MENA oil reserves grow by 11% in 2003-08 (page 2 of 2)

Outlook and Implications

Several MENA countries have presented sizeable increases in their proven reserve levels over the past five years.

Saudi Arabia, the largest economy in the MENA region and the biggest OPEC oil producer, maintained its position as the holder of the largest proven oil reserves in the world.

With the information about reserves controlled by these countries' respective governments, the estimates could very well overstate reserve levels and should be viewed with caution.

Indeed, the world's super-giant oilfields were nearly all discovered prior to the 1970s—some as long ago as the early 1930s.

More recent oilfield discoveries have generally been very small.

Moreover, the MENA region pumped out around 50 billion barrels of crude oil during 2003-07.

The reported increase in proven reserve levels therefore implies that new discoveries and/or improved recovery factors were more than sufficient to cover production and add to oil initially in place.

The United Arab Emirates have maintained its proven oil reserves at about 98 billion barrels for more than 20 years, while pumping out more than two million barrels per day.

Certainly, the 49-billion-barrel jump in Iran's proven oil reserves looks suspicious.

Given the surging growth in energy demand, MENA oil producers will have to raise production levels over the coming years.

High global oil prices have jumpstarted upstream oil-sector investment and should eventually lead to a gradual expansion of the region's production capacity.

Rising output levels to meet growing demand, however, will deplete MENA's oil reserves at a faster rate, thereby threatening the long-term economic outlook of these countries.

Oil remains the life blood of the MENA economies, and oil reserves underpin the long-term strength of these economies.

With most of the Gulf's oil output coming from very old fields, new fields will not only be of smaller size, but more costly to extract.

Indeed, some of MENA's smaller oil producers like Oman, Syria, and Yemen are now faced with declining production levels given the maturation of their major fields. Iraq is an exception, however, since most of its oilfields remain relatively undeveloped and there is the potential for new, large discoveries.