Middle East national oil companies continue to spend heavily on oil and gas capacity enhancement projects in their quest to retain global market share, with billions of dollars worth of greenfield investments in the pipeline.
Abu Dhabi National Oil Company (Adnoc), Saudi Aramco, Kuwait Petroleum Corporation and QatarEnergy are leading the pack with their capacity expansion programmes and have earmarked ambitious capital expenditure plans in the coming years.
Robin Mills, chief executive of Dubai-based consultancy Qamar Energy, told Upstream that there is “likely to be a growing demand for Middle East oil and gas” at least over the next two decades, as production from other global producers is expected to decline in an otherwise shrinking crude market.
While some leading European energy companies have indicated that their oil production might have already peaked in the push for energy transition, hydrocarbon production in the Middle East is expected to continue growing at least until the end of this decade.
Core assets
Global energy consultancy Wood Mackenzie believes that while Middle East nations are pursuing diversification strategies, the region's national players will continue to focus on their core oil and gas assets.
Ian Thom, research director with Wood Mackenzie, said that strong oil prices are likely to lead to higher upstream investments in the region.
With a rebound in oil and gas investments in the United Arab Emirates, Qatar and Saudi Arabia, "higher oil prices make budgeting for and approving new investment projects much easier”, he said.
Thom added that while a robust oil price is a huge boost for oil and gas investments, some of the key Middle East producers remain highly competitive in almost all demand scenarios.
Rystad Energy also noted that a crude price of around $80 per barrel "momentarily sends a positive message across the industry”.
However, national oil companies are committed to sustained investments in the industry, owing to a longer-term outlook.
"Oil and gas investments in the Middle East region stand out globally, with the project pipeline from 2021-2023 likely to be worth about $102 billion," said Rystad Energy Middle East upstream analysis vice president Aditya Saraswat, adding that the investments target the development of around 35 billion barrels of oil equivalent.
“These are primarily oil and gas expansion projects from Qatar, the UAE and Saudi Arabia in line with their national objectives,” he said.
Adnoc has set out plans for $122 billion of capital expenditure between 2021 and 2025 aimed at expanding its oil production capacity to 5 million barrels per day by 2030, up from the current 4 million bpd.
It also plans to expand its gas production capacity on the back of its Hail & Ghasha, Shah Gas and Dalma sour gas projects.
Saudi Aramco has earmarked a capex of $35 billion this year on the back of higher profits and improved market fundamentals.
A majority of Aramco’s investments are likely to be diverted to its offshore incremental programmes, which are crucial to its plans to expand Saudi Arabia’s oil production capacity to 13 million barrels per day from the existing 12 million bpd.
Kuwait Oil Company (KOC) aims to boost its crude production capacity to 4 million bpd by 2040, up from the current level of almost 2.43 million bpd.
Ambitious
The Kuwaiti state player is expected to spend billions of dollars on expansion projects over the next five years, but sceptics have termed the nation’s plan as “ambitious” and one which poses “numerous downside risks, including Opec+ production curtailments and the uncertain oil price environment”.
Iraq and Iran also plan to increase production steeply in the coming years, competing with other key Opec producers such as Saudi Arabia, the UAE and Kuwait.
Russia's Lukoil, which has significant exposure to the Iraqi market, said it is scaling up its production in the country.
Lukoil Middle East's managing director Egor Zubarev told Upstream that the West Qurna 2 oilfield in Iraq produces up to 400,000 bpd, depending on restrictions imposed by Iraqi partners as part of the Opec+ deal.
However, he added that work is progressing “to reach the target production of 480,000 bpd” at West Qurna 2 in line with the field’s final development plan.
Lukoil said it has invested more than $10 billion in capital and operating expenditures in the West Qurna 2 oilfield development.
“Lukoil plans to make future investments to maintain the current level of production from the Mishrif formation, as well as to commence a full-field development of the Yamama formation,” Zubarev noted.
Lukoil also said it is awaiting approval from the Iraqi Ministry of Oil to proceed with development of the Block 10 Eridu oilfield project in Dhi Qar province.
QatarEnergy, recently rebranded from Qatar Petroleum in line with the company's increased focus on energy transition, has lined up massive liquefied natural gas expansion plans, as it aims to decisively wrest global dominance of liquefaction capacity back from current leader Australia.
Qatar presently has a nameplate liquefaction capacity of 77 million tonnes per annum and its ongoing expansion schemes at the North Field are likely to catapult its LNG capacity to 126 million tpa by 2027.
