Arab oil producers are on target this year to earn their highest annual oil revenues ever with prices averaging above US$100 a barrel for the first time.
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That should provide many economies in the Middle East with a dramatic boost in hydrocarbon related revenues - Saudi Arabia is earning about US$1 billion (Dh3.67bn) per day.
But could this crest of the wave signal the end of the easy-oil era, and what does it mean for the oil market outlook?
For much of the 20th century, the region has been blessed with a steady flow of low-cost oil production, thanks to its abundance of conventional reservoirs - in parts of Iraq crude oil has been known to bubble to the surface without any technical assistance.
But as a relatively mature oil producing region, there is renewed focus on improving recovery from many of the Middle East's largest fields. The world's largest reservoirs, such as Kuwait's Burgan and Saudi Arabia's giant Ghawar, have pumped more than half their recoverable reserves after 50 years - the point at which production traditionally begins to decline.
When Oman faced huge production declines in the past decade, it turned to enhanced oil recovery (EOR) technology to reverse the collapse and now these techniques are responsible for harvesting about a third of the country's production - which amounts to salvaging about $30 million a day in oil revenue at current prices.
The state-owned Saudi Aramco is currently evaluating the use of carbon dioxide injection technology to avert production declines and plans a series of pilot programmes in mature oil fields such as Ghawar, the world's largest, by next year.
The US Geological Survey estimates there are some three trillion barrels of heavy oil in the world, about 100 years of global consumption at current levels. The catch: only a fraction of it - about 400 billion barrels - can be recovered using existing technology. New techniques are required to unlock more.
There are an estimated 970 billion barrels of heavy and extra-heavy crude oil reserves known in the Middle East region, but until now much of it has been left undeveloped because there has been so much easily accessible oil to develop. But with ageing reservoirs and prices exceeding $100 per barrel, the economics of using EOR to go after heavy oil extraction become more attractive.
Global EOR spending has leapt from a standing start over the past decade to almost $100bn and is expected to continue growing rapidly with the support of government investment as we have seen in Oman, the UAE and now Saudi Arabia.
In US, the department of energy has estimated full use of EOR technology in US oilfields could generate an additional 240 billion barrels of recoverable resources, which at current oil prices amounts to about $24 trillion, almost 50 per cent more than the national debt.
EOR is a series of techniques used to increase the amount of oil that can be extracted from any particular reservoir. During its life cycle, an oilfield goes through a number of distinct phases where various techniques are employed to maintain crude oil production at plateau levels - primary, secondary and tertiary recovery.
Arab oil producers are entering the tertiary phase, that requires techniques such as injecting steam, gas or chemicals into a reservoir to make the oil thinner and easier to extract from tight rock formations.
EOR played a significant role in salvaging the Omani oil industry, which was facing significant production declines - between 2001 and 2007 Oman's oil production fell by 27 per cent. But by 2009, due mostly to EOR projects, oil production had increased by 17 per cent.
In total, four major Omani projects are planned to start by next year, with at least another two expected to start soon after. By next year, Oman is expected to be producing between 250,000 and 300,000 barrels of oil per day using EOR methods, about a third of the country's total output.
In the UAE, the Abu Dhabi Company for Onshore Oil Operations (Adco) initiated an EOR project in November 2009 to test the injection of carbon dioxide into the North-East Bab field, a complex carbonate reservoir. Adco's main objectives for utilising carbon dioxide EOR techniques are to significantly increase recoverable reserves, sustain long-term production and maximise ultimate recovery. The high oil price has resulted in significant investment in EOR methods globally, and has already borne fruit in arresting the decline in US oil production.
EOR methods, along with advanced technologies designed to extract unconventional oil and gas, could ultimately significantly increase the supply of oil around the world, forcing many Middle Eastern oil exporters to rethink their strategies.
(Stuart Walley is the regional manager for Senergy in the Middle East and India).
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Company%20profile
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
How to donate
Send “thenational” to the following numbers or call the hotline on: 0502955999
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BIGGEST CYBER SECURITY INCIDENTS IN RECENT TIMES
SolarWinds supply chain attack: Came to light in December 2020 but had taken root for several months, compromising major tech companies, governments and its entities
Microsoft Exchange server exploitation: March 2021; attackers used a vulnerability to steal emails
Kaseya attack: July 2021; ransomware hit perpetrated REvil, resulting in severe downtime for more than 1,000 companies
Log4j breach: December 2021; attackers exploited the Java-written code to inflitrate businesses and governments
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Bareilly Ki Barfi
Directed by: Ashwiny Iyer Tiwari
Starring: Kriti Sanon, Ayushmann Khurrana, Rajkummar Rao
Three and a half stars
Company Profile
Company name: NutriCal
Started: 2019
Founder: Soniya Ashar
Based: Dubai
Industry: Food Technology
Initial investment: Self-funded undisclosed amount
Future plan: Looking to raise fresh capital and expand in Saudi Arabia
Total Clients: Over 50
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
Killing of Qassem Suleimani
'The Ice Road'
Director: Jonathan Hensleigh
Stars: Liam Neeson, Amber Midthunder, Laurence Fishburne
2/5
The Great Derangement: Climate Change and the Unthinkable
Amitav Ghosh, University of Chicago Press
