Is MENA losing the global energy investment race?

Posted on May 1, 2012

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Accelerated investment by Gulf oil producers would not hurt.

Offshore platform located in the Gulf of Mexic...

Offshore platform located in the Gulf of Mexico. (Photo credit: Wikipedia)

‘Lies, damned lies, and statistics’, a phrase whose origin is still being debated by researchers, is often used to describe the persuasive power of numbers, particularly the use of statistics to bolster weak arguments. It is also sometimes colloquially used to doubt statistics used to prove an opponent’s point. And our point is…?

This: IHS CERA, an energy research consultancy, says in a report published this week that energy companies in the Middle East and North Africa are expected to invest USD 133 billion in 2012, or just under 11% of the total global energy investments this year. The lion’s share of such investments will come from North America and Mexico, which will collectively account for USD 324 billion of the USD 1.23 trillion being spent by energy companies across the world this year.

The International Energy Agency expects the MENA region to contribute more than 90% of the required growth in oil production to 2035. The largest increases in production come from Iraq, adding five million barrels per day (mbd), and Saudi Arabia, adding almost four. The IEA is worried that a shortfall would radically alter the global energy balance, arguing that MENA production could be 6 mbd lower in 2020 if the region under-invests in the sector.

If this suddenly starts ringing alarm bells in your mind, read on. The Middle East is expected to be one of the main growth regions in terms of total spending going forward, with capex rising by nearly 80% from 2011 to 2016 driven by increased drilling activities in Saudi Arabia and particularly Iraq. This compares to a global capex increase of 45% globally over the same time period. This is from IHS CERA.

The MENA region — the Gulf nations in particular — have always been the powerhouses of oil production. They are also mastering the art of balancing supply and demand in a way that keeps multiple economic balls in the air at all times. It is relatively simple to look at short-term trends and extrapolate alarming scenarios. Given how critical it is for both buyers and sellers in the supply chain to have visibility on spending trends, a little more thought and care are necessary to provide a clearer understanding.

Accelerated investment by the MENA oil producers too would not hurt.

More intelligence on MENA energy investments:

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Posted in: Commodities