Gulf burns less oil for power despite rising electricity demand

• IEA releases Global Energy Review
• Middle East turning to natural gas
• Rapid growth in data centre demand

Gulf states are burning less oil for power even as electricity demand rises, according to the International Energy Agency.

The Middle East is increasingly turning to natural gas to meet rising needs in growing economies and has upped its use of air conditioning systems, the Paris-based group said in its latest Global Energy Review.

Electricity demand in the Middle East rose by almost 4 percent last year, while overall energy requirements went up by around 1.5 percent.

Globally, electricity demand rose by around 3 percent in 2025, growing “well over twice the rate of energy demand”, the IEA said.

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 overall.

In the Middle East, the IEA said 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.

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, according to IEA data.

The shift to use even more natural gas comes as the region, especially Saudi Arabia, makes large investments to wean itself off the use of oil in domestic power generation.

As part of its long-term plan to move away from oil, Saudi Aramco began producing gas from the first phase of its $100 billion Jafurah project in December.

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.

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 also continues to press ahead with its North Field expansion – one of the world’s largest LNG projects.

It is not yet clear if or how the Iran war will affect these plans. 

In an interview last week 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.

Further reading:

• Aramco launches two gas projects after crude export volumes rise
• Gas field hits in Iran and Qatar scramble markets
• Gas disruptions in Middle East send prices soaring

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.