By Dr Mohammad Al Asoomi

15-04-04

A great deal of controversy has recently arisen among Western sources of information concerning their estimates of Arab crude reserves, making economists and oil experts in the region more perplexed regarding this extremely vital issue, not only for the oil-producing countries but also for all the Arab states and other countries of the world in general.

As national oil companies have opted to remain silent, further ambiguity emerged about the extent of the Arab crude reserves that will be the lifeline for all the development projects and economic and social development in the coming decades.

This controversy first started in the United States whose relations with the Arab countries are characterised by being unusually tense with the President of Simons Avoco expressing scepticism about Saudi Arabia's crude reserves, saying that they will be exhausted long before the date forecast for such event. Several articles by US oil experts expressed similar views.

Conflict

Then, there was a reply from Olivier Aubercame, president of the French Petroleum Institute, who said that the "rate of natural exhaustion of Saudi crude is lower than the rate in other regions such as the North Sea". He also considered the "issue of depletion of oil-fields in the Middle East is vital, but information about it is scarce".

So is this a new international conflict over the region's wealth? Or have certain Western circles decided to intensify their pressures on the oil-producing countries to achieve more gains?

It is clear that we are faced with an overall re-evaluation of the size of crude reserves and the whole of the oil industry in the Gulf and Middle East, especially after the third Gulf War and all the significant changes in the balance of energy between the major oil-producing countries in the region and the new division of influence among the foreign oil companies operating in such countries, especially the two major oil-producing countries Saudi Arabia and Iraq, and perhaps Iran at a later stage.

In the middle of the 1980s a surprising announcement was made about the rises in oil reserves by as much as a triple of the reserves discovered at that time in some regional countries. At the time, no detailed justifications were made about this huge rise except to say that there was a re-evaluation of the oil-fields discovered in these countries.

During the last two decades, amazing developments occurred in the methods of prospecting and exploration for natural wealth, including the oil wealth. Modern technologies using satellites and space sensor equipment were introduced making methods of exploration much more accurate and objective.
In view of the above, are we faced with a real process of re-evaluation? Are we to face a new phase of some conflict? The answer to these two questions is partially in the hands of national oil companies in the region that have a lot of information about the truth of this matter.

Aramco, the biggest oil company in the region, gave a very brief answer following increased controversy saying that its oil fields were depleted at the annual rate of 2 % compared with a rate ranging between 4 and 9 % in the US and North Sea oilfields.

Satisfactory reply

Although this does not provide a satisfactory reply to the ongoing controversy, as the rate of depletion is linked, in addition to the levels of reserves, to production levels, oil field exhaustion rates and extent of maintaining pressure levels, yet this announcement points to the ability of Saudi oil fields to continue production at high levels during the next 50 years at least.

The significance of this issue lies in drawing up the future economic policies of the Arab oil-producing states. According to the precise estimates of oil reserves, economic policies, strategies and forecasts can be devised in such a way as to achieve stability of conditions in the region and finding alternative sources of crude oil through utilising the oil earnings for diversifying the sources of national income and increasing the share of non-oil sectors of the total Gross Domestic Product.

The writer is an UAE economic expert.

Source: Gulf News