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Please Returr To EXXON BACKGROUND SERIES DOCUMENT CONTROL Middle East Oil and Gas
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i) "'' ~~ J - DECEMBER 1984 L L Middle East Oil and Gas List Gf Figurres, Tables a11d Map~ Table of Contents 1 Figure.~ Page Chapter Title Page 1 World Distribution of Proved Oil Reserves 2 :;;- ---~--~------~------2 Proved Oil Reserves of Middle East and Other Nations 4 1 A Position llf Preeminence 2 3 Changes in the Oil Imports Dependence of Principal Industrialized Nations 7 2 His tor)' of Area's Oil Operations--- 5 4 Rates of Discovery 'ilnd Production of Total World Oil Reserves 8 Iran 5 Principal Oil Movements by Sea 14 Iraq 9 6 Major Events which Changed Middle East Bahrain 13 Crude Oil Selling Prices-1970-83 28 Kuwait 1il 'I 7 Middle East Oil Production and Significant Related Events-1950-83 31 Saudi Arabia 13 8 World Crude Oil Production-1945-83 32 Neutral Zone ;· 15 9 International Oil Companies' Equity Interest if Qa-.tar 16 in Middle East Crude Oil Production-1965-82 35 TJ nited Arab Emirates 16 10 Middle East Government Receipts from Oi! 36 Oman 17 '• .'" Egypt 18 Tuble$ 3 Gas Operathms 19 1 Middle East Oil Discoveries: Cumulative Production Saudi Arabia 22 and Remaining Reserves 3 Iran 22 2 Middle East Gas Reserves 5 Kuwait 22 I, 3 Middle East Crude Oil Production 5 Qatar 22 4 Middle East Gas Production and Utilization 19 Iraq 23 ,, 5 Middle East Natural Gas Liquids (NGL) Capacity 22 United Arab Emirates ?..3 6 OPEC Crude Oil Production-1960-83 25 7 Changes in Selling Price of Arabian Light Crude Oil 27 t! The Changing Relationships With Producing Countries 23 8 Middle East Crude Oil Refining Capacity 33 The Early Years 23 9 Middle East Oil/Energy Demand 34 Fifty-Fffiy 23 10 Comparison of Middle East Countries' Domestic The Bitth elf OPEC 24 Petroleum Product Demand 37 Jlt!aintainin{J Gorernment Take 2A 11 Middle East!ndustrializ.ation Projects 38-39 Higha Government Take 26 12 Middle East Nations Compared: People, Area and Revenue from Oil 40 Gol'ernmeutParticipation 26
Maps 5 A New Oil Pricing Environment 27 Unilateral Action 1 The Head of the Gulf 27 10 Tu.,o-Tier Pricing 2 The Middle East 29 10-11 Iran in Crz'sis 3 The Gulf 29 20~21 A "Cushion"jor Consumers 29 The Second "Price Shock" 30 1bw.ard Complr,te Ownership 30 UniformP}'lcing 30 Prii·e Sqften'ing 30 w ·-··- --·-----·---~ 6 Refining and Other Industrial Activities 33 ·------~-----·------·-~- 7 Change and Progress 37
© 1984 Exxon Corpomtion Maps® 198/; by westernwnn clruck 1 A Position of Preeminence
2 The most impressive measure of the economic Figure 1 importance of the 1\cfiddle East* is the size of its leum E:-q>Orting Countries (OPEC). This led to a Iraq exceeded 10,000 b/d. By1983, after three 3 petroleum reserves.l\Iore than half of the wodds World Distribution significant expansion of non-OPEC oil production years of declining world demand, this had fallen proved oil resenes and about a quarter of its nat .t!f Proved Oi! Reserves and to an offsetting drop in demand for OPEC to 6,500 and 3,000 b/ d, respectively. (See Table 3.) ural gas are judged to be in the re!,>ion (Tables 1 In Blll10ns of Barrels, as of January 1, 1.984 oil-particularly from the six nations in the In comparison, the overall average well rate in and2, and Figures 1 and 2). Middle East that accounted for aboui ;1'0 to 70 the United States in 1980 was about 16 b/d (and pel'cent of OPECs total production. By 1983, 14 b/d iP 1983). Oil was discovered in Iran as early as 1908, but it Middle East cmde oil production was down to ·was not until after \Vorld War II that sufficient just over 12 million b/ d, or 2 million b/d less than Because of the economies of scale, as well as the resen·es had been found and de\·eloped in the the area had produced in 1970. It is unlikely, how proximity of fields to marine loading terminals, area as a whole J~Jr the .Middle East to become a ever, that production at such a low level will con pre-tax costs per barrel of Middle East cmde significant factor in world ener!-,1)~ Thereafter the tinue indefinite})~ The world's need for energy is have been and continue to be lo\v. This vvas the regions production rose rapidlj~ from 1/2 million too great, and the regions reserves are too primary factor in the rg.pid increase in free world barrels a day (b/d) in 1945 to more than 1 million prolific. dependence on oil from this source in the years h/d in 19-18 and 2 million bt d four vears latet: By following World War II. It is a dependence that 1952, it accounted f·H' over one nf e~·erv six • By ordinary standards, Middle East oil fields are remains strong despite the manyfold increase in l·arrels produced worldwid<>. • especially large and productive. At least 20 of oil prices imposed by the members of OPEC since them are expected ultimately to yield more than the winter of 1973-74 (Figure 3). Moreove1; in the The ~·Dpid po.stwar growth in .Jliddle East oil pro 5 billion barrels each. Deven had produced this long mn, it seems destined to grow: ductiOn was m response to surging demand in amount by 1983. We~t<:rn 1'urope and Japan, induced by the resto The prospects for Middle East natural gas are ration and subsequpnt expansion of war-shat High well productivity in the Middle East is less clear. Although the reserves are large, they tered economies. Resen·oirs that had been attributable, principally, to two characterisiics of have as yet not played a major role in world ~i::;covered h:fore the war were quickly brought its reservoir rocks: continuous thick (200 feet and energy supply. Gross production in re~entyears mto produt'tton, and intensive exploration soon more) intervals containing petroleum and unusu has averaged only 10 to 11 billion cubic feet per led to ?ewdiscm:tlries:..induding Ghawm~ the ally high permeability which permits the oil (and day (cf/ d), about 10 percent of total free world worlds large~;t ml fielrl, in Saudi Arabia. gas) to flow at high rates. gas output. During this period, because of limited local demand and the high costs of moving nat ~r ~H65!.the ~\liddle gast had displaced the Actual production rates, however, have depended ural gas over great distauces to foreign markets, l: n:ted ~tates as ~he wor-lds largest em de oil pro on market conditions. In 1980, for instance, a half or more of Middle East gas productive duct~g area, and Its output continued to increa ..'>e. ayerage production per well in Saudi Arabia and capacity has gone unutilized (page 19). Dul'lng the lH'iO$, it accounted for 30 pereent of ~otal world produ~tion. The dramatic oil priee Table 1 mcreasPs of 1~>73-74, incident to the Arab oil Middle East Oil Discoveries: Cumulative Production and Remaining Reserves embm~o •.an~ the global recPssion of 1974-75 onlv (Billions of Barrels) temp~rart~~- mtermpted thl' pattern of growth. · 7htctl D i scm·c·· 1·iu:: Cumulat it•c: Estimated Prul'ed Rc·st'l"t'C'/1 (Rc.~crl'tll +Cum. By 19 i7 I\liddle Ea..;;t production had reached a Pmtludion Axot'Jan.; Prud11.1 highof221/2 million b/d. Count 111 A.~qt'Jf};!J~ J[l;;o JliUS 1/IXIJ 1!. '1.} A~< '!f,Jan.J,l.'/8!, Bahrain 0.7 0.3 0.3 0.2 0.2 0.9 Itremai~ed n~~rthat level through 1979, when the I~·aat~n crJs1s brought about a further series Iran 31.8 13.1J 38.0 58.0 51.0 82.8 of pr~ce h!k('.s. Onlr then did asigniticant re Iraq 16.6 8.7 25.0 31.0 43.0 59.6 trenchment m th<.• demand for Middl<' Ea..'>t oil Kuwait* 23.0 15.0 69.3 68.5 66.8 89~8 emerge· Energv consen·ation and substitution Oman 1.9 0.5 24 2.8 4.7 ~1easures -l~C!-,'Un after the Ul74 oil priee Qatar 3.6 1.0 3.5 3.8 3.3 6.9 mcreases, remforc~d hy the increases of 1979-SO ~?d ~urt;1 ~r .strengthe~ed by a worldwide reees Saudi At·abia* 50.1 10.0 66.8 166.5 161'.9 219.0 Shm 1111980- resulted m a sharp decline in the United Arab demand for l'l1(!l'J.,ryand especially for petroleum. Emirates 8.6 7.7 29.4 32.3 40.9 Total Gulf Area 136.3 48.0 211.1 359.8 368.3 504.6 :\Ior~ovet~ t.hose same price inerea:;es sc.•t in Egypt 3.0 0.2 3.1 ·MANIJJX.I mo~wn an tr:tensiiied seareh for oil supplit~s in 1.5 3.5 6.5 natiOns ou~stde the Organization of the Petro- Total Middle East 139.3 48.2 212.6 362.9 371.8 511.1 .·JI.: Un itetl State~: l.J(i.!J 2(}~2 .!!;.5 J(j.5 2i..J 16/;.2 ·r/11 frrm ~\lull/1 •-• t" · l · 111 1 J/;1.;] · • • l Ltt>< 1m·J111Uiculirmrr fi-r" ft1t111. Thtal World 515.0 95.0 641.1: {i6!J..J 1,184.;1 f'flll/1 1I'll~" 1/'tf1 II 111 l'111 tJ 11 l I • • . ' · · · !1 • m JHIII ur H·n c' .· / )• ,.r'· 2 fiistory of Area's 4 Figure2 Oil Operations Proved Oil Reserves of Middle East Nations Table2 European companies be(:ame involved in Middle 5 In Comparison with Othel' Principal Oil Producing Nations Middle East Gas Reserves East oil around the turn •h ~he century, more than As ofJanuary .1, 1984 As of January 1, 1984 25 years before U.S. companies appeared on the BILLIONS OF BARRELS Estimated Prm•ed Reserves scene. 'fhe earlier interest of the Europeans was Counfl·y (Trilliot!s ofGulii"! Peel) due not only to the proximity of Europe to the Bahrain 7 Middle East, but also to the fact that European • MIDDLE EAST l!ountries, with the exception of Russia, produced ::-' Egypt 7 ® OPEC MEMBER little or no oil at the time. The United States, in Iran 480 contrast, was then producing 50 to 65 percent of $ INCLUDES 1h OF NEUTRAL ZONE Iraq 29 the worlds oil and supplying around 20 to 25 per Kuwait 35* cent of non-U.S. demand in addition to its own Oman 3 rapidly-rising requirements. Qatar 62 In the first half of this century, foreign oil com s~udi Arabia 125* panies with interests in the Middle East, which UniteU.Arab Emirates 31 by the 1930s included several American firms) combined their resources i! joint e:11:ploration Total Middle East. 779 ventures. They did this to spread investment United States 1lJ8 risks and to raise the large amounts of capital 1btal World 3,:200 needed for operations in an area which, at the time, was remote and presented difficult oper •Jnducicl! one-ltalfofNeull·al Zone. Source: Oil & Gas Journal. ating and living conditions. Much of the oil pro duced in the Middle Ea.<;t still comes from areas which were in the original concessions granted to U.S. and European oil firms pri<;l' to 19•10. 'l'able3 Middle East Crude Oil Production ----~.:!l:SJ.. ___ 1'/wusand.~ ofBarrel,q per Dau Pr()([IU·iu,q Daily A1•g. Cmozt t!1 1!150 1!165 1975 197!1 1980 J98J _Qi!_ Tl'el.l!!.._ IJM I Wi:ll Bahrain 30 57 57 50 48 n 243 169 Iran 664 1,886 5,350 !3,168 1,662 2,49~ 530 4,702 Iraq 136 1,322 2,262 3,477 2,514 :J22 290 3,179 Kuwait* 344 2,351 2,087 2,497 1,Jo1 1,076 755 1,'125 Oman 341 295 282 s':u 477 788 Qatar 34 231 437 fi08 471 295 125 2,360 Saudi Arabia* 547 2,206 7,075 i•,535 9,903 5,062 781) 6,490 Unit~dArab Emirates 282 1,69~ 1,831 1,702 _).,119 399 Total Gulf Area 1,755 8,335 19,303 21,361 1:8,243 11,383 3,599 3,163 ~w_p_t_·-" 45 125 231 !32! 595 689 500 1,378 Total Middle East 1,800 8,460 19,534 21.8d!:i 18,838 12,o,72 4,099 2,945 United States 5,4();· 7,804 8,J~2 8,5J;J 8,5!17' 8,680 (j;]6,900 14 IH1rld 10,428 .10,,/08 5;1,418 fi2,fif8 :)9,464 52,621 NA NA • InC'luden mle-lw.lfrif Nt•utral Zonr. NA ::.· .V!•L11'Uiloblf'. .":mtr:·"· Oil & Ga.~ Journal Sources: International Pt>troleum Annual, U.S. Bureau rifMilli'l!i International EnergySt.atistieal ReviEw,(!.'), Central Intel/ifJem·~: Ayrncy: Oil & Gas .Journal. 6 Beginning in the mid-1950s, other oil and non-oil By 1938, after name had been changed to companies-including some from Japan as well as Persia~ Iran and Anglo-Persian had become Ang-lo-Ira Figurel:! 7 new ones from the U.S. and Europe-joined in the nian Oil Company Ltd., production amounted to Middle East s::arch for oiL By the early 1970s, 215,000 b/d. As military again became par Changes in the Oil Imports* Dependence of Principal Industrialized Nations over 100 companies had become active in the area. ne~ds amount during World War II, both producing and MILLIONS OF BARRELS Some of them were granted new concessions. PER DAY refining facilities were further enlarged with the 19 Others bought into existing ventures of the orig aid of American lend-lease funds. After the war, inal concession owners or acquired portions of EUROPE · ··' JAPAN ' I production continued its rapid e1.1Jansion, rising 18 ! concession areas that had been relinquished by to more than 700,000 b/ d by the beginning of ~ the companies that first e::-.:plored the region. 'j@':~l TOTAL CONSUMPTION 1951 and accounting for nearly half of all Middle 17 The phenvmenal success of Middle Eastern East production at the time. However, operations .fill NET IMPORTS e:\:ploration efforts over the years is depicted in were distupted later that year by the culmination 16 - MIDDLE EJ\ST IMPORTS r.,igure 4. After a relative lull during World War of a prolonged dispute between Anglo-Iranian and the Go,·ernment of Iran over a revision of 15 II, the rate of discovery reached its peak in the conression terms. 