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Home CEOs HUB Robin Mills

Middle East keeping capacity in focus

Middle East region's investments in expanding oil and gas production likely to be worth about $102bn between 2021 and 2023

9 November 2021
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National oil corporations in the Middle East are continuing to invest substantially in oil and gas capacity improvement projects in order to maintain global market dominance, with billions of dollars in greenfield investments planned. With their capacity development programmes and aggressive capital investment plans for the next years, Abu Dhabi National Oil Company (Adnoc), Saudi Aramco, Kuwait Petroleum Corporation, and QatarEnergy are leading the charge.

According to Robin Mills, CEO of Dubai-based consultant Qamar Energy, there is “likely to be an increasing demand for Middle East oil and gas” over the next two decades, since output from other global suppliers is predicted to fall in an otherwise diminishing crude market. While several big European energy corporations have warned that their oil output may have peaked in the push for energy transition, hydrocarbon production in the Middle East is anticipated to rise at least through the end of this decade.

The most important assets
While Middle Eastern countries pursue diversification initiatives, Wood Mackenzie believes the region’s national players will continue to focus on their core oil and gas assets. According to Ian Thom, research director at Wood Mackenzie, rising oil prices are expected to lead to more upstream investment in the region. “Higher oil prices make budgeting for and approving new investment projects much simpler,” he added, citing a revival in oil and gas investments in the United Arab Emirates, Qatar, and Saudi Arabia.

Thom went on to say that, while a high oil price is great for oil and gas projects, some of the top Middle Eastern producers remain extremely competitive in virtually all demand scenarios. According to Rystad Energy, a crude price of approximately $80 per barrel “momentarily sends a favourable message across the business.” National oil corporations, on the other hand, are dedicated to long-term investments in the sector due to the longer-term prognosis. “Oil and gas investments in the Middle East region stand out globally, with the project pipeline from 2021-2023 likely to be worth around $102 billion,” said Aditya Saraswat, vice president of Rystad Energy Middle East upstream analysis, adding that the investments aim to develop around 35 billion barrels of oil equivalent. “These are mostly oil and gas growth projects from Qatar, the United Arab Emirates, and Saudi Arabia in accordance with their national interests,” he explained.

Adnoc has budgeted $122 billion in capital spending between 2021 and 2025 to increase its oil production capacity to 5 million barrels per day by 2030, up from 4 million bpd now. It also intends to increase its gas production capacity as a result of the Hail & Ghasha, Shah Gas, and Dalma sour gas projects. Saudi Aramco has budgeted $35 billion in capital expenditures for this year, owing to stronger profitability and improving market fundamentals. The vast bulk of Aramco’s investments are anticipated to be directed into its offshore incremental programmes, which are critical to Saudi Arabia’s goals to increase oil production capacity to 13 million barrels per day from the current 12 million bpd. Kuwait Oil Company (KOC) intends to increase its oil production capacity to 4 million barrels per day (bpd) by 2040, up from the present level of over 2.43 million bpd.

Ambitious
The Kuwaiti state actor is set to invest billions of dollars in growth projects over the next five years, but critics have labelled the country’s strategy “ambitious” and fraught with “many potential risks, including Opec+ production curtailments and an uncertain oil pricing environment.” Iraq and Iran also want to significantly boost output in the future years, competing with other big Opec producers like as Saudi Arabia, the United Arab Emirates, and Kuwait. Russia’s Lukoil, which has a strong presence in the Iraqi market, has announced plans to increase production in the nation.

According to Egor Zubarev, general director of Lukoil Middle East, the West Qurna 2 oilfield in Iraq produces up to 400,000 bpd, depending on constraints imposed by Iraqi partners as part of the Opec+ agreement. However, he said that work at West Qurna 2 is advancing “to meet the goal output of 480,000 bpd” in accordance with the field’s ultimate development plan. Lukoil stated that it had committed more over $10 billion in capital and operational expenses in the development of the West Qurna 2 oilfield. “Lukoil intends to make further investments to sustain present levels of output from the Mishrif formation, as well as to begin full-field development of the Yamama formation,” Zubarev said.

Lukoil also stated that it is waiting for authorisation from the Iraqi Ministry of Oil to move forward with the construction of the Block 10 Eridu oilfield project in Dhi Qar region. QatarEnergy, which was recently renamed from Qatar Petroleum to reflect the company’s greater focus on energy transition, has announced major liquefied natural gas development plans in order to reclaim world liquefaction capacity from current leader Australia. Qatar currently has a nameplate liquefaction capacity of 77 million tonnes per year, and continuing development plans at the North Field are expected to increase its LNG output to 126 million tpa by 2027.

 

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Source: UpStream
Via: UpStream
Tags: SDGs17SDGs8
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