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Oil in Arabian Peninsula
Oil in Arabian Peninsula
Amongst the GCC states, Saudi Arabia leads in terms of oil production. Saudi Arabia is considered
a crude oil swing producer because it can increase or decrease its oil production output without
significantly increasing production cost. As of 2018, Saudi Arabia was the leading crude oil
supplier worldwide, with an export value of over 183 billion U.S. dollars. Saudi Arabia’s breakeven
oil price per barrel was less than half of its main global competitors, Russia and Venezuela.
The leading oil company worldwide, in terms of daily production volume, is the state-owned
enterprise Saudi Aramco. Despite its competitive standing on the global market, the Saudi Arabian
government decided in late 2019 to publicly trade about three percent of the company in order to
use the revenue to diversify its economy from crude oil. Saudi Aramco’s total asset values are
worth around 510.5 billion U.S. dollars, making it one of the world’s most valuable companies.
The United Arab Emirates has thus far been the most successful GCC member state to shift its
revenue away from dependence on fossil fuels, having established itself as a tourist destination and
a financial hub for the Middle East.
Qatar has diversified from crude oil and as of 2017 is the largest natural gas exporter in the world.
The Middle East includes five of the top ten oil-producing countries and is
responsible for producing about 27% of world production.1 While state-owned
enterprises produce much of the oil, many international oil companies engage in
oil production and related activities in the Middle East through joint ventures,
production-sharing agreements, and other business models.
1. Saudi Arabia
Saudi Arabia produces almost 12 million barrels of oil per day and nearly 12%
of world output. The country ranked as the largest oil producer in the decade
from 2003 to 2012, after which it fell to second place due to surging oil
production in the United States. Saudi Arabia remains the world's largest
petroleum exporter. With proven oil reserves of about 337 billion barrels and
relatively low production costs, Saudi Arabia should maintain its position as a
top-three oil producer for the foreseeable future.
KEY TAKEAWAYS
Many of the largest oil producers are in the Middle East, including Saudi
Arabia, UAE, and Iraq.
Saudi Arabia is the world's largest oil producer and accounts for roughly
15% of global output.
Iraq has increased production since the end of the Iraq War and is now the
second-largest producer in the Middle East.
Iran is one of the world's largest oil producer, but output is below potential
due to economic sanctions.
Kuwait is the world's ninth-largest producer, with output between 2.5
million and 3 million barrels per day for more than a decade.
Saudi Arabia's oil and gas industry is controlled by Saudi Aramco, which is
controlled by Saudi Arabia's Ministry of Petroleum and Mineral Resources
and the Supreme Council for Petroleum and Minerals.5 Saudi Aramco is
mostly state-owned, but had an initial public offering (IPO) of 1.5% of the
company in Dec. 2019.
94.2 Million
The number of barrels of crude oil produced each day globally as of 2020.11
2. Iraq
Iraq produces about 4.8 million barrels of oil per day and is the sixth-largest
producer in the world.1 The country has achieved substantial production gains
since 2005, two years after the start of the Iraq War. However, the country faces
challenges that could limit production toward these goals, including political
instability, continuing violence, and inadequate infrastructure.
Oil production in most of Iraq falls under the control of the Ministry of Oil in
Baghdad.
More than a dozen major international oil companies are involved in Iraqi oil
production. U.S. and European oil majors include Exxon Mobil, Occidental
Petroleum, BP, Royal Dutch Shell, and Total S.A. Other international oil giants
in Iraq include China National Petroleum Corporation, known as CNPC; China
National Offshore Oil Corporation, known as CNOOC; Malaysia's Petroliam
Nasional Berhad, known as Petronas; and Gazprom Neft OAO.
The state-owned Abu Dhabi National Oil Company (ADNOC) controls oil
production operations in Abu Dhabi under the direction of the emirate's Supreme
Petroleum Council. Most oil production in Abu Dhabi is organized under
production-sharing agreements between ADNOC and international oil
companies. Other emirates use similar production-sharing agreements and
service contracts to organize oil production. Some of the biggest international
companies involved in UAE oil production include BP, Royal Dutch Shell, Total
S.A., and ExxonMobil.
4. Iran
Iran is the ninth-largest oil-producing nation in the world, at nearly 3.2 million
barrels per day, but the effects of economic sanctions placed on Iran have kept
production levels below true potential.1 According to the U.S. Energy
Information Administration (EIA), sanctions have had especially severe effects
on upstream oil and gas investment, including numerous canceled investment
projects.
In July 2015, Iran came to an agreement with the permanent members of the
U.N. Security Council and Germany on the Joint Comprehensive Plan of Action
(JCPOA), in which Iran agreed to strict limits on its nuclear program in exchange
for the removal of international economic sanctions. However, the U.S.
withdrew from the deal in 2018, as former President Donald Trump fulfilled a
campaign promise to exit JCPOA, which he labeled a "disaster" and the "worst
deal ever." Then, in 2019, the U.S. imposed additional economic sanctions in
response to a drone attack on an oil facility in Saudi Arabia, which U.S. officials
blamed on Iran.
Oil and gas production in Iran is controlled by the state-owned National Iranian
Oil Company (NIOC) under the direction of the Supreme Energy Council. While
the Iranian constitution bans private or foreign ownership of the country's natural
resources, international companies have historically participated in oil
exploration and development in the country through buyback contracts, a
contract model that does not convey equity rights to the international company.
5. Kuwait
Kuwait produces almost 3 million barrels of oil per day, placing it just inside the
top 10 oil producers in the world.1 It has maintained consistent production of
between about 2.5 million and 3 million barrels per day, but, according to the
EIA, Kuwait has been struggling to raise production to 4 million barrels per day
during this period, falling short due to inadequate foreign investment and related
delays in new oil production projects.
The Ministry of Oil carries out oil policy in Kuwait through the state-owned
Kuwait Petroleum Corporation and its subsidiaries. International oil companies
have long been denied access to Kuwait because the Kuwaiti constitution does
not allow foreign companies ownership stakes in Kuwaiti natural resources or
the revenues associated with those resources. This means standard joint
ventures and production-sharing agreements used in other countries are
outlawed in Kuwait.
6. Yemen
Yemen's crude oil production was 49,000 barrels per day in December 2022. This
was an increase from 44,764 barrels per day in December 2021. The average
production from 1960 to 2022 was 37,000 barrels per day.
Yemen's oil production has been reduced by a long-running civil war. Before the
conflict, Yemen produced around 200,000 barrels per day.
Yemen's oil is refined locally. The country's finances have been hit by low
production and a lack of exports. Before the war, oil contributed 63% of
government revenues.
Yemen's most recent exports include: