Energy Resources in the Gulf Cooperation Council Countries - Essay Example

The Energy Resources in the Gulf Cooperation Council Countries Historical Background Energy resources exist as the main source of generating revenue for the Gulf Cooperation Council (GCC) countries. The GCC countries consist of Kuwait, Qatar, Saudi Arabia, Oman, United Arab Emirates (UAE) and Bahrain. Working for the cooperation among Arab countries remains the objective of the GCC in the Gulf region. Energy resources in these economies include oil, gas, solids, renewables and nuclear. This paper provides the historical background of energy resources in the GCC from the founding of oil in Saudi Arabia to the most recent finding of natural gas in Qatar. The paper further distinguishes the various types of energy resources in the context of the energy market composition, and its strengths and weaknesses in each of the high performing GCC countries. Saudi Arabia exists as the largest state among the GCC countries with the Shi’i population placed on the oil producing gulf coast of eastern province. The discovery of oil dates back to 1930s with its commercial production beginning shortly after the Second World War. Saudi Arabia became the largest producer of oil by 1993. Similarly, Kuwait became an oil producer ever since 1946 before gaining its independence from Britain in 1961. The country received independence before massive revenues from oil could be concentrated on the hands of the ruling family possessing overwhelming power. As well, cohesion and the historical organization of unique merchant families had significant contributions. Bahrain emerged as the first oil producing country among the six GCC countries with initial production occurring in 1932. The oil wealth possessed by Bahrain from the beginning gave it a head start to develop social and educational institutions. As a result, this contributed significantly to its status as the best socially liberal over its neighbors in the GCC countries. However, Bahrain’s current oil reserves remain almost exhausted. By contrast, tourism and finance service industries play the main role in Bahrain’s present day economy (Gause 5-8). Abu Dhabi, Fujayra, Dubai, Ajman, Ra’s al-Khayma, ’Um al-Qaywayn and Sharjah constitute the seven emirates making up the federation of the UAE. Large production of oil began in the 1960s within the UAE mainly in Dubai, Abu Dhabi and Shaarjah. UAE’s per capita national income remains among the highest worldwide. Most notable would be Dubai which continues to develop into a regional communications, services and business center. In addition, Dubai exists as a cosmopolitan and the liveliest country of the GCC states as well as a flourishing port. Furthermore, oil production began in the 1970s in Oman. Agriculture remains the most fundamental sector of Oman’s economy. Oil production in Qatar began in 1949 whereas a large segment of the country’s income remains accounted for by the production of natural gas. Natural gas production in Qatar remains as the most recent discovery in the energy sector of GCC countries. Qatar emerges as the highest per capita national income earner worldwide (Gause 8-9). In the early 1970s, the GCC countries accumulated much financial surpluses prior to every deliberate idea for their investment abroad or domestic absorption. Not any historical experience existed upon which future growth predictions on domestic absorption could be founded. In this regard, the economic reasoning of a surplus of the amount realized could not be questioned on any grounds. Consequently, the GCC countries have become conscious on the risks associated with the accumulation of income generating fixed assets in an essentially inflationary world. Moreover, they no longer remain contented with the single role as simply the residual crude oil requirement suppliers of the world in accommodating the oil demands of industrialized countries at the expense of their economic advantage. The efforts of the GCC countries to create an integrated and advanced economy stay bent in the face of obstacles such as lack of sufficient minerals, arable land and water, harsh climate, and a shortage of unskilled labor availability. On the other hand, increasing oil revenues may have posed significant challenges like mismanagement, considerable duplication of effort and confusion. The endorsement of the GCC put to an end permissions relating to the justification of failures in addition to substantively correcting oil prices (Pappe 51-57). Conventional energy resources consist of fossil fuels and hydro and nuclear resources whereas non-conventional energy resources comprise of wind, biomass and solar. Conventional sources of energy, with the exception of hydro resources, remain non-renewable and in this regard bound to depletion in the long run. They cause pollution thereby degrading the environment. In addition, fossil fuels should be conserved since they act as raw materials for medicine and chemical industries. Big dams along with large hydro resources impact on wildlife as well as posing social problems and causing deforestation. Furthermore, conventional energy resources could be secured, remain convenient and affordable. On the contrary, safety of nuclear plants in addition to dislocation and ecological disturbances caused by hydroelectric plants remain controversial issues. These factors have necessitated the exploration and development of non-conventional or renewable energy resources in order to reduce reliance on conventional energy resources. On the other hand, non-conventional energy resources remain available in nature for free, inexhaustible, cause little or no pollution and have low maturation period. However, the cost of harnessing energy from these sources remains generally high and in watered down forms. Also, these forms of energy remain difficult to transport and bear uncertainty of availability since they rely on multiple natural occurrences outside human control. Hydropower exists as the most conventional source of electric power among all renewable resources of energy. Renewable energy technologies continue to increase by viability and type regardless of fossil fuels comprising the most dominant source of energy. These include solar, hydro, wind, ocean, geothermal and biomass. Nuclear fission and nuclear fusion entail alternative energy resources. Nuclear fission