Energy demand in the UAE for transportation, manufacturing and for easing adverse climatic conditions (air-conditioning during the high heat in summer and lighting at night) is soaring – just like in most other economies. Different sources of energy are employed for different uses, which range from renewable sources (wind, water, solar etc.) to non-renewable sources (fossil fuels and nuclear). Suitability is often determined by cost and availability rather than any technical reasons. For instance, several energy sources can be used for transportation (e.g. oil, electricity, gas), but oil still remains to be the cheapest. Energy sources Very few economies are fortunate to have abundant resources of all energy sources. Almost all need to plan and economize their precious energy sources, particularly the non-renewable ones. For instance, while the GCC region ranks as the world's top energy providing region, this largely related to oil energy. At the same time, however, economy has been less fortunate with respect to the other energy sources. The entire GCC region, in the absence of any river system, is not endowed with any source for hydroelectric power and while it has an abundance of fossil fuels, this does not include deposits of coal, which is still a major source of non-transport energy requirement around the world. Producing electricity from natural gas After transport, the key demand for energy in the GCC region is electricity, with a myriad of applications for residential, commercial and industrial purposes. Electricity is a secondary energy form and can be produced from a variety of different sources. While the UAE economy is fortunate to be abundantly supplied with oil for its transport energy requirements, other energy resources are not so abundant and oil is not suitable to produce electricity because of its high costs and thus, UAE needs alternative sources to produce electricity. Globally, the coal is the chief source of producing electricity, accounting for more than 40 percent, followed by gas (21 percent), hydro (16 percent) and nuclear (13 percent). Electricity produced from oil is less than 6 percent. The source of electrical energy varies considerably across countries depending on the domestic availability of energy resources. For instance, China, the world's second-largest electricity producers after US, relies heavily on coal. On the other hand, more than half of Saudi Arabia's electricity is generated from oil. Electric energy requirements in UAE have so far been met almost entirely from natural gas. Only a small amount is produced from diesel. In the absence of any coal deposits and river system, this has been obvious choice given the availability of this clean and relatively "free" source, considering UAE produces considerable amounts of associated gas, a by-product of oil extraction. However, demand for electricity has been rising very rapidly in the country and the supply of gas has not risen at the same pace. Since most of the gas produced in UAE is associated with oil, gas availability is dependent on the production of crude oil. The International Energy Agency has estimated that the supply of gas in the Gulf or Middle East region would have an overall average growth of 2.5 percent per annum till 2035. However, the outlook for UAE's gas production at 0.8 percent is one of the weakest in the region, well below the region's and global average. Moreover, in the immediate future, in the next 5-10 years, supply is projected to be almost flat around 50 billion cubic meters per year. Given that UAE gas is associated gas, the most likely scenario in which supply will increase is when crude oil production increases. However, even in the most liberal scenario, crude oil production is not likely to rise adequately to meet gas requirements. Besides OPEC agreements, there are capacity constraints for extracting oil. – The writer is an economic consultant, GCC General Secretariat, Riyadh __
