Business as usual for MENA region

Others including Algeria, Iraq and Yemen have been facing attacks on energy-related infrastructure which has caused a rise in debates about the status of MENA as a reliable energy supplier.

With current global oil supply at 90.6 mbpd, and the global natural gas supply at 3.4 Tcf, the MENA region accounts for approximately 37.1% and 21.4% of the total oil and gas supply respectively.

Over the past few years, countries such as Algeria, Egypt, Iraq, Libya, Syria, Tunisia, and Yemen have encountered fluctuations in their oil and gas production levels due to the multiple challenges that these countries have had to face.

Although Algeria has been taking measures to protect its energy infrastructure from rebel groups such as Al-Qaeda in the Islamic Maghreb (AQIM) who have targeted oil and gas infrastructure, it has continued to see instability with its oil and gas production.

With attacks such as the one on BP-Statoil’s In Amenas gas facility that resulted in multiple deaths, companies have begun to reevaluate doing business in the country.

Egypt has suffered from multiple protests and numerous changes in its government due to the Arab Spring. In addition, the country’s energy sector faced a setback due to a series of attacks on the Arab Gas Pipeline in Sinai which transported gas to Jordan and Israel.

A country proven to have one of the largest crude oil reserves in the world, Iraq has had to deal with sectarian violence which has resulted in numerous delays for oil and gas projects within the country.

With the Libyan civil war taking place in 2011, there was a fall in the regime and a shift in control to the Transitional National Council and affiliated rebel militias. In 2013, the country faced labour-related protests at various oil fields. In the same year, production at two major oil fields were stopped due to the Zintan militia closing pipelines.

Syria’s energy sector has faced numerous challenges. This ranges from attacks on energy infrastructure such as oil and natural gas pipelines and electricity transmission networks to the impact of Western-led sanctions which has hindered development and production of the country’s energy resources.

Tunisia has encountered attacks on its trans-Mediterranean pipeline and has kept special combat units along its borders with Algeria and Libya to protect its oil and gas facilities from further potential attacks from Islamic militants.

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Yemen has witnessed over 40 attacks on oil pipelines last year – mostly in the Marib governorate. The threat on oil infrastructure ranges from the use of bombs to explode pipelines to the prevention of access to pipelines for repair to the blockage of oil wells.

Due to the emergence of the Arab Spring, countries in the MENA region have been struggling with civil war while others have been besieged by protests and attacks on the country’s energy infrastructure.

Oil production levels for Algeria, Egypt, Syria, Tunisia, and Yemen have consistently fallen over the years while Libya has seen fluctuations in its oil production levels.

Similarly, Egypt, Syria, Tunisia, and Yemen have seen a decline in their natural gas production levels since 2011 whereas Algeria and Libya have seen an increase.

By delving deeper into details, we can see that despite MENA regions’ large contribution to the global oil and gas supply, countries that are currently struggling with political and social problems account for only a small percentage of the total.

With MENA accounting for 37% of the global oil production, these countries account for a mere 4.9% of the total. Similarly, with MENA accounting for 21.4% of the global natural gas supply, these countries represent 2.7% of the total.

Compensating for the reduction in volumes of the countries discussed above, other MENA countries have seen an increase in production levels.

While large oil producing countries such as Saudi Arabia, UAE, Iraq, and Kuwait have significantly contributed to the global oil supply over the years, these countries have continued to show an increase in their oil production levels despite the birth of the Arab Spring.

Iraq saw a 16% increase in crude oil production whereas Kuwait, Oman and Saudi Arabia saw 14%, 11%, 10% increases in their natural gas production respectively. Bahrain, a small contributor to the global supply of oil and gas, also witnessed a 20% increase in its oil production and a 8% increase in its natural gas production.

Moreover, by taking a look at the total Capex spends from 2011 to 2015, we can see that although the Capex spends over the past few years have been low due to difficulties faced in the MENA region, there has been a gradual increase in investments within the GCC countries (excluding Bahrain). This steady increase in investments will be evident in the current and upcoming years.

The political and social turmoil that has had a ripple effect on numerous countries within the MENA region since the emergence of the Arab spring, along with international sanctions placed on Iran, has led to increased insecurity regarding the reliability of MENA as an energy supplier.

While these are important factors to consider, the countries within the MENA region that remain important producers such as Saudi Arabia, Iraq, UAE and Kuwait continue to play a key role in the global oil and gas supply, cannot be discounted.

In addition to the continuous growth in oil and gas production levels seen by these countries, an increase in investments and project spends over the years are being seen as well for key MENA producers as well as countries currently struggling with political and social challenges. The MENA region will continue to be a key contributor to the global energy sector.