Kemp: Petroleum Producers Shift Attention From Middle East

Following four decades of war, sanctions, nationalization and unrest, oil and gas producers are gradually adjusting to rely less on the Middle East.
Following four decades of war, sanctions, nationalization and unrest, oil and gas producers are gradually adjusting to rely less on the Middle East.


(John Kemp is a Reuters market analyst. The views expressed are his own)

LONDON, Aug 15 (Reuters) - Following four decades of war, sanctions, nationalisation and unrest, oil and gas producers are gradually adjusting to rely less on the Middle East.

The countries around the Persian Gulf and on the Arabian Peninsula still contain the greatest concentration of giant and super-giant fields anywhere in the world and have some of the most attractive oil and gas geology.

But the increasingly hostile political environment above ground has forced oil and gas companies to hunt for new reserves in other parts of the world where the geology is tougher but political conditions are much easier.

Diversification away from the Middle East is one of the main reasons why oil prices have remained virtually unchanged as unrest has spread across much of the region since 2011.

Output And Reserves

The region's importance has been declining in terms of both production and share of proved reserves in recent years

In 2013, the countries of the Gulf and the Arabian Peninsula, which the BP Statistical Review of World Energy terms "the Middle East", accounted for almost 33 percent of global oil production and 17 percent of gas output.


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Philippe | Aug. 18, 2014
This article put in evidence the changing business model of the O&G majors. It is not possible to argue the direction Middle East governments have taken in controlling the O&G production. One omission this pertinent article forgets to mention is the disparity of the Middle East players. By enlarge the “have” do not have to cater to large populations, where as the “have not” do. This disparity is one of the causes of the political situation in the Middle East. The “have” live off the rent of the O&G production, therefore do not have to spend much on social development. The “have not” do not have the revenues to provide a social development to a population in need. Add to this disparity a religion angle and the bases of instability become relevant. Forever the O&G majors have been the investor with technology and capital, up front. The majors have seen the profits going to the local governments. RigZone previous article has pointed toward the Shale play changing capital investment. The Middle East “Elephants” require large up front investments. Once the investment is in place and “First oil” starts, O&G majors sees the political wind change over time and their investment under abuse if not corruption. Shale play development does not require the same level of capital, up front, to start with. Drilling, in a shale play, takes place over time, to cover the area and volume of the geological formation. This is why the capital expenditure is controlled according to the potential production. I see this business model embraced by many wanting to control risks. Without large capital to develop new O&G field, Middle East nations will suffer more internal insurrections.


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