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  Region to continue robust spending on oil and gas

  29 December 2024

  

   

  The upstream oil and gas industry in the Middle East and North Africa (Mena) region recorded more than $53bn of capital expenditure (capex) on oil and gas production projects in 2023. 

  It was forecast that the sector might never repeat that level of spending on engineering, procurement and construction (EPC) contracts, especially with hydrocarbons producers striving to achieve their net-zero carbon emissions goals and broader sustainability commitments.

  Abu Dhabi National Oil Company (Adnoc) led capex on Mena production projects in 2023, largely due to its $17bn spending on the Hail and Ghasha offshore sour gas development project.

  Saudi Aramco was the second-largest spender in the region in 2023, on the back of the estimated $10bn-worth of EPC contracts it awarded for the second expansion phase of its Jafurah unconventional gas development. It also maintained spending on offshore field upgrade works, awarding about $5.3bn-worth of engineering, procurement, construction and installation (EPCI) contracts.

  Yet upstream project spending in 2024 year-to-date has surpassed 2023’s level, with Mena hydrocarbons producers collectively spending more than $58bn on oil and gas production capacity maintenance and expansion projects.

  Record year

  Iran emerged as the largest spender in the Mena upstream sector in 2024, with the country’s capex exceeding $22bn. State-owned Pars Oil & Gas Company spent $20bn on EPC contracts in March, on a project to boost gas output capacity at the South Pars field.

  Iran shares the South Pars field with Qatar, where it is known as North Field. The natural gas reserve in the Gulf’s waters is estimated to hold 1,800 trillion cubic feet of gas and 50 billion barrels of condensates.

  Pars Oil & Gas Company aims to produce 90 trillion cubic feet of gas and 2 billion barrels of condensates from the latest expansion phase of the South Pars field development. The company expects to generate $900bn in total revenues from the expansion project.

  Qatar was the second-largest spender in the region in 2024, with state enterprise QatarEnergy advancing its North Field production sustainability (NFPS) project, which aims to support its liquefied natural gas (LNG) expansion programme with gas feedstock.

  QatarEnergy LNG, a subsidiary of QatarEnergy, awarded Italian contractor Saipem an estimated $4bn EPCI contract in September as part of the second phase of its NFPS project.

  Saipem was awarded two packages, the scope of which encompasses EPCI work on a total of six platforms, approximately 100 kilometres (km) of corrosion resistance alloy rigid subsea pipelines of 28-inches and 24-inches diameter, 100km of subsea composite cables, 150km of fibre optic cables and several other subsea units.

  Separately, in January, Qatar’s North Oil Company awarded $6bn-worth of contracts for four engineering, procurement, construction, installation and commissioning packages on a project to increase oil production from its Al-Shaheen offshore oil field by about 100,000 barrels a day (b/d).

  The project, known as Ruya, is the third capacity-expansion phase of the Al-Shaheen oil field, which has a production potential of 300,000 b/d at present. North Oil Company – a joint venture of QatarEnergy (70%) and France’s TotalEnergies (30%), which has been the operator of Al-Shaheen since July 2017 – aims to increase the field’s output through the Ruya project.

  Saudi offshore spending

  In late January 2024, the Saudi Energy Ministry directed Aramco to abandon its campaign to expand its oil production spare capacity from 12 million b/d to 13 million b/d by 2027. As a consequence, Aramco cancelled the tendering process for at least 15 tenders involving the EPCI of structures at offshore oil and gas fields.

  Since that decision, however, Aramco has gone the other way, spending an estimated $4.5bn in 2024 on offshore EPCI contracts, known in the Aramco ecosystem as CRPOs. 

  Saipem has been the biggest beneficiary of Aramco’s offshore spending, winning all of the CRPOs awarded in 2024. In early May, Aramco awarded the contractor CRPO 143, which involves replacing an oil line between the Berri and Manifa oil fields in the kingdom’s Gulf waters.

  Aramco then awarded Saipem the contract for CRPO 138, which involves laying a trunkline at the Abu Safah offshore field. The contract is estimated to be worth $500m. 

  The firm then scooped three major CRPOs in August, starting with CRPOs 132 and 139, the combined value of which is estimated to be about $1bn. In early September, Saipem began work on the two contracts, which involve the EPCI of structures to upgrade the Marjan, Zuluf and Safaniya offshore field developments.

