Shale Gas - Threat or Opportunity for the GCC.pdf

1Shale Gas: Threat or Opportunity for the GCC?

Shale Gas: Threat or Opportunity for the GCC?Shale gas has upended the North American natural gas and chemical markets, and its effects are propagating. Profiting from the new opportunities will require flexibility and swift action.


North America’s development of shale gas has triggered a revolution in the gas market that could have a major impact on other energy sources and on the petrochemical footprint. The effects are spreading to the rest of the world and are even affecting the hydrocarbon-rich countries in the Gulf Cooperation Council (GCC).1 A full appreciation of the potential threats and opportunities that shale gas brings to the GCC’s oil and gas and petrochemical industries requires an understanding of the impact of shale gas in North America and other international markets.

Shale gas is bringing the United States close to self-sufficiency and could turn the country into a net exporter of gas.We look at the impact of shale gas from two angles. First, we focus on gas markets, and then we examine the impact on the global chemical and petrochemical markets.

Impact of Shale Gas on Natural Gas MarketsThe natural gas market comprises regional markets, connected through liquefied natural gas (LNG). Regional natural gas markets have traditionally been rather stable and predictable; shale gas has caused a fundamental shock to the North American natural gas market. We first provide an overview of the shale gas revolution in North America. Then we analyze its potential to propagate to other regional natural gas markets and impact the global LNG market. Finally, we explore the implications for the GCC’s oil and gas industry.

The shale gas revolution in North America

High gas prices in the 2000s prompted the development of shale gas, which is now emerging as a main source of natural gas in North America. Shale gas is bringing the United States close to self-sufficiency and could turn the country into a net exporter of gas in the near future. U.S. production of shale gas grew from two trillion cubic feet (Tcf) in 2008 to more than eight Tcf in 2012, accounting for more than a third of total domestic natural gas production. Shale gas is projected to grow to 14 Tcf by 2030, representing almost half of U.S. natural gas production.

Shale gas has triggered a sharp drop in natural gas prices and decoupling from oil prices. Shale gas has upended the natural gas market. In 2012, natural gas prices dropped to between $1.82 and $3.77 per million British thermal units (MMBtu), down from between $5.82 and $13.31 per MMBtu in 2008, and natural gas and oil prices decoupled, having traditionally been strongly correlated (see figure 1 on page 3).2 In the past, significant global demand shocks and natural disasters have caused temporary divergence from the oil and gas energy equivalent ratio, but this time it looks as if the split is here to stay.

There is consensus on the upward trajectory of North America’s natural gas prices, which will be required to make dry shale gas developments economically viable. A.T. Kearney’s scenarios predict equilibrium in the range of $4 to $8 per MMBtu by 2020, with the reference case in the

1 The Gulf Cooperation Council is comprised of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. 2 Source: Henry Hub Gulf Coast Natural Gas Spot Price from the U.S. Energy Information Administration


$6 to $7 per MMBtu range.3 However, there are no signs that natural gas prices will go back to the pre-shale correlation with oil prices.

Shale gas has the potential to turn the United States into an LNG exporter in the near future. Abundant domestic resources and low prices are displacing natural gas imports to the United States and creating the potential for the country to become a net exporter of natural gas by 2020 and a net exporter of LNG by 2016. LNG import terminals in the United States, built on the expectation of substantial future LNG demand, are all suffering from low capacity utilization and are looking for export opportunities.

At the same time, LNG importers are trying to secure supplies of North American shale gas linked to the Henry Hub price. Japan, the largest LNG importer, has already signed agreements with the United States and is working to secure shale gas from Canada. By 2020, North American shale gas could represent 30 percent of Japan’s demand, with 17 million tons per annum (MTPA) coming from the United States and nine MTPA from Canada. GAIL (India) recently signed a 20-year contract with the U.S. Sabine Pass terminal linked to the Henry Hub price.

Shale gas is turning North America into an important LPG exporter. The exploitation of wet shale gas plays, which give producers higher returns, is not only fueling the renaissance of the North American chemical industry but also lifting liquefied petroleum gas (LPG) production for domestic and export markets. The increasing production of LPG has already turned the United States into a net exporter with the potential to capture a growing share of the market currently dominated by the GCC.

