The Gulf Corporation Council (GCC) region is part of the wider Middle East, and presently consists of six member-states, namely, the State of Kuwait, Kingdom of Saudi Arabia, State of Qatar, Kingdom of Bahrain, United Arab Emirates (UAE) and Sultanate of Oman. Relative to world hydrocarbon scales, these six states are highly oil and gas rich, and combined, produce today about 25% of the world’s oil production and 10% of the world’s gas production. In terms of future reserves, they combined hold today about 30% of the world’s oil reserves and 20% of the world’s gas reserves. This signifies the impact such a region has on the global energy market.
Having said the above, it is interesting to note if nearby Iran and Iraq are included in the above statistics, then the extended region holds 45% of the world’s oil reserves and 35% of the world’s gas reserves. The extended region has the potential to produce significantly higher than current production rates, in terms of both oil and gas, if the political and investment environments were to be favoured, stabilized and commercially optimized.
It seems many parts of the world, and not only the wider Middle East or GCC regions have been producing for the past 50 to 100 years, and have certainly produced - and still producing from - most of their large hydrocarbon accumulations or the so called ‘crown jewel’ fields. Several large fields seem to be presently exhibiting close to peak potential production capacity. Globally and regionally, declining field production is usually counterbalanced by new but smaller field additions or by intensifying existing field development programs to sustain production capacity, i.e. moving to expensive enhanced or tertiary production regimes. The production plot below shows the production leveling capacity in the GCC region beyond 2010 to current date.
The Middle East has been maximizing value by not only exporting crude oil and gas, but also investing in additional refining and petrochemical production capacities for both local use and export. In the GCC region, almost all member states have started, beside crude oil and gas export, the production and export of increasing volumes of fuels, commodity petrochemicals in the form of polyethylene and polypropylene, and specialty chemicals such as derivatives used in the plastics, rubber, pharmaceutical and cosmetics industries. Manufacturing of such chemicals is either made inside the GCC region or other regions worldwide, targeting sale of such materials in the regional and international markets, usually and primarily targeting the East Asian region. By utilizing some of the crude to manufacture chemicals, these countries can now positively extract additional value from each oil barrel, but this is not trivial as petrochemical manufacturing requires heavy investments, and expensive technology licensing acquisitions or alliances.
The world has lived through several peaks and troughs in oil price fluctuations, which seem to occur periodically almost every decade or less, as the case proved lately, and this has affected not only suppliers of hydrocarbon but also consumers. Oil prices do impact quite heavily world economies with indirect effect on several related industries, some affected more than others. It is clear that, in the Middle East region, even something like real estate is directly affected by oil price movements as GDP is lowered, demoting all associated businesses during rapidly declining oil price periods, while energy companies reducing activities and sometimes cutting staff.