Despite an abnormally profit-soaked 2008, the global picture for pure-play E&P companies looks decidedly bleak.
However, thanks to much needed upgrades and capacity expansions throughout the Gulf, firms that have built a solid reputation in the Middle East will almost certainly be insulated from the worst effects of a “sub-prime” oil market environment.
Projects commissioned in the Gulf and Saudi Arabia when the price was at it fullest remain much needed. Some analysts are arguing that the recession in the west will be so hard-hitting that demand may actually fall in 2009. However, globally there is almost no question that more oil will be needed next year, and that oil is, in large part, going to come from the Middle East.
The reality remains that the situation is far from bleak for those upstream firms which have built relationships in the region.
Of course, there will remain a high correlation between upstream spend and the crude oil price, and that will have a direct impact on all the international companies, from international oil giants, right through to the gasket manufacturers in the region’s freezones.
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However, that correlation is not perfect, and through to 2010, it may be more imperfect than ever before. The projects in the early stages of development in Abu Dhabi, Qatar, Kuwait and Oman are not only vast in scale and size, and have been confirmed as recently as the end of December.
The Kuwaiti oil minister called a press conference at his offices and said that whilst new projects there will be re-evaluated, the core developments already underway were part of a long-term strategy and would definitely be going ahead. The following day the President of the UAE echoed the same sentiments for the oil and gas sector.
In Bahrain the largest seismic survey project the country has ever known is under way, with Occidental managing three blocks, and Thailand’s national oil company taking the last.
Whilst much attention has been grabbed by delayed, or scaled back downstream projects in Saudi Arabia, the upstream spend in The Kingdom through 2010 will surpass the previous 4 years with ease.
Those companies which choose to enter the region aggressively in 2009 may find to their disappointment that they have indeed missed the boat, for relationships fostered in the previous cycle will prove absolutely vital in the downturn.
The Gulf economies are more than ever looking for intelligent solutions to enhance the reserves at their disposal, and the international players who can assist in these long-term objectives will see their Middle Eastern investments pay dividends for years to come.
Daniel Canty is the editor of Oil & Gas Middle East.
