The drive to push through previously uneconomic projects will continue while oil prices remain high.
With oil prices averaging about $72 a barrel in 2007, national oil companies (NOCs) in the region are flush with cash. From oil powerhouses, such as Saudi Aramco, through to emerging gas-focused exploration giants, such as Algeria's Sonatrach and Libya's National Oil Corporation, the drive to push through previously uneconomic projects while prices remain high will continue in 2008.
In Saudi Arabia, the focus is on the kingdom's ability to keep pace with its ambitious target of boosting crude production to 12.5 million barrels a day (b/d) by 2009 through an $80bn investment programme. Significant milestones will be the commissioning of the 500,000-b/d Khursaniyah crude oil increase, the start-up of the Nuayyim oil field and the development of the 1.2 million-b/d Khurais field.
Riyadh observers are also anxiously moni-toring the kingdom's gas plans, with development to continue on the estimated 1 billion cubic feet a day (cf/d) Karan field and the Rub al-Khali (Empty Quarter) exploration programme. Costs have escalated for Aramco's two export refineries at Jubail and Yanbu over the past 12 months, forcing the private sector partners to re-evaluate the returns on the projects.
Costs on the Yanbu refinery, being carried out as a joint venture of Aramco and the US' ConocoPhillips, are likely to exceed $12bn, compared with an initial costing of about $8bn. Costs for the Jubail refinery, being carried out by Aramco and France's Total, have increased to $10-11bn from $7-8bn. The international oil companies (IOCs) are expected shortly to either reinstate their commitment to the projects or withdraw completely.
Neighbouring Qatar will enter a consolidation phase in 2008, with the state recently suggesting the current moratorium on exploration in the North field may be extended until 2012.
Qatar Petroleum's (QP) international arm will look to sign a further round of deals as it continues building energy assets in growing overseas markets. Domestically, QP is focusing on implementing the Barzan gas field, currently the subject of a feasibility study, and the next phases of the Qatargas and Ras Laffan Liquefied Natural Gas Company (RasGas) ventures at Ras Laffan.
In Bahrain, IOCs are pledging to double the capacity of the onshore Awali oil field to 70,000 b/d and boost gas production to 2 billion cf/d in the next bid round, the winner of which is expected to be announced in January. Work on three of the four offshore blocks recently tendered will also start in the first quarter.
In the UAE, an international oil company is to be selected to develop Abu Dhabi's sour gas fields. With growing concern over the availability of gas feedstock, attention will again turn to the Dolphin pipeline, with phase 2 potentially bringing in an additional 1.2 billion cf/d of gas, if Qatar can commit to supplying it.
Oman will also look to Dolphin to supply its new and growing industrial sectors - aluminium, construction and desalination - with about 200 million cf/d. Elsewhere, enhanced oil recovery projects at Harwel, Qarn Alam and Marmul will be developed for start-up in 2009.
With a high turnover of oil ministers in 2007, Kuwait will be looking to consolidate and convert more IOC agreements into enhanced technical service agreements to boost production. The US' Chevron Corporation and Exxon-Mobil Corporation, as well as the UK/Dutch Shell Group, the UK's BP and Total, are expected to sign new deals in 2008.
Iran and Iraq are both looking to improve on years of underinvestment in their hydrocarbons sectors. IOCs are expected to sign agreements with Baghdad's government, although the sector will continue to be hampered by the slow progress of the hydrocarbons law. Tehran, meanwhile, will struggle to entice oil majors' to invest while US sanctions remain in place.
The US and Western powers are still pushing for a third UN Security Council resolution against Tehran to punish its defiance in the nuclear stand-off despite US intelligence reports in early December saying Iran had halted a nuclear weapons programme in 2003. Despite the US' hardline stance on sanctions, financial institutions in Russia, China and much of the Middle East have failed to cut ties with Iranian banks.
In North Africa, Sonatrach will progress the controversial Gassi Touil liquefied natural gas (LNG) facility alone following the dismissal of Spanish companies Repsol and Gas Natural in early September. Algiers and Spain will also be looking to prioritise the planned 8,000 million-cubic-metre-a-year gas pipeline between the two countries.
Egypt is looking to follow the example of Algeria and Libya by enticing oil majors into deep water oil and gas drilling. Libya's National Oil Corporation has turned its attention to gas, with several exploration and production licences to be awarded in 2008.
Energy in numbers
$4bn - the estimated increase in the cost of building a new export refinery at Yanbu.
12.5 million - the oil production target Saudi Arabia has set for barrels a day by 2009