  Just days later, Aramco awarded Saipem CRPO 127, a $2bn contract that involves EPCI of topsides and jackets for wellhead platforms, a tie-in platform jacket and topside, rigid flowlines, submarine composite cables and fibre optic cables at the Marjan oil and gas field.

  Jafurah development

  Aramco has also made swift progress in 2024 on successive expansion phases of its programme to produce and process gas from the Jafurah unconventional development in Saudi Arabia. Spending on the Jafurah expansion projects, along with offshore contracts, helped to make the kingdom the third-biggest upstream spender in the Mena region.

  Aramco awarded contracts on 30 June for the Jafurah second expansion phase, which aims to raise processing potential to up to 2 billion cubic feet a day (cf/d) of raw gas. Aramco awarded 16 contracts, worth about $12.4bn, for EPC works and drilling services for the second expansion phase.

  Within weeks of those awards, a consortium of Spanish contractor Tecnicas Reunidas and China’s Sinopec Group announced that it had been selected by Aramco to carry out EPC works on the third expansion phase at Jafurah, worth $2.24bn. The EPC scope mainly covers building three gas compression plants, each capable of processing 200 million cf/d. Aramco officially awarded the contract to the Tecnicas Reunidas/Sinopec consortium in late September.

  

  Capex to hold steady

  While the Mena upstream oil and gas industry may not be able to match its 2024 level of project capex in 2025, the sector is expected to maintain a robust level of spending, especially with national energy companies striving to achieve their strategic long-term oil and gas production capacity goals before the end of the decade.

  Data from regional projects tracker MEED Projects suggests that the Mena upstream sector could invest about $40bn on projects in 2025, with gas output expansion schemes predicted to dominate spending.

  In line with its target to increase gas production by 60% by 2030, with 2021 as its baseline, Aramco is on course to further advance its Jafurah unconventional gas production programme. It issued the main EPC tender for the fourth expansion phase of the programme in July, within days of selecting the main contractors for the third phase.

  Contractors are preparing bids for the project, the scope of which is similar to that of the third expansion phase, and which is therefore understood to be valued at $2.5bn.

  Saudi Arabia’s spending on offshore brownfield and greenfield EPCI contracts is set to remain high, with the tendering process under way for eight more Aramco CRPOs.

  Four tenders were issued in August for CRPOs 149, 150, 152 and 153, which cover the EPCI works on the Arabiyah, Hasbah and Marjan offshore oil field developments. Of the four CRPOs, contractors in Saudi Aramco’s Long-Term Agreement (LTA) pool have submitted bids for 149, 152 and 153. 

  Separately, LTA contractors are also preparing bids for four tenders worth a total of $4bn, which will further expand the Zuluf offshore field development.

  Meanwhile, Iran is expected to give shape to its plan for gas extraction from its North Pars field, along with raising output from its onshore and offshore oil fields. Increasing production is vital for Tehran in order to maintain steady volumes of exports to earn vital revenue for its economy, which has been crippled by years of international sanctions.

  Pars Oil & Gas Company is estimated to have allocated $15bn to the North Pars gas field development project. However, with the project being in the study phase, and with Iran’s cash-strapped government barely able to provide support to its population, the scheme could see little to no progress in 2025.

  In the UAE, with the deadline approaching for Adnoc’s target of raising crude output capacity to 5 million b/d by 2027, it is anticipated that the company will funnel billions of dollars into increasing the production potential of its onshore and offshore oil fields. 

  Adnoc Group subsidiary Adnoc Offshore is evaluating bids for three packages of a multibillion-dollar project to boost oil production at the Lower Zakum offshore hydrocarbons concession in Abu Dhabi. The goal of the first phase of the Lower Zakum long-term development plan is to raise the asset’s output capacity to 520,000 b/d by 2027 and maintain that level until 2034. 

  Adnoc Offshore has also started the tendering exercise for front-end engineering and design work on the second expansion phase of the Umm Shaif offshore oil field.

  Another Adnoc Group subsidiary, Adnoc Onshore, has made a significant capex investment in growing crude output from its main Bab, Northeast Bab, Bu Hasa and Southeast fields. As a result, it is on course to award more contracts in 2025 to maintain and eventually increase output from these fields through its P5 projects, which aim to achieve an oil production potential of 5 million b/d by 2027. 

