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World Demand For Middle East Oil Will Grow Rapidly From 2004; The Focus Is On Asia.

BEIRUT - The 12th Annual APS Conference, MIDDLE EAST STRATEGY TO THE YEAR 2011, held in Beirut on Oct. 12-13, 1998, concluded that world demand for Middle East oil and gas will increase rapidly from the year 2004. By the year 2010, the Asian/Pacific basin will have become by far the biggest oil market in the world, with the Middle East to be the main supplier. In a presentation by Conference Chairman Pierre Shammas, President of APS Energy Group, it was forecast that, if no recession other than the present one were to occur in Asia/Pacific during the next twelve years, that region's demand for oil would grow to 38 million b/d by 2010. In the event of another recession, Asian/Pacific oil demand by 2010 would grow to 28.8 million b/d, compared with less than 20 million b/d in the first quarter of 1995 (see Gas Market Trends of this week's Review). The following are the main points raised at the Conference, which was held under the patronage of Lebanon's Prime Minister Rafic Hariri. The meeting was opened by Lebanese Oil Minister Chahe Barsoumian, who stressed the importance of this Conference series to Lebanon and the significance of APS Group's planned return to the country. He explained the background of APS conferences, with the first series held in the US between 1975-79. The second series was held in Greece and Cyprus from 1980 to 1986. The Middle East Strategy series, begun in Cyprus in 1987 and shifted to Lebanon this year, featured a number of mega-projects announced annually. These include the Trans-Malay crude oil storage, pipeline and refining project (see Gas Market Trends). Mr. Barsoumian announced two new oil refining projects to be built in Tripoli and Zahrani as well as a gas pipeline from Syria to feed Lebanon's power plants and industry. Shammas spoke next, giving a broad overview of conditions existing in the world energy market and the perspective ahead. He singled out one of the projects to be announced for the first time at the Conference: the world's most cost-efficient set of mini-power plants to be fuelled by natural gas. Being developed by a Japanese consortium of Chiyoda Corp., Fuji Electric and Kawasaki Heavy Industry (KHI), the plants can be installed along gas pipelines or near oil refineries and oil or gas fields anywhere in the world. The plants range in capacity from 0.5 MW to 7 MW. They can be installed easily in remote communities where gas pipelines are passing - communities which in the Middle East, North Africa and the Caspian region are usually under-developed. Called "The OASIS Project" (abbreviation for Opportunity of Advanced Services for local residents and Improved Security for regional and multinational

pipelines), this was presented at the Conference by Masao Hatta of Chiyoda Corp., speaking on behalf of the consortium. In his keynote address, Shammas likened the potential socio-economic effectiveness of the OASIS power plants to that of "the lap-top PC in the business of information technology, which has revolutionised the way people do things and greatly improved the work environment and efficiency, be it in the office or at home". These plants can take the gas (methane or propane) directly at one end and give electricity at the other end. Each 1 MW plant can provide power to a community of 10,000 people or their equivalent in terms of industrial productivity. Shammas pointed to the experience of Southern Italy as "its GDP grew very fast as soon as the TransMed pipeline began pumping gas from Algeria to Sicily in the early 1980s, and thousands of small and medium-sized industries shifted from north to south". With gas and electricity being crucial to economic development, he said, "the OASIS project could become a key socio-economic factor to the peace process between the Arabs and Israel, as the gap between them in GDP terms is so dangerously wide at present". Mr. Raouf Abou Zaki, CEO of Al Iktissad Wal Aamal followed with an address to the opening session, in which he stressed the importance of oil revenues to the whole of the Middle East economy. He noted: "Whereas oil revenues in the Gulf countries still constitute 75-80% of total revenues and about 90% of exports, the decline in oil prices during 1998 will have far reaching effects in these countries. The estimates indicate that the revenues of the Gulf Co- operation Council (GCC) countries will decline by about 40% during this year; to its lowest level in the last decade". "Furthermore", he added, "the contribution of the oil sector to the GDP of these countries will drop by 25% from the mean contribution of 33-35% in 1997. Consequently this could lead to a decline in the GDP of the GCC countries for the first time in the past ten years by an average of 6.5-7% annually. It is evident that this sharp decline in oil revenues will place budgetary constraints on the Gulf countries, following the great improvements in these budgets over the past two years. This will necessitate cutbacks in the expenditures on development projects and the slowing of economic activity in the private sector. One of the consequences of these cutbacks led to the recent decline of share prices in the Gulf countries". The patron of the Conference, Lebanon's Prime Minister Hariri, was represented by Senior Minister of State Michel Edde. After underlining the importance of the APS Conference, Mr. Edde described the gathering as an "occasion to discuss the latest economic, financial and scientific developments" in the petroleum industry. He said "the fall in world oil demand, the decrease of prices and the increase of the transportation and storage costs necessitate closer co-operation and co-ordination among the Middle East countries and the Caspian region to come up with proper solutions". Minister Edde also pointed to the recent crisis between Syria and Turkey. He said: "We invite Turkey to pursue the path of negotiation, instead of using the language of threats against Syria. Syria is still committed to historical bonds and good neighbourliness in order to deal with what it is actually facing. Lebanon and Syria are co-ordinating to face the challenge regarding both the Arab and Islamic worlds, in standing against Israel's aggression and its plans to dominate the region". (For the background of the Syrian-Turkish crisis, see APS Diplomat's News Service).

Upstream developments are, of course, central to the Middle East oil sector and to the whole of the Middle East economy. Dr. Susan Hodgshon of Petroconsultants addressed the first session on the changing fiscal regimes for E&P. She reviewed the political risks associated with E&P investments in the hydrocarbon sectors in Middle East countries and in the Caspian states. Much work remains to be done before the countries of the former USSR have good legal and fiscal regimes in place to attract investments, financial and technical. These are essential for the development of their hydrocarbon industries to the extent that their oil and gas reserves would dictate. In contrast, Dr. Hodgshon noted, the Middle East hydrocarbon producing countries had relatively good oil and gas legislation and were taking steps to make private investments even more attractive. Daniel Champlon, of the Institut Francais du Petrole, reviewed developments in the world oil industry with particular reference to investments in new oil and gas production. The present decline in investment in world oil production is expected to be only about 3% in 1998, with drilling actually declining by 9%. It is not possible to forecast just how quickly the oil industry will recover from the present downturn but there is considerable optimism for the long term. Champlon forecast that there will be continual advances in E&P efficiency, productivity and technology and further financial investments to ensure a good long-term growth. Dr. Abdullah H. Al Moajil, the president of Gulf Tech International of Bahrain, reviewed the extensive opportunities for drilling for hydrocarbons in the GCC region. Much more drilling equipment is required in the Gulf, particularly to develop natural gas resources. The three countries mentioned which will be major markets were Saudi Arabia followed by Qatar and Oman (see Moajil's paper in Gas Market Trends).
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Publication:APS Review Oil Market Trends
Geographic Code:00WOR
Date:Oct 26, 1998
Words:1364
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