Gulf energy resources to secure a very bright future

A new study from the Organization of Arab Petroleum Exporting Countries has highlighted the strength of the Gulf Arab oil producers, and the weakness of other oil producers whose supplies are either running out or uneconomic.

Kuwait-based Oapec predicts an annual average growth rate for oil and gas production of 1.2 to 2.5% to sustain global demand until 2032. Such an expansion of demand can only be met by an increased global energy market share for the Gulf States, says the report.

It suggests that in the long term the GCC's share of total crude oil supplies will rise from 20 to 30%. This is partly because oil supply extraction costs are very low in the Gulf States, and the capacity to expand production is huge.

Indeed, at present the Gulf States operate at four million barrels per day below their capacity of 18 million bpd. This figure could well rise to 30 million bpd by 2020, also restoring the Opec cartel's dominance of the oil market and therefore securing prices at advantageous levels.

Moreover, continuous technological innovations mean that Oapec, which comprises the Gulf States and six other Arab oil producers, will be able to easily increase its reserves in that period, according to the study, while boosting output. It claims that the UAE could double output to 5.1 million bpd by 2020, with Saudi Arabia producing 22.1 million bpd, Kuwait 4.8 million bpd and Iraq 5.5m bpd.

Most energy experts agree that rival oil sources such as the Caspian Sea will not offer anything to touch this type of output capacity, and indeed alternative sources will not come on stream fast enough to cope with increasing demand.

This will leave the world more reliant on the Arab world for its oil and gas than ever, and with an even clearer geo-political imperative to ensure than oil and gas supplies remain in friendly hands. And regional GDP should rise by a substantial multiple as a consequence, quite aside from the impact of economic reforms and foreign inward investment.

So there is clearly reason to expect higher economic growth in the Arab oil states over the next two decades than in the previous 20 years. That alone should secure the economic prosperity of the region.