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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

$294 bn oil, gas projects under way in MENA

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By Business Reporter — MUSCAT: FEB. 26 - Oil, gas and petrochemicals projects to the tune of about $294 billion are in the pre-execution phase across the Mena region even while concerns about global oversupply continue to suppress oil prices, according to Meed Insight’s Mena Oil and Gas Report 2017. Gas spending is also set to increase as countries such as Saudi Arabia and the UAE study higher-cost sour gas and shale gas plans to meet rapidly-growing domestic demand, Last year saw average crude prices drop to a 13-year low as oil and gas producers in the Mena region continued to face the impact of global oversupply.


The drop in crude revenues coincided with an eight-year low in the value of engineering, procurement and construction (EPC) contracts awarded in the regional oil, gas and petrochemicals sectors. Investment in the Mena hydrocarbons industries hit an eight-year low in 2016, dropping 34 per cent to $32.4 billion.  “The oil, gas and petrochemicals sectors will continue to be the backbone of economies across the Mena region,” Meed Editorial Director, Richard Thompson was quoted as saying in the report.


“With an estimated $294 billion-worth of projects in the pre-execution phase, the sector provides a wealth of opportunity for business from Saudi Arabia’s ambitious oil-to-chemicals complex to the re-emergence of the Iran oil industry following years of sanctions.”


Upstream investment has been driven by the need to meet rising demand, at both home and abroad, and the need to replace resources lost through natural depletion. In the GCC, Saudi Arabia, the UAE,


Kuwait and Qatar have all raised their sustainable crude oil production capacity, while Oman has managed to reverse a slump in output through its enhanced oil recovery (EOR) programme. Outside the GCC, production capacity and output has stagnated or fallen in Algeria, Egypt and Libya, mainly due to the political problems in those states. Iraq has been able to increase capacity through one of the world’s largest upstream investment programmes.


In terms of a subsector breakdown of future projects, the largest sector is petrochemicals with over a quarter of total projects planned. Many projects in this sector, however, are at an early stage and the current market environment for petrochemicals is not strong. The future of many of them also depends on the availability of feedstock, which has held back many GCC petrochemicals projects in the past. Oil refinery projects rank in second place with the announcement of several new refinery projects in Iraq boosting this sector. Spending is also anticipated on new refineries in Bahrain and Oman.


With capital spending on oil & gas projects of about $44.3 billion, Kuwait has been by far the biggest spender over the past two years after a slump in project spending at the start of the decade. That was driven by major projects such as the Clean Fuels Project, the Al-Zour refinery (also known as the New Refinery Project) and the Lower Fars heavy oil handling facilities.


Kuwait is only number five however in terms of pre-execution project value. This includes the estimated $7 billion Olefins 3 petrochemicals project and phases two and three of the Ratqa Lower Fars Heavy Oil project.


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