Mideast upstream oil and gas could lose $50bn of investment

The Middle East is expected to lose some $50 billion of investment from the oil and gas sector over the next five years as a result of the coronavirus fallout. (AFP file photo)
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Updated 26 June 2020

Mideast upstream oil and gas could lose $50bn of investment

RIYADH: The Middle East could lose some $50 billion of investment from its oil and gas sector over the next five years, according to Wood Mackenzie.

In 2020 alone, WoodMac expects new upstream investments to drop by $16 billion across the region from its pre-crash view.

The worst oil price crash in history has wiped $1.6 trillion off the valuation of the global upstream industry.

“The oil price crash and the market uncertainty it caused has affected all regions, all operators and all resource themes. In early March, we anticipated the industry’s response would be rapid and decisive. It has been,” said Fraser McKay, WoodMac vice president, upstream. 

“To date, cuts to expenditure have largely been in line with our expectations. New project spend has stagnated and output has been curtailed, most notably among OPEC+ participants and in the US tight oil sector.”

The research group has significantly reduced its expectation of new investment projects joining the global upstream industry from 50 to just nine.

Oil production cuts by the OPEC+ group of exporters, which includes Russia and market-driven shut-ins, is expected to reshape near-term supply outlook.

The valuations for oil sands and heavy oil have received the hardest hit, decreasing by more than half, while more than $1 trillion has been wiped off conventional onshore and offshore projects.

“Tight oil and heavy oil cash flows suffer the most, but overall resilience has improved since the last downturn,” WoodMac said. 

While the spending cuts are expected to be severe for Middle East upstream energy projects, they do not offset the valuation impact of lower production among OPEC+ producers and weak oil prices, WoodMac said.



Saudi Arabia’s 6-point plan to jumpstart global economy

Updated 07 July 2020

Saudi Arabia’s 6-point plan to jumpstart global economy

  • Policy recommendations to G20 aim to counter effects of pandemic

DUBAI: Saudi Arabia, in its capacity as president of the G20 group of nations, has unveiled a six-point business plan to jump start the global economy out of the recession brought on by the COVID-19 pandemic.

Yousef Al-Benyan, the chairman of the B20 business group within the G20, told a webinar from Riyadh that the response to the pandemic -— including the injection of $5 trillion into the global economy — had been “reassuring.”

But he warned that the leading economies of the world had to continue to work together to mitigate the effects of global lockdowns and to address the possibility of a “second wave” of the disease.

“Cooperation and collaboration between governments, global governance institutions and businesses is vital for an effective and timely resolution of this multi-dimensional contagion transcending borders,” Al-Benyan said.

“The B20 is strongly of the view there is no alternative to global cooperation, collaboration and consensus to tide over a multi-dimensional and systemic crisis,” he added.

The six-point plan, contained in a special report to the G20 leadership with input from 750 global business leaders, sets out a series of policy recommendations to counter the effects of the disease which threaten to spark the deepest economic recession in nearly a century.

The document advocates policies to build health resilience, safeguard human capital, and prevent financial instability.

It also promotes measures to free up global supply chains, revive productive economic sectors, and digitize the world economy “responsibly and inclusively.”

In a media question-and-answer session to launch the report, Al-Benyan said that among the top priorities for business leaders were the search for a vaccine against the virus that has killed more than half-a-million people around the world, and the need to reopen global trade routes slammed shut by economic lockdowns.

He said that the G20 response had been speedy and proactive, especially in comparison with the global financial crisis of 2009, but he said that more needed to be done, especially to face the possibility that the disease might surge again. “Now is not the time to celebrate,” he warned.

“Multilateral institutions and mechanisms must be positively leveraged by governments to serve their societies and must be enhanced wherever necessary during and after the pandemic,” he said, highlighting the role of the World Health Organization, the UN and the International Monetary Fund, which have come under attack from some world leaders during the pandemic.

Al-Benyan said that policy responses to the pandemic had been “designed according to each country’s requirements.”

Separately, the governor of the Saudi Arabian Monetary Authority said that it was “too early” to say if the Kingdom’s economy would experience a sharp “V-shape” recovery from pandemic recession.