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  Indrajit Sen
• 
  Kuwait 2025 country profile and databank

  29 December 2024

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  MEED Editorial
• 
  Industrial projects enjoy sustained rise in spending

  27 December 2024

  

   

  The past two years have seen a significant upswing in the value of industrial project contract awards in the Middle East and North Africa (Mena) region, driven by development schemes in a diverse range of materials processing and manufacturing, and with an emphasis on pushing into higher value sectors.

  While in the past 10 years, the value of annual industrial project contract awards has averaged around $8bn a year, the regional awards figure surged to $13.5bn in 2023 and rose again in 2024 to $15.2bn by the end of October – placing the year on track to top the record $16.1bn awards figure in 2015.

  At the time of writing, the value of projects in bid evaluation and prospectively due for award in the final two months of 2024 was $3.8bn – only a quarter of which would need to be awarded to make 2024 a new record year for industrial projects awards in the Mena region.

  The lull in this sector until two years ago is a reflection of cyclical events, with the cash-rich oil-exporting countries coming down from an energy price high in 2015 and being further influenced in their industrial investment decision-making in 2020 by the impact of Covid-19.

  However, as a key focus for both the predominantly non-oil economies in the region and a diversification target for the energy-rich economies, the industrial sector is an area of perennial investment that was always bound to bounce back when the conditions were right.

  Top awards

  Many of the highest value project awards in the past two years have been in either heavy industry, and especially metals processing and refining, or in assembly and manufacturing. In a sign of the newer technologies and industries being invested in, top project contract awards in the past two years include: a $2.4bn green steel plant being developed by India’s Vulcan Green at Duqm in Oman; a $1.4bn solar polysilicon plant being developed by United Solar Polysilicon in Sohar Oman; a $1.3bn Ceer-brand electric vehicle manufacturing plant being developed by the Public Investment Fund and Taiwan’s Hon Hai Precision Industry in King Abdullah Economic City, Saudi Arabia; and a $1.4bn battery factory project being developed by China’s Gotion High Tech in Kenitra, Morocco.

  These examples reveal an emerging trend for regional investment into strategic and investor friendly sectors such as renewables, electrification and decarbonised industry. Such projects build upon a baseline of regional activity in mining and metals refinement, as well as local construction materials production, by diversifying away from more traditional industries and sectors towards the development of a higher tech manufacturing base with potentially higher returns.

   

  Several similar projects are in bid evaluation and up for award before the end of 2024 or in design and expected to be tendered in 2025. These include the $3.2bn plans by the US-based Statevolt to develop a battery cell factory in the Al-Hamra Industrial Zone, Ras Al-Khaimah, UAE; a $2bn green steel plant planned by the UAE’s Taqa and Emirates Steel in Abu Dhabi; a $2bn project being developed by Morocco’s Al-Mada and China’s CNGR Advanced Material to build a factory for electric vehicle batteries in El-Jadida, Morocco; plans for another $450m lithium hydroxide plant for the battery production supply chain to be developed by Australia’s EV Metals Group in Yanbu, Saudi Arabia; and a $400m Al-Damani electric vehicle manufacturing plant planned to be built by the UAE’s M Glory Group in Dubai Industrial City.

  Those projects alone represent over $8bn in combined value, or more than a third of the pipeline of projects due for award before the end of 2025, demonstrating the pace at which new investments are being made in more technologically advanced localised manufacturing capabilities and supply chain assets.

  High-tech investment

  With significant interest in the development of local data centres and artificial intelligence capabilities, the next wave of high-tech manufacturing investments in the region could well be into computer processor chips. In September, it was reported that both Taiwan TMSC and South Korea’s Samsung Electronics had expressed interest in building chip-manufacturing facilities in the UAE.

  While the mainstay of regional industry remains heavy industry, recent project awards and the project pipeline provide a clear sense of the shifting focus of regional industrial investment efforts. 

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  John Bambridge
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  Water sector braces for likely slowdown

  27 December 2024

  

   

  Geopolitical tensions, climate change and higher-than-average population growth have exacerbated the water demand and supply gap across the Middle East and North Africa (Mena) region, home to some of the world’s most water-stressed countries.

