Middle East Oil & Gas Review

OPEC+ left its oil production policy unchanged, for now, while producers lagging in compliance with the ongoing output cuts pledged to improve their conformity rates and compensate for previous overproduction.

Saudi oil giant Aramco reported lower second-quarter profits as it continues to restrict production, while it raised $6 billion from a new bond issuance, weeks after a secondary share sale raised more than $12 billion for the Kingdom of Saudi Arabia.

Aramco, as well as the other major national oil companies from the Middle East, have signed several major agreements to develop oil, natural gas, and low-carbon energy projects.  

OPEC+ Leaves Oil Production Policy Unchanged

The Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel monitoring oil market developments and compliance with the cuts, met on 1 August for a regular meeting to assess conformity and the situation on the oil market.

JMMC reviewed the crude oil production data for the months of May and June 2024 and noted the high overall conformity for participating OPEC and non-OPEC countries of the Declaration of Cooperation (DoC), OPEC said.

At the end of July, the OPEC Secretariat said that it had received compensation plans from Iraq, Kazakhstan, and Russia for their overproduced volumes for January to June 2024.

The cumulative overproduction in these six months was about 1.184 million barrels per day (bpd) for Iraq, 620,000 bpd for Kazakhstan, and 480,000 bpd for Russia, OPEC said.

At the JMMC meeting in early August, the producers that had expressed intentions to begin easing the cuts in the fourth quarter “reiterated that the gradual phase-out of the voluntary reduction of oil production could be paused or reversed, depending on prevailing market conditions,” OPEC said.

JMMC did not recommend any changes to current policy, but noted that it retains the authority to convene additional meetings or to request an OPEC and non-OPEC Ministerial Meeting.

The next meeting of the JMMC is scheduled for 2 October 2024.

Russian Deputy Prime Minister Alexander Novak has said that there is no discord between Russia and OPEC+ over Moscow’s recent poor compliance with the group’s production cuts.

Russia’s Energy Ministry said at the end of July that the country remains fully committed to the OPEC+ agreement. Russia exceeded production volumes in June, but output has declined in each month since April, per estimates from independent sources approved by the agreement, the ministry said.

Saudi Aramco Earnings Drop on Lower Output

Saudi Aramco, the world’s largest oil company by both production and market capitalization, reported a net income of $29.1 billion for the second quarter of 2024, down by 3.4 percent compared to the same quarter last year, as Saudi Arabia is reducing its crude oil production as part of the OPEC+ deal and adding an additional voluntary cut of 1 million barrels per day (bpd).
 
Aramco, which aims to focus on maximizing shareholder returns, declared a base dividend of 76.1 billion Saudi riyals ($20.3 billion) and the fifth distribution of performance-linked dividends of 40.4 billion Saudi riyals ($10.8 billion). This brings the total declared dividends for the second quarter to 116.5 billion Saudi riyals ($31.1 billion).

The company said in its earnings release that it remains confident in its forecasts for medium- and long-term oil demand growth.

In addition, Aramco has progressed several natural gas developments to support its strategy of increasing gas production by more than 60 percent by 2030, compared to 2021, subject to domestic demand.

Design, procurement, and construction activities continued at the Jafurah Gas Plant, part of the Jafurah unconventional gas field development. Phase one is expected to commence production in 2025 and phase two is underway. Production from the Jafurah gas development is expected to reach a sustainable sales gas rate of 2.0 bscfd by 2030, in addition to significant volumes of ethane, NGL, and condensate.
 
Commenting on the second-quarter milestones for Aramco, president and CEO Amin Nasser said,

“We have also continued to create and deliver both value and growth, as demonstrated by the positive investor response to the Government’s secondary public offering of Aramco shares and our recent $6.0 billion bond issuance.”

Continued Nasser,

“Building on these strengths, we also made significant progress in key strategic areas during the second quarter — from advancing our gas program and expanding our new energies portfolio, to partnering with leading car manufacturers on lower-emission vehicle technologies and growing our global retail network.”

 Deals and Projects

Aramco has also recently signed definitive agreements to buy a 50-percent equity interest in the Jubail-based Blue Hydrogen Industrial Gases Company (BHIG), a wholly-owned subsidiary of Air Products Qudra (APQ). The transaction, which is subject to standard closing conditions, will also include options for Aramco to offtake hydrogen and nitrogen.

Aramco expects its investment in BHIG will contribute to the development of a lower-carbon hydrogen network in Saudi Arabia’s Eastern Province, serving both domestic and regional customers. Upon completion of the transaction, Aramco and APQ, a joint venture between Air Products and Qudra Energy, are expected to each own a 50-percent stake in BHIG.

Italy’s engineering group Saipem said it had been awarded two offshore projects in Saudi Arabia, under the existing Long-Term Agreement (LTA) with Saudi Aramco. The overall amount of the two projects is approximately $500 million.

Saipem’s scope of work under the first project involves the Engineering, Procurement, Construction and Installation (EPCI) of a crude trunkline of approximately 50 km for the Abu Safa Field, while the activities related to the second project involve the production maintenance programs of the Berri and Manifa fields.

ADNOC, the national oil company of the United Arab Emirates, signed in early August a long-term Heads of Agreement (LNG agreement) with Osaka Gas, one of the largest utility companies in Japan, for the delivery of up to 0.8 million metric tonnes per annum (mmtpa) of liquefied natural gas.

The LNG will primarily be sourced from ADNOC’s lower-carbon Ruwais LNG project, which is currently under development in Al Ruwais Industrial City, Abu Dhabi, and is expected to start commercial operations in 2028. Under the agreement, LNG cargoes will be shipped to the destination ports of Osaka Gas and its Singapore-based subsidiary, Osaka Gas Energy Supply and Trading Pte. Ltd. (OGEST).  

ADNOC has also deployed RoboWell, AIQ’s artificial intelligence (AI) autonomous well-control solution, in its operations at the offshore NASR field.

RoboWell uses cloud-based AI algorithms to autonomously operate wells that self-adjust according to changing conditions. This enhances the safe operation of the well, improves efficiency, reduces the need for travel and physical interventions, and so minimizes emissions, ADNOC says.
 
In another AI-enabled digital operation, the Abu Dhabi giant said that its offshore Satah Al Razboot (SARB) field had achieved a 25-percent increase in production capacity through the implementation of advanced digital technologies. The increase at SARB field, to a total of 140,000 bpd, supports ADNOC’s target to increase its production capacity to 5 million barrels of oil per day by 2027.  

“AI and digitalization are at the heart of ADNOC’s smart growth strategy to help responsibly meet the world’s growing energy demand,” said Abdulmunim Saif Al Kindy, ADNOC Upstream Executive Director.

Qatar’s state firm QatarEnergy is expanding operations outside the tiny Gulf nation by signing an agreement with Chevron to acquire a 20-percent working interest in a production sharing contract for block 5 offshore Suriname. Pursuant to the signed agreement, Chevron, as the operator, will retain a 40-percent interest, while Paradise Oil Company, an affiliate of Suriname’s national oil company “Staatsolie”, will own the remaining 40 percent.

“This agreement highlights our continued commitment to exploring the promising basins of Suriname and marks an exciting new partnership with Chevron in the international upstream sector,” said Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs and the President and CEO of QatarEnergy. 

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