June 2005

OPEC Revenues: Country Details

Algeria's oil and natural gas export revenues account for more than 95% of Algeria's total export revenues, around 70% of total fiscal revenues, and 40% of gross domestic product (GDP). The combination of strong oil prices and higher net oil exports since 1999 has resulted in significantly higher oil export revenues for Algeria -- an estimated $22.7 billion in 2004 -- up 32% from $17.2 billion in 2003 and more than quadruple the $5.7 billion earned in 1998. For 2005 and 2006, Algeria's net oil export revenues are forecast at about $30 billion each year on higher net oil exports and oil prices.

In October 2004, Algeria unveiled its draft budget for 2005. The budget calls for increased social spending and assumes economic growth of 5.3%, and a $19 per barrel price for Algerian oil. The oil price assumption appears to be extremely conservative, considering that prices in 2004 averaged around $19 per barrel higher than this. Revenues earned from oil prices above the budgeted assumptions are to be channeled into a "stabilization fund." Including the stabilization fund, Algeria's foreign reserves reached around $30 billion by the end of 2003. In comparison, Algeria's total external debt was estimated at around $20 billion -- and falling -- at the end of 2002.

Algeria's real GDP grew by more than 6% in 2004, with continued strong real growth (around 6.4%) also expected in 2005 and 2006, as both oil and natural gas export revenues increase. With rapid population growth, Algeria's top priority is to reduce the country's extremely high unemployment rate (estimated at around 50% for the "under-30s" age group). Officially, structural reforms and fiscal discipline remain important parts of the government's economic program, as urged by the International Monetary Fund. To date, however, little in the way of reform has moved ahead. However, an important hydrocarbons reform bill, which among other things would "corporatize" state oil company Sonatrach, was approved by Parliament early 2005 after stalling out for a while. Part of reason for the lack of progress on privatization in recent years is that high oil and gas revenues tended to reduce any sense of urgency in pushing forward with such changes.

Algeria had net oil exports of 1.7 million barrels per day (bbl/d) of oil in 2004, with 1.8 million bbl/d expected in both 2005 and 2006. This represents a sharp increase in just the past few years (i.e., 1.2 million bbl/d in 2000), and very well could continue given Algeria's ambitious oil production expansion plans. Algeria produces around 1.3 million bbl/d of crude oil, well over its OPEC crude output quota of 878,000 bbl/d, not including large volumes of natural gas liquids and condensates the country also produces.

Besides oil, Algeria is a large and growing natural gas exporter, both by pipeline (to Europe) as well as by liquefied natural gas (LNG) tanker. In the long run, export revenues from natural gas exports are likely to grow in importance as new fields (like In Salah and In Amenas) come online. A short-term setback occurred, however, on January 19, 2004, with a boiler explosion at the Skikda LNG export terminal, Algeria's second largest next to Arzew. The blast killed at least 27 people and shut down operations at several adjacent facilities, including a refinery and crude oil and petroleum product loading terminals. Three liquefaction trains (out of six) at Skikda were heavily damaged, accounting for 11% of Algeria's total LNG capacity. Energy Minister Chekib Khelil has promised to build two new LNG trains in Skikda, with double the capacity of the three destroyed units and utilizing the most advanced technology. The cost of rebuilding could approach $800 million.

For 2005, Indonesia is forecast to import more oil than it exports (by about $400 million), the first time since at least the early 1970s that this has been the case. The country remains a net crude oil exporter but imports large volumes of refined oil products. Indonesia's net oil revenues have fallen from more than $5 billion as recently as 2000, the result of reduced Indonesian oil production combined with increased consumption. In 2005, Indonesia is expected to import 24,000 bbl/d of oil on a net basis, compared to net exports of 697,000 bbl/d in 1998 (at its peak in 1977, Indonesia exported nearly 1.4 million bbl/d). Fortunately for Indonesia, liquefied natural gas exports -- and earnings -- have been increasing at the same time that oil export revenues have been decreasing. This is important since Indonesia depends heavily on oil and gas export earnings for a significant share of its government revenues.