involves the splitting of atoms in heavy elements in creating energy whereas nuclear fusion involves the combination of light elements in creating heavy elements, a reverse process of nuclear fission. Energy conservation could offset adequate energy use as an alternative to the use of fossil fuels. For instance, energy conservation takes the form of better sealing of air leaks, integration of passive solar designs in the building sector. In addition, conversion of existing windows to improved window designs, using high efficiency air conditioners and furnaces as well as better insulation also constitute energy conservation techniques in the building sector. Similarly, increasing energy standards for appliances and equipment, use of compact fluorescent lights and energy saving software contribute to reduced energy consumption levels. In effect, these measures could help efforts by GCC countries in achieving world energy needs in the long run. Scarcity forms the basis for energy related challenges on economic growth and development. Alternative and renewable resources of energy remain expensive for economic development since the initial investment remains high and generate short term losses to the economies with pay offs in the long run. The present day consumption levels of energy have associated potential for significant harm to human health and the natural world in addition to degradation impacts on the environment. Energy Market Perspective of GCC Economies Energy resources in the GCC economies remain as the most significant in oil and gas supplies with a high reliance rate in both Africa and beyond. Oil and gas exports comprise sixty five percent of the total exports and on average account for seventy five percent of the total revenue for GCC countries’ government. For instance, the European Union supply level constitutes fifty three percent for gas and oil. In addition, the demand for energy by the European Union (EU) stays projected at eight percent in 2030. The EU remains the world’s leading importer of oil and gas at eighty and sixty percent respectively. The adoption of the EU’s security of supply regarding energy resources stays grounded on the exporter’s perspective for energy resources. The security strategy encompasses conservation of energy, diversification of suppliers and energy resources, efficient consumption of energy and the protection of the environment. In this regard, the GCC economies follow the strategies of moderate pricing in addition to massive investments in the expansion of production capacity through expansion projects in ensuring affordability and ready accessibility to the available gas and oil resources. However, the security of energy remains the key issue surrounding uncertainties in the GCC energy market following the energy strategy by the EU (Ramady 51-58). The exploitations of nuclear energy as an alternatively uninterrupted and clean source of power have gained potential focus in the GCC economies in the recent past. The strengths attributed to the nuclear energy as a source of power include advancement towards a knowledge based economy, self-sustainability and the establishment of climate change. The United Arab Emirates possesses highly advanced programs in civil nuclear along with a well-established regulatory and legal infrastructure within the GCC region. Research shows that Kuwait and Saudi Arabia have developed plans for peaceful nuclear power generation programs whereas Qatar, Oman and Bahrain still undertake deliberations intended for formulating policies for the adoption of peaceful power generation and consumption. Water desalination processes constitute an expensive process that utilizes power generated by both gas and oil in the GCC region hence the need for nuclear power generation (Ramady 59-60). Oil became discovered in the 1930s in the Arabian Peninsula in commercial quantities. Significant increases in the magnitude of oil production occurred from 1940s to 1950s. The Arab countries had by 1960s preserved sixty percent of the world’s reserves in addition to producing a quarter of the world’s total crude oil. Most of the oil remained exported due to the small domestic market available at the time. Saudi Arabia and Kuwait remained among the largest producing Arab countries of the GCC. However, the massive revenues generated from oil production and exportation created an essentialist and false impression of Arabs earning high incomes as well as owning vast wealth. Moreover, this false impression created Arab countries to appear as wealthy in economic resources. There exists a vast gap in relation to oil reserve variations between poor countries and rich countries like UAE and Qatar in the world. Furthermore, the discovery of and demand for oil by other world states contributed significantly to the advantage of the rich countries both in regional competition and global economic balances. Oil production continues to bear significance to capability of the GCC countries’ economic life. One weakness of oil production remains as exhaustible and limited resource in spite of staying as the dominant economic activity in the GCC countries. In this regard, Kuwait must invest in alternative energy resources in order to secure its future since it relies exclusively on oil production. Kuwait emerges as the fourth largest exporting country of oil and its revenues relies heavily on oil. Oil exportation marked at ninety five percent accounts for Kuwait’s revenue contribution of fifty percent of GDP. Revenue from Kuwait’s exports also constitutes eighty percent of the total government’s income. Furthermore, domestic consumption of oil takes up a large amount within the country. As a result, Kuwait began importing vast amounts of gas in order to diversify away from the consumption of oil for domestic power consumption. Conversely, no significant expansion could be evident in spite of domestic consumption and large reserves of oil in Kuwait’s electricity sector currently facing annual increases in electricity demanded. The need to establish alternative sustainable and low carbon producing power generation source in meeting high power demand follows the high carbon emission rate of 30t per capita comparable to the 10t of industrialized nations annually. Lastly, Kuwait signed nuclear associated international agreements with Germany, France and Russia with regards to