The playbook for Middle East oil and gas today looks simple:
Step 1: Get money.
Step 2: Bolster production.
Accordingly, most countries in the region have launched large-scale projects to strengthen output from their established reserves and to add infrastructure, especially for exports.
“As the industry shifts towards decarbonization, there is a growing pressure to maximize production and accelerate the monetization of resources,” said Dalia Salem, senior research analyst, Middle East upstream for Wood Mackenzie in Dubai.
UAE Projects
A leading example of the region’s ambitions is work planned and under way in the United Arab Emirates, which announced in July it would invest up to $54 billion over the next seven years to meet its energy demands and promote use of renewables.
“The UAE is working to expand its oil production capacity to 5 million barrels per day. That was (originally) by 2030, but they have brought it forward to 2027. It also has a target to become gas self-sufficient by 2030, and nearly triple its LNG export capacity with a new 9.6 (million tonnes per year) facility in Ruwais,” Salem noted.
“In the UAE, a big driver for them is to take advantage of their resources to support their plans for expansion.
“They need all the resources they can put their hands on, especially gas, to help them achieve self-sufficiency and increase LNG exports,” she observed.
The Emirates’ announced energy-expansion plans include tripling the contribution of renewable energy, making investments in low-emission hydrogen fuel and developing infrastructure for electric vehicles.
Several Middle East countries have committed or planned significant funding for renewables and other low-carbon energy projects. The UAE will host the 2023 UN Climate Change Conference – COP28 – in Dubai this December.
In addition to expanding production and export capabilities, the Middle East area, including the eastern Mediterranean, is expected to lead the world in upstream offshore spending for 2023-24.
During 2018 and 2019, the UAE “offered multiple exploration blocks through licensing bid rounds in Abu Dhabi, Sharjah and Ras al Khaimah (RAK),” offshore and onshore, Salem noted.
“Eni has already made a gas discovery in Abu Dhabi at Offshore 2 block and commenced drilling offshore RAK. It is also active in Sharjah with the first well on Area A planned this year, and another on Area C planned next year,” she said.
Oman
In 2021, Eni finished drilling Oman’s first deepwater well in an under-explored block offshore southern Oman covering 90,000 square kilometers, with water depths ranging up to 3,000 meters.
“As far as we know, it was dry. Now they are planning to drill a second one in shallow waters. That will be in Block 52 in Oman,” Salem said.
“In Oman, exploration activity never stops. Oxy is a major player in Oman and part of their strategy is near-field exploration drilling,” she added.
An Oxy Oman near-field exploration well in Block 52 recently chalked up initial production of 6,000 barrels of oil equivalent/day, the highest IP test in Oman in the past decade, according to press reports.
Qatar
Qatar has developed a $30 billion North Field Expansion plan targeting the LNG sector, including six liquefied natural gas trains to ramp up liquefaction capacity from 77 million tonnes to 126 tonnes, about a 64-percent production increase by 2027.
That program includes a North Field East project in Ras Laffan where expansion drilling started in 2020, and a subsequent North Field South project.
“Qatar is investing nearly $50 billion on both NFE and NFS and we estimate another $21 billion on the North Field Sustainability project alone, so we’re looking at significant spending levels,” Salem said.
Eastern Mediterranean
Chevron has submitted a field development plan for the Aphrodite gas field offshore Cyprus in the eastern Mediterranean. Aphrodite, discovered in 2011, is located in Cypriot Block 12 and extends slightly into Israeli waters.
It’s a messy area that includes the maritime zones of Cyprus, Israel and Lebanon. Turkey and the Turkish Republic of Northern Cyprus have also weighed-in to object to the development.
Last year, Israel and Lebanon reached a maritime demarcation agreement that ended a long-running rights dispute and eases the way for offshore exploration. A TotalEnergies-led consortium plans to drill a deepwater test offshore Lebanon later this year.
Saudia Arabia, OPEC+
In other countries, Saudi Arabia has targeted increasing its production capacity from 12 to 13 million barrels a day. And Kuwait, which has seen a recent decline in crude exports, wants to up its own oil output capacity to 3.15 mmbd from 2.7 million bpd within four years.
Meanwhile, a Saudi news agency announced in August the kingdom will extend a voluntary oil output cut of 1 mmbd at least through September, limiting actual production to about 9 mmbd. OPEC+ also reaffirmed its member countries’ commitment to reduced production quotas, to the end of 2023.
Iraq and TotalEnergies signed a $27 billion energy deal in July aimed at increasing oil production, attracting foreign energy-sector investment and reducing Iraq’s reliance on gas imports from neighboring Iran.
The two sides had reached an initial agreement in 2021, but the deal stalled while Iraqi politicians disagreed over terms.
“Iraq’s political instability has slowed development in the energy sector and they stand to benefit from much-needed foreign investment,” Salem commented.
National Iranian Oil Company has reportedly begun producing natural gas from the South Pars Phase 11 development in the Persian Gulf, where production facilities are expected to yield peak output of 56 million cubic meters/day.
South Pars/North Dome, with ownership shared between Iran and Qatar, is far and away the world’s largest natural gas-condensate field.
According to most industry estimates, Iran has reached a five-year high in crude oil production despite U.S. sanctions, with 2023 output now close to 3 mmbd. Iran has an exemption from OPEC+ quota restrictions.
Trends
Among current trends in Middle East oil and gas, “the first one would be the big spending and investment aligned to the ambitious expansion plans, and also, increasingly reflecting low-carbon objectives,” Salem commented.
“Another trend we’re seeing in the Middle East is rising costs. Even the low-cost producers within the region are now having to navigate the higher-cost environment,” she said.
“In one example, we’ve seen ADNOC move the location of its new LNG export facility from Fujairah, a geographically advantaged location, to Ruwais, which is closer to its existing infrastructure and future gas projects and will result in cost savings,” she noted.
Earlier this year, ADNOC announced it would move the planned LNG terminal site to Abu Dhabi based on “synergies and existing infrastructure” considerations.
“Key projects like the Hail and Ghasha (sour gas megaproject in Abu Dhabi) have had contract cancellations this year due to high costs. It will be interesting to see if this trend will continue in the next year,” Salem said.
For energy producers in the Middle East, today’s playbook is also the game plan: secure state funding, attract outside investment when possible, expand oil and gas reserves and strengthen production and export capacity.
And most importantly, monetize resources to stay ahead of an energy-transition clock that has already started ticking.