During 2004, the Indonesian economy grew by an estimated 5.1%, in spite of unresolved structural problems and around $150 billion in foreign debt. For 2005 and 2006, real GDP growth is forecast at around 5.1%-5.2%. Indonesia's merchandise trade balance recorded a surplus of $26 billion in 2004, given strong prices for major export commodities (natural gas).

For 2005, Indonesia reportedly is assuming a $45 per barrel oil price, slightly lower than EIA's forecast price for the country. Fluctuating oil prices affect Indonesia in a variety of ways, given that the country is a relatively small net oil importer and large consumer of oil products.  For instance, higher oil prices raise crude oil export revenues, but also increase oil product import costs. Perhaps most importantly, higher oil prices raise the costs to Indonesia's budget of government-financed fuel subsidies. For 2004, these politically popular subsidies were estimated to have reached $7.8 billion. On March 1, 2005, the government announced that it would raise fuel prices by 29% on average as a means of reducing these subsidies. The government also has said that it aims to eliminate fuel subsidies entirely by 2010.

Iran's economy relies heavily on oil export revenues -- around 80% of total export earnings and 40%-50% of the government budget.  Strong oil prices the past few years have helped Iran's economic situation, although the country's budget deficit continues to grow.  For 2004, Iran's real GDP increased by around 5.9%; for 2005 and 2006 it is expected to grow at around 5.5% and 4.7%, respectively. High oil prices and revenues also have helped Iran maintain strong trade and current account surpluses, although foreign debt remained relatively high in 2004, at $13 billion. Iran's reserves of foreign exchange and gold reached $30 billion in 2004.

As a result of higher oil prices and net oil exports, Iran's net oil earnings during 2004 rose by 35%, to $32.2 billion. For 2005 and 2006, Iran is expected to earn around $41 billion and $43 billion, respectively. Iran is expected to average net oil exports of around 2.6 million bbl/d and 2.7 million bbl/d of crude oil in 2005 and 2006, respectively, up from 2004 export levels even as domestic oil consumption continues to grow.

Despite these relatively strong oil export revenues, Iran continues to face budgetary pressures, a rapidly growing, young population with limited job prospects; high unemployment; heavy dependence on oil revenues; significant external debt (including a high proportion of short-term debt); expensive state subsidies on many basic goods; a large, inefficient public sector and state monopolies (bonyads, which control at least a quarter of the economy and constitutionally are answerable only to supreme leader Ayatollah Ali Khamenei); international isolation and sanctions. To cope with its economic problems, Iran's government has proposed a variety of privatization and other restructuring and diversification measures. In January 2005, for instance, the Majlis decided to freeze domestic prices for gasoline and other fuels at 2003 levels.

Iran's $127 billion budget for 2004/2005 reportedly was based on a price assumption for Iranian oil of around $19.90 per barrel. This compares to an average price for Iranian crude oil in 2004 of around $34 per barrel, and a forecast price for 2005 of around $42 per barrel. Iranian budget deficits have been a chronic problem, in part due to large-scale state subsidies on foodstuffs and especially gasoline. Iran imports around 160,000 bbl/d of gasoline at market prices, while selling it for less than 40 cents per gallon domestically, far below cost. The low price of domestic gasoline has encouraged wasteful consumption and, as world oil prices have increased, has absorbed an increasing share of Iran's budget. In late November 2004, the Iranian parliament agreed to allow the government to withdraw $825 million from the country's oil stabilization fund (OSF) in order to pay for rapidly increasing gasoline import costs. The amount approved was less than the $1.3 billion the government had requested on an emergency basis from the $10 billion fund, which receives surplus oil revenues above budgetary assumptions.

