Five Mideast states to invest $20b a year in oil projects

DUBAI - The world's five leading oil powers, including the UAE, Saudi Arabia, Kuwait, Iraq and Iran, will be pumping an average $18-20 billion a year into expansion projects that will boost their output to more than 42 million barrels per day before 2007.

By A Staff Reporter

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Published: Mon 2 Feb 2004, 12:15 PM

Last updated: Thu 2 Apr 2015, 11:49 AM

According to the Paris-based Arab Petroleum Research Centre (APRC), such a two-fold expansion is essential to meet the expected growth in world oil demand which is forecast to rise by around 45 million bpd to more than 120 million bpd by 2025. In the next four years, these five countries will be pumping some $100 billion into their hydrocarbon sector.

"The increase means that the share of these producers will rise from 28.4 per cent in 2002 to 35 per cent in 2025, while their share of worldwide natural gas production will jump from 12.4 to 20 per cent," according to an APRC bulletin.

Over the past four years, the UAE has invested over $8 billion into the oil sector as part of the long-term plan to maintain its current output and expand capacity to nearly four million barrels per day. "Such large scale expansion of capacity has been triggered by a steady growth in global demand and a gradual decline in crude resources in some areas outside the Middle East," an industry source said.

Government investments in the oil sector totalled around Dh30 billion between 1999 and 2002 while more than $2 billion was channelled into the sector last year. Most of the investments were made by the Abu Dhabi National Oil Compay as it is implementing most of the expansion projects in the Emirates. According to statistics from the Ministry of Planning, oil investments during 1999-2002 accounted for nearly 13 per cent of the overall investments of Dh233 billion made by the public and private sectors in the UAE during that period.

Abu Dhabi was the main investor in oil as other emirates are not concentrating on this sector given their limited crude resources and their efforts to develop non-oil sector.

Abu Dhabi accounts for more than 90 per cent of the UAE's total proven oil reserves of around 98 billion barrels and nearly 85 per cent of the overall output. The UAE and the other four oil giants supply nearly a fifth of the world's crude consumption and according to estimates their combined capacity will exceed 50 per cent in two decades.

According to the Middle East Economic Survey, the UAE plans to increase its oil production capacity to 3.58 million barrels per day in the next couple of years. "A crucial element in its expansion plan is the development of the Upper Zakum from its present level of 550,000 bpd to 1.2 billion bpd," it said.

In tandem with the big leap in oil production, refining capacity in the region has also undergone significant growth. Steve Church, Communications Director, World Refining Association (WRA), pointed out that the Middle East's immense production cost advantage and the willingness of its governments to diversify their oil-based economies had fostered exponential growth of an industry that has over recent years changed the global face of refining and petrochemicals. "The region's industry has grown from being insignificant 20 years ago to being home to about 10 per cent of global ethylene capacity today. For Europe and the US, the region is both a threat and opportunity, gobbling up the export market on the one hand and presenting a profitable place to invest on the other," he said.

Meanwhile, WRA said the challenge of different crude oil supplies continues to grow as refiners look to reduce their dependence upon the Middle East. "However, it now appears that while some European refineries have invested in new technologies to cope with increasingly sour crudes, there continues to be a ready supply of sweeter crudes to replace dwindling supplies from the North Sea. The increasing number of new pipeline projects, particularly in southern Europe will also offer new sources of supply and hopefully improved security of supply for many refineries," WRA newsletter said.

"Thoughts are now turning to what lies ahead for the refining industry in 2004. For the most part, refining margins have improved this year and have shown up in better returns for many of the oil companies. With only one year to go until the new European Clean Fuel standards come into place, many refineries are working to complete their upgrading programmes while some of those whose new equipment and technology is already in place are looking to see which markets will still accept motor fuels with higher sulphur contents," it said.

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