Middle East earns $408bn from crude oil

A surge in crude prices boosted the combined revenues of Arab countries by nearly $28 billion (Dh102.7bn) to a record $408bn in 2007, although their oil production shrank by more than three per cent, according to official figures.

But the earnings at current prices were lower by nearly $75bn in real terms and remain far below their real peak level in 1980 and 1981, according to the figures reported by the Organisation of Arab Petroleum Exporting Countries (Oapec).

Despite a slight rise of only 0.2 per cent in their proven oil reserves in 2007, Arab states remained in control of more than half the world's total crude resources. Their gas wealth also accounted for more than 29 per cent of the global gas reserves.

The report showed an increase in the refining output of the UAE and some other members boosted the combined Arab refining production capacity by nearly 200,000 barrels per day last year, while the total Arab energy consumption hit an all-time high of more than 8.7 million bpd.

From around $380.3bn in 2006, the nominal oil export earnings of the UAE and the other Arab countries surged to their highest ever level of $408.2bn as a result of a sharp rise in oil prices, which more than offset the output decline. The 2007 income, which is projected to climb to another peak this year, was more than double the 2003 revenues of around $159bn.

The 350-page annual report by the Kuwaiti-based Oapec showed there was an increase in the income of all of its 10 members but the UAE and other Gulf oil giants emerged as the main beneficiaries of higher oil prices.

The UAE's net oil export earnings climbed to a record $56.02bn in 2007 from $53.22bn in 2006 and around $22.05bn in 2003.

Those of Saudi Arabia, the world's dominant oil exporter, swelled to a record $171.8bn from $162bn in 2006 and around $70.6 billion in 2003.

The Kingdom's income was as low as $34bn in 1998.

Kuwait earned $48.8bn last year compared with $46.4bn in 2006, while Qatar's revenues grew to $18.7bn from $17.6bn.

Outside the Gulf, Algeria and Libya were the main beneficiaries, with their oil earnings peaking at $27.7bn and $36.9bn respectively.

But in real terms, the Arab oil revenues were far lower, standing at around $333.9bn in 2007, nearly $75bn below their nominal level.

REAL INCOME

They were also as below their real value during the first oil boom, when they were estimated at $398.7bn in 1981 and $338.6bn in 1980.

The report showed the real Arab earnings had remained far lower than their nominal value over the past seven years despite a sharp rise in the income in current prices.

It based its calculation on the 1995 dollar price and on global inflation, population growth in member states and other factors.

While they stood at around $380bn in current prices in 2006, the real Arab earnings were only $316bn.

In 2005, nominal revenues were estimated at $316bn but in 1995 prices, they were only around $269bn.

The report showed nominal and real oil prices have sharply varied since 1970 because of sharp fluctuations in the value of the dollar, the official price of oil.

In 2007, the nominal price of Opec's basket of crudes hit a record $69.1 a barrel but the real price was only $56.5.

The price was estimated at $61.1 in nominal terms in 2006 and $50.9 in real terms.

OIL PRODUCTION

The report showed the combined Arab production of oil and other liquids totalled around $22.4 million bpd in 2007 compared with 23.1 mbpd in 2006. Output was estimated 22.7 mbpd in 2005, 22.1 mbpd in 2004 and 20.6 mbpd in 2003.

A breakdown showed there was a decline in most key members, except Sudan, Oman and Egypt.

The biggest percentage decline was in Tunisia but in volume, Saudi Arabia accounted for the bulk of the fall, slashing output by nearly 500,000 bpd to around 8.754 mbpd from 9.2 mbpd, one of its highest levels.

The UAE's average production slipped by only 0.4 per cent to around 2.557 mbpd, while that of Kuwait declined by 2.6 per cent to 2.574 mbpd.

Qatar's output remained almost unchanged at 802,000 bpd while production by conflict-battered Iraq dropped by 5.7 per cent to 1.85 mbpd.

Production by Algeria and Libya declined by two and 5.7 per cent respectively, while Egypt boosted output by 2.1 per cent and that of Oman grew by around 3.3 per cent. Sudan's production leaped by 21.1 per cent to 460,000 bpd. The report showed the combined Arab oil production accounted for nearly 26.8 per cent of the world's total oil supplies of around 94 mbpd in 2007.

OIL RESERVES

Despite years of relatively high production, the Arab crude oil resources swelled to their highest level of 669.6 billion barrels at the end of 2007 compared with around 668.4 billion barrels at the end of 2006.

The 2007 reserves are higher by nearly 1.2 billion barrels over 2006 and by 11 billion barrels over their 2003 level of 658 billion barrels. The increase occurred despite a cumulative crude production of around 37 billion barrels during 2003-2007 and Oapec attributed the reserve growth to new discoveries and higher extraction rates in some member states.

