Majors eyeing Gulf region as ideal location to invest
Independent Oil Analyst Now with the end or near end of shale oil revolution as shale oil seems to be reaching its peak and there is gradual reduction in the easy oil shares, traditional oil companies are starting to focus again on their core basics of traditional oil to invest again.
This is in view of long term economic prosperity and growth in population, which would result in a surge in demand from China and India. The fact that the oil price is firmly at $60 per barrel is comforting to many oil companies’ balance sheets, and resulting in a record level of profits for this year. This increases the investments on traditional oils, while new technical challenges are ahead for shale oils.
BP, Statoil of Norway and Roseneft of Russia are investing in oil and gas once again. BP has bought ten percent shares of Italian Eni, the main shareholder of Zohr gas field in Egypt, which is the biggest gas field in the Mediterranean Sea. Roseneft will follow suit by buying 30 percent from Eni also.
Meanwhile, Statoil went heavy in investing $2.5 billion for buying shares in the third largest offshore oil field Roncador in Brazil. The company sold its shares in major oil companies, and has been focused on gaining experience in deepwater exploration, which is much more difficult than its own kind. With its ageing North Sea oil and gas fields, it has to invest directly instead of collecting dividends and cash from its shares in the oil companies.
Handson business is far better to take home and apply to their oil fields. It seems more logical as always to invest in known technology of conventional oils, which is very familiar to major oil companies, and enhance accordingly instead of taking unknown moves and being confronted with expensive challenges on traditional oil and gas fields. Without any doubt, all oil companies are eyeing the Middle East particularly the Arabian Gulf region as their ideal location to place their capital.
The Arabian Gulf region is the ultimate due to availability for cheap costs, low need for technology, guaranteed volume throughout the year and long-term experience in the area. However, it has always been challenged by overseas politics that prevent them from excelling and insuring long term volume of oil and gas. Importantly, major oil companies are back to invest in their core business with minimum risk.
By Kamel Al-Harami