GCC oil and gas project activity sharply declines

The GCC has witnessed a noticeable decline in oil and gas project activity over the course of 2020 in the wake of the Covid-19 pandemic and subsequent collapse in global oil prices.

This decline has been led by Kuwait, where total project activity in the oil, gas and chemical sectors has fallen by more than a third since the start of the year, according to data from MEED Projects.

On 31 December 2019, the total value of all active oil, gas and chemical projects in Kuwait came to $66.8bn. By 19 May 2020, the total value of active projects in these sectors had declined by 37.4 per cent to just $41.8bn.

ANALYSIS: Kuwait’s oil and gas projects sector shrinks by a third

The GCC nation with the second-biggest decline in activity over the period was Oman, which saw the total value of oil, gas and chemical projects decline by 6.5 per cent from $85.1bn to $79.6bn.

The total value of oil, gas and chemical projects in Saudi Arabia, meanwhile, declined by 4.2 per cent from $102.9bn to $98.5bn.

Growth recorded

The countries that appear to have been most resilient during the period are Bahrain and the UAE, both of which recorded growth in the total value of active projects.

In the UAE, the total value of oil, gas, and chemical projects grew by 11.5 per cent from $99.5bn to $111.0bn, overtaking Saudi Arabia and becoming the region’s biggest market for hydrocarbon projects.

Bahrain is the region’s smallest project market. It expanded by 29.1 per cent over the period, rising from $7.3bn to $9.5bn.

Regional decline

As a region, the total value of active oil, gas and chemical projects in the GGC declined by 4.8 per cent over the period, falling from $403.9bn to $384.5bn.

The region’s oil projects market was the hardest hit, declining by 9.2 per cent from $199bn at the end of 2019 to $180.5bn on 19 May 2020.

The total value of active chemical projects declined by 8.8 per cent over the period. It fell from $78.6bn to $71.7bn.

Gas projects were more resilient, with the total value of projects increasing by 4.8 per cent from $126.3bn to $132.3bn.

It is likely that the impact of the Covid-19 pandemic and the decline in global oil prices has had more of an impact on project activity than these figures suggest

According to MEED Projects, active projects include projects that are under study or in another pre-execution phase and projects that are currently being executed.

If new projects are being announced then this drives the total value of active projects higher.

If projects are completed, cancelled or put on hold, then the figure is driven lower.

Covid crater

It is likely that the impact of the Covid-19 pandemic and the decline in global oil prices has had more of an impact on project activity than these figures suggest.

This is because some projects may have seen a slowdown in progress or been unofficially put on hold – something that would not necessarily be represented in the MEED Projects data.

Project markets in the GCC have been negatively affected by restrictions designed to reduce the spread of Covid-19.

Many of these restrictions have made it harder to transport people and equipment.

This has caused delays and logistical complications for many major projects across the region.

Low oil prices

Additionally, the value of Brent crude has declined by around half since the start of 2020, falling from more than $67 a barrel at the beginning of the year.

At its lowest point, it was trading at less than $10 a barrel in April, as major oil-producing nations struggled to agree on the terms of a deal to reduce exports and support prices.

Low global oil prices have sent a shockwave through the region’s oil and gas sector – simultaneously reducing the financial incentive to extract hydrocarbons and reducing the amount of capital that governments and international oil companies have available to invest in projects.