Gulf oil producers are expected to pump nearly $272 billion into oil and other energy projects over the next five years as part of plans to expand capacity and meet local and external demand, a Gulf official said on Monday.
The investments by the six-nation Gulf Cooperation Council (GCC) involve around $111bn in the upstream and downstream crude oil sector, nearly $108bn in gas projects and the rest in power generation, said Majid Al Moneef, Chairman of the GCC Energy Working Group.
Addressing an oil conference in Abu Dhabi, Moneef said the investments would allow the GCC nations to maintain a large spare output capacity of around five million barrels per day despite an expected rise in production.
His figures showed the GCC’s combined oil output could rise by about 1.5m bpd through 2015 and nearly 4m bpd between 2015 and 2030.
“The excess capacity in the GCC will be the key to oil market balance…this capacity is expected at around five million bpd in 2015 but could decline to between two and 2.25 million bpd afterwards,” he said.
“As for the value of oil exports by the GCC countries, they will depend more on prices than the volume of production…prices of course will depend on demand.”
Moneef, also member of the economic and energy committee in Saudi Arabia’s Shura Assembly (appointed parliament), said that despite long-standing policies by the GCC nations to diversify their sources of income, their economies are still heavily reliant on the hydrocarbon sector which “commands the highest share of GDP, government revenues and merchandise exports.”
“The hydrocarbon sector, whether directly or indirectly, is the main determinant of growth in the non-oil productive sectors…this has mad the GCC economies more vulnerable to external shocks impacting oil output and prices,” he said.
He said the “bonus and downturns” in the GCC economies over the past three decades correspond more or less to booms and gluts in the world oil market.
“This dominant role of the hydrocarbon sector is projected to continue in those oil and gas resource rich economies given the most conservative global energy outlook and the required production and investment needed to meet the world oil and gas requirements from the GCC.”
Moneef said that while the global energy outlook offers opportunities, it also poses numerous challenges of an external and internal nature to the GCC.
“The uncertainties in energy (and especially oil) demand and supply projections related to world economic growth prospects, environmental considerations, energy security concerns and the global trade system all pose challenges that will impact investments in the hydrocarbon sector in the GCC, and consequently their oil and gas production and export potentials.”