Last year was a record year for oil and gas contractors in the Gulf. Some $46bn-worth of engineering, procurement and construction contracts were awarded between April 2009 and March 2010, according to MEED’s annual survey of the sector.

This is the highest level of contract awards since 2006-07. The surge in investment during a global economic downturn will enable the regional governments to capture huge cost savings as contractors and materials providers compete to win business. It will also place the GCC in a strong position to meet higher production targets.

But with increased production comes a new challenge for the Gulf’s hydrocarbons producers. To boost production, the region is having to exploit oil and gas fields that are sour, meaning they contain high levels of hydrogen sulphide.

Extracting hydrocarbons from these field leaves them with additional volumes of sulphur on their hands. Previously, sulphur was a valuable commodity worth more than $800 a tonne. Since 2008 the world sulphur market has become oversupplied and prices have collapsed to less than $200 a tonne.

The supply/demand imbalance is set to worsen in the years ahead. By 2016, consumption is forecast to be 91.1 million tonnes, compared with production of more than 100 million tonnes.

The oversupply is of key concern for the Middle East, which is expected to account for 20 per cent of global production by 2014, up from 15 per cent today.

Finding an end-use for the co-product is important not just to help offset to the cost of exploiting the more technically challenging sour oil and gas fields, but to prevent the need to store the sulphur. Storage of any substance only delays finding a long-term solution and should always be a last resort.