Energy Resources of Countries Belonging to the Gulf Cooperation Council - Essay Example

 Energy Resources of Countries Belonging to the Gulf Cooperation Council I. Introduction Founded on May 25, 1981, Gulf Cooperation Council (GCC) is comprised of six states namely, Saudi Arabia, Bahrain, Kuwait, Oman, the United Arab Emirates and Qatar. The objectives of the council include among others, the formulation of regulations in various fields such as trade, economy, customs, finance, legislation, tourism and administration (Perterson, 1988)1. Although the GCC strives to come up with regulations, it does control the resources of its member countries. All members of the GCC have autonomy and control over their energy resources. Most members of the GCC have vast oil and natural energy resources. However, most of these countries are having issues in terms of supply and utilization. Note that most of the oil fields in the GCC states are already old and some of them are already depleted. With the rising demand for energy within the GCC states and around the world, many sectors fear that these resources will run out faster than was originally projected. To give us a clearer picture of the energy resources and needs of the six member states of the GCC, let us take a look at the energy profiles of the states of Saudi Arabia, Bahrain, Kuwait, Oman, the United Arab Emirates and Qatar. II. Energy Profile of the Kingdom of Saudi Arabia The Kingdom of Saudi Arabia is a member of the Gulf Cooperation Council (GCC) and in the world’s leading oil producing country. This country is rich in natural gas and has one of the most efficient power systems in the world. The Saudi economy is dominated by two giant companies namely, Aramco which currently holds the development of about 98% of the country’s oil reserve including upstream development and the Saudi Basic Industrial corporation (SABIC), which is the world’s seventh largest petrochemical company2. a. Oil Reserve and Production Saudi Arabia has one-fifth of the world’s known oil reserves. It is the biggest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), supplying 14% of the United States’ crude oil imports as of 2006. According to the United States Energy Information Administration (EIA) Independent Statistics and Analysis, two-thirds of the county’s are considered as “light” or “extra light” grades of oil while one-third is classified as “medium” or “heavy” grade. Saudi Arabia has over 100 oil and gas fields with more than 1,500 wells. However, according to the EIA, most of Saudi Arabia’s oil reserves are found in eight locations including the Ghawar3, Safaniya, Khurais, Qatif, Shaybah, Zuluf and Abqaiq which is known as the largest offshore oilfield4. Located about 100 kilometers from the City of Dhahran, Khobar, Eastern Province, the Ghawar oilfield which is an onshore field spans about 1260 square miles with an estimated reserve of 70 billion barrels5. This field accounts for half of the total oil production of Saudi Arabia. According to the EIA, Ghawar produces more that 5 million bbl/d of API Arabian Light crude, which is more than the production of most other countries around the world except Russia and the United States6. On the other hand, the Safaniya oilfield which is considered as the world’s largest offshore Safaniya, the largest offshore oil field in the world, is located 265 km north of the company headquarters in Dhahran. Discovered in 1951, it is 50 km by 15 km with a producing capability of more than 1.2 million barrels per day. Another giant oilfield in the country is the Khurais oild field which went online in 2009. The latest giant oilfield to rise in Saudi Arabia, the Khurais oilfield is located around 90 miles east of Riyadh. According to the New York Times, this oilfield holds around 27 billion barrels of oil which is more than the total proven oil reserve of the entire United States. According to the EIA, Aramco estimated the total depletion rate of the oilfields in the country to be about 29% as of 20097. The oldest field which is the Abqaiq is about 74% depleted while the Ghawar has exhausted about 48% of its total oil reserves. However, the newer field including the Shaybah oilfield in reported to be only about 5% depleted. To slowdown the decline in supply, the oilfields in Saudi Arabia are currently undergoing reservoir management and rehabilitation8. According to Aramco, the long term goal of Saudi Arabia is to develop lighter crude reserves including the Shaybah field located on the borders of the United Arab Emirates and to increase production efficiency in the newer fields while rehabilitating the older oil fields. b. Natural Gas According to the EIA (2009), Saudi Arabia holds