Upstream spending in the Mena region is forecast to rise by 9 per cent this year and the number of new projects to more than double thanks to lower costs, according to consultancy Wood Mackenzie.
Globally, the oil and gas industry’s spending on exploration and production will rise by 3 per cent to US$450 billion, after falling for the past two years on the back of the oil price rout, the Edinburgh-based consultancy said in a report.
The amount, however, is still 40 per cent below 2014 levels.
In the Mena region, which includes Iran, upstream spending will increase to more than $76.7bn this year, after dropping by 9 per cent since 2014, said Jessica Brewer, the principal analyst for Mena upstream oil and gas at Wood Mackenzie. The number of new projects will rise to five this year, compared with two last year. “The one thing that is interesting about the Mena region is, throughout the low oil price it has actually been more robust [than other regions],” Ms Brewer said.
“Part of it is that a lot of the national oil companies have been continuing with investments throughout this period and we have see cost deflation in some areas. A lot of companies have taken advantage of the lower cost base.”
Costs, which dropped by 20 per cent since 2014, are forecast to decline by another 3 to 7 per cent this year, which is likely to be a trough year. About 50 per cent of the capital spending in the Mena region will be in Saudi Arabia, Iraq and Kuwait. Across all projects, capex per barrel of oil equivalent (boe) this year for the Middle East will be flat at $4 per boe, and in North Africa it will be $6.7 per boe, up by about $0.5 per boe, she said.
The Mena region’s total liquids capacity, which includes condensate and NGLs, in 2017 is expected to be 34 million barrels per day (bpd) and is forecast to rise to 40 million bpd by 2035.
“We are seeing investments in North Africa going up and a lot of that is being driven by gas projects,” Ms Brewer said. “In the Middle East, oil still kind of reigns supreme. There is investment going into gas but the majority of investments is going into sustaining oil capacity.”
Countries in the Middle East are expected to continue spending on oil capacity, despite the agreement between Opec and non-Opec countries to cut output by about 1.8 million bpd starting this month.
“We are not expecting any drop-off in investments that has to do with Opec cuts,” Ms Brewer said.
Globally, companies are projected to give the go-ahead for about 20 projects this year, doubling the figure for 2016, with the majority of developments centred around US tight oil production.
This figure is still lower than the 40-a-year average between 2010 and 2014. Deep-water projects are also likely to make a comeback.
dalsaadi@thenational.ae