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GENERAL BACKGROUND
The Persian Gulf, also known as the Arabian Gulf, is a 600-mile-long body of water which separates Iran from the Arabian Peninsula, and one of the most strategic waterways in the world due to its importance in world oil transportation. At its narrowest point (the Strait of Hormuz), the Gulf narrows to only 34 miles wide.

There have been, and continue to be, significant territorial disputes between Persian Gulf countries. Besides the Iraqi invasion of Kuwait in August 1990, and before that the Iran-Iraq War from 1980 to 1988, another important dispute is between the UAE and Iran over ownership of three islands -- Abu Musa, Greater Tunb Island, and Lesser Tunb Island, all strategically located in the Strait of Hormuz. The three islands were effectively occupied by Iranian troops in 1992. In 1995, the Iranian Foreign Ministry claimed that the islands are "an inseparable part of Iran." Iran rejected a 1996 proposal by the Gulf Cooperation Council (GCC) for the dispute to be resolved by the International Court of Justice, an option supported by the UAE. In early 1996, Iran took further moves to strengthen its hold on the disputed islands. These actions included starting up a power plant on Greater Tunb, opening an airport on Abu Musa, and announcing plans for construction of a new port on Abu Musa. In September 2000, Iran stated its willingness to resume talks with the UAE on the dispute. In March 2000, Jane's Defence Weekly reported that satellite images of Abu Musa and the Tunbs did not show any evidence that Iran had fortified the islands militarily, or turned them into "unsinkable aircraft carriers capable of closing the (Hormuz) Strait during a crisis." On December 31, 2001, the GCC issued a statement reiterating its support for the UAE's sovereignty over Abu Musa and the Tunbs, declared Iran's claims on the islands as "null and void," and backed "all measures...by the UAE to regain sovereignty on its three islands peacefully."

In February 1991, Iraqi troops, before being expelled from Kuwait by coalition forces, dumped millions of barrels of oil into the Persian Gulf, creating an environmental crisis and also threatening desalination plants in the region. During the Iran-Iraq War, oil tankers were attacked in the Persian Gulf by both Iraq and Iran, leading in part to the U.S. decision in 1987 to "reflag" Kuwait tankers and also to increase U.S. naval forces in the Persian Gulf.

In January 2002, in his State of the Union address, President Bush labeled two key Persian Gulf coutnries -- Iran and Iraq -- as members of an "axis of evil" that supported terrorism and were developing weapons of mass destruction. This speech came five months after the terrorist attacks of September 11, 2001, the worst such attack ever on U.S. soil.

OIL AND GAS RESERVES, PRODUCTION, CAPACITY
The Persian Gulf contains around 679 billion barrels of proven oil reserves, representing approximately 66% of total world oil reserves, and 1,918 Tcf of natural gas reserves (35% of the world total). Also, as of early 2002, the Persian Gulf maintains about 22.7 million bbl/d of oil production capacity, or about 31% of the world total, and accounts for 27% of world total oil production. Perhaps even more significantly, the Persian Gulf countries�maintain a significant percentage (about 91%) of the world's excess oil production capacity (note: as of early 2002, world excess oil production capacity had increased to around 7.3-7.8 million bbl/d from about 4.4 million bbl/d in 2001). Excess production capacity is important because, in the event of an oil supply disruption, this capacity can be brought online to compensate. If such a disruption were to occur in the Persian Gulf, it would leave the world with relatively limited options for making up the lost oil production.

In 2001, Persian Gulf countries had estimated net oil exports of 16.8 million bbl/d of oil (see pie chart).� Saudi Arabia exported the most oil of any Persian Gulf country in 2001, with an estimated 7.4 million bbl/d (44% of the total). Also in 2001, Iran had estimated net exports of around 2.6 million bbl/d (15%), followed by the United Arab Emirates (2.1 million bbl/d -- 12%); Iraq (2.0 million bbl/d -- 12%), Kuwait (2.0 million bbl/d -- 12%), Qatar (0.8 million bbl/d -- 5%), and Bahrain (0.02 million bbl/d -- 0.1%).

According to the Energy Information Administration's International Energy Outlook 2001, Persian Gulf oil production capacity is expected to reach about 30.4 million bbl/d by 2010, and 44.5 million bbl/d by 2020,�compared to about 23 million bbl/d currently. This would increase Persian Gulf oil production capacity to 36% of the world total by 2020, up from 31% as of early 2002.

Offshore Persian Gulf Oil Development
Major offshore Persian Gulf oil fields include Khafji and Hout, both of which are connected to Saudi Arabia's Safaniyah, the world's largest offshore oilfield (with estimated reserves of 19 billion barrels). Saudi offshore Persian Gulf production includes Arab Medium crude from the Zuluf (over 500,000 bbl/d capacity) and Marjan (270,000 bbl/d capacity) fields and Arab Heavy crude from the Safaniya field.�� The Doroud 1&2, Salman, Abuzar, Foroozan, and Sirri fields comprised the bulk of Iran's offshore output, all of which is exported.� Iran plans extensive development of existing offshore fields and hopes to raise its offshore production capacity to 1.1 million bbl/d by 2003 (from around 600,000 bbl/d now). Iran's national oil company (NIOC) has expressed interest in developing five oil and gas fields in the Hormuz region (Henjam A -- HA, HB, HC, HD, and HE), which, according to NIOC, hold an estimated 400 million barrels of liquids (oil, natural gas condensates, etc.) and have production potential of 80,000 bbl/d.

