The world is transitioning away from its centuries-long dependence on fossil fuels. For oil producers in the Middle East and North Africa (Mena), the global energy transition is a fundamental change in their business model. Their customers are changing, and so too must they. 

In response, the region’s leading national oil companies (NOCs) are rolling out new policies and investments to keep them at the forefront of the global energy sector. The policy focus is on diversifying investments into new technologies and fuels, conserving hydrocarbons reserves, and reducing greenhouse gas emissions through clean tech and reduced consumption.

At the same time, NOCs are turning from their traditional customers in the West towards new markets in China, India and Southeast Asia. This is bringing new clients, suppliers and financiers to the region’s oil and gas sector.

But even with such seismic changes under way, oil and gas producers know hydrocarbons will be the world’s biggest source of energy for decades to come, even after oil demand growth slows. They also know that their low production costs are a huge advantage. As a result, they are investing heavily to expand upstream and downstream production capacity.

Seven major refinery schemes worth more than $40bn in total are currently in the feed phase

While award levels slowed sharply in 2020 due to the Covid-19 pandemic, there has been a resurgence in spending in 2021. Some $29.5bn of oil, gas and petrochemicals project contracts were awarded in the region in the first seven months of 2021, an increase of 24 per cent on the value of awards in the whole of 2020. 

The projects pipeline is vast. Some $471.7bn of oil, gas and petrochemicals projects are planned across the Mena region.

Financing is a challenge, however. The impact of Covid-19 and lower oil revenues are squeezing regional budgets and the NOCs are looking to new ways of raising capital through share sales, bonds and by selling stakes in assets. 

There is also change taking place in the way work is procured and delivered in the region. The drive to increase the value of local content in projects requires companies to procure people, goods and services from local sources where possible, while the need to increase energy efficiency and reduce carbon dioxide emissions is becoming an important aspect of projects.