The GCC’s hydrocarbon reserves are estimated to be worth around US$65trn at current export prices, based on new analysis from QNB Capital.
This is almost a third of the $200trn value of world oil and gas reserves.
To put US$65trn in context, it is equivalent to 47 times the GCC’s estimated GDP in 2011, or 93% of global GDP. It is also 125 times the estimated US$521bn that the region’s governments received in oil and gas revenue during 2011.
The rest of the MENA region has the next largest share of global hydrocarbon reserves (23%), particularly in Iraq and Iran, followed by Europe and Eurasia (16%), mainly Russia and Kazakhstan.
In volume terms, the GCC’s 495bn barrels of oil account for 36% of global oil reserves and its 42trn cubic metres of gas are 22% of global gas reserves.
Splitting down the total hydrocarbon reserves by country shows that Saudi Arabia represents almost half the GCC total, followed by the UAE, Kuwait and Qatar which each have around a sixth of the total. Qatar’s share is worth about US$9.5trn. Oman has only 1.2% 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) $42trn.
As gas prices vary considerably between countries, unlike oil prices, QNB Capital assumed a gas price of about US$7.5 per thousand cubic feet, an average of US, 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 US$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 US$109/barrel in 2011.
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 subsidised 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.
The positives and negatives may broadly cancel out, making US$65trn a fair, if rough, estimate. In any case it is clear that the GCC’s oil and gas reserves have been, and continue to be, a remarkable asset for the region. Even after decades of extraction to date, 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.