Middle East Oil & Gas Review

OPEC’s continued production cuts, Saudi Aramco’s view on the energy transition, and a number of gas and LNG projects and contract awards marked the past month in the Middle East’s oil and gas industry.

OPEC Remains on Course with Oil Output Cuts

The Joint Ministerial Monitoring Committee (JMMC), the OPEC+ group’s panel that monitors market developments and compliance with the cuts, met in early April and did not make any recommendation to the OPEC+ alliance about changing its production policy.

The committee expects the countries that have so far exceeded their quotas, most notably Iraq and Kazakhstan, to submit their detailed compensation plans to the OPEC Secretariat.

“The Committee welcomed the Republic of Iraq and the Republic of Kazakhstan pledge to achieve full conformity as well as compensate for overproduction. The Committee also welcomed the announcement by the Russian Federation that its voluntary adjustments in the second quarter of 2024 will be based on production instead of exports,” OPEC said in a statement after the panel’s regular meeting.

The next meeting of the JMMC is planned to be held on 1 June, when OPEC+ participants are expected to decide how to proceed with the current cuts into the second half of the year.

OPEC Says $14 Trillion Investment Needed to Meet Oil Demand by 2045

The oil industry needs cumulative oil-related investments ofaround $14 trillionfrom now until 2045, Dr.Ayed S. Al-Qahtani, Director of OPEC’s Research Division, said at the 10th Joint IEA-IEF-OPEC Workshop on the Interactions between Physical and Financial Energy Markets at the end of March.

“This massive spending will be required to meet global oil demand, which is expected to reach 116 mb/d by 2045,” Al-Qahtani added.

“This must be an industry priority if we are to maintain security of supply and avoid unwanted volatility in the years ahead.”

According to Al-Qahtani, “we must continue to do everything we can to avoid volatility, and this includes speculative positioning, which can adversely impact the global oil market.”

Saudi Arabia Warns Against Ideas to Phase Out Oil and Gas

At the CERAWeekin Houston, one of the top annual oil industry events, Saudi Aramco’spresident and CEO, Amin Nasser, warned that “We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately, reflecting realistic demand assumptions.”

The current energy transition strategy ignores the message from consumers globally, who “want energy that helps protect the planet and their pocket books, with minimal disruption to supplies and their daily lives,” the chief executive of the world’s largest oil firm told the CERAWeek audience.

The world should ramp up efforts to reduce carbon emissions, aggressively improve efficiency, and introduce lower carbon solutions, he added.

“We should phase in new energy sources and technologies when they are genuinely ready, economically competitive, and with the right infrastructure, adjusting all of the above as needed, as we go,” Nasser said, noting that the energy transition enthusiasm faces hard truths such as still low wind, solar, and EV shares compared to conventional energy sources andthe huge subsidies given out to clean energy sources.

Aramco Key Investor in China

Saudi Aramco, the world’s single largest crude oil exporter, is investing in China, the top crude importer, and will continue to do so in refining, petrochemicals ventures, and venture capital to explore new strategic investment in critical materials and renewables, Aramco’s Nassersaid at the China Development Forum 2024 in late March.

“While energy remains a strategic pillar of our rock-solid relationship, our vision of the future extends far beyond investing and cooperating in energy alone. Here we have noted with keen interest what Premier Li recently called the “strategic emerging industries and future-oriented industries,” he added.

“We want to be a partner of first resort in China’s economic development journey, as new opportunities clearly come into focus,” Nasser said, noting that Aramco was among the leading direct investors in China last year.

ContractsTo Boost Middle East’s Oil and Gas Supply

Meanwhile, Aramco awardedin early April $7.7 billion worth of engineering, procurement and construction (EPC) contracts for a major expansion of its Fadhili Gas Plant in the Eastern Province of Saudi Arabia. The project is expected to increase the plant’s processing capacity from 2.5 to up to 4 billion standard cubic feet per day (bscfd). The additional processing capacity is expected to contribute to the company’s strategy to raise gas production by more than 60 percent by 2030, compared to 2021 levels. The Fadhili Gas Plant expansion, which is expected to be completed by November 2027, is also expected to add an additional 2,300 metric tons per day to sulphur production.

“The award of these contracts reflects Aramco’s goal to increase supplies of natural gas, help efforts to reduce greenhouse gas emissions, and free up more crude oil for value-added refining and export,” said Wail Al Jaafari, Aramco Executive Vice President of Technical Services.

In the United Arab Emirates (UAE), ADNOC has issued a Limited Notice to Proceed (LNTP) for early engineering, procurement and construction (EPC) activities for its low-carbon liquefied natural gas (LNG) project in Al Ruwais Industrial City, Abu Dhabi. The early EPC award went to a joint venture led by Technip Energies with JGC Corporation and National Petroleum Construction Company PJSC.

The Final Investment Decision (FID) for the project is expected this year. Once completed, RuwaisLNG will consist of two 4.8 million metric tonnes per annum (mmtpa) LNG liquefaction trains with a total capacity of 9.6mmtpa, and is set to more than double ADNOC’s LNG production capacity, from 6mmtpa to around 15mmtpa.

Ruwais LNG is set to be the first LNG export facility in the Middle East and North Africa region to run on clean power, making it one of the lowest-carbon intensity LNG plants in the world, ADNOC says.

ADNOC has also signed a 15-year Heads of Agreementwith a subsidiary of Germany’s SEFE Securing Energy for Europe GmbH, for the delivery of 1 million metric tonnes per annum ofLNG. Deliveries are expected to start in 2028, upon commencement of the facility’s commercial operations.The fuel will primarily be sourced from ADNOC’s Ruwais LNG project.

The deal with the German firm is the second long-term LNG supply agreement from the Ruwais LNG project, following the 15-year agreement with China’s ENN Natural Gas signed in December 2023.

ADNOC announced at the end of March the start of crude oil production from its Belbazem offshore block, which is operated by Al Yasat Petroleum, a joint venture between ADNOC and China National Petroleum Corporation (CNPC).

Production capacity at the Belbazem offshore block is set to progressively ramp up to 45,000 barrels per day (bpd) of light crude and 27 million standard cubic feet per day (mmscfd) of associated gas, contributing to ADNOC’s target of reaching 5 million bpd by 2027 and enabling UAE gas self-sufficiency, ADNOC said.

Qatar’s state firm QatarEnergyhas signed time-charter party (TCP) agreements with Qatar Gas Transport Company Limited (Nakilat) for the operation of 25 conventional-size LNG vessels as part of the second ship-owner tender under QatarEnergy’sLNG fleet expansion programme.Seventeen of the 25 LNG vessels are being constructed at the Hyundai Heavy Industries (HHI) shipyards in South Korea, and the remaining eight are being constructed at Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering), also in South Korea.

QatarEnergy has also signed long-term agreements with four international shipowners for the operation of 19 new, ultra-modern conventional size LNG vessels, bringing the total number of ships for which it has signed TCPs to 104 vessels, saidQatarEnergy’s chief executive officer SaadSherida Al-Kaabi.

“Today’s signings form a significant milestone in QatarEnergy’s LNG fleet expansion program, as it marks the conclusion of the conventional sizes vessels portion of program, bringing the total number of ships for which we have signed TCPs to 104 vessels, a massive undertaking that is the largest shipbuilding and leasing program ever in the history of the industry,” said Al-Kaabi, who is also the Minister of State for Energy Affairs of Qatar.

“These ships will support our expanded LNG production capacity from the North Field in Qatar and Golden Pass in the U.S., while also meeting our long-term fleet replacement requirements.”

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