The past two years have been a particularly tumultuous time for Iraq, and this has been reflected in its oil exports and oil export revenues. At the beginning of 2003, Iraq was producing around 2.6 million bbl/d of oil. This fell to just 73,000 bbl/d in April 2003, following the onset of war, before rising gradually to 2.0 million bbl/d by December 2003. During 2004, EIA estimates Iraqi oil production of about 2.0 million bbl/d, and export earnings of $18.2 billion -- the highest in nominal terms since 2000. For 2005 and 2006, Iraqi oil export revenues are expected to increase slightly, to $19.3 billion and $19.4 billion, respectively. This forecast assumes that Iraqi net oil exports will decline to 1.3 million bbl/d in 2005 and 1.2 million bbl/d in 2006, and is subject to a large degree of uncertainty. If, for instance, Iraqi production and exports rebound faster than forecast, Iraqi oil export revenues could be far higher. Alternatively, if Iraqi production and exports rebound slower than expected, revenues would be lower than projected here. In the meantime, repeated sabotage of Iraqi oil facilities has resulted in billions of dollars in lost oil revenues.

In October 2004, Iraq unveiled its draft 2005 budget, with anticipated spending of $18 billion and assumed oil exports of 1.8 million bbl/d. One of the largest components of Iraq's spending is subsidies, largely on food and fuel. One estimate is that Iraq spends $4 billion per year on such subsidies, which are highly popular politically, and therefore difficult to trim. Besides subsidies, Iraq will need to spend large amounts of money in coming years on rebuilding the country's infrastructure, including power generation and transmission, crude oil production and exports, and oil refining. Currently, Iraq has insufficient refining capacity to meet its product needs and must import around $250 million per month in gasoline, kerosene, and other refined products. In addition to subsidies, Iraq plans to spend $3 billion in 2005 for investment in oil production capacity, compared to just $800 million in the 2004 budget.

In May 2004, a revenue stabilization account was set up to help protect Iraq from fluctuations in oil revenues. The account received an initial $180 million in funds from the Development Fund for Iraq (DFI), which was run by the Coalition Provisional Authority (CPA). At the end of June 2004, when the CPA officially handed over sovereignty to Iraqis, the DFI, with assets from oil export revenues of $10 billion, was to be run by the Iraqi government. In late June 2004, U.N.-mandated auditors (under the authority of the U.N.-authorized International Advisory and Monitoring Board) issued an interim report stating that the DFI has been "open to fraudulent acts," and criticizing the way $11 billion in Iraqi oil revenues have been spent since a May 2003 UN Security Council resolution creating the DFI. The auditors also criticized Iraq's State Oil Marketing Organization (SOMO) for its accounting practices. In addition to problems with the DFI, the U.S. Senate has determined that Saddam Hussein stole $21.3 billion in Iraqi oil revenues during the years of the U.N.-run "oil-for-food" program, from 1996 to 2003.

Besides the DFI, a portion of Iraq's oil revenues are also obligated to pay for claims stemming from the 1990/91 Gulf War. In 2003, the percent of Iraqi oil revenues going towards such claims was reduced from 25% to 5%. Iraq's interim leaders have stated that Iraq should not be liable for claims stemming from a war started by former President Saddam Hussein, nor should they be forced to pay the $100 billion or so in debts incurred by Hussein. Already, the Paris Club of creditor nations has agreed to forgive 80% of the $32 billion Iraq owes to Club members (the United States, Japan, Russia, European nations). In late December 2004, the United States went even further, agreeing to write off 100% of Iraq's debt to the U.S. -- over $4 billion.

In the medium- and long-term, Iraq could increase its oil production, exports, and export revenues substantially. According to the Oil and Gas Journal, Iraq contains 115 billion barrels of proven oil reserves, the second or third largest in the world, depending on how one counts Canadian oil sands. Estimates of Iraq's oil reserves and resources vary widely, however. Some analysts (e.g., the Baker Institute, the Center for Global Energy Studies) believe, for instance, that deep oil-bearing formations located mainly in the vast, unexplored Western Desert region could yield large additional oil resources (possibly another 100 billion barrels or more). Other analysts, such as the US Geological Survey, are not as optimistic, with median estimates for additional Iraqi oil reserves closer to 45 billion barrels.

