The Gulf’s gas megaprojects in Qatar, Saudi Arabia and Abu Dhabi often make the headline but innovation in the sector often takes place in smaller test-tubes. At the Middle East Gas Conference in Dubai last week, I had the chance to test this theory.
My panel featured representatives of four smaller Middle Eastern jurisdictions, facing their own special gas challenges and pioneering their own paths: Sharjah National Oil Company (SNOC), RAK Gas of Ras Al Khaimah, Bapco Energies of Bahrain, and Sharjah-based Dana Gas, which operates in the Kurdistan Region of Iraq and in Egypt.
What do these localities have in common? They are all dynamic jurisdictions with considerable growth in population and economy. They are highly dependent on gas, for power generation and industry. They have some gas resources of their own, but are all net gas importers, with the exception of the Kurdistan region, which is now inching towards becoming a significant gas exporter.
Three of the companies are state-owned, with a primary mandate of serving their domestic markets. They supply vital industrial sectors, such as Bapco serving Aluminium Bahrain (Alba), the world’s biggest aluminium smelter outside China, and RAK Gas feeding into the cement, ceramics and glassworks sectors in the northern UAE emirate of Ras Al Khaimah
Masoud Al Hamadi, SNOC’s executive director of upstream, noted that electricity demand in the emirate is growing at a strong rate of 4 per cent annually. Data centres and their hunger for electrons is another hot topic. Sharjah’s new underground gas storage facility will help balance demand between the cool winter and the fiery summer period, when air-conditioning use makes electricity consumption rocket.
Dana Gas, listed on the Abu Dhabi stock exchange, is the dominant gas producer in Kurdistan as part of the Pearl Petroleum consortium. It works closely with the government of the semi-autonomous region, represented at the event by its deputy minister of natural resources, Ahmed Mufti.
The Runaki Programme – “light” in Kurdish - is intended to deliver reliable 24-hour electricity to all Kurdistan inhabitants, replacing noisy, polluting and expensive diesel generators. This combines reform of pricing and billing to consumers and the use of smart meters, with ensuring power plants receive enough gas.
Meanwhile, Egypt, the Arab world’s most populous country, has improved its gas availability this year, but at the cost of expensive liquefied natural gas imports. Dana Gas is the fifth-largest producer there.
The five-prong approach
The responses of these companies to the swelling demand in their core markets is five-pronged.
First, they are exploring for new resources. On Wednesday at the conference, Dana Gas chief executive Richard Hall confirmed the company had found gas in its latest well drilled in the onshore Nile Delta. The company is also advancing development of the giant Chemchemal field in Kurdistan, alongside expanding its existing Khor Mor asset.
SNOC has found two new fields in recent years, notable successes in an area that had seemed thoroughly explored. RAK Gas’s chief commercial officer, Kim Bendfeld, discussed plans for new exploration licensing in the northernmost emirate.
Second, these companies are going the unconventional gas exploration route. Ahmed Al Janahi, Bapco’s vice-president of production, spoke of evaluating deep gas beneath the existing Awali field in Bahrain, in partnership with the US shale gas specialist, EOG.
Third, they are working across borders. This is an important step in a region where international co-operation on gas has often been unnecessarily hampered by politics. SNOC has a share in Ras Al Khaimah’s exploration Block 7, and is also working on bringing its geological insights to areas in Abu Dhabi. On Tuesday, Bapco announced it would work with Saudi Arabia’s Acwa Power to build a large solar power plant with battery storage, with power to be transmitted to Bahrain.
Fourth, they are going overseas. Mr Al Hamadi mentioned SNOC’s interest in acquiring international assets. Dana Gas, already a multinational operator, signed a preliminary agreement last month to revive the post-war gas sector in Syria, including redeveloping one of the country’s largest fields. It may send some of its gas from the Kurdistan region to the rest of Iraq, helping to alleviate the severe and protracted gas and electricity shortages there.
Fifth, they are bringing new energies into the tent. In July, SNOC began operations at the emirate’s first utility-scale solar power plant.
Mother of all innovations
At last month’s Adipec in Abu Dhabi, Sharjah announced it had found natural underground hydrogen in a well, probably formed by reactions of water with particular minerals. This could provide a low-cost source of the clean fuel, and SNOC has already begun thinking about a power plant to be built with German Siemens Energy.
Ras Al Khaimah is also looking for hydrogen under its mountains. And its geology is ideally suited to injecting carbon dioxide, which reacts to form solid minerals, trapping the global warming gas permanently. Sharjah too is developing a carbon storage facility in one of its depleted gas fields, in partnership with Japanese corporation Sumitomo.
Necessity is the mother of all invention. For countries importing gas, international gas prices remain relatively high, certainly well above the levels that are typical in the Gulf. These companies have to be agile, imaginative and risk-takers to meet the demands of their customers affordably, in the face of new technical and environmental challenges.
The solutions they are pioneering can be applied across the wider region. Countries throughout the wider region, from Morocco to Oman, are grappling with fast-rising energy demand, rising costs or depletion of traditional resources, and the need for lower-carbon solutions. Not everything they try will work out, but they might be evolving Mena’s next big gas business.
Robin M. Mills is chief executive of Qamar Energy, and author of The Myth of the Oil Crisis
