(MENAFN- Gulf Times) • What is slowing down the recovery of oil market? • Investments in the oil and gas sector are fraught with risks due to price fluctuations
• The golden age of gas did not come as many producers had hoped
When looking at the oil and gas market, optimism depends on the continuous integration of the final value chain. Some oil and gas companies engaged in the field of gas in our region, such as Iraq, Iran and Saudi Arabia, are still not committed to their planned gas investments, and the decision is constantly being postponed.
Iraq and Saudi Arabia are reportedly planning projects to convert gas to energy and consumption internally, while Iran increases its focus on exploitation in the petrochemical sector and the export of gas production.
On the other hand, the UAE has stumbled over its gas development plans, which include well-covered unconventional and sour gas projects, and is trying to bring in foreign investment to support these projects.
This may happen or be delayed even as gas experts monitor plans to expand production in Qatar, and the huge planned investment of about $22bn, which is on the table.
However, some question the full feasibility and commercial appeal of expanding LNG in Doha in light of the LNG glut in the global market.
As part of the future gas success stories in the region, will the national oil companies follow a different path than the previous one in light of the current economic conditions and the coronavirus pandemic, taking into account the sale of a minority stake in pipeline assets for future projects to international investors?
However, the future may indeed be different.
Or will there will be a plan to privatise some future gas projects or the ones producing them to increase production?
The massive negative impact that the pandemic has had on demand has turned the fundamentals into negative, and the planned giant LNG projects are another concern, and investors will become wary of future investment projects if demand does not improve or prices do not improve in the long term.
Using gas to generate power and petrochemicals for regional natural gas projects is risky as the total energy supply in the GCC and North Africa is shifting towards an oversupply state.
So the potential options for exporting energy are bleak, as economic viability is lacking and the economic slowdown is causing huge losses in demand.
On energy:
The economic slowdown in the main markets in the Arabian Gulf and North Africa will also affect demand for gas-based products. And the main markets in Europe or Asia, such as India and China, also do not reflect the increased demand for gas and petrochemicals.
Focusing on local and regional supply and demand makes sense and import substitution is financially and economically attractive.
However, the domestic markets are neither mature nor large enough to handle future supplies of natural gas and petrochemical products despite their different types and uses.
Strong export markets are needed, and while all global markets face less demand, gas volumes in the Mena region are not the only ones hitting global markets.
Others are also preparing the same natural gas liquefaction schemes, and are all competing for a slice of the same pie.
The current natural gas investments may already be too late, as the "golden age of gas" has not come about as many producers had hoped due to the global economic slowdown and lower consumption rates.
Obviously, this makes current and future investments in more initial projects risky. At present, however, the main threat comes from the highly volatile global oil markets.
Gas market investments in the Mena region are 100% linked to world oil prices.
The current decline in oil prices, which has led to the removal of billions of dollars in terms of revenues from the coffers of governments in the Middle East and North Africa, will lead to a decrease in appetite for planned projects due to increasing financial pressures, as long as oil prices hover below $ 50- $ 60 per barrel.
In terms of the new gas projects, owners will face a tough challenge, regardless of the official plans and the rosy numbers mentioned in reports, newspapers and other industry-related conferences.
In fact, bright new projects that do not achieve economic feasibility, or have high extraction and liquidation costs, and do not provide a promising market, will be excluded.
* Saad Abdulla al-Kuwari graduated in Chemical Engineering from Qatar University and obtained an MBA in Oil & Gas from Liverpool University. He was appointed CEO of Tasweeq in 2010. During his career, he has occupied several key positions in refining projects and processing, oil, gas and refined products, storage tanks and export terminals operation. He also has considerable experience in the field of Gas Processing Operations. He was also manager of Gas, Oil Petrochemical Marketing in QP Marketing Directorate for several years.
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