The GCC in 2020: Resources for the future

Dubai Initiative Fellow Justin Dargin quoted in The Economist Intelligence Unit report concerning GCC energy policy.

“...Before this discovery, the Gulf states had assumed that their cheap gas would not only give their national industries a push, but it would help to attract foreign direct investment from international companies and help them to obtain technology transfer,” notes Justin Dargin, research fellow at Harvard University’s Dubai Programme. “Three years ago, the cost of buying gas in the US was about US$13 per million Btu compared with US$1 per million Btu in the Gulf. But the shale gas that’s been found may stop the Gulf from being so competitive.”

"...Mr Dargin of Harvard comments: “The development of petrochemicals is seen as important for the national interest. There will be significant new demand in this sector, particularly in India and China.” Increasingly, the GCC will find itself in competition for these markets with established petrochemicals exporters such as Germany and the UK.

Clearly, the availability of low-cost feedstock energy is an important attraction for foreign investors. Energy feedstock for industry is typically sold at a break-even price or a small profit, owing to low production and transport costs. “Supplying gas at the wellhead price rather than the international market price has a significant opportunity cost, but is an important part of Gulf industrialisation strategy,” says Mr Dargin."

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