TMF World Energy Map: Middle East

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The Middle East is arguably the least diverse region in the world when it comes to energy. Coal production is minimal, and there is only one nuclear power plant. Right now, the Middle East is all about oil and natural gas, though in recent years, there has been a noticeable uptick in renewable energy investment.

Renewables
Despite the reliance on oil and gas for domestic consumption and export revenue, or perhaps because of it, there has been a pretty serious push to develop renewable energy in the Middle East. As domestic demand increases, the oil producing nations must keep more and more of their supply at home, diminishing export revenue. Demand is only going to increase, and so many of these nations are implementing renewable reforms.

The effort is manifesting itself in a variety of ways. The United Arab Emirates is building cleantech center with the lowest possible carbon footprint called Masdar City in Abu Dhabi. Kuwait is aiming for 5% renewable capacity by 2020. Saudi Arabia wants to generate solar capacity equal to its oil export power generating capacity.

The need for renewable energy affects some Middle Eastern countries from the other side as well. Jordan imports 95% of its energy, and the country hopes to develop 1.5 GW of solar and wind capacity over the next 10 years to bring that number down.

Oil
The Middle East plays a crucial role in the world oil picture: Seven of the 10 largest oil companies by oil and gas reserves are located there. All seven are national oil companies, or NOCs, and play a vital role in propping up state governments with oil and gas revenue. The top five producing countries in the Middle East are listed here:

Country

2011 Production
(Million bbls per day)

2011 Proved Reserves
(Billion bbls)

Saudi Arabia11.2265
Iran4.3151
Kuwait2.9102
Iraq2.8143
Qatar1.725

Source: BP 2011 Statistical Energy Review.

Saudi Arabia continues to dominate production. It has the largest oil reserves in the Middle East, and the second largest in the world after Venezuela. Some have questioned the legitimacy of its reserve base, however, and have predicted the number may actually be as much as 40% lower.

Natural gas
Qatar is top of the heap when it comes to natural gas. The country is the world's No. 1 exporter of liquefied natural gas. Home to the third-largest reserves in the world, natural gas provides all of the country's electricity capacity.

Iran has the world's second-largest natural gas reserves, and the commodity makes up 54% of the country's energy consumption. Iran has just under 3 million natural gas powered vehicles in service, more than the U.S., China, and all of South America.

The top five natural gas producing countries in the Middle East are shown here:

Country

2011 Production
(BCF)

2011 Proved Reserves
(TCF)

Iran5,3681,169
Qatar5,184885
Saudi Arabia3,503289
United Arab Emirates1,826215
Oman93634

Source: BP 2011 Statistical Energy Review.

Though it has the 10th-largest natural gas reserves in the world, Iraq is not on this list because annual production is negligible compared to its peers.

Geopolitical risk
The importance of oil to Middle Eastern economies cannot be overstated. Saudi Arabia derives 80% to 90% of all its revenue from oil exports. In Iraq, crude oil exports make up more than two-thirds of GDP. In Iran, oil exports provide half the government's revenue, while petroleum in one form or another accounts for 80% of all exports. As such, these governments will go to great lengths to protect the interest of their NOCs, reserves, and production. To be fair, a good number of foreign oil companies have a presence in the Middle East. Governments there understand the value of private company technology and expertise, but that doesn't mean the relationships don't get contentious from time to time.

Ultimately, the biggest risks here are unstable governments and tyranny. Over the past year and a half, numerous production operations have been shut down because of uprisings and war in the Middle East or neighboring North Africa. Because the region is so dependent on oil production, political sanctions are often levied by foreign governments in the form of oil embargoes. For example, Europe no longer imports oil from Syria; beginning July 1, that policy will extend to Iran. These actions can significantly impact the production of foreign oil companies operating in the region.

Players
Saudi Aramco
Saudi Aramco is not a publicly traded company; it is 100% owned by the Saudi government. It is the No. 1 oil producer in the world though, and should be included here. Believe it or not, Saudi Aramco has the same origin as many of today's integrated majors: Standard Oil. It was more or less owned by two American companies until the Saudi government began taking stakes in the 1950s, increasing its ownership bit by bit until 1980, when it assumed full control of the company.

Today, the company manages the second-largest proven oil reserves in the world, and the fourth-largest natural gas reserves. The company supplies the world with 10% of its oil supply.

ExxonMobil (NYSE: XOM)
Exxon has ruffled a few feathers in the Middle East recently. Last year, the company entered into an agreement with the Kurdish regional government to explore six blocks for oil and gas. Iraq doesn't recognize regional governments' right to grant exploration licenses, though, and is less than pleased with this arrangement. The Iraqi government has consequently banned Exxon from bidding for its blocks and has appealed to President Obama for intervention. Exxon refuses to back down because the Kurds offered it a sweeter deal than the Iraqi government typically does.

Baker Hughes (NYSE: BHI)
Baker Hughes has brought one significant project online in Saudi Arabia each year for the past three years, culminating with the opening of the Dhahran Research and Technology Center this past February. Baker Hughes partnered with Saudi Aramco to create the center, which will focus mainly on unconventional resources and offers state-of-the-art laboratories for students and scientists specializing in petrophysics, drilling, geomechanics, fluids, and production technology.

Noble Energy (NYSE: NBL)
In 2009, Noble discovered the Tamar gas field offshore Israel. It was the largest deepwater natural gas field discover at the time, estimated to contain 9 trillion cubic feet of gas. The field is scheduled to begin producing commercially in 2013. In light of this, Noble recently inked a 15-year deal with Israel Electric to source the utility 2.7 TCF of gas from Tamar. The deal is worth an estimated $23 billion over the 15 years.

Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B)
Shell operates the world's largest gas-to-liquids facility in Qatar. Once it begins operating at full capacity, which should be any day now, Pearl GTL has the ability to produce 140,000 barrels per day of NGLs.

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