Iraq's oil production costs are amongst the lowest in the world, making it a highly attractive oil prospect. However, only 15 of 73 discovered fields have been developed, while few deep wells have been drilled compared to Iraq's neighbors. Overall, only about 2,000 wells reportedly have been drilled in Iraq (of which about 1,500-1,700 are actually producing oil), compared to around 150,000 producing wells in Texas for comparison purposes. In addition, Iraq generally has not had access to the latest, state-of-the-art oil industry technology (i.e., 3D seismic), sufficient spare parts, and investment in general throughout most of the 1990s, but has instead reportedly been utilizing questionable engineering techniques (i.e., overpumping, water injection/"flooding") and old technology to maintain production.

With oil revenues accounting for about 90% of Kuwait's government income (and around 40%-50% the country's GDP), sharply increased oil prices since early 1999 have had positive implications for Kuwait's financial, budgetary, and economic situations. For fiscal year (FY) 2004/05, which runs through March 2005, Kuwait assumed oil prices of $15 per barrel (for Kuwaiti oil), with actually prices running around $19 per barrel higher. As a result of this windfall, Kuwait is expected to record a large budget surplus for FY 2004/2005, although final numbers are not in yet. This would mark the sixth straight year of Kuwait budget surpluses, and is expected to be followed by a huge budget surplus in 2005/2006.

Following a serious recession in 1997 and 1998, Kuwait's economy grew by about 5.2% in 2003 and 5.7% in 2004. During 2005 and 2006, Kuwaiti real GDP is expected to grow by 5.8% and 4.7%, respectively. Kuwaiti net oil export revenues in 2004 are estimated at $27.4 billion, up 40% from 2003 revenues of $19.5 billion, and nearly triple 1999 revenues. Kuwaiti net oil exports are expected to average around 2.3 million bbl/d in 2005 (and 2.5 million bbl/d in 2006), up from 2.1 million bbl/d in 2004, as the country increases production in response to high world oil prices. Kuwaiti net oil export revenues in 2005 and 2006 are forecast at $36.9 billion and $40.3 billion, respectively.

Kuwait's relatively healthy oil export revenues and economic situation, paradoxically could make things worse in the long run if they dissuade Kuwait from undertaking important reforms (i.e., privatization, taxation, foreign investment) or maintaining fiscal discipline.  Currently, however, Kuwait's budget appears to be in surplus, and the country appears to be moving ahead with spending increases on public works, including port expansion and a new north-south pipeline. Meanwhile, Kuwait's population is growing rapidly, and job opportunities for native Kuwaitis remain limited. And, despite the current surge in oil revenues, Kuwait's per capita oil export revenues are estimated at $12,142 in 2004, just one-third  the peak levels (in constant dollars) reached in 1979/1980.

Kuwait maintains large cash reserves -- around $80 billion as of late 2004 -- in its Reserve Fund for Future Generations (RFFG), which by law receives 15% of all revenues (increased from 10% in December 2004). Despite this, and despite sporadic attempts at diversification, privatization, and attraction of foreign investment, Kuwait today remains heavily dependent on the vagaries of oil markets for its economic fortunes. In coming years, Kuwait intends to spend billions of dollars expanding its main oil export terminal (Mina al-Ahmadi), its refining sector, and its oil production capacity (through the "Project Kuwait" program).

Libya earned an estimated $18.2 billion from oil exports in 2004, up 38% from 2003 revenues. For 2005 and 2006, Libya is projected to earn $24 billion and $25 billion, respectively.  Oil export revenues account for about 95% of Libya's hard currency earnings and around 75% of the government budget. Over the past decade or so, Libyan oil export production and export earnings have been adversely affected by U.N. (and U.S.) sanctions imposed in the years following the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland, in which 270 people were killed (see EIA's report on energy sanctions). On June 28, 2004, direct diplomatic relations between the United States and Libya were restored after 24 years. In February and April 2004, U.S. economic sanctions against Libya were eased, eliminating travel restrictions and allowing investment by U.S. corporations, including in Libya's petroleum sector, as well as Libyan investment in the United States. After years of U.S. and U.N. sanctions, Libya's oil sector is in critical need of foreign investment, while U.S. corporations are eager to return to the country, given its estimated 36 billion barrels of high-quality oil reserves as well as geographic proximity to western markets.

