Despite the rapid rise in shale oil & gas production in North America in recent years, the Middle East region will remain the most important region for the worldwide energy sector, according to Majid Jafar, Chief Executive of Crescent Petroleum and Managing Director of the Board of Dana Gas PJSC.
He described – at the World Economic Forum in Davos – how the shale oil and gas revolution in the United States was a boost to the whole industry worldwide, increasing oil & gas consumption and stabilising prices, while introducing new technologies and management techniques. In addition, he highlighted how the old theory of “peak oil” which expected oil production to reach a worldwide maximum and start declining is no longer considered the reality, with new discoveries and additional production worldwide expanding the future supply.
Jafar also stressed that despite the rapid rise of US production which would potentially make it the largest producer in the world by the end of this decade, the Middle East would continue to be the most important region for world oil markets, containing approximately half of the world’s oil and gas resources, and also the lowest in terms of production cost. Therefore, the highest export potential would remain in the Middle East.
However, in order to further develop the maximum potential of the oil and gas resources in the Middle East North Africa region, increased investment in exploration and production would be required, including a greater role for the private sector. In addition better contract mechanisms and regulatory regimes would be needed to encourage such investment, and a gradual reform of the energy subsidies in the Middle East would also be required in order to reduce the rapid growth of in domestic demand and waste of energy. According to the International Monetary Fund (IMF) energy subsidies currently cost the region over US $220 billion annually – almost half the world total.
Jafar also described how the independent energy companies, rather than the oil majors, have led the unconventional revolution, particularly in developments of both shale gas and tight oil in the USA. It is only subsequently that the large international oil companies and foreign national oil companies have bought into the US unconventional industry. He also highlighted how the political instability had reduced production potential in several Middle East countries such as Yemen, Sudan, Libya and Iraq, and that this further raised the importance of the GCC members if OPEC in oil production.
Shale gas exists worldwide, also, with non-US shale resources actually much larger than those in the US itself. In fact, the Energy Information Agency (EIA) of the United States estimates that non-US shale gas resources are 32% of global technically recoverable gas resources. And China, Argentina and Algeria are all estimated to hold greater shale gas resources individually than the US. Tight oil resources are significant too, with much of this concentrated in Russia, which may help it to become the world’s largest oil producer again after its conventional oil production growth has stalled. Indeed countries in the Middle East such as Saudi Arabia have already commenced shale exploration programmes. Also the departure of many western oil & gas companies from some countries in the Middle East has further increased the opportunities for private companies from the region.
Tuesday, January 28- 2014 @ 5:23 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.