The world is transitioning away from its centuries-long dependence on fossil fuels. And for oil producers in the Middle East and North Africa (Mena), the global energy transition is a fundamental change in their business model. Their customers are changing, so too must they.
In response, the region’s leading national oil companies (NOCs) are rolling out new policies and investments to keep them at the forefront of the global energy sector. The policy focus is on diversifying investments into new technologies and fuels, on conserving hydrocarbons reserves, and on reducing greenhouse gas (GHG) emissions through clean tech and reduced consumption.
At the same time, the region’s oil companies are turning from their traditional customers in the west towards new markets in China, India and Southeast Asia. This is bringing new clients, suppliers, and financiers to the region’s oil and gas sector.
But even with such seismic changes underway, the region’s oil and gas producers know that hydrocarbons will be the world’s biggest source of energy for decades to come, even after oil demand growth starts to slow. They also know that their low production costs give them a huge advantage. As a result, they are investing heavily to expand their upstream and downstream production capacity.
Oil and gas project investment
Since 2010, about $414bn of oil, gas and petrochemicals project contracts have been awarded in the Mena region, and average of more than $38.4bn of awards every year. And while award levels slowed sharply in 2020 due to the Covid-19 pandemic, there has been a resurgence in spending in 2021.
Some $29.5bn of oil, gas and petrochemicals project contracts were awarded in the region in the first seven months of 2021, an increase of 24 per cent on the value of awards in the whole of 2020.
About $126.6bn of upstream projects are under execution in Mena, and the region is expected to maintain a steady flow of capital expenditure towards upstream oil and gas schemes.
Meanwhile, the $75bn of downstream projects under execution and $60.3bn planned is set to add some 2 million b/d of refining capacity by 2022. Seven major refinery schemes worth more than $40bn in total that are currently in the front-end engineering and design (feed) phase.
The projects pipeline is vast. Some $471.7.5bn of oil, gas and petrochemicals projects are planned across the Mena region. These offer abundant future opportunities for contractors, consultants and suppliers working in the oil, gas and petrochemicals sector in the region.
Financing is a challenge however. The impact of Covid-19 and lower oil revenues is squeezing regional budgets and the NOC’s are looking to new ways of raising capital through share sales, bonds, and by selling stakes in assets
There is also considerable change taking place in the way work is being procured and delivered in the region. The drive to increase the value of local content in projects requires companies to procure people, goods and services from local sources where possible, while the need to increase energy efficiency and reduce carbon dioxide emissions is becoming an important aspect of projects.
Mena Oil and Gas Market 2022 is the latest premium intelligence report from MEED Insight. It provides a comprehensive snapshot of the regional oil and gas projects market at the start of 2020 and examines the outlook for policy and investment in oil, gas and petrochemicals projects across the Mena region.