Dubais oil discovery and Dubais debt

Dubai announced a new oilfield discovery on Thursday, raising hopes of a boost to both oil output and revenues for the cash-strapped emirate.
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Feb 05, 2010, 10.50 AM | Source: Reuters

Dubai's oil discovery and Dubai's debt

Dubai announced a new oilfield discovery on Thursday, raising hopes of a boost to both oil output and revenues for the cash-strapped emirate.

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Dubais oil discovery and Dubais debt

Dubai announced a new oilfield discovery on Thursday, raising hopes of a boost to both oil output and revenues for the cash-strapped emirate.

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Dubais oil discovery and Dubais debt
Dubai announced a new oilfield discovery on Thursday, raising hopes of a boost to both oil output and revenues for the cash-strapped emirate.

WHAT IS THE SIZE OF THE FIELD, POTENTIAL OUTPUT AND POTENTIAL REVENUE FOR DUBAI?
Questions about the size of the field, compounded by Dubai's refusal to provide details, led to some market speculation that it might have a material impact on Dubai's ability to meet its debt burden or affect Gulf petroleum export levels.

But oil industry sources say it unlikely to pump more than 10,000 barrels per day. A field that size would give Dubai additional revenues of around USD 750,000 per day, or some USD 270 million per year.

Not all of this would be additional production or revenue, as Dubai is battling declining production from its mature oilfields. Output stands at around 50,000 to 70,000 bpd, down from a peak over 400,000 bpd in 1991.

HOW QUICKLY COULD IT START PUMPING OIL?
This would depend on how close the field is to existing deposits. Dubai said on Thursday the field was east of the producing Rashid oilfield, but did not say how far.

Rashid is one of Dubai's four main oilfields, so it may be able to use Rashid's infrastructure for the new production. In that scenario, investment would be small, construction fast, and output could start from the new field in 12 to 18 months, industry sources said. That would keep extraction costs low.

If the field was a long way from Rashid, more infrastructure would need to be put in place and the project would cost more and take longer.

In both cases, Dubai would need to drill more wells to appraise the discovery, and then may need further drilling to develop the reservoir. It would also need to put in place pipelines and the underwater structure, or jacket, needed to pump the oil.

HOW MUCH WOULD OIL FROM THE NEW FIELD IMPACT DUBAI'S DEBT?
The impact would depend on the size of the field. A small field of around 10,000 bpd, giving USD 270 million a year, would have little overall impact on a debt that ratings agency Moody's estimates is USD 100 billion for Dubai and related entities.

A much larger oilfield would have a much bigger impact and would bolster Dubai's books.

Still, any eventual additional cash-flow would help the emirate. Dubai is restructuring USD 22 billion in debt held by state conglomerate Dubai World. It shocked global markets when it announced it planned to delay payment on the debt last year.

Dubai was expected to announce the debt restructuring soon, so future oilfield revenues were unlikely to have much impact on that.

WHAT DOES IT MEAN FOR THE OIL MARKET?
Dubai's crude has an influence disproportionate to the size of its output on global crude markets - a tiny fraction of global daily supply of around 85 million bpd.

It is part of a pricing benchmark used to value around 10 million bpd of Middle East crude that is shipped to Asia. Additional supply could change the price of Dubai relative to other grades of crude in the region.

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