  For example, Jordan, where available water per capita is equivalent to only 12% of the absolute water scarcity level, hosts over 700,000 refugees fleeing wars and conflicts in neighbouring countries.

  Most regional governments have developed and started to implement water strategies aimed at narrowing this gap. Subsidies are being phased out, environmental campaigns are being developed and digital solutions are being deployed in order to manage demand and improve efficiency.

  Expanding desalination and treatment capacity, increasing treated sewage effluent (TSE) reuse, boosting reservoir capacity and building more efficient transmission and distribution networks are key levers used to improve supply.

  Strong spending 

  These efforts have prompted significant capital spending on more energy-efficient water production, distribution and storage facilities, typically in partnership with private investors, particularly among the more affluent states.

  According to data from regional projects tracker MEED Projects, the Mena region awarded $17bn of project contracts across the water desalination, treatment, transmission and distribution, storage and district cooling subsectors in the first nine months of 2024.

  This figure represents about 72% of the contracts awarded in 2023 and is slightly above the average value of annual contract awards in the preceding five years.

  With only a few more packages expected to be awarded before the end of the year, 2024 looks set to be one of the best years so far in terms of water project activity, even if it fails to match the record value of contracts awarded in 2023, which reached almost $24bn.

  In 2024, Saudi gigaproject developer Neom set the pace in January by awarding a $4.7bn contract to build dams at the Trojena Mountain Resort in Tabuk to Italian contractor WeBuild. 

  The contract covers the construction of three dams that will form a freshwater lake for the Trojena ski resort. The main dam will have a height of 145 metres and will be 475 metres long at its crest. It will be built using 2.7 million cubic metres of roller compact concrete.

  While this project does not necessarily belong to the band of solutions that aim to narrow the water supply and demand gap, the overall development is part of Saudi Arabia’s drive to boost tourism and diversify its economy away from oil.

  Meanwhile, 2024 also saw the award by UAE northern emirate utility Sharjah Electricity, Water & Gas Authority of the contract to develop its first independent water project (IWP), the 400,000 cubic-metres-a-day facility in Hamriyah, to Saudi utility developer Acwa Power, the contract’s sole bidder.

  In May, Saudi Arabia’s National Water Company announced that it had completed the award of 10 contracts under the first phase of its privatisation programme. Each rehabilitate, operate and transfer contract involves the retrofitting or expansion of existing sewage treatment plants and associated network, and their long-term operation and management. The facilities are expected to deliver water at the TSE level for irrigation reuse.

  On the greenfield sewage treatment front, Saudi Water Partnership Company (SWPC) awarded a $400m contract to develop the Al-Haer independent sewage treatment plant (ISTP) project to a team comprising the local Miahona Company and Belgium’s Besix. The facility is the largest and first to be tendered under the third round of the water offtaker’s ISTP procurement programme.

  In September, Chennai-headquartered VA Tech Wabag confirmed it had won a $317m contract to build the Ras Al-Khair seawater reverse osmosis (SWRO) facility in Saudi Arabia using an engineering, procurement and construction (EPC) model. The project client is Saudi Water Authority (SWA), formerly Saline Water Conversion Corporation.

  In Oman, Nama Water Services awarded two water distribution network packages, worth a combined $600m, catering to Al-Dhahirah Governorate.

  Jordan also appointed a team comprising Paris-based Meridiam, Suez and Vinci Construction Grands Projets, along with Egypt’s Orascom Construction, for the contract to develop the Aqaba-Amman water conveyance and desalination scheme. It is the country’s largest infrastructure project to date and the first phase is valued at an estimated $2bn-$3bn.

  The project is crucial to addressing Jordan’s severe water shortage problem, piping desalinated water over 445 kilometres from the southern Red Sea coast to the country’s northern regions. The consortium is talking to lenders and aims to reach financial close for the project in 2025.

  Slower momentum

  Despite 2024 being a good year for contract awards, it fell short of the expectation built over the past few years, when the region’s largest economies began to execute their long-term water strategies.

  For example, in Saudi Arabia, the years-long restructuring of the domestic water sector took a significant turn in 2024, with Water Transmission Company (WTCO), the kingdom’s licensed desalinated water transmission operator, gaining a broader portfolio of projects. As a result, the mandate to procure upcoming water transmission pipelines has been transferred to WTCO from SWPC.

