GCC income may fall $4b on oil cutbacks

A series of oil production cuts intended to prevent a price collapse will likely cost GCC around $4 billion this year as their crude sales are projected to slide below $100 billion, according to independent estimates.

From nearly $101.7 billion in 2001, crude export earnings by the UAE and its GCC partners will recede to around $97.9 billion in 2002 within an overall decline in the revenues of the 11-nation Opec, said the London-based Centre for Global Energy Studies (CGES), which is owned by former Saudi Oil Minister Sheikh Ahmed Zaki Al Yamani.

As a whole, Opec's gross crude export sales are projected to retreat to around $169 billion this year from $166 billion in 2001, CGES deputy director, Leo Drollas, said. "The decline is because of lower production by Opec...prices were slightly higher but the increase was offset by the decline in supplies," he told Gulf News by telephone.

"This shows that Opec's repeated cuts to keep prices high and earn more from crude exports have backfired as their earnings are going down."

CGES's estimates showed Opec's oil production, excluding that of sanction-hit Iraq, would plunge by 1.4 million barrels per day to 23.4 million bpd in 2002 from 24.8 million bpd in 2001.

But the price of the organisation's basket of seven crudes is forecast to climb to around $23.9 this year from an average $23.1 in 2001.

The UAE, Saudi Arabia and Kuwait have slashed production by hundreds of thousands of barrels over the the past 20 months within a collective agreement between Opec and other producers to clean up the market excess and forestall a sharp weakening in prices.

Despite quota violations by some Opec members and independent producers, prices have remained relatively strong this year because of lower market surplus and tensions in the Middle East, particularly U.S. threats to attack Iraq.

"Excluding 2000, when prices were above $27, the expected price average in 2002 will be the highest in nearly two decades," a CGES report said.

A breakdown showed the individual income of GCC states will be lower this year except Qatar, whose revenues are projected to rise slightly because of higher crude supplies.

The main victims will be the UAE and Saudi Arabia, as they will account for more than 70 per cent of the decline in the 2002 income.

The GCC's income this year is nearly $30 billion below the 2000 income of around $127.2 billion, the highest since the end of the oil boom 20 years ago.

"This income this year is still considered high in GCC budget standards as most of them have forecast much lower prices," Kuwaiti economist, Jassim Al Saadoun, said.