Gulf oil producers need to be reassured by major crude consumers about demand in the long term to push ahead with costly expansion programmes in their hydrocarbon sector, a senior Arab oil official has said.
As world demand is set to pick up with the gradual recovery in the global economy, the six Gulf Co-operation Council (GCC) countries are expected to play a major role in meeting that increase given their enormous hydrocarbon potential, said Abbas Naqi, Secretary-General of the Organisation of Arab Petroleum Exporting Countries (Oapec), which groups 10 Arab oil producers.
Addressing a recent energy investment conference in Bahrain, Naqi said GCC nations controlled 41.5 per cent of the world's recoverable crude deposits and 23.4 per cent of the global gas reserves at the end of 2008. He said new technology could add 162 billion barrels of crude oil and 22 trillion cubic metres of natural gas to the GCC's hydrocarbon resources.
His figures also showed the six countries pumped 19.2 per cent of the world's oil supplies and 8.4 per cent of the marketed gas in 2008.
"The GCC countries recognise the importance of their role in ensuring sufficient hydrocarbon supplies to the world and meeting the expected increase in demand following the global economic crisis," he said in the speech, published yesterday in the magazine of the Kuwaiti-based Organisation.
"They are ready to press ahead with investments in all parts of the hydrocarbon industry. But to continue with these investments requires stability in the oil market and guarantees for demand. Unfortunately, such projects and investments are obstructed by the policies of major hydrocarbon consumers and their measures to lessen reliance on oil and find alternative energy sources."
Naqi said the easing of the global crisis and signs of a gradual recovery in the world economy means crude demand is starting to pick up.
"This means an increase in the world's reliance on the Gulf oil in the future is inevitable. This in turn places additional responsibility on the GCC countries to pursue their capacity expansion plans and development of their hydrocarbon sector, including production, exploration, refining, gas liquefaction and petrochemicals. This of course will require massive investments."
Naqi gave no figures for such investments. According to estimates by the Arab Petroleum Investment Corporation (Apicorp), an affiliate of Oapec, the GCC and other oil producers in the Middle East would require $385 billion (Dh1.4 trillion) in the next five years to fund hydrocarbon expansion projects.
The report had earlier put such investments at $550bn but slashed its estimates on the grounds most of those producers were expected to shelve some of the expansion ventures following the eruption of the crisis. Another factor was a drop in the project costs due to lower prices of commodities.
The report showed the total energy investments in the Middle East and North African during 2010-2014 would plunge by around 30 per cent, or nearly $271bn, from $550bn to $385bn.
The figures showed the percentage of the investment reduction in the UAE is the lowest in the region, standing at 17 per cent. It was put at 21 per cent in Saudi Arabia, 43 per cent in Qatar, 36 per cent in Iran and 20 per cent in Algeria.
In terms of project value, Saudi Arabia is expected to lower investments by $29bn during the review period while the decline was estimated at $26bn in Qatar, $30bn in Iran and $7bn in Algeria.
By Nadim Kawach
© Emirates Business 24/7 2009