Note: MMBtu is million British thermal units.

Sources: U.S. Energy Information Administration, Chicago Mercantile Exchange; A.T Kearney analysis

Figure 1Natural gas prices have decoupled from oil prices

Spot and future prices for oil and gas$ per MMBtu

Henry Hub natural gas price

1/1/01

1/1/02

1/1/03

1/1/04

1/1/05

1/1/06

1/1/07

1/1/08

1/1/09

1/1/10

1/1/11

1/1/12

1/1/13

1/1/14

1/1/15

1/1/16

1/1/17

1/1/18

$ per barrel

Cold winter, decrease in hydroelectric power due to drought

Cold winter,unanticipateddrop inproduction

HurricaneKatrina

West Texas Intermediate crude oil price

14

13

12

11

10

9

8

7

6

5

4

3

2

10

140

130

120

110

100

90

80

70

60

50

40

30

20

100

3 See With Fortunes to Be Made or Lost, Will Natural Gas Find Its Footing? at www.atkearney.com.

http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/with-fortunes-to-be-made-or-lost-will-natural-gas-find-its-footing-/10192


Shale gas impact on international markets

North American shale gas has created uncertainties in natural gas markets. Despite the fact that shale gas production is still confined to North America, its impact is being felt around the world. Shale gas has created more uncertainties in natural gas markets and has added a new dimension to the already complex and fluctuating global flows of natural gas, making it even more difficult to forecast the evolution of the natural gas markets, the supply-and-demand balance for each regional market (domestic conventional and unconventional resources versus pipeline gas versus LNG), and the international flows of natural gas. This amplified uncertainty is at the heart of the mounting pressure on natural gas producers to move away from long-term contracts and gas prices indexed to crude oil.

Shale gas is creating mounting pressure on natural gas exporters. The price of natural gas in Europe and Asia remains substantially higher than in the United States, but some signs of decoupling are emerging in the European market (see figure 2).

The duration of new gas contracts signed over the past five years has become significantly shorter, and the LNG spot market has grown to represent 30 percent of all LNG trade in 2012, favored by the need to reallocate LNG flows originally directed to the U.S. market and by new uncertainties in the natural gas market.

Note: MMBtu is million British thermal units. NBP is the national balancing point. LNG is liquefied natural gas.

Sources: U.S. Energy Information Administration, Bloomberg; A.T. Kearney analysis

Figure 2Signs indicate natural gas and oil prices are decoupling in Europe

Spot prices for oil and gas$ per MMBtu

UK NBP for natural gas

1/1/00

1/1/01

1/1/02

1/1/03

1/1/04

1/1/05

1/1/06

1/1/07

1/1/08

1/1/09

1/1/10

1/1/11

1/1/12

1/1/13

1/1/14

140

130

120

110

100

90

80

70

60

50

40

30

20

10

0

20

15

10

5

0

$ per barrel

R2 (UK NBP − Brent) = 0.59

Brent price for crude oil Japan’s price for LNG

R2 (Japan LNG − Brent) = 0.79


The development of shale gas resources could reshape the global natural gas market. Large developments of shale gas and aggressive expansions of LNG capacity have the potential to fundamentally reshape regional and global gas markets. Most of the unconventional technically recoverable resources are outside of the United States (see figure 3).

Development of the vast unconventional resources in China and Latin America will take at least another five to 10 years because of the need to better understand shale formations, adapt technology, build the midstream infrastructure, and create a supporting political and regulatory environment. But it’s just a matter of time—and when it happens, it could have a major impact on the regional market balance and on regional and global natural gas prices.

China has vast unconventional gas resources, and their exploitation could cause another major shock that reshapes the entire natural gas market. China recently started assessing and exploring its shale reserves in cooperation with more experienced international players. The government has set ambitious targets for the production of shale gas and is releasing several policies to encourage the development of indigenous unconventional gas. However, we believe more time and effort will be required to meet the government shale gas targets because of the concentration of shale gas reserves in mountainous or densely populated areas with technical challenges and insufficient infrastructure, a lack of capabilities, and an unfavorable political and economic system. By 2020, shale gas is expected to account for 3 to 9 percent of China’s domestic demand and further grow thereafter. Whether domestic unconventional gas displaces rapid natural gas import growth or coal used for power generation, it will have a huge impact on the regional and global gas market. This will largely depend on environmental considerations and regulations.

