The MENA region is leading global LNG market growth in 2016 – a trend that will continue as domestic gas output falls short of rising regional demand for power and industry, according to the ‘Energy Research’ report released by Arab Petroleum Investment Corporation (APICORP).
Egypt and Jordan received first LNG shipments in 2015; Kuwait, the Gulf’s first LNG importer and Bahrain are looking to construct permanent import terminals; and Abu Dhabi has opted to import LNG via a floating storage and regasification unit (FSRU). Regional LNG importers are seeking to enter into deals to buy gas on favourable terms.
The report says despite its dominant role regarding hydrocarbons reserves, MENA will become the world’s second-largest gas-importing region according to a forecast by the International Energy Agency. The consumption of natural gas in the Middle East will go up from 480 billion cubic metres (bcm) in 2015 to 738 bcm in 2040, according to the IEA forecast. Despite massive gas reserves in the region, production has largely failed to keep pace with a rise in demand and this situation will continue for years.
In 2015, imports by consumer countries in the region amounted to just 10.5bcm of LNG, of which 40% arrived from Qatar. However, these levels will rise sharply, spurred by the present global supply overhang, which should allow buyers to lock in preferential prices and enable them to choose from a wider range of suppliers.
According to the APICORP report, some MENA countries will take a ‘wait-and-see’ approach to building capital-intensive permanent LNG-import terminals. MENA countries will invest around $10.3 billion in LNG-importing facilities to meet growing demand, and they will charter floating storage and regasification units (FSRUs) as a temporary and lower-cost solution.
Global gas demand has increased by 700bcm during the past decade, with 70% of this quantity coming from Asia Pacific and Middle East countries and gas is expected to be the only fossil fuel whose share in the global energy mix will grow between now and 2040.
Within that market segment, LNG’s share has been rising for the past ten years, driven by the need to transport gas efficiently over longer distances to a more diverse customer base. Expectations of rising LNG demand from Asian countries have been a key driver for investment in liquefaction capacity. However, despite these bullish projections for long-term demand, the short-term picture is different, characterised by weaker-than-expected consumption growth and rising supplies. Gas prices have been falling for the past three years.
While the GCC’s per capita gas demand ranks among the highest in the world, domestic production has mostly failed to meet the demand. Some GCC countries have started energy pricing reforms, but the short-term impact on demand is not expected to be significant soon.
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