That could be about to change. With oil prices riding well above $60 a barrel and governments determined to further boost production levels, national oil and gas producers and their global counterparts have never needed each other more. NOCs need new investment capital, new management practices and technology, while IOCs are determined to gain access to the region’s mammoth hydrocarbon reserves. In return, they demand more acceptable rates of return, incentives for enhanced oil recovery (EOR) and opportunities for repeatable investments. And this is where the problem with the
relationship lies.

‘IOC frustration with previous joint
exercises and the increased confidence of NOCs in their own capacity led many on both sides to privately question the terms of engagement,’ Valerie Marcel, a principal researcher with the energy, environment and development programme at UK-based Chatham House, says in a recent report. ‘As they stand, these terms do not give IOCs adequate incentives to develop resources for the long-term benefit of the [host] country and often do not meet IOC criteria for investment. Consequently, a number of producers, such as Saudi Arabia and Iran, are unable to attract [the desired] bids from a large number of big players.’

Recently, however, attitudes have begun to change. ‘Over the past year, IOCs have seen the value of their Middle East portfolios increase significantly,’ Edinburgh-based Wood Mackenzie says in a new study issued in early July. ‘Cumulative asset values have jumped by around 87 per cent, due in part to more bullish expectations of oil price, but also as a result of the award and approval of several major development projects.’

These projects are clustered in the southern Gulf. They include: the long-awaited award of a 28 per cent equity stake to the US’ ExxonMobil Corporation in Abu Dhabi’s super giant Upper Zakum field (see box); the approval of the third-phase development of the Al-Shaheen field in offshore Qatar; the US’ Occidental Petroleum Corporation acquiring operatorship of the Mukhaizna field in Oman; and progress on several liquefied natural gas (LNG) and gas-to-liquids (GTL) projects in Qatar.

These regional developments have had a significant impact on the portfolios of most of the IOCs involved. Perched on top of the regional league table is ExxonMobil. ‘It has the most valuable upstream portfolio at $18,180 million [or 28 per cent of the total of IOCs]. About 92 per cent of its value is attributable to Qatar, where the company has a presence in several world-class gas and LNG projects,’ the study says. The Upper Zakum deal, signed in March, was also a major shot in its arm.

The Royal Dutch/Shell Group follows closely behind with $15,895 million, along with Total of France and Occidental Petroleum at $8,802 million and $6,107 million respectively (see table). ‘Shell and Total have both benefited from enhancing the value of their assets in Oman and Syria. Despite their buy-back contracts in Iran advancing another year through remuneration periods, Shell has maintained its position through the mix of long-term legacy assets and recent
initiatives. The 7.8 million-tonne-a year Qatargas 4 and 140,000-barrel-a-day [b/d] Pearl GTL projects in Qatar comprise 27 per cent of its regional value,’ it says.