It has always been an axiom of world energy markets that Persian Gulf oil is both easy and cheap to produce. The crude that gushes from the scorching desert sands of Saudi Arabia, for example, is widely thought to cost less than $5 a barrel to produce, compared to the $70 price tag on raising a barrel from deep Atlantic waters. But, many of the Persian Gulf oilfields have been producing for decades, and an increasing number of the newer fields in the region contain heavier and harder to extract crudes. Squeezing out the remaining reserves from some existing fields and developing new more complicated ones will be costlier and will require more advanced technology. As a result, more Gulf countries are exploring the use of enhanced oil recovery (EOR)

The Middle East countries have varying levels of maturity in their fields,” said Chris Graham, a Middle East analyst at Edinburgh-based oil consultancy Wood Mackenzie. While the major OPEC producers in the region mostly don’t need to use EOR techniques, the situation is different for the smaller non-OPEC producers such as Oman and Bahrain. In those countries, “you’ve got maturing production profiles and each barrel becomes more difficult and more costly to extract,” Graham said.

And even the large OPEC producers such as Kuwait have started to turn to EOR technology as they seek to develop new, more complex, heavy-crude reservoirs on which they will have to rely for future production growth. EOR tends to be needed most when oil is heavy–sometimes as thick as asphalt–and only flows when it is melted with steam, as is the case in some of Kuwait’s yet-to-be-developed fields.

“EOR will become over the years an important component of what the industry collectively has to develop,” said Jean-Luc Guizion, President of Exploration and Production at Total. “The luck of the Middle East countries is they have a lot of resources so they have ample time to plan the necessary EOR improvement.”

According to technicians at one company with EOR operations, the methods can improve recovery rates in some fields by 40%, but at an additional cost of anywhere between $20 and $60 per barrel of oil. In the so-called Partitioned Neutral Zone, shared between Saudi Arabia and Kuwait, Chevron is involved in an EOR scheme aimed at developing heavier crudes using steam flooding. Abu Dhabi Co. for Onshore Oil Exploration is working on an EOR project involving carbon dioxide injection. And Saudi Aramco is working on plans to implement a CO2 EOR demonstration plant in the next two years, although this project is, for now, aimed at trapping emissions rather than boosting recovery rates.

However, while Middle East producers are starting to take a closer look at EOR, many are handicapped by the reliance of the technology on gas, which is sometimes used as an injectant and sometimes burned to generate another common injectant, steam. Despite massive reserves in countries like Qatar, natural gas is in short supply in most other countries in the region due to its increased usage in power generation and in industries such as petrochemicals. Accordingly, there is a new focus on alternative technology solutions, including the use of solar power to generate steam for injecting into oilfields.

Middle East possesses most proven reserves
The Middle East continues to hold the majority of the world’s proved oil reserves, although this percentage has declined in the past two decades, according to BP’s Statistical Review of World Energy that was published last month. At the end of 1989, the Middle East held 661.0 billion barrels of oil, or 65.7 % of the world’s proved oil reserves, and at the end of 1999, the region had 685.8 billion barrels of the world’s proved oil reserves, or 63.2%. By the end of last year, the Middle East had 753.7 billion barrels of oil, or approx., 56.6 % of the world’s proven oil reserves.

Iraq increased the official size of its proven oil reserves with new data suggesting its proven oil reserves have reached 143.1 billion barrels of oil, up from a previous 115 billion barrels. The figure, the first update since 2001, would mean Iraq has the world’s second largest reserves according to statistics on the OPEC website. Iraq would take second place from Iran, which has 137.01 billion barrels of proven reserves, but would still be far behind Saudi Arabia, which has 264.59 billion barrels of proven oil reserves, according to OPEC figures.

These are not random figures; rather they were the results of deep surveys carried out by the ministry’s oil reservoir company and international companies, which signed contracts with Iraq. Most of these figures were the result of surveys conducted by these international companies, especially at oil fields such as West Qurna and Zubair. Iraq has signed 12 deals with international oil companies to ramp up output capacity to about 12 million barrels a day from around 2.4 million barrels a day now. BP, Exxon Mobil, Shell, Lukoil, Eni, Total, Japan Petroleum Exploration and China National Petroleum Corp., or CNPC, have signed on to develop Iraq’s vast oil fields. Iraqi”s oil minister said the largest Iraqi oil field was West Qurna. With total proven oil reserves of 43 billion barrels, it could be the world’s second largest. West Qurna is divided in two–Phase 1 and Phase 2. Exxon Mobil led a consortium won a deal to develop Phase 1, while Lukoil led a consortium to develop Phase 2. Rumaila, which is being developed by BP and CNPC, is the second-largest Iraqi oil field, with total proven reserves of 17 billion barrels. Majnoon, which Shell won the right to develop, comes third with proven reserves of 11 billion barrels of oil. These three are in southern Basra governorate. The untapped East Baghdad oil field, near the capital, has proven reserves of 8 billion barrels, while Kirkuk oil field in the north has 8.9 billion barrels, the minister said. Shahristani said 71% of Iraq’s total oil reserves are located in the southern Iraqi governorates, particularly in Basra. Some 20% of the reserves are in northern governorate particularly in Kirkuk, while the remaining 9% are located in central Iraq. The minister said the new reserve figure doesn’t include the semi-autonomous region of Kurdistan in northern Iraq. The region’s authorities have estimated reserves in their Kurdistan region to be around 40 billion barrels. The ministry will update Iraqi oil reserves on yearly bases from now on.

Global proved oil reserves in 1989 totaled 1006.4 billion barrels; a decade later, the world’s proved oil reserves totaled 1085.6 billion barrels. At the end of last year, total proven oil reserves worldwide stood at 1333.1 billion barrels. The Central and South American regions experienced significant growth during that time as the Orinoco heavy oil play in Venezuela and Brazil’s deep water play have expanded the region’s production. Proved oil reserves found in the Central and South American regions have grown from 6.9% of the world’s proved oil reserves in 1989, or 69.5 billion barrels, to 97.8 billion barrels in 1999, or 9.9  % of the world’s proved oil reserves, to 198.9 billion barrels, or 14.9 % of proven reserves in 2009. All global regions except   North America experienced growth in proved oil reserves from 1989 to 2009. This due to its tar sands production; Canada saw its proved oil reserves growth from 52.0 billion barrels in 1989 to 18.3 billion in 1999 and 33.2 billion in 2009. However, the U.S. experienced a decline from 34.3 billion barrels in 1989 to 29.7 billion barrels in 1999 to 28.4 billion barrels in 2009. Mexico’s proved oil reserves experienced the largest decline out of North America, falling from 52.0 billion barrels in 1989 to 21.5 billion barrels in 1999 to 11.9 billion barrels last year.  Declining output from Mexico’s offshore Cantarell oil field in the Gulf of Mexico lies behind the significant decline in the country’s oil reserves.

Middle East Gas Consumption Outpaces Production
Rapid economic growth in the Middle East has resulted in the consumption of natural gas outpacing production, according to the Ernst & Young report, The Global Gas Challenge. As a result, tension exists between the requirement to supply domestic markets to fuel economic growth and the desire to achieve higher revenues via export sales agreements.

Forty-one percent of the world’s remaining proved (conventional) gas reserves are in the Middle East, with 73% concentrated in Iran and Qatar. However, Iran is a net gas importer due to international sanctions, which have hampered Iran’s oil and gas reserve development. While new reserves have been discovered in Iran, these discoveries have failed to translate into higher production as sanctions prevent foreign technology cannot be brought in to develop these reserves, and potential foreign investors for offshore oil and gas projects have   been deterred by the complex structure of the buyback contracts that Iran favors.

Under these deals, the international oil companies invest money upfront and then hand over a field to the National Iranian Oil Company once production starts; the oil major recoups its costs at a pre-agreed rate of profit, based on global oil prices and field production targets. Iran’s oil and gas fields also have some of the highest decline rates in the world.

Gas production has increased in the region over the past decade but only accounts for 12 percent of current global gas production. Gas demand in the Middle East has been rising by around seven percent per annum and has outpaced growth in regional gas production. Domestic demand growth is being fueled by economic expansion, low gas prices, the switch from oil to gas for power generation and the injection of gas into oil reservoirs to enhance oil recovery. The International Energy Agency (IEA) reports that Middle East gas demand growth in the period to 2030 will be surpassed only by China.