Oil and gas: What is the regional outlook for the sector?
Now Reading
Oil and gas: What is the regional outlook for the sector?

Oil and gas: What is the regional outlook for the sector?

Petrochemical projects offer hope amid a bearish industry outlook

Avatar

The oil and gas sector carries a bearish outlook on the back of sluggish global growth, forecasted at 3 per cent for 2019, the lowest still since 2008-09.

Although the International Monetary Fund (IMF), in its latest outlook in October, predicted a 3.4 per cent growth for 2020 on the back of marked economic improvement in certain emerging markets, growth could be downplayed by a slowdown in markets such as China and the US as well as geopolitical strains, it said.

The numbers from the Organisation of Petroleum Exporting Countries (OPEC) also corroborate a slowdown, with global demand for OPEC crude estimated to average 29.6 million bpd in 2020, a drop of 1.2 million bpd from 2019.

The OPEC group’s production in September was 1.32 million bpd lower month-on-month at 28.49 million bpd, primarily due to the attack on Saudi Aramco’s oil facilities.

In a report last month, the International Energy Agency (IEA) cut its oil demand growth forecast for both 2019 and 2020 to 1 million bpd and 1.2 million bpd respectively. This year is seeing two very different halves, it highlighted. In the first half of the year, global growth was only 0.4 million bpd but in H2, it could be as high as 1.6 million bpd goaded by with growth seen in non-OECD nations.

“Demand is supported by Brent prices that are more than 30 per cent below year-ago levels. For 2020, a weaker GDP growth forecast has seen our oil demand outlook cut back,” it added.

Additionally, renewable energy growth is also triggering a slowdown in demand for traditional energy sources such as oil and gas. The share of renewable energy in fulfilling global energy demand is touted to reach 12.4 per cent in 2023.

Despite the headwinds, industry forecasts do predict a positive longer-term outlook for the sector, propelled by population increase and economic growth. Global oil demand is expected to grow by a minimum of 10 million barrels a day by 2040, according to the IEA. Natural gas demand is forecast to grow by 40 per cent and petro- chemicals by 60 per cent in that time.

Regionally, to cater to this demand, more than $859bn worth of oil, gas and petrochemicals projects are planned or in progress across the Middle East and North Africa region, according to a research report by MEED.

The report credits Saudi Arabia as the single largest spender in the region’s oil and gas sector with more than $31bn worth of contracts in execution. Second in line are Kuwait’s three largest oil and gas companies, which have $42.2bn accumulated worth of projects in progress. Abu Dhabi National Oil Company (ADNOC), which has announced several new partnerships and deals in recent months, has $16.7bn combined contract worth of projects under execution across onshore and offshore upstream businesses, the report found.

Outside the GCC, Algeria’s Sonatrach has announced plans of $10.8bn worth of projects, while Egypt’s Petroleum Ministry has sought $12.3bn worth of projects. Up to 130 new crude and natural gas projects are also expected to be underway in Asia in the next eight years, contributing close to 518,000 barrels per day.


© 2021 MOTIVATE MEDIA GROUP. ALL RIGHTS RESERVED.

Scroll To Top