about 258 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2009 while its natural gas consumption as of 2007 stands at 2.7Tcf. As it is, Saudi Arabia has the 4th largest proven natural gas deposits in the world9. Most of the non-associated natural gas deposits of the country are located at the fields of Manjura, Mazalij, , Niban, Tinat, Shaden, Al-Waar, and Fazran in the deep Jauf, Khuff, and Unaizah reservoirs (www.eoearth.org). Associated and non-associated natural gas deposits are also found in the extreme northwest of Saudi Arabia particularly at Midyan and in the southeastern desert of Rub al Kali (www.eoearth.org). According to Aramco, Rub al Khali potentially contains natural gas reserves as high as 300 Tcf. On the other hand, the largest associated natural gas deposit of the country can be found in the giant oilfield of Ghawar and in the offshore oilfields of Zuluf and Safaniya. According to the EIA, the fields of Ghawar holds about one-third of the countries proven natural gas deposits. Yet, despite the vast reserves of natural gas in the country, according to the EIA, Saudi Arabia remains relatively low and highly subsidized. c. Electricity The electric generation capacity of Saudi Arabia has more than doubled in the last two decades. According to the EIA, “Saudi Arabia's Water and Electricity Ministry estimates that the country will require up at least 30 Gigawatts (GW) of additional power generating capacity by 2023-25 -- doubling the current installed capacity of 29.1 GW -- at a cost of an estimated $90-100 billion”10 According to the EIA (2009), electricity generation of the country in 2008 is around 182 billion kilowatt-hours (Bkwh) while its electricity consumption is about 165 Bkwh. The big surge in the demand for electricity in the country has been attributed to the increase in the population in the area and the expansion of industrial base. According to the EIA, about 65 % of power plants in Saudi Arabia are gas-fed, while 27% are steam and only 8% re oil-powered. Some of the newest and largest facilities power generation facilities in the country includes the 2400-MW Ghazlan II plant north of Dammam , the1600-MW Ghazlan I; and the 2500-MW Qurayya I and II. III. Energy Profile of Bahrain11 Oil Reserves and Production12 According to the Oil and Gas Directory and the CIA World Fact Book, the proven oil reserve of Bahrain as of 2008 is 125 million barrels13. All of Bahrain’s oil reserves are located at the Awali oilfield. Aside from the oil reserves at the Awali oilfield, Bahrain and Saudi Arabia share the production at the Abu Saafa field which is roughly 300,000 barrels per day (bbl/d). In 2007, the country produced about “49,000 bbl/d of total oil liquids, of which 35,000 bbl/d was crude oil, 11,000 bbl/d was natural gas liquids, and 3,000 bbl/d was refinery gain” (www.oilandgasdirectory.com). In the same year, Bahrain is said to consume an estimated 35,000 bbl/d of oil (www.oilandgasdirectory.com). Unlike the other members of the GCC, Bahrain exports refined petroleum products instead of crude oil. It refines petroleum in its refinery at Sitra which is located south of Manama. The refinery currently has a capacity of 248,900 bbl/d. The oil refinery is owned by the Bahrain Petroleum Company (Bapco) which handles the processing and refining of oil in the country. Natural Gas Unlike the Kingdom of Saudi Arabia which has a huge supply of associated and non-associated natural gas, Bahrain’s natural gas reserve is limited. As of January 2008, the proven natural gas reserves of Bahrain stood at 3.25 trillion cubic feet (Tcf) and much of this reserve can be found in the oilfields of Awali. In 2006, Bahrain produced 390 billion cubic feet (Bcf) of natural gas which it used for local consumption (CIA World Fact Book, 2009). With the growing population and the expansion of industries inside Bahrain, the country’s natural gas reserves are not enough to meet the demand. Since the natural gas supplies from the fields of Awali is not enough to meet the demands for natural gas in the country, Bahrain is planning to import natural gas from its neighboring countries (EIA, 2009). As early as 2001, the country signed an agreement with Qatar for supply of natural gas at 500 million cubic feet per day from Qatar’s north gas and oil fields but such arrangement did not materialize as planned. As the talks for the supply of natural gas collapsed between Bahrain and Qatar, Bahrain is currently negotiating with the Iranian government for the supply of natural gas to the country. Electricity According to the EIA, Bahrain installed a 2.3 gigawatts (GW) power plant when generates energy from natural gas and oil. The power plant generates 1.2 billion