The net wealth of Saudi Arabia, which controls more than a quarter of the world's extractable crude deposits, was put at $4.35trn, while that of Kuwait was estimated at $1.67trn.
The estimates were included in a working paper released by the International Monetary Fund (IMF) this week and based on an assumed oil price of $67, population growth, and a discount and extraction rate.
"The oil wealth term involves the present discounted value of future per capita oil production… the baseline estimate for the valuation of oil wealth for each country uses a five year average of future oil prices for Brent and West Texas oil," it said.
The IMF said the estimate used in the paper, prepared by its experts, is taken from the summer 2007 World Energy Outlook report, which estimated the five year average of future oil prices at $76.4 a barrel. It noted that the present discounted value of oil wealth is dependent on the assumption made about the discount rate and population growth as well as the oil price.
The report said the current real return on an inflation indexed bond in the United States is two per cent while the Office of Management and Budget estimates that private companies in the US use a seven per cent real discount rate when making judgments about the viability of investment projects.
"As a baseline estimate a real discount rate of four percent is used. Population growth estimates are taken from World Bank 20-year forecasts issued in its World Development Report," the study said. It citing World Bank forecasts as showing the that populations in the Middle Eastern countries are projected to grow the fastest at between 2.2 and 2.5 per cent, with Malaysian and Venezuelan populations projected to grow at 1.5 per cent and Russia's population is projected to decline slightly.
"Another assumption required to obtain the net present value of oil wealth is the extraction rate.
"To obtain the current extraction rate, average production estimates over the period of 2004-2006 were expressed in terms of the stock of oil reserves in 2006," the IMF experts said. "For our estimate of the net present value of oil wealth we assume an extraction rate of one percent per annum for the UAE, Venezuela, Kuwait, and Saudi Arabia, which implies that the oil reserves are fully extracted within 100 years."
According to the study, the present value of future oil production is based on a four per cent real discount rate (r = 0.04), country-specific population growth estimates, oil prices at $67 per barrel, and extraction periods between 20 and 100 years. At $67 per barrel, oil wealth varies between $212bn for Malaysia to over $4300bn in Saudi Arabia.
The annual return (assumed at four per cent with corrections for population growth differences) is smallest in terms of output for Malaysia at 2 .5 per cent of GDP and rises to almost 20 per cent of GDP for Kuwait, the study added.
Citing other estimates, the study put the proven oil reserves at around 97.8 billion barrels in the UAE, 264.25bn in Saudi Arabia, 101.5bn in Kuwait, 90.01bn in Venezuela, 79.54bn in Russia and 4.20bn in Malaysia.
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