Business | Oil & Gas
Offshore oil find expected to be a shot in the arm for GDP
Discovery will be good supplement to currently depleting reserves and low output and an addition to tourism and real estate
- By Himendra Mohan Kumar, Staff Reporter
- Published: 00:00 February 5, 2010
Abu Dhabi : Dubai's new offshore oil find may hold the promise of making a significant contribution to the emirate's gross domestic product (GDP) during its life cycle, but much will depend on the volume of commercially recoverable reserves and the cost of production, say energy experts.
At present, oil contributes less than 5 per cent to Dubai's $54 billion (Dh198 billion) GDP.
Dubai's oil reserves have been declining over the past decade and were expected to be exhausted within a few years until the latest discovery was announced by the Dubai government early yesterday.
"His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai brings good news to the people of the UAE and declares the discovery of a new oil field in Dubai," said a statement from the Dubai Media Office. The statement added that the "oil field will reinforce infrastructure and production of Dubai and give a positive side to the local economy of Dubai."
However, the Dubai government gave no indication of the estimated oil reserves in the field or how long it will take for commercial production from the field to start.
"This is certainly good news for Dubai, if it's confirmed as a commercial discovery. Dubai's oil production has been in decline for years and its current output is less than 100,000 barrels per day," Kate Dourian, Middle East Editor for global energy information provider Platts, told Gulf News.
"Despite its declining oil production, Dubai still is a benchmark of sour crude east of Suez," Dourian added.
Dalton Garis, Associate Professor of Economics and Petroleum Market Behaviour at the Petroleum Institute in Abu Dhabi, said it may take three to five years for production to start.
"However, it's a promising source of cash each month for Dubai, which is separate from the vagaries of tourism and real estate prices," said Garis.
Dubai's first oil field was discovered in 1966 and the first production was from the Fateh field in 1969. A second oil field, Falah, was discovered in 1972 and production started in 1978. Two other oilfields — Rashid and Margham — were discovered in 1973 and 1982, respectively. Dubai Petroleum Company (DPC) is the main operator. Dubai has a 2 per cent share of the UAE's natural gas reserves and its contribution to the UAE's oil output is also small.
The UAE has the world's fifth largest proven oil reserves, which amount to 97.8 billion barrels of crude oil. But more than 90 per cent of it is in Abu Dhabi. The UAE also has six trillion cubic metres of gas reserves, the world's sixth largest.
The UAE's average sustainable crude oil production capacity is set to increase 12.5 per cent to 3.06 million barrels per day by 2014, recent estimates by the Paris-based International Energy Agency (IEA) showed.
The IEA also said crude oil production in the UAE in December rose marginally over the previous month to 2.28 million barrels per day (bpd) with the country's compliance with production cuts previously announced by the Organisation of Petroleum Exporting Countries (Opec) standing at a high 98 per cent.
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