For 2004, Libya's real GDP grew by around 6.7%, down from 9.8% growth in 2003.  For 2005 and 2006, Libya's real GDP is expected to grow by 6.5% and 6.8%, respectively.   Low oil revenues in 1998 and 1999 had forced Libya to adopt a more conservative fiscal policy and to limit public infrastructure spending to a few main projects, such as the Great Man Made River (GMR), a $25 billion project to bring water from underground aquifers beneath the Sahara to the Mediterranean coast. The rebound in oil prices since 1999, and the suspension of U.N. sanctions, have resulted in a modest improvement in Libya's economic situation. On the other hand, higher oil earnings may also be removing incentives for Libya to restrain spending and to implement needed economic reforms.

Still, Libya is looking at possible areas, such as tourism, for economic expansion outside the hydrocarbons sector. In December 2004, President Qadhafi reiterated his call for "liberating" the Libyan economy from its dependence on oil export revenues. In 2003, Qadhafi had called for privatization of the country's oil sector, in addition to other areas of the economy, and had pledged to bring Libya into the World Trade Organization (WTO).

For 2004, Libya's per capita oil export revenues were $3,310, only about one-fifth of 1980 peak levels (in inflation adjusted terms). Libya continues its attempts at diversifying the country's economy away from oil and towards natural gas, and generally has kept government spending under tight control in recent years. Libya is expected to export around 1.4 million bbl/d of oil in 2005 and 1.5 million bbl/d in 2006, up from 1.3 million bbl/d in 2004.

Crude oil exports generate over 90%-95% of Nigeria's foreign exchange earnings and 80% of government revenues. Nigeria's net oil export revenues are expected to grow 27% in 2005, to $37.7 billion, and then rise another 9%, to $41.1, billion in 2006.  This represents a big increase from 1998, when the country earned less than $10 billion (in constant $2005)  amidst a period of political and social turmoil following the deaths of President Sani Abacha on June 8, 1998 and of Mashood Abiola -- presumed winner of 1993 presidential elections -- on July 7, 1998, and the election of a new president (General Olusegun Obasanjo) on March 1, 1999. Political turmoil over the past several years, including a flare up in March 2003 which resulted in force majeure declarations by ChevronTexaco and Shell, both large oil producers in Nigeria, has had a serious effect on the country's economic and fiscal situations. In addition, Nigeria's oil revenues are reduced by theft and illegal "bunkering" of oil (by thieves and criminal syndicates), possibly by several billion dollars per year. In December 2004, Nigeria's Finance Minister announced that the National Nigerian Petroleum Corporation's budget would be integrated into the federal budget starting in 2006, partly as a way to increase transparency.

Nigeria's real GDP is estimated to have grown by 5.5% in 2004, with forecast growth of 5.2% in 2005 and 4.8% in 2006. Nigeria is expected to export around 2.2 million bbl/d of crude oil in 2005, the same as in 2004, before increasing to 2.5 million bbl/d in 2006. Nigeria's 2004 budget was based on an assumption of $25 per barrel (for Nigerian oil), about $12 per barrel below Nigeria's actual oil price for that year. As a result, Nigeria experienced a windfall in 2004, resulting in a debate over what to do with the extra money. In September 2004, the government decided to distribute half of excess oil revenues to the country's stabilization fund, with the rest going to federal, state, and local governments. In November, the government further decided to use about $280 million from the stabilization fund to help offset higher fuel costs for Nigerian citizens. For 2005, Nigeria reportedly assumed an oil price of $30 per barrel.

