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Saudi And Qatari Energy Companies Look Abroad For Growth

The Middle Eastern oil and gas empire is undergoing dramatic change as the two biggest petroleum companies, Saudi Aramco and Qatar Petroleum are aiming to expand overseas in a bid to increase their global presence and increase competition with the world’s other oil majors.

Qatar Petroleum – Focus on production

Qatar is one of the smallest contributing members of OPEC and its oil revenues have seen a sharp drop in last two years. Qatar is also the largest liquefied natural gas (LNG) exporter in the world and Qatar Petroleum, the state owned petroleum company, is the largest global producer of LNG.

But in an effort to become more efficient, Qatar Petroleum recently decided to expand its operations to international markets with a specific focus on production. The petroleum company also fired some of its employees and consolidated its foreign investment arm while divesting its non-energy units. Related: BP Agrees To Pay $18.7 Billion To Settle Deepwater Horizon Spill

(Click to enlarge)
Image Source: QP

From a small crude oil producer to becoming the King of LNG

Qatar’s economy, like most of the other Middle East countries, is heavily dependent on its energy sector. The oil and gas sector contributed around 57.8 percent to the nation’s GDP in 2012, according to the EIA.

When the country’s oil output started declining, Qatar Petroleum shifted its focus to LNG production. National oil companies are becoming more capable, more financially sound, and they have less need for international oil companies,” said Qatar Petroleum’s Chief Executive Officer Saad Sherida al- Kaabi. Related: New Silk Road A Disaster Waiting To Happen?

But with oil production declining, Qatar Petroleum is diversifying into energy projects abroad. The strategic pivot by Qatar Petroleum is seen by many as a response to the upcoming merger of Royal Dutch Shell and BG group. With around 16% of the global LNG market share, the merger would make Shell-BG the largest independent producer of LNG in the world.

Qatar Petroleum is already collaborating with ExxonMobil through a joint venture to construct a liquefaction plant in Texas. Once U.S. regulators approve its export license, construction can begin, perhaps as early as next year.

A recent IEA report states that by 2020, U.S. LNG exports will become one of the largest sources of supply to Europe and other areas. Qatar Petroleum is eyeing this opportunity with its investment in Texas.

Saudi Aramco - Moving to China to beat others to the punch?

Much like Qatar Petroleum, even Saudi Aramco is under the process of re-structuring as the government is separating it from the influential and powerful oil ministry. This restructuring means that the National Oil Company (NOC) is set to become more aggressive in its overseas spending.

The 2014 Saudi Aramco annual report described Asia as the company’s preferred investment destination. In fact, the NOC plans to invest between $70- $80 billion in overseas markets in the next five years. It comes as little surprise as to why Aramco is moving to China which is one of the biggest consumer markets for oil and gas. Related: Nature Provides Novel Solution To Energy Storage Problem

Although China’s economic growth rate has faltered due to an ongoing economic slowdown, this has not deterred Saudi Aramco. Apart from being China’s largest energy supplier, Aramco is aiming to further collaborate with China in its refining and petrochemical sector along with consumer product markets.

The NOC is currently helping China build a processing plant with a capacity of 260,000 barrels per day in addition to another plant in China’s Fujian province which it operates along with ExxonMobil and China Petroleum and Chemical Corp. “Saudi Arabia is willing to come in and partner with Chinese companies,” said Aramco’s CEO Khali Al Falih who wants to make Saudi Aramco a household name in China.

Moving to China has been one the smartest moves by Aramco as the world’s largest upstream company is slowly but steadily transforming itself into an integrated oil and gas company.

In short, two of the Middle East’s largest energy companies, Qatar Petroleum and Saudi Aramco, which have long lived on domestic production, are now seeking to capitalize by investing in growing markets abroad.

By Gaurav Agnihotri for Oilprice.com

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