By Giselle Jetti, Communications Intern & Maysaa Otayek, Energy Policy and Security Program Intern
The AUB Issam Fares Institute for Public Policy and International Affairs (IFI) held a webinar on Thursday, February 17, 2022 to discuss the findings of Dr. Naji Abi Aad’s analysis “Petroleum Pipeline Security in the Middle East
”, published in December 2021 by IFI. The paper offers a historical analysis of oil and gas pipeline security in the Middle East, providing a thorough description of their operational patterns. In this paper Dr. Abi Aad examines the reasons behind their continuous shutdowns, and highlights the important relationship between oil and gas pipelines and political stability.
The webinar titled “Paper Discussion: Security of Oil and Gas Pipelines in the Middle East” was moderated by Marc Ayoub, coordinator of the Energy Policy and Security program at IFI. Invited to the discussion with Dr. Naji Abi Aad were Dr. Mostefa Ouki, a Senior Research Fellow at the Oxford Institute for Energy Studies and an independent energy consultant; Kate Dourian, a Non-Resident Fellow at the Arab Gulf States Institute in Washington, a Contributing Editor at the Middle East Economic Survey and a Fellow at the Energy Institute; and Walid Sinno, Vice President for business development at Delta Oil Company.
Dr. Abi Aad started the discussion by giving an overview of the oil pipelines in the Middle East showing a map of the region illustrating the main international oil pipelines. He enumerated each pipeline, along with its specificities and historical background, demonstrating the interlinkages between oil pipeline insecurity and political conflict, may it be within or between producing, exporting or transit countries. His main findings revealed that every major pipeline in the region was closed at least once due to political conflict.
Reflecting on why only few gas pipelines had been built in the region, Dr. Abi Aad asserted that these have not been favorable in the Middle East given that most countries struggle to address the issues related to their development (including for example the high cost of transit fees, or determining adequate gas pricing), and also that the LNG industry has been considered as more attractive than the piped gas industry. Listing the existing gas pipelines in the region, Dr. Abi Aad described the infrastructure currently in place as mostly defective, or even ineffective with the exception of the Dolphin Pipeline between Oman, UAE, and Qatar, which has been supplying Qatari gas to its neighbors since 2007.
“I believe that policymakers in the region have to always encourage and support the building of a regional gas network. Such a network would really make gas sources available to the regional economy and create a development drive in the region. It also boosts intra-regional trade and acts as an important step towards long-term political cooperation and economic integration”, he said.
Dr. Mostefa Ouki was the first to comment on Dr. Abi Aad’s findings. Adding to what was said regarding the issues behind effective development of gas pipelines, he insisted that beyond political stability, it is key to take into consideration the commercial and financial domestic policies (such as subsidy policies) that may disincentivize the expansion of a piped gas network. He also noted that most utilities in the region suffer from poor credit worthiness and lack of sovereign guarantees from their governments. Such fragile markets and institutions limit the hopes of building a regional gas pipeline grid. Commenting on Dr. Abi Aad’s concerns over the growth of the LNG market, Dr. Ouki furthermore stated that LNG could be an opportunity rather than a threat for the gas industry. Giving the example of Europe, he demonstrated the possibility of having LNG terminals and gas pipelines as complementary rather than competing infrastructures. Finally, Dr. Ouki presented the global energy transition and the increased number of decarbonization measures as drivers of new dynamics in the energy market that should be taken into consideration as they may offer new challenges and opportunities to the Middle East.
Asked about the possibility of the Middle East becoming a floor for future exports alongside Russia, Kate Dourian stated that there were serious talks about having emergency gas hubs in the Middle East. However, this project had lost support from the US due to the pressure of reducing methane emissions. Highlighting the importance of having a regional gas grid, she explained that this as well has lost feasibility due to several problems related to subsidies. On the other hand, electricity interconnection that has worked in the GCC countries is being expanded to other countries such as Egypt and Sudan; but some efforts like bringing Iraq into the GCCIA have failed after years of negotiations. This has led Iraq to become dependent on Iran for imports of gas and electricity. Recently, Iraq has suffered a huge crisis due to the disruption of gas supplies. Dourian moreover asserted that there is a certain politicization of gas pipeline projects and hence it is becoming harder to finance and foster fuel projects. In addition, she indicated that several countries have lost trust in transit pipelines since they create a certain interdependence between countries and therefore can be used as a political tool. “It is true that there are very successful cross-border pipelines, but at the same time gulf countries are net importers of gas and are now pursuing independent gas infrastructure and development individually as opposed to collectively. Here lies the psychological and geopolitical barrier for GCC countries.” Dorian said.
“I don’t think it’s impossible to conduct business at some point in the future, you may have some effort to create a regional market” based on funding and regional political efforts, concluded Dorian.
As per the commercial side of the issue, Walid Sinno stated that history does not necessarily give us a guideline concerning modern-day issues, especially concerning pipelines. Historically, countries in the Middle East had dealt with a barely formed region that had faced serious changes such as the Israeli conflict. “However, when taking other examples and expanding our scope, we see how numerous projects were successful irrespective of political tension like for instance in Morocco and Algeria.” Sinno justified his optimism towards the future of gas pipelines in the Middle East by several factors. Firstly, the switch to gas as well as growing climate pressure has pushed states to focus their finances on other types of infrastructure projects. Secondly, there is larger acceptability surrounding the idea of having gas sold at a decent, fair market value as opposed to previous market prices. Thirdly, the entry of infrastructure funds could benefit the possibility of establishing gas pipelines. Finally, there is a European and American need for regional integration as they aim to unlock gas from the Middle East.
Dr. Ouki however noted that history provides a clear parameter of recent issues. He explained that there is still no replacement for Russian gas and the project of having Middle Eastern pipelines could be a distant idea since it relies on both huge investments (a 6-billion-dollar project) in addition to having regional political stability. He argued that this is not only related to the issue of commercial viability when discussing east-med pipelines, but also high political risks surrounding the region.
The webinar ended with a Q&A session, where all speakers answered and shared their thoughts with the participants.