Emirates Business 24-7, 04 November 2009

GCC-based oil firms plan massive upstream investments worth $365 billion (Dh1.34 trillion) in the oil and gas sector in the near future, said the regional director of SAS, a business intelligence and services company.

"In addition to multibillion dollar investments, the region's oil and gas players are undertaking plans to expand the market through a massive investment worth $365bn. This reflects how oil and gas remain a very important economic driver and a critical resource for the region's economy," said peter C Venn, Regional Director for Oil and Gas, SAS-Middle East and Africa.

Venn said these projects are being planned keeping in view the rising consumption in India and China.

"It's simple logic. Families in these countries are moving from not having a car to having a car. When the world's cheapest car Nano was launched in India, there were 60,000 bookings on a single day. And that happened amidst the recession."

Besides, development and exploration investments valued at more than $196bn are already being undertaken across the GCC, said an SAS communiqué.

Venn said these upstream oil investments in GCC states remain a major attraction for various downstream firms across the world.

"Many national oil companies in the Middle East are capitalising on the lower construction materials and engineering costs and are now more open to adopting technology-driven solutions to power their development and exploration investments," he added.

Industry insiders have repeatedly pointed out that several upstream and downstream oil projects in the GCC were awarded when construction costs subsided by about 20 per cent. Costs of steel, cement and other construction materials are still substantially low as compared to the 2008 peaks.

Robin Mills, a Dubai based oil economist, said the increased confidence among GCC-based oil producers comes from the rise in oil prices and therefore a perceived hike in demand.

"The Opec oil producers see a hike in demand some years down the line and are therefore investing in new projects. The recent hike in prices has given them added confidence," said Mills.

Commodities analyst at Merrill Lynch said they see oil rising to $100 a barrel by 2011. "The combination of surging money supply, a rapidly weakening dollar and a cyclical improvement in oil demand could push prices above $100/bbl as we head into 2011," a team of analyst headed by Francisco Blanch wrote in a report.

By Shashank Shekhar and Nancy Sudheer

© Emirates Business 24/7 2009