meed-logo

line1 line2 line3
SIGN IN / REGISTER

Hydrocarbons exploration rebounds

1 March 2023

MEED's upstream oil & gas report also includes: Energy security facilitates upstream spending

 

The world, and particularly countries in the Middle East and North Africa (Mena) region, remains undeterred in its quest to find more oil and gas resources, despite headwinds from energy transition activity and falling long-term hydrocarbons demand forecasts.

Last year, the global oil and gas exploration sector had its strongest year in more than a decade. In its effort to improve portfolios by adding lower-carbon, lower-cost advantaged hydrocarbons, the sector created at least $33bn of value and achieved full-cycle returns of 22 per cent, at $60-a-barrel Brent prices, according to a recent report from Wood Mackenzie.

Julie Wilson, director of global exploration research at Wood Mackenzie, says 2022 was “a standout year for exploration”. 

“Volumes were good, but not stellar. However, explorers were able to drive very high value through strategic selection and by focusing on the best and largest prospects. 

“The discoveries bring higher-quality hydrocarbons into companies’ portfolios, allowing them to reduce carbon by displacing less advantaged oil and gas supplies while also meeting the world’s energy needs.

“The highest value came from world-class discoveries in a new deepwater play in Namibia, as well as resource additions in Algeria and several new deepwater discoveries in Guyana and Brazil, where the latest wave of pre-salt exploration finally met with success,” she says.

“The average discovery last year was over 150 million barrels of oil equivalent, more than double the average of the previous decade,” she adds.

The exploration sector continues to be dominated by national oil companies (NOCs) and majors, with QatarEnergy, France-headquartered TotalEnergies and Brazil’s Petrobras leading the way in net new discovered resources in 2022, according to Wood Mackenzie. In total, NOCs and majors accounted for almost three-quarters of new resources discovered, the research consultancy said.

Qatar’s overseas footprint

In addition to raising gas production capacity from the North Field gas reserve and carrying out a liquefied natural gas (LNG) output expansion programme, QatarEnergy has been pursuing an overseas offshore oil and gas exploration and production (E&P) campaign in recent years.

The state enterprise has been investing in expanding its international upstream footprint, particularly in the gas space. In the past five years, QatarEnergy has acquired interests in gas-rich offshore blocks in Angola, Guyana, Kenya, Egypt, South Africa, Argentina, Mozambique, Morocco, Cyprus, Mexico, Brazil, Oman, Suriname and Canada.

In December, QatarEnergy won an offshore exploration block in Brazil in a consortium with TotalEnergies and Malaysia’s Petronas. QatarEnergy will hold a 20 per cent working interest in the Agua-Marinha production sharing contract, with TotalEnergies holding 30 per cent and Petronas Petroleo Brasil holding 20 per cent. Brazil’s state energy producer ANP will be the operator of the block, with a 30 per cent interest.

QatarEnergy also recently acquired a 30 per cent interest in exploration blocks four and nine off the coast of Lebanon. TotalEnergies is the operator of the blocks, holding a 35 per cent interest, with Italy’s Eni owning the remaining 35 per cent.

Oman E&P arena

Oman hosts the most foreign hydrocarbons E&P companies in the GCC. Majors such as BP, Shell and TotalEnergies have been present in the sultanate since the early 20th century, while smaller international upstream players have also been looking for – and producing – oil and gas for the past three decades.

The majority state-owned Petroleum Development Oman (PDO) operates the sultanate’s biggest and most prolific hydrocarbons concession, block six. The smaller oil and gas concession areas are operated by firms headquartered overseas such as Eni, Occidental Petroleum, Tethys Oil and Maha Energy, as well as by local firms such as ARA Petroleum, Majan Energy & Petroleum and Musandam Oil & Gas Company.

Oman’s Energy & Minerals Ministry signed a concession agreement in December 2021 with a consortium led by Shell’s Oman subsidiary, Shell Integrated Gas Oman, to develop and produce natural gas from block 10 of the Saih Rawl gas field.

The consortium comprises Omani state energy enterprise OQ and Marsa LNG, a joint venture of France’s TotalEnergies and OQ. The concession agreement established Shell as the operator of block 10.

By late January, Shell had started producing gas from the Mabrouk North East field located in block 10.

In September last year, the Omani energy ministry signed another E&P agreement with Shell and France’s TotalEnergies to develop block 11, which is located adjacent to block 10 and is understood to be rich in natural gas reserves.

Shell and TotalEnergies will own 67.5 per cent and 22.5 per cent stakes in block 11, respectively, with OQ holding the other 10 per cent. Shell is the operator with the majority stake in the concession.

