Gulf energy producers could be facing further challenges as the cost of oil rises and energy and carbon policies progress slowly, says an expert.

Although the process of agreeing and implementing national carbon emission controls are estimated to take five years, the environmental movement towards more environment-friendly production is beyond tipping point, PFC Energy chief executive Lew Watts told the Gulf Daily News, our sister newspaper.

A client seminar was recently held by global energy advisers at the Ritz Carlton Bahrain Hotel and Spa to discuss the global energy industry including full oil and gas value chains from upstream, midstream and downstream.

"After California introduced the AB32 which involves caps on carbon, other US states have been joining in, which could lead to federal legislations concerning carbon emissions," Watts said.

"This impact on the huge US consumer market could lead to further impacts trailing back to the suppliers. With the recent hike in oil prices we are also entering a new economy of oil whereby as oil prices rise production costs rise.

"To add to this, long-term projections of the demand of oil are at 110 million barrels per day which we realistically cannot see being produced due to the shaky market not guaranteeing cost-effectiveness in the development of new facilities."

"Other factors that could affect the oil industry are the high level of investment needed, the demand shock or climate change affecting the market," Watts added.

"Greenfield refineries although are high risk due to uncertainty as well as being twice the cost that they were 10 years ago are most likely to be located in the Middle East rather than anywhere else in the world as companies may decide to produce added value products here to increase profit."

"The petrochemicals market is another sector which in being located in the Middle East could be beneficial due to an increase in jobs and the diversification of the economy to include a wide variety of products."

"As an overview of the region's energy market the gas market's potential in the Middle East is also one to rival even that of Europe's and would be profitable regardless of its lower energy density and high transportation costs.

"Iran has the third largest gas market in the world and is the largest reserve globally. A subsidy of prices for gas in the Gulf from Iran has led to a concentration of prices which other nations are now considering tapping into through pipelines."

The seminar was attended by 120 PFC Energy clients and is the first event that the company has held in Bahrain.

Topics at the seminar included world politics, economies and risk for energy producing and consuming countries, US foreign policy, oil markets and prices, Opec, energy demand and clean energy and carbon emissions. -TradeArabia News Service