With the passage of time, the volume of recoverable oil discoveries worldwide is declining. This may have repercussions on longer term supplies and bring about seismic changes in the global energy balance.
There are, however, technological developments that may alter this equation and allow the extraction of oil from fields that currently cannot be exploited for various reasons. The US company Chevron recently announced that it has made some technological progress with the commencement of production from the first deep-sea, high-pressure field in the Gulf of Mexico at a cost of $5.7 billion.
This breakthrough paves the way for deep-water oil production in many parts of the world that have been inaccessible for years. It will lead to a significant increase in global oil reserves of 1.58 trillion barrels, especially as Chevron's achievement has encouraged other companies, such as BP and Beacon Offshore Energy, to explore deep-water oil extraction. The two giants are currently working to extract oil from deep waters.
As expected, the Middle East—particularly the Arabian Gulf region, as well as the Red Sea and Mediterranean Sea—holds significant reserves within its deep waters. With the advent of new technologies, these regions could see substantial increases in their recoverable reserves, thereby extending the lifespan of their oil wealth.
Arab oil producers can take the lead
Some Arab and GCC countries, currently producing modest quantities of oil, can raise their output by large percentages. This means the potential emergence of new oil-producing countries, especially since these countries have already announced major oil and gas discoveries but may not have the extraction process available for technical reasons.
Moreover, Arab countries with substantial oil production also possess considerable deep-water oil reserves. With the advancement of technologies, they will also be able to increase their reserves, which will have positive returns on their development.
On the other hand, this may create some marketing difficulties after two decades due to potential differences that will occur between supply and demand rates. It is expected that the contribution of renewable energy sources to total demand will rise, knowing that some of the current major production centres may witness some decline in production. This may reduce the gap between supply and demand.
Overall, this is a positive for offshore oil-producing countries, including the GCC, where it is possible to prepare to grant new concessions for deep-water exploration to discover new reserve areas to be added to those already found.
Certainly, production costs from deep-water reserves will be higher, especially considering that the Arabian Gulf region is among the lowest-cost production areas globally. However, the economic feasibility of deep-water production will hinge on oil prices, which are believed to be feasible, given that the era of cheap oil is behind us thanks to the strategic policies adopted by the OPEC+ grouping.
OPEC+ has successfully maintained relative optimum oil prices despite ongoing challenges and attempts to reduce prices by consuming countries and speculators seeking to achieve outsized profits.
In general, technological advances open up prospects for the oil industry that can be leveraged to further develop this vital sector, whose output is not limited to transportation needs but extend to numerous industries.
This is in addition to the development of alternative and renewable energy sources, an area in which the GCC has made remarkable progress. They have also approved new projects in this field that will allow them to enhance energy diversification, with the end result being higher growth rates.