1945-49 period, when the fabulous 60 billion barrel Gha\var field was rdiccovered in Saudi 14 Arabia. In the five years beginning with 1970, A tentath·e agreement that had been reached however, the rate of additions to Middle East nil eru·lier was rejected in March 1951 by Premier 13 reserves dropped shru-pl)'~ bringing the '''orld rate Mohammed Mossadeq and the Iranian Majlis not only below previous periods but also below {Pru·Iiament), which tl ;en nationalized Anglo 12 the rate of world oil production. Iranians operations. 1'he National Iranian Oil Company (NIOC) \Vas created to take over the 11 ·~\ I roil nationalized properties, including the Abadan In Iran, or Persia as it was then known, the refiner)~ by then the \Vorlds largest, as well as the 10 search for oil began late in the 19th centmj; but oil fields. The nmv company immediately encoun was unsuccessful. In 1901, William D'Arcy, a tered problems, owing to the umviUingness of 9 British entrepreneur who had made a fortune in establish<.'d international oil companies to Australian gold mining, received an e::-.:ploration process or market the expropriated oil 8 concession from the ruler which cm·ered the entire counhy except for five northern provinces. After the 1\Iossadeq regime was forced out by 7 After seven years of arduous but fruitless effort, supporterg of Shah Reza Puhlavi in August 1953, D'Arcy and his associates were about to abandon tht• F.S. Government Mked a group of U.S. inter 6 the seaf('h when they discm·ered oil in commC'r nationa1 .... .:OMpanies to form a consortium with cial quantities near the head of the Gulf at British, French and Dutch interests in order to 5 Mas~id-i-Sul2iman. In 1909, the D'Arry ~rroup restore Iranian oil to world commerce, In October formed Anglo-Persian Oil Company Ltd., and the 1954, the consortium, Iranian Oil Participants 4 first shipments of oil from the Middle East were Ltd. (lOP), and the new Iranian government made in 1912 from Abad an. reached an agreement under which the con 3 sortium would conduct operations for, and share 2 In those early years, oil from Persia did not ha\·e revenues with, NIOC. The original concession a major impact on the world petroleum scene, holdm:Anglo-Iranian-which by then had although it was used to fuel British naval and changed its name to British Petroleum Coml?any merchant ships operating east of Suez. With the (TIP)-arquired 40 percent of the new consortmm. American companies (five majors, including 0 outb:eak of World War I, howeve1; Persian pro 1970 1975 1979 ductiOn assumed sudden importance as a secure Ex.xcm Corporation, with7 percent each, and a },>roup of smaller companies with 5 percent~ . source of fmel for the British Navy. At the urging *Dtude oil and petroleum produds combined. of Winston Churchill, then First Lord of the obtatned another 40 percent, and the remammg Source: E.uon Cm'Poralion estim!lfes Admiralty; the British government in 1914 20 pereent was divided between the Royal Dutch/ acquired a majotity interest in Anglo-Persian. Shell Group of Companies (14 percent) and Com Production and refining capacity wa.,q tiipled to pagnie Francaise des Petroles (CFP) (6 p~rcent). meet the demands of the wru: ., Following the 1954 agreement, production in Iran resumed its steady rise. 8 Figure4 After 1957, NIOC entered into agreements with a Early in 1979, NIOC unilaterally repudiatkd the 9 Rates of Discovery and Production number of private and government-owned com 1973 agreement, assumed aU operations pre of Total World Oil Reserves panies from the United States, Europe, India and viously assigned to OSCO, and declared new, Japan, granting them rights to explore and lower levds for crude produc~ion m1d. for e},.-ports. develop offshore acreage in the Gulf not C(lVered Crude exports WP.re resumed in :.Ylarch 1979. The OUTSIDE MIDDLE EAST BILLIONS OF BARRELS U by the agreement with lOP. The agreements pro Iranian government established:.~ n~aximum pro PERYEAB 35 -MIDDLE EAST vided for either fifty-fifty joint venture!': ·"•ith duction target of 4 million b/d for the remainder NIOC or arrangements whereby the outside of 1979, a figure which would allow about 3.3 mil party acted as a contractor for NIOC. lion b/d for export. Actual production turned out tv be 3.1 million bId while exports fell to less than In July 1973, the Iranian government, NIOC, and half the prerevolutionary level. In November 1979 each of the lOP shareholder companies entered 30 the U.S. Governmsnt imposed a freeze on Iranian into a 20-year agreement to replace the 1954 ansets when the U.S. Embassy in Teheran was agreement. Under the 1973 agreement, NIOC seized and its personnel held as hostages. Iran took over all operating responsibility within the responded by suspending ali crude deliveries to i '' areas covered by the 1954 agreement. Oil Service U.S. oil companies, regardless of the ultimate Company of Iran (OSCO) was er::tablished by lOP destination of the oil. In th<~ first six months of to act as operator under the direction and control 1980, e:h.-ports dropped still further, due largely to ofNIOC. The consortium companies were given the substantial surcharges Iran imposed on its rights to purchase all the crude oil produced in crude oil. this area for 20 years, except quantities required for consumption within Iran and certain stated The outbreak in September 1980 of the war quantities for direct export by NIOC. between Inm and Iraq and fighting in the oil pro ducing province of Khuzestan occasioned The 1973 agreement was structurc::J as a sale and another reduction in Iran's oil production. For the purchase arrangement and, therefore, differed in year as a whole, it fell to an average of 1.5 million form from participation agreements (see page b/ d, a drop of over 50 percent from 1979, and in 26) concluded about the same time between oil 1981 it slipped further to 1.3 million b/d before companies and other producing country govern recovering in 1982. By 1983, Iran's production \Vas ments in the Gulf area. It was intended that the reported to be up to around 2.6 million b/d. net financial consequences would be comparable. As a consequence of the continuing changes in Iraq the international oil markets, the Iranian gov Competition among rival European entrepre~ ernment became dissatisfied with its share of oil neurs for oil e},.-ploration rights in Iraq began revenues. In1975 it initiated discussions to early in this century. Turkish Petroleum Com modify the 1973 agreement, and intermittent pany (TPC), formed before Wc~rld War I and negotiations were held between the companies eventually owned by British, l"l'ench and Dutch and NIOC from 1976 until the time of the Iranian interests, began exploration in northern Iraq revolution. No final res0lution was achieved, how after the wat: In the 1920s, amid talk of an oil ever. 'rhe revolution brought strikes and civil dis shortage i:r. the U.S., the State Dep::~rtment urged order which disrupted oil produrtion, causing a thC:: British and French governments to provid~ short interruption in exports of crude oil from American companies "equality of commercial Iran beginning in December 1978. opportunitY.~ 'rhe American objective was to obtain exploration and producing rights in Imq Just prior to that time, I ran's total production had near discoveries that had been made in neigh *![IHIJ-.\./ ~ate is ?''erayr.for 4-ycar period. approximated 5.2 million b/ d, 90 percent of boring Iran. B1mrr·•: E.r.mn ( orporatiou cstimat£.~ which came from onsl;ore properties operated by NIOC. The b:•~ance came fr:)m fou:- non-eon In October 1927, dm·ing the course of the negotia surtium offshore producing al'~as in the Gulf. tions aimed at introducing an American interest into TPC, oil was discovered in what was to become one of the great oil fields of the world: Kirkuk. This heightened American enthusiasm for the venture. Legend 1; u=" Oil field or discovery Has.:;.Mel Gas field or discovery < 'r u k m ·8 :n 10 The following year an agreement was concluded under which a group of five U.S. companies, con Crude oil pipeline Kt~YbArvat C> '· ;) stituting Near East Development Company,* Natural gas pipeline •', obtainr.d an equity interest in TPC, "Which was Natural gas liquids (NGL) subsequently renamed Iraq Petr(Jleum Company or products pipeline (IPC), so that they could share operations in Iraq Pipelines pian ned or and elsewhere in the Gulf. under co~tstruction Three of the American companies later sold their ... Refinery interests, leaving Ex:..:on and Mobil Oil Corpo Refinery planned CYPRUS\.-r·· fr or under construction ration each holding half of the U.S. share of -·· .... ----:..~\,,~1'- 23.75 percent in IPC. The other shareholders were Tanker terminal or loading platform BP (23.75 percent), Shell (23. 75 percent), CFP • l' r t a n u u 11 (23.75 percent) and the Gulbenkian interests Liquef;ed natural gas (5.0 percent).** (LNG) plant s 8 u II NGLplant Through the succeeding years, IPCs fields in aorthern Iraq accounted for the greater part of lnter11ational boundaries the countrys oil exports. In 1932, "Iraq granted a Hei>Jht of symbol corresponds to tht> annual cntde.::apaclty(t division * E'uon,J!ohil, Allau/ it· !Ue}£tiell/ ('ompany, Gu{(Oi/ 40.000 barrels daily ' Corpm'lt/ion,a.ul S/autlard Oil Cimcpun!f{!udiamtJ. 2 miitlon metric tons) Some of the refineries, **Cabmst1·S. Gulbellkiai!,IJIII' ttfthr ori!tinalowu< rx •Jt'TP(~ terminals and pipelines lwd ueyutiufcclwith the f/OI'f'l''l11l!'lllt{lltco/r.' Ottrmwn listed on these maps may EmpirtJiw the Cti/ICtllsion iulratJ. be partially or totally Inoperable due to war action or other reasons. i ~oOasim Burnydah s A u D oMedina /,_ tl,v" al oAaJ'~gh. 4• [I ,,1 ~· Jiddnhf .;~~ Joccn A R A B , ; ··,r tP , ___.. ;; Port Sudan :f'Jalf11lld "R"'Q Rll1 J Mamtul limo! Q)t'imr .;~~UrfJ!f3 Ilona!> Dhofar Kuria Murin Is. 0 411 Salalah t• n Mnasauao· Dahlak Is. 0 Atimara Kmnaran Is. Scale t:12COOOOO ETHIOPIA 100 200 EI·Obi!ld , 0 100 L l2 concession for the area west of the Tigris River received compensation for its properties. At the a'lld north of the thirty-third parallel to a com same time, the MPC interests were relinquished out. of the Iran-Iraq war, in which Syria has sided a concession in Kuwait in 1934 and discovered in pany that subsequently sold its interest to the 13 because the owners were unable to meet the min with Iran. A north/south line ofl million b/ d 1938 ~l,e prolific Burgan field, one of the worlds -owners of IPC. 'fhe new company came to be imum production rate specified in the terms of capacity, built within Iraq to provide outlets to largest. 1 ~:,· development was inter!Upted by called the Mosul Petroleum Cc1mpany (MPC). the concession. both the Gulf and the eastern Mediterranean, World War II, however; the first export shipment Mter an extensive e:\.'J)loration effort, oil in com could only be used to ship oil north after Iraqs of Kuwaiti crude oil was not made until1946. '1\vo mercial quantities was discovered atAin Zalah in In October 1973, following the outbreak of the main e:\.'J)Ort tern1inals on the Gulf, Khor-al other fields were discovered in the mid-1950s, 1939 and later at Butmah. fomthArab-Israeli wru~ Iraq began nationalizing Amaya and Mina-al-Bakr, were destroyed in increasing the growth rate of Kuwaiti crude oil p01tions of the BPC operations. Percentages cor 1980. This left Iraq with only one crude expmt production during that decade to 17 percent per In 1938, a third companj~ Basrah Petroleum Com responding to the interests of Exx:on and Mobil, route: the 1 million b/ d line from Kirkuk to the year, the fastest in the world. pany (BPC), also owned by the IFC group. was 60 percent of Shells interest (corresponding to Mediterranean through 1brkey, terminating at granted a concession covering the southern part the Dutch share in Shells holdings), and the 5 the port ofDortyol. 'l'o increase its export This rate of increase reflected Kuwaits low costs of Iraq. BPC began production in 1951 from the percent share held by Gulbenkians Participation capacity, the Iraqi government in mid-1984 was of both production, due to the relative ease of Zubair discovery and later developed the and Exploration Company were succ~ssively considering building three new pipelines, one via recovering its crude, and transportation, d~e to Rum ail a field. taken. These actions were directed ag-ainst com- . Saudi Arabia and a second through Jordan that the proximity of its oil fields to C:h'J)Ort loadmg panics whose home governments were consid would give Iraq alternative outlets via the Red facilities. In the late J950s, follcwjngthe overthrowofthe ered by Iraq to be supporting Israel. '1\vo year'S Sea, and a third pru·alleling the existing line monarchs~ relations between the oil companies later, in December 1975, Iraq nationalized the through 'lurkey. Like other Gulf producing country governments, and the Iraqi government became strained. British and French interests in BPC operations. Bahrain the Kuwaiti government in the early 19'l0s began Mterseveral years of fruitless negotiations It was not urrtil March 1979 that an agreement negotiations with. the oil compan.ies for pru~i~ip.a regarding acreage relinquishment, government was reached between BPC and the government The discovery of major reserves of oil in Iran and tion (see page 26) m the ownership of KuwmtJ ml pruticipation in ownership and other issues, the alising out of these nationalizations. Iraq stimulated e.X".