Middle East Oil: back to the present

Middle Eastern oil producers have been faced with huge market shifts, led by the COVID-19 pandemic and Russia’s invasion of Ukraine. In the earthly theatre, devastating natural disasters are forcing people to come to grips with the idea that global climate change is real, and that cutting greenhouse gas (GHG) emissions is increasingly urgent. The EU’s Copernicus Climate Change Service and the World Meteorological Organization reported that July 2023 was the hottest month on record, and the hottest in around 120 000 years.¹ Heat domes and wildfires plague parts of the world while others are pummeled by hurricanes and flooding. A recent study headed by the Cyprus Institute and the Max Planck Institute warned that the eastern Mediterranean and Middle East are warming almost twice as fast as the global average.²

As this edition of Hydrocarbon Engineering goes to press, we ponder the Middle East’s role in the current and future oil market. The ‘back to the present’ title of this article expresses the idea that 2023 brings a return to ‘normalcy’ (if such a thing exists) and refers to the ‘back to the future’ film series, where the future comes back to influence the present. Adopting a traditional stance implies the belief that oil and natural gas will retain dominance in tomorrow’s energy market. Logically, then, the Middle East could spearhead a new wave of investment in the oil and gas sector to capture market share, and to maximise the value of its hydrocarbon resources. Conversely, adopting a futuristic stance implies the belief that the world will commit itself to a more rapid phaseout of hydrocarbon use. Logically, the Middle East could use its hydrocarbon wealth in the short-term to invest in clean energy and to hasten its achievement of carbon neutrality.

Which will it choose, traditional or futuristic? Apparently, both. First, the Middle East is far from monolithic, and some countries lack the resources and desire to invest too heavily in long-term, futuristic, or simply expensive projects. Second, many producers are focusing first on full recovery and growth in their traditional strengths: oil, natural gas, and petrochemicals. Markets still demand these commodities, and the Middle East has a competitive edge. Third, some countries already have long-term strategies that move beyond fossil energy. They are working to develop new strengths in carbon neutrality, efficiency, and clean fuels. For example, countries including Saudi Arabia, the UAE, and Oman are developing low-carbon ammonia as a potential clean fuel for export, chiefly to Asia. Some clean fuels may bridge the past with the future; for example, clean methanol may have a future role as a shipping fuel, but some of the cargo shipped may continue to be conventional energy. Middle Eastern oil and gas producers envision a future where fossil energy’s role shrinks, but it does not vanish.

References

²The Cyprus Institute, www.cyi.ac.cy.

This article was originally published in the October 2023 issue of Hydrocarbon Engineering magazine. To read the full article, sign in or register for a free subscription.

Written by Nancy Yamaguchi, Contributing Editor.

Read the article online at: https://www.hydrocarbonengineering.com/special-reports/18102023/middle-east-oil-back-to-the-present/