Gulf States Cut Oil Power Use as Natural Gas Demand Surges

Gulf states are burning less oil for power generation even as electricity demand rises, according to the International Energy Agency’s latest Global Energy Review released in April 2026. The Middle East is increasingly turning to natural gas to meet rising energy needs in growing economies and expanded air conditioning use, the Paris-based agency reported.

Energy Demand Trends

Electricity demand in the Middle East rose by almost 4 percent in 2025, while overall energy requirements increased by around 1.5 percent. Globally, electricity demand rose by around 3 percent in 2025, growing “well over twice the rate of energy demand,” according to the IEA. Part of that increase is being driven by data centres, including those powering artificial intelligence, which saw rapid growth despite accounting for a relatively small share of overall demand.

Oil-to-Gas Transition

In the Middle East, the shift from “oil-to-gas switching in the power sector and the region’s expanding gas-intensive industries” pushed demand for natural gas 2.5 percent higher, the IEA said. Natural gas already dominates the Middle East’s power systems, accounting for roughly two-thirds of electricity generation, while oil still makes up a significant minority and is often used to meet peak demand.

The shift to use even more natural gas comes as the region, especially Saudi Arabia, makes large investments to transition away from oil in domestic power generation.

Major Regional Projects

Saudi Arabia’s Jafurah: As part of its long-term plan to reduce oil use, Saudi Aramco began producing gas from the first phase of its $100 billion Jafurah project in December 2025. Jafurah is expected to become the largest shale gas field outside the US and is intended in part to replace crude used in the country’s power network.

UAE Expansion: In the UAE, Abu Dhabi National Oil Company (Adnoc) is expanding upstream gas production and liquefied natural gas capacity as part of efforts to meet domestic demand while maintaining export growth.

Qatar’s LNG: Qatar continues to press ahead with its North Field expansion, one of the world’s largest LNG projects.

Iran War Impact on Infrastructure

It is not yet clear if or how the Iran war will affect these plans. In an interview the head of the IEA, Fatih Birol, said it could take around two years for oil and gas production in the Middle East to return to pre-conflict levels after damage to infrastructure during the Iran war. He said the organisation’s research suggested that more than 80 energy facilities had been affected, with over a third severely damaged.

Renewable Energy Expansion

Separately, the Global Energy Review said renewable energy capabilities are expanding rapidly across the Middle East. Solar generation rose by more than 20 percent in 2025, in line with increases seen in the US and India.

The IEA said renewable capacity doubled in the Middle East and North Africa in 2025 to around 12GW, while Saudi Arabia’s solar capacity alone quadrupled to nearly 7GW.

FAQ

Q: Why is the Middle East shifting from oil to natural gas for power generation? A: Gulf states are making large investments to transition away from oil in domestic power generation to preserve crude for export and meet rising electricity demand more efficiently. Major projects like Saudi Aramco’s Jafurah shale gas field and Adnoc’s LNG expansion are central to this strategy.

Q: How much has natural gas demand increased in the Middle East? A: Natural gas demand in the Middle East rose 2.5 percent in 2025, driven by oil-to-gas switching in the power sector and the region’s expanding gas-intensive industries. Natural gas now accounts for roughly two-thirds of Middle East electricity generation.

Q: What is the impact of the Iran war on Middle East energy production? A: According to IEA head Fatih Birol, it could take around two years for oil and gas production in the Middle East to return to pre-conflict levels. The IEA’s research indicates that more than 80 energy facilities were affected, with over a third severely damaged.