[)loration elsewhere in the fields. An agreement for 25 percent government situation came to a head in 1961. In December of Middle East, including the island of Bahrain,25 participation was reached with KOC in late 1972, that year, the gov,..,rnment exp:ropriatec, without miles off the Gulf coast of Saudi Arabia. Bahrain Iraq has substantial prove!1 crude oil reserves Petroleum Company (BAPCO), then a wholly but the National Assembly declined to ratify it. compensation, more than 99.5 percent of the total (Figure 2), and i ls undiscovered potential is con Further negotiations took place, leading to a concession ateas held by Iraq Petrol~'um and its owned subsidiary of Chevron Corporation, struck revised agreement which was mtified in May 1974 siderPd to be among the most promising in the oil with its first well in 1932. Four years later, associated companies, leming the companies Middle East. By late 1979 actual production had and provided for60 percent government prutic'i Texaco, Inc. acquired a 50 percent int ·~"stin free to operate only in the limited areas w:here reaehed 3.7million b/ d. For 1979 as a whole- the pation in KOC retroactive to January 1, 1J74. In wells wete then in actual production. Attempts to BAPCO Production began at a modest ' 'P.l in 1975, the government acquired 100 percent of last full calendar year prior to the war \vith Iran the mi.J-1930s and remained below 40,00(, ·-1 settle the dispute by arbitration, as provided in Iraqi cmde oil exp01ts averaged approximately the properties and worked out arrangements for the concession agreements, werf frustrated by untill958.Amaximum levelof77,000b/d '"' 3.3 million b/ d, up by more than one-third over reached in 1970. BP and Gulf Oil to iift about 950,000 b/ dover the governments unwillingness to name its 1978, helping to offset the lower levels of Iranian five years. arbitrator. exports. In November 1974, the Bahraini government Tiny Kuwait was third in production among After two years oi negotiations, the companies acquired a 60 percent interest in BAPCO's pro .. exporting countries in the Gulf during the 1970s, Iranian military action in the war, which broke ducing operations. In early 1980 the government and the Iraqi oil minister, with the approval of a out in September 1980, destroyed Iraq's export smJ,>assed only by Saudi Arabia and Iran. But the ministerial committee set up for the purpose, increased its ownership to 100 percent. Bahrain trend of nroduction during the decade was never facilities in the Gulf and caused a shruJ.> cutback also shares equally with Saudi Arabiather~v- . reached a compromise agreement in July 1965. in production; output of ler.s than 1 million b/d theless uown, reflecting a gov12rnment policy o""' The agreement included prodsion for a joint enue from the offshore Abu Safah field, wh1ch hes conserving reserves. By 1979, output had fallen to during the final quarter brought the average for astride their boundary. While Bahrain has come exploration venture by the government and the all of 1980 do,vn to about2.5 million b/d. The con an average of 2.5 miaiun b/d from a peak of 3.3 companies in the disputed areas. Howeym~ a coup to depend heavily on oil exports as a source of million b/din 1972. Beginning early in 1980, the tinuation of the Iran-Iraq war and the denial by re:v<>nue, its crude production has never been a in 1966 brought to power a new government Syria and Lebanon of pipeline shipments of Iraqi government reduced production ceilings further, which did not approve the agreement, and nego majorfactor in the Middle East totul. Moreover, crude across their tenitory to their 1\~cditerra because of reduced world oil demand as well as tiations ·were terminated. In 1967, the govern output l1as fallen from the 1970 peak and in mid- the coi1tinuance of its conservation policy. As a nean ports of Banias and Tripoli, respectively; 1984 was running around 40,000 b/d. ment assigned exclusive rights \vith r~spect to limited Iraq's production to about 1 million b/d in consequtnce, production fell in ensuing years to the e:h'J)ropriated acreage to the state-uwned Iraq the ensuing three years. an average of around 1 million b/ d. National Oil Company (INOC). Subsequently, A small refinery was constructed in 1936; e:h1)anded ovel' the years, i~ became c:ne of the Salldi Arabia INOC reached an agreement with the French gov Three separate pipeline systems had been used ernmeltcompany, Entreprise de Recherches et 1·cgions largest at 265,000 1/ d capae1ty, pro- . Altbough by now well known as the nation with d'Activities Petrolieres (ERA.P), under which the in the past to transport Iraqi crude to eastern cessingclUde oil delivered by ~ipr iinc from Saudi the most proved oil reserves, Saudi Arabia was latter would explore and de\·elop a portion of the Mediterranean and Gulf export terminals. In Arabia as well as lor:al productiOn. Tn 1980, the not known to have oil !lntil the 1930f: It was not early 198(1, after Lebanon and Iraq failed to area on acont~act. basis. gov~rnment acquired a majority interest in the until long after the first-unsuccesstul-expiora agree on transit fees, exports were halted refinery from BAPCO. tion efforts bv a British syndicate in 1923-24 that through the Lebanon branch of the 1.1 million b/ d In June 1972, the Iraqi government nationalized Kuwait the magnitude of the country's petroleum wealth the remaining IPC concession areas, consisting line running from Kirkuk in the north to Syria became apparent. and Lebanon. In April1982 all cmde movements Kuwai~; Oil Company (KOC), owned in equal . almost wholly of producing properties. A settle shares by Gulf Oil Corporation* andBP, obtamed ment was negotiated in .li'ebruary 1973, and IPC across Syria were also discontinued as a result of disagreements between Sytia and Iraq arising *Acquired by Chrz•r·mt in mid-11184. 14 Figurc5 Exxon and Mobil started negotiations to acquire In earlier times, considerable volumes of Saudi 15 Principal Oi! Movements by Sea -·1983 equity in Aramco in 1946 and worked out a pre cmde had been moved to the eastern Mediter liminary agreement with Chevron and Texaco in ranean through the 30-inch diameter'l'i;:-ns 1947. The arrangements were concluderllate in Arabian Pipeline (Tapline) across Saudi Arabia, 1948. Exxon acquired a 30 percent equity interest Jordan and Syria to a tank<'r t<:'l·minal at Sidon in inAramco, and Mobil, 10 percent. Chevron and Lebanon. Completed in 1950, the line was built to Texaco each retained 30 percent.* reduce transportation costs to Europe f\:v elimi nating the long haul around the Arabian Penin Aramcds production increased rapidly; rising su1.a (Figure 5). However, the development and f,.om about 500,000 b/ din 1949 to more than 3 mcreased use of very large crude carriers million b/ din 1969. During the 1970s, it escalated (VLCCs)* and the decline in tanker rates made even faster; by 1978, Aramco cmde production Tap line oil shipment uncompetitive with other oil averaged over 8 million b/ d. While the govern routes, beginning in 1975. For that reason, as well ment had established a maximum allowable fer as the unsettled political situation in Lebanon, Aramco in the mid-1970s of 8.5 million h/ d, in there have been no regular Tap line e:x'Potts from 1979 it increased the allowable to 9.5 million b/d Sidon since that year. '.1'apline doe::;, howeve1; con as a temporary measure when Iran's cmde tinue to supply Saudi crude oil to Jordan to meet e:x'Ports were cut back as a result of that country's some of its internal requirements. revolution. Throughout most of the subsequeht two years, average production remained around Under the 1972 General Agreement on ParticijJa the higher allowable le\·el. Total Saudi produc tion (dir.eussed in more detail on page 26), a 25 tion, howeve1; dropped to 6.3 million b/ din 1982 percent interest in the crude oil producing opera and to just over 5 million b/ din 1983 in response tiont; of Aramco was acquired by the Government to the decline in world oil demand. of Saudi Arabia. Its interest was increased to 60 ,,., ...... ,.. .!i percent, effective January 1, 1974, and in mhl-1974 '•-...,J .... Of the four grades of Saudi crude oil-Arabian the government made known its desire to acquire E"iraLight, Light, Medium and Heavy-Ara substantially all of Aramcds assets and opera Lian Light is of special significauce. Since 1971, it tions. By 1980 the acquisition was completed. Th2 has functioned as a ''marker" cmde 0i1,sen1ng as anangements covering the go\·ernments acquisi the standard in rdation to which other Gulf and tion of assets provide Aramco a significant role later all OPEC crudes have been priced. in operating the oil fields for the govcrnmt·nt, m1 well as access to substantial volumes of Saudi Encouraged by the Chevron disc:over:dn nearby By the autumn of 1943, the United States Gov The principal sources of Arabian Light are the crude oil. Bahrain in 1932, the IPC group pursued con- • ernment h.ecame concerned that wartime petro Ghawar and Abqaiq fields in the east central part cession rights in Saudi Arabia. But it was outbid leum reqmrements were serio.1sly draining of the country: Arabian Medium crude comes At the urging of the go\·ernmcnt, the scope of by Chevron. In 1933, King Abdul Aziz ibn Saud Am.erican oil fields. Accordingly, the government mainly from two offshore fields, Zuluf and Aramco operations in Saudi Arabia broadened gran~ed Chevron a concession covering a large decided to allocate the necessary materials for a Marjan. Arabian Heavy is produced from the off considerably in recent years to include prutidpa area m eastern and central Saudi Arabia This 50,009 b/d refinery at Ras Tanura to process shore Safaniyah and Manifa fields, and Arabian tion in non-oil activities, such as the elec ~W:S later extended offshore into the Gulf. Texaco Saudi cmde. Construction proceeded despite E:xira Light comes from the offshore Berri 11eld. trification of the Eastern Province, as well as JOined Chc\ ron's Saudi venture in 1936 at the wartime logistical problems, and the refinery major petroleum~related ventures. Aramco has time it bought into Che•-rons Bahrain operations wa.<; completed and placed in operation in the fall The bulk of Saudi cmde production is exported operated mac;sive water injection facilities· to In 1938, the compan:v later to be named Arabian·· of194.5. via the Gulf in tankers loaded at Ras Tanuru, the maintain the reservoir pressure of several oil American Oil Company (Aramco) made the first nation's original oil mrmi nal, and the nearby off fields; it also has undertaken the constmction of a important oil discoven· in the Eastern Province ln the immediate postwar period, further explo shore terminal atJu'aymah. Sincemid-1981, crude and natural gas liquids (NGL) terminal of Saudi Arabia, at Dammam. ration in Saudi Arabia quickly indicated the when a pipeline from the Eastern Prov1nce to the and tankage at Yanbu and the huge Saudi master area's huge potential and culminated in the 1948 Red Sea was completed, substantial quantities of gas system (see page 22). The first tanker cargo of Saudi Arabian cmde crude have also been exported from the western discovery of the 160-mile-long Ghawar field. Neutral Zone was shipp~d in May 1939, but World War II began E."'Ploration also made clear that development terminal of Yanbu. (See map on page 11.) the follo.mng s~:ptember, gradually bringing The Neutral Zone (also known as the Dh1ded would r~quire a massive infusion of capital, men J\ramcos operahons to a halt. Shippmg became Zone or Partitioned Zone) is. an ru·ea of some and eqmpment. In the face of suet requirements, 3,560 square miles between Saudi Arabia and difficult, tanker shortages were common mili Aramcos two original shareholders, Chevron and tary actio"'. made some markets inaccessible and Kuwait whicl1 was established bv their mlers in there was little demand for oil in the Indian ' ~exaco! wer~ receptive to admitting other partie~ *InApri/,1975,Mobil w-rant;rtl ll'ilh .tlramcolo inl'l·case 1922. Under their treaty, resolving a boundary ~pants m the1r venture. At the same time, surg its o!l'llcr.~hip ofAtamco to 15 percent o1•cr aji1•c-ywr Ocean area Operations continued only to the prriod. Thus, a.~ctf111ay 1.'17!1, the E.r.mn, C'het'I'OJI ami dispute between them, they agreed to share ~ng- post~var demand for oil caused other major 1 extent n~eded to ?upply about 15,000 b/ d to the 'll!.rac·o intc•t'£•sl.~ were con·£ Hponcling/y l'cdurcd /o..!.'/ .3 refinery m Bahram. ~nterna~IOnal petroleum companies to :f1 ·}an prrrl'lll flll'll. ThiHdi1•z'sion c!f'Hhal'l' ownership ll'CI.~ not mcreasmg need for new sources of crude. a.Oecttd u•hrn lite Saudi .4rabia llfflll'C1"1mwnt m•quircd subslantiallya/l C!fAramco:~ assets and oj:('ratio;l.~ in L'llill. *Jlj{},000-.120,01111 lichdH•!'i[Jllt I ems (clwt) -- iii, t-:,:._ • ~- ~ l~, ,C;;: ~ , (I .. ~ ." '" ,. L C] .-~~~-: ~ ·-~·~ ·~?