OGV Energy's Middle East Oil & Gas Review September 2021

Saudi Arabia’s state-owned oil giant Aramco reported bumper profits for the second quarter, while a new Iranian president was sworn in amid a rise in tensions in the Middle East in the past month. 

Saudi Aramco, the world’s largest oil firm by production and market capitalization, also joined the biggest solar power project in Saudi Arabia, while the state oil and gas firm of the United Arab Emirates (UAE), the Abu Dhabi National Oil Company (ADNOC), awarded engineering services contracts and signed deals to supply ammonia to Japanese customers.  

Saudi Aramco’s Q2 Profit Soars as Oil Prices Rally

Aramco reported surging profits and cash flows for the second quarter, much like all international oil majors which benefited from the significantly higher oil and gas prices this year compared to the pandemic-induced price collapse in the spring of 2020.

Saudi Aramco’s net income jumped by 288 percent year over year to US$25.5 billion for the second quarter. Last year in Q2, the oil giant had booked US$6.6 billion in net income. For the first half of 2021, Saudi Aramco posted a net income of US$47.2 billion, a 103-percent surge compared to US$23.2 billion booked for the first half of 2020.

The significantly higher profits in 2021 were primarily driven by higher crude oil prices, improved downstream margins, and the consolidation of SABIC’s results, partially offset by lower crude oil volumes sold and higher crude oil production royalties, Aramco said in a statement. Second-quarter net income was also the result of the recovery in global oil demand, supported by the easing of COVID-19 restrictions, vaccination campaigns, stimulus measures, and accelerating activity in key markets.

The company declared US$18.8 billion dividend for the second quarter, keeping the annual US$75 billion dividend to shareholders, the largest of which with over 98 percent is the Kingdom of Saudi Arabia. 

“We continue to move forward on a number of strategic programs, which focus on sustainability and low-carbon fuels, maximizing the value of our assets, and advancing our downstream integration and expansion journey. For all these reasons and more, I remain extremely positive about the second half of 2021 and beyond,” Aramco’s president and chief executive officer Amin Nasser said, commenting on the results.

Saudi Aramco also said that its crude oil increment programs at the Marjan and Berri oil fields are in the final stages of detailed engineering, and construction activities continue to progress. The two projects are expected to add oil production capacity of 300,000 barrels per day (bpd) and 250,000 bpd, respectively, by 2025.

The Saudi oil firm also dismissed in early August media reports that it would start Bitcoin mining.
“With reference to recent reports claiming that the Company will embark on Bitcoin mining activities, Aramco confirms that these claims are completely false and inaccurate,” the Saudi oil giant said.

New Iranian President Sworn In Amid Rising Tension in Middle East

Iran’s new President Ebrahim Raisi was sworn in on 5 August, days after a drone attack on the commercial vessel Mercer Street offshore Oman killed two crew members. The attack on the Israeli-linked Mercer Street tanker most likely came from Iran, according to statements from the governments of the UK, the US, and Israel.

“UK assessments concluded that it is highly likely that Iran attacked the merchant vessel MV Mercer Street in international waters off Oman using unmanned aerial vehicles,” the UK Foreign Office said.

“We believe this attack was deliberate, targeted, and a clear violation of international law by Iran,” Foreign Secretary Dominic Raab said, adding “Iran must end such attacks, and vessels must be allowed to navigate freely in accordance with international law.”

“Upon review of the available information, we are confident that Iran conducted this attack, which killed two innocent people, using one-way explosive UAVs, a lethal capability it is increasingly employing throughout the region,” US Secretary of State Antony Blinken said in a statement.

Days after the attack on Mercer Street, another tanker, Asphalt Princess, was a target of an attempted hijacking, an incident that ended with no casualties or injuries. 

The incidents with the tankers in critical shipping lanes in the Middle East raised the tensions between Israel and Iran, and the West and Iran, while the Iran nuclear talks continued to be on hold awaiting the transfer of power in the Islamic Republic. The stalled nuclear talks pushed the timeline of a potential return of Iranian oil to the global market to 2022 at the earliest.

Middle East To Lead Global Gas Capacity Growth in Medium Term

The Middle East is expected to lead growth in capacity in the global gas processing industry from planned and announced projects between 2021 and 2025, data and analytics company GlobalData said in a report. The Middle East is set to account for around 37 percent of the global gas processing capacity growth by 2025. The region will have a new-build gas processing capacity of 21.0 billion cubic feet (bcfd) by 2025, including 19.4 bcfd from planned projects that have already received approvals, GlobalData forecasts.

“In the Middle East, a total of 26 planned and announced gas processing plants are expected to start operations by 2025. Of these, the planned Ras Laffan-NFE plant in Qatar has the highest gas processing capacity of 4.6 bcfd. It would process gas from the giant North Field East project and helps Qatar to maintain its status as one of the leading producers and exporters of LNG in the world,” said Nachiket Kaware, Oil & Gas Analyst at GlobalData. 

Qatar and Iran will be among the leading offshore gas producers through 2025, GlobalData said in another report identifying Malaysia as the leader.

Iran is set to have the second highest offshore gas production globally with 2.70 bcf of natural gas production in 2025 or about 11 percent of the total global natural gas production in the year. Qatar follows with natural gas production of 2.67 bcf from planned and announced offshore projects in 2025.

Oil, Gas, Renewables Projects

The Abu Dhabi National Oil Company (ADNOC) signed on 23 August a framework agreements for Concept and Front-End Engineering Design (FEED) services for major projects across its full value chain to support the delivery of its 2030 strategy. The framework agreements were signed with eight top-tier global engineering contractors and have a combined scope worth up to $1 billion (AED 3.67 billion).

ADNOC signed the framework agreements with AMEC International Ltd (part of the Wood Group), Fluor, McDermott, Mott MacDonald, SNC-Lavalin International Arabia Limited – Abu Dhabi (part of the Kentech Group), Technip Energies, Worley, and a joint venture between Tecnicas Reunidas and NPCC. 

ADNOC also announced in August that, in partnership with Fertiglobe, it had sold its first cargo of blue ammonia to Itochu in Japan, for use in fertilizer production. The sale builds upon recently announced joint efforts to enhance industrial cooperation between the UAE and Japan and support the development of new UAE-Japan blue ammonia supply chains.

Saudi Aramco Power Company (SAPCO) joined a consortium led by ACWA Power and the Water & Electricity Holding Company (Badeel) developing the largest solar PV project in the Kingdom. The project, the 1,500 MW Sudair Solar plant, reached financial close in August. Total investment is estimated at 3.4 billion Saudi riyals (US$906 million / £660 million).

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