$53 billion question

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Energy market analyst Rod Westwood says gas production in the Middle East and North Africa region will grow at a faster rate than in the rest of the world.

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Kuwait has invested heavily in its export terminals, but will further step up oilfield spend in the years ahead.

Oilfield spend in the MENA region is forecast to reach bold new heights in the quest to boost production.

Results from ‘The Middle East & North Africa Oilfield Services Market Report 2008-12', published by energy industry analysts Douglas-Westwood, indicate strong growth in the market over the next five years. In this article the authors give some of the thinking behind their views.

Background

Since 2003, the Middle East and North African (MENA) oilfield services market has been undergoing a period of heavy investment. The region has been producing for many years and basins are becoming increasingly mature.

Continued demand for oil & gas creates a necessity to drill for new wells and workover existing wellstocks in order to maintain and/or boost production. Average productivity per existing well is declining and increasing efforts are required to deliver each barrel of oil to the surface.

Oil prices have increased rapidly in recent years, however, unlike previous oil price ‘spikes' caused by geopolitical tension or temporary supply disruption, this price rise has been gradual and sustained, driven fundamentally by a lack of spare production capacity in producing countries, many of which (>50 countries) are past peak production and are in decline. Most of these post-peak countries are situated in the Americas, Western Europe and Asia.

With two thirds of global proven oil reserves MENA is rightly regarded as the world's most influential oil province, eclipsing all other regions by some margin.

The vast majority of MENA reserves are found in the Middle East which is estimated to hold over 742 billion barrels (bbls) of oil - North African reserves are currently slated at 59 billion bbls. Other significant reserves can also be found in Russia and North America.

Future development of heavy oil technologies threaten to sway the balance of global reserves; especially as Canada and Venezuela are each considered to have over one trillion bbls of heavy oil and bitumens.

However, with this option is not currently perceived as economically viable and therefore not considered in global estimations. It is the Middle East that continues to dominate the global oil reserves picture.

Building reserves

Over the past twenty years MENA gas reserves have been significantly augmented due in no small part to the ongoing exploration of the giant North Field/South Pars basin in the Persian Gulf.

MENA states currently account for 45% of global natural gas reserves; 82 tcm, significantly more than 1986 estimations of 32%. Large gas reserves are located in the Persian Gulf so it is Iran and Qatar that dominate the reserve landscape accounting for 34% and 31% of total MENA reserves respectively. Other significant reserves in the area can be found in North Africa, the UAE and Saudi Arabia.

In 2006, MENA produced circa 23 million bbls of onshore oil a day and accounted for 42% of global output. As MENA production continues to increase over the coming years we estimate that by 2015 the region will have an onshore crude output of just under 27 million bpd; a 16% increase over 2006 production levels and 46% of global onshore oil production in 2015.

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