·~~~::· . '·' C> 16 equalrightsin the territory. Bidders for oil rights into the Gulf. In 1!?:-;5, Qatar Petroleum Company The ruler of Abu Dhabi granted its first oil con b/d. Thus, by 1983, total production from both 17 began to be invited in the mid-1940s. In 1971 the (QPC), one of the IPC group, obtained a 75-year cession in 1939 to Abu Dhabi Petroleum Com offshore and onshore fields averaged just under two ~o?ntri~s dhided the ;one geographicaliy for concession for the entire onshore territory. In pany Ltd. (ADPC), owned by the IPC group. 800,000 b/ d-or less than half the peak rate. adrmmstratlve purposes, mto northern (Kuwaiti) 1940, QPC discovered the Dukhan field on the Having a term of 75 years, the concession cov and southern (Saudi Arabian) portions. However. west coast and, after a war-imposed delay, began ered all of Abu Dhabi s land area, coastal wate:rs, Dubai, the second most populous sheikhdom in they retained equal interest in all petroleum that production in 1949. The concession for Qatars and islands in the Gulf. The war in Europe and the v:.. E, is also the second largest producer of oil, had been discovered in the interim or would be offshore areas was granted in 1952 to Shell, which boundary disputes witt Saudi Arabia, however, all of it from offshore fields. Oil was discovered in discovered in the future. discovered the IddEl Shargi field in 1960 and precluded intensive exploration and development 1966 by Dubai Marine Areas Ltd. (DUMA), a con Maydan-Mabzam and Bul Hanine in ensuing until1950. In 1960 ADPC discovered oil in com sortium of U.S. and European compz.nies \vith The two governments granted oil concessions in years. (In 1972, it also discovered very large non mercial quantities at an onshore field called Bah, Conoco Inc. as the operator. Production from the the zone to three companies. In 1948, Kmvait associated gas reserves. See page22.) and exports of its crude-known as Murban field, named Fateh, began in 1969. Other discov granted its onshore rights to American Indepen began in 1963. eries were made subsequently. Since the late dent Oil Company (Aminoil), formed by a group In late 1972, the Government of Qatar, along with 1970s, Dubais production has been relatively ofmajo:r and independent companies. Saudi those of other Gulf producing countries, under A concession covering offshore areas apart from stable at an average of about 350,000 b/ d. Arabi as onshore rights were conveyed in a 1949 took negotiations \vith the companies for partici the islands and coastal waters had been granted Sharjah has been prodttci~g small quantities of concession to Getty Oil Com pan~~* The rights to pation in their oil operations (see page26). By in 1953 to Abu Dhabi Murine Areas Ltd. (A DMA), oil since 1974, when its Mubarak offshore fit.!ld "'· 3 the entire Neutral Zone offshore area were year-end, Qatar acquired a 25 percent invcrest a company owned by BP and CFP, later joined by discovered by Buttes Gas & Oil Co. as operator acquired from the two countries in 1957-58 bv and, in 1974, its share was incre:llled to 60 percent. Japan Oil Development Company Ltd. Oil was for a group of companies. From a peak of 38,000 Arabian Oil Company Ltd. (AOC), a Japanese In 1975, Qatar asked that the level be raised to 100 discovered in this concessio:1 in 1958 at Umm b/ din 1975, crude production from Mubarak fiJ:?~ organized by a group of Japanese industrial, percent, and in the following year an agreement Shaif; e}qJorts began in 1962. dropped to aboutlO,OOO b/din 1983. However, utthty and other companies. to that effect was concluded with QPC. A similar the Sajaa gas condensate field, discovered in 1980 agreement was executed by Shell in 1977. Both In 1972 the government undertook participation in East Sharjah, began production in mid-1982, Aminoil, which was operator for all onshore concessions were transferred to Qatar General negotiations with the oil companies (see page 26); and by mid-1984 condensate production had operations for the first several years, discovered Petroleum Corporation (QGPC), which assigned by the beginning of the following yeru~ Abu reached55,000 b/d. In the otherfouremirates the zone's first oil in 1953 at Wafra, about20 miles operations to two divisions, QGPC Onshore Dhabi National Oil Company (ADNOC) had Ajman, Fujairah, Ra.'.l al-Khaimab and Umm south of Kuwaits Burgan field. Later, Aminoil OperatioPs and QGPC Offshore Operations. acquired a 25 percent interest in the concessions. al-Qaiwain-exploration over the last decade has and Getty formed a joint operating committee, This was increased to 60 percent in 1974. Under not yielded commerc!al cmde oil reserves, but a staffed by both companies, which jointly carried In conjunction with the governments 100 percent the participation agreement, ADPC's share substantial gas condensate reserve was discov oute:x-ploration and development and operated participation, the QPC shareholders established holders and ADNOC established Abu Dhabi Com ered in Rasa!-Khaimah. the gathering facilities. Pipelines, refining, and pany for Onshore Oil Operations (ADCO) to Dukhan Service Company to provide services to Oman e::..-port activities remained separate. QGPC Onshore Operations. The QPC share conduct all operations in the ADPC concession. holders also signed a cmde purchase contract Abu Dhabi Marine Operating Company (ADMA After many years of exploration by a number of In 1961, AOC made its first discovery in Gulf ,vith QGPC. Similar arl'angements were made by OPCO) was established to conduct operations on American and European companies, oil was dis wat\!t3 at Khafji, which is a northern e:x-tension Shell with QGPC Offshore Operations. behalf of ADMA and ADNOC. covered !n the early 1960s at three locations in the of Saudi Arabi as Safaniya field, the largest off d~sert of Oman, a sultanatfl on the southeastern shore field in the world. Aminoils interests were Qatars total crude oil production peaked in 1973 About two-thirds of Abu Dhabi's production tip of the Arabian Peninsula and the only signifi nationalized by the Kuwaiti government in at 570,000 b/ d, dropped in response to declining comes from OHshore fields-Bu Hasa,Asab, and cant Gulf producer which is not a member of 1977.** Getty continues to produce in the zone, world demand in the following years, rose again Bab, all operated by ADCO-and is exported from OPEC. The discoveries were made by Petroleum moving the oil by pipelinP:..., ik., efinery atMina to 500,000 b/ din 1979, and subsequently fell a terminal at Jebel Dhanna. Mol't of the country's Deyelopment (Oman) Ltd. (PDO), then a Saud in Kuwait. again, dropping below 300,000 b/ din 1983. Pro offshore production comes frum. the Umm Shaif majority-owned subsidiary of Shl'll. Production duction has been about ever.ly divided between and Upper and Lower Zakum fields operated by began ln 1967 and rose rapidly to 335,000 b/d by Production from the Neutral Zone-dhridedfifty onshore and offshore fields. ADMA-OPCO. The oil is pumped through under 1970. During the 1970s, over a dozen additional fifty between Kuwait and Saudi Arabia-rose water pipelines to a terminal on Das Island. but mostlv small-fields were discovered act·oss through the years until it peaked at about 570,000 United 1\rab Emiratf:s Small additional volumes are produced from the counti'y, and output from older fields wa.c:; b/ din 1979. By 1982, output had fallen to an The seven Arab sheikhdoms on the southern offshore fields developed by Japanese and ma:.1tained by secondary recovery techniques aYerage of about315,000 b/d; in 1983, it recovered coast Jf the Gulf, formerly known as the Trucial European firms. and additional drilling. Also during that decade, to just under400,000 b/ d. States, constitute the United Arab Emirat-es the government obtained and increased its (UAE), a federation formed in 1971 with the ter Total Abu Dhabi production exceeded nn average interest in petroleum company operations. Si nee Qatar mina:tion of tho treaties nnderwhich Britain had of 1 million b' d by 1972 and peaked in 1977 at 1970, production has fluctuated considerably; Qatar occupies a peninsula of about4,000 sq. mi. been responsible for their defense and foreign about 1.7 million b/ d, but production restrictions dropping below 300,000 b/d during the 1971-74 jutting from the Arabian mainland northward relations. Of the seven, two-Abu Dhabi and and reduced world demand have 10\vered output period, rising to around 350,000 b/ d in 1976-77, Dubai-are significant t)il producers, end a third, and export levels in recent years. In 1981 the gov and falling below 300,000 in 1979. In 1981, how Sharjah, produces mod•ast amounts. However, ernment imposed production limits. AD CO's ini eve.l', output turned up again, and in 1983 it expJoration activities are b'ling ~arried out in all tial production allowable was set at 7~0,000 b/ d, reached a new peak of' about ~75,000 b/ d. *Arquirnl by 'll·.rm·tlillmitl-1!18}. sev;en emirates. down from a peak production leYel of 1 million *"Aminoil had l!feu w''Jilircrl i111fRII by rt..J.Reynoltl.>~ b/ d. ADCO's allr 1vable has been reduced since to Imlustries, Im·. 500,000 b/ d. ADMA's cun·ent allowable is 250,000 3 Gas Operations 18 Egypt The 'El Mol'gan discovery had been fortuitous. Until the 1970s, natural gas was a largely unused eitherin solution or as a gas cap overlying the 19 Centuries ago, oil seepagea at Gebel el Zeit, near Having gone on stream in April and although the mouth of the Gulf of Suez, earned that ridge by-prorluct of crude oil production in the Middle crude. Such gas he)lps to drive oil to the surface ttam,porru:ily idled by the war, its rapidly East. In 1972 gas production in the major coun and is reeovered al:ong with the oil. Thus, the the Roman name Mons Petroleus, but Egypts increasirag production did much to raise Egypts first commerdal oil we:U was not drilled until tries of the region totalled 11.7 billion eubic feet producti10n rate of assadated gas tends to be totalfr10m ahoutl20,000 b/din themid-1960sto per day (cf/ d), or the equivalent of 1.95 .million provortim1al to the crude production rate. 11Non 1909, one year afte1· tlne discovery well in Persia. over325,000 bjd in 1970 (excluding the Sinai b/ d of crude oil,* but only 30 percent was utilized In ~he decades fli~e.a then, Egypt has been h~avily associabad" gas is:produced from reservoirs con !fields tlhen under Israeli control). Recovery diffi (Thble 4). 'fhe remaining 70 percent was flared taining,only gas; thus,, its production can be con C:\"Plored-botlwn- and 0ffshore-by many Egyp culties in El Morgan and other fields caused a because there was little local demand for it and tian and foreign cc,mpalllies. In spite of many dry trolled to meet demand. In the MidldleEast, sharp· drop in 1972, howeve1: and theArab-Israelii the cost of transporting it to energy-importing holes and the efiects ())f two world wars, four associated gas cOimpdses 53 percent of the war of Oct(Jiber 1973redueed output furthe1; countries was so high that it could not compete. gas res1erves. Arab-Israeli w~u'S (induding lsraers eight-year resultiing int a decline to below 150,000 b/d.lorthe occupation of a regiOJn \ri.th severa] oil fields), a:nu year 1974. By 1976, when control of most of the reversals in govemmenll policies toward forei1:,-r:r1 occup'ied Sinai fields had been returned to Egypt, Table4 oil companies, sufficient oil has been found and output had climbed back to the 1970 peak of over Middle East Gas Production and iltilizationc developed tQ make EgJlPt the se\·enteenth largest 325,0100 bjd. By the end ofl979, with new devel·· 1972 19(12 crude producer in the world. opment and the mmpletion of the phased return GI'OIIS Gross Production Utilizatiou F'rocluction Utilization of Si1nai, production had almost doubled to about .Million Million r:c ~Million ll.fill!'on % Thefirstimjportantfield, Hurghada, was found in 600,000 b/d. It has continued i'isingsince, aver Country cH.jt.Jday ru.ft.{tlay Utilized t'U • .fl,jclct[/ cu.jt.;day Utilized 1913, but little exploration, development or pro agingabout690,000 b/d in1983. duction occurred until highly restrictive gm·ern Abu Dhabi 1,085 121 11 1,080 730 68 mentre.t,rulations wereTela.xed in1937. U.S. and Eg,rpts Suez Canal has pJ.ayE>d an important role Iran 4,024 1,724 A3 2,370 990 42 European companies then obtained permits and for Imany years in the international oil trade. Iraq 718 90 1.3 410 70 17 carried out exten;.,h e cJxploration. but this 1 Un til its closure following- thC:; 1967 war, the eamal Kuwait 1,774 688 39 450 -100 89 resulted in only one discovelJ~ Gharih. on the wa:5 a major mtery for t:Je shipment uf oil from west coast ofthe 'Gulf of Suez in 1H38 before the Middle East to much of the workl since it Qatar 493 107 22 560 510 91 World War II curtaile,a their acthities. made a round-trip voyage from the Gmlf te~rmi Saudi Arabia 3,150 533 17 3,250 1,310 40 mils to Europe or Nolih America about 9,5'00 Other* 500 300 60 .1.500 900 60 E:li."Ploration was resumed after the war and had miJes shmter than the alternative mute around! remained essentiall:nmsuccessful when, in 1948, .A!frica's Capl' of Good Hope (sel'~ Figure 5). With Total 11,744 3,563 30 9,620 4,910 51 the government enaatedk!,ri..qJation unfavora'' 'I' the canal closed, the oil industry 1hiftedmost of • Int'lur/,:; Baltraiu, b'yypt, Oman ami United Arab Emirates (excludiny Aim Dhabi}. to non-Egyptian .companies. This led some to :>u > its crude moYements to the Cape route, using the Snttrt·f~: Citerl rozwtries, Statistical Bulletin, Oryanization of the Pdroleton Exportiny Cozwcries: e.