Qatar is well-positioned to regain market share over the coming decade in low-carbon investments, according to Fitch Solutions.
In the MENA region, natural gas will become an increasingly important strategic focus over the longer term, in support of domestic climate targets, economic diversification and the creation of new revenue sources.
Climate ambitions are creeping up the agenda of MENA’s national oil corporations and will absorb a rapidly growing, albeit proportionally small, share of capex over the coming years, Fitch Solutions said.
Spending and production outlooks will continue to diverge within the region, as the core GCC increasingly outperforms the rest of the region. The GCC – in particular Qatar, Saudi Arabia, the UAE and Kuwait – boast large and low-cost resource bases.
“In light of spending pullbacks elsewhere, the four are well-positioned to regain global market share over the coming decade, driving robust spending growth. In light of peak oil demand, the calculus for these countries is shifting: resource depletion is less of a concern, while maximising revenues to build up fiscal buffers and fund their economic diversification programmes is gaining in importance,” Fitch Solutions noted.
Qatar is relatively unique, in that its gas projects are largely export-led, Fitch Solutions said.
“Notably, Qatar Petroleum is investing in a large-scale expansion of its liquefaction capacity, to be fed by increased output from the giant North Field. Growth was previously constrained by a drilling moratorium in place on the field from 2005, which has since been lifted. The company now plans to expand its liquefaction capacity by 63.6%, from 77mn tonnes per year (mtpy) to 126mtpy, by 2027.
“The expansion is the largest LNG project ever to be announced and will see Qatar regain its position as the largest exporter of LNG globally,” Fitch Solutions said.
In the region, natural gas will become an increasingly important strategic focus over the longer term. In most markets, incremental production will be targeted towards the domestic market.
Natural gas has a high penetration in the MENA energy mix and is set to further grow its share over the coming decade, not least due to growth in gas-based industries.
Due to inadequate domestic production, several countries, including Bahrain, Kuwait, Iraq and the UAE are reliant on imports to plug domestic deficits in supply.
Meanwhile in Algeria, net exports are falling, as volumes are increasingly diverted towards domestic consumption. In response to this, countries are ramping up their investment into domestic gas production.
While traditionally the focus has been on associated gas resources, non-associated and unconventional reserves are increasingly coming to the fore. The region benefits from a large and underutilised reserves base, although low state-set gas prices have been a deterrent to foreign investment in many markets, Fitch Solutions said.
Climate ambitions are creeping up the agenda of MENA’s national oil corporations. A number of companies have been upping their rhetoric around the energy transition over recent quarters, although firm investment commitments have been lacking to date.
Climate change tends not to rank high on the policy agenda in MENA, in particular in the more hydrocarbon-dependent economies. Nevertheless, as global efforts towards climate change mitigation pick up pace, NOCs in these markets may find themselves under greater pressure to act.
Moreover, Fitch Solutions noted those countries which are lagging on their Paris Agreement commitments could find it more difficult to secure inward investment, or to sell their products into markets such as North America and Europe.