A rapid growth in domestic gas demand due to surging power needs is posing a challenge to Gulf hydrocarbon producers as this sector remains underdeveloped compared to the crude industry, a Saudi bank has said. Over the past decades, the six Gulf Cooperation Council (GCC) countries have given priority to developing their oil sector at the expense of gas because of low prices and the need to boost crude exports for higher income, National Commercial Bank (NCB) said in a study. It said that the traditional focus on hydrocarbons exploration and development in the GCC has been on oil even though the Middle East region is home to some 41 per cent of proven gas reserves, estimated at 76 trillion cubic metres. Roughly half of this total is in the GCC, the study said, adding that the gas sector has suffered from “relative neglect and underinvestment” in comparison to oil. Apart from the challenge of historic underinvestment, the regional gas endowments are highly uneven, it said. Qatar is the only regional economy in a position to keep boosting exports even in the face of growing domestic demand, NCB said. Its figures showed that Qatar and Iran account for 72 per cent of the total Middle Eastern gas reserves – 29.6trn and 25.3trn cu m, respectively. Saudi Arabia’s reserves, by contrast, are estimated at eight trn cu m and those of the UAE at six trn. As a result, one of the most gas-rich regions in the world is in fact faced with significant and growing gas shortages outside of Qatar. “The challenge facing the GCC gas sector comes from the fact that both the global and the regional demand for gas has grown very rapidly in recent years and these trends are showing no sign of slowing down,” the report said. “In the region, the need for gas comes above all from power generation and the rapid development of gas-powered heavy industries such as petrochemicals, aluminum, and steel…..faced with rapidly growing gas demand and a distorted pricing environment, the region is responding to the gas shortages by trying to boost supply through a combination of exploration & development and imports.” The report added that the growing predilection for gas is also evident in the GCC where gas demand growth has in recent years fairly consistently exceeded economic growth at 5.5 per cent a year. It said the current 100bn cu m annual demand for gas is expected by the IEA to rise to more than 300bn cu m in 2020 and up to 600bn cu m by 2030. “This is largely due to two factors. Firstly, more gas will be needed for power generation and as an input in rapidly developing industries,” it said. “Secondly, the rapidly growing domestic demand for oil has created a situation where the trade-off between the domestic consumption of heavily subsidized oil and the ability to generate oil revenues in the world market is becoming increasingly acute. Among other things, a growing proportion of oil is being channeled into power generation where gas would be much more appropriate.”  Citing IEA data, the report said gas will be used to meet 90 per cent of the incremental energy demand for power generation over the coming two decades. It noted that electricity generation in Qatar, the UAE, and Oman is virtually all from gas while in Bahrain, gas accounts for close to 60 per cent of the total.  In Saudi Arabia and Kuwait, the share is barely over a third. The report showed gas demand for re-injection in the UAE is expected to grow from 18bn cu m in 2008 to as much as 45bn cu m in 2020 It said the UAE now faces a gas shortage of up to 2bn cu ft/d during the peak summer season, adding that ADWEC already in 2009 increased its use of crude and gas oil by 280 and 260 per cent, respectively. Abu Dhabi in 2010 burned 3.2mn barrels of oil and 2.7mn barrels of gasoil in its power stations. Since then, peak power demand has risen by 14 per cent in 2011 and ADWEC expects it to advance by another 10.1 per cent a year until 2020. “This would mean an increase from 9.7 GW in 2011 to 23.1 GW in 2020. Saudi Arabia is variously estimated to use anywhere between 700,000 b/d and one mbd of crude in its power plants during the summer peak season.”