GCC spend to kick-start upstream revival in 2010
E&P investment schedule driving upturn in global upstream spending
Spending by the Middle East national oil companies (NOCs) is underpinning the return to previous levels of global spend in the upstream sector, according to a report from Wood Mackenzie.
The report reveals that the Middle East, along with the US, West Africa and the states of the former Soviet Union, will contribute to the majority of growth in the sector, as the economy recovers. The report also found that the major areas of growth have been underwritten by NOC’s such as in Saudi Arabia, Abu Dhabi and Brazil.
Morris Reid, managing director, BGR Group, affirms that NOC’s in this region are in a strong position. “They are bullish, as long as they are running their prices at a steady level, they are in great shape. If we had every renewable known to man available, it would still only be able to produce 50% of our energy, so crude is still a big part of our lives,” Reid states.
Reid adds that the Middle East region is looking extremely healthy in general: “This region is still the most important region because it has all the capital, the major oil reserves and a young population,” he comments.
Production capacity is expected to grow globally over the next few years, and the Middle East is expected to lead the way in this respect. Iain Brown, vice president, upstream energy research for Wood Mackenzie explains in the report: “By far the greatest growth in the five year period to 2014 is in the Middle East, with installation of new oil capacity in Saudi Arabia, Iraq and Abu Dhabi, and incremental gas in Qatar, Abu Dhabi and Iran.”
Part of the reason for this projected increase in capacity is the relatively low cost of expansion in certain regions in the Middle East. “New capacity in Iraq is amongst the lowest cost in the world, but at the same time it is the most tenuous. We expect that over US$24 billion dollars could be spent in the five years to 2012, with the prospect of increasing production capacity by 850,000 b/d,” reveals Brown.
“However, the scale and schedule of any significant development spend is fundamentally uncertain due to the prevailing security situation, and growth in oil capacity is reliant on renovation and expansion of key distribution and processing infrastructure,” he adds.