By Parag Deulgaonkar
New BMI report says UAE will be able to achieve 3.5m bpd target by year-end
Major national oil companies (NOCs) in the Middle East are expected to increase their capital expenditure by 2.5 percent to $58 billion (AED212.86bn) in 2017, according to a new report.
London-based BMI Research said on Tuesday that the Middle East has been one of the least affected regions in terms of oil and gas investment despite the oil price downturn.
The NOCs still maintain their capital budgets as they have benefited from the lower oilfield service costs, it added.
“Despite the expected underperformance of most NOCs in relation to their production target, capex over 2017 is set to increase,” the Fitch Group company said, adding a 1.7 percent capex increase is expected next year.
While oil prices over the first quarter 2017 have been supported by OPEC and non-OPEC market action, prices remain sufficiently low to limit investment into only the most cost-competitive developments outside of the Middle East. Crude prices closed at $50.25 a barrel on Monday.
The report said many of the key oil producing countries in the Middle East plan to increase their production capacity over the coming three years, with Saudi Arabia planning to invest to maintain production capacity of 12.50 million barrels per day (bpd), holding between 2 million and 2.5 million bpd in spare capacity.
“Saudi Aramco has marginally increased spending over the last two years and we expect this to be maintained as Saudi Arabia will become an increasingly important supplier once a supply deficit returns,” BMI added.
According to the report, the UAE is expecting to achieve production capacity of 3.5m bpd by 2018 with production over early 2017 just under 3m bpd.
With new investors in the onshore concession and the Upper Zakum project due to be delivered in 2018, BMI said the target is achievable by year-end.
It, however, noted that Abu Dhabi National Oil Company (ADNOC) is one of the few companies in the Middle East that is set to lower capex from $8bn in 2016 to $7.2bn in 2017.
In December 2016, OPEC and 11 other oil producers such as Russia agreed to cut their combined output by almost 1.8 million bpd in the first half of 2017.
Last week, Kuwaiti Oil Minister Essam Al Marzouq told media that the pact may possibly be extended by another six months.