The international oil and gas industry this week has been focused on the Abu Dhabi National Exhibitions Centre for the Middle East’s largest oil and gas show, ADIPEC.
For the first time the event, which is normally held every two years, has moved to an annual show. Indications are that what may have been considered a bold move has paid off. Increasing the frequency of the exhibition and conference does not appear to have diminished its popularity and is a reflection of the demand for such sector-specific gatherings in the region.
That demand highlights the importance of the oil and gas industry to the Middle East, and the importance of the Middle East’s oil and gas industry to the world. For several years now, the region has been at the political hub of the global industry, not least because of its abundance of oil and gas reserves compared to elsewhere.
The clearest expression of that power was evidenced 40 years ago last month when the Arab members of OPEC announced an oil embargo against many of the world’s leading industrial nations in the wake of the Arab-Israeli war. That embargo, coupled with dwindling production in the west, led to a quadrupling of oil prices and from there on established OPEC as the player holding pretty much all the aces in the oil game, by controlling production and determining prices.
But is there a possibility that the status quo may change?
The emergence of recently discovered shale oil and gas reserves in North America has certainly generated an increased confidence across the Atlantic, amid reported predictions from the International Energy Agency earlier this year that the US could be “all but self-sufficient” in its energy needs by 2035.
The same agency stated yesterday (12 November) that the US would become the world’s top oil producer by 2016, outstripping Saudi Arabia and Russia.
Throughout Europe we have seen a growing interest in fracking as the solution to our energy problems – but the jury is still very much out on what impact fracking will have on domestic resources.
How will all this affect OPEC and the Middle East producers?
It’s difficult to say for now, but the noises coming from OPEC do not indicate any great concern. Why? Well, as the IEA also predicted in its report yesterday, the US surge may be short-lived, and by 2020 the Middle East may once again regain its prominent position and become the leading supplier to growing markets, mainly
As an example of the current confidence in the Middle East, at ADIPEC this week, ADNOC announced it was looking at bids for production rights to its biggest onshore oil concession, which currently yields 1.5 million barrels, or half of the UAE’s daily output. It was reported that the company aims to produce 70 per cent of available reserves – double the current standard – by 2055.
Key to supplying the growing markets will be the impending return to the fold of Iran as an exporter of oil, depending on when sanctions against it are lifted. It has been suggested that a flood of Iranian oil into the global market may well have an impact on price and potentially stifle tight oil production but, as yet, how Iran’s reintroduction to the international scene will affect the industry remains unknown.
ADIPEC represents the ideal place for the international industry to discuss all these pertinent points, but maybe we should refer again to yesterday’s report from the IEA for its long-term view of the region’s importance.
“The Middle East is and will remain the heart of the global oil industry for many years to come,” IEA chief economist Fatih Birol is reported as saying.
To paraphrase Mark Twain, reports of its demise appear to have been greatly exaggerated.