~limatesjM: "olltrr" pend their search for oil in E!,>-ypt and others to then new tanker class of VLCCs, whose lower cmt 1llri1's, Exxon Corporation. close up their operations in the countr~: costs per barrel ofl'set the greater distance oil had to be carried. When the canal was reopened on With rapidly riP:ng energy prices and acceler Although reserve levels are comparable, produc The next dozen or so years smv the monarch~· June 5, 1975, it was economically attractive only ated industrial uevelopment throughout thP. tion rates of the two types of gl:lk.' are widely dif overthrown, the Suez Canal seized, and foreign for smaller tankers and other vessels. This led the petroleum production companies nationalized. region since the early 1970s, however, the Middle ferent and vary among countries of the region. Egyptian government to undertake an expan East nations have been giving increasin5 atten In 1972, non-associated gas production was well Nevertheless, exploration for petroleum was sion, completed in 1980, to enable larger vessels to resumed by some foreign interests and con tion to utilization of gas. By 1982, although gas under 5 percent of the l'P.gion's total gas pl·oduc transit the canal loaded and to permit VLCCs and production had fallen about 18 percent, utiliza tion. This was because most countries of the tinued by EID1lts government and private com even some ultra large crude carriers (ULCCs)* to panies. With discoveries of the Belayim fields in tion had increased38 percent. Flaring had been region had surplus associated gas. By 1982, r..on transit the canal when r<: 'urningin ballast to the reduced to about half. This trend is likely to con associated gas accounted for 15 percent of the Sinai and offshore in the Gulf of Suez, e:ll.-plora Middle East. tion also became more successful. tinue. Some authorities believe flaring .may drop output and, given the impetus of the Middle to us low as 10 percent of gross production by 1990. East's industrial development, the non-associated Moreowt; Eg)"Pt constructed the SUMED system In 1960, E!-,>'}"Pt again sought to e.:-..-pa11 .. fa~~~. Jabrio ls. ~amakl,. Sarl . BAHRAIN : 0AJ-Uqayr '. - H a s a \ 0 0-Sohar \o\Salwah /-., ..... ,~· ...... ; ...... \ \ _J Al-Khar j \ ., C) ·,, oSila A~ -Sulaymantyah '· '· '·,,Abu D h a b \ \ Khanto \ Olbrl ·:.A \ R A 8 A \ \ UNITED ARAB 0 M \ '-·-·-·-·-·-·-·-·--·-·-· See legend on page 10 ·-·-··-·- Seal~ 1!3000000 Q ~~ !'>) 15km Shayoah o 25 50Mi ,Rnmlah ....Kidnn south 'lb:tcontinues from page 19 4 The Changing Relationships With Producing Countries 22 Under the impetus of accelerating oil pric.es, the Iran regions NGL capacity has grown in little more nitude of the North field became evident, Qatar Since the early decades of the century, changes 23 With gas reserves of 480 trillion cubic feet (tcf) began planning its development to supplement have occurred in the relationships between oil than 10 years from two small plants in Kuwait Iran has nearly two-thirds of the regions total,' the existing gas system and to supply an LNG producingcountlies and the internn~;ional oil and Saudi Arabia to facilities in seven countries but it currently accounts for only one-fifth of the with a total capacity of over 12 million b/ d (Table plant having at least 1 billion cf/ d export companies. Changes, \vith their consequences for areas gas utilization. In 1970, Iran began the capacity. In 1984 QGPC announced an agreement con'3umers, are still going on. 5). Esser•... :any all of the LPG output is ex"J)orted in operation of a 1.6 billion cf/ d pipeline (IG.AT-1) to specialized refrigerated vessels, most of it to with BP and CFP for their participation in the supply treated associated gas to both northern LNG venture, with the project completion to The Early Years. The original Middle East oil Japar., where LPGsclean-burningproperties Iran and the Soviet Union. By 1978, phu1s were make it a desirable, though premium-priced, fuel. occur some time in the 1990s. Qatars total gas ex-ploration and production concession agree well advanced for a similar, but much larger, par reserves are adequate to support several world ments which U.S. companies signed were entered Led by new projects in Iran and Iraq, the regions allelline (IGAT-2), and construction began that NGL capac1ty is expected to rl!Oe one-third by 1990. scale LNG plants. Their realization, however, into dm·ing the late 1920s and 1930s. During this year on the SC•• :thern half. Work was halted in depends on market conditions. period the average wellhead value of U.S. crude 1979, however, following the revolution. Plans Iraq oil, with which Middle East oil would have to com Table5 also had been developed by 1978 for supplying 10 pete in European markets, was falling. (From a Middle East Natural Gas Uquids (NGL) Capacity billion cf/ d of non-associated gas to the new pipe Iraq has the lowest rate of utilization ot gas high of $3.07 per barrel in 1920, when post-World As of January 1, D84 line, to gas injection projects that would enhance reserves among the major Middle East oil pro War I inflation peaked, it fell to $1.34, recovered Tlllluscmds of recovery from producing oil fields, and to a pro ducers. Prior to the war with Iran, Iraqs gas to $1.88 in 1926, and then slumped well below $1 0Pmtru Barr;lspcr Day posed liquefied natural gas (LNG) plant. But, non based industlialization consisted of po\ver gener during the early 1930s as the Great Depression a associated gas development was severely cur ation, a fertilizer plant, an iron and steel mill, and U.• Saudi Arabia cut demand and major new U.S. discoveries l',~ 675 tailed-firstin the wake ofthe Iranian revolution, an aluminum plant. Plans for a petrochemical added to supplies.) Despite the combination of Kuwait: 200 then again when the wanvith Iraq broke out. At plant and NGL recovery facilities were well depressed prices and unknown eventual costs of Abu Dhabi {l'AE) 190 the same time, production of associated gas has underway in 1980 when the war began. Although finding and producing new oil in difficult areas Iran fallen with the decline in crude output. No gas these plant<; ~~1ve since been completed, stattuy is far removed from major markets, the Middle 60 deliveries have been mo.de to Russia since 1980. not ex-pectrd until after the war. As a result, Iraq Qatar 55 East concession agreements provided that the Given Irans enormous reserves, the potential for continues to flare over 80 percent of its associated companies would pay the governments land rents Dubai (rAE) 20 ex-tensive gas-based industrialization and large gas production. Iraq is expected to concentrate plus fixed amounts for each barrel of oil produced Bahrain 10 gas ex-p01t projects remahls. on increasing gas utilization when the war -irrespective of the profitability of a venture. is over. Iraq * Kuwait United Arab Emirates Fifty-fifty. In the early 1950s, as market prices for Total 1,210 Significant amounts of associated gas have been oil were strengthening and relatively low pro *Tiro majm·plcml~<'lrt mmplrtnl but 1111t in OJ!frafirm. utii:zed in Kuwait for more than 10 years. Major 'fhe United Arab Emirates possess substantial " -;? ducing costs were made possible by high produc &Urt'l.' r::rxun Owporatimz n:timatn~. applications have included processing into NGL, gas reserves, currentlv estimated at 31 t.!f and 'I :0 tion rates and technical innovations in the Middle •i power generation, fertilizer manufacture, and mostly located in Ab.1 Dhabi. In 1976, the Abu I .. East, income ta.xes were introduced, at a 50 per - Saudi Arabia refinery fuel. These and other gas-based facilities Dhabi government, having acquired a 60 percent cent rate, in most of the regions producing coun and the related supply system were designed on interest in theindustrys oil operations, nation £' tries. Thereafter, the companies and the host .. Saudi Arabia has been the regions leading pro the basis that up to 1.5 billion cf/ d of associated alized all non-associated and associated gas ducer of gas, as of crude oil. Large-scale utiliza governments shared profits fifty-fifty. To deter gas would be available from crude production of \vi thin it'5 boundaries and, shmtly thereafter, mine taxable income, the companies were per tion of this gas began \vith the advent of about3 million b/d. Significant gas shortages began tapping its gas reserves. In the mid-1970s, industrializh-tion in the early 1970s and \V2.S sub mitted to deduct a "marketing allowance" off were felt in the early 1980s, however, \vhen gas Abu Dhabi Gas Liquefaction Company Limited their posted prices for cru:le oil.,. This allowance sequently reinforced by a $14 billion master gas output fell to 400 million cf/ d as crude production (ADGAS) constructed the regions only LNG system and the development of an NGL industrv. was intended to encourage a rapid growth in dropped below 1 million b/ d. At the start of 1984, plant. With a capacity of 2.2 million tons per year Middle East production by compensating the On completion, the gas system will gather and ~ the country had no known reserves of non-associ (equivalent in energy to 55,000 L/ d of oil), the process more than 99 percentvf the kingdoms companies for the extra costs which they ~ted gas, but was actively conducting an explora Das Island plant bf.gan production and expo1t to incurred in marketing the areas em de. associated gas ;,>roduetion. In fact, the future tiOn program. markets in Japan in 1977. demand for gas :s e:\-pected to be so large-for peu·ochemicals, steel, sulfur and other new indus Qatar Abu Dhabi and sorne.ofthe otlter sheikhdoms tries-that non-associated gas reserves are being Owing largely to t1le discovery of the offshore also have NGL projects in operation or under way. developed as welL ~orth field in 1972, Qatars gas reserves have GASCO, a consortium of companies headed by JUmped from less than 5 tcf to more than 60 tcf. ADNOC, the national oil company, operates a •111 the Middle Ea.~t arul othei· l'cgionsoutside til<• United Statements by QGPC, the national oil company. plant at Ruwais with a capacity of150,000 b/ d of States and Canada,Jioslcd priers t raditionalluwere ,qet indicate that tL~ actual rel:ierve is likely to be sub NGL. Sharjah and nas AI Khaimah recently and pub/My stated by oil com panics a,q the '1ist "prices at stantially more than 100 tcf. Between i978 and placed plants l 1tream, and another is scheduled which they woll/clscll c11tdeoil. With the infrl)(lttetl"on of 1981 Qatar developed fertilizer, steel, power, pet to start up in 19b4 in Dub?..i. ilu·ometa.t'i's, posted p1·ices less ullO!t'tlltces also became "la.r rejerence Jll"it•es" on11'hichpa/Jmeuts togcn•ernnwnl.~ rochemical andNGL production, all based on wen based. In 1971, the companies agreed tJ share the associated gas and backed up byveryliroited determination ofpostf'll prices with goremments tmd, in onshore non-associated gas reserves. As the mag- 1,97.J,gOt•ernments took complete control f!,rlletiing post ings, as noted onpuac27. (In the [T.S. and Canuel a, posted ptiees wr,re, and ?'(i/IHtiu, the ptit·cs at which companies buy J crude.) i ~->~"-'--""""-'""'-·-~r-.~...... ,..._-.~· ------~- -~,_~--...... ,_, ...... , __"'-"' ___,....,_.,.4>-~--•-_,...-~=-'i~_,~""""",_,~~ri\' ~« ·~- I '.· • ~ " • ~·' ' .l. ,. • • " ', ~::~~·-~':~~ ~·\f"~~:'' ' . " . > '"1:;,: 'r :! ' . ' ~'l!!lll!lill'.. _.. --~""' ~. ·' . As production costs per barrel of oil declined 'vith Maintaining Government Take. In its c:arly d2.ys, greater output and as the companies occasionally In 1970 a Syrian bulldozer ruptured and shut of its crude supply, felt co1npelled to agree to 25 OPEC's principal objective was to insulate its down the Trans-Arabian Pipeline h1gher posted price..: in September 1970 after posted small increases in oil prices, government members' revenue pE!r barrt1 (then referred to as ~mporarily revenue per barrel rose. With the industry con which brought crude oil from the eastccru:t of Libya had not only cut back production, but also /: government "take') from a decline in crude oil Saudi Arabia to the Mediterranean. With the threatened a total production stoppage. tinuing to make major discoveries, however, pro market prices, which continued throughout the duction capacity '"'as lJeing developed more Suez Canal closed following the 1967 Arab-Israeli 1960s. Member governments achieved this in watt the closure of Tapiine meant that Gulf oil At the OPEC conference in Caracas in December rapidly than oil demand by the late 1950s. The essentially two ways: by exerting pressure to 1970, other e.x-porting states sought to follow the ensuing competition for market out1ets resulted destined for Europe had to be brought around the keep stable the companies' posted prices for Cape of Good Hope. Demands or the world's Libyan example. They proposed that posted price by 1957 in the oil companies' widespread dis crude oil, on which their income ta..'