The Middle East occupies such a dominant spot in the world oil market that its natural gas industry tends to be overshadowed. In recent years, however, a number of new market directions have caused the relative importance of natural gas to rise. Several cutting edge projects have come onstream that place the Middle East at the forefront of monetising natural gas deposits. Moreover, the planning horizon for these projects involved years, if not decades, showing great foresight and the fortitude to see projects through to their completion. This article will examine these developments and discuss the Middle East's natural gas sectors, including the growing role of natural gas relative to oil, natural gas trade, and LNG and GTL capacity. Natural gas is playing a larger role in essentially all aspects of the Middle East's economic growth and activity, and it has become a key consumer fuel also.
Recent price, supply and demand trends
In their crucial role as incremental suppliers, Middle Eastern oil producers continue to play the final role in balancing market supply and demand. As such, the region is highly focused on issues of global price, supply and demand. Global events are now causing major shifts in oil production and trade, which have economic and political repercussions throughout the Middle East.
Natural gas developments
Although the call on OPEC oil by OECD customers has declined, the same cannot be said for natural gas, which not only has grown as an export commodity, but also is increasing in importance within the Middle East. Given the eminence of petroleum, the Middle East's natural gas industry for many years took a muted, secondary role. Natural gas was found because geologists were prospecting for oil. In far too many instances, associated natural gas was flared because the cost of development was deemed too high. In recent times, however, natural gas development and utilisation have expanded significantly. Several massive projects, requiring years of planning and billions of dollars of investment, are now in full swing or are slated to come onstream soon.
The abundance of low cost natural gas has been a boon for many other types of industrial development, including petrochemicals (another key Middle Eastern strategy for monetising natural gas), and it has also grown as a consumer fuel. Yet this has taken many years. Most of the distribution networks are still local. Pipeline construction is a challenge, and cross border lines are considered risky. Only recently has there been sizeable growth in gas exports via pipeline.
While Qatar’s gas exports via pipeline have grown, the majority of Qatar’s natural gas is exported in the form of LNG. Qatar is the largest exporter of LNG in the world. In 2011, Qatar exported 102.6 billion m3 of LNG, over 31% of the global total. Malaysia was a distant second with exports of 33.3 billion m3, approximately 10% of the global total. In the Middle East, Oman, the UAE and Yemen are also LNG exporters, exporting 10.92 billion m3, 7.96 billion m3 and 8.94 billion m3 respectively in 2011. Collectively, the four Middle Eastern LNG exporters account for nearly 40% of global LNG exports.
The abundance of Middle Eastern natural gas resources and the difficulty of utilising gas locally also gave birth to the world’s largest gas to liquids industry. Building a world scale GTL facility is a huge commitment of time, technology and capital, and the GTL industry now operating in the Middle East is a major achievement. Qatar once again is the leader in the region. Qatar’s Oryx GTL plant, located at Ras Laffan Industrial City, was the first GTL plant in the Middle East, and was in fact only the third commercial GTL plant in the world, the others being in South Africa and Malaysia. The Oryx GTL plant was established in partnership with South African company SASOL. SASOL is the world’s pioneering GTL company, having been established in 1950. Oryx was inaugurated in June 2006, and it started coming onstream in phases beginning in December 2006. The plant was built within its budget though ramping up production took longer than anticipated. In March 2011, the plant celebrated its 100th shipment. The plant was designed to produce 34 000 bpd of GTL output, composed of 24 000 bpd GTL diesel, 9000 bpd naphtha, and 1000 bpd LPG.
The world of oil is a politically charged one. It is natural that oil captures the majority of attention in the Middle East. Yet as we contemplate the long term growth in the natural gas industry, it becomes clear that natural gas is growing in importance relative to oil. Moreover, natural gas developments are creating a dual effect: on one hand, natural gas development and utilisation create synergies with oil, making both more valuable, and on the other hand, natural gas is competing with oil in end uses where oil is less useful or has perhaps fallen out of favour. Important synergies are being achieved in refining and petrochemical integration, for example, where natural gas and oil both may be used as fuel and/or feedstock to maximise value added. Saudi Arabia is a famous example of a country that moved first into export refining then into petrochemical refinery integration; the three massive refinery projects now underway at Jubail, Jazan and Yanbu all have petrochemical tie ins. Using natural gas at home frees up oil for export as well. Crude oil, refined products, and petrochemicals remain vital export commodities, but as noted, the most rapid growth in demand for these commodities is expected to come from domestic markets and other non-OECD countries. In contrast, exports of LNG and GTL products focus on the OECD markets, where the call on Middle Eastern oil has fallen. LNG demand has risen in the electric power sector as countries work to minimise the environmental impacts of oil, coal, and nuclear power. GTL diesel is prized in countries using EURO V standard diesel or other ultra low sulfur diesel. This movement is not restricted to the developed world; concern over environmental protection is rising around the globe. Oil may remain a mainstay in the Middle East, yet the rise of natural gas will allow the region to remain a key provider of energy to all markets worldwide.
Author: Nancy Yamaguchi, Hydrocarbon Engineering, Contributing Editor.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/29042013/middle_east_natural_gas/