The Middle East and North Africa region needs to increase oil production by five million barrels per day (bpd) over the next decade to meet global demand, Bahrain’s energy minister said on Thursday.
Dr Abdul Hussein Bin Ali Mirza said that despite price instability and geopolitical tension in the region, “oil demand is increasing year after year and is expected to continue at 10 million bpd”.
At the same time, he said, the region is seeing ongoing depletion of oil field capacity, which could shrink production to just four million bpd.
“So we need to add five million bpd to replace the natural reduction in output,” Bin Ali Marza told the Apicorp Energy Forum in the Bahraini capital of Manama.
Citing Apicorp estimates, Bin Ali Marza claimed the region needs to invest $700 billion over the next ten years in extraction technologies and other strategies to boost production, and called for new bond issues and local development funds to make this possible.
He said: “The challenges we are facing in the Arab world means increased need for joint action between all members of the GCC and its institutions, to invest in the field of oil and gas while also working to offset and reduce emissions.”
The minister was speaking amid reports that Bahrain will next year follow in the footsteps of other Gulf states, such as the UAE, in axing domestic fuel subsidies.
The substantial drop in oil price since last autumn from over $100 per barrel to $65 has put pressure on GCC budgets – Bahrain included, which expects to run a deficit of around 12 percent of GDP in 2016.
This year the country axed meat subsidies, and last week confirmed that subsidies on fuel, electricity and water will also be phased out from next year.
Bin Ali Marza did not reveal any details as to when the latest stage of reforms would take effect, but said continuing with subsidies was unsustainable.
“Unless the tariff is changed, people will continue spending the resources because it does not affect their pocket too much,” he said.
“But they need to know that [fuel] is a scarce and valuable resource and needs to be conserved.”
Meanwhile, Matar Hamed Al Neyadi, the UAE’s undersecretary to the minister of state reminded delegates that the initial 24 percent fuel price hike seen in the country immediately after it axed domestic fuel subsidies in July had been short-lived.
“Now, in November, fuel prices are even lower than they were when the subsidy was in place,” he said.
He refused to speculate on when oil prices in the region would stabilise, other than to say: “In 2016 we will see some sort of correction in the market”.
And he backed up comments by UAE energy minister Suhail Mohamed Al Mazrouei on Wednesday, in which he defended last year’s decision by OPEC to maintain high oil output levels despite falling prices.
“I am sure the decision was right and am confident that the market will stabilise,” Al Mazrouei told a conference in Dubai.
But Saudi Arabia’s oil minister Ali Bin Ibrahim Al Naimi admitted at the Apicorp forum that the industry would continue to face tough times in the short-medium term.
“The oil market is once again in significant turmoil,” he said. “At no time other has [price] change taken place at such an accelerated rate.
“This volatility has profound effects on an industry characterised by long lead times – where investment decisions have to be made months, even years in advance.”
In the long term, he said: “Oil as a commodity is not in decline” – future oil investments should continue to meet an anticipated global growth in crude demand by more than 1 million barrels per day.
Follow us on
