The way UAE's non-oil economy is currently growing, there is the constantly increasing demand for air-conditioning from an increasing population, residences, offices, shopping malls and so on. At the same time, the growing manufacturing sector has a large energy requirement, if not of gas, then of electricity. UAE's flagship aluminum smelter plant was largely built on the grounds of the availability of abundant and inexpensive natural gas. Demand for gas has continued to grow despite the slowdown of 2009 as counter-measures to stimulate the economy were successful and at the same time, some sectors, e.g., tourism were largely unaffected by it. The growth in demand shows no signs of stopping and in the coming year, demand can be expected to grow. Demand and Supply While demand has been growing, domestic supply of gas has remained constant or even declined marginally. For example, IEA figures show a production of 51 bcm in 2007 and 49 bcm in 2009. With demand for natural gas expected to grow at a faster rate than supply, there is a need to plan for this demand-supply mismatch and address both demand & supply sides, specifically, importing gas, seeking alternative sources to generate electricity and conserving its use of electricity. Imports The demand for excessive gas can be, and is being, met from imports. Fortunately, abundant gas is available in the region. Two of the top three world's natural gas producers are located just next door, namely Qatar and Iran (the third is Russia). Qatar is the most appropriate and obvious choice for the supply of gas for UAE, and the Dolphin gas pipeline is crucial while imported gas will be far cheaper than using oil to meet electric energy requirements, as Saudi Arabia is doing. Alternative energy sources In the absence of hydropower and coal deposits, the only alternative source option is nuclear energy. Abu Dhabi has started a program for this. However, it is unlikely that it can meet all expanding economy's need for gas and electric energy. The maximum dependence on nuclear energy even in countries with such advanced programs is still less than 20 percent. Demand vs. conservation Thus reducing electric energy consumption by conserving energy has to be a major part of the strategy to meet natural gas shortfalls. This can be done via both higher prices and introducing efficient energy use. While electricity prices in the country have risen to reduce its wasteful use - especially for air-conditioning - there may be room for process to go up further. Only a detailed study could determine the optimal price, after establishing the price elasticity and price responsiveness of electric energy consumption. However, more important may be enforcing energy conservation via regulation and information by incorporating energy conservation in building construction regulation. At the same time, there can also be regulation usage of lighting in public places like streets, shopping malls etc. Some retailers view that bright lighting stimulates purchasing. However, health studies have demonstrated that headache, stress and fatigue generally increase with over-illumination, which is common in many shopping malls. Natural daylight seems to increase productivity levels, and this too, could be incorporated into building regulation especially for shopping malls. Outlook While transportation energy is abundantly available, UAE is faced with a major turning point where domestic demand for electric energy is outstripping domestic supply. To start off, there is a need to project this shortfall in the coming years. While the IEA has provided a projection of potential gas supply up to 2035, which can be vetted, the greater need is to establish the growth in demand. Subsequently, it can be analyzed how much of this demand can be reduced with improved efficiency, and what is likely to be the requirement of gas in the coming years so that it can be appropriately negotiated for the best price as well as develop an infrastructure for its import. – The writer is an economic consultant, GCC General Secretariat, Riyadh __
