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What Role Will LNG Play in Balancing Gas Demand in the MENA Region?

The complete paper analyzes the role of liquefied natural gas (LNG) in balancing the natural gas demand in the Middle East/North Africa (MENA) region. Natural gas increasingly is becoming a main energy source in the region. Contrary to widely held belief, several countries in MENA could fall into deficit regarding their self-supply of gas, leading to the need to import. The options of supply are through pipeline networks, or LNG. The global LNG pricing mechanism is changing toward flexible market-related methods that might encourage some countries to switch to LNG supplies. The study presented in this paper estimates the future demand of natural gas by country using multivariate regression and then compares it with the availability of gas as estimated by the Gas Exporting Countries Forum. The deficit is derived for each country, and the study indicates how the deficit could be filled through pipeline or LNG.

Introduction

The MENA area has lagged behind the global energy market during the last three decades in switching from oil and coal to natural gas consumption, despite the huge reserves it owns. During the 1980s, many industrial and financial centers in western Europe attracted gas importation from gas-producing regions such as Russia because of the wide difference between domestic and international values. The oil/gas price spread during the period 1980–2005 did not provide a strong economic incentive to MENA oil producers to substantially switch from oil- to gas-based power generation. Since 2005, oil prices have decoupled from gas prices and registered a wide positive spread, which has exaggerated the loss to oil producers from continued dependence on oil for power generation.

LNG Potential in the MENA Region

Non-oil MENA oil producers or small oil producers have attempted to minimize oil consumption, particularly in power generation, by switching to gas or even coal. However, this process has been hindered by economic difficulties and financing problems. Limited attempts to import LNG to balance energy needs have been carried out in the region. One possible reason for this is the inability to finance investment requirements for LNG receiving and gas-distributing facilities.

This article, written by JPT Technology Editor Judy Feder, contains highlights of paper SPE 198054, “The Global LNG Price Trend and the Role of LNG in Balancing the Gas Demand in MENA Region,” by Mohamed El Shahati, Haidar Khadadeh, and Fajer Al-Aradah, Kuwait Foreign Petroleum Exploration Company, prepared for the 2019 SPE Kuwait Oil and Gas Conference and Show, Mishref, Kuwait, 13–16 October. This paper has not been peer reviewed.
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What Role Will LNG Play in Balancing Gas Demand in the MENA Region?

01 April 2020

Volume: 72 | Issue: 4

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