kilowatt hours (Bkwh) of electricity and serves as one of the main sources for electricity in the country. Aside from the government owned power plant, Bahrain also has independent power stations namely the natural gas-fired Al Ezzel plant, with a total capacity to 950 MW as of 2007 (EIA, 2009). The Al Ezzel power plant currently provides 30% of Bahrain’s electricity needs (CIA World Fact Book, 2009). Aside from the Al Ezzel, there are three other independently owned power plants in Rifa which has a power generating capacity of 700 megawatts, in Manama which can generate 167 megawatts and at Sitra which has the capacity of 125 megawatts (CIA World Fact Book, 2009). As of 2009, the peak power demand of the country is already near its current power generation capacity of 2,230 megawatts per day (CIA World Fact Book, 2009). To meet the increasing demand for power and water in the country, the government of Bahrain through its Ministry of Electricity and Water announced the plan to build a $1 billion electric power and desalination project in February 4, 2008 (EIA, 2009). The project which is located in Al Dour is already being contrasted and it to finished and become operational in the later part of 2010. Once the project is completed, it is expected to generate 1,200 megawatts of electricity daily and will produce 48 million gallons of desalinated water (EIA, 2009). IV. Energy Profile of Kuwait Oil Reserves and Production Like the Kingdom of Saudi Arabia, Kuwait has some of the largest oil deposits in the world. According to the EIA, Kuwait has an estimated 101.5 billion barrels of proven oil reserve. The amount of oil deposits located with the territories of Kuwait accounts for about 8% of the total world supply of oil. About 5 billions barrels of reserves under Kuwaiti territory is located in the Saudi-Kuwaiti Divided Zone which means that all in all, Kuwait holds around 104 billion barrels of oil reserve. Most of the oil reserves of the country are located at the Greater Burgan region which comprises the Magwa, Burgan and Ahmadi oil facilities constructed in 1938 (CIA World Fact Book, 2009). Aside from the Greater Burgan area, the fields of Sabriya, Raudhatain and Minagish also hold plenty of oil reserves. Raudhatain has 5.1 billion barrels in oil reserves while Sabriya and Minagish have 4.3 billion and 3.3 billion barrels of oil reserve (CIA World Fact Book, 2009). Very light oil can also be found in the areas of Kara al-Marou, Sabriya and Unm Niqa. At present, Kuwait has around 1,600 producing oil wells located all over the country. However, most of these fields are already more than 60 years old and like some of the oil fields of Saudi Arabia, these wells are already depleted to a large extent (EIA, 2009). In fact, in 2005, Kuwait Oil Company (KOC) lowered its production plateau estimates for the Greater Burgan area from 2 million bbl/d to 1.7 million bbl/d over a 20-30 year period, citing that the oil wells in the area are almost depleted (EIA, 2009). According to the EIA, a leaked memo issued by the KOC said that the total reserve of the country is only half of what was declared by the government. Consequently, this could mean that the oil reserves of the county will last for only about 50 years instead of the previously projected 105 years. However, the Kuwaiti government denied this allegation stating that such data only refers to some of the oilfields in the country and does not represent the oil reserves of the entire nation. At present, Kuwait continues to plan for significant expansion of its oilfields. The country hopes to reach a production capacity of 4 million bbl/d by 2010 and 5 million bbl/d by 2020. To increase production, Kuwait aims to increase the outputs of five of its northern oil field namely, Sabriya, Bahra, Ratqa, Raudhatain and Abdali. However, there are some sectors that are not comfortable with Kuwait’s plan to increase its production rate. According to the Oil and Gas Journal, the controversy over Kuwait’s oil reserve figure can affect the expansion plans of the country. Natural Gas Although Kuwait has a vast oil reserve, its natural gas reserves are not as plentiful. According to the EIA, as of 2004, the country only has 55.5 trillion cubic feet of natural gas reserves. Most of the natural gas reserves of the country are associated gases which are found and produced in conjunction with oil. To bolster its natural gas production, the country is currently conducting exploration in the Raudhatain oil field to find natural gas deposits. The country is also negotiating with the Saudi Arabia and Iran for drilling at the Durra filed which has been claimed by the three countries. Electricity Kuwait has five power plants