The Arab region, comprising the 22 member states of the Arab League, has seen a wave of major oil and gas discoveries in recent years. These new finds have the potential to significantly boost many countries’ hydrocarbon production capacity over the next decade.
Some of the largest discoveries have been made in the United Arab Emirates (UAE), Oman, Egypt, and Algeria. However, promising new reserves have also been located across other parts of the region.
This article provides an overview of the most notable new oil and gas discoveries in the Arab world and analyzes their potential impact on future production capacity.
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Impact on Future Production Capacity
These new discoveries have the potential to significantly boost many Arab countries’ oil and gas production capacity over the next decade. Developing these complex reservoirs will require billions of dollars in investment and take many years. But once online, they could transform outlooks for future supply.
UAE oil officials estimate the Jebel Ali discovery could boost their production capacity from around 3 million barrels per day currently to as much as 5 million bpd. The development is expected to come online in the late 2020s.
In Egypt, bringing new offshore gas projects like the West Nile Delta online has enabled gas production to rebound after years of decline. Egypt is aiming to boost its gas output 50% by 2025 to help meet rising domestic demand.
Oman’s Mabrouk field could deliver a major supply boost when it begins producing in the early 2030s. Combined with other finds, total Omani oil output could potentially reach 1 million barrels per day, up from just over 700,000 bpd currently.
Algeria is hoping its new southern oil discoveries can help stabilize or even reverse declines at mature oil fields elsewhere. Hassi Bir Rekaiz development could lift Algerian production capacity back above 1 million bpd later this decade.
For Kuwait and Saudi Arabia, tapping into new gas reservoirs will help free up more of their oil for export and provide feedstock for planned gas-to-chemicals projects.
Challenges Ahead
However, developing these discoveries into producing assets faces geological, technological, and financial challenges.
Many of the new finds are located in complex geological formations that make extraction difficult. The reservoirs tend to be deeper underground, harder to reach, and contain heavier grades of hydrocarbons.
Producing from these discoveries will require using advanced Enhanced Oil Recovery (EOR) methods like steam flooding, CO2 injection, and hydraulic fracturing. These techniques help boost recovery rates but add costs.
With relatively low oil prices in recent years, hydrocarbon investments have fallen across the region. Attracting the billions in financing required to develop discoveries may be difficult unless prices rise.
There are also above-ground risks like political instability, sanction regimes, and contractual disputes that could hold up projects. Building local technical expertise to manage complex oil and gas projects remains a key challenge.
Outlook for Oil Production Capacity Growth
If countries can overcome these hurdles, the region’s oil production capacity could grow substantially. However, output increases are unlikely to significantly alter the global supply-demand balance or challenge Saudi dominance as the world’s major swing producer.
Most forecasters see the Arab world’s crude oil production capacity rising from about 35 million bpd currently to around 44 million bpd by 2030. Higher output will largely meet rising domestic and Asian demand rather than compete for market share.
The major exception is Iraq, which aims to boost production capacity from around 5 million bpd now to 9 million bpd by the end of the decade. If successful, this could reinforce Iraq’s position as OPEC’s second-largest producer after Saudi Arabia in the long run.
Across the rest of the region though, output gains will likely come through incremental capacity additions rather than huge new mega-projects like those of the early 2000s boom.
Major new discoveries provide some exciting long-term potential. But near-term supply growth in the Arab oil sector is set to remain relatively modest.
Frequently Asked Questions
What are some of the largest new oil discoveries made recently in the Arab world?
Some of the most notable new finds since 2015 include:
- The Jebel Ali discovery in the UAE, estimated to hold 5 billion barrels of oil.
- Egypt’s 30 trillion cubic feet Zohr offshore gas field.
- Oman’s 4.2 billion barrel Mabrouk North-East oil discovery.
- Algeria’s 1 billion barrel crude oil find in the Hassi Bir Rekaiz basin.
- New Jurassic gas reservoirs found in Kuwait likely holding about 80 trillion cubic feet of gas.
How will these new discoveries impact the region’s oil production capacity?
Once developed, discoveries like Mabrouk, Jebel Ali and Hassi Bir Rekaiz could boost production capacity significantly in Oman, UAE and Algeria. However, major increases are unlikely until the late 2020s and 2030s once projects come online. Iraq aims to raise capacity faster. But overall, gains will be incremental rather than transformative.
What are the key challenges ahead in developing these discoveries?
Key hurdles include securing financing given lower oil prices, building technical expertise, and overcoming geological complexities. Reservoirs tend to be deeper and require advanced EOR techniques. Above-ground risks like contract disputes and sanctions may also cause delays.
Will Arab supply gains challenge Saudi dominance in global oil markets?
Unlikely in the near future. Most Arab supply additions will meet rising regional demand rather than compete for export market share. Iraq’s expansion plans pose the biggest potential competitive threat. But Saudi Arabia will likely maintain its position as the major swing producer able to balance global oil markets.
How will these discoveries impact OPEC’s influence in oil markets?
OPEC, led by Saudi Arabia, has coordinated production cuts in recent years to balance oil markets. As major non-OPEC producers like the US, Brazil and Canada raise output, OPEC’s market share has declined. However, new OPEC capacity from the Arab region could bolster the group’s leverage, provided countries cooperate. Higher output would also give OPEC more flexibility to respond to supply or demand shocks.
Do these finds reduce the risks from geopolitical supply disruptions?
Somewhat. Having new capacity options in stable producing countries like the UAE and Oman could help offset risks of supply disruptions from conflict-ridden nations like Libya or Iraq. But geopolitical risks remain high across the Middle East and North Africa. New finds may also spark tensions between neighboring countries.
Are there concerns these projects won’t go ahead due to energy transition pressures?
If oil prices stay relatively low in the long run, some high-cost discoveries may not be commercially viable. But with ample oil and gas reserves, most projects will likely advance albeit at a slower pace than envisioned. The economics of long-term developments may be reevaluated though as the world transitions toward cleaner energy.
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Conclusion
The past half-decade has seen a flurry of world-class oil and gas discoveries across the Arab world. Fields like the UAE’s Jebel Ali, Oman’s Mabrouk, and Egypt’s West Nile Delta hold billions of barrels of resources and tremendous potential.
Once developed, these new finds could significantly bolster hydrocarbon production capacity in the region through the 2030s and beyond. They provide encouragement that mature producing countries like the UAE, Oman and Algeria can stabilize or even increase oil output. For Kuwait and Saudi Arabia, new gas reserves will also fuel economic diversification plans while freeing up more oil for export.
However, geological complexities, financing constraints, local capability challenges, and low oil prices may delay projects or alter initial plans. Iraq is the only country with truly transformational growth ambitions, although unstable politics poses risks.
Overall, while exciting, the new discoveries are unlikely to dramatically reshape the global supply picture or OPEC dynamics over the next decade. But they provide vital long-term supply security for a rapidly growing region. In a world undergoing an uncertain energy transition, the Arab oil and gas sector retains strong fundamentals. Leveraging its vast newfound resources in a sustainable manner will be the region’s key long-term challenge.