1 Annual estimate based on daily U.S. production

Sources: U.S. Energy Information Administration study of 42 countries; A.T. Kearney analysis

Figure 3Shale gas resources are present around the world

Shale gas productionand resources

Selection

Unproven, technically recoverable shale gas resources

2012production

(billioncubic feet)

2013resources

(trillioncubic feet)

9,405 7,201

567

United States

Rest of the world Countries with significant potential for shale gas recovery

North America1,685

SouthAmerica1,430

Middle Eastand Africa1,393

Pacific437

Asia1,170

SouthAsia201

Former Soviet Union415Europe

470

Brazil245

Argentina802

South Africa390

Australia437

China1,115

Canada573

United States567

Mexico545

Poland148France

137

Algeria707

Libya122


Large projects under development to build natural gas import capacity (pipeline infrastructure to connect Central Asia, Russia, and Myanmar gas to China and relevant LNG capacity creation) suggest a strong expectation that China’s demand for natural gas will grow.

Europe has about 6 percent of the world’s technically recoverable shale gas reserves.4 However, European shale gas developments will likely require more time because land resources and the political and regulatory environment are not expected to favor any significant shale gas production before 2020. Based on A.T. Kearney scenarios, European shale gas production in 2035 could account for 2 to 10 percent of total domestic consumption. Europe is therefore expected to continue to rely on imports of both piped gas and LNG to meet its internal demand.

Shale gas impact on the GCC

The impact of U.S. shale gas on the GCC has been rather limited so far, but shale gas could represent both an opportunity and a threat for the GCC countries in the future. The effects vary widely across the region. The challenges faced by gas-rich Qatar are substantially different than those faced by the other gas-short GCC countries. We expect shale gas will cause no major disruption to the GCC before 2020, but the scenario could be fundamentally different in the longer term.

The biggest threat for Qatar is major unconventional gas developments and overinvestments in LNG capacity, potentially resulting in pressures on the price of natural gas in all major markets.Qatar faces potential threats. Qatar, the world’s largest exporter of LNG with a capacity of 77 MTPA, enjoys long-term gas contracts linked to the price of oil. However, the contract structure is coming under pressure as customers, encouraged by new natural gas supplies, are looking to end the indexation to oil prices and seek shorter, more flexible agreements. For example, Asian customers, currently representing almost half of Qatar’s LNG exports and paying a price premium of $5 to $7 per MMbtu, are trying to secure natural gas supplies from North America. As mentioned above, Japan and India have already signed agreements with North America linked to the Henry Hub price. In Europe, where the gas supply is more diversified and prices more competitive, Qatar is facing the same issues. For instance, the United Kingdom recently signed a contract with Qatar for only five years.

The biggest threat for Qatar in the medium to long term is major unconventional gas develop-ments and overinvestments in LNG capacity, potentially resulting in overcapacity and pressures on the price of natural gas in all major markets. Future shale gas exports from North America, and shale gas developments in China and other markets, are still uncertain and are not likely to have any relevant effect on Qatar until after 2020. The realization of all the announced LNG projects could result in an oversupply in 2015-2020, creating favorable demand-side economics.

4 Source: U.S. Energy Information Administration


However, project delays and cancellations are likely because the uncertainty in the natural gas market is making buyers increasingly reluctant to sign the long-term contracts that have traditionally underpinned large LNG projects and is resulting in more difficulties in achieving the final investment decision.

The Qatar National Development Strategy is based on an LNG price (cost, insurance, and freight) of $9.60 per MMBtu. In 2012, the average price of Qatari LNG was about 40 percent higher, with substantial differences across markets. (For example, Japanese LNG prices averaged $17 per MMBtu while European prices have been more restrained at $11 per MMBtu.) A drop in the price of LNG would directly impact Qatari GDP and net government savings. For example, a price drop of 30 percent to $6.90 per MMBtu would cause a reduction of Qatar’s GDP by about $100 billion over a five-year time frame and a decrease in net government savings from 5.7 to 2 percent of GDP.

