MENA — The largest oil & gas holding region in the world
Energy is considered the most critical ingredient for the development of any economy. For decades, the MENA region has played a significant role in the global energy ecosystem and supported industrialisation and economic growth in several countries around the world. The Middle Eastern and North African (MENA) region holds about 57% of the world’s proven oil reserves and about 41% of the natural gas resources. The geological framework of the region favours the generation and accumulation of large oil and gas reserves.
The region is home to some of the world’s largest conventional onshore and offshore oil and gas fields. The most prominent fields in the region include Ghawar and the Safaniya oil fields in Saudi Arabia, the Burgan oil field in Kuwait, the Rumaila oil fields in Iraq, and the South Pars/North Dome gas field, co-owned by Iran and Qatar. The North African oil and gas landscape revolves primarily around three producer countries: Algeria, Libya, and Egypt.
All conventional basins across the world also contain large volumes of shale. It is estimated that the MENA region has 2547ft of shale gas reserves. Some Middle Eastern countries such as Saudi Arabia, UAE, Bahrain, and Oman are developing shale oil and gas fields in the region, such as Khazzan, South Ghawar, Jafurah, and Rub’ Al Khali.
The Oil & Gas Sector in the region is highly regulated and controlled through the national oil companies (NOCs)
The energy and resources sector is the cornerstone of economic growth and development for Middle Eastern and North African countries. Since oil- and gas-related activities are the primary source of revenue for the government, it is a strictly regulated sector. National oil companies (NOCs) are responsible for developing the oil & gas sector in their respective countries. A few of the prominent NOCs within the region are Saudi Aramco, National Iranian Oil Company, Iraq National Oil Company, Kuwait Petroleum Corp., Qatar Energy, Sonatrach Algeria, OQ Oman, National Oil Company Libya, and ADNOC.
Figure 2: Prominent NOCs in the region.
NOCs enter strategic partnerships with international oil companies (IOCs) such as BP, Chevron, Shell, Exxon Mobil, etc., to develop oil and gas fields within the region. While IOCs get access to the country’s oil and gas reserves, NOCs benefit from IOC’s technological prowess and financial capabilities.
Another important stakeholder in the value chain is the oil field service (OFS) providers. These companies provide necessary products and services to explore and develop wells and further production of oil & gas from those wells. Notable international OFS companies in the region are Schlumberger, Baker Hughes, Halliburton, Weatherford, etc. When doing business with the Middle East NOCs, suppliers and service providers need to demonstrate compliance with the in-country value addition requirements that have been introduced by Aramco (IKTVA), ADNOC (ICV), and Oman’s Ministry of Oil and Gas (ICV), with Kuwait and other producer nations likely to follow suit.
Figure 3: Revenue (US$ billion) of the MENA NOCs. Source: Annual reports of the respective companies.
The MENA region has been the backbone of the world’s energy ecosystem for decades
Oil and gas producers in the Middle East and North Africa have been the backbone of the global energy system. Historically, the region has contributed to about 37% of the world’s total oil supply and approximately 35% of the world’s total gas supply.
Current crude oil production in the MENA region stands at approximately 30.4 million bpd, amounting to about 31% of the total oil produced in the world. Natural gas production is about 925 billion m3, roughly 23% of the total gas produced globally.
Currently, the region accounts for approximately 50% of oil exports and 15% of natural gas exports worldwide. Major oil producers within the region include Saudi Arabia, Iraq, UAE, Kuwait, and Iran. The gas production in the MENA region is dominated by Iran, Qatar, Saudi Arabia, Algeria, Egypt, and UAE.
Figure 4: Oil production of key producer countries in MENA, 2021, million bpd. Source: International - US Energy Information Administration (EIA).
Figure 5: Natural gas production of key producer countries in MENA, 2021, billion ft3. Source: EIA.
