Oil import states gain from taxes

The surge in crude prices over the past few years has benefited consuming countries more than the producers as their revenues from oil taxes far surpassed the total Arab oil export earnings, according to an official report.

Although industrialised countries keep complaining about oil price spikes on the grounds they hurt their economies, they make big gains in terms of revenue as the surge in prices means higher taxes, showed the report by the 11-nation Organisation of Arab Petroleum Exporting Countries (Oapec).

During 2002-2006, Arab oil producers netted about $1,205 billion (Dh4,426bn) from their crude exports while taxes in seven major industrialised nations (G7) fetched them a staggering $2,310bn, Oapec said in two separate studies.

International oil companies (IOCs) emerged as the top gainers as their combined revenues reached $5,503bn during that period.

Oapec's figures showed the sharp rise in oil prices in 2008 boosted the combined Arab revenues to a record $618bn. It estimated the total Arab proven oil reserves at about 672 billion barrels at the start of 2009, but said about 175 billion barrels remained undiscovered while total hydrocarbon deposits in place could be nearly 645 billion barrels higher than the world's total recoverable crude resources. The report also put the cumulative Arab oil production at 302 billion barrels.

"The figures prove that the revenues of the industrialised countries from oil taxes and those of the IOCs far exceed the income of Arab oil producers. During 2002-2006, the IOCs netted nearly five times the income of Oapec members while the revenues of industrialised nations from energy taxes were almost double Oapec's income. This shows they benefit from high oil prices," it said. "On a yearly basis, the annual average income of Oapec member countries was about $241bn during that period while it was as high as $460bn in the industrialised countries and $1,100bn for IOCs."

The report showed the 2008 revenues of Oapec members, including the UAE and four other GCC nations, were nearly $210bn higher than their 2007 income of about $408bn and nearly five times their 2002 earnings of $130bn. They exceeded eight times the income of about $76bn in 1998, when the region's revenues dipped to one of their lowest levels following the collapse in oil prices to just $10 a barrel due to a production war.

In terms of reserves, the study estimated the recoverable oil deposits at about 672.18 billion barrels at the beginning of 2009, accounting for nearly 57.7 per cent of the world's total extractable crude resources. Arab proven gas reserves were put at about 53.7 trillion cubic metres, nearly 30.3 per cent of the world's gas deposits. But the report noted that oil and gas production in Arab countries does not match their massive resources as it accounted for about 27.5 per cent and 13.4 per cent of the world's total oil and gas output, respectively.

"Arab oil production stood at about 23.7 million barrels per day and gas production at nearly 392 billion cubic metres in 2008. This shows that the oil and gas output in the region is low compared with the massive resources."

The study estimated Arab crude oil consumption at about 5.4 million bpd and gas at nearly 4.5 million equivalent bpd, adding that this left about 17.2 million bpd of oil and 142 billion cubic metres of gas for exports.

"Looking at figures again, we notice that the total Arab proven oil reserves stood at 672.18 billion barrels at the beginning of 2009. By the end of 2008, the cumulative Arab oil output totalled about 302 billion barrels," it said. "Assuming an extraction rate of 35 per cent, Arab oil deposits in place could reach 2,738 billion barrels. This means the oil quantities that cannot be extracted by present technology are about 1,809 billion barrels, which are nearly 645 billion barrels above the world's proven oil resources. These quantities, if they can be extracted, will meet the world needs for 60 years. Even if only 10 per cent of them could be extracted, they could be enough for seven years."

The report showed four Gulf countries – the UAE, Saudi Arabia, Kuwait and Iraq – controlled about 50 per cent of the world's recoverable oil potential and more than 86 per cent of the total Arab crude reserves.

But it noted large quantities of oil and gas remained undiscovered or undeveloped in the region, totalling about 175 billion barrels of oil, 43,368 billion cubic metres of natural gas and 67 billion barrels of gas liquids.

In the UAE, the undiscovered hydrocarbon reserves were put at about 7.7 billion barrels of crude oil, 1,261 billion cubic metres of natural gas and 2.4 billion of gas liquids. They were estimated at 87.1 billion barrels of oil, 18,158 billion cubic metres of gas and 48.9 billion barrels of gas liquids in Saudi Arabia. In Kuwait, undiscovered reserves were estimated at about 3.8 billion barrels of crude, 194 billion cubic metres of gas and about 0.2 billion barrels of gas liquids. In Iraq, they were put at 54.1 billion barrels of oil, 9,000 billion cubic metres of gas and about 6.2 billion barrels of gas liquids.

The figures also showed the UAE's oil and gas resources accounted for 14.6 and 11.3 per cent of the total Arab oil and gas deposits while Saudi Arabia, the world's dominant oil power, controlled 39.3 and 13.6 per cent, respectively. Qatar controlled 46.9 per cent of the Arab gas reserves.

Although they have pumped in excess of 50 billion barrels of oil during 2003-2008, Arab countries have managed to increase their crude reserves by about 14 billion barrels from 658 billion to 672 billion barrels.

Most of the increases were achieved in Sudan, where they jumped from less than one billion barrels to five billion barrels. The rest came from Saudi Arabia, Kuwait, and Libya, which boosted them by about two billion barrels each. Gas reserves grew by about 1.7 trillion cubic metres and the bulk of the increase was achieved in Kuwait, Saudi Arabia and Egypt, the report said.

In the downstream sector, the report showed Arab states had 64 refineries with a combined output of about 7.39 mbpd at the end of 2008 compared to nearly 7.2 million bpd at the end of 2006. The increase was mainly a result of expansion in refining units in some members, including the UAE, where capacity grew to 798,000 bpd from 778,000 bpd in 2006. Saudi Arabia's refining output remained unchanged at about 2.095 mbpd but it accounted for nearly 27 per cent of the total Arab refining production.

According to Oapec, Arab energy consumption has grown fast over the past few years. From about 6.8 million barrels of oil equivalent (boe) in 2006, the combined energy consumption of the member states rose to about nine million boe in 2008.

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