Despite its huge oil wealth, most of Nigeria's population of over 137 million is extremely poor. According to the World Bank, around 80% of Nigeria's oil and natural gas revenues accrue to just 1% of the population, while the other 99% receive the remaining 20% of the revenues. Overall, Nigeria's per capita oil export earnings are the second lowest in OPEC, next to Indonesia, at around $268 per person. This compares to $736 per person earned in 1980, the peak year for Nigerian oil export revenues (in constant $2004).

Nigeria maintains significant subsidies on oil products, and attempts to raise product prices have often met with angry reactions by the Nigerian people. In late May and early June 2004, for instance, increases in gasoline prices led to calls for a nationwide strike called by the Nigerian Labor Congress (NLC). The Nigerian High Court subsequently ordered the NLC not to proceed with the strike, and also ordered fuel marketers to reverse price increases.

Another source of tension in Nigeria is over the division of oil revenues between state and national governments. In February 2001, the Obasanjo government (reelected in April 2003) took the unprecedented step of asking Nigeria's Supreme Court to intervene in its argument with the 36 regional state governments over control of the country's offshore oil and gas resources. In a 10-point statement, the Obasanjo government stated that all natural resources within the territorial waters of Nigeria are derived from the federation and not from any one state, and asked that the Supreme Court validate this position. In April 2002, the Supreme Court ruled that Obasanjo's position was correct, sparking threats of violence and unrest. In October 2002, however, the Nigerian legislature passed an amendment to the country's oil revenue sharing law, meaning that coastal states will once again earn 13% of the revenues from oil produced in the Gulf of Guinea off their coasts.

Oil continues as the dominant feature of Qatar's economy, although liquefied natural gas (LNG) exports and gas-based petrochemical industries are becoming increasingly important and the government is pushing diversification efforts. Oil accounts for around 70% of Qatar's government revenues, and also has an impact on production of condensate and associated natural gas. Increased oil prices since early 1999 are helping Qatar in several ways, not the least of which is the increase in revenues which can be used to balance the country's budget and to pay for a huge liquefied natural gas (LNG) and petrochemicals development program. Qatar has the third-largest gas reserves in the world, after Russia and Iran, and is rapidly expanding LNG export facilities, including the Rasgas development (a third LNG train is slated to come online in 2004). Qatar also is increasing spending on public services, infrastructure development, and debt repayment. Meanwhile, the country is looking to reform its generous welfare system, including heavy subsidies on water and electricity consumption, although this could prove politically difficult to carry out.

Qatar's oil export earnings for 2004 currently are estimated at $13.5 billion, up 43% from the $9.5 billion earned in 2003.  Qatari revenues are expected at around $17 billion in both 2005 and 2006. Qatar's budget for 2004/2005 was based on an assumed oil price of only $19 per barrel, around $17 per barrel below the actual price. Given this, combined with higher earnings from LNG exports, Qatar's budget appears likely to achieve a significant budget surplus, despite increases in spending. For 2005, Qatar reportedly is considering an oil price assumption of $25 per barrel.

Qatar's real GDP is estimated to have grown by about 7.0% in 2004. For 2005 and 2006, Qatar's real GDP growth is forecast at 6.7% and 4.7%, respectively. Qatar is expected to export around 40,000 bbl/d more oil in 2006 than it did in 2004.

Saudi Arabia
Saudi Arabia ranks as the first or second largest crude oil producer in the world, and is a leader in OPEC's production quota decisions. As such, Saudi Arabia was a critically important player behind the oil price collapse of late 1997 through early 1999, and also in actions taken by world oil producers which have led to a tripling in oil prices by the fall of 2000. During 2004, Saudi Arabia produced an estimated 10.4 million bbl/d of oil (32% of total OPEC oil production), with net export of around 8.7 million bbl/d (the comparable figures for 2003 as a whole were 9.9 million bbl/d and 8.4 million bbl/d, respectively). 