Saudi Arabia—which accounts for more than 600 Tcf of unconventional gas resources—is highly committed to exploiting its large shale gas potential to meet its increasing gas demand. The other GCC countries could benefit from shale gas but also face threats of natural gas substitution for oil. GCC countries other than Qatar face natural gas shortages as a result of sustained growth in domestic energy consumption. The UAE and Kuwait have recently turned into net importers of natural gas, and Saudi Arabia is burning an increasing amount of oil to meet its growing domestic demand. Both the UAE and Kuwait already import LNG to cover their summer peaks but are planning more investments in LNG facilities to cover growing domestic demand. For example, in the UAE, Mubadala Petroleum and International Petroleum Investment Company recently established a joint venture, Emirates LNG, to develop a new LNG regasification facility on the UAE’s east coast to supply 1.2 billion cubic feet of natural gas per day from the international market. In parallel, GCC countries are aggressively pursuing exploration and development of new non-associated gas fields, in addition to other sources of energy such as nuclear and solar. The costs of all new energy sources are substantially higher than those of domestic conventional gas.

Gas-short GCC countries could benefit from shale gas in two ways: exploiting the domestic unconventional gas potential and profiting from better demand-side economics on natural gas imports. All GCC countries except Qatar are assessing their indigenous shale gas potential. Preliminary estimates indicate that unconventional gas resources in the GCC could amount to more than 700 Tcf, with Saudi Arabia accounting for more than 600 Tcf. Saudi Arabia is highly committed to exploring its large shale gas potential because of the unsustainability of the growing domestic consumption of oil that could affect its export capacity and the country’s wealthfare in the longer term. It is still too early to predict the role of unconventional gas in the energy mix of the GCC countries, but this should become clearer within the next three to five years.


Impact of Shale Gas on the Chemical and Petrochemical MarketsWe now turn to a review of the impact of shale gas on the global chemical and petrochemical industries and then zoom in on the implications for global polymer producers. Finally, we conclude with the implications for GCC players.

How shale gas will affect the global chemical and petrochemical industries

The renaissance of the North American chemical industry, driven by shale gas, will affect the global market in the short to medium term. The U.S. chemical industry is taking advantage of liquid-rich shale gas, shifting from naphtha to lighter natural gas liquids feedstock, and planning to increase its capacity substantially. If all announced expansion plans are realized, more than 10 MTPA of ethylene production will be added in the United States by 2020, an increase of 40 percent over current capacity. Part of the increase in North American production will most likely foster some reshoring of manufacturing activities, while the rest will be directed to the export market, creating challenges for the less cost-effective producers. If announced capacity is realized, North America will become a major exporter of chemicals alongside the GCC by 2020.

Aggressive plans to expand ethane crackers in the United States are likely to determine overcapacity in the market by 2020 and lead to the potential shutdown of less competitive production in Europe and Asia. This situation would deteriorate significantly if China drives for self-sufficiency. In the longer term, new shale gas developments outside North America could further affect the chemical industry.

The U.S. ethane-cracking expansions benefit from cheap feedstock availability, similar to the Middle East in the past few decades. The Middle East will remain the most competitive on a global scale, thanks to the advantageously priced feedstock, supported by world-scale assets (see figure 4).

Note: MT is million tons. MMBtu is million British thermal units.

Source: A.T. Kearney analysis

Figure 4The Middle East is the most competitive for ethane-cracking expansions

Ethylene cash cost—regional feedstock platforms($ per MT of ethylene produced)

Brazil:ethanol

European Union:naphtha

China:coal

–50

Ethylene cash cost range basedon past three years of feed-stock fluctuation (maximum, average, and minimum value)

Middle East:ethane

Ethane:$0.75-$2.50per MMBtu

Ethane:$3.50-$13.10 per MMBtu

Coal:$500-$800per MT

Ethanol:$1-$2per gallon

Naphtha:$730-$1,070per MT

United States:ethane

1,400

1,200

1,000

800

600

400

200

0



Figure 5The world’s ethylene capacity is expected to rise well above demand

Global ethylene capacity vs. demand(in million metric tons)

2012 2018e (unconstrained planned

capacity build-out)

149131

209

159

Capacity

Demand

However, this will impact profitability when supply outpaces demand as a result of increasing global ethylene overcapacity by 2018. Assuming all announced ethane-cracking capacities will be fully built out, capacities will far exceed demand, putting tremendous pressure on operating rates and profitability (see figure 5).

