Middle East Oil & Gas

By Tsvetana Paraskova

Despite the heightened tension in the Middle East in recent months, oil and gas producing countries in the region—many of which are OPEC members—go ahead with their plans to boost oil and gas production, strike alliances with foreign firms to lock in future demand for their oil and gas, and award contracts to foreign service contractors for expansion of the massive onshore and offshore oil and gas fields.

Greenfield investments in the Middle East are expected to surge this year to meet gas demand, Rystad Energy said at the beginning of 2019. Projects involving more than US$240 billion in greenfield investments are expected to be sanctioned in the world in 2019, with nearly 25 percent of those expected coming from the Middle East, Rystad Energy forecasts. Qatar, the United Arab Emirates (UAE), and Saudi Arabia are set to drive investment growth.

“The industry in the Middle East is aiming to ramp up gas production in order to meet rising regional demand, while also increasing oil output,” said Aditya Saraswat, senior analyst at Rystad Energy.

Of the counties expected to lead growth, Qatar’s major project to boost its LNG capacity to 110 million tonnes per year by 2024 is expected to require over US$35 billion in greenfield investments, making it one of the biggest projects to be approved in the region over the last decade, Rystad said.

The UAE is prioritising offshore gas projects to increase gas availability for domestic consumption and reduce its dependence on imported gas and LNG, looking to add 1.6 billion barrels of oil equivalent of resources. Rystad Energy expects these plans will need some US$14.5 billion in greenfield investments.

Saudi Arabia plans to develop around 9.8 billion boe of additional resources by investing just over US$24.5 billion in greenfield projects at the Marjan, Berri, and Zuluf oilfields.

In early July 2019, Saudi Arabia’s state oil firm Saudi Aramco awarded 34 contracts worth a total of US$18 billion for the engineering, procurement, and construction of the Marjan and Berri increment programmes.

The Marjan increment programme is an integrated development project for oil, associated gas, non-associated gas, and cap gas from the Marjan offshore field, worth a total of US$12 billion. The development aims to boost the Marjan Field production by 300,000 barrels of oil per day (bpd)of Arabian Medium Crude Oil, process 2.5 BSCFD of gas, and produce an additional 360 MBCD of C2+NGL. The development will entail a new offshore gas-oil separation plant, as well as 24 offshore oil, gas, and water injection platforms.

The Berri increment programme, for its part, is worth around US$6 billion and is aimed at raising the offshore field’s production by 250,000 barrels of Arabian Light Crude per day. Once completed, the planned facilities will include a new gas-oil separation plant in Abu Ali Island to process 500,000 bpd of Arabian Light Crude Oil, and additional gas processing facilities at the Khursaniyah gas plant to process 40,000 barrels of associated hydrocarbon condensate. The expansion project includes a new water injection facility, two drilling islands, 11 oil and water offshore platforms, and nine onshore oil production and water supply drill sites.

After the Marjan and Berri project commitments, the global offshore sanctioning tally for 2019 exceeded US$50 billion, while the Marjan expansion project alone was the largest field to be sanctioned globally since 2014, Rystad Energy said in July.

The United Arab Emirates (UAE), which hosts the Abu Dhabi International Exhibition & Conference (ADIPEC) on 11-14 November, is opening more oil and gas blocks to international bidding and is expanding natural gas production fields.

At the beginning of 2019, the Abu Dhabi National Oil Company (ADNOC) awarded work for the dredging, land reclamation, and marine construction to build multiple artificial islands in the first phase of development of the Ghasha Concession. The Ghasha Concession consists of the Hail, Ghasha, Dalma, Nasr and Mubarraz offshore sour gas fields. The project is expected to take 38 months to complete and will provide the infrastructure required to further develop, drill, and produce gas from the sour gas fields in the Ghasha Concession.

Commenting on the initial work on the projects, UAE Minister of State and ADNOC Group CEO, Dr. Sultan Ahmed Al Jaber, said:

“This award accelerates the development of the Hail, Ghasha and Dalma sour gas offshore mega-project, which is an integral part of ADNOC’s 2030 smart growth strategy. As one of the world’s largest sour gas projects it will make a significant contribution to the UAE’s objective to become gas self-sufficient and transition to a potential net gas exporter.”

Abu Dhabi also launched this year its second competitive block bid round, following the first-ever competitive block bid round that began on April 2018 and concluded successfully in March 2019. Abu Dhabi is offering five blocks up for commercial bidding in the second round, including three offshore and two onshore blocks.

“Some of the blocks already have discoveries, and within the combined area there are 290 targeted reservoirs from 92 prospects and leads. In addition to the country’s conventional potential, one of the offered blocks is expected to contain significant unconventional resources,” says ADNOC, which has set the end of November 2019 as the deadline for receiving bids.

ADNOC also welcomed minority foreign shareholders in its oil pipeline infrastructure earlier this year and invested in oil storage capacity outside the UAE to gain access to storage capabilities across some of its key export markets.

In August, ADNOC announced a strategic investment in global storage terminal owner and operator VTTI BV, in which the Abu Dhabi company would buy a 10-percent stake.

“VTTI’s diverse portfolio of storage assets across key target markets such as Asia, Africa and Europe, provides us with direct access to our customers around the world, a key building block to accelerating ADNOC’s transformation into a more integrated and commercially-minded global energy player,” Al Jaber said.

In September, ADNOC closed the last leg of a deal that saw BlackRock, KKR, ADRPBF, and Singapore’s sovereign wealth fund GIC take a combined stake of 49 percent in select ADNOC oil pipeline infrastructure for US$4.9 billion. ADNOC retains the remaining 51 per cent.

In the new entity ADNOC Oil Pipelines and keeps sovereignty over the pipelines and management of pipeline operations.

Qatar, the world’s top LNG exporter, aims to boost its LNG production capacity by 43 percent—from 77 million tonnes annually now to 110 million tonnes a year in 2024.

Qatar is also building the largest carbon dioxide (CO2) recovery and sequestration facility in the Middle East and North Africa (MENA) region, Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs and CEO of Qatar Petroleum, said at the 40th Oil & Money Conference in London in early October.

“We need to reach the right balance of reliable and secure sources of energy, which maintains our growth needs while at the same time alleviates our environmental concerns,” Al-Kaabi said, outlining the benefits of LNG as “the destination fuel” of the energy transition.

“It is versatile. It is flexible. It is economic. It is clean,” the Qatari minister said.

Qatar is looking to work with a growing number of LNG buyers as it bolsters its LNG export markets. At the same time, Qatar Petroleum leads a new wave of investment from national oil companies (NOCs) in international exploration, Westwood research showed in August.

Apart from Qatar Petroleum, the largest oil-producing companies in the Middle East—Saudi Aramco, ADNOC, and Kuwait Petroleum—will become even bigger, with plans to grow in natural gas, refining and petrochemicals, and at the same time sustaining their core oil production at home, Wood Mackenzie said in a report on October 2019.

“Domestic development remains central but international expansion is firmly on the agenda, especially for Saudi Aramco,” WoodMac said, estimating that the NOCs would require a total of US$1.2 trillion of investment over the next 20 years to achieve their ambitions.

“The combination of big ambitions and advantaged portfolios means we expect the Middle East NOCs to become increasingly competitive global energy players,” Wood Mackenzie reckons.