( collections tanker fleet increased, and Europe became more increases be extended to all OPEC members; tbat counting from posted prices and, in 1959 and '"ere based, and by changing the manner in dependent on oil from North Africa. Libya 55 percent be established as the minimnm ta..'( 1960, in the reduction of posted prices them which the tax revenues per barrel produced were seizeJ this opportunity to press for higher posted rate on the net income of oil companies operating selves. These actions led to a fall in the Middle calculated. IJrices and a higher income tax rate, and rein in member countries; and that nominal posted East producing countries' revenue per barrel forced its bargaining power by imposing produc prices be linkea to an index of industrial coun from a high of 80 cents in 1957 to 78 cents in By treating royalty payments* as an item of tion restrictions on !>everal of the oil companies tries' export prices to protect the purchasing 1960-and provid-~d a key impetus to the forma e:J..-pense. rather than as a ta'( credit, the income producing there. Occidental Petroieum Con;>o power of oil revenue against industri~lized coun tion of OPEC in the latte1•year. ta.'( paymmts due the governments were ratlon, which relied on Libya for over 95 percent tries' inflation and currency devaluations. increased several cents a barreL In addition, the The Birtlr of OPEC. In September 1960, govern companie:/ marketing allowances off posted ment officials of Saudi Arabia, Venezuela, Iran, 'fable 6 prices were reduced. As a result of these changes OPEC Crude Oil Production Iraq and Kuwait, meeting in Baghdad, adopted and the continued decline in the companies' oper 1950-83 two principal resolutions. The first stated that atingcosts, average government take to Middle {Thousands of Barrels per Day) the five countries could "no longer be indifferent East countries recovered during the decade of Micldlc Ea11f to the attitude adopted by the oil companies in the 1960s, rising from 78 cents per barrel in. 1960 OPEC effecting (posted) price modiP.cations". The reso to about 85 cents in 1968. ()]'£'(' Mnulwt.~ lution demanded that the oil companies "main as ~; ot Ntm a11 ri o(Xon il!idcl/P Ea.~t 'irot' Other 'Jhtal Comnilllii.~t ('onmi u 11 i11f tain their prices steady and free from all By 1970, :narket conditions had changed signifi 11fl'mberB OPEC Mcmbrrx OPEC !:in·ld mn·lrl unnecessary fluctuations" and declared the coun cantly as the worlds demanrl for oil acce1erated. 2,846 7,874 44 28 tries' intention to "study and formulate R-system \Vhereas oil had accounted for abour 10 percent 1960 5,028 64 to ensure the stabilization of prices by, among of the total energy consumed in Westmn Europe 1961 5,577 66 2,920 8,497 45 30 other means, the regulation of production .. ?' in 1950, its share was more than 55 percent by 1962 6,110 61 3,84<1 9,954 49 30 1970. In Japan over the same period, oil's share 1963 6,701 62 4,164 10,865 50 31 The l5ecoPd resolution advised that the ''Confer rose from 9 percent to 33 percent. Imports 61 4,724 12,082 52 32 ence decic.1t:s to form a permanent organization accounted for virtually all the oil consumed \n 1964 7,358 called the Organization of the Petroleum both areas. Even in the U.S., which already had 1965 7,\J;>B 61 5,181 13.177 53 32 EA-portir.g Countries •.• The principal aim of the relied on petroleum for 40 percent of its e 1ergy 1966 8,876 62 5,341 1•1,217 53 33 organization shall be the unification of petroleum consumption in 1950, oils share rose furtbet; to 44 1967 9,837 63 5,794 15,631 54 34 policies for the member countries ann thP deter percent; almost a third of the increase in petro 1968 10,8!55 61 6,805 17,660 55 31 mination of the best means for safeguarding the leum prcrluct demand was supplied by imports. interests of member countries, individually and 1969 11,893 58 8,448 20,3'11 59 34 collectivel;y.'' The world had becm 1e not only heavily 1970 13,229 60 8,905 22,134 58 35 dependent on oil, but, more specifically, on 197·-1-----~·- 15.:...,5-94___ 62--· ·-·-- ~-~498___ ,_ 25,092 63 39 With approval of the resolutions later that year imported OPEC oil. And of OPECs production, 60 41 by each of the governments, OPEC offirmlly came 1972 17,301 65 9,410 26,711 64 percent came from its Middle East members (see 30,989 67 •15 into being. In little m0re than 10 years, OPEC Table 6). OPECs domination of the oil e:J..-port 1973 20,599 66 10,390 e.x-panded its membership to its present 13, of market, and its commanding position with 1974 21,234 69 9,513 30,747 68 47 which six are Middle Eastern states. (Qatar 27,200 65 45 regard to oil reserves, provided it the necessary 1975______...... 1R,904 _ ----··w·---·----·9,2·1970 8,296 · joined in 1961, Indonesia ad Libya in 1962, Abu basis for a new period of 3J>sertiveness. 30,558 67 47' Dhabi--laterthe UAE-in 1967 Algeria in 1969, 1976 21,30~ Nigeria in 1971, and Ecuador iu 1973. Gabon 1977 21,805 69 1:),612 31,417 6. 47 became an associate memb~'r in1973 and a full 1978 21,013 69 9,358 30,371 45 MANfLI memberin 1971.".) 1979 21,016 68 9,895 30,911 64 43 1980 17,913 67 9,028 26,941 59 . --- 40 1981 15,221 -· -·~-·-· 7,459 22,680 55 37 1982 12,137 64 6,754 18,891 49 31 *In the Middle £'a.~l, myalty puynumts-usually at a rate of U.:i percent-were made to the!JOI•ermncnts on tltc posted 1983 10,965 62 6,584 17,549 46 . 29 v {'" E I . • · , '·'n· • ··tratiow Inte>rnational Energy Str.tistical Review, U.S. Crntmllutcllrtll'llre Aaent·y. pri<"e1•ttlur c!foil produced. ,,ourus: •.•~. •neroy 11.1 orma.wl, .. w. •1 11• Q • Table 7 A NeVI Oil 5 Changes in Selling Price Pricing Environment of Arabian Light Crude Oi! 26 Higher Government rfake. Responding to pres At about the same time, four Gulf producing By the fall of 1973, the Gulf members of OPEC Prices shown here are those for Arabian Light 27 sures from producing country governments, 24 states undertook participation negotiations with had become dissatisfied with the 19'71 Teheran crude, regarded since February 1971 as the bench oil firms commenced in early 1971 negotiations the oil companies. Mter lengthy negotiations, a p11c11 and tax agreement. Scheduled to be in force mark for other Saudi Arabian and OPEC crude with the Gulf members of OPEC in Teheran in an GeneralAg;reement on Participation was through 1975, it had already been modified twice: grades. They are FOB prices quoted at Ra.c:; Tanura. effort to agree to a new price structure for the reached in December 1972 with representatives by the Geneva agreements of January 1972 and Date Dollars p_e1· Bar1·el % C/w.nge Gulf.Mter an initialsta1amate, ar. agreement of the governmPnb:; of Saudi Arabia, Kuwait, June 1973, which raised the posted price of oil by ·was concludd in February 1971 wbch included a Abu Dhabi and Qatar. Its provisions included the 20 and 15 cents per barrel, respectively, to reflect 1/1/70 1.39 30 cent increase in posted (or ta.x · eference) acquisition by the governments r.1f an immediate chauges in currency exchange rate.':l andinfta- 6/1/70 1.34 (3.6) prices, a 55 percent income tax rate, and the elim 25 percent participation interest in the existing tion. (The U.S. dollar, in which OPEC crude prices 11/30/70 1.41 5.2 ination of special allowances on sales of crude oil. oil concessions with increasing ,government were and still are, quoted, was devalued in Feb- 1.68 19.2 In all, the Teheran agreemertt resulted in an shares each year thereafter, leading to 51 percent ruacy 1973.) But the countries regarded these 2/15/71 :ncrease of up to 50 percent-25 to 6.? cents-in government participation by 1982. The com gains as inadequate. 6/1/71 1.74 3.6 per barrel payments to the producing countries; panies were to be compensated for unrecovered 10/1/71 1.79 2.9 it also provided £or an escalation in posted prices investments, '\vith due allowance for inflation In September 1973, the oil ministers of OPEC's 1/1/72 1.75 (2.2) of 50 c<:r.ts per barrel over the follo\ving five that has occurred since the investments were Gulf member countries scheduled a meeting with 1/20/72 1.87 6.9 years-the intended term of the agreemant. made". Although theKuwaitNationalAssembly the companies for October 8 to negotiate addi- rejected the agreement, the governments of tional adjustments of the Teheran tax reference 7/17/72 1.91 2.1 Negotiations in 'l'r.poli, Libya, six weeks later led Saudi Arabia, Abu Dhabi and Qatar ratified it. price provisions, again with the expressed goal of 1/1/73 2.00 4.7 to similar arrangements for Libyan oil. The offsetting their loss of purchasingpowe1: Two 1/10/73 2.10 5.0 Tripoli agreement, signed by the Libyan govern The 1972 participation agreements, however, days before the meeting began, the Arab-Israeli 4/1/73 2.19 4.3 ment r>.nd 15 oil companies, was also intended to were short-lived. As world oil markets tightened, war broke out, resulting in some disruption in oil last five years. ComJ?arable agreements with Iraq the OPEC countries were quick to take advantage movements and uncertainties about future con- 6/1/73 2.29 4.6 and Nigeria followed in the ensuing weeks. of their growing bargaining strength vis-a-vis sequences for oil markets. A week of talks failed 7/1/73 2.33 1.8 the oil companies. They called the 25 percent to produce an agreement, and on Octo her 12th~ Thus, posted prices, previuusly set by the com 7/6/73 2.48 6.4 participation unsatisfactory and raised their sessions were recessed. 2.55 2.8 panies as their askin~:; prices for oil, came to be demands. Kuwait resumed negotiations for a 8/1/73 5.9 governed by a contract betwe~:! -!:h~> companies larger ownership share and, in mid-1974, Unilateral Action. Before negotiations were re- 10/4/73 2.70 and the governments. obtained 60 percent, retroactive to the previous scheduled, the OPEC countries acted unilaterally: U:/16/73 3.65 35.2 January. Later that year, the other countries on Oc::Ober 16, 1973 they decreed an increase in 3.70 1.4 The Teheran and Tripoli agreements were a 11/1/73 joined Kuwait in achieving 60 percent. Eventu the posted price of the marker crude, Ara l)ian 12/1/73 3.60 (2.7) watershed in the international oil industn~ ally, as we \\ill see, most were to reach 100 Light, from $3.01 to $5.12 per barrel and marking the first time that the producing~ percent. announced a selling price for the governments' 1/1/74 8.32 131.1 country g.overnments of the Middle East had share of crude of $3.65 (Table 7). Tr"' increase in 3/1/74 9.30 11.8 achieved the dominant role in the setting of posted prices of about ';'0 percent r May19BO oil companies. Levied at 55 percent since 1971 s and exports, and forcing BP and Shell to declare Saudi Arab1a sets price for At db•an Light at S28. ret~oacti\'e 'leheran agreem<;Jnt, the income tax rate \Vas first a limited and then a fulljbrce tnajeure on 26 to April increased in steps to 85 percent of ta.xable income cmde oil deliveries. Other companies followed. In December 1979 by November 1974; royalties were raised from November and December, Iranian produ.:!tion fell Arabian tight raised to S24,retroaclive :o Nov. 1, alter breakdown ol OPEC prtctt unify and series of indiVIdual members· increase~ 12.5 percent to20 percent of i·he posted price. dramaticallJ~ and uncertainty about future 24 Mar.:h1979 security of supplies gripped wurld consumers. OPEC telescopes ll:ltal1979 increase of 14.5'tb into first quarter, When governments acquired and increased Although world oil demand continued to climb, raiSing government s&ftn9 price. to St4.55 equity ownership in their countries' oil produc Middle East production slipped. 22 December 1S78 tion in 1974, their posted pliccs lostimportance as OPEC statas intention to raise prict~ by 14.5~1! in 1979 in quarterly adJuStments the prkes at which oil was sold. By Novembm~ This was the context in which the annual year end OPEC confer~J11'P agreed to raise the govern 20 July1977 selling prices, which had been essentially those of OPEC !)OI'ernmont s'l!ling prices reunified at $12.70 the companies, became government selling ment selling r rice of the marker crude quarterly January 1977 pJices-the prices at which Middle East govern during 1979; i.lythe fourth quartet; the price OPEC goes to two-tierpncir.g (Saucll Arabia and Untied Arab 16 ments would sell crude to the companies and to would be $14.55, 14.5 percent higher than it had Emirates at $12,09, others, S12.70 average) other, third party customers. been at the start of the yem: Events in Iran October 1, 1975 quickly wrecked that pian, howevm: Af'. 1978 ~PEC mcreased price by 10~~ The 1973-74 otl price escalation interrupted the ended and the crisis became more violent, most 16 Oct.