UAE makes strides

Abu Dhabi National Oil Company (Adnoc) has completed two upstream concession licensing rounds in the past

four years, attracting oil and gas producing companies from the US, Italy, Pakistan, India, Thailand and Japan to explore for resources.

Offshore block two, which is operated by Italian energy major Eni with Thailand’s state-owned PTT Exploration & Production Public Company (PTTEP), has so far yielded two discoveries with combined estimated reserves of up to 3 trillion cubic feet (tcf) of gas.

In addition, in May last year, Adnoc announced the discovery of 650 million barrels of onshore crude oil reserves in Abu Dhabi, which increased the UAE’s hydrocarbons reserves base to 111 billion stock tank barrels of oil and 289 tcf of gas.

Adnoc also awarded Malaysia’s Petronas a six-year concession agreement in December to explore and appraise oil in unconventional onshore block one, deemed to be the Middle East’s first unconventional oil concession.

In Sharjah, Eni won stakes in all three upstream concession areas offered by Sharjah National Oil Company (SNOC) to international investors in the emirate’s first competitive hydrocarbons block bidding round, launched in June 2018. 

In January 2019, Eni successfully secured 75 per cent, 50 per cent and 75 per cent stakes in SNOC’s concession areas A, B and C, respectively.

Then, in October last year, PTTEP acquired a 25 per cent stake from Eni in area A, as a result of which Eni’s share in all three concession zones is now at 50 per cent.

Sharjah’s oil and gas fortunes reversed in January 2021, when SNOC, together with its partner Eni, announced the start-up of the Mahani 1 gas well. This marked the commencement of gas production from the Mahani field, located in area B, the first such onshore hydrocarbons discovery made in Sharjah in 37 years.

Energy security facilitates upstream spending

Bahrain labours on

Bahrain announced the discovery of the large Khalij al-Bahrain offshore hydrocarbons basin – estimated to contain 80 billion barrels of oil and 10-20 trillion cubic feet of gas – in April 2018.

Nearly five years later, Manama has been unable to make significant progress on the commercial appraisal of the oil and gas resources base. However, the lack of success with Khalij al-Bahrain has not deterred the country from continuing its exploration elsewhere.

In November, state energy conglomerate Nogaholding announced the discovery of natural gas in the two reservoirs of Al-Jawf and Al-Juba. The gas deposits are unconventional and situated in the Khuff and Unayzah geological formations.

Mena players make progress

Iraq, Opec’s second-largest oil producer, continues to seek more hydrocarbons resources in its territory. As recently as in February, the Oil Ministry awarded six oil concessions as part of the country’s fifth licensing round.

Three E&P concessions – one in Basra and two in Diyala governorates – were awarded to UAE-based Crescent Petroleum. Three others, also in Basra and Diyala, were awarded to China’s Geo-Jade Petroleum.

Eni’s discovery of the large Zohr gas field in the Mediterranean waters in 2015 elevated Egypt’s status as a significant upstream market globally, and the country’s government intends to continue to attract more E&P players on the back of this success.

Egypt’s hydrocarbons reserves spiked in 2022 with 53 new oil and gas discoveries: 42 oil wells and 11 gas wells, according to the Petroleum & Mineral Resources Ministry. The discoveries were made in Egypt’s Western Desert region, the Suez Gulf, the Mediterranean Sea and the Nile Delta.

So far in 2023, US-based Chevron, which operates the Nargis offshore concession in the East Mediterranean, together with its partners Eni and Egypt’s Tharwa Petroleum, has announced a discovery of Miocene and Oligocene gas-bearing sandstones.

At the start of this year, Egypt also launched an international licensing round for exploration rights in the Nile Delta and the Mediterranean, comprising 12 onshore and offshore blocks.

“There is a lot of uncertainty in future long-term demand scenarios for oil,” says Wilson. 

“Explorers are accelerating oil exploration to meet near- and mid-term demand, while gas exploration was focused in geographies that can supply the gas-hungry European market. In some cases, major leases are approaching the expiration of the exploration term and companies are pushing to optimise their value.”

She concludes: “By 2030, fast-tracked development of these new discoveries could deliver 1 million barrels a day in oil and half a million barrels a day of equivalent gas production, generating $15bn in free cash flow.” 

https://image.digitalinsightresearch.in/uploads/NewsArticle/10640105/main.gif
Indrajit Sen

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Gigaproject spending finds a level

    29 November 2024

     

    By the end of October 2024, there had been $17bn of contract awards across Saudi Arabia’s five gigaprojects, according to regional projects tracker MEED Projects, up from the $16bn recorded during the same period in 2023. 