The combination of relatively high oil prices and exports led to a revenues windfall for Saudi Arabia during 2004. For the year as a whole, Saudi Arabia earned about $116 billion in net oil export revenues, up 35% from 2003 revenue levels. Saudi net oil export revenues are forecast to increase in 2005 and 2006, to $150 billion and $154 billion, respectively, mainly due to higher oil prices. This is important for Saudi Arabia, given that oil export revenues account for nearly 90% of the country's total export earnings. Increased oil prices -- and revenues -- since the price collapse of 1998 have significantly improved Saudi Arabia's economic situation, with real GDP growth of 7.2% in 2003, 5.5% in 2004, and forecasts of 5.6% and 4.7% growth for 2005 and 2006, respectively.

For fiscal year 2004, Saudi Arabia originally had been expecting a budget deficit. However, this was based on an extremely conservative price assumption of $19 per barrel for Saudi oil -- and assumed production of 7.7 million bbl/d. Both of these estimates turned out to be far below actual levels. As a result, as of mid-December 2004, the Saudi Finance Ministry was expecting a huge budget surplus of $26.1 billion, on budget revenues of $104.8 billion (nearly double the country's original estimate) and expenditures of $78.6 billion (28% above the approved budget levels). This surplus is being used for several purposes, including: paying down the Kingdom's public debt (to $164 billion from $176 billion at the start of 2004); extra spending on education and development projects; increased security costs (possibly an additional $2.5 billion dollars in 2004; see below) due to threats from terrorists; and higher payments to Saudi citizens through subsidies and other means. For 2005, Saudi Arabia is assuming a balanced budget, with revenues and expenditures of $74.6 billion each.

In spite of the recent surge in its oil income, Saudi Arabia continues to face serious long-term economic challenges, including high rates of unemployment (around 15%-20%), one of the world's fastest population growth rates, and the consequent need for increased government spending. All of these place pressures on Saudi oil revenues. The Kingdom also is facing serious security threats, including a number of terrorist attacks (on foreign workers, primarily) in 2003 and 2004. In response, the Saudis reportedly have ramped up spending in the security area (reportedly by 50% in 2004, from $5.5 billion in 2003).

Saudi Arabia's per capita oil export revenues remain far below high levels reached during the 1970s and early 1980s. In 2004, Saudi Arabia earned around $4,564 per person, versus $22,589 in 1980. This 80% decline in real per capita oil export revenues since 1980 is in large part due to the fact that Saudi Arabia's young population has nearly tripled since 1980, while oil export revenues in real terms have fallen by over 40% (despite recent increases).  Meanwhile, Saudi Arabia has faced nearly two decades of heavy budget and trade deficits, the expensive 1990/1991 war with Iraq, and total public debt of around $175 billion. On the other hand, Saudi Arabia does have extensive foreign assets -- around $110 billion -- which provide a substantial fiscal "cushion."

The United Arab Emirates (UAE) earned an estimated $30.2 billion in net oil export revenues in 2004, up 32% from 2003 revenues. For 2005 and 2006, the UAE is projected to earn $39 billion and $43 billion, respectively. As with other OPEC countries, relatively strong oil prices and revenues in recent years have helped to significantly improve the UAE's economic, trade, and budgetary situations. The UAE economy is relatively diversified, having moved increasingly towards services (tourism, banking, re-exports, information technology, etc.). Privatization has moved ahead relatively quickly, and the country has set up the Sharjah Airport International Free Zone to encourage foreign trade and investment. These moves have helped to moderate the effects of fluctuating oil prices (and revenues). The UAE's current account ran a $9 billion surplus in 2005, with surpluses of $7-$8 billion expected for 2005 and 2006.

For 2004, the UAE exported around 2.3 million bbl/d of oil. For 2005 and 2006, UAE net oil exports are forecast at 2.5 million bbl/d and 2.7 million bbl/d, respectively. Real growth in the UAE's gross domestic product (GDP) is estimated at 6.4% for 2004, with forecasts of 6.7% for 2005 and 5.1% for 2006.  Most of the UAE's federal revenues -- and oil production -- are provided by Abu Dhabi, the richest emirate in the federation.

