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Middle East Oil & Gas Review January 2023

Middle East Oil & Gas Review January 2023


Saudi Arabia reduced in early January the price of its crude oil going to Asia and Europe in February, expecting still weak demand, but signs started to emerge later in January that oil consumption in China could be set to rebound in the coming months, OPEC and the Saudi state oil giant Aramco said.

In addition, OPEC left its 2023 global oil demand forecast unchanged, but noted that now it expects better performance in China’s economy after its reopening from COVID-19 restrictions and slightly better economic performance in the Eurozone and the United States.  

OPEC More Upbeat on Global Economy and Oil Demand

OPEC sounded a more upbeat tone on the prospects of the global economy and oil demand growth this year, following better-than-expected data for the fourth quarter of 2022. The forecasts in OPEC’s Monthly Oil Market Report (MOMR) published in the middle of January were for slightly higher economic growth in major economies. The forecast for global oil demand growth in 2023 was left unchanged from the previous month’s assessment at 2.2 million barrels per day (bpd), with the OECD increasing by 300,000 bpd and non-OECD growth at 1.9 million bpd. Minor upward adjustments were made due to the expected better performance in China’s economy on the back of its reopening from the ‘zero COVID’ policy, OPEC said.

“The global momentum in 4Q22 appears stronger than previously expected, potentially providing a sound base for the year 2023, especially in the OECD economies. The 2022 growth in both Euro-zone and US has surpassed previous forecasts,” the organization noted.

China’s latest efforts to reopen the economy and support the property sector have improved the prospects for a rebound in 2023 economic growth after the end of the ‘zero COVID’ policy, while India is likely to weather the current global economic issues relatively well in 2023, following strong growth in 2022, according to OPEC.    

Moreover, additional impetus to the economy could come from the US Fed managing a soft landing for the American economy, the cartel said.

“Upside potential may come from the US Federal Reserve successfully managing a soft landing in the US. This is the most likely outcome, given the expected slowdown in inflation and the sufficient underlying demand dynamic. An even stronger-than-anticipated rebound in China is another possibility as well.”

Oil demand in China, the world’s top crude oil importer and a major customer of OPEC’s Middle Eastern heavyweights, “is on course to rebound” after the easing of the COVID restrictions, with the country’s GDP projected to grow by 4.8 percent in 2023.

“In addition, China’s plans to expand fiscal spending to aid the economic recovery is likely to support oil demand in manufacturing, construction and mobility,” OPEC said.

“The manufacturing sector is expected to start recovering relatively quickly, and the aviation sector is expected to see significant increases in both local and international travel given pent-up demand. Furthermore, the performance of the resilient petrochemical sector is also projected to improve further.”

Manufacturing and construction activity are set to accelerate in the second quarter of the year, and requirements for the petrochemical industry are also expected to expand. This would boost demand and output for middle and light distillate products. Accordingly, China’s oil demand is projected to accelerate further to reach year-on-year growth of 800,000 bpd, said OPEC.

Chinese Reopening Could Be Major Boost To Oil Demand

OPEC Secretary General Haitham Al-Ghais also expressed cautious optimism about an economic and oil demand recovery in an interview with Bloomberg in mid-January.

“We are optimistic, but we are cautiously optimistic,” Al-Ghais said.  

“We’re seeing signs of green” as China is easing the Covid measures, OPEC’s Secretary General told Bloomberg.

Saudi Aramco, the Saudi state oil giant and the biggest oil firm and exporter in the world, also expects the Chinese reopening to result in a rebound in global oil demand in 2023, Aramco’s chief executive Amin Nasser told Bloomberg on the sidelines of the World Economic Forum in Davos.

“We are very optimistic in terms of demand coming back to the market,” Nasser said, adding – referring to China – “Hopefully, in the next couple of months, we’ll see more of a pickup in the economy there.”

Deals & Investments

While the Middle Eastern firms prepare for a rebound in Chinese oil demand this year, they have also recently signed major deals for investments, including in low-carbon solutions.  

In the United Arab Emirates (UAE), Abu Dhabi National Oil Company (ADNOC) and Mubadala Investment Company announced at the end of December a transaction involving Austria-based energy and chemicals group OMV AG. Under the agreement, ADNOC will acquire a 24.9-percent shareholding in OMV from Mubadala. Financial details of the transaction were not disclosed.

ADNOC also allocated $15 billion to advance low-carbon projects across its diversified value chain by 2030. The projects will include investments in clean power, carbon capture and storage (CCS), further electrification of ADNOC’s operations, energy efficiency, and new measures to build on ADNOC’s policy of zero routine gas flaring. The announcement follows the guidance by ADNOC’s Board of Directors in November 2022 to accelerate delivery of its low-carbon growth strategy and the approval of its Net Zero by 2050 ambition.  

“Now, more than ever, the world needs a practical and responsible approach to the energy transition that is both pro-growth and pro-climate, and ADNOC is delivering tangible actions in support of both these goals,” said Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and ADNOC Managing Director and Group CEO.

ADNOC announced the setting-up of ADNOC Gas, effective 1 January 2023, its new world-scale gas processing, operations and marketing company. The company combines the operations, maintenance, and marketing of the ADNOC Gas Processing and ADNOC LNG businesses into one global consolidated business.  

ADNOC has also entered into a partnership with the Fujairah Natural Resources Corporation (FNRC), Abu Dhabi Future Energy Company (Masdar), and 44.01 to pilot technology that permanently mineralizes carbon dioxide (CO2) within rock formations found in the Emirate of Fujairah. The project, beginning in January 2023, will use 44.01’s Earthshot prize-winning Carbon Capture and Mineralization (CCM) technology to eliminate CO2 from the atmosphere. It will be the first CCM project by an energy company in the Middle East.  

Abu Dhabi Chemicals Derivatives Company RSC Ltd (TAZIZ) signed a shareholder agreement with Fertiglobe, GS Energy Corporation, and Mitsui & Co., Ltd., to develop an anticipated 1 million tonnes per annum low-carbon ammonia production facility at the TA’ZIZ Industrial Chemicals Zone. This is a further step in the project’s journey towards a final investment decision (FID).

Finally, ADNOC started in January work on the world’s first fully sequestered CO2 injection well in a carbonate saline aquifer. The project, expected to begin injecting CO2 in Q2 2023, marks another step in ADNOC’s commitment to decarbonize its operations, reduce its carbon intensity by 25 percent by 2030, and deliver on its Net Zero by 2050 ambition.

In Kuwait, Paris-listed Technip Energies has been awarded a large contract for Project Management Consultancy (PMC) by Kuwait Oil Company (KOC). A “large” award for Technip Energies is a contract award representing between €250 million and €500 million of revenue.  

The five-year framework agreement contract covers front-end engineering design (FEED), project management, and associated services for KOC’s major projects. This contract represents a renewal of the first five-year framework agreement that was awarded to Technip Energies by KOC in 2014.

Qatar’s state firm QatarEnergy announced in early January the Final Investment Decision (FID) with Chevron Phillips Chemical Company LLC (CPChem) to build the Ras Laffan Petrochemicals complex - a $6 billion integrated olefins and polyethylene facility at Ras Laffan Industrial City.  

The Ras Laffan Petrochemicals complex, expected to begin production in 2026, consists of an ethane cracker with a capacity of 2.1 million tons of ethylene per annum, making it the largest in the Middle East and one of the largest in the world.  

“This marks QatarEnergy’s largest investment ever in Qatar’s petrochemicals sector and the first direct investment in 12 years,” said Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs and President and CEO of QatarEnergy.      

Read the latest issue of the OGV Energy magazine HERE

Published: 14-02-2023

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