Thanks to a pervasive instability in the price of new projects, from materials to labour costs, upstream plans in the oil and gas sector are on hold across the region, as national oil companies, contractors and IOCs wait for the market to settle before tendering for new work or signing new contracts.

Compared with the oil and gas projects boom that ended in mid-2008, the problem now is not so much the difficulty of finding contractors to do the work, but in agreeing a price that accurately reflects the changed financial environment.

The relative failure of Opec to significantly raise oil prices despite a series of cuts in oil production announced in 2008 is also affecting upstream projects. Oil prices are currently close to $45 a barrel, barely half the $70-90 a barrel price Opec president Chakib Khelil cited in mid-2008 as being “the bottom cost below which we cannot step down”.

Despite this evidence that the energy sector is set for a weaker 2009, the tough economic conditions are a cyclical downturn rather than a structural problem that will derail the Middle East’s upstream schemes altogether.

Index of all stories:

• Outlook: Oil price falls put regional development on hold

• Algeria’s tough terms deter energy majors

• The Ahnet acreage in Algeria

• Doha - Moving beyond the North hydrocarbons field

• Why Tripoli is revising its oil ambitions

• Upstream oil masterplan Project Kuwait set for review