Mideast Economic Notes

By John Haldane

Oman Oil Output Highest Ever

Latest Omani government figures indicate that that country has set a new oil production record. Output averaged 468,000 barrels a day (b/d) in the first quarter of 1985, nearly 8 percent more than in the previous quarter.

With oil production now running above 400,000 b/d, Oman can no longer be considered a marginal producer of oil. While it is neither a member of OPEC nor OAPEC (Organization of Arab Petroleum Exporting Countries), it now produces more oil than several OPEC countries. Oman's production target of 500,000 b/d by the late 1980's is believed to be feasible, in view of production increases from new fields.

In 1983, Oman's total oil receipts equaled $3.8 billion, out of total revenues of $4.4 billion. Petroleum and petroleum related products represented more than 50 percent of Oman's GDP.

Qatar Developing Huge Gas Field

A generally weak worldwide demand for crude oil has encouraged Qatar to accelerate its plans to develop the huge North Field offshore gas field. With proven reserves of 150 trillion cubic feet and estimated reserves at twice that figure, the field is large enough to ensure Qatar's domestic energy supplies and guarantee sizeable export earnings into the foreseeable future.

The Qatar General Petroleum Company signed agreements in June, 1984 with the British Petroleum Company and the Compagnie Francaise Des Petroles to begin production studies on the first phase of the North Field project. This phase involves bringing about 600 million cubic feet of natural gas ashore for use in Qatar's electricity/desalination plants and in its industrial factories as fuel and feedstock. The second, and larger, phase of development would involve construction of an LNG processing plant and shipping terminal. The total cost of this export-oriented project is estimated to be about $6 billion.

Bahrain Diversifying Its Economy

The Arabian Gulf State of Bahrain, located about 15 miles offshore from Dhahran, Saudi Arabia, is making serious efforts to become a regional center for communications and services. Already it is the Gulf's principal base for banking, with 77 offshore banking units and a total of more than 160 financial institutions. Bahrain is also a regional leader in providing insurance and ship repair Bahrain now is striving to become the Gulf's focal point for regional business operations and Gulf joint venture industrial projects. Bahrain has important aluminum, iron ore pelletisation, and gas liquefaction installations. It soon will add a petrochemical complex, an aluminum rolling mill, and a sulphuric acid plant. A charter member of the Gulf Cooperation Council (GCC), Bahrain is encouraging other member states to take advantage of its modern business and communications facilities.

Need for OPEC Oil Will Continue

An April, 1985, report by the Coordinating and Planning Department of Conoco, Inc. entitled "World Energy Outlook Through 2000," makes clear that OPEC oil will become increasingly important as the 21st century approaches. It projects that "OPEC will supply more than half of the world's oil in the year 2000, up from about two-fifths in 1984. World reliance on natural gas from the Soviet Union and OPEC also will increase significantly. Over the remainder of the century, the non-Communist world will rely on OPEC and Communist nations for fully one-fourth of its energy."

Although coal, nuclear power and renewable energy sources will supply an increasing share of the world's energy needs, the shift away from oil and gas has been slowed by their increased price competitiveness, the report states. As a result, oil and gas still will supply nearly three-fifths of the world's energy by the year 2000.

The drop in crude oil prices has seriously discouraged exploration and development efforts in non-OPEC countries. The result is expected to be a gradual decline over the next 15 years in total non-OPEC supplies, including a 15 to 20 percent reduction in U.S. and North Sea production and vanishing exports from the Communist countries. Beyond 1990, Norway and Mexico are the only two non-OPEC countries with the potential to boost oil output substantially.

Thus, slowly rising demand and peaking non-OPEC supplies will mean increasing reliance on OPEC oil. The report notes that this trend is not readily apparent at present because more than a third of OPEC's production capacity stands idle and predominant near-term price pressures are downward. But, by the early 1990's, most of OPEC's remaining excess capacity will be concentrated in countries such as Saudi Arabia that have the least-pressing revenue needs. Simultaneously, OPEC's production will become increasingly concentrated in the Middle East, where the bulk of its reserves remain. OPEC also will realize rapidly rising oil export revenues in the 1990's. Altogether, the report concludes, these factors will restore OPEC to a much more powerful position in world oil markets.

John Haldane is a specialist in Middle East affairs who has served as a foreign service officer in Baghdad, Beirut and Cairo, and as an international economist in the Departments of Commerce and Treasury.