National oil companies in the Middle East and North Africa region are expected to invest some $140 billion in the oil and gas industry this year, with even more to follow in coming years, according to a recent report.
"Looking ahead to the coming 5 years, the majority of engineering, procurement, and construction (EPC) work will be awarded in Saudi Arabia," said the report by Deloitte in the Middle East.
The report also states that Iraq is a "new focus" as contractors follow their client oil companies into the country with more than $130 billion in contracts to be awarded.
"The Iraqi opportunity itself is lucrative with the government expected to award EPC contracts worth more than $130 billion over the course of the next few years," the report said.
The report notes that upstream oil and gas development and pipelines have not been widely accessible to the private sector. However, it says that exceptions have been made in the interest of pressing market need, or to gain access to specialist technologies and practices.
"Saudi Arabia developed its own gas initiative some time ago to lessen dependence on imported gas for domestic consumption and exploit natural gas reserves for the same purpose," the report states.
Saudi Arabia entered into joint ventures and contracts with IOCs "to access the technology and transferable skills necessary to enable optimal use of their natural resources," said Kenneth McKellar, partner and energy and resources leader at Deloitte in the Middle East.
The report reiterates that offshore exploration also presents an opportunity for IOCs to lend much-needed technical expertise.
It shows that regional NOCs originally focused on more accessible and cheaper onshore exploration, but that they are now under pressure to maximize and replace output from onshore and offshore fields that are maturing.
"The region's offshore technological requirements have to cover a range of geologies, from the large shallow-water Gulf acreage, to the deepwater acreage in Egypt with depths of over 600 m," McKellar said.
The private sector also has the potential to play a particularly important role is the construction and upgrading of regional petrochemical refineries and petrochemical plants.
"Over the course of the coming decade, governments of the Middle East will deploy significant resources to ensure that petrochemicals manufacturing plays a key role in their domestic industrial base," McKellar said.
Private sector involvement throughout the Middle East enabled petrochemical capacity in the region to grow by 3.7% during the past decade, the report said.
That growth came "despite the global financial crisis, and at a time when manufacturers in the US and Europe were forced to either cut production or close their facilities."
Over the next 5 years, MENA will witness "strong growth" in hydrocarbon production as the world's dependence on fossil fuels continues.
"To attain forecast production levels, drilling activity, both onshore and offshore, must grow at a considerable rate due to the increasing demand for rigs and associated drilling services," said McKellar.
"As an example, if Iraq is to achieve its forecast medium-term outputs, not hundreds but thousands of wells will have to be drilled," McKellar said.
The report restates that oil field services in the MENA region are provided not only by the in-house resources of the NOC's, but also by a host of private players.
These private firms, both international and domestic, will conduct drilling work and require expenditure in the MENA region that is forecast to surge by more than $10 billion to reach $28 billion by 2014.
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