Offshore Persian Gulf Natural Gas Development
Besides oil, the Persian Gulf region also is important because it contains huge reserves (1,918 trillion cubic feet -- Tcf) of natural gas, with Iran and Qatar holding the world's second and third-largest reserves (behind Russia), respectively. This likely will become increasingly important in coming years, as both domestic gas consumption and gas exports (by pipeline and also by liquefied natural gas -- LNG -- tanker) increase. In late 2000, Saudi Arabia resolved a long-standing offshore Persian Gulf border dispute with Kuwait, opening the door to development of the huge (13-Tcf) Dorra gas field, which lies in waters straddling Iranian, Saudi, and Kuwaiti territories. Most of Qatar's gas is located in the North Dome Field, which contains 380 Tcf of in-place and 239 Tcf of recoverable reserves, making it the largest known non-associated gas field in the world. The Qatari government believes that the country's economic future lies in developing this vast gas potential. Currently, Qatar has two LNG exporters: Qatar LNG Company (Qatargas); and Ras Laffan LNG Company (Rasgas). The Dolphin Project would supply gas from Qatar's North Dome to the United Arab Emirates, Oman, and possibly Pakistan at some point in the future (although at present this seems unlikely).

Another major Persian Gulf offshore gas project is Iran's huge South Pars field. Current estimates are that South Pars contains around 280 Tcf of gas, of which a large fraction will be recoverable, and over 17 billion barrels of liquids. Development of South Pars is Iran's largest energy project, and already has attracted around $20 billion in investment. Natural gas from South Pars largely is slated to be shipped north via the planned 56-inch, $500 million, IGAT-3 pipeline (a section of which is now being built by Russian and local contractors), as well as a possible IGAT-4 line, and then reinjected to boost oil output at the mature Aghajari field (output peaked at 1 million bbl/d in 1974, but has since fallen to 200,000 bbl/d), and possibly the Ahwaz and Mansouri fields (which make up part of the huge Bangestan reservoir in the southwest Khuzestan region). South Pars natural gas also could be exported, both by pipeline and possibly by liquefied natural gas (LNG) tanker. Initial gas production from South Pars is expected in early 2002. On September 29, 1997, Total (now TotalFinaElf) signed a $2-billion deal (along with Russia's Gazprom and Malaysia's Petronas) to explore South Pars and to help develop the field during Phase 2 and 3 of its development.� In July 2000, Italian firm ENI signed a $3.8-billion deal with Iran to develop the South Pars region for gas. The deal reportedly was the largest between Iran and a foreign company since the 1979 Islamic Revolution.

In addition to South Pars, Iran aims to develop the 6.4-Tcf, non-associated Khuff (Dalan) reservoir of the Salman oil field, which straddles Iran's maritime border with Abu Dhabi, where it is known as the Abu Koosh field. NIOC is seeking to develop the Khuff reservoir, which could lead to the production of 500 Mmcf/d of non-associated gas, along with the 120,000 bbl/d of crude oil that is now being produced from a shallower reservoir. Also, the 47-Tcf North Pars development will be integral to Iran's long-term gas utilization plans. Development plans call for 3.6 Bcf/d of gas production, of which 1.2 Bcf/d would be re-injected into the onshore Gachsaran, Bibi Hakimeh, and Binak oil fields. The other 2.4 Bcf/d would be sent to the more mature Agha Jari oil field.�

OIL FLOWS
Strait of Hormuz
In 2001, the vast majority (around 80%) of oil exported from the Persian Gulf transited by tanker through the Strait of Hormuz , located between Oman and Iran, and onwards. By far the world's most important oil "chokepoint," accounting for transit of around two-fifths of all world traded oil, the Strait consists of 2-mile wide channels for inbound and outbound tanker traffic, as well as a 2-mile wide buffer zone. Closure of the Strait of Hormuz would require use of longer alternate routes (if available) at increased transportation costs. Such routes include the�4.8-million-bbl/d-capacity East-West Pipeline across Saudi Arabia to the port of Yanbu, and the Abqaiq-Yanbu natural gas liquids line across Saudi Arabia to the Red Sea. The�13 million bbl/d or so of oil which transit the Strait of Hormuz goes all over the world, eastwards to Asia (especially Japan, China, and India) and westwards (via the Suez Canal, the Sumed pipeline, or around the Cape of Good Hope in South Africa) to Western Europe and the United States. Another route for Saudi oil exports which reportedly has been under consideration is through Yemen to the Gulf of Aden.

