Is price administration a hurdle to gas development?
It is ironic that, apart from Qatar, Middle Eastern countries1, which account for 30% of global gas reserves, face gas supply shortages and the prospect of diminishing net gas exports. This Industry Insight explores this contradictory situation and focuses on its underlying cause: regional domestic gas price regimes. The existing administered or regulated gas prices are largely based on social and political needs and have resulted in gas prices being lower than the marginal cost of production for new gas fields. Over the years this has deterred field development initiatives, an unwelcomed situation given the region’s dependence on gas in its energy mix. Governments throughout the region will eventually need to address gas price reforms and establish a sustainable energy system for the longer term, where natural gas facilitates the energy transition and can underpin future economic development. An important element in the reform of gas prices is the need to ensure that future prices stimulate the development of new gas reserves.
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1. For the purpose of this Industry Insight, we have defined Middle Eastern countries to include Bahrain, Iran, Iraq, Kuwait, Oman, Saudi Arabia, Syria, the United Arab Emirates and Yemen.