located in Doha East, Doha West, Shuaiba South, al-Subiya and A Zour South. The total power generation capacity of these power plants is 9.4 gigawatts. According to the EIA, Kuwait has one of the highest electricity consumption in the world due to its reliance on desalination for water and heavy use of air conditioning systems. The power rate consumption of the country is said to increase around 7% to 9% per year and given this kind of demand for electricity, the country will need to construction more power plants to meet the growing needs for electricity. V. Energy Profile – Oman Oil Reserves and Production According to the Oil and Gas Journal, as of January 2007, the proven oil reserve of Oman is at 5.5 billion barrels. The oil deposits in Oman were discovered years after its neighbors started extracting oil from its fields and unlike the oil deposits in Saudi Arabia and Kuwait which are plentiful and concentrated in certain areas, the oil deposits in Oman are relatively smaller, less productive and scattered throughout the country. According to the Oil and Gas Journal, the average well in Oman can only produce around 400 barrels a day which is roughly one-tenth of the production of an average well in Kuwait and Saudi Arabia. Since 2005, the oil production in Oman has decreased by 5% to 7 % in the last six years. According to the EIA, the production rate of the oil wells in Oman is more likely to decrease further as the oil reserves in the area drop lower. To offset the decline in the outputs of the oil wells, the Minster of Oil and Gas of the country invested in upstream oil and natural gas. Natural Gas According to the CIA World Fact Book (2009), the proven natural gas reserves of Oman as of January 2009 are at 849.5 billion cu m. As the country veers away from oil production to natural gas extraction, Oman’s natural gas production has increased significantly since 1999. In February 2007, Oman started commercial production at the Shams field in Block 44 at an initial rate of 50 million cubic feet per day. As of January 2008, the total natural gas production of the country is at 24 billion cubic meters while its natural gas consumption is at 13.46 billion cu m (CIA World Fact Book, 2009). In that same year, Oman exported 10.89 billion cu m. (CIA World Fact Book, 2009). Electricity As of January 2007, the electricity production of Oman was at 13.58 billion kilowatt hours while its electricity consumption is at 11.36 billion kilowatt hours (CIA World Fact Book, 2009). VI. Energy Profile of the United Arab Emirates Oil Reserve and Production The United Arab Emirates (UAE) is a federation of seven emirates namely Dubai, Abu Dhabi, Sharjah, Fujairah, Ajman, Umm al-Qaiwain and Ras al-Khaimah. According to UAE, each of the seven emirates shall have control over their oil production and resource management. According to the EIA, as of January 2009, the proven oil reserve of the UAE is 97.8 billion barrels while its production as of 2008 is at 3.0 million barrels per day. The oil refinery of the country has the capacity to distill crude oil up to 781,000 barrels per day. In terms of consumption, the entire country consumes about 525,000 barrels per day. The major oil fields of the country are located in Abu Dhabi, Dubai and Sharjah. Abu Dhabi has four major oilfields namely, Bab, Asab, Bu Hasa and Al-Zakum. Dubai has three major oilfields - Falah, Fateh, and Southwest Fateh – while Sharjah has one which is the Mubarak oilfields (EIA, 2009). The major refineries in Dubai are Ruwais and Umm al-Nar. The Ruwais refinery can process 350,000 bbl/d while the Umm al-Nar can process 150,000 bbl/d. The other three big oil refineries of the country are located in Dubai (with 120,000 bbl/d capacity), Fujairah (with 90,000 bbl/d capacity) and Sharjah (with 71,250 bbl/d capacity) (EIA, 2009). Natural Gas According to the CIA World Fact Book (2009), as of January 2009, the proven natural gas reserves of the United Arab Emirates are at 214.4 trillion cubic feet. The production rate for natural gas of the UAE as of 2008 is 1.77 trillion cubic feet while its consumption is at 2.1 billion cubic feet (CIA Work Fact Book, 2009). The largest reserves of natural gas in the country are located in Abu Dhabi while Dubai, Ras al-Khaimah has smaller amounts of natural gas reserves. According to the EIA, the non-associated natural gas reserves located beneath the oil fields of Umm Shaif and Abu al-Bukhush ranks among largest in the world. Electricity According to the CIA World Fact Book (2009), as of January 2007, the electricity production of the United Arab Emirates has reached 71.5 billion kilowatt hours while its total electricity consumption stands at 66 billion kilowatt