The persistently low oil & gas prices, not helped by the observed conflict in certain parts of the region, has weighed heavily on the economic prospect of the Middle East and North Africa (MENA). The International Monetary Fund forecasts the overall growth of the region for this year and the next to be in the area of a mere 3.2%.
Photo credit: Flickr
But, amidst the depressing economic projection, concerns of superfluity and stubbornly suppressed prices, approximately USD 294 billion of oil, gas and petrochemical projects are said to still be underway across the MENA region.
Spotlight: Select Regional Developments in the Oil & Gas Sector
Investment in oil & gas operations remains to be a crucial focus of oil producers in the MENA region to meet exponentially rising energy demands and to replace consumed or depleted natural resources.
As a case in point, let us take a close look at major oil & gas developments brewing in the region.
Driven by its objective to expand is gas capacity, the UAE is now looking to develop new sour gas reservoirs. This is said to include major projects in the Bab and Hail fields, as well as the expansion of the Shah gas field.
Photo credit: Flickr
Saudi Arabia is home to two of the region’s largest oil & gas projects underway: Sabic’s oil-to-chemicals project and Aramco’s integrated refinery and petrochemicals development, both in Yanbu. Additionally, Aramco is said to be planning to pour in USD 334 billion into its oil & gas activities by 2025. The world’s largest oil & gas company is reportedly keen at looking at expanding its gas capacity, which includes the development of non-associated gas fields in the Gulf and expanding shale gas production in the north.
Saudi Arabia is also reportedly planning to list Saudi Aramco in the stock market, with an IPO that values the company at a staggering USD 2 trillion.
For its part, Kuwait is expected to invest USD 115 billion on energy projects over the next several years to help enhance crude production capacity, keeping in mind its target of four million barrels a day by 2020.
A Time of Conviction with Caution
It is clear that oil producers and allied stakeholders in the MENA region remain undaunted by the bleak market outlook and the headwinds blowing against the global oil & gas sector. Looking at the slew of oil & gas projects in the pipeline, it is not difficult to see the region’s conviction to satisfy domestic and international energy demands, achieve energy production objectives, and maintain its role as the world’s premier energy resource provider.
Photo credit: Pinterest
But in these economically trying times, it is essential for oil & gas companies in the MENA region to practice caution by controlling costs while capitalizing on expansion prospects and profitable opportunities. Oil & gas companies in the region, the likes of the UAE’s Emirates National Oil Company (ENOC) and Abu Dhabi National Oil Company (ADNOC), should ensure the efficient utilization of their working capital while the industry is still on its way to recovery.
One area of operation where oil & gas companies can make significant adjustments to their capital expenditure is power generation.
While electricity remains one of the most important components of an oil & gas operation, regional oil producers do not have to confine themselves with devoting a significant portion of their scarce capital to a major expenditure, like a permanent power plant. Instead of building their own power generation facility, oil & gas companies can choose to hire temporary power plants.
By turning to rental power, oil & gas companies can have a consistent, dependable and sufficient supply of electricity throughout the lifecycle of their operations without the need to strap a large portion of their funds to a permanent facility. Temporary power plants can adequately provide for the power needs of various processes of an oil and gas operation, from exploration and extraction, through to development and processing.
Photo credit: Flickr
Aside from savings in capital expenditure, renting power will also have an impact on the allocation of funds for an oil & gas project. Regional oil majors, such as the National Iranian Oil Company, Iraq’s North Oil Company and Kuwait Petroleum Corporation, will welcome the fact that payment schedules for the rented power are fixed and regular over a contracted term. This will help them in formulating accurate financial forecasts.
Moreover, a complete rental power service includes all ancillary and spare parts, as well as expert on-site engineers and technicians. This means that oil & gas companies will be shielded from additional costs that come with building a permanent power plant, and that they no longer have to hire, train or re-allocate staff members to manage the power plant.
Photo credit: Altaaqa Global Caterpillar Rental Power
For more information on rental power for oil & gas operations, click here
Bucking the Trend
In defiance of growth forecasts and of the impacts of global oversupply that prompted a sharp fall in oil prices since 2014, oil producers in the MENA region have been continuously investing in the oil, gas and petrochemical sector. While global oil & gas spend is expected to continue to decline, oil producers in the MENA region are looking to buck the trend and to continue pouring funds into the industry to maintain capacity and fulfill ambitious production targets. But while the oil & gas sector is still regaining its old glory, regional industry stakeholders are expected to restrain their aggression with a bit of caution.
This article is sponsored by Altaaqa Global Caterpillar Rental Power