Who dares predict what revenues oil producers will earn from oil and gas exports in ten, twenty or thirty years’ time? The last couple of years have provided a sobering lesson in the extreme volatility of oil prices -- soaring to close to $150 a barrel, before slumping to around $35, and then reviving to just under $80 today.
So what will the future hold for countries -- including several in the Middle East -- whose whole economies are built on the export of oil and gas? Will they be rich beyond the dreams of avarice or poor as church mice?
A trend, much talked about these days, will need to be watched carefully. It is the world-wide effort to cut the emissions of greenhouse gases, such as CO2. By causing global warming, these carbon emissions are having a devastating impact on the climate of our planet.
Most people -- and especially those who live in the countryside and work the land -- are by now aware that the world is experiencing extreme weather conditions. Anyone with access to a television screen will have seen heartrending pictures of people trapped by ferocious storms and floods, which wash away crops, houses and even human beings, or others portraying struggles to survive exceptional heat waves and drought, which leave fields parched and cattle dying or dead. In many parts of the world, deserts are gaining on arable land.
One way or the other, some experts predict that -- within our lifetime or that of our children -- climate change could cause the mass migration of hundreds of millions of people, or trigger savage wars as nations fight over scarce resources.
Next month in Copenhagen, the challenge of climate change will be the subject of a highly-important international summit meeting. The main issue to be decided will be how to cut greenhouse gas emissions in industrialised countries like the United States, Japan and Europe, in emerging economies like India, China and Brazil, and in countries still struggling to develop, especially in Africa and Latin America. The problem is how to share the burden of decarbonisation between the rich, the less rich, and the poor. Negotiations are expected to be fierce.
The danger from carbon emissions has sparked a world-wide search for renewable sources of energy, such as wind power, nuclear energy and solar energy. China, the United States, Spain and Germany have all launched ambitious projects to harness solar energy. The idea is also catching on in the Arab world. Morocco, for example, has just announced a 6 billion euro project to produce 2,000 megawatts of electricity from solar power by 2020. It is estimated that six solar energy production sites could produce over 40% of Morocco’s electricity needs, and save up to a million tons of oil a year. Kuwait, in turn, is considering the use of solar power as an alternative to oil, according to Saad al-Showeib, managing director of the Kuwait Petroleum Company, who was speaking last week at an international conference on Alternative Energy Applications.
According to the International Energy Agency (IEA), the world’s dependence on natural gas will drop dramatically if environmental policies are adopted to limit carbon emissions. The IEA’s World Energy Outlook, its influential annual publication, published on November 10, is said to predict a coming glut in gas supplies and over-capacity of gas pipelines. Russia, Iran and Qatar, three major gas exporters, should take note.
Another trend worth watching is an expected over-supply of oil. Iraq, for example, has recently signed a number of highly-significant agreements with international companies which, according to Oil Minister Hussein Shahristani, could boost Iraq’s production from less than 2m barrels a day today to nearly10mbd within a decade.
Britain’s BP and China’s CNPC signed a deal which could nearly triple production at the southern oilfield of Rumeila, while ExxonMobil and Royal Dutch Shell are to develop the West Qurna field. Italy’s ENI has initialled a contract to explore the smaller Zubair oilfield in southern Iraq.
Within the coming years, OPEC countries will have to face the most unwelcome prospect of having to decrease their own production to make way for Iraq’s soaring output.
At the same time, more intensive oil exploration deep beneath the seabed, together with new technologies for enhanced oil recovery (EOR) of existing fields, are expected to give a considerable boost to the world’s recoverable oil reserves. In other words, far from oil and gas being scarce, they may well soon be plentiful. What was a sellers’ market could easily become a buyers’ market within the coming decade.
With these developments in mind, who would dare predict where prices will be a decade or two from now?
Patrick Seale is a leading British writer on the Middle East, and the author of The Struggle for Syria; also, Asad of Syria: The Struggle for the Middle East; and Abu Nidal: A Gun for Hire.
Copyright © 2009 Patrick Seale – distributed by Agence Global
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