(Oil Price) – The highly focused development of the U.S.’s shale oil and gas sectors from the early 2010s transformed it from one of the world’s biggest importers of both into one of its leading exporters of both. But it did much more than this: it reversed the balance of energy power in the world from where it had been left at the end of the 1973 Oil Crisis.
As forecasts for the demand for gas continue to surge on fears of further global conflicts and on the dramatic expansion of data centres around the globe, the Middle East is looking to expand its own gas production, particularly with a view to developing its own shale resources. The U.S., in this context, is seen by these countries – most notably Saudi Arabia and the United Arab Emirates (UAE) – not as a future competitor but as a key knowledge resource, which is a status Washington is happy to adopt. After all, becoming an integral part of any country’s energy production on the ground is as good a way as any – and a lot better than most – to keep those relationships running to the U.S.’s best advantage.
It is interesting to note at this point the circularity of history here, albeit with a twist. Prior to 1973/74, the global oil industry had effectively been run by a small group of Western oil firms known as the ‘Seven Sisters’, as detailed in my latest book on the new global oil market order. These firms – comprised of the Anglo-Persian Oil Company (which changed its name in 1935 to the Anglo-Iranian Oil Company, and is now BP), Royal Dutch Shell, three iterations of Standard Oil (Standard Oil of California, Standard Oil of New Jersey, and Standard Oil Company of New York), Gulf Oil, and Texaco — were able to control oil exploration, development, transport and pricing for decades up to October 1973. At that point, OPEC members – led by Saudi Arabia — plus Egypt, Syria, and Tunisia, began an embargo on oil exports to the U.S., the U.K., Japan, Canada, and the Netherlands in response to their support for Israel in the Yom Kippur War. By the end of the resulting Crisis, in March 1974, the price of oil had risen from around US$3 per barrel (pb) to nearly US$11 pb before settling down for a while, before trending higher again. This, in turn, stoked the fire of a global economic slowdown, especially felt in the West. The then-Saudi Minister of Oil and Mineral Reserves, Sheikh Ahmed Zaki Yamani, highlighted that the extremely negative effects on the West of the oil embargo marked a fundamental shift in the world balance of power between the developing nations that produced oil and the developed industrial nations that consumed it.
However, from that point onwards, the U.S. was determined to keep the power of these Middle Eastern countries in check, which it largely achieved through a policy variant of Henry Kissinger’s ‘triangular diplomacy’ that he advocated in formulating the dealings of the US with the two other major powers of the time, Russia and China. Kissinger served as National Security Advisor from January 1969 to November 1975 and as Secretary of State from September 1973 to January 1977. This variant was focused more on the simple ‘divide and rule’ principle that undermines opponents over time by playing one side off against the other, leveraging whatever fault lines ran through target areas at either a community, national or international level. These fault lines could be economic, political, or religious, or any combination thereof. This is what broadly marked U.S. policy in the Middle East up to the advent of its Shale Revolution. This in turn prompted the 2014-2016 Oil Price War with OPEC, again led by Saudi Arabia, which ultimately saw the U.S. triumphant, as also analysed in full in my latest book.
Aside from any other lessons that may have been learned by senior OPEC member countries was that the U.S. had extraordinarily managed to transform its then-nascent shale oil sector at the time of the breakout of the 2014-206 Oil Price War into a lean, mean, low-cost oil production machine, with similar advances in its shale gas sector. It is precisely for this reason that Saudi Arabia and the UAE are now looking at Washington for help in developing their own shale resources. Riyadh was the first of the two to take the lead, with U.S. companies involved in the development of its landmark Jafurah shale gas development since around 2019. An early notable participant was the U.S.’s National Energy Services Reunited Corp., which has conducted large-scale hydraulic fracturing operations across the relevant sites. From an investment perspective, the U.S. has also played a key role in the shape of financial giant BlackRock, which led a consortium to invest around US$11 billion in Jafurah’s midstream infrastructure. As of now, Saudi Arabia’s goal is to boost its gas output by 80% by 2030. According to Saudi Aramco in its Q3 2025 financial statement released on 4 November, Phase 1 of the Jafurah Gas Plant is on track for completion this year. Production is forecast to reach a sustainable sales gas rate of 2.0 billion standard cubic feet per day by 2030.
The UAE, meanwhile, has been developing shale gas reserves with a view to boosting energy supplies available to meet local power demands and with an eye on future exports. According to a recent comment from the Abu Dhabi National Oil Company’s (ADNOC) chief executive for upstream, Musabbeh Al Kaabi, the firm is utilising knowledge and methodology learned from U.S. hydraulic fracturing in its own fields and working with the U.S.’s EOG Resources Inc. to develop both oil and gas reserves. Ruwais remains a key location for its shale gas exploration activities, with the Ruwais Diyab Unconventional Gas Concession initially a joint venture between ADNOC and TotalEnergies, before the French firm reduced its stake to leave ADNOC as the lead operator as the project moved into full development phase. The target here is to produce 1 billion standard cubic feet per day before 2030. This project will work alongside Ruwais’ huge conventional oil refinery and a new liquefied natural gas (LNG) facility that is currently under construction. Overall, the plan is that Ruwais will add 9.6 million tons of annual gas export capacity, more than doubling ADNOC’s current production capability.
Driving both countries gas production expansion plans are the continued importance of LNG in global energy markets and forecasts for surging demand for gas from global data centres, according to the firms involved. LNG has become the world’s key emergency energy source since Russia invaded Ukraine on 24 February 2022. Unlike pipelined gas, LNG can be quickly bought in the market and then shipped expeditiously to wherever it is required. In the 12-month run-up to Russia’s invasion, China scrupulously – and with an apparently supernatural degree of ‘good luck’ — signed multiple long-term LNG contracts at preferential prices, leaving it in an exceptionally advantageous position to weather the resultant storm of spiralling energy prices. Since then, the U.S. has ensured that those countries that had been highly dependent on Russian gas supplies – notably several countries in Europe – have since been able to secure long-term LNG contracts with other suppliers. Meanwhile, the forecasts are that artificial intelligence, cloud, and heatwave-driven power needs will drive 40-50% of incremental global gas demand to end-2040 at minimum. Moreover, according to industry projections, by that point data centre-related demand could add 150–200 billion cubic metres a year globally, a 3.6-4.9% increase over current global gas demand projections.
By Simon Watkins for Oilprice.com
