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Middle East and Peak Oil - Sept 10

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Debate about peak oil is misleading

David Robertson, Emirates Business 24/7
Flying across the Gwahar oil field in Saudi Arabia is a startling reminder of just how vast and impressive the oil industry is. Wells are dotted everywhere, huge pipes run across the desert and towers belch fire as the excess gas is flamed off. Gwahar is the largest oil field in the world and seen at sunset from above, it looks beautiful.

The enormity of an operation such as Gwahar can make us complacent about the scarcity of the world's supplies of oil but, as we all know, this is a finite resource and it will not last for ever. Dubai is already moving to a non-oil economy and many other countries [the UK not least] will have to do the same in the coming years.

This has led to the concept of "peak oil" – the point at which there is less oil left in the ground than the amount we have taken out. There are plenty of theories about when peak oil will be reached: two years ago, next year, five years… take your pick.
Despite the rather pessimistic view generated by the concept of peak oil, new fields are being discovered all the time. One pops up and then another, and another. Each new discovery pushes peak oil just a bit further away and leaves us wondering whether the panic over declining oil reserves is just another bit of eco-hype.

...However, before we get complacent and rush out to swap the Toyota Prius for a thirsty Land Rover, none of this new development is going to be easy to exploit. The days of oil bubbling out of the ground, as it used to do in Saudi and Bahrain, are long gone and the new fields are often extremely hard to tap.

Take the BP find in the Gulf of Mexico. Its drill hole is a staggering 10,685 metres deep – this is nearly two kilometres more than the height of Mount Everest. The well is also in deep water, which will make it much more expensive to construct a drilling platform and pipeline to shore.
Analysts were estimating last week that BP's cost of production from the Tiber field could be as high as $40 (Dh146.92) a barrel, which given that we have seen oil as low as $33 this year may not be very attractive to shareholders. Also, while there may be five billion barrels of oil in the field the chances of BP getting anywhere near that amount out of the ground is zero.

...The debate about peak oil is, therefore, misleading. We are not about to run out of oil any time soon, but we are going to have to pay a great deal more to get it out of the ground. We should be focussing on cost of production rather than some mythical tipping point at which we start to run out of oil...
(8 Sept 2009)
The writer is a Business Correspondent of The Times of London


Saudi provides realistic outlook on energy future

Mohamed A Ramady, The National
Peak oil predictions – including that dreaded day when the maximum rate of extraction is reached, after which the rate of production enters decline, leading to depletion of reserves – are back.

Unlike some previous forecasts, recent reports are more sober.

The debate on output highlights the Saudi government’s increasing calls for a more “equitable” oil pricing level at US$75 a barrel. This would encourage continuous investment in this vital energy sector, while at the same time ensuring that peak oil thresholds are pushed back.

Saudi pleas seem to have fallen on deaf ears, as recession-hit Western governments are loath to see higher energy prices for domestic political reasons. This comes almost a year after oil prices hit peaks of $147 a barrel and the same leaders were trooping to Saudi Arabia to literally beg for increased oil production to bring prices down.

...The collapse of oil prices to the $30-$45 levels was a short-term blessing that masks the urgency of the Saudi warning that more, and not less, investment is now needed.

..The implications are many: more energy market concentration in a few, predominantly Middle East hands, with future accusations of oil pricing “blackmail” and geopolitical tensions and rivalries in the region.

...It behoves the world to take the Saudi warning very seriously. Like it or not, the fates of oil consuming countries such as the US to that of Saudi Arabia are connected and will remain so for decades to come...
(6 Sept 2009)
Dr Mohamed A Ramady is a former banker and visiting associate professor, finance and economics at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia


OAPEC to spend $133 bn on boosting refinery output

Kevin Baxter, Arabianoilandgas.com
A study by the Organisation of Arab Petroleum Exporting Countries (OAPEC) has said that Arab countries will invest over $133 bn in boosting existing refinery capacity in the next six years.

...The report, published in Emirates 24/7, stated that $96.4 bn would be spent on new facilities while the remainder would go on expansion capacity of existing refineries. The report also said that considering the massive amounts of oil Arab states actually produce, the joint refining capacity was very low. Arab countries operate less than 10% of the world's refineries -- 64 out of a total 655 -- which produce 9% of global capacity -- 7.55 mm bpd out of a total of 82.5 mm bpd...
(10 June 2009)


Abu Dhabi to invest $10 bn on green projects

Kevin Baxter, arabianoilandgas.com
The CEO of Masdar, the state-owned company specialising in the development of green energy projects, has said that the company still had major investments to make in various areas and has only spent $3 bn out of a budgeted $15 bn.

