While the strategic chess game of global oil and gas supply goes on at the macro-level between OPEC and non-OPEC players, at the project level the Middle East’s producers are painfully aware of their own very real need to reduce their costs.

Present estimates by OPEC for the region’s conventional oil reserves are put at 796 Bbbl, nearly half the global total of recoverable crude, while its gas reserves are also almost equally abundant, representing more than 40% of the world’s total.

But this doesn’t exclude the region from feeling some pain due to the oil price slump that has decimated the global industry since late 2014. Saudi Arabia, for one, has seen its credit rating cut by various agencies as the price decline hits its national revenues (derived 80% from energy exports), with its public debt to possibly increase to up to 50% of its GDP within the next five years.

Then again, this doesn’t seem to have particularly worried King Salman bin Abdulaziz al-Saud who, after acceding to the throne in January 2015, announced one-time bonuses for public sector workers. It’s also worth pointing out that even if the kingdom’s GDP did rise to 50%, the figure would still be well below that of most Western economies.

Long Term

State-owned Saudi Aramco also is increasingly assured about its long-term place in the world. Its chairman, Khalid al-Falih, confirmed in early November that the company had no plans to cut oil production and that he foresees a rebalancing of the oil market in 2016, according to an interview in the Financial Times newspaper.

He described $100/bbl oil as having been a “free-of-charge insurance policy” provided by Saudi Arabia that had allowed shale and deepwater producers to flourish. However, that policy “does not exist anymore,” he said.

The United Arab Emirates (UAE) also is pushing on with its plans to increase crude output while at the same time looking to take advantage of market conditions to bring down its opex by a set target of 25%, according to Ali Khalifa al-Shamsi, Abu Dhabi National Oil Co.’s (ADNOC’s) strategy and coordination director. Speaking at a press briefing ahead of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), he said the company is making good progress toward achieving that figure.

His message was backed up by UAE Minister of Energy Suhail Al Mazrouei, who stressed in an official statement ahead of ADIPEC that its national oil companies would continue to “seek to reduce production cost by increasing the efficiency of their operations.”

Fall In Spending

Aside from looking to renegotiate with contractors for lower prices by anywhere between a widely reported 10% to 25% for services across the spectrum of their upstream and downstream operations, the majority of the Middle East’s operators are—like many of their Western counterparts—also likely to simply delay nonessential maintenance work on their existing projects to keep a tighter control on spending.

In terms of capex on new field developments or projects in the process of development, analyst Infield Systems said capex is expected to slow. Although capex will continue to be driven by Iran, Qatar and Abu Dhabi over the period, with several capital-intensive projects under development, it said that as developments such as various South Pars phases offshore Iran come to a close, overall capex will fall by 17% between 2016 and 2017.

Enhanced Recovery Focus

The region’s interest in enhanced recovery technologies continues to be one of the main emerging themes generating fresh activity. The latest example of this came from ADNOC and Germany’s Wintershall, which confirmed at ADIPEC that they had signed a memorandum of understanding regarding future cooperation in R&D activities.

This will specifically focus on EOR using specialized chemicals, or “cEOR,” as they dubbed it, with the aim of jointly developing solutions to meet typical subsurface challenges presented by the emirate’s oil fields—high temperature and high salinity in carbonate reservoirs.

A pilot test is in the pipeline, said the companies, with the memorandum of understanding’s aim being to help Abu Dhabi on its way toward its publicly stated eventual target of 70% ultimate recovery from its fields.

Another EOR project taking place in Saudi Arabia is the kingdom’s first carbon capture and storage pilot project, underway on the world’s biggest oil field, Ghawar. If successful, according to oil minister Ali al-Naimi, it could boost recovery rates by up to 20%.

Ghawar, which has been pumping crude since 1951, incredibly still produces more than 5 MMbbl/d of oil as well as 70.7 MMcm/d (2.5 Bcf/d) of gas. Saudi Aramco’s carbon project got underway earlier this year after first being hatched in 2011. About 1.1 MMcm/d (40 MMcf/d) of CO2 will be captured at the Hawiyah gas recovery plant and piped to the Uthmaniyah area for injection into the oil reservoirs. The aim once more is to raise the field’s recovery factor from its current given figure of 50% to 70%, which on a field of Ghawar’s scale is a huge increase in recoverable reserves. It currently has estimated remaining proven oil reserves of 75 Bbbl, according to the U.S. Department of Energy.

Sour Gas

Shell is another major partner with Abu Dhabi, where it is underway with its 30-year joint venture with ADNOC on the onshore Bab sour gas development, signed in 2013.

Bab is a challenging reservoir because of its high concentration of hydrogen sulfide and CO2 , but the companies are well underway with technical studies after completing a pre-FEED study earlier this year. A full FEED study is expected to get underway during 2016, with the project defi nitely world-class if it proceeds to sanction—estimates put forecast capex at about $11 billion, with an onstream date expected near 2020 with production of up to 28 MMcm/d (1 Bcf/d) for local use.

Despite the global fall in energy prices, this project is progressing to schedule with no sign of potential delay, particularly as gas remains in big demand in Abu Dhabi, which currently imports it from Qatar through the Dolphin pipeline mainly for electricity generation and desalinating seawater.

Meanwhile, BP’s Khazzan tight gas field development in Oman is progressing to schedule, with first gas due in late 2017. More than 45% of the project and infrastructure work has been completed so far, with seven drilling rigs currently on the field and 12 wells drilled so far. Sixteen will be drilled by year-end 2015, with nine rigs planned to be operational by then.

The full field development of Khazzan will see about 300 wells drilled over a period of 15 years. The central processing facility will include two 14-MMcm/d (494-MMcf/d) process trains. The project will increase the country’s gas supply by one-third, with up to 28 MMcm/d of gas expected to flow. BP operates Block 61 with a 60% interest, with Oman Oil Co. Exploration and Production holding the remainder.

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