Billions spent to up capacity in OPEC heartland

Despite slump, Middle Eastern oil producers look to boost output

OPEC members may be weighing oil production cuts again, worried that a slowing global economy will undermine prices, but in the group’s Middle East heartland, producers are spending billions to add output capacity for the long term.

As the global oil industry recovers from one of the worst slumps in its history, the biggest international energy companies are keeping their chequebooks closed and tightening up on investment so as to boost returns to shareholders. Na- tional oil companies in the Middle East, home to 48 per cent of the world’s reserves, are bucking the trend.

Iraq, Saudi Arabia, Kuwait and the United Arab Emirates are among Middle Eastern producers that are drilling wells to maintain or boost output, in an expansion comparable to the surge in U.S. shale oil since 2010.

Abu Dhabi, home to most of the UAE’s oil deposits, this month increased planned spending by 22 per cent to exploit recent discoveries and raise capacity.

“Globally we’re looking at a pretty flat picture, but under- neath that headline number there is growth in some areas” of upstream investment, said Richard Mallinson, an analyst with consultant Energy Aspects Ltd. in London.

Ministers from OPEC and allied producers met in Abu Dhabi on Sunday to discuss scenarios including the possibility of cutting output.

Crude futures are wilting in the face of another historic shale boom, prompting the suppliers to discuss an aboutface in production.

Saudi Energy Minister Khalid al-Falih said Monday that producers need to cut about 1 mil- lion barrels a day from October output levels.

The planned boost in capacity signals that Persian Gulf producers want to be ready to meet future demand.

Almost two-thirds of the 7.8 million barrels of extra oil that OPEC expects the world to need in 2025 could come from planned capacity expansions in Iraq, Kuwait and Abu Dhabi, Bloomberg calculations show.

“There are many countries that are suffering production declines, therefore we need to continue to invest,” UAE Energy Minister Suhail Al Mazrouei told reporters.