Mena energy sector 'will attract $ 1.1tn this decade' |
Gulf Times - 27 June, 2012
In a new wave of mega capital projects, the Middle East and North Africa (Mena) region will see investments exceeding $ 1.1tn this decade, approximately one-fourth of the industry's total global investment through 2020, a new report here has said.
However, the significant capital outlay "needs to be carefully managed", says management consultancy firm Booz & Company in the report.
The region’s “track record is mixed” when it comes to executing large capital projects, it said.
Management consulting experts from Booz & Company have identified the root causes of inefficient development, management, and execution of capital projects that may impede taking full advantage of the anticipated capital outlay, and examined ways in which they can be overcome.
Mena’s oil and energy exporting countries, particularly Saudi Arabia, Qatar and the UAE, have made “impressive strides” in consolidating their position in the energy markets, the report said.
For example, Saudi Arabia’s national oil company (NOC), Saudi Aramco, built infrastructure facilities in 2009 to increase its oil production capacity to 12.5mn barrels per day (bpd), including the development of the massive 1.2mn bpd Khurais field, at a cost of $ 10bn and crafting a leadership position in new adjacent industries, such as bulk petrochemicals, natural gas, liquefied natural gas (LNG), steel, and aluminium.
The industry has achieved this diversification by executing a number of ground-breaking new megaprojects across the Middle East.
For instance, Saudi Arabia has become one of the largest players in the bulk petrochemicals market, with its flagship company, Sabic, among the top five producers worldwide. This has been achieved by establishing massive industrial sites with world-scale petrochemicals complexes in Jubail and Yanbu.
Qatar has become the largest LNG exporter in the world during the past decade, by setting up 14 LNG mega trains through its two flagship companies — Qatargas and RasGas. In addition, Qatar also built the largest gas-to-liquids project in the world (in collaboration with Shell), Booz & Company said.
Also, the United Arab Emirates has been an early pioneer in developing LNG from the Middle East and is building highly complex sour-gas fields, along with a planned increase in oil production capacity.
During the coming decade, the Mena energy industry is expected to continue this massive investment programme by executing projects worth $ 1.1tn across the energy value chain.
Raed Kombargi, a partner with Booz & Company said, “However, the next wave of capital projects will be larger and more complex, and will represent a significant capital outlay that needs to be carefully managed. History suggests that the region’s companies have a mixed record of executing large capital projects.
“Cost overruns, schedule slippages, and inconsistent quality have become recurring concerns for senior management. Some of these problems come from market-related issues, such as a surge in commodity prices in the middle of the last decade.
“Many of these problems, however, arise from within the industry itself. In our experience, the root causes include inadequate engineering and project management (E&PM) strategies, a lack of clear governance, inadequate checks and balances, insufficient standardisation, and a shortage of local capabilities, Kombargi added.”
Mena energy companies have a “rare opportunity” now to fundamentally review the way they develop, manage, and execute capital projects. Specifically, the industry will need to master seven key habits to build world-class project delivery capabilities.
These are development of a clear engineering and project management strategy, implementation of a governance model with clear accountabilities and responsibilities, best-practice processes including appropriate checks and balances, in-house centres of excellence in key E&PM areas, strategic alliances to address local capability gaps, dedicated project and commercial academies to improve learning and development and increase standardisation levels across all areas.
“As a new wave of mega investments kicks in, now is the right time for Mena companies to fundamentally review the way they develop, manage, and execute their capital projects. In addition, through these major capital project programmes, Mena companies have a unique opportunity to build and incubate the local private sector and play an essential national role in contributing to GDP and the economy as a whole. Perhaps most important, they can help build homegrown capabilities and reduce their dependence on outsiders,” Kombargi added.