But could this crest of the wave signal the end of the low cost easy oil production era and what does this mean for long-term global energy security?
For much of the 20th century, the region has been blessed with a steady flow of low cost production, thanks to its abundance of conventional crude oil reservoirs — in parts of Iraq crude oil has been known to bubble to the surface without any technical assistance.
However as a relatively mature exploration oil-producing region, there is renewed focus on improving recovery from many of the Middle East's large and well-known fields. The world's largest crude reservoirs, such as Kuwait's Burgan and Saudi Arabia's giant Ghawar, have pumped more than half their recoverable reserves over the last 50 years — the point at which production traditionally begins to decline.
When Oman faced massive production declines in the last decade it turned to Enhanced Oil Recovery (EOR) technology to reverse the collapse and now these techniques are responsible for harvesting about a third of the country's production — which amounts to salvaging about $30 million a day in oil revenue at current prices.
The state-owned Saudi Aramco is currently evaluating the use of Carbon Dioxide (CO2) injection to avert production declines and plans a series of pilot programs in mature oil fields like Ghawar, the world's largest, by 2012.
The US Geological Survey estimates there are some three trillion barrels of heavy oil in the world, about 100 years of global consumption at current levels. The catch: only a fraction of it — about 400 billion barrels — can be recovered using existing technology. New techniques are required to unlock more.
There are an estimated 970 billion barrels of heavy and extra-heavy crude oil reserves known in the Middle East region, but until now much of it has been left undeveloped because there has been so much easily accessible cheap oil to develop. But with ageing reservoirs and prices exceeding $100 per barrel it makes the economics progressively more attractive to utilize the latest technology and skills available from EOR to go after heavy oil extraction.
The global market expenditure on EOR has leaped from a standing start over the last decade to almost $100 billion and is expected to continue growing rapidly with the support of government investment as we have seen in Oman, the UAE and now Saudi Arabia.
In United States, the Department of Energy has estimated that full use of next generation CO2-EOR technology in US oil fields could generate an additional 240 billion barrels of recoverable resources, which at current oil prices amounts to about $24 trillion, almost 50 percent more than the country's national debt.
EOR is a series of techniques used to increase the amount of recoverable oil that can be extracted from any particular reservoir. During its lifecycle, an oil field goes through a number of distinct phases where various techniques are employed to maintain crude oil production at plateau levels — primary, secondary and tertiary recovery.
Arab oil producers are entering the tertiary phase, commonly known as Enhanced Oil Recovery that employs techniques such as injecting steam, gas or chemicals into a reservoir to make the oil thinner and easier to extract from tight rock formations.
Enhanced Oil Recovery played a significant role in salvaging the Omani oil industry which was facing significant production declines — between 2001 and 2007 Oman's oil production fell by 27 percent, but by 2009, due mostly to EOR projects, oil production had increased by 17 percent.
In total, four major Omani projects are planned to start by 2012, with at least another two expected to start soon after.
Occidental, who operates the Mukhaizna field in south-central Oman, implemented a major steam flood project between that boosted gross daily production tenfold between 2005 and 2010 with total output recently exceeding 100,000 barrels of oil per day for the first time. Similarly, Petroleum Development Oman is implementing a number of EOR projects in the Marmul field in the South of Oman, in the Harweel field and in Qarn Alam, which marks the world's first commercial application of steam-assisted gas-oil gravity drainage in a fractured carbonate reservoir.
By 2012, Oman is expected to be producing between 250,000 and 300,000 barrels of oil per day using EOR methods, about a third of the country's total output.
In the UAE, the Abu Dhabi Company for Onshore Oil Operations initiated an EOR project in November 2009 to test the injection of Carbon Dioxide into the North-East Bab field, a complex carbonate reservoir. Masdar, a subsidiary of Mubadala is supplying up to 60 tons of CO2 per day which is injected into a series of pilot wells. ADCO's main objectives for utilizing CO2 EOR are to significantly increase recoverable reserves, sustain long-term production, and maximize ultimate recovery.
The high oil price has resulted in significant investment in EOR methods globally, with the success seen for example in arresting the decline in US oil production. EOR methods along with advanced technologies designed to extract unconventional oil and gas, coupled with anticipated slow global economic growth could ultimately have a serious impact on future supply and demand fundamentals over the next decade and result in many Middle Eastern oil exporting economies having to continually rethink their long term strategies.