hours. However, according to the EIA, the energy consumption of the UAE is bound to increase drastically in the next few years. According to the EIA (2008) and the CIA World Fact Book (2009), 65% of the power supply of the country is generated through the use of natural gas while 35% is generated through oil. The different emirates have their own power plants which supply energy within its territories. VII. Energy Profile of Qatar14 Oil Reserves and Production Qatar has significant oil deposits and as of January 2009, the proven oil reserves of the country are at 15.2 billion barrels (CIA World Fact Book, 2009). According to the EIA, as of 2008, the oil production of the country is at 1.2 million barrels per day, of which 850,000 barrels was crude oil. The country’s oil refineries have a combined capacity of 129,000 barrels per day. The Dukhan oil field which is located on the west coast of the peninsula is the largest oil producing field in the country. Aside from the Dukhan field, Qatar also has six offshore oil fields namely Maydan Mahzam, Bul Hanine, al-Shaheen, al-Rayyan, Id al-Shargi North Dome, and al-Khalij. Natural Gas Unlike Bahrain which has limited amounts of natural gas, Qatar has a vast natural gas reserves. According to the CIA World Fact Book (2009), the proven natural gas reserves of the country is at 910.5 trillion cubic feet (Tcf) and is about 15% of the total world reserves for natural gas. As it is, the country ranks 3rd in terms of natural gas deposits next to Russia and Iran (CIA World Fact Book, 2009). Most of the country’s natural gas is located at the offshore North Field. Electricity According to the EIA (2009), the electricity production capacity of Qatar is 15 billion kilowatt hours while its consumption is at 13.7 billion kilowatt hours. Since the country has massive supply of natural gas, 78% of its power comes from natural gas and only 22% comes from oil. As the population of the country increases and the industries in the area grow, it is expected that the electricity consumption of the country will increase drastically in the future. VIII. Country Comparison and Conclusion The energy reserves, production and consumption among the GCC countries vary. Countries like Saudi Arabia and Kuwait have vast deposits of oil while countries like Oman and Bahrain have limited reserves. The amount of reserves in each GCC country may be affected by the land area of the country. Note that Saudi Arabia has a huge land area as compared to Bahrain thus, Saudi Arabia can easily have more than 1,500 wells in different locations while Bahrain only has a few oil wells located in its single oil field. Moreover, the geographical terrains of the GCC countries affect the amount of oil they have. Oman for instance has an average land area but it has only limited amounts of oil reserves and these reserves are scattered all over the country. Although the different GCC countries have different amounts of oil and natural gas reserves, all of these countries now face the challenge of resource depletion. In Saudi Arabia for instance, its biggest oil field the Ghawar is already 78% depleted and some of its smaller fields are also beginning to run dry. On the other hand, Kuwait is also facing possible shortage of oil resources as its wells start to run dry. With the increasing demand for fuel and energy from within these countries and in other parts of the world, the threat of over extraction of oil and natural gas is very real. Bibliography Books and Journals 1. Peterson, Erik R. (1988) The Gulf Cooperation Council: Search for Unity in a Dynamic Region. Boulder, CO: Westview Press 2. CIA World Fact Book (2009) 3. Energy Information Administration (EIA) Country Fact Index (2009) Websites 1. Aramco http://www.saudiaramco.com/irj/portal/anonymous?favlnk=%2FSaudiAramcoPublic%2Fdocs%2FOur+Business%2FOil+Operations%2FOil+Fields+%26+Reserves%2FSafaniya&ln=en 2. Country Analysis Briefs – Saudi Arabia http://www.eia.doe.gov/emeu/cabs/Saudi_Arabia/Oil.html 3. Energy Profile – Bahrain http://www.eoearth.org/article/Energy_profile_of_Bahrain 4. Energy Profile – Bahrain http://www.oilandgasdirectory.com/2009/research/Bahrain.pdf 5. Energy Profile – Kuwait http://www.eoearth.org/article/Energy_profile_of_Kuwait 6. Energy Profile – Oman http://www.eoearth.org/article/Energy_profile_of_Oman 7. Energy Profile – Qatar http://www.eoearth.org/article/Energy_profile_of_Qatar 8. Energy Profile – United Arab Emirates http://www.eoearth.org/article/Energy_profile_of_United_Arab_Emirates 9. Energy Profile of Saudi Arabia http://www.eoearth.org/article/Energy_profile_of_Saudi_Arabia 10. United Arab Emirates Energy Profile http://www.eia.doe.gov/emeu/cabs/UAE/Profile.html Read More