GCC oil and gas reserves 'worth $18.3 trillion'
Dubai, October 13, 2009
The present value of the oil and gas reserves of the six countries of the GCC is estimated at $18.3 trillion, according to an economic note released by the Dubai International Financial Centre Authority (DIFCA).
That figure assumes a conservative price of oil at $50 per barrel and gas at $9 per million BTU; if oil prices were to average $100 per barrel and gas $15, the present value of GCC energy reserves would be $37.7 trillion, equal to the world’s total stock market capitalisation at the end of 2008.
According to Economic Note No. 6, prepared by the DIFC Authority’s Economics unit and entitled 'Wealth Effects in the GCC from Energy Commodity Prices', this energy commodity wealth is sufficient to finance the transformation of GCC countries into diversified economies through investments in infrastructure and education.
The report’s authors also note that this wealth, as it is extracted, will be invested worldwide, with “non-negligible repercussions on asset valuations and in particular on the continuing restructuring of the world’s financial and corporate sectors.”
“The DIFC considers it a part of its mission, not only to provide the legal, regulatory and operating infrastructure necessary to support the growth and deepening of capital markets in the region, but also to contribute to the body of research and analysis that is so crucial to efficient decision making by all participants in today’s sophisticated global financial markets,” stated Dr Omar Bin Sulaiman, Governor of the DIFC.
Breaking down the $18.3 trillion total, the study shows that the present value to 2030 of GCC oil reserves is $11.2 trillion, assuming a 3 per cent rate of return (and discount rate) and a price of $50 per barrel (at 2009 constant prices), while GCC natural gas reserves would be $7.1 trillion, assuming a discount rate of 3 per cent and a price of $9 per million BTU.
The analysis explores results under a variety of hypotheses, including energy prices with oil at $25, $50 and $100 per barrel; gas prices at $4, $9 and $15 per million BTU and three levels of the real discount rate, 1 per cent, 3 per cent and 5 per cent.
The research calculations were conducted under the assumption that oil and gas production is kept constant at 2008 levels and that both oil and gas reserves in the GCC (as a result of new discoveries and/or improved recovery rates resulting from improved extraction technologies) grow, though at a decreasing rate from 0.5 per cent in 2009 to 0 in 2030.-TradeArabia News Service