  The slower pace of IWP contract awards in Saudi Arabia was somewhat offset by a slew of tenders from SWA. The authority received bids for the EPC contracts to build four SWRO facilities in 2024, although as of November it had only managed to award one.

  Earlier in 2024, Saudi gigaproject developer Neom also shelved a project to develop a zero-liquid discharge (ZLD) SWRO plant.

  “The year may not have been as strong as 2023, but it is still a good year,” says Robert Bryniak, CEO of Dubai-based Golden Sands Management (Marketing) Consulting. “Some projects have been delayed or cancelled – for instance a few in Saudi Arabia – but all in all [2024 has been] a good year for the water business.”

  Bryniak adds that Neom’s ZLD scheme is one of the year’s shelved projects that he would like to see revived in the future.

  Beyond the GCC states, Morocco and Egypt are endeavouring to move their planned SWRO projects into the tendering phase.

  In Morocco, Office National de L’Electricite et de L’Eue Potable (Onee) extended the review of its second IWP in Nador while waiting for its first IWP in Casablanca to reach financial close.

  The first batch of renewable energy- powered desalination plants in Egypt has yet to reach the proposals stage despite the Sovereign Fund of Egypt having completed the bid prequalification process in 2023.

  

  Potential contract awards

  According to data from MEED Projects, an estimated $34bn-worth of water projects are in the tendering stage across the Mena region. A further $40bn-worth is in the prequalification stage and $57bn is in the design and study phases.

  The $22bn Dubai Strategic Sewerage Tunnels (DSST) scheme stands out among the upcoming projects due to its scale, as well as for the chosen procurement approach.

  The project aims to convert Dubai’s existing sewerage network from a pumped system to a gravity system by decommissioning the existing pump stations and providing a sustainable and reliable service that is fit for the future.

  In April, Dubai Municipality launched the procurement process for the DSST project, which is to be developed as a public-private partnership (PPP).

  While a dose of pessimism persists over the chosen PPP model – in part due to the project’s scale and strong civil works orientation, and Dubai’s dismal track record in procuring PPP schemes outside the utility sector – the project has managed to attract strong interest from EPC contractors, as well as from potential investors and sponsors.

  Some of those that have sought to prequalify as investors, such as Begium’s Besix, Beijing-headquartered China Railway Construction Corporation and South Korea’s Samsung C&T, have previously been prequalified as EPC contractors for the DSST project, which suggests that the preferred approach of prequalifying EPCs ahead of investors could offer advantages.

  In Saudi Arabia, WTCO, SWA, SWPC and Neom’s utility subsidiary Enowa are each expected to let several contracts in 2025, while Bahrain and Abu Dhabi could award one IWP contract each.  

  However, a robust overall pipeline does not necessarily guarantee that 2025 will resemble the upward trajectory that the sector has seen in the past two years.

  “This year could be a turning point for the water industry throughout Mena,” says Bryniak, alluding to the possibility that, come January, the foreign and climate policies of the new occupant of the White House could affect the trend of water production capacity buildout in the Mena region.

  Bryniak says that if US President-elect Donald Trump follows through with his promises, then we may be in store for, among other events, lower energy prices as the US drills more oil; a dampening of world trade as the US places tariffs on imports, especially on Chinese goods and services; less focus on the environment; and, generally, a more isolationist America.

  “In my view, much depends on how much oil prices fall,” he continues. 

  “A significant drop in oil prices could result in cut-backs in a lot of development projects, and this, in turn, will adversely impact water demand and the overall build programme.”  

  However, the impact will not be uniform across asset types and procurement models, Bryniak notes. He expects water PPP projects to continue to grow, especially if capital availability is reduced by lower oil prices, as this is one way to preserve capital for use in other areas. 

  “I do not see any reason for tariffs to fall further in 2025. Tariffs, in my view, will remain roughly where they are now or increase slightly,” adds Bryniak.  

  However, the executive says that EPC contracts will likely have “a higher opportunity cost”, so there might be a reduced focus on this type of procurement model.  

  He concludes: “To the extent that development projects get trimmed down due to less capital being available as a result of significantly lower oil prices, then water procurers and other developers will likely scale back their projects.”

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  Jennifer Aguinaldo
• 
  Iraq 2025 country profile and databank

  27 December 2024

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  MEED Editorial