ME E&R whitepaper 5

Perspectives

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Managing scarcity for the future

In this whitepaper, Deloitte Middle East tackles the increasing level of federal scrutiny on the strategy of national oil companies (NOCs) in the Middle East during the recent years. Rising global energy consumption patterns coupled with rebounding oil prices have created the ideal opportunity for Middle Eastern governments to increase their treasury intake from the sale of hydrocarbons.

In recent years there has been an increasing level of federal scrutiny on the strategy of national oil companies (NOCs) in the Middle East. Rising global energy consumption patterns coupled with rebounding oil prices have created the ideal opportunity for Middle Eastern governments to increase their treasury intake from the sale of hydrocarbons.

As a result, the NOCs are pursuing various initiatives aimed at building an energy infrastructure that is truly world-class in terms of both capability and scope. The private sector is also expected to play a role in bringing this to fruition. Realizing such ambition hinges on deploying the appropriate levels of investment. Pure NOC investments will help drive the oil services’ backlog for contractors in the longer term, making them a price-setter in the context of global capital expenditure (CAPEX) recovery. Studies indicate that on a global level, NOCs are projected to spend approximately USD 400bn, which is 40% of total global CAPEX.

In the Middle East, approximately USD 140bn worth of engineering and construction contracts in the sector have either been a warded or planned in 2011. Capital costs could push CAPEX spend even higher, particularly as higher commodity prices have led to increased downstream costs. Much of this money will be spent on Front End Engineering Design (FEED) work. 

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