Implications for global polymer producers

Expected polymer capacity expansions will drive a global battle for polyethylene demand. The North American investments in ethane-cracking capacity will likely result in subsequent ethylene derivative investments, in line with the current North American ethylene derivative profile. Ethylene producers will want to capture the value further downstream with a more integrated asset base. These downstream investments are a low-risk approach for an ethane-cracking player to secure off-take while protecting revenue streams from downstream conversion steps. Polymer investments are likely, as the resins can be much more easily exported globally as containerized products, as opposed to many other derivative options. In addition, logistic costs associated with exporting ethylene are high when compared to distribution costs for polymer resins, making downstream conversion of ethylene at the cracking site even more likely. Although most North American ethane cracking investors have not yet finalized or announced their downstream plans, we believe several polyethylene capacity projects will emerge from the planned ethane-cracking investments.

North America is already a net exporter of polyethylene resins. Assuming a full build-out of the announced cracking capacity, polyethylene exports from North America are going to explode (see figure 6 on page 10). Even in a conservative 50 percent build-out scenario, North America will still become a much stronger exporter of polyethylene resins and will compete head to head with the Middle East for market share (see figure 7 on page 10).



Figure 6Armed with a supply of ethylene, North America is poised for explosive polyethyleneexport growth

North American ethylene derivative supply(% of installed capacity)

North American polyethylene exports(million metric tons)

4%5%

6%

12%

16%

Polyethylene57%

Ethylene oxide

Ethylene dichloride

Alpha olefins

EthylbenzeneOthers

2012 2018e (50 percent

build-out)

2018e (unconstrained

build-out)

3.2

7.4

12.1

Sources: GlobalData; A.T. Kearney analysis

Figure 7North America is expected to rise among the ranks of polyethylene resin exporters

Global demand and supply for polyethylene(unconstrained capacity build-out scenario, million metric tons)

Demand Supply

2012 2018e

4 4 5 6

2012 2018e

13 1115 15

2012 2018e

2

11

3

15

2012 2018e

30 27

4035

2012 2018e

1519 17

28

South America

North AmericaEurope (including Russia)

Middle East and Africa

Asia Pacific


Implications for GCC players

The U.S. shale gas revolution provides both risks and opportunities for the GCC’s petro-chemical sector:

• The U.S. ethane cracking expansion will result in increased polyethylene overcapacity and shortages of propylene, butadiene, and aromatics. Opportunities are emerging in liquid cracking and its derivatives.

• Opportunities will emerge for GCC players to convert propane exports to propylene.

• GCC players will face fierce competition in the traditional polymer export markets and will need to reassess their sales and supply chain strategies.

• Many international players’ high debt and low margins create attractive potential for mergers and acquisitions, provided vertical integration and complementarity of assets, intellectual property, and skills are high.

Let’s take a deeper look at each.

Increased polyethylene overcapacity and shortages of propylene, butadiene, and aromatics

Europe’s ethylene supply is largely naphtha-based, which also results in a good supply of propylene, butadiene, and aromatics (see figure 8). The planned U.S. petrochemical invest-ments are driven by the availability of shale gas, and thus ethylene capacity expansions are fully ethane-based, which results in very limited secondary yields.

The cheap ethylene supply from strong expansion of U.S. ethane cracking will put severe pressure on European and Asian naphtha cracking capacities, pushing for accelerated closure of older, less integrated assets. As a result, a significant shortage of propylene, butadiene, and aromatics will emerge, the size of which is difficult to predict. Even if liquid cracking on its own were not to take a significant hit, still-older and smaller-scale naphtha-based infrastructure is likely to be impacted by new, world-scale, and possibly more flexible, assets.

