President of Crescent Petroleum gives keynote address at National Oil Company and Governments Summit
- United Arab Emirates: Tuesday, September 18 - 2012 at 14:24
- PRESS RELEASE
Badr Jafar, President of Crescent Petroleum, the 40 year old privately-owned oil and gas company headquartered in the UAE, gave the keynote address at the National Oil Companies and Governments Summit being held in Dubai under the patronage of His Highness Sheikh Mohammed Bin Maktoum Al Maktoum.
Jafar's keynote speech was entitled "The Role of the Private Sector and Natural Gas in Transforming the MENA Region's Economy". Arguing that the wider economic wellbeing of the MENA region has been under-recognized when discussing energy matters and that instead they should be seen as closely interlinked, he claimed that only by having a robust and broad based economy, with a healthy role for the private sector to encourage competition and the pursuit of best practices, can the region ensure that it is able to provide ample and reliable energy supplies first and foremost for itself and thereafter the international export market.
Conversely, he added, given the importance of energy within any economy, and particularly the MENA region with its amazing natural endowments, getting energy policy itself right is also integral to ensuring a robust economy. "It is a virtuous circle, if one can get the policy right," Badr Jafar said.
Jafar described the two central steps that MENA region policy-makers need to take: First, allowing a greater role and freedom for the private sector to compete in the energy part of the economy; and second, a shift in energy policy to allow natural gas to assume a primary role in the MENA region's economy by addressing the subsidies and distortions which prevent natural gas from being utilized in the most economically efficient way and encouraging the development of gas infrastructure to increase regional integration.
He conceded that in the period from 2004 to 2011 the MENA region's nominal GDP has grown by about 160%, with the government and oil playing a central role in the economy throughout that period, but argued that one should bear in mind that much of that GDP rise was driven by average oil prices going from round $30 to $100 per barrel, and not necessarily by broader economic growth.
"The region needs to diversify its energy sector to build on this economic boom and ensure that further growth can be delivered on a more stable platform," he said.
Jafar made several propositions in a wide-ranging address, "In a situation where we need to move from doing what has always been done by pumping oil to sustain the economy via exports, to something new in order to create a more diverse energy mix for both diverse domestic and export use, the fast adaptive pace of the private sector will be essential."
Jafar highlighted three example case studies. First, he drew attention to the North American shale revolution that is ongoing. It started, he noted, with private companies developing new techniques to get access to the trapped natural gas contained in the shale but this initial success itself created market pressures to pursue shale liquids production. Consequently, North America has amongst the lowest natural gas and NGL prices in the world.
Secondly, he noted how Qatar Petroleum's work with the Western Major oil companies and various LNG buyers around the world has allowed the country to grow into the world's largest LNG supplier in under a decade, providing over a quarter of global LNG volumes. Qatar was able to maintain majority control, secure the lion's share of the economic value of these projects for the Qatari people while incentivizing the private sector to commit to deliver several huge mega projects quickly and efficiently.
The final example was in the Kurdistan Region of Iraq, where Crescent Petroleum is actively involved in the development of the huge gas resources this area is endowed with. The company decided to first focus on ensuring that local gas demand was met and developed first, and helped construct a pipeline linking up the fields we are involved with to gas-fired power plants that provide badly needed affordable, reliable power. In doing so, and by investing close to one billion dollars in this initiative, Crescent enabled electricity to over 4 million Iraqi's, creating many thousands of new jobs, and saved the Iraqi government over $2bn/year in subsidies it would have otherwise had to pay for this power generation.
"The private sector within the right framework can be best placed to assist in the delivery of projects of considerable public good," he added.
The MENA region needs to secure the next phase of reliable economic growth, via the encouragement of a substantial, vigorous private sector in combination with energy market reforms that ensure effective competition across all sectors of the economy. The private sector, if suitably incentivized in a liberalized market, can deliver innovation, remain closely aligned with the state's interests, and deliver private projects that further public goals, he said, adding that in that liberalized, regionally interconnected market, "Natural gas is likely to become the fuel of choice due to its superior price, cleanliness and availability compared to rival fuels."
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