Bab al-Mandab
Oil heading westwards by tanker from the Persian Gulf towards the Suez Canal or Sumed pipeline must pass through the Bab al-Mandab. Located between Djibouti and Eritrea in Africa, and Yemen on the Arabian Peninsula, the Bab al-Mandab connects the Red Sea with the Gulf of Aden and the Arabian Sea. Any closure of the Bab al-Mandab could keep tankers from reaching the Suez Canal/Sumed Pipeline complex, diverting them around the southern tip of Africa. This would add greatly to transit time and cost, and effectively tie up spare tanker capacity. In December 1995, Yemen fought a brief battle with Eritrea over Greater Hanish Island, located just north of the Bab al-Mandab. The Bab al-Mandab could be bypassed by utilizing the East-West oil pipeline. However, southbound oil traffic, which totaled about 1 million bbl/d in 1997, would still be blocked. In addition, closure of the Bab al-Mandab would effectively block non-oil shipping from using the Suez Canal, except for limited trade within the Red Sea region.

Suez/Sumed Complex
After passing through the Bab al-Mandab, oil en route from the Persian Gulf must pass either through the Suez Canal or the Sumed Pipeline complex in Egypt. Both of these routes connect the Red Sea and Gulf of Suez with the Mediterranean Sea. Around 3 million bbl/d of Persian Gulf oil exports transit the Suez Canal/Sumed complex, destined mainly for Europe and the United States. Any closure of the Suez Canal and/or Sumed Pipeline would divert tankers around the southern tip of Africa (the Cape of Good Hope), adding greatly to transit time and effectively tying up tanker capacity.

Other Export Routes
In 2001, around�3.4 million bbl/d (20%) of oil from the Persian Gulf was exported via routes besides the Strait of Hormuz. This oil was exported mainly: 1) via the Saudi East-West pipeline to the port of Yanbu on the Red Sea (about 2 million bbl/d); 2) via pipeline from Iraq's Kirkuk oil region to the Turkish port of Ceyhan (about 0.8 million bbl/d);�3) by pipeline via Syria (around 0.2 million bbl/d); 4) by various means (smuggling by truck and small boat, for instance) to a variety of destinations, including Kurdish areas of northern Iraq, Turkey, Jordan, Iran, India, and Pakistan; and 5) by truck to Jordan.

OECD Oil Imports from the Persian Gulf
U.S. gross oil imports from the Persian Gulf�increased during 2001, to around 2.7 million bbl/d (of which 2.6 million bbl/d�was crude), from 2.5 million bbl/d (of which 2.4 million bbl/d�was crude) in 2000. The vast majority of Persian Gulf oil imported by the United States came from Saudi Arabia (63%), with significant amounts also coming from Iraq (25%) and Kuwait (11%), and small amounts from Qatar and the United Arab Emirates. Iraqi oil exports to the United States�increased by about 160,000 bbl/d in�2001 compared to 2000, to�around 780,000 bbl/d, while Saudi exports increased by about 80,000 bbl/d, to 1.66 million bbl/d. In�2001, the United States imported more oil on a daily basis from the Persian Gulf than in any previous year.� The Persian Gulf accounted for about 25% of U.S. net oil imports, and 14% of U.S. oil demand, in 2001.

Western Europe (defined as European countries belonging to the Organization for Economic Cooperation and Development -- OECD)�averaged�2.8 million bbl/d of net oil imports from the Persian Gulf during the first�9 months of 2001. This represented a decrease of about 0.3 million bbl/d from the same period in 2000. The largest share of Persian Gulf oil exports to Western Europe came from Saudi Arabia (47%), with significant amounts also coming from Iran (27%), Iraq (15%), and Kuwait (8%).

Japan�averaged 4.1 million bbl/d�of net oil imports from the Persian Gulf during the first�9 months of 2001. Japan's oil imports from the Persian Gulf as a percentage of demand�were up slightly compared to 2000, at about 76%. Japan's dependence on the Persian Gulf for its oil supplies has increased sharply since the 58% figure of 1986. During the first�9 months of 2001, around 31% of Japan's imports from the Persian Gulf came from�Saudi Arabia, about 30% from�the United Arab Emirates, 14% from Iran, 13% from Kuwait, 12% from Qatar, and 1% from Bahrain.

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*January-September 2001

Links to other U.S. government sites:
2001 CIA World Factbook
U.S. Department of Energy's Office of Fossil Energy's International section (Near East and South Asia)
U.S. State Department Bureau of Near Eastern Affairs

The following links are provided solely as a service to our customers, and therefore should not be construed as advocating or reflecting any position of the Energy Information Administration (EIA) or the United States Government. In addition, EIA does not guarantee the content or accuracy of any information presented in linked sites.

Columbia University Gulf/2000 project
Columbia University Gulf/2000 project: Persian Gulf map
Planet Arabia.com
Middle East News Online -- Persian Gulf
Gulf Wire
Persiangulf.com
Persian Gulf News

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File last modified: March 13, 2002

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