russia 1,677.0 26.0% 1,672.0 25.8%
Iran 1,006.4 15.6% 1,020.0 15.7%
Qatar 907.3 14.1% 919.6 14.2%
Saudi Arabia 253.0 3.9% 256.5 4.0%
UAE 216.8 3.4% 219.8 3.4%
USA 213.1 3.3% 217.1 3.3%
Nigeria 185.3 2.9% 186.6 2.9%
Algeria 160.2 2.5% 161.3 2.5%
Venezuela 153.0 2.4% 153.6 2.4%
Iraq 113.4 1.8% 114.9 1.8%
Rest of the World 1,562.7 24.1% 1,569.8 24.0%
Source: BP Statistical Review & Global Research
In 2007, the world gas production stood at 19,250mnboe, which depicts 2002-07 CAGR of 2.5%, an increase of 2,730mnboe. During the same year, production from European region stood at 4,971.9mnboe, which was 36.9% of the world production, followed by North American region, which contributed 25.8%, and Asia-Pacific region having a share of 12.1%. Going forward, the higher crude oil prices will lead to increase the production of gas with 2007-2011 CAGR of 3.5%.
We expect the Middle-East production will increase with 2007-11 CAGR of 7.5%, since in these regions gas industry is in under-developmental phase. European region will share 34.9% in total production of gas in 2011.
In 2007, most of the production was carried out from Russia, which contributed 21% of total world’s production. The US remained on 2nd position in terms of gas production by contributing 18% of the world’s production.
In the wake of shifting oil based economy to non-oil industrial based economy, the Middle-East has registered the highest demand growth with 2002-07 CAGR of 6.1%. The overall world consumption increased with 2002-07 CAGR of 2.4%. However, the large portion of total gas was consumed in European region, as it accounted for 40.0% of total gas consumption of the world in 2007. Going forward, we expect Asia to register the highest demand growth of gas due to higher crude oil prices, and an increase in demand of electricity. While Europe will remain the biggest gas consumer with an expected 38.0% share in 2011.
Country wise, the US remained the world largest gas consumer with 21.4% of the world consumption in 2007, followed by Russia which has 15% share in of total gas consumption in the world. Going forward, we expect these countries will maintain their status by contributing 19.0% and 14.3%, respectively, in 2011.
The crude oil prices are used as a benchmark to set gas-wellhead prices in international markets. Gas prices are highly subsidized in certain regions of the world i.e. Middle-East, Northern Africa, and South Asia. The gas-wellhead prices, in these regions, are subjected to have pre-determined discounts.
Throughout the past year natural gas prices have been following an upward trend. The increase in gas prices can be attributed to the huge increases in oil prices over the past year. Henry Hub future contracts have hit their current year high on May 11th, 2008 reaching US$11.6/mmbtu.
High natural gas prices encourage continued high drilling activity and investments necessary to develop the gas sector. High oil prices also help support the growth of LNG imports and exports to meet the increasing international demand. Nonetheless, there is a cost consequence of high natural gas prices to consumers and energy-intensive industries.
GCC countries have been relying on the hydrocarbon sector for their main source of revenue. The GCC countries hold a share of 22.7% of the world’s total proven natural gas reserves. We expect the natural gas exploration activities and trade to increase because of growing international and domestic demand.
GCC Natural Gas Reserves
Source: BP Statistical Review, Global Research
Among the GCC members Qatar holds the highest reserves, 907.3Tcf of gas reserves, followed by Saudi Arabia, which contains around 253.0Tcf of gas, then the UAE containing estimated reserves of 216.0Tcf.
In 2007, Qatar has made it as the world’s largest LNG exporter after opening up a new LNG train. The majority of Qatar’s exports are directed to the east, mainly Japan and South Korea. However, Qatar is currently negotiating deals to export LNG to Europe, competing with Russia. Oman and UAE are other GCC members engaged in the global LNG trade market.