    The five official gigaprojects named by Saudi Crown Prince Mohammed Bin Salman Bin Abdulaziz Al-Saud are: Diriyah, Neom, Qiddiya, Roshn and the projects being developed by Red Sea Global.

    While the growth in awards on these schemes in 2024 is positive, the pace of activity falls short of the strong growth that was expected as the gigaprojects move into the delivery phase. 

    The highlights for 2024 have been a $4.7bn contract to build dams at the Trojena mountain resort that was won by Italy’s WeBuild, a $2bn contract won by a joint venture (JV) of local firm Albawani and Qatar’s Urbacon Trading & Contracting for the construction of assets in the Wadi Safar development of the Diriyah project in Riyadh, and a $1bn contract secured by a JV of Spanish firm FCC Construction and local firm Nesma & Partners to build the Prince Mohammed Bin Salman Stadium at the Qiddiya City project on the outskirts of Riyadh.

    These awards appear to confirm the consensus in Saudi Arabia that the focus for development is on projects underpinned by events. These are Trojena, which will host the Asian Winter Games in 2029; stadiums for the Asian Cup in 2027 and the Fifa World Cup in 2034; along with Expo 2030 Riyadh and the Asian Games in 2034. 

    There is also a view that projects in and around Riyadh are being prioritised ahead of schemes in remote areas. 

    The stabilisation of activity in 2024, rather than the expected growth, combined with the intermittent nature of contract awards, has led to concerns about the prospects for the future of the market. 

    The concerns peaked when no contract awards were recorded in August on any of the five official gigaprojects, but were abated when there were several high-profile awards in September and October, most notably the Qiddiya stadium deal.

    The Line

    The most scruntinised project in 2024 has been The Line at Neom. 

    Since January, there have been reports about how the delivery of The Line will be phased, as well as rephasing exercises for other projects as budgets came under strain. Neom effectively confirmed these reports in November, when it said it is focused on the initial phases of infrastructure and enabling works for the new city. 

    Neom commented on the next phase of the project when it replaced CEO Nadhmi Al-Nasr with Aiman Al-Mudaifer as acting CEO, saying: “As Neom enters a new phase of delivery, this new leadership will ensure operational continuity, agility and efficiency to match the overall vision and objectives of the project.” 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13025339/main.gif
    Colin Foreman
  • Joint venture wins Jeddah airport terminal deal

    29 November 2024

     

    Jeddah Airports Company (Jedco) has awarded a contract to a joint venture of the local Algihaz Contracting and Turkiye’s TAV for the rehabilitation of the South Terminal at King Abdulaziz International airport (KAIA) in Jeddah.

    The project involves fully rehabilitating the old South Terminal to welcome pilgrims arriving in Jeddah for Umrah and Hajj pilgrimages.

    Singapore’s Surbana Jurong is the consultant.

    KAIA has three operational terminals. Opened in 2018, Terminal 1 is one of the world’s largest passenger terminals, and caters primarily for the state carrier Saudia and domestic flights. The North Terminal handles international airlines, while the Hajj Terminal is dedicated to pilgrim traffic. Operations from the South Terminal were transferred to Terminal 1 when it closed in 2020.

    Jedco has plans to transform KAIA into one of the world’s largest airports with a SR115bn ($31bn) expansion plan that will increase its capacity to 114 million passengers a year.

    The largest components of the plan cover the design and expansion of Terminal 1 and the construction of a new Terminal 2. In 2023, officials said the expected completion date for the expansion project is 2031.

    Jedco is also building a new Hajj and Umrah terminal. Pilgrims comprise a large portion of passenger traffic, and the new arrivals and departures hall for budget airlines will be able to handle 15 million passengers a year. The project is expected to be completed by 2025.

    The project investment programme is a result of Jedco’s forecast that annual demand will reach 114 million passengers by 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13023497/main0357.jpeg
    Colin Foreman
  • Saudi gigaprojects create long-term construction market

    28 November 2024

    Register for MEED's 14-day trial access 

    Speakers participating in a panel discussion on Saudi Arabia’s gigaprojects at MEED’s Mena Construction Summit 2024 in Dubai on 20 November discussed the progress of what is shaping up to be the world’s largest construction programme.

    There are five official gigaprojects in the kingdom. They are Diriyah, Neom, Qiddiya, Red Sea Global’s projects and Roshn. All five are subsidiaries of the Public Investment Fund (PIF). In addition to these projects, there is a wide range of other very large schemes commonly referred to as gigaprojects, such as New Murabba and King Salman Park.

