The market for the Saudi Arabia oil and gas midstream market is expected to register a CAGR less than 5.51% during the forecast period of 2020–2025. Factors such as increasing oil and gas production, the government's push to invest in the pipelines, and the growing consumption of oil and gas are expected to boost the demand for the Saudi Arabia oil and gas midstream market during the forecast period. However, policy to artificially reduce the production to increase the price of oil has reduced the required capacity of the pipeline and thereby impeded the growth in the market.
- The pipeline sector is expected to witness growth due to the government's push in the oil and gas midstream sector. Few pipelines have been proposed by the Kingdom of Saudi Arabia and neighboring countries that are expected to cross the country over the forecast period. The expansion project of Petroline is expected to generate the largest increase in capacity for the country.
- In 2020, the Kingdom of Saudi Arabia plans to develop unconventional natural gas reserves in the eastern Jafurah field, which can become an opportunity for the companies with expertise in unconventional resources and also increase the capacity required for storage and pipelines.
- Increasing gas production and further plans to increase the output are expected to drive the market. Infrastructure related to the storage and pipeline is likely to increase as the demand for oil and gas in the country increases.
Key Market Trends
Pipeline Sector to Witness Growth
- The oil production increased in the country, by 0.59%, year-on-year, from 11998 Thousand barrels daily, in 2015 to 12287 thousand barrels daily, in 2018. Keeping low oil production capacity is used as a method by the countries of OPEC plus to reduce the supply of oil, so the price per barrel of oil increases.
- Saudi Aramco operates more than 90 pipelines and 12,000 miles of crude oil and petroleum product pipelines throughout the country, all of which link production areas to processing facilities, export terminals, and consumption centers. There are three main pipelines with large capacities in operation in 2019, and one major pipeline was retired in 2018.
- The East-West crude oil pipeline is 1,200 kilometers long. The pipeline runs from the oil fields in Saudi Arabia's eastern province to the port at Yanbu along the Red Sea. Expansion related to the pipeline is proposed to increase the capacity of the pipeline from 5 million barrels per day in 2019 to 7 million barrels per day when fully completed.
- Saudi Arabia's only functioning international crude oil pipeline system carries Light Arab crude from Saudi Arabia's Abu Safah field to Bahrain. The capacity of the pipe is around 35000 barrels per day.
- Hence, pipeline capacity is expected to increase significantly during the forecast period due to an increase in the production of oil and gas and an increase in the investment in the sector through government-owned companies.
Increasing Gas Production to Drive the Market
- Consumption of natural gas increased in the country, by 2.6%, from 93.9 million metric ton oil equivalent, in 2017 to 96.4 million metric ton oil equivalent, in 2018, mainly due to the government’s focus on increasing gas production and its usage to reduce carbon footprint.
- Production of natural gas in Saudi Arabia increased significantly by 3.10%, year-on-year, from 85.3 million metric ton oil equivalent, in 2015 to 96.4 million metric ton oil equivalent, in 2018. An increase in production is expected to provide a boost for the growth in the sector.
- The country has a master gas system (MGS), which is an integrated gas gathering, processing, and transmission system. The transportation of natural gas both associated and non-associated and using this system to derive NGLs (natural gas liquids) production. An increase in demand for NGLs is expected to drive the demand for natural gas.
- Saudi Arabia’s oil and gas midstream industry is expected to grow significantly in the forecast period due to an expected increase in the production of oil and gas.
The Saudi Arabian oil and gas midstream market is consolidated. Some of the major companies include Bahrain Petroleum Company, Saudi Aramco Total Refining and Petrochemical Co., Saudi Aramco Jubail Refinery Company, Saudi Arabian Oil Company, and Saipem SPA.
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