A breakdown showed the UAE's proven oil reserves remained unchanged at 97.8 billion barrels at the end of 2007 while those of Saudi Arabia stood at 264.2 billion barrels, unchanged from their 2006 level but nearly two billion barrels higher than their 2003 level of around 262.7 billion barrels.

Iraq remained the second largest Arab oil power and the world's third, with proven reserves of 115 billion barrels. Kuwait was the third in the Arab world and fourth in the whole world, with around 101.5 billion barrels.

The bulk of the reserve increase during 2006-2007 came from Syria, with its oil wealth soaring by 38 per cent to 4.15 billion from three billion barrels.

The report showed that at the end of 2007, Arab states controlled 50.3 per cent of the total global extractable crude deposits of 1.331 trillion barrels compared with 50.7 per cent in 2006 and 57.8 per cent in 2003.

As for exploration, Oapec members reported a total of 25 new oil discoveries, including 15 in Algeria. There were seven in Egypt, two in Libya and one in Syria.

GAS RESERVES

Like in oil, the Arab gas reserves also recorded growth despite a sharp increase in gas output over the past 10 years. From around 53.49 trillion cubic metres at the end of 200, they climbed to a record 54.7 trillion cubic metres at the end of 2006. They were estimated at nearly 53 trillion cubic metres at the end of 2003.

Qatar remained the dominant Arab gas power, accounting for almost half the total. Its reserves stood at 25.6 trillion cubic metres at the end of 2007, the third largest in the world after those in Russia and Iran.

Saudi Arabia had the second largest Arab gas wealth in 2007 of around 7.15 trillion cubic metres, followed by the UAE with nearly 6.04 trillion cubic metres.

Algeria ranked fourth, with its gas wealth standing at around five trillion cubic metres at the end of 2007, nearly 11 per cent higher than its 2006 reserves.

Kuwait recorded the largest increase in gas reserves in the region, with its wealth jumping by 40.8 per cent to 2.5 trillion from 1.78 trillion cubic feet during the same period following large gas discoveries early last year. By the end of 2007, the combined Arab gas wealth accounted for 29.1 per cent of the world's total proven natural gas reserves of about 188 trillion cubic metres.

REFINING

In the downstream oil sector, the report showed Arab states had 64 refineries with a combined output of around 7.39 mbpd at the end of 2007 compared with nearly 7.2 million bpd at the end of 2006. The increase last year was mainly a result of expansion in refining units in some members, including the UAE, where refining capacity grew to 798,000 bpd from 778,000 bpd in 2006. Saudi Arabia's refining output remained unchanged at around $2.095 mbpd but it accounted for nearly 27 per cent of the total Arab refining production.

The Kingdom's capacity is also projected to rise sharply in the next few years as it is pushing ahead with major refining projects. Kuwait had the second largest refining capacity in the region, standing at 889,000 bpd, which is set to surge in the near future once new refining projects are completed.

Other key Gulf producers in this sector include Bahrain and Oman, with around 249,000 bpd and 222,000 bpd respectively. Iraq's refining capacity has remained unchanged at 597,000 bpd since 2003.

Outside the Gulf, Egypt had the highest refining capacity in the region, with 726,000 bpd. It was followed by Algeria and Libya, with their refining production standing at 463,000 and 378,000 bpd respectively.

ENERGY CONSUMPTION

According to OAPEC, the Arab energy consumption has grown fast over the past few years because of an economic upswing in most members. From around 6.8 million barrels of oil equivalent (boe) in 2006, the combined energy consumption of Oapec's 10 member countries rose to nearly 7.43 million boe in 2004, to 7.91 million boe in 2005 and around 8.36 million boe in 2006. It swelled to a record 8.73 million boe in 2007.

The report showed all members recorded increase in demand over the past two years, with that in the UAE peaking at 960,000 bpd in 2007 compared with 924,000 bpd in 2006.

Saudi Arabia's energy consumption grew to 2.65 million boe from 2.53 million bpd. Egypt, the most populous Arab nation, ranked second in energy consumption, which rose to 1.24 million boe from 1.21 million boe during the same period.

Consumption rose to 589,000 boe from 555,000 boe in Kuwait, to 531,000 boe from 497,000 boe in Qatar and 279,000 boe from 273,000 boe in Bahrain.

In non-GCC states, demand stood at 565,000 boe in Iraq, 810,000 boe in Algeria 490,000 boe in Libya, and around 459,000 bpd in Syria. Consumption in Tunisia was estimated at around 157,000 boe.

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