Introduction

The global energy scenario has recently undergone some very significant changes; these include: (a) changes in global energy consumption and the share of different fuels in the global energy mix; (b) application of new technologies that have significantly boosted conventional and unconventional production in different parts of the world; and, (c) increasing concerns relating to energy efficiency and climate change, which have reduced global hydrocarbon demand and encouraged a shift in favour of renewables. Total primary energy consumption is expected to go from 257 mbdoe in 2010 to anywhere between 341- 368 mbdoe in 2035, an increase of 30-44 per cent in the next 25-year period. However, energy consumption will display considerable regional variation: Asia, including West Asia, with half the world's population and 60 per cent of global income growth, will account for 70 per cent of world energy consumption growth in 2035.

The production of oil and gas from shale deposits in different parts of the USA, has led to a surge in domestic hydrocarbon production, moving the US from being a major importer towards self-sufficiency, at least over the next 10-15 years. However, over the longterm this will have little effect on the centrality of hydrocarbons and Gulf production in the global energy scenario. In spite of the shale boom, the Gulf still controls 50 per cent of proven global reserves, while North America has 15 per cent and the US just 2 per cent. Cost of production in the Gulf is between $1.5-8 per barrel, while the cost of producing unconventional resources is generally around $80-100 per barrel.

Asian dependence on Gulf imports, presently about 75 per cent, is likely to rise to 90 per cent by 2035; in that year, 90 per cent of Gulf production will also flow to Asian markets. Thus, Asian energy security is crucially dependent on Gulf supplies, giving the Asian consuming nations a direct and abiding interest in Gulf security. The present turbulence in the region, centred around the Saudi-Iran confrontation bilaterally and across West Asia, is therefore a source to legitimate concern to Asian chancelleries.

The paper will provide a detailed analysis of the energy landscape in the Gulf in the global context and will highlight the challenges – economic and political – that this region is facing in maintaining supplies to world markets.