Middle East: demand growth; forward-thinking NOC actions

Outside of Asia-Pacific, the Middle East is the most significant emerging market, and we expect strong energy demand and oil production to remain consistent themes through 2035. But how will potential subsidy reforms and regional instability affect the future energy environment? In this final article in our hydrocarbons report series, we explore likely developments and economic growth in the Middle East over the next 20 years. 

Due to resource availability, the Middle East will remain a net energy exporter, and the development of hydrocarbon reserves will remain an important component of economic growth. By 2035, oil production capacity in the Middle East will reach almost 40 mb/d, far ahead of any other oil-producing region, as Saudi Arabia continues to build capacity, Iran increasingly returns to the oil market, and Iraqi supply expands. While consumers will become somewhat more sensitive to the volumes of fuel they use in road transportation, high levels of development will cause car numbers — and fuel demand — to grow rapidly.

Chief Analyst Simon Flowers shares his thoughts on how Middle East NOCs will meet growing energy demand and whether they will diversify away from purely oil and gas and into renewables and other technologies. 


The low-price environment created by OPEC has stimulated demand, but revenue from oil and gas is a critical part of the economies of OPEC producers. Some OPEC members will not be able to break even until prices reach closer to US$90/bbl — well above the US$45/bbl average for Brent in 2016. The large-scale deepwater projects of the future will require even greater oil prices to break even. While the OPEC production cuts of 1.2 million b/d (effective January 2017), supplemented by 0.6 million b/d from non-OPEC producers, will help oil prices to grow and further recover, returning to 2014 prices is unlikely.

Low oil prices have also created economic barriers for disruptive technologies, including renewables and electric vehicles. However, many OPEC members are restructuring their economies, in particular by removing fuel subsidies and cutting infrastructure investment. Some NOCs are also developing strategies to begin diversifying away from oil, a trend we expect to see gaining momentum globally over the next 20 years. Saudi Arabia’s Vision 2030, which may involve the IPO of Saudi Aramco in 2018, is perhaps among the most radical response, envisioning a future with less dependence on oil.

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