Potential impact of the Methane Hydrates development on the Gulf Cooperation Council (GCC) and North East Asia (NEA) energy trade

Abstract

Methane hydrates (MHs), compounds of frozen methane and water found in massive quantities on the continental seaboards all over the world, are potential energy sources for this century. This study calls the attention on how they may alter the energy trade between the Gulf countries (GCC) and their important customers on North East Asia (NEA), given that several NEA countries are the front-runners on the race to develop commercially their hydrates resources. The study proceeds first with an assessment of the state of the art on MHs technology and projects; then with the characterization and status of the energy trade between GCC and NEA blocs, on the side of the closest hydrates substitute: Natural Gas. One of the main goals is the quantification of the impacts on the energy trades, revenues and economic losses on the GCC side, based on the future projections of NG trades between the blocs, on the time horizon between 2017-2030. Once quantified, the study proposes the development of an optimization model for the UAE as an example to illustrate possible measures to mitigate and lessen the disruption of this new energy source. As such, the results demonstrate that the impacts could affect between 0.1 to 1.4% of the future GDP of the GCC countries involved on the trade. However, from the optimization model, the study suggests that the Gulf countries may manage the losses on the exports, by finding other potential customers and uses, among them, the growing domestic demand on gas or reinjecting the gas down to the oil reservoirs to boost oil secondary production. On a strategic level, the results suggest that the GCC economies should stress their efforts to diversify their exports and economy, relying less on the energy exports, due to the likelihood that the importers might develop their own unconventional domestic resources in the future and other changes on the dynamic energy markets. The negative implications of such developments should serve to focus on the strategic plans to avoid shocks on exports and revenues, and to supply the domestic energy markets more efficiently.

Date of Award	May 2017
Original language	American English
Supervisor	Sameh El Khatib (Supervisor)