Hydrocarbon reserves of the six-nation Gulf Cooperation Council (GCC) are estimated to be worth around $65 trillion at current export prices, constituting almost a third of the $200 trillion value of world oil and gas reserves, says a new analysis by the Qatar-based QNB Capital.
To put $65 trillion in context, it is equivalent to 47 times the GCC's estimated GDP in 2011, or 93 percent of global GDP. It is also 125 times the estimated $521 billion that the region's governments received in oil and gas revenue last year.
The rest of the MENA (Middle East and North Africa) region has the next largest share of global hydrocarbon reserves (23 percent), particularly in Iraq and Iran, followed by Europe and Eurasia (16 percent), mainly Russia and Kazakhstan, the analysis said.
In volume terms, the GCC's 495 billion barrels of oil account for 36 percent of global oil reserves and its 42 trillion cubic meters of gas are 22 percent of global gas reserves.
Saudi Arabia represents almost half of the GCC total reserves, followed by the UAE, Kuwait and Qatar each having around a sixth of the total. Qatar's share is worth about $9.5 trillion. Oman has only 1.2 percent of the regional total and Bahrain less than half that amount.
These estimates are only indicative as hydrocarbons prices are volatile and hard to predict given that they are influenced by a number of factors. These factors include world economic growth, geo-political risk, energy efficiency and technological advancements. If the lower hydrocarbon prices recorded in 2009, which can be seen as a worst case scenario, were used in QNB Capital's calculation, then the reserves would be worth (only) $42 trillion.
As gas prices vary considerably between countries, unlike oil prices, QNB Capital assumed a gas price of about $7.5 per thousand cubic feet, an average of U.S., European and Asian pipeline and liquefied natural gas (LNG) import prices.
This is a reasonable estimate of what gas is currently worth to the main importing countries. At these prices, it would cost about $40 to purchase a volume of gas that produces the same amount of energy as a barrel of oil. Therefore, exported gas is worth just over a third of the oil price, which is estimated at $109 a barrel in 2011, the Arab News reported.
Gas can be regarded as even cheaper relative to oil if environmental costs are taken into account as it is a cleaner burning and more efficient fuel. Therefore, it is possible that, as technology makes it cheaper and easier to transport and use gas (including in vehicles), its discount to oil may reduce. This would increase the value of gas reserves relative to oil reserves.
QNB Capital also stated that its calculations may be an underestimate because new reserves will probably be found. Also, technological advances and high prices will make a larger share of the existing in place reserves commercially exploitable.
On the other hand, the estimated value for GCC hydrocarbon reserves overestimates the value of reserves for two reasons. It assumes that all the hydrocarbons are extracted today and sold at current prices. However, in practice a substantial portion of the oil and gas is consumed domestically at subsidized prices for power generation, vehicle fuel and industry feedstock. In addition, a discount factor is applied to the value of expected future revenue, compared to cash in the bank today, because of interest rates.
QNB Capital estimates that, at current production rates, the current official oil reserves would last for about 70 years and gas for 118 years, on a region-wide basis. Their careful use will therefore shape the GCC's economic future well into the next century.
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