Note: Percentages may not resolve due to rounding.


Figure 8Ethane crackers yield much more ethylene than naphtha crackers

Steam cracker yields by type of feedstock(in weight %)

Naphtha cracker Ethane crackerEthylene (C2)

Propylene (C3)

Butadiene (C4)

Aromatics

Other82%

13%

3%1%1%

15%

30%38%

13% 5%


This opens opportunities for GCC players because liquid cracking will become more attractive for several reasons. First, the global shortage will drive up prices for butadiene and aromatics. Second, U.S. competition will be low because of a lack of heavier yields from the ethane-cracking capacity additions. Third, liquid cracking opens opportunities in higher-value specialty chemicals, currently less available in the Middle East region. Fourth, technology improvements and larger scale of new assets allow greater economic returns for new investments compared to older petrochemical capacities in Europe or Asia. And last but not least, the potential for creating jobs increases, which fits well with local government agendas.

However, liquid cracking comes with two main risks that potential investors should carefully assess. First, feedstock competition is continuously increasing from internal demand for fuels in the GCC. Public policies that are geared to reduce fuel-based electricity generation and stimulate fuel efficiency in transport and process and manufacturing industries will still surely benefit the GCC petrochemical industry in that respect. Second, liquid cracking yields substantial additional ethylene, for which margins will be low and finding demand will be difficult. Vertical integration of assets, flexibility of feedstock, and selective use of on-purpose technologies, especially to find alternatives for ethylene output, will be a must for any solid business case.

Opportunities to convert propane exports to propylene

U.S. shale gas is wet as dry plays are uneconomical at current prices. This has resulted in substantial propane capacity expansion plans that will help the United States become a net exporter of propane (see figure 9). The GCC has been a major exporter of propane, driven by Saudi Arabia and, more recently, Qatar and the UAE. A global surplus of propane will emerge that can only be absorbed by the petrochemical sector, as other demand for propane is much less elastic.

Note: GCC is the Gulf Cooperation Council.


Figure 9Middle East propane exports will face strong competition from North American suppliers

GCC propane exports('000 barrels per day)

Estimated U.S. propane export capacity ('000 barrels per day)CAGR

United Arab Emirates

Kuwait

Qatar

Saudi Arabia

2,000

1,500

1,000

500

02007 2008 2009 2010 2011 2012

2,000

1,500

1,000

500

02013 2014 2015 2016 2017 2018

5%

20%

8%

−12%


As global propane prices will come under pressure and propylene will likely be short from reduced output from naphtha cracking, an opportunity emerges to convert propane to propylene. GCC players could create significant value through this conversion and further reduce their dependency on less attractive propane exports.

Fierce competition in the traditional polymer export markets

The biggest impact for polyethylene producers can be expected in European and Chinese markets, the traditional export markets for many GCC players. Polyethylene exports from the Middle East to Europe will likely see strong competition from U.S. exports, particularly in light of the ongoing free trade agreement discussions between the United States and the European Union. China, on the other hand, is driving for self-sufficiency and is unlikely to regain previous manufacturing double-digit growth thanks to rapidly increasing labor costs. In the next few years, there will still be substantial exports to China, but in the longer term, GCC petrochemical exports will likely require some redirection of volumes to other markets. A strong sales and distribution presence in emerging markets such as Southeast Asia, the India subcontinent, or Africa will help absorb the impact of a reduced market share in China and Europe.

A need to shift the sales footprint of many GCC polyethylene players can be expected as competition becomes fiercer. New trade patterns will emerge eventually, but a period of higher uncertainty and variability is likely to set in. Sales and associated supply-chain strategies will need to be reassessed. Players with a specialty portfolio are more protected in the battle for lower costs and better service levels, but in a commoditizing market, these advantages could be more short-lived than anticipated. A strong, flexible, and cost-conscious sales and marketing organization is a must for any serious polymer player aiming to sell out its assets.