...The centrepiece of all of the Emirate's green commitments is the carbon-neutral Masdar City.

...Abu Dhabi hopes to generate 7% of its electricity using renewable sources.
(10 June 2009)


UNDP Arab Human Development Report 2009

United Nations Development Programme
The starting point for the present Report is that, since the publication of the first volume in the series, the region's human development fault lines have grown more complex, and in some cases deepened. While there has been some improvement in quality of life in some countries, there are still too many people in the Arab region living insecure lives, too many people living under persistent pressures that inhibit them from realizing their potential as human beings, and too many traumatic events cutting lives short. In some Arab countries, more than half of the population lives in hunger and want, with no means to look after their families or safeguard their own quality of life. Recent fluctuations in global food prices as well as the current global economic crisis have sent even more people into poverty and malnutrition. Health systems leave many beyond their reach. Water scarcity looms as an existential threat on the horizon. And armed conflicts take their grim toll in the destruction of human lives.

The AHDR 2009 argues that the trend in the region has been to focus more on the security of the state than on the security of the people. While this adherence to the traditional conception of security has in many cases ensured the continuity of the state, it has also led to missed opportunities to ensure the security of the human person, and has left the bond between state and citizen less strong than it might otherwise be. And it has hampered the region's embrace of diversity, curtailing opportunities to welcome population groups of differing origins and inclinations into the national project. The result is an all-too-common sense of limited opportunities and personal insecurity, witnessed in the world's highest levels of unemployment, deep and contentious patterns of exclusion, and, ultimately, strong calls from within for reform. Indeed, the pursuit of state security without attention to human security has brought on suboptimal outcomes for the state and citizen alike. And in the long run, the government that pursues state security without investing in human security is the government that achieves neither.

- from the foreword by Amat Al Alim Alsoswa, Assistant Secretary-General and Assistant Administrator, Regional Director, Regional Bureau for Arab States,
United Nations Development Programme (UNDP)
(2009)

Contributor's comments - Rahul Goswami
This selection of reports and comments is fairly representative of the popular view about energy and its place in the lives of the people of the Middle East. The mainstream media in the Arabian peninsula is, in almost every case, connected to one or another ruling family of the states of the GCC, the Gulf Cooperation Council. That's why their views will support those of their patrons. The comment in Business24-7, a UAE newspaper, is taken from the Times, London. The reporter has mis-spelt the giant Saudi oilfield, which should read 'Ghawar'. The reporter's dismissal of peak oil and his populist imagery serve to illustrate how difficult the mass media (whether in London or Dubai) seem to find the subject.

The second comment, published by the Abu Dhabi daily, 'The National', is of greater value. Dr Ramady makes a few points worth thinking carefully about: that the KSA (Kingdom of Saudi Arabia) plans to invest more than US$400 billion over 15 years to increase production to 16 million barrels per day (from its 2008 level of 10,846,000 bpd, according to the BP Statistical Review of World Energy 2009); that the KSA argument for US$75/barrel is an 'equitable' price that will encourage investment and thereby ensure that "peak oil thresholds are pushed back"; and that this is 'warning' from KSA that the fates of oil consumers are tied to those of oil producers.

The first of two short reports in Arabian Oil and Gas helps explain the Saudi view. The huge planned increase in refining capacity is to bring the Middle East region's total refining capacity to 12,500,000 bpd up from the 7,592,000 bpd (BP Statistical Review). KSA is therefore seeing a producing-consuming world, within 15 years, in which its own production will increase 67% and the region's refining capacity will rise 60%. The second of the Arabian Oil and Gas reports celebrates another milestone in Abu Dhabi's renewable energy programme (with the curious and staggeringly expensive Masdar City as its showpiece, a 'renewable' oasis in an emirate that will not retrofit its existing urban dwellings and systems to meet its 'carbon-neutral' aims).

Finally, this year's Arab Human Development Report 2009 helps place the energy, oil and renewables debate squarely within the community and social framework. This is not a report the GCC likes, not this one and none of its earlier editions. The foreword sets the tone for the critical current that runs through the 265 pages of analysis, indices and examples.

Editorial Notes: EB contributor Rahul Goswami is a "Researcher and writer based in Goa, India and Berlin, Germany. Areas of study: local economies, energy and food interweaves, community planning.

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