Strong outlook for the upstream sector in the MENA region—NOCs are investing in production capacity expansion
MENA’s five-year (2022 – 2026) energy investment portfolio comprises a total investment of US$879 billion, which is a 9% increase over the investment projection for 2021 – 2025. Of all the projects in the pipeline for implementation, about 30% are in the execution phase, while the remaining 70% are in the planning stage. The increase in project expenditure is spearheaded by the GCC, with committed projects making up more than 45% of the Gulf States’ total energy investments.
National oil companies in the region have committed investments in the upstream sector to increase the country’s oil and natural gas production in the coming years:
- Saudi Aramco targets to increase its sustainable production capacity to 12.3 million bpd by 2025, thereby bringing additional output to meet global energy requirements. The plan is to further raise the production capacity to 12.7 million bpd by 2026 before reaching 13 million bpd by 2027.
- The kingdom plans phase-wise expansion of the nation’s production capacity - The Dammam field is forecasted to yield an additional 75 000 bpd by 2024, and the offshore Marjan and Berri fields are set to provide another 300 000 bpd and 250 000 bpd, respectively by 2025. The Zuluf field expansion is projected to add 600 000 bpd by 2026 and the Safaniyah development is set to increase production by 700 000 bpd by late 2027.
- The ADNOC board recently endorsed plans to bring forward the company's 5 million bpd oil production capacity expansion to 2027 from a previous target of 2030 to meet rising global energy demand.
- The ADNOC board has approved a five-year business plan and a capital expenditure of 550 billion dirhams (US$150 billion) to enable the firm’s growth strategy for the period 2023 – 2027. Further, ADNOC will introduce low-carbon solutions and an international division centred on new energies, gas, LNG, and chemicals.
- Qatar Energy has planned expansion of the North Field to ramp up its liquefaction capacity from 77 million tpy to 126 million tpy by 2027. The project will boost Qatar’s position as the world's top LNG exporter and help guarantee long-term supplies of gas to Europe as the continent seeks alternatives to Russian flows.
The Middle East oil & gas sector landscape has always been the focal point of global energy dynamics. The sector has recently gone through significant challenges and changes, and, as a result, future investment commitments in the region have become more diverse, with a focus on LNG, more complex offshore projects, renewables, and decarbonisation. The trend aligns with the energy transition plan for most global economies.
An increasing focus on energy security and low-carbon investment may pose a threat to the growth of the region’s upstream sector
The ongoing Russia-Ukraine tension has deeply impacted the European energy supply market. The European Commission announced plans to make the continent independent of Russian fossil fuels through the widespread adoption of renewable energy and diversification of natural gas supplies. Frost & Sullivan identified five trends that will shape the global energy landscape in the coming years:
- Energy security will be the foremost priority for most nations.
- Renewables adoption will no longer be by choice but out of necessity.
- Fossil fuel prices are to become a key geo-political lever for the energy-supplying nations.
- Coal and oil will be reduced to regional fuels.
- Demand for natural gas, a transitioning fuel, will depend on its affordability.
Fossil fuel importers are always vulnerable to supply disruption and price volatility; therefore, tapping into a country’s indigenous resources for energy needs will gain priority in the coming decades. As countries reduce dependence on energy imports, the upstream sector, which is dominated by the MENA region, may be affected as supply may outstrip demand. Further, a demand reduction would create a stagnant low-price environment in the oil market that will impact the upstream operator and the producing nations.
Figure 6: Average annual renewable capacity additions (GW), 2021 – 2026. Source: International Energy Agency (IEA).
The global energy industry is going through a huge transformation, and the future of the MENA oil & gas sector is one to watch. It will be interesting to see how the regional NOCs navigate these interesting and challenging times and usher in a low-carbon environment.
Written by Rudranil Roy Sharma, Director, Energy & Environment Practice, Frost & Sullivan
Read the article online at: https://www.oilfieldtechnology.com/digital-oilfield/21122022/the-latest-developments-in-the-mena-region/
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