    These projects, launched from 2017 onwards, have faced and continue to face considerable delivery challenges. Due to their vast scale, one of the main challenges has been attracting construction resources to the kingdom. The panellists said that while progress has been made in this regard, lots of work still needs to be done.

    Several major European contractors have won work on the gigaprojects over the past five years. They include France’s Bouygues, Spain’s FCC and Italy’s Webuild.

    Companies from the Far East include Hyundai Engineering & Construction, Samsung C+T, and a range of Chinese contractors including China State Construction Engineering Corporation, Powerchina and China Harbour Engineering Corporation.

    Regional contractors have also played a role, with GCC-based contractors such as Dubai-based Alec and Qatar’s UCC securing major contracts. Egyptian companies have also played an important role with contractors such as Hassan Allam winning work.

    Looking ahead, the panellists said that more contracting resources will need to be developed. This will involve roadshows to other markets around the world to promote awareness of the business opportunities available in Saudi Arabia to bring in new players and grow resources within the kingdom.

    In 2023, the PIF invested in four contracting companies: Al-Bawani, Almabani, El-Seif Engineering Contracting and Nesma & Partners. In the future, more investment will be needed in the supply chain.

    The business case for these investments is becoming stronger as the gigaprojects programme gathers momentum and demonstrates that it is creating a long-term market rather than discrete opportunities for construction companies in Saudi Arabia.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13018565/main.gif
    Colin Foreman
  • Adnoc launches energy and chemicals investment vehicle

    28 November 2024

    Register for MEED's 14-day trial access 

    Abu Dhabi National Oil Company (Adnoc Group) has launched a new investment company named XRG that will focus on low-carbon energy sources and the chemicals value chain.

    XRG has an enterprise value of over $80bn, Adnoc said in a statement on 27 November. The creation of the new investment vehicle was endorsed by Adnoc’s board of directors in a meeting chaired by Sheikh Mohamed Bin Zayed Al-Nahyan, UAE President and Ruler of Abu Dhabi.

    XRG aims to more than double its asset value over the next decade by “capitalising on demand for low-carbon energy and chemicals”.

    The independently operated investment company will initially focus on developing three value platforms, which are:

    • Global chemicals – XRG aims to be a top five global chemicals player, producing and delivering chemical and specialty products, to help meet the projected 70% increase in global demand by 2050.
    • International gas – XRG aims to build an integrated gas portfolio to help meet an anticipated 15% increase in global natural gas demand over the next decade, as a lower carbon transition fuel, as well as meet the expected 65% increase in demand for liquefied natural gas by 2050.
    • Low-carbon energies – XRG seeks to invest in boosting the supply chain needed to meet increasing demands for low-carbon energies and decarbonisation technologies to drive the global energy transition. The market for low-carbon ammonia alone is expected to grow by between 70-90 million tonnes a year by 2040, from close to zero now.

    XRG will formally begin operations in the first quarter of 2025, Adnoc said, adding that it will host a global strategy day next year.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13017143/main.png
    Indrajit Sen
  • Local firm bids $277m for Bahrain’s signature bridge

    28 November 2024

    Register for MEED's 14-day trial access 

    Manama-based Haji Hassan Group has submitted the lowest bid for a contract to build package four of the Busaiteen Link road scheme.

    The package involves the construction of a signature bridge connecting Muharraq to the existing North Manama Causeway and Bahrain Bay.

    Bahrain’s Ministry of Works (MoW) received bids for the contract in June, and the Bahrain Tender Board opened prices on 25 November.

    Haji Hassan offered to build the project’s package four for BD104.2m ($277.1m).

    According to the Bahrain Tender Board, the other bidders and their offers are:

    • Six Construct: BD221m
    • Al-Rashid Trading & Contracting Company: BD181.2m
    • Cebarco Bahrain: BD162.1

    The three-year contract covers construction works on the Busaiteen Link from junction four to junction five, as well as the bridge and roads connecting the new Busaiteen Link to the existing North Manama Causeway.

    The Saudi Fund for Development is financing the project.

    According to GlobalData, the output of Bahrain’s construction industry is expected to grow by 3.4% in real terms this year, supported by developments in commercial, energy and utilities projects and an increase in foreign direct investment.

    The infrastructure construction sector is expected to grow by 6% in 2024 and register an annual average growth of 4% in 2025-28, driven by the government’s efforts to upgrade the country’s transport infrastructure.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13016410/main.jpg
    Jennifer Aguinaldo