the application of nuclear energy such as generation of electricity (Ramady 60-61). Following Qatar’s findings on their independent evaluation, there would be no requirement for an immediate generation of electricity using nuclear power. In this regard, findings revealed that Qatar produces fifteen billion kilowatt hours with a consumption of thirteen billion kilowatt hours indicative of a surplus. Worth noting would be the lowest unemployment rate and highest per capita income of Qatar in the GCC region. The country ranks third worldwide due to verified oil reserves of twenty five billion barrels capable of lasting for fifty seven years into the future. Moreover, the country possesses established gas reserves. Qatar’s revenue depends heavily on oil and gas exports that generate fifty percent of its GDP. Export partners with Qatar include Singapore, Japan, India and South Korea. However, these countries progress towards achieving self-sufficiency through the adoption of nuclear power technologies. This would in turn reduce Qatar’s export of fossil fuels in the long run. Furthermore, the continuous decline in Qatar’s oil reserves together with international pressure for reducing dependence on fossil fuels advocate the need for alternative sources of power in Qatar in the long run (Mallakh 20-37). The United Arab Emirates successfully established a highly developed electricity producing programs from nuclear energy. UAE comprises a growing population living in an artificially sustained environment. This growing population creates extremely high electricity demands that result to the development of peaceful nuclear program for power generation. The high demand for power could also be attributed to the speedy construction of excessive power consuming buildings and recreational facilities such as Burj Khalifa. Like other GCC economies, Oman conducted a feasibility study in order to explore its nuclear energy potential for power generation. The findings, however, revealed that the required power output remains achieved by its current supply of power. Evidence shows that Oman’s oil reserves keep declining hence the need for the government to diversify its sources of energy. In this regard, Oman could also follow the footprints of other GCC countries of adopting a peaceful nuclear program for power generation in the long run (Ramady 61-64). Bahrain remains to be amongst the already highly diversified economies in the GCC region. The country’s diversity encompasses aluminum smelting, petroleum processing, Islamic banking, ship repairing, iron pelletization, tourism and insurance. Petroleum processing, as the largest industry in Bahrain, relies on revenue generated from oil exports and constitutes eleven percent of Bahrain’s GDP. In addition, there exists an unemployment rate of fifteen percent which remains the highest in all GCC economies. As well, Bahrain signed the United States’ Atomic Energy Act of section 123 with the objective of diversifying its nuclear sector through international assistance and decreasing the effect of oil export on the country’s GDP. Conclusion There exists no doubt that oil played a significant role in the revolution of the GCC countries over the last six decades. Due to the large proceeds earned form exporting oil, the GCC countries managed to construct modern skyscrapers and infrastructures. These, in turn, contributed to increased literacy levels to about eighty percent while life expectancy increased to seventy four years. In addition, the average GDP per capita for GCC countries in 2010 stood at US$ 61,000 whereas the combined nominal GDP stood above one trillion US dollars. However, there exists an increasing cognizance of the need to lessen dependence on oil among the GCC countries as the source of stable income in the long run. In addressing this issue, some of the GCC countries have begun diversifying projects such as the construction of tourist, futuristic cities, cultural and financial centers. Moreover, nuclear energy receives more attention in the recent past as having the potential to address the diversification needs of the GCC countries. Economic reasons for the adoption of nuclear energy in meeting the increasing local consumption of power include the need to reduce overreliance on fossil fuel resources. Secondly, fossil fuel prices would most likely go up in the long run due to increasing population and few discoveries of gas and oil. Thirdly, with the invention of hydraulic fracturing technology, used for extracting natural resources such as shale gas, the technology could be used to discover considerable untapped resources. Also, by using this technology, the United States of America could emerge once again as the world’s leading oil producer. Furthermore, the use of this new hydraulic fracturing drilling technique would make oil prices to retreat in the long run. Taking this into account, the present day GCC countries’ huge investment in nuclear technology would become increasingly unwarranted. Conventional sources of energy, with the exception of hydro resources, remain non-renewable and in this regard bound to depletion in the long run. These factors have necessitated the exploration and development of non-conventional or renewable energy resources in order to reduce reliance on conventional energy resources. Hydropower exists as the most conventional source of electric power among all renewable resources of energy. Renewable energy technologies continue to increase by viability and type regardless of fossil fuels comprising the most dominant source of energy. The present day consumption levels of energy have associated potential for significant harm to human health and the natural world in addition to degradation impacts on the environment. Energy conservation could offset adequate energy use as an alternative to the use of fossil fuels such as better insulation and the use of compact fluorescent lights. Works Cited Gause, F. Gregory. Oil Monarchies: Domestic and Security Challenges in the Arab Gulf States. New York, NY: Council for Foreign Relations Press, 1994. Print. Mallakh, E. Ragaei. Qatar: Energy and Development. New Hampshire, USA: Routledge, 1985. Print. Pappe, Iian. The Modern Middle East. New York, NY: Routledge, 2005. Print. Ramady, A. Mohamed. (ed.). The GCC Economies: Stepping Up to Future Challenges. New York, NY: Springer, 2012. Print. Read More