OPEC Members Will Face an Unavoidable Challenge

While some analysis reports in previous century forecasted the oil depletion in the significant amount of oil reservoirs till the end of second decade in 21st century, the recent oil exploration projects backed by new technologies raised the oil proved reserves to 1,706.7 billion barrels of oil in 2016 (more than 48.7% comparing with 1996). Simultaneously, the proved reserves of Natural Gas was raised from 123.5 Trillion cubic meters in 1996 to 186.6 Tcm in 2016 (hiked by 56.5%).(1)

Of course, Hydrocarbons (Crude Oil and Natural Gas) are the main world’s primary energy source yet, while the Crude Oil was in the first stand in 2016 (by share of 33% of world’s primary energy source) and Natural Gas was in third place (by share of 25% of world’s primary energy source). (1)

Despite all the environmental concerns, cost raising issues and risks of supplying in the political crisis, hydrocarbon’s share in total world primary energy source is still about 60% which means the actual dependence of world economy to the hydrocarbon sources.

The members of OPEC (Organization of Oil Exporter Countries) as one of the most important players in the world energy market could consolidate their rank in supplying hydrocarbon products during 21st century, where they retain their place in the world oil market by producing about 42% of the world oil production during 2001 to 2016. Meanwhile, their share in the world natural gas production was sharply increased by 21% in 2016 comparing to 13.47% in 2001. Totally, OPEC’s hydrocarbon products supplied 20% of the world total primary energy in 2016 which keeps them in the rolling position of the world energy market, but if they continue conducting their current energy polices, they would not be able to supply their internal demand even in the future.(1)

Regardless of their production volume or related costs and international oil and gas prices, the most of hydrocarbon exporter countries, particularly the OPEC members, deal with their reserves and revenues, similarly. They rely on hydrocarbon products, not only for supplying their energy sources but also it is considered as their main income source, so far from world energy markets.

Hydrocarbon’s rent in OPEC GDP

The oil rent (% of GDP) in OPEC members was about 25 in 2014. This indicator was 23.7 in 2001 and 33 in 2011, approximately. Contrary to a downturn from 2011 to 2014 which occurred mainly because of falls in the oil price, the trend of this indicator between 2001 to 2014 was ascending that could represent the OPEC members’ dependence to the oil values(2).

The most radical increase was reported in Kuwait, while it was raised from 38.3 to 53.4, as well as the Kuwait’s oil rent (%GDP) is the highest rate in the world.

The reliance of OPEC members’ GDP to the natural gas value is the same as oil. The natural gas rent (%GDP) of OPEC members was doubled roughly, from 2001 to 2014(2).

Wholly, the total hydrocarbon’s rent (% GDP) for OPEC members was about 34% in 2011 and more than 26.4 in 2014, which could be addressed as a factor of affiliation OPEC members’ economy to the hydrocarbons.

Hydrocarbons in supplying internal demands

Meanwhile the role of hydrocarbon product in supplying internal demand of exporter countries is as its importance in making value for them. A significant amount of OPEC members’ hydrocarbon production is used for supplying internal demands, more than any other sources.

Analyzing energy consumption data in OPEC countries and comparing with OECD, EU and World would indicate the differences between their fuel strategies and plans.

While during 2001 to 2014, OPEC members’ population was increased by 35%, their share in producing CO2 emissions was raised twice (70.34%) (2). In the same period of time, the population in OECD countries was raised by 10% but their share in CO2 emission was declined by 4%. In the same condition, the EU’s population rose about 4.5% from 2001 to 2014, but their CO2 emission amount was decreased sharply by 19%.

Moreover, the radical raises in the OPEC members’ consumption (from 2001 to 2014) neutralized the developments in their oil and gas industry and enhancing their production rate. While they could increase their oil production by 27.9%, their consumption rose by 91.3%, As well as, a significant amount of 125.8% increasing in their Natural Gas production was lost by their boomed consumption by 124.4%. Totally, the OPEC members’ primary energy consumption was raised by 100.1% during this period of time.

The pattern of OPEC members in increasing the primary energy consumption was not conformed by the most of world and groups of countries. The world’s primary consumption was increased by 40%, this rate for OECD countries was 2% while in EU members was declined by 6%, in the same time.

Regarding to the lag of OPEC members in Renewable Energy production (Hydropower, Solar, Wind…), hydrocarbon products supplied more than 97% of total OPEC primary energy sources in 2016 while this rate for the world was about 57%, in the OECD members was less than 65% and for EU countries is 61%.

The risk of current dependences of OPEC members to the hydrocarbon products could ring the bells for their energy and economy, not only because of the threats by falling the international prices which could shrink their budget but also for their consumption pattern which could cut off their export or increase their cost of supplying internal demands. Consequently, the tragedy of oil and gas products for the economy of oil exporter countries is gaining to be extended to the security of supplying their energy demands. The domino of unavoidable challenges will occurred when their high internal hydrocarbon consumption increase the costs and decrease their export capability which could be intensified by expensive production costs and high required investments for more developments in their oil and gas fields.


(1): www.bp.com

(2): www.worldbank.com

Shahriar Sheikhlar
Shahriar Sheikhlar
Shahriar Sheikhlar is an independent energy security and strategic development analyst, in Erbil, Kurdistan Region of Iraq. Mr. Sheikhlar, holds postgraduate in Management, Strategy. He is giving advices and services to some local and international think tanks and news agencies.