Flip through the latest issue of Gulf Weekly.
Iran's agreement to export natural gas to Bahrain will surely boost relations between the two countries, but it also underpins the sad reality that GCC states have not moved fast enough to help each other by creating a gas network of their own and firing a power grid, providing energy for the high-potential petrochemical sector.
Iran has promised to supply initially one million cubic feet per day (cfd) of natural gas. The agreement also provides for the future supply of one billion cubic feet per day of Iranian natural gas to Bahrain.
The supply of the gas would be completed within a year and it would take three years to build the pipelines that will carry it. Technical committees would examine whether Bahrain will invest in one of Iran's gas fields and import the gas or whether it will buy gas produced through Iranian investments.
All these depend on Iran getting ahead well with its ambitious gas projects. Geo-political tensions and sanctions notwithstanding, it has also to be kept in mind that despite being a gas-rich country, Iran itself faces shortage of natural gas, the consumption of which is increasing day by day.
Therefore, the planned GCC gas grid still has relevance in a scenario where natural gas maintains the fastest consumption growth rate among the world's primary energy sources, and has the highest consumption rate among developing countries. Based on the International Energy Prospect scenario, the global natural gas consumption during the period 2001-2025 will experience an average growth rate of 2.8 per cent which is comparable to 1.8 per cent for oil and 1.5 per cent for coal.
Studies estimate the overall gas deficit in the GCC at about 7.5 billion cfd. According to BP, the Gulf region is struggling to meet spiraling gas demands despite holding some of the world's largest reserves that make up 22.7 per cent of the world's total. Moreover, undiscovered gas reserves in the GCC countries are about 1,025.5 trillion cubic feet or 72 per cent of the proven reserves.
But the Gulf share of global output now is far less at just 6.5 per cent in 2006. The lag was chiefly due to the lack of advanced infrastructure for production and distribution.
Qatar, which has the world's third largest gas reserves, has invested billions of dollars to tap its vast gas riches. Natural gas from Dolphin Energy's production wells offshore Qatar started flowing to UAE customers for the first time in July.
That was the culmination of a nine-year project, linking Qatar, the UAE, and shortly Oman in a unique regional gas grid.
Saudi Arabia has invited international firms to tap its huge gas potential.
The GCC needs to put the joint infrastructure in place now if it wants to be a major force in gas production as it is in oil. Therefore, individual countries need to speed up the implementation of long-standing gas projects and be ready to link up with the gas network as and when it comes on stream.
If one looks at a timeframe for grid expansion, it should be completed by the start of the first phase of the $7 billion GCC power grid to be commissioned by the first quarter of 2009.
More than 30 per cent of the power grid construction in the $1.1-billion first phase, which will link Saudi Arabia to Bahrain, Kuwait and Qatar through 800km of transmission lines, was completed at the end of June.
The Dolphin grid was first proposed by the six GCC states of Oman, Qatar, UAE, Kuwait, Bahrain and Saudi Arabia in the 1990s. It aims to transport Qatar's North Field gas in the first stage to Saudi Arabia and Kuwait. The pipeline would be extended to other GCC states in a second stage.
Producers have been reluctant to develop gas fields without guaranteed demand due to the difficulties of transporting and storing the fuel.
Ample gas supplies would reduce reliance on expensive petroleum products as feedstock for water desalination and power plants. Primary energy demand will more than double in the Mena region by 2030 and to meet this demand countries within the region will have to invest on an average $56 billion per year in energy infrastructure alone.
Vastly increased domestic consumption of electricity throughout the region in addition to the growing demand for domestic hydrocarbons for power generation, petrochemicals and desalination means that there has been a significant increase in the use of natural gas.
Saudi Arabia has made increased natural gas production a priority, aiming to triple output to 15 billion cubic feet a day by 2009, while Abu Dhabi's Dh1 billion natural gas distribution network is just one example of the importance being placed on natural gas as an alternative to oil.