·Nov. 1974 1ax rate ra1sed to ssqn wowth in world-wide petrr leum consumption, as expatriate employees in the oil sector left the Royally r~:.ed to 20'" oil users sought to minimize the impad of hip: her country. In the midst ofthe govermnen t changes, 14 January 1974 prices through conservation and efficiency mea demonstrations and strikes, Iranian e::q)mis Governments a.:qU\I'bd a 6Qqb sures and throughsubt~dtution for petroleum. plummeted until they were finally suspended Interest i:'l the produting FOLD properties Middle East production managed only a slight altogether vn December 26. Crude oil pril!f~S LENGT 12 January 1974 gain in 1974 and, for the first time in thirty years, soared on the spot market. OPEC more than double'J tile nEwpos!ed price declined in 1975 (Fi~-,rure 7). 12 I A ''Cushion" for Con:>umers. Consuming coun 10 October 1973 11 Two-Tier Pricing. During 1976, as an excess of tries, which before the crisis had been importing l OPEC '~r.reased the 8.5 I pcsled pnce of o;l by 70~;, available erude oil overhung the world market about Sf' percent of It·ans production of 5.5 mil January 1973 d<:spite recovery in demand, OPEC members kept lion b/ d, were "cushioned" somewhat from the -8 .I 6 Governments acqulred a25<;b loss of Iranian crude by increased m·.-ports from ! lnterest in the producing their selling prices steady-until year-end. At a propet!ies December 1976 mc<.'ting, several countries, led by other countries, notably Saudi Arabia. In Jan uary 1979, the Saudi government temporarily 6 February 197t Iran, pressed for a substantial increase. Saudi lr.com& tax rate raised tl Arahia, on the other hand, argued for moder raised its production allowable to 9.5 million b/d, AUTO. !iS% from SOI>ll and pos!ed pnce 1 million b/ d above its official ceiling. .ra!sed 30e' under Teheran ation. When the two camps failed to reach ap:ree Ag:-eement. ..:gnaning naw eca ment, a two-tier pricing system emerged. Saudi .aL: in whicll governments lake role On March 5,1979, the new revolutionary govern (.._ in selling oil poces Ambia and the UAE raised tlwir government Belling prices about 5 percent, efrective January 1, ment in Iran resumed exports, although at a level MANUJ~ 2 1977. The other 11 OPEC members raised theirs substantially below tne prerevoiutionary one. about 10 percent and scheduled an additional5 Nonetheless buyers continued vigorous bidding JL\ percentincrease for July 1977. Saudi Arabia for supplies to meet demand and to restore the very low world inventory levels us a precaution 0 reacted L>y suspending its production allowable of FEIED: ~9~3 1974 1!17~· 1976 1977 1978 1979 1980 1!.181 1982 1983 8.5 million b/ d and letting its etude production against further supply disruptions. rise. L ,";'_;:;;:;'' 30 OPEC members decided that their planned quar As the 1980s unfolded, the various national oil Figure7 terly selling price increases for 1979 would not companies were expanding their refining opera 31 adequately :·eflect these changed circumstances. tions and increasing sales of petroleum products Middle East Crude Oil Productaon and Significant Related Events-l.950-83 In1\:Iarch, thP..r telescoped these adjustments, in ex1)ort markets (see nex-t chapter). They con BILLIONS OF BARRELS raising the marker crude priee to $14.55, the level tinued to rely on foreign personnel and expertise PERYEAF! MILLIONS OF BARRELS PER DP:f it had been scheduled to reach on Oetober 1. however, for much of their operations. Thus, whil~ 24 the private companies-including many of the 1983- 0PEC agrees'toredaJce crude prices and establish overall production-quota of 1'15 million b/d,-March. The Second JIPrice Shock!' In earlier times. the ori&rinal concession holders-had lost most of Iran· Iraq war entered fourth year with produclloh lrorn two countries tot:~lllnp3.5 million b/d.-September. 23 marker price would ha\·e served as the bench their equity and become primarily purchasers 1981-----~------::...----4 mark for all other major types of cmde oil. How of thz Middle East's ex11orted crude oil, they con 8 _ OPEC establishes a unU prm pricing dructure.-October. 22 ever, crude transactions in the spot market were tinued to supply personnel and technical and 1980------'---:-----:-~------...... -----i~ War breaks out between Iran and Iraq and Iraq's Gulf, exaeting premia of$1(• and more per barrel, as management services to the government export terminals ilestroyed.-September. 21 some OPEC members chose to charge 'vhat ti1e companies. market would bear. The r!'sult was another In1~--~-·~-~-~-:----~~~~------~~----·------1 wake of the loss of Iranian crude, Saudi Arebia sets temporary production 20 allowable of 9.5 million bfd-Jnnuary. breakdown of OPEC\:; unified pricing system. In Uniform Pricing. It was not until October 1981 Iran resumes exports &I lower levels Jollowlns establishment of new government-March, Ju~J~ responding to incre~.ing demand and to that OPEC members again unified their price 19 higher prices prevailing elsewhere, Saudi Arabia Pollticalu;~rest1Yrn~--~~--~·~~------·------Iran-September/December. structure-around a marker crude price of $34 Iranian exports suspend"'d-Decomber. raised the price of Arabian Light to $18, retro per barrel. As a result, the selling price of 18 active to June 1. This Saudi eifort failed to Arabian Light was increased another $2 per With two·tler OP~C pricing in effect, Saudi Arabia suspends narrrO\v the price gap \v:ithin OPEC as other gov production celllng~··January. 17 barrel while the benchmark used by the other 12 6_ With raaUgnme'lt of OPEC Jlrfce.;, Saudi Arabia returns to ernments raised the premia on their em des. countries for their crudes was cut $2. These 8.5 million b/d ceiling-July, actions resulted in about an average $1 per barrel 16 With world demand continuing strong-as things increase in the worldwide price of cmde. li turned out,1979 was the peak year (Fii,Ttll'e 8) 15 1974---~------,-----,-~~--=--=-::---- ii the Saudis again raised the marker crude price in Thus, in a series of almost quarterly increases Several governments acquire 60% Interest in oil productron -First Half. December, to $24 per barrel retroactive to from the beginning of 1979 until the fall of 1981, 5 _ Embargoes and production cuts ended-March. 14 November 1, and, in January 1980, to $26 per 1973 the price of OPECs marker crude had gone up Ubya nationalized 51% of oil propert!es-September. :i,~ barrel retroactive to January 1. These efforts still With the fourth Arab-Israeli War, 13 more than 150 percent. While these increases Arab governments order production cutbacks er.d failed to reunify OPEC prices; other major OPEC temporarily brought the OPEC governments eml)argo United States, Netherlands, etc.-October. ex"POl'tera con tinned to raise their prices to main sharply increased per barrel revenues, they also OPEC tripled the price of crude oii-Octob&r/January 1974. 12 tain the differentiaL depressed world oil consumption by contributing 4_ 11 to reduced economic growth and by encouraging In .June 1980, the OPEC governments' oil minis conservation and a shift to oil substitutes. More 10 ters decided "to set the level of oil price for a over, they stimulated greater development of oil 19~------,-~-----~ marker crude up inn ceiling of $32 per balTel;' Suez canal closed by third Arab· Israeli War-June. ., resources in non-OPEC countries at the ex11ense 19611--:-:----:-~~~-:-:=--- g but made allowances for the price of certain of OPEC oil. As a result, the total oil revenues of Jraq expropriated the bUll< or IPC higher quality grades to go to $37. Saudi Arabia, 3_ C.'Oocesslon areas-December. Middle East government'l began to drop in 8 howe\'er, maintained a price of $28 a barrel until 19tl1 !Figure 10). f960------September, when it raised the prire of Arabian 0PEC formed-September. 1956-·--- 7 Light to $30, retroacth·e to AUf.,'ltst. In Nm·ember, Price Softening. With demand softening for oil in Suez: Canal nationalized-July. it raised the price to $32 per barrel, but early in general-and for OPEC oil in particular-surplus 1954- 6 1981 some other OPEC producers raised prices capacity built up. It exerted downward pres 2_ -1ranla!1 Consortium and delayed price unifieation again. formod-September, sure on market prices and caused financial • 1951 5 strains in several OPEC states, notably those Iranian_ oll fields Toward Complete Ownersl;ip. Whilr world atten nationalized ·with large populations and a high need for -March. 4 tion wa.•:; focused on OPEC gowrnments' escala imported products (sometimes referred to as the tion of their selling vri<:es for oil, other changes high absorber countries). In March 1982 OPEC 3 were occurring in go\'ernment-company relation members, in an effort to sustain prires, estab ships which strengthened the countries' ability to lished a total OPEC production ceiling of 17.5 mil 2 influence world oil markets. Most OPEC go,·er~n lion bj d, compared with 1981 output of 22.7 ments were raising their mvnership of producing million bj d, as well as production quotas for indi operations to 100 perc(.lnt and turning their inter vidual member countries. ests O\·er to national oil eompanies. In the Middle 0 East, the international oil companies' share in the 1950 jg55 1960 1965 1985 ownership of total production had dropped below •INCLUDES ONE· HALF OF THE NEUTRAL ZONE 10 percent by 1980 {Figure 9). 0 6 Refining and other Industrial Activities 32 FigureS World Crude Oil Pr"Jduction-1945-83 As 1982 progressed, demand for OPEC oil While dwarfed by crude oil producing and 33 remained depressed, and world crude market exporting operations, petroleum refining and MIUIONS 01' BARRELS prices continued to soften. In an effort to raise petrochemicals are by now substantial industries PEROAY more revenues, some members produced above in the Middle East. Despite excess worldwide their quotas and sold at discounts off official gov capacity in these businesses, construction of both ernment selling prices. This resulted in total types of facilities is continuing throughout the OPEC production of more than 1 million b/ din region. In fact, the pursuit of downstream devel excess of the official ceiling. In December of the opment (including natural gas processing) has vear, OPEC sought to formalize the new produc become a top government priority for several of tion level by increasing the quota to 18.5 million the oU-producing countries. b/ d for 1983. This accomplished little, however, in the face of stagnant world demand and the Although projections, made several years ago, of inability of o~-EC members to agree on lower total Middle East r~fining capacity of about 6 prices. million b/ d by 1984 did not materialize, the cur rent level of about 3.6 million b/ d does represent Having come through a year in which total OPEC a 44 percent increase over 10 years ago (Table 8). production had dropped to the lowest share of This growth occurred despite the shutdown of total free world output in 20 years (Table 6) Iran's 610,000 b/ d Abadan refinery; damaged in member:> held :?.special meeting in late January the war with Iraq. Moreover, large investments 1983 to deal with the situation .. Against a back were also made in a few countries (Bahrain, ground of continuing decline in production, the Egypt, Kuwait and Saudi Arabia) to upgrade meeting ended without a&rreement. Follow·ing existing facilities, enabling them t0 manufactur~> intensive bilateral negotiations and e:xiensive more valuable products. consultations in February among the members oi the Gulf Cooperation Council,* OPEC min.Jters For the region, petroleum refining is almost as met again in early March. old as crude production, dating back to 'the com ph~tion of plants at Abadan :1 nd Suez in 1913, only After two weeks of discussions, they agreed to four or five years after oil was discovcrerl in Iran reduce the selling price for the marker crude by and Egypt. Until World War II, mo::;tofthis $5 to $29 a barrel,effect;ve March 1"'*-the first capacity was in one country, Iran, and one refi official price cut in OPECs 22y2 year history. They nery, Abadan, and dc\'otcd primarily to one also agreed to establish new individual quotas product, fuel oil. The fuel oil found its main within a lower total OPEC production ceiling of outlet-: in the bunkers of the Royal Nm'); oper 17.u million b/ d for the rest of 198.'3. Saudi Arabia ating ea.c;t of Suez, and in oil tankers earrying was not assigned an individual quota, but the regions crude and produC't cxport..q. accepted the role af "swing" producer with an implied production level in the neighborhood of 5 Tabk·~ million b/d. Middle East Cttule Oil Refining Capar.ity Tlwu.-:a lUi.< r1t'Ra Nl'!.< pc r /Ju!f q 'rhe plan held up through 1983. For all of that CltullfJI' ,. Barrd., ( year, OPEC produeed around 17.6 million b/ d. Of .c~~!!U!JD~ this, Saudi Arabia accounted for about 5.1 million Bahrain 265 265 b/ d and an other Middk East members com Egypt um 400 220 122 bined, around 5.9 million bjU. Iran (i(ilj 585 (80) (12) Iraq um 545 360 195 Kuwait* 5:35 635 100 19 Oman 50 50 NMI•' (~a tar 1 60 59 Nl\fP 1945 1950 1960 1970 i9j5 1979 1980 1983 Saudi AtPbh~ 66ii 875 210 32 .. Nmncd in 1!181 bu 1:i.r Gu[(:;talcsjiw 1/u· r•oorc/ination r!f Unite::! Arab Sourer Oil & Ga.