MIDDLE EAST READY FOR FUEL EVOLUTION Increased Post-Pandemic Project Activity in O&G, Fossil-free Fuels

By Asma Ali Zain

Post-pandemic momentum for project activity in the Middle East region has not slowed; if anything, it has continued to grow at an incredible pace. From brownfield emission-reducing facilities and gas pipeline construction to subsea transmission systems, the region is realizing its oil diversity ambitions faster than ever before.

Thursday 08 June 12:00 - 12:30

Region: Middle East Problem: The Middle East needs to meet demand for long term alternative fuels while still supplying fossil fuels Solution: Projects are progressing in tandem to desulphurize fossil fuel plants and construct hydrogen facilities

Underneath it all is a mission to diversify economic resources, become more sustainable, and carve out a place in the post-oil world. The Middle East has long been a major player in the global oil and gas industry and remains one of the world’s largest producers and exporters of oil and gas. However, this dependence on fossil fuels alone has made it highly vulnerable to supply disruptions and price shocks in the past. Not to mention, with oil and gas resources depleting, economic and energy diversification is critical for a secure future.

Countries in the region have already realized that diversification of the energy mix will help reduce vulnerability and make them more energy secure. Beyond that, the same strategy is powering the region’s economic diversification as well. By investing in renewable energy, upgrading existing infrastructure, and developing downstream, countries across the Middle East are creating new sources of income and jobs.

Climate change is another key factor driving project activity in the region; there’s deep-seated awareness of the need to address the challenge. The Middle East is particularly more vulnerable to the impact of global warming and investments in renewable energy and other sustainable practices will help to mitigate environmental impact, enabling the region to contribute to the global efforts to combat the challenge.

From a purely business standpoint, the oil and gas industry in the region has a lot to gain from investing in renewables as it faces increasing competition from alternative sources of energy. Therefore, to remain competitive, Middle Eastern countries, particularly the UAE, Saudi Arabia, and other GCC nations, are investing in technological innovation to improve the efficiency and sustainability of their operations. All of these factors are shaping the energy dynamics of the region and adding to the post-pandemic momentum for project activity being seen today.

This year got off to a strong start for fuel-related projects with many multimillion-dollar deals announced and energy projects in the works across the region. In the UAE, projects are led by ADNOC, which recently awarded nearly US$140 million worth of total contracts for the pre-construction works of its mega Hail and Ghasha development.

The project is a significant initiative for the UAE, with the potential to deliver economic, technological, and environmental benefits that will position the country as a leader in the global energy sector while ensuring the long-term sustainability of the Emirate’s hydrocarbon resources. ADNOC has also contracted the National Petroleum Construction Co and its partners Saipem and China Petroleum Engineering and Construction Corp to the tune of US$60 million to initiate pre-construction works related to the offshore facilities of the master development.

Petrofac, a UK-based company listed on the London Stock Exchange, has been awarded an engineering, procurement, and construction lumpsum contract by ADNOC in the UAE. Petrofac will design and install new facilities at the Habshan production complex, located in the southwest of Abu Dhabi, which will optimize operations and curb methane and greenhouse gas emissions. The project involves designing and installing state-of-theart facilities to ensure sustainable and eco-friendly energy production. As part of the Habshan production complex’s expansion plans, a pipeline will be constructed to transport gas from the facility to the Fujairah liquefaction plant, which is expected to produce up to 9.6 million tonnes annually by 2027.

A spokesperson at Petrofac, said: “The MENA region is an important market for Petrofac. We are supporting ADNOC with the delivery of facilities for their Habshan Complex, providing engineering, procurement and construction services to optimize operations and reduce methane and greenhouse gas emissions.

“The UAE is an operational base for many of Petrofac’s projects. Putting in-country value at the center of our delivery, we are procuring a large portion of goods and services from local vendors and suppliers. This simultaneously creates a huge number of local jobs while training and expanding the capacities of the local people.”

Highlighting the same level of hyperactivity in the region’s green fuel sector, Saudi Arabia’s ambitious NEOM Green Hydrogen Co selected Larsen & Toubro, or L&T, to serve as the sub-EPC contractor for the country’s massive hydrogen plant. L&T will be responsible for executing power grid and power generation works for the plant on an EPC basis. The green hydrogen plant is expected to be huge in size and scope, producing up to 650 tonnes of green hydrogen per day, which would be used primarily for transportation and other industrial applications.

Representing a major investment in renewable energy, the mega project is part of Saudi Arabia’s efforts to reduce its dependence on oil and diversify its economy. Once complete, it will contribute to the creation of a sustainable hydrogen ecosystem in the region, while supporting the development of a new clean energy industry in Saudi Arabia. With broader implications for the global energy sector, the project demonstrates the potential of green hydrogen as a viable alternative to fossil fuels.

Carrying the momentum, Technip Energies, a French engineering and technology company, has been granted a contract to upgrade the sulfur recovery facilities at Aramco’s Riyadh Refinery, under its ongoing long-term agreement with the Saudi Arabian oil company. The contract will involve the installation of three new tail gas treatment units, which will improve the performance of the three existing sulfur recovery units to meet more stringent regulations for emissions. With a recovery efficiency of over 99.9 percent, the upgraded facilities will comply with the new regulations and enhance the refinery’s overall operational efficiency.

Other GCC nations are also investing in fuel resources. Asyad Shipping, which is a subsidiary of Oman’s stateowned Asyad Group, recently inked a deal with Hyundai Samho Heavy Industries, a South Korean shipyard, to construct two advanced liquefied natural gas, or LNG, carriers. As per the agreement, the new fifth-generation LNG carriers will be supplied to the group, marking a significant milestone in its expansion plans to boost energy logistics capabilities and cater to rising global demand.

Meanwhile, the Kuwait Oil Company, or KOC, has granted maintenance contracts to two local companies for critical oil facilities. The contracts, worth around $176.2 million combined, will be provided by Bader Almulla and Brothers Co. and HOT Engineering and Construction Co. respectively. Bader Almulla and Brothers Co. will be responsible for providing maintenance services for KOC’s South and East Kuwait facilities under a US$74.6 million contract, while HOT Engineering and Construction Co. has been awarded a US$101.6 million contract for maintaining KOC’s South Kuwait facilities. These maintenance contracts are expected to help KOC maintain the efficiency of its upstream industry operations.

Saipem, an engineering and construction company, has also announced new contracts in Egypt and Guyana, with a combined value of US$1.2 billion. The first contract was awarded by ExxonMobil, a major U.S.-based oil company, for work on the Stabroek block located offshore in Guyana while the second contract was given by Petrobel for the pre-commissioning of control lines spanning 170 kilometers for the Zohr Field, off the coast of Egypt.

The future of the Middle East’s fuel industry is likely to face a number of challenges and uncertainties. On one hand, rising demand from emerging economies, particularly in Asia, is likely to provide a continued source of demand for the region’s hydrocarbon resources. However, the global transition towards cleaner, more sustainable forms of energy will also have a significant impact on the industry in the region. With a post-oil era on the horizon, some Middle Eastern countries will see their fossil fuel resources run out over the next two decades.

From geopolitical tensions and competition within the region to increasing concerns around climate change, these elements will shape the region’s fuel industry in complex and unpredictable ways. But one thing is certain: as long as the region has the drive and tenacity to initiate mega projects and see them to fruition, they will inevitably be ready for what comes next. Ultimately, the ability of the region’s governments and energy companies to adapt to these changing dynamics will be critical in determining the long-term viability and competitiveness of the industry.

Asma Ali Zain is a Dubai-based journalist with over 20 years’ experience in writing for and editing business-to-business publications.

By Liesl Venter