The world’s top oil exporting region, the Middle East, is looking to boost natural gas production and exports as global and local gas demand is set to grow in the coming years.
Qatar, one of the world’s largest exporters of liquefied natural gas (LNG), has been the gas leader in the Middle East for years, while the other Gulf countries rich in natural gas have been lagging when it comes to gas project developments.
This is no longer the case.
The major oil producers in OPEC—Saudi Arabia and the United Arab Emirates (UAE)—have been working to increase their domestic gas production with some projects planned alongside carbon capture projects to reduce emissions. Oman, outside of OPEC but part of the OPEC+ alliance, is also betting on more gas production and an expansion of gas exploration and production.
The highly volatile global gas market since the Russian invasion of Ukraine and the expected strong demand for LNG in Europe as it seeks to cut off dependence on Russia are bullish factors for those Middle Eastern oil and gas producers with plans to export more LNG.
LNG Demand Is Back
Demand for non-Russian gas in Europe is set to be robust for years as the EU looks to replace as much pipeline gas from Russia as soon as possible.
LNG buyers are returning to long-term contracts in order to secure the long-term supply of non-Russian gas and to insulate themselves from spiking volatile spot prices.
“Many traditional LNG buyers will neither procure spot gas or LNG nor renew or sign additional LNG contracts with Russian sellers. Spot prices have also been high and volatile, pushing many buyers towards long-term contracts,” Wood Mackenzie principal analyst Daniel Toleman said in May.
The Middle East, whose major exporters of both oil and gas traditionally prefer long-term contracts, could play a larger role in global LNG term supply by the end of the decade.
Qatar is leading the Middle East’s response to global LNG demand with the world’s biggest LNG expansion project ever. Other producers in the Gulf also aim to boost production and exports, as well as domestic consumption of gas for power generation to reduce the amount of oil burned for electricity, freeing more crude for exports.
Qatar’s Mega LNG Expansion
Qatar announced last year the world’s largest LNG project, North Field East Project (NFE), which is set to raise Qatar’s LNG production capacity from 77 million tons per annum (mmtpa) to 110 mmtpa. The project, expected to start production in the fourth quarter of 2025, will cost as much as US$28.75 billion. Qatar also plans another expansion phase at the North Field, the world’s largest natural gas field, which it shares with Iran. The second expansion phase will be the North Field South Project (NFS), set to further increase Qatar’s LNG production capacity from 110 mmtpa to 126 mmtpa, with an expected production start date in 2027.
State firm QatarEnergy has recently picked international majors ExxonMobil, ConocoPhillips, Shell, Eni, and TotalEnergies as partners in the North Field East expansion project.
UAE Advances Gas & LNG Export Projects
In the UAE, the Abu Dhabi National Oil Company (ADNOC) is expanding its LNG fleet as part of strategic plans to support ADNOC’s existing LNG business and its significant growth plans.
ADNOC plans to have a new export facility, Fujairah LNG, expected to be operational between 2026 and 2028 and include an LNG plant with a total capacity of 9.6 million tons per annum (Mtpa). Earlier this year, the Abu Dhabi state firm awarded McDermott a contract to provide front-end engineering design (FEED) services for the facility.
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A few days ago, ADNOC announced drilling contracts for the Hail and Ghasha Gas Development Project, part of the Ghasha Concession, the world’s largest offshore sour gas development and a key part of ADNOC’s plans to make the UAE self-sufficient in gas.
“ADNOC is committed to unlocking the UAE’s abundant natural gas reserves to enable domestic gas self-sufficiency, industrial growth and diversification, as well as to meet growing global gas demand,” said Sultan Ahmed Al Jaber, ADNOC Group CEO and Minister of Industry and Advanced Technology.
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Moreover, in partnership with international majors, ADNOC continues to explore for more gas (and oil) and has just announced a second gas discovery from Offshore Block 2 Exploration Concession in Abu Dhabi, which is operated by Italy’s Eni.
Oman Looks To Boost Upstream Gas
Oman also bets big on gas, and its LNG exports—mostly to Asian buyers South Korea and Japan—grew by 8% annually in the first half of 2022. The Sultanate plans expansion of gas production and is considering creating a new company to manage Oman’s gas assets by the end of this year, sources told Energy Intelligence.
Oman is entering a phase in which it has to renegotiate all its sales contracts which expire in 2025. However, its oil and gas sector management has seen a lot of personnel changes recently, and the LNG team at the energy ministry is relatively inexperienced, a source told Energy Intelligence.
The major oil producers in the Middle East are now joining Qatar in expanding upstream gas development and LNG export project plans as global and local gas demand is expected to rise for years to come.
By Tsvetana Paraskova for Oilprice.com
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The global LNG market isn’t going to benefit from gas production expansion by Saudi Arabia and UAE. There is a reason for this.
Saudi Arabia will need every single cubic foot of gas for the diversification of its economy. Natural gas along with solar energy and nuclear power will be replacing crude oil in electricity generation and water desalination plants thus releasing more oil for export at relatively high crude oil prices. Part of the gas produced will be diverted to the Saudi petrochemical industry thus adding more value to its energy exports. In fact, Saudi Arabia might get more gas and LNG supplies from neighbouring Qatar.
Likewise, UAE’s expanding gas production will overwhelmingly be used to achieve self-sufficiency and in the diversification of its economy. And like Saudi Arabia, UAE might import more gas and LNG from Qatar to satisfy its needs.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert