Tuesday, 8 November 2005

saudi neibourhood troubles on the petrol side


AUGUST 04, 2005

Oil at heart of renewed UAE-Saudi border dispute

The United Arab Emirates (UAE) has rekindled a long-standing territorial dispute with Saudi Arabia in a bid to grab a share of a giant border oilfield that contains nearly 1.5 per cent of the world's total crude resources.

Just eight months after the death of Sheikh Zayid bin Sultan al-Nahyan, its pragmatic leader and founder, the UAE surprisingly declared that a 31-year-old border pact with its giant neighbour was no longer in force. While analysts rule out a military confrontation, they acknowledge that such a declaration by a top royal figure could harm relations and increase tension between the two Gulf oil heavyweights.

A former UAE diplomat, who is close to the UAE Ministry of Foreign Affairs, said: "As far as I know, I think it is the first time in this region that a senior official openly speaks about real border problems within the Gulf Co-operation Council (GCC)." While such statements were strong, I do not think this means the two countries are bracing for war...but you can sense tension, and the demands made by the UAE will only put pressure on Saudi Arabia... In my opinion, the UAE chose this time because of Sheikh Zayid's death and global changes that limit Saudi Arabia's ability to dominate the Gulf."

After negotiations with Saudi Minister of Interior Prince Nayef bin Abd al-Aziz in Abu Dhabi in June, Sheikh Hamdan bin Zayid al-Nahyan, Deputy Premier and Minister of State for Foreign Affairs in the UAE, announced that the 1974 border accord with Saudi Arabia "is no longer practical or implementable" and that the UAE wanted it amended. Sheikh Hamdan is looking for a "satisfactory" agreement during further negotiations in Riyadh; however no date has yet been set for this visit.

Observers said Sheikh Hamdan's statements effectively annulled the 1974 agreement. ," One analyst said: "I am not saying it is a declaration of war but the current UAE leaders are getting really tough, completely different from the peaceful and conciliatory approach adopted by the late Sheikh Zayid."

Field of dreams

At the heart of the dispute is the giant Shaybah oilfield. Discovered in 1968, the field straddles the UAE-Saudi border and is believed to be one of the world's largest onshore oilfields, with current estimated proven reserves of 15.7 billion barrels.

Up until 25 December 2003, the field had yielded one billion barrels, however oil industry sources believe its recoverable oil potential could rise to 18 billion barrels in a few years with the deployment of new technology, such as horizontal drilling. Besides oil, the field contains in excess of 25 trillion cubic feet of associated gas, almost equivalent to Oman's total gas reserves.

An oil industry source said: "Shaybah is one of the most lucrative oilfields in the world...it contains billions of barrels of premium-grade 41.6 API sweet (nearly sulfur-free) crude oil. This explains the UAE's apparent bid to redraw the border map and get a share of that field."

Western diplomats say the UAE signed the 1974 Jeddah agreement under duress as it was forced to give up current and future claims to most of the Shaybah field. The agreement stipulated that "in case of oil findings along the common border, whether before or after the accord, ownership of the whole field will go to the country where the largest part of the field is located (Saudi Arabia)".

The UAE's long-standing resentment of the border pact was underscored when the UAE boycotted the inauguration ceremony for the field in 1998. Saudi Arabia though has so far invested around USD2.5 billion in developing the field, which is now producing more than 500,000 barrels per day. The field has more than 140 production wells and its output capacity could reach one million barrels per day (bbl/d).

It's all ours

Old Emiratis are convinced that Shaybah had totally belonged to the UAE before the two Organisation of the Petroleum Exporting Countries (OPEC) countries signed the Jeddah border pact.

Mohammed Qabeesi, a 75-year-old national from Abu Dhabi's eastern fertile Liwa area, near Shaybah, claims: "I can assure you that all of it was ours. What happened I believe was that Saudi soldiers used to disguise [themselves] as Bedouins and come at night to push the barrels and barbed wire across the sand towards the UAE... they kept doing so for a long time until most of the field's area was inside Saudi Arabia. Our leaders knew about it, but could not do anything because they did not want any problems."

Facts: Saudi Arabia and the UAE

Saudi Arabia UAE

Oil reserves (billion barrels) 262 98

Gas reserves (trillion cubic metres) 6.7 6.06

Oil production (million barrels per day - May) 9.4 2.4

Gas production (billion cubic metres - 2003) 65 44.5

GDP (billion dollars - 2004) 247 80

Population (millions) 25 4

© 2005 Jane's Information Group

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