Majors Size Up Finite Chances in Mideast

Western majors may be poised to invest big in the Middle East and North Africa (Mena) this year after seeing their output from the region stagnate over the last decade. A combination of post-Arab Spring security upheaval, sanctions, and poor commercial terms hurt majors' interest in Mena in recent years. But the region's low-cost, low-carbon reserves look competitive in the energy transition, making them attractive to majors. Decisions on partner selection for Qatar's LNG mega-expansion and a multiproject by Total in Iraq should come this year. But beyond these, opportunities in the Mideast Gulf remain relatively sparse. Indeed, it could be the last big hurrah for majors to participate in the region's upstream bounty. Qatar will select partners for its 32 million ton per year LNG expansion later this year, but investment opportunities in other parts of the Gulf look played out or limited. In Iraq, Exxon Mobil wants to exit the West Qurna-1 project, while Total is targeting completion of a multiproject initiative. The United Arab Emirates is poised to move on a few f key unconventional gas plays, but oil opportunities there have largely been allocated already. Sanctions risks mean Iran may never truly open to Western majors (related). Qatar’s LNG expansion is the best example of the new drive to decarbonize output. State-owned Qatar Petroleum (QP) is looking to integrate massive carbon, capture and storage (CCS), solar powering of operations, and new flaring and methane emissions reduction technologies into the $29 billion project (PIW Feb.12’21). Total is also looking at around 1 gigawatt of solar in Iraq, which would both supply the grid and help power its planned expansion of the Ratawi oil field by 120,000 barrels per day and the 600 million cubic feet per day Ratawi Gas Project. The French firm is looking at potential solar power, CCS and hydrogen components for its Omani LNG bunkering project. Of the majors, only BP and Total have avoided big declines in regional net output over the past 10 years. On paper, BP’s 54% increase since 2010 looks more impressive, but it may be difficult to sustain. The UK major's transition strategy includes a commitment to cut upstream production by 40% by 2030. Total, however, has the project pipeline to potentially challenge Exxon as the top major in Mena. BP has not been short-listed for the Qatar LNG opening, and this year it sold 20% of its growing Oman assets to Thailand's PTTEP. Even if projects currently under discussion all fail, Total will see its net regional output grow, despite the hit it is about to absorb because of Doha's recent decision to take 100% of the 10 million ton/yr Qatargas-1 when Total’s contract expires in 2022 (PIW May’24’19). The Shaheen redevelopment in Qatar is now back on track and should add some 80,000-100,000 b/d by 2025. Total also participates in three UAE oil projects currently under development -- Adnoc onshore, Umm Shaif and Lower Zakum. A decision on whether to proceed on two unconventional gas projects -- Umm Shaif Gas Cap and Ruwais-Diyab -- should come this year, too. Security challenges triggered a 37% drop in net Libyan output last year, but volumes have bounced back (PIW Apr.16'21). Qatar’s LNG expansion is the big prize for most majors, but it is conceivable that all are shut out from the project. Doha has warned that it is prepared to go it alone if bids -- due in late May -- come up short. Failure to secure participation would be an especially bitter pill to swallow for Exxon, the dominant foreign investor in Qatar. Including its soon-to-be extinguished participation in Qatargas-1’s three trains, Exxon has stakes in 12 of Qatar’s existing 14 trains. Even if Exxon’s net Qatari output is down over 350,000 boe/d from its 1.02 million boe/d peak in 2011 peak, it still makes up around 75% of the company's regional output. For Chevron, too, this year could determine if it emerges a genuine Mena upstream player. In addition to the Qatar LNG opening, it has been seeking an Iraq entry for some time. Chevron also is developing two petrochemical projects with state-owned QP (PIW Jul.26'19). Majors' Net Mena Output ('000 boe/d) 2018 2019 2020 2020 vs.