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Mideast Oil Majors to Invest $29b

National Oil Companies and super majors across the globe as a wholeare planning to deliver in excess of $375 billionof investments this year through the down cycle, andthe Middle East investment plans form part of it, the report says.

The report, ‘Investing for the upturn,’ which was launched at the ongoing NOC Congress here, forecaststhat the largest NOCs are on course to invest over $275 billion in the development of their businesses at home and abroad in 2009 — with almost 70 per cent of total investment coming from NOCs in Asia and South America.

African NOCs will invest about
$21 billion, according to Don Painter, Leader of Ernst & Young’s Middle East Oil & Gas Practice. The NOCs of Commonwealth Independent States countries have announced plans to invest $36 billion in total in oil and gas activities in 2009.

Replying to questions he said he did not have the break-down of the investments planned by each country in the Middle East in the oil sector this year. “But we have anecdotal evidences to indicate that investments of some of the NOCs could be higher than what are known as “many state-owned oil companies do not make their investment intentions public,” Don Painter told Khaleej Times on the sidelines of the congress. According to him there has been no report of any significant cancellation of oil projects by the NOCs in the Middle East. Some them may have decided to delay the projects, and this could be due to their plans to take advantage of the slide in commodity prices. They could also be trying to delay the projects to synchronise the commissioning with the revival of oil demand in the global market.

Don Painter argued that most of the NOCs have adequate cash reserves to implement their planned projects without relying on outside funding sources. “The major companies are unlikely to be affected by the current credit crunch, only the small players will be hit by it.” “Cash rich GCC producers are currently evaluating investment options that match their Return on investment aspirations. They are still seeking appropriate investment opportunities in the region and elsewhere. The slowdown in their capital expenditure does not reflect their appetite for major investments.” Based on current estimates, the largest NOCs across the world would have invested around $600 billion in their hydrocarbon sectors by 2015, he said.

The super majors have also committed to substantial investment in oil and gas activities this year — around $100 billion, according tothe reportreceived here from Ernst & Young.

Andy Brogan, global oil and gas transaction advisory services leader at Ernst & Young and author of the report, says, “NOCs and the super majors continue to show a real determination to push ahead with their major capital expenditure plans this year, at least for now. 2008 was a record year for capital investment in the sector and 2009 is shaping up to be another record year. Companies are wary of finding themselves in a position where they have to play catch-up on investment when the upturn materialises.” He adds that despite the International Energy Agency’s current estimates for oil demand, investment is still required in production capacity enhancement projects to offset falling output due to natural field depletion.

ramavarman@khaleejtimes.ae