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New investments in oil and gas production and refining in the Middle East and Africa region fell by 32 percent last year to US$41 billion, according to the latest annual MENA Oil and Gas Market Report by MEED. This was the size of newly awarded projects in these industry segments.
At the end of the year, MEED said, however, there was US$396 billion worth of planned but not yet awarded projects in the region, out of a total US$664 billion in planned and in-progress projects.
The report’s authors acknowledge the strength of oil, gas, and petrochemicals spending in the biggest legacy oil and gas producing region in the world, but adds a word of caution: “But the market is changing. And everyone involved in Middle East oil and gas must be ready to change with it.”
The change mainly concerns forecasts about peak oil demand, which is expected to occur sometime between 2030 and 2040, after which it will start declining. This has motivated more spending on petrochemicals as this industry segment is seen to account for a growing portion of crude oil and natural gas demand globally in the future, as demand for fuels declines.
As a result, the Gulf Cooperation Council, which involves six of the biggest producers in OPEC, plans to pour some US$200 billion in new refining and petrochemicals production capacity between this year and 2025, the MEED report notes.
The focus, in other words, is shifting from the traditional model of producing as much oil as possible to fuel the local economies, to increasing the value of every barrel produced. The motivation for this shift in focus is not just in future oil demand projections, though. The high volatility in benchmark oil prices over the last few years has made producers change tack, betting more on value-added refined products.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.