Iraq posted international tenders for the development of three major gas fields in the country last week. They are the Akkaz field in the Anbar province, the Mansuriyah field in the province of Diyala and the Saba field in the province of Basra. However, these tenders did not pass without causing some measure of controversy and doubt in the country, especially regarding the very small number of international companies that participated in the bidding, and also regarding the financial commitment of these companies, which raised suspicions regarding their ability to execute the contracts. Meanwhile, there were objections by the Anbar province, where some officials questioned the constitutional jurisdiction of the Ministry of Oil in signing export contracts with international companies, without first consulting the provinces concerned. Some officials also demanded that development plans for the province be drafted, with a view to develop gas fields and exploit them in the development of industries and in providing fuel to power plants. While such stances by these officials in the province are sound and correct, the problem is that, according to some reports, a particular company has pushed several local officials, through enticement and bribery, to work on hindering exports. It is unfortunate that given the extent of chaos in the country, such incidents are taking place in more than a province of Iraq, encumbering the development of the petroleum sector of Iraq. It should be noted that there currently is a growing demand for Arab gas. Arab countries have a strategic location that allows them to cater for both European and Asian markets, where there is thirst for gas for environmental motives, and also in order to reduce reliance on oil as much as possible. There is a clear European policy being pursued in order to enhance reliance on gas for environmental and strategic considerations, in addition to reducing dependence on Russian gas and replacing it with gas from other regions. On the other hand, the industrial growth of Asian countries, especially South Korea, China and India, requires additional supplies of natural gas. This is not to mention the huge market in Japan. The issue of gas exports has been raising important questions in more than one Arab country. For instance, should natural gas be exported, or should it be used as feedstock for power plants, and local petrochemical industries, aluminum smelters, and iron foundries? In truth, this issue has previously been raised in Egypt, as some called for allocating adequate quantities of gas reserves for domestic consumption, and to not make commitments to export projects. The Egyptian opposition thus objected to export-related commitments, voicing fears that natural gas reserves are insufficient to meet future requirements, and opposed, in vain, the construction of a pipeline to supply Israel with 7.1 billion cubic meters of gas annually. In light of this debate in both the parliament and the media, the Egyptian Ministry of Oil decided to allocate a third of proven gas reserves for domestic consumption in the future, a third for “future generations”, and the remaining third for exportation. Also, the same ministry decided in mid-2008 to suspend gas export projects until 2010, and indeed, no new export projects have been approved during that period. Arab countries adopt different policies in relation to natural gas. Saudi Arabia, for example, has decided a while ago not to export gas at the present time, and to exploit it locally to feed power stations, desalination plants, and petrochemical and other industries. Saudi Arabia thus exploits its gas domestically in lieu of the liquid fuel it exports, and also to meet the growing demand for energy with the increasing standards of living in the Kingdom. On the other hand, Qatar, which has recently become one of the world's top gas exporters, exports gas in addition to using it for domestic needs, and is expected to commence converting gas to petroleum liquids soon. But the fact of the matter is that there is no one policy on gas. The UAE, for instance, exports liquefied gas to Japan, while importing natural gas from Qatar through the Dolphin Gas project. The same can almost be said about Oman, which exports liquefied natural gas to international markets, but at the same time, has been seeking to import natural gas from Qatar, also through the Dolphin project. The arguments on whether gas should or should not be exported revolve around points such as that gas is a clean fuel, and that it is more fruitful to use it domestically. It is argued that it is more economical to consume natural gas and export liquid petroleum fuels instead. The development of local industries and the generation of electric power will require increasing amounts of gas supplied to the local market, and hence, it is more expedient to not commit to large export projects. In fact, exploiting natural gas locally would gradually open new markets that remain so far untapped, such as delivering gas directly to households through a gas pipe network for the purposes of heating, cooling and cooking, in addition to using gas in public transport (e.g. buses and taxis). This means that the areas where natural gas can be used are continuously increasing and expanding. The important thing is that petroleum officials should study this issue in a rational manner, taking into account available reserves, the population size, the previous and projected rates of economic growth, and the alternatives available to a given country. For their part, petroleum companies are trying to export natural gas, and do not content themselves with domestic gas consumption exclusively, with a view to enhance their profits. They hence often attempt to propose export projects for either natural gas or liquefied natural gas. * Mr. Khadduri is an energy expert
