Elsevier

Energy Policy

Volume 157, October 2021, 112449
Energy Policy

An economic analysis of gas pipeline trade cooperation in the GCC

https://doi.org/10.1016/j.enpol.2021.112449Get rights and content
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Highlights

  • Expanding GCC gas pipeline trade provides up to $3.1 billion in economic gains.

  • The value of pipeline trade is restricted by administered fuel pricing policies.

  • Pipeline trade and regional price integration helps lift barriers to power trade.

  • Non-commercial aspects can catalyze or hinder GCC gas trade.

Abstract

Natural gas plays an important role in the global energy system. Thus, optimizing trade in natural gas is a key concern for many countries. This study investigates the value of expanding the Gulf Cooperation Council's (GCC) natural gas grid. We consider the documented successes and failures of the regional gas trade in Europe and Asia and weigh them against a GCC case study. The case study uses a partial equilibrium model of energy production, trade and demand calibrated to 2018 conditions to assess regional pipeline gas trade opportunities. The model incorporates parameters that are relevant to energy policy issues, including fuel allocation and energy price reforms. We also incorporate the regional liquified natural gas (LNG) trade strategy of Qatar, a regional and global leader in LNG production and exports. We find that pipeline gas trade cooperation in the GCC can contribute up to $3.1 billion to the regional economy by reducing transportation costs. More accessible gas offers a substitute for liquid fuel consumption and can offset the opportunity costs of using domestic oil to meet domestic energy demands. We also investigate the influence of an integrated gas market and price reforms on the power trade along the GCC interconnector.

Keywords

Natural gas
Pipeline
Investment
Gulf Cooperation Council trade cooperation
Integrated energy model

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