Venezuela earned $29.8 billion in oil export revenues during 2004. For 2005 and 2006, the country is expected to earn about $36 billion and $34 billion, respectively. For 2004, Venezuelan oil production averaged 2.9 million bbl/d, up from 2.6 million bbl/d in 2003. In contrast, Venezuela's 2004 budget had assumed total oil output of 3.4 million bbl/d. For 2005, the government is assuming oil production of 3.4 million bbl/d, well above the EIA forecast of 2.8 million bbl/d. On the other hand, Venezuela is assuming a conservative oil price of just $23 per barrel, about $18 per barrel below the EIA forecast price for 2005.

During late 2002 and early 2003, a general strike and related unrest had reduced the country's oil production sharply. In January 2003, Venezuela's oil output fell to only 697,000 bbl/d, down nearly 80% from the 3.3 million bbl/d produced in November 2002. Total Venezuelan oil output then rebounded to 1.6 million bbl/d in February 2003 as the strike ended, 2.6 million bbl/d in March 2003, and 2.9 million bbl/d by the summer of 2003.

Oil export revenues are a serious matter for Venezuela, since the country relies on these revenues for around 75%-80% of total export earnings and 40%-50% of government revenues.  Given the country's recent political and economic crises, Venezuela's real GDP declined by about 9% in 2002 and 2003 before rebounding by 17% in 2004. For 2005 and 2006, the country is expected to experience real economic growth of around 6% and 4%, respectively, driven by high oil revenues and social spending.

Over the past few years under President Chávez, cuts in state oil company PdVSA's budget, combined with a lack of adequate foreign investment, a policy of strict adherence to OPEC quotas, and the dismissal of many PdVSA employees have crimped the company's ambitious long-term expansion plans.  According to a five-year plan released in late February 2001, PdVSA aimed to raise the country's crude oil production capacity to 5.5 million bbl/d by 2006 (Chávez had previously planned to reach capacity of 5.5 million bbl/d by 2008).  Also, according to a statement made in May 2004, PdVSA plans to invest $37 billion in oil and natural gas exploration and production between 2004-2009, with oil production targeted to reach 5 million bbl/d by 2009. At present, this goal appears highly unlikely, with EIA estimating Venezuela's current crude oil production capacity at just 2.5 million bbl/d (including non-PdVSA production, some of which is synthetic oil).

For 2004, PdVSA contributed around $3.7 billion to the country's social programs, compared to $1.7 billion that had been budgeted (out of PdVSA's $15 billion budget). In addition, PdVSA President Ali Rodriguez announced in early June 2004 that the company would also contribute $750 million to a new development fund, plus $600 million to a fund dedicated to agriculture. Many analysts have predicted that tapping PdVSA's budget for social expenditures could compromise the country’s oil production, given that Venezuela’s oil sector has been suffering from under-investment. Contributions to the state budget leave PdVSA with less money to invest specifically in oil projects. It is believed that PdVSA requires around $3 billion a year simply to compensate for natural decline rates at oilfield in the country; for 2005, PdVSA plans to spend $5 billion on all oil-related projects. Recently, there have been signs that PdVSA has been spending more on oil investment, with the country's "rig count" up as well. On the other hand, there have also been admissions by government officials that production in western Venezuela has fallen due to "sabotage;" this does not bode well for Venezuelan production.

In October 2004, the Venezuelan government raised royalties on oil revenues from four joint ventures with foreign companies to 16.67%, from 1% previously. This move was taken despite the fact that the companies' contracts specifically prohibit such royalty increases for the length of the joint venture contracts, which in this case last through 2009. Still, the projects are believed to be highly profitable at current high oil prices. Currently, Venezuela is attempting to collect $4 billion in back taxes from foreign operators.

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File last modified: June 16, 2005


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