* Short of supply despite holding 40 pct global gas reserves
* Middle East gas demand growing 5 pct annually
By Simon Webb and Eman Goma
KUWAIT, April 26 The Middle East needs to solve
the conundrum which sees it sitting on 40 percent of the world's
gas reserves and yet suffering from a supply shortage, a senior
executive from Royal Dutch Shell (RDSa.L) said on Monday.
Natural gas demand in the region was growing at such a rate
that by 2015, total consumption in the Middle East and North
Africa (MENA) would be close to that in major European
economies, Malcolm Brinded, Shell's executive director for
international upstream, said in a speech at an industry event.
Middle East gas demand was rising at around 5 percent per
year, a similar rate to growth in China, he said. By 2015,
demand in MENA would be close to 60 billion cubic feet per day,
"Domestic demand is growing, fuelled by economic growth, low
gas prices and a gradual switch from oil to gas for power
generation. As a result, some Middle East countries face natural
gas shortages," Brinded said.
The region would need to explore new technology and
investment in infrastructure as it looked to meet gas demand,
While global gas markets suffer a glut, the only country in
the Gulf with gas to spare is Qatar. The rest of the region
would burn more if it could in power plants, where oil or oil
products are often used, and in heavy industry.
Demand for gas has grown rapidly across the region,
especially among oil producers that have witnessed a
petrodollar-fuelled boom. The world's top oil exporters have
been slow to develop their gas resources to meet the needs of
their own economies.
Countries would need to exploit both conventional and
non-conventional gas reserves to meet demand, Brinded said.
Much of the region's gas is regarded as tough to produce, as
it is either tight gas - in pockets of rock that require special
techniques to produce - or sour gas with high sulphur content
that is expensive to clean up.
Of Saudi Arabia's 260 trillion cubic feet of gas reserves,
around 60 percent is at oilfields, Brinded said. Production of
that gas is limited by Saudi Arabia's adherence to OPEC oil
Of the remaining 100 trillion cubic feet, about 75 percent
is tight gas or sour gas, leaving only 25 trillion cubic feet of
conventional gas that is not linked to oil output.
Developing the gas would require the region's governments to
pay higher gas prices to encourage international firms to
undertake the projects, he said. Internal gas prices in most of
the region are subsidised and below benchmark international
Shell has worked on growing its gas business in the Gulf in
the past three years.
It signed a preliminary deal in 2008 to capture gas burned
off as a by-product at Iraqi oil fields for supply to Iraq's
market and possibly for export.
Iraq said earlier this month it would invite 15 companies by
the end of the year to bid to develop three gas fields, adding
Shell was among the favoured. [ID:nLDE63D2FQ]
In February, Kuwait signed a 5-year service contract with
Shell to develop non-associated gas fields in the country's
north. The Gulf Arab state plans to increase output from the gas
fields to 1 billion cubic feet per day (cfd) from around 140
million cfd. [ID:nLM183881]
Shell signed a deal in June 2009 to supply Kuwait, one of
the world's highest per capita consumers of electricity, with
liquefied natural gas imports (LNG) to feed its power generation
stations during the summer. Shell also plans to supply LNG to
Dubai in the United Arab Emirates.
(Editing by James Jukwey)