Dubai: The government of Dubai, facing dwindling oil resources and a mountain of debt, announced on Thursday the discovery of a new offshore oil field which it hoped would rescue its limping economy.
The ruler of Dubai, Sheikh Mohammed bin Rashed al-Maktoum, “heralds the good news to the people of the United Arab Emirates that a new offshore oil field has been discovered in Dubai,” a government statement said.
The UAE sits on the world’s fifth largest proven oil reserves, amounting to 97.8 billion barrels of crude oil. But 95% of those reserves are controlled by the leading partner in the federation, Abu Dhabi.
The UAE also has 214.4 trillion cubic feet (six trillion cubic metres) of gas reserves, ranking it sixth in the world after Russia, Iran, Qatar, Saudi Arabia and the United States.
Dubai’s poor oil reserves, mostly offshore, are expected to be exhausted within 20 years, while it controls only two percent of the country’s gas wealth, according to UAE government website.
The statement did not provide information about the size of the new field, saying that Sheikh Mohammed instructed the emirate’s oil department to “begin exploration work and conduct needed research to specify the size of the reserve, and its production capacity in the short and long term.”
It said that the new field lies east of the small Rashid field, which is located some 70 kilometres (44 miles) off Dubai’s Gulf coast.
Dubai discovered oil in commercial quantities in 1966 at the offshore Fateh field, and began exporting in 1969. Its oil reserves stand at four billion barrels.
The city-state’s oil production reportedly peaked in 1991 at 410,000 barrels per day and has been steadily declining since, dropping to 170,000 bpd in 2000. Up-to-date official figures are not available.
Sheikh Mohammed, who is also the UAE vice president and Prime Minister, hoped the discovery would “give a strong boost to all sectors of the local economy and provide a new source of revenue that could strengthen the drive for comprehensive development in Dubai,” the statement said.
Dubai’s economy had boomed over the past years on non-oil sectors, particularly real estate and construction, which attracted huge investments, in addition to its prospering tourism sector.
But its rapid economic growth came to a grinding halt after the global financial crisis hit Dubai in autumn 2008, drying out foreign financing that was vital for the overheated real estate sector.
Dubai had heavily borrowed its way to build its economy, splashing on grandiose projects, mainly man-made tree-shaped islands. It is now facing severe problems in meeting its debt obligations.
The emirate sent jitters through world global markets in November when it said it needed to freeze payments on the debt of its largest state-corporate, Dubai World.
The group is now negotiating the restructuring of some $22 billion in debts owed by its troubled subsidiaries.
Dubai’s total debt is estimated at between $80 and 100 billion, although some reports say it could be as high as $170 billion.
But the emirate has so far leaned on its rich neighbour Abu Dhabi, which together with the central bank, has extended aid worth $20 billion in 2009 to bail out Dubai’s troubled companies.