In this week’s Oilgram News column Petrodollars, Tamsin Carlisle looks at the shift in Middle East investment spending to a broader base than just having the dollars showered on Saudi Arabia.
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Saudi Arabia and the UAE have emerged as by far the dominant markets for projects in the Middle East and North Africa region over the past few years, with both also showing a large lead in oil investment.
If petrochemicals projects are included, the petroleum sector investment lead established by Saudi Arabia since 2007 increased further, recent analysis by Middle East-focused publishing and information company MEED has shown.
In a July seminar, however, MEED Editorial Director Richard Thompson forecast a significant shift in regional spending patterns, with Saudi upstream oil spending expected to fall, while big increases are forecast in Kuwait, Iraq and possibly Iran.
In the period from 2012 to 2017, MEED sees total Saudi spending on upstream and downstream oil products reaching barely $15 billion, compared with about $40 billion for the UAE. Chronologically, that compares with $40 billion of Saudi investment in the six-year period from 2007 to 2012 and about $35 billion for the UAE.
In both Kuwait and Iraq, oil investment in 2012-2017 is seen surging to between $80 billion and $90 billion from less than $10 billion for Kuwait in 2007-2012 and about $20 billion for Iraq.
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Iranian oil project spending could potentially increase to $30 billion in 2012-2017, modestly up from about $25 billion in 2007-2012, depending on the future course of the country’s international relations and sanctions over Tehran’s nuclear program. However, Iran’s spending on development of its huge gas reserves could surge to as much as $120 billion in the 2012-2017 period from about $90 billion in 2007-2012.
Gas project spending in Saudi Arabia and the UAE, which until now has played second fiddle to oil development, is also likely to increase to meet growing domestic gas demand, although not by as much as in some other regional oil producers, notably Iran, Iraq and Oman.
The managing director of Abu Dhabi National Oil Company’s gas directorate, Mohammed al-Suwaidi, told reporters in Abu Dhabi Tuesday that ADNOC had earmarked $25 billion for gas out of a total $40 billion of planned total spending on oil, gas and petrochemicals projects over its five-year planning period from 2011 to 2015.
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MEED sees Iraq’s gas project investment totaling roughly $150 billion in 2012-2017, growing from almost zero in 2007-2012. A similar future gas spending level is seen for Oman, up from about $5 billion in the earlier period. The projected increases reflect Iraq’s huge need for concerted development of its gas and power sectors to meet long neglected domestic needs, while Oman, which also has fast-growing domestic gas demand, simply has more remaining untapped gas than oil potential.
By contrast, 2012-2017 gas project spending in Qatar and Kuwait is seen contracting in each country to $2 billion or less from roughly $10 billion for Qatar and $8 billion for Kuwait in 2007-2012. Qatar, the LNG export leader, has been switching its petroleum sector development priorities from gas to petrochemicals, while Kuwait faces huge technical and political challenges to developing its very deep, sour reserves of non-associated gas.
MEED projects that the Saudi project market will exceed $450 billion in 2012-2017, up from about $310 billion in 2007-2012. The UAE’s market, by contrast, is expected to shrink to $180 million from $220 billion while Kuwait’s market expands to rival that of the UAE from barely more than $50 billion in the 2007-2012 period.
Key oil and gas projects in Saudi Arabia’s pipeline include the Jizan Refinery, currently under construction, the Ras Tanura Refinery, which has been tendered for bidding, and the recently awarded Midyan gas field development.
The UAE is developing its Shah gas field and is proceeding towards development of a second technically challenging gas field, Bab. Both are ultra-sour gas deposits containing high concentrations of hydrogen sulfide. At the same time, ADNOC continues efforts to increase output capacity to 3.5 million b/d by 2017 from about 2.9 million b/d currently.
Subject to a resolution of political difficulties that have previously slowed decision-making on energy spending, Kuwait is seeking to make headway with its oil and gas master plan, with targets that include production capacity of 4 million b/d by 2020 from about 3 million b/d currently.
But, in a separate report released Wednesday, MEED said the UAE was well placed to hold onto its current ranking as the Persian Gulf region’s second largest project market in coming years.
MEED said the main drivers of the region’s projects market were high oil prices, demographic growth, economic diversification, the desire to create jobs, and the political necessity of investing in social infrastructure following regional Arab Spring uprisings.
–Tamsin Carlisle in Dubai
The post Petrodollars: Investment wealth is being spread around among Middle East oil producers appeared first on The Barrel Blog.