Continuing to invest in oil and gas ensures the GCC will retain its influence in global energy

Some $1.7 trillion was invested in global energy in 2016, according to the International Energy Agency. That is about 2.2 per cent of global GDP.

The figure covers all aspects of the energy supply chain, from upstream extraction to power distribution networks. But it represents a 12 per cent fall in investment on 2015.

Increased focus on energy efficiency has been a factor. As has the shift to renewables and lower procurement costs. But the biggest factor has been a collapse in investment in upstream oil and gas production, which started in 2015 as energy companies cut back in response to the fall in oil prices.

In 2014-16, global investment in oil and gas output fell 38 per cent, a loss of some $184bn, with the 24 per cent decline in 2016 wiping out the 8 per cent rise in energy efficiency spending and 6 per cent on power. For the first time, investment in electricity eclipsed hydrocarbons spending.

However, Middle East producers have continued to spend on hydrocarbons over the past five years, although there was a fall in contract awards in the GCC in 2016.

With GCC oil production costs averaging less than $10 a barrel, Gulf producers are less affected by the fall in prices than other producers. Additionally, the region’s national oil firms are sticking to long-term investment plans, which, with long project lead-in times, prevent sudden cutbacks.

Ultimately, however, it is about the strategic positioning of a region that supplies 33 per cent of global crude. Oil prices are forecast to recover steadily over the coming three years as global growth strengthens and the oversupply of oil reduces as a result of the investment cuts. Continuing to invest now ensures the GCC will retain its influence in global energy.