Public-private partnerships key to expanding production and sustaining economic growth, says World Economic Forum Energy Security Council member
Addressing fellow members of the World Economic Forum Council on Energy Security, as part of the ongoing Summit on the Global Agenda in Dubai, the Managing Director of the Crescent Group and President of Crescent Petroleum said today that the Gulf region has the potential to produce up to an additional 30 billion cubic feet per day (bcf/d) of natural gas – nearly doubling current production levels.
Badr Jafar, who is also Chairman of Pearl Petroleum, a joint venture with OMV of Austria and MOL of Hungary, which is Iraq’s largest private-sector natural gas producer, highlighted the current mismatch between the level of proven regional gas reserves and total production, and said that national oil companies (NOCs) and private-sector companies must form stronger alliances to address this imbalance and support the Gulf’s sustained economic growth.
Today, the Gulf is home to 20% of the world’s total proven gas reserves, but accounts for only 11% of global gas output. Consequently, the region has the longest gas reserve life in the world, able to produce at current levels for at least 120 years, almost double that of the global average of 64 years. If the region were to produce in proportion to its reserves, Jafar said, average global output would rise by approximately 30 bcf/d.
“NOCs and the private sector can work together far more closely – in an environment that encourages competition and best practices,” said Jafar, who has been appointed for the second year as a member of the Council on Energy Security, which is holding discussions this week in Dubai that will help set the agenda for the World Economic Forum Annual Meeting in January 2013 in Davos, Switzerland.
Current gas production levels in the Gulf are constrained by the unintended consequences of regional energy policy, he said, emphasising the need for prices to reflect market dynamics.
The region currently deincentivises the development of new fields, Jafar said, pointing out that today the cost of production is roughly US$4 per thousand cubic feet (mcf), but is sold at an average of just US$1 per mcf, reflecting the existing pricing regime. According to Jafar, reform of this pricing is essential to generating the massive investments required to develop the region’s undeveloped gas reserves.
“The region must realise its full exploration and production resource potential to secure the next phase of its sustained economic growth,” he said. “While energy security is a strategic priority for every nation, and the state will always play a central role in the sector, this does not preclude greater private-sector support in the delivery of these goals. On the contrary, by operating through public-private partnerships and towards government-set objectives, the sector can drive innovation and maximise efficiency.”
Described as the world’s largest brainstorming session, the Summit on the Global Agenda is currently being held in the UAE for the fifth consecutive year. Over the course of this three-day event, which concludes on November 14, 2012, over 1,000 internationally leading thinkers – from government, business, academia and civil society – will come together to debate and generate transformational ideas that will shape a greener and more inclusive future.