Attractive potential for mergers and acquisitions

The U.S. shale gas investments in petrochemical conversion are resulting in much higher debt on the balance sheets. When such investments are not 100 percent backed by downstream off-take, these debts are open and put investors at high risk. There are definite opportunities for cash-rich GCC players to support these investments and acquire a complementary asset base from international players that need debt restructuring or fresh cash injections for capacity expansions.

Capacity expansions are also putting tremendous pressure on players with older, less efficient asset bases, particularly when feedstock is secured from liquid cracking. This can result in some players offering good intellectual property at discounted value.

These opportunities will not last long, and now is the time to move. Waiting a few more years will increase the equity value of potential targets, especially if they have a strong U.S. base, while debts will have been refinanced or old assets discontinued to clean up the balance sheets. To capitalize on these opportunities, vertical integration of the asset base can secure high asset utilization both upstream and downstream. This would be particularly attractive when assets, intellectual property, and skillsets are complementary. A downstream player with established global sales and marketing presence could be the perfect catalyst for an upstream player looking to substantially expand its petrochemical activities. When the strategic planning function is strong and centrally steered, the impact on the top and bottom line can be especially positive.


Authors

Ada Perniceni, principal, Middle East [email protected]

Wim Van Asch, consultant, Middle East [email protected]

Bernd Hartmann, partner, Middle East [email protected]

Preparing for the Future GCC countries and organizations operating in the region would be wise to prepare for the major challenges that lie ahead.

Forward-thinking national oil companies and petrochemical players should make four moves:

• Improve their cost positions and competitiveness of domestic productions

• Strengthen sales and marketing capabilities and the ability to quickly react to demand shifts and changes in buyers’ behavior

• Reassess the downstream integration strategy in light of possible future scenarios and the priorities for increasing economic development and employment opportunities

• Rethink the international strategy to secure market access, benefit from cheap hydrocarbon resources, and build a balanced portfolio

All GCC countries should become less energy-intensive, freeing resources to fuel further industrial development. Those that are short on natural gas should focus on gas exploration and development of economic conventional and unconventional gas resources while fostering the development of a regional natural gas market.

As the shale gas revolution continues, addressing the risks and capitalizing on the emerging opportunities will require a global mindset and timely action.

Additional contacts, Middle East

For further information, please contact the authors or any of the following: Jose Alberich, Kurt Oswald, Dan Starta, Gaël Rouilloux, Saji Sam, Ubaldo Tripoli, Ojas Wadivkar, or Bartek Znojek.

A.T. Kearney is a global team of forward-thinking partners that delivers immediate impact and growing advantage for its clients. We are passionate problem solvers who excel in collaborating across borders to co-create and realize elegantly simple, practical, and sustainable results. Since 1926, we have been trusted advisors on the most mission-critical issues to the world’s leading organizations across all major industries and service sectors. A.T. Kearney has 59 offices located in major business centers across 40 countries.

Americas

Asia Pacific

Europe

Middle East and Africa

AtlantaBogotáCalgary ChicagoDallas

DetroitHoustonMexico CityNew YorkPalo Alto

San FranciscoSão PauloTorontoWashington, D.C.

BangkokBeijingHong KongJakartaKuala Lumpur

MelbourneMumbaiNew DelhiSeoulShanghai

SingaporeSydneyTokyo

Abu DhabiDubai

JohannesburgManama

Riyadh

A.T. Kearney Korea LLC is a separate and independent legal entity operating under the A.T. Kearney name in Korea.

© 2014, A.T. Kearney, Inc. All rights reserved.

The signature of our namesake and founder, Andrew Thomas Kearney, on the cover of this document represents our pledge to live the values he instilled in our firm and uphold his commitment to ensuring “essential rightness” in all that we do.

For more information, permission to reprint or translate this work, and all other correspondence, please email: [email protected].

AmsterdamBerlinBrusselsBucharestBudapestCopenhagenDüsseldorfFrankfurtHelsinki

IstanbulKievLisbonLjubljanaLondonMadridMilanMoscowMunich

OsloParisPragueRomeStockholmStuttgartViennaWarsawZurich

Shale Gas - Threat or Opportunity for the GCC.pdf

Documents

Transcript of Shale Gas - Threat or Opportunity for the GCC.pdf