~.Journal llll'ii'!'I'CJIW11lir and oflt!'r polil'ie]{, fl.c rouneil cou:;i:;IB •l Emirat('s u;o 180 NMF tlmrOPBC NH·mbcr.q .. f{zumit, Qala1;SaudiA ra!Jia and 'Uuitul Arab Emirate:;-pfu,~ B:duain aml Oman. Total :Z,•1H6 3,595 1,099 44 **Some· OPEC m••mflfl~~ impfnncnted tltcdc!'il!ion ill tll'o • Iurlwh·N oue-ltu{((((.Vn(/l'ltl Zonl'. sltps, redzll'illtf the [Wires r!f'thci roil by $.1, c:tfccfi 1'1' Jtl-b .\'.1/l<' · • i\'o 1/l!'ll/1 i llfllid ji Jlt rc rzwr;Jl, awl 1111 mlditioual $1, ~{!h·lin• Marc·h L SounT: E.r.mu Crwprlruli•m !'tllinwlc.<. 0 .· 34 .As the region's crude production and economy \Vhile processing CI1Jde for e>.-port of products g-rew; refining capacity grew as well. Refineries has long been a factor iu Middle East refining, it Figure9 35 were built in the more populated countt;es- became a particularly significant goal in recent International Oil ComJ)anies' Equity lnteres* in Egypt, Iran, Iraq and Saudi Arabia-principally years as the region sought to broaden its indus Middle East Crude Oil Production -19G5~82 to make products from their own cmde for their trial base. own consumers and, secondarily, for other coun tries in the region and beyond. In other Middle - HOST GOVERNMENTS l<"br many Middle Eastern countries, it was a MILUONS OF BARRELS East countries, notably Bahrain and Kuwait, mutter of policy that products from some of their PEROAY lliiJINTt:RNATIONAL OIL COMPANIES refineries were built principally to make products refineries should enter the world market. This for e:x-port (with Bahrain having to import crude export orientation has led to :increased capacity 22 from Saudi Arabia to supplement its own). In coming onstream at a time when world oil later years, e>.-portrefineries were also built in demand has Leen substantially reduced. Abu Dhabi and Saudi Arabia. 20 One factor that is e>.-pected to benefit the Middle In the last decade, Saudi Arabia became the East countries is that their new refineries have area's leading refiner-\vi th about half of its the advantage of being up-to-date. 'l'hey are 18 capacity (442,000 b/d) at Ras Tanura; additional costly facilities which make a:ta.nge of high capacity of 533,000 b/dis scheduled to be com value, light products (such as motor gasoline and 16 pleted in 1984. The largest increase was recorded, distillates) that hav~ been in greater demand in howevet~ by Iraq, which built two new refineries importing countries. On the oth\-:!r hand, the at Baiji and expanded an existing one. Major transport of products is usually more e11.-pensive 14 additions were made in Egypt, which more than than transporting cmde oil because of·, esse} size doubled the country$ capacity, and in the United and other supply system constraints. Arab Emirates, which joined the ranks of refi 12 ners with two new facilities in Abu Dhabi. The drive to export products has not been the Although Iran completed new refineries at only force behind the Middle Easts dO\vnstream Tabriz, Isfahan and :Savan, and e>.-panded those expansion, however. As shown in Table 9, the 10 atAbadan and Teheran, it showed a small net regions own energy consumption grew vigor decrease in capacity during the ten-year period ously during the last decade, stimulated by the because of Abadans closing. prosperity that came \vith incre~ed l'Jil e11.-port 8 Table9 Middle East Oil/Energy Demand 6 1973 vs. 1983 ThouRands of Barrels per Day Oil Equh·alt•nt Pml 1!/X./ c:; Change 4 Motor gasoline* 88 363 312.5 Naphtha 0 10 N.MF 2 Distillate 372 1,016 173.1 FUel Oil** 698 600 (M.O) 0 LPG 19 61 221.1 1965 1970 1972 1974 1976 1978 1980 Other 1982 46 194 321.7 Total Petroleum Products 1,223 2,244 Suunl's: Annual Btatislic·al Blll/l'liu, Organi::atiou of 83.5 I he P('fro/rum R.rporliuu Countries: E.t·~·on Gas Corporation clltimat('s 254 853 235.8 Goal 20 52 160.0 Hydro/Geothermal 56 120 114.3 Total Energy 1,553 3,269 110.5 * lndmltn az·iuliull acu "':'f'( , • - _s 7 Change and Progress 36 Figure 10 revenlles and by local product prices established The discovery and production of oil has had a far 37 Midd!e East Government Receipts From Oil by governmPnts at levels below world market reaching impa.ct on economic and social condi prices. (Tht: Middle Easts 7.7 percent annual tions in the Middle East. The oil companies, par DOLLARS PEA BARREL BILUONS OF DOLLARS growth rate in energy demand during the period 33 30 27 24 21 18 15 12 9 6 3 0 o 3 6 9 12 15 so 6n 70 80 90 1001101~013014015_01601701e019o ticularly in the quarter of a century after World 200 was well ahead of the: non-Communist worlds 0.8 War II, were responsible for major infrastructure ~ --~: .-..... 7 ;·~.- ,.,.,...,.,...... , 1982 percent.) Moreover, the countries of the region ~:.....~~ projects in the areas of their operations. More have tried also to maintain, or inc1·ease, their important, revenu.:ls from oil operatiuns provided 1981 degree of self-sufficiency in petroleum products. the governments with the means for intensive national development programs. This was par 1980 The largest absolute increases in demand during ticularly the case after the dramatic price·· scala the decade occurred in distillates and natural gas, tion of the 1970s, which by January 1980 resuli ~d 1979 reflecting increased fuel requirements associated in income per barrel to the producing countries ,...... ,..._ ~;::-~,- """"-- v.rith intensive industrial development, particu 1978 more than 20 times higher than it had been in 1970. " . ··.:l.:-~tr' larly for electric power, diesel trucks and jet air ""-~- ~-·- ~ craft. Motor gasoline demand grew with the 1977 -- FOr centuries, trade, animal husbandry and basic ~~ increase in automobile ownership made possible agriculture were almost the only means of liveli --~.~., --- -·-~-\ 1976 by greater consumer purchasing power. Fuel oil hood in the Middle East. Industry was almost ... =--~- -· sales dropped, however, largely because of lower non.-existent. Governments and local business requirements for tanker bu11ker fuel, which has lacked capital to improve conditions. In 1932, for paralleled the decline in crude oil e:x.'}>orts. The --~- -- ~- ,...... , __ :.....,.... - example, the total government income in Saudi bunker fuel decline more than offset growing ~ - .c._. ~.:..J:II Arabia was about $2.4 million, d.,;:··,..d partly - fuel oil demand from krge central electric power from customs du:·ies and local taxes b, 1t princi 11973 stations. pally from a tax collected from pilgrin,s to Mecca. Five decades later Saudi Arabi as incon e from oil 11972 Among Middle East countries, Iran has been the exceeded $75 billion (Table 12). The imp \Ct on regions leading consumer of petroleum products living standards has been dramatic. In the 11971 1!1 (and of the area's small volume of coal and hydro UnitedArab Emirates, for instance, combined electric power). But Irans share of the region's 11970 private and government consumption expendi 11 total domestic oil demand has dropped since 1973 tures per capita had risen to almost $15,000 by (Table lG). Almost even with Iran has been Saudi 1982, about c.ne-~hird higher than in the U.S. 11965 1 Arabia, which, along with Iraq and Egypt, re i960 corded large gains during the decade. Kuwait, in 1 1 comparison, experienced an absolute as well as a Table 10 11955 g re!ative decline in its local oil consumption, due primanly to low~r demand for"' J,ips' bunkers. Comparison of Middle East Count:-ies' Damestic Petroleum Product Demand 11950 1 In addition to refining and NGL facilities, vir Pei"Cellf nificant industrial capacity. Sandi AraiJia 22 30 Saudi Arabia has the largest number of projects, Others 11 7 consisting of joint ventures between several for Smtl't'l': 8.r.ron Crii')JIJI'IIIitlll <': ABU DHABI Description Stuttts KUWAIT Rnwais Fertilizer Industries 1,000 tj d ammonia, 1,50\l tj d Start-up in 1983. - I Petrochemical Indust;-!"'s Co./ Expansion to provide ammonia C BAHRAIN OMAN Aluminium Bahrain/Bahrain, 170,000 tfy aluminum Start-up in 1971. ., Il Oman Mining Co./Government 20,000 t/y copper Start-up in 1983. Saudi Governments, Kaiser, I Breton Investments 'f Gulf Petrochemical QATAR I 1,000 t/d ammonia, 1,000 t/d Construction contract I Industries Co./Bahrain, methanol awarded-completion 1985. Qatar Petrochemical Co./ 280,000 tjy ethylene, pro- Start-up in 1980. Kuwait, Saudi Governments Government, CdF Chimie ducing LOPE Qatar Fertilizer Co./f'';vern- Ammonia/urea expanded to Expanded 1979. DUBAI ment, Norsk Hydro 2,000 tjd capacity Qatar Steel Co./Government, DubaiAluminum Co./ 135,000 tjy aluminum Start-up in 1979. 400,000 t/y st~el Start-up in 1978. Government, Alusmelter Kobe Steel, Tokyo Boeki Holdings SAUDI ARABIA IRAN Saudi Petrochemical Co./ 650,000 t/y ethylene, Start-up in 1984. SABIC, Shell producing styrene, Iran-Japan Petrochemical 300,000 t/y ethylene, s5r; complete at end Co./ Government, producing low-density ethylene dichloride, of 1978 (held up ethanol Iran Chemical Development polyethylene (LOPE) because of war). Co. ethylene dichloride Arabian Petrochemical Co./ 500,000 t/y ethylenE', Construction contract aromatics, etc. SABIC produdng ethylene glycol awarded-comtJetion 1985. Razi Petro-Ch~mical Co./ 1,000 t/d ammonia, 1,000 tjd Exi)anded 1978. Al Jubail Petrochemical Co./ 260,000 tfy LOPE Start-up in 1984. Government urea and other chemicals SABIC, Exxon Saudi Methanol Co./SABIC, Iran FC11ilizer Co./ Expansion to 1,200 t/d Start-up in 1984. 600,000 t/y methanol Start-up in 1983. Government ammonia; 1,500 t/ci urea Japanese group National Methanol Co.jSABIC, Nt~~)Qnal Iranian Copper 150,000 tty copper Start-up in 1982. 650,000 t/y methanol St,art-up in 1984. Intiush"iesjGovernment Texas Eastern, Celanestl Eastern Petrochemical Co./ 300,000 t/y ethylene Construction in progress- SABIC, Japanese group glycol, 130,000 t/yLOPE completion 1985. !'RAQ AI Jubail Fertilizer Co.jS.".BIC, 1,600 t/d urea, 1,000 t/d Start-up in 1983. Petroc·hemical-Basrah/Govern- Ethylene complex producing Project cvmplet~>. Start-up Taiwan Fertilizer Corp. ammonia ment polyvinyl chloride, LDPE, delayed by war. Saudi Iron and Steel Co./SABIC, 800,000 t/y direct reduc- Start-up ln 1982. high-density polyethylene Korf-Stahl tion steel plant (HOPE), caustic, etc. Saudi Yanbu Petrochemical 450,000 tfy ethylene, Fertilizer-Khor al-Zu bairI Construction m progross- 2,000 t/d ammonia, 3,200 t/d Start-up in 1979. Co./SABIC, Mobil producing LOPE, HOPE, completion 198/i. Government urea. ethylene glycol Iron & Steel-Khor al-Zubair/ 1.2 million t/y spo!Jge iron, Start-up in 1978. Government 400,000 t/y finished steel Company/Prin<"ipu! Owner.~ If«/== tunspertluy:I/Y =iOII.~pt•rycar. 40 Tablel2 Middle East Nations Compared: People, /\rea and Revenue From Oil Govern Popu- ment Oil Area1 latwn2 Gorernment Rn•emte from Oi/3 Rel•enue Square ~l!illious In Milli SOtll't'CS: 1 Tlw Time~ Atlruwf the World • .! fl!lcrnational.llcmt•lct'1f Fuml, International Financial Statistics• •~Data ba.~nl unt>xporls.qfc·ruck. rt~tiucd pnxiw•fstmd 11utumlgas/iquidll. I' Tl>xt continues from page 37 When private oil companies entered the region, Governments are now using their revenues and first to e:\-plore and later to build producing, ship expanded capabilities to develop large-scale agri ping and refining facilities, they found local labor cultural and industrial projects with the aim of ",rilling but untrained. In those early years the establishing diversified economies that will sup companies had to import both the skill and the port fubre generations. In support of these technology needed to canyon operations, while efforts, they are greatly e:\iending their educa local workers received on-the-job training and tional and health care facilities and e:\-pand:ng often were sent abroad for higher technical the infrastmcture of roads, power systems, com education. munications networks, and fresh water supplies. Besides importing skilled workers for direct Changes in the economic conditions and quality A background paper prepared by the Public Affairs Department of activities, the operating companies had to estab of life in the Middle East have been remarkably Exxon Cotporation in cooperation with other Exxon di::iJartrr.ents and affiliates. lish ser.ice enterprises for a '"ide range of sup swift and in some respects unsettling. But there Additional copies of this and the following papers in the Exxon Background porting activities. They found themselves in food is an enduring foundation of stability in these supply, utilities, refuse collection, and hardware Series are available upon request from the Public Affairs Department, (:- countries. Their leaders place great value on the Exxon Corporation, 1251Avenue of the Americas, New York, New York 10020. ;._ and clothing-all based on massive imports. The traditions of their native cultures. They appear Akr ';: compar.ies prO\ided communities \\ith roads, determined to nmiure the old as well as the ne\v. agricultural projects and in·igation, health care, Fate and Effect~ ofOil in the Sea .Itt. ,i!' sanitation, schools, bankingandhousiug. Over How Much Oil and Gas? the decades, however, as the economies of the Middle Eastern nations e~-panded, governments Improved Oil Recovery and local private enterprise took over more of 1'he Offshore Sem-chfor Oil and Ga.~ these activities. Reducing Thnke1· Accidents Thnkers and the Flags They Fly