The Gulf’s known unknown
We all know the oil is running out. But the GCC is struggling to devise a collective approach to energy security for the future, reports Trends magazine.
February 7, 2010 5:12 by Edmund Sheen
It’s almost like waiting for the next Black Swan.
As the debate rages as to the shape of the global recovery (U or V or W?), a major component of the equation – companies that produce energy – are finding their formerly unassailable position redefined in the resource-rich countries of the Middle East.
Whether it’s because of the uncertainty of global consumption, a classic producer-consumer conflict of interest, fluctuating fuel prices, or growing focus on renewable energy, one thing’s certain: There’s no dearth of challenges for hydrocarbon producers in the post-downturn era.
The debate assumes even greater significance for the Gulf region. The six Gulf Cooperation Council countries account for 65 percent of OPEC’s crude oil output and 60 percent of its marketed production of natural gas.
Gulf reserves will last longer than OPEC reserves, just as OPEC reserves will last longer than the world’s reserves. That is to say, the shares of proven reserves in the GCC are at 72 percent for oil and 79 percent for natural gas. The region possesses 57 percent of the world’s crude oil reserves and 40 percent of its natural gas. And its share of world output is just a fraction of this – at 30 percent for oil and 11 percent for gas.
Several industry experts say these high reserves can lead to a problem of plenty, especially when insufficient investment is going back into the industry. They gathered in Abu Dhabi recently to discuss a range of such issues at an energy security conference. Energy security in a globalized economy, oil price preferences, demand implications for oil-producing countries and a sustainable energy mix were some of the topics discussed.
What was most evident was the tussle between energy producers and consumers that has manifested itself over the years. The president of OPEC and Angola’s minister of petroleum, José Maria Botelho de Vasconcelos, was the most combative. He decried uncertainty over future world economic growth levels, consuming countries’ energy policies and the state of oil exploration and extraction technology. He demanded transparency, predictability and consistency in policy-making.
According to Vasconcelos, the lack of clarity on these issues makes it almost impossible to devise effective investment strategies for future production capacity to meet rising demand. Even more worrisome has been the lack of a collective approach on energy security, something both sides strive for but hardly achieve. “We have been sad to hear recent calls by some influential parties in richer nations to reduce dependence on imported oil. We cannot see where this is leading to and what they hope to gain from such calls,” he said.