Middle East NOC oil and gas strategies beyond the crisis

As the war in Iran has sent shock waves through energy markets and the global economy, national oil companies (NOCs) in the Middle East have been in the eye of the storm. Neivan Bouroujerdi, Director, Corporate Strategy and Analytics Service, analyses Saudi Aramco, ADNOC and QatarEnergy, three of the giant NOCs in the region.

I asked him how they have fared through the turmoil, how the war is changing their strategies and the future appeal of Gulf resources to international oil companies (IOCs).

How has the war affected Middle East NOCs’ performance?

All Gulf-based NOCs took a production hit from export constraints over the past nine months, caused by the closure of the Strait of Hormuz and damage to infrastructure. Alternative oil export routes that circumvent the Strait, however, have proved invaluable for some, effectively acting as an insurance policy. 
By getting their oil to market and capturing high prevailing prices, Saudi Aramco and ADNOC have generated US$35 billion more operating cash flow (OCF) in 2026 than we forecast at the start of the year.

That option was not available to producers further north, including Kuwait and Iraq. Nor is there any alternative shipping route for LNG. QatarEnergy (QE), the world’s biggest LNG producer, lost 17% of its liquefaction capacity to war damage and, with the Strait effectively closed since February, has exported only minimal cargoes to its customers. Its OCF is US$10 billion lower than we forecast at the start of the year, despite the start-up of its new 18-mmtpa liquefaction facility on the US Gulf Coast, Golden Pass.

What lessons have we learned from the crisis? 

Building resilience into the system has leapt to the top of the agenda, with 
access to alternative export routes now a must for these export-dependent economies. The UAE is adding 1.5 million b/d to the capacity of its 1.8-million b/d pipeline to Fujairah on the Gulf of Oman. Saudi Arabia’s alternative export pipeline capacity could rise from 7 million b/d to up to 10 million b/d by 2030 – technically sufficient for all of its exports.

Geography, though, is (almost) everything. Qatar, Kuwait and Iraq face stiffer challenges to develop alternative liquids export capacity at scale. Gas presents additional complexity. Alternative routes for Qatar LNG exports would realistically involve cross border arrangements for gas pipelines and liquefaction infrastructure. Ceding sovereign control of critical parts of the value 
chain will come with significant risks and costs.

Will Middle East NOCs look to diversify overseas? 

A strategy for some time, the rationale has been strengthened by the war, 
with gas and LNG at the forefront of their efforts. Government-to-government relationships are providing an increasingly important route to overseas opportunities. Leveraging existing partnerships with IOCs that operate with an NOC domestically, notably in the UAE and Qatar, has also proved to be another useful option.

• ADNOC: the strategy for XRG, ADNOC’s vehicle for international growth, is bold. Launched in December 2024, XRG has already built positions in the Americas, Africa and the Caspian. It is reportedly targeting a US$15 billion-plus US shale gas 
position and exploring a stake in LNG Canada. The announcement of XRG’s acquisition of Shell’s North West Shelf LNG stake earlier this month bulks up the overall portfolio to 22 mmtpa. If the ambitious goal of 47 mmtpa by 2035 is achieved, ADNOC would become the fifth-largest LNG supplier globally. And we could see further deals both upstream and downstream of these positions to support integration.

• Saudi Aramco: Aramco has been pursuing multiple international LNG opportunities, both independently and through its (now reduced) stake in MidOcean Energy, targeting 10 to 20 mmtpa of supply by 2030. To date, it’s secured two LNG sales and purchase agreements with US LNG projects, Rio Grande and Commonwealth LNG, and has ambitions to build further.

However, the biggest opportunity in LNG might be domestic. We estimate Aramco could have 6 bcfd of surplus domestic gas production early next decade, sufficient to support up to 40 mmtpa of LNG exports. At present, foreign participation in Saudi oil and gas production is not permitted, though domestic funding requirements and ambitions in gas may open up parts of the country’s upstream sector to strategic partners.

• QatarEnergy: QE recently signed up for 7 mmtpa of US LNG via deals with Cheniere and Woodside Energy – undoubtedly a response to events in the Gulf – and more deals are likely. Combining these deals with its 70% stake in Golden Pass makes QE the largest offtaker of US LNG, shoring up its LNG marketing position and playing to an existing strategy to diversify the LNG portfolio and build LNG trading capabilities. 

QE has also leveraged its relationships with its domestic partners to build an exploration-led international upstream portfolio, one that could produce over 200,000 boed next decade. We expect organic 
investment and perhaps even M&A deals.

• KUFPEC: Kuwait Petroleum’s international business, KUFPEC, has been investing overseas for decades and produces around 80,000 boed. Even after recent deals to enter offshore Brazil and progress on the Lang Lebah gas project in Malaysia, more business development is needed to reach its target of 200,000 boed.

Do IOCs still want to invest in the Middle East? 

Undoubtedly. Recent deals struck by ExxonMobil, BP and ConocoPhillips in 
Iraq, and BP and TotalEnergies' Bab Gas Cap deal in the UAE show the appetite is still there. Kuwait’s extension of enhanced technical service agreements to BP and Shell may be a precursor to offshore investment opportunities for IOCs.

Big Oil faces a longevity challenge, with declining production over the next decade. Discovered resource opportunities in the Middle East can help address at least part of the problem, offering access to significant long-life and low-cost reserves. And while returns are typically modest, we expect Middle East governments will be increasingly keen to attract investment in a 
competitive environment for capital.

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