The Middle East has long been associated with “easy oil” and “low tech, low cost” production models. But the volume, scale and complexity of energy projects across the region are creating increasing demand for advanced technology and expertise.
This rapidly changing scenario is being driven by factors including the accelerating need for enhanced oil recovery, sour gas, heavy oil, tight gas, LNG, GTL, “clean fuels” refineries, carbon capture and storage, nuclear, and solar technologies.
This intelligent energy trend, which can be evidenced by Saudi Aramco’s drive towards high technology solutions, presents major opportunities and challenges for international companies, in relation to intellectual property acquisition, transfer, and protection, across the region.
The scope and scale of opportunity in the region is exercising a significant pull for IOCs and the global supply chain. Just over half of the world’s proven conventional oil reserves and 42% of the world’s proven conventional gas reserves are in the Middle East and North Africa (MENA). The region has 13 of the world’s 20 giant oilfields, as well as the largest gas field in the world.
There is an estimated US$3 trillion of projects underway or planned in the six Gulf Cooperation Council countries (Saudi Arabia, United Arab Emirates, Kuwait, Oman, Bahrain and Qatar) plus Iraq and Iran. The majority of these relate to upstream oil and gas, downstream (including refineries, LNG and GTL), petrochemicals and related infrastructure projects. Industry watchers anticipate that Iraq will overtake Saudi Arabia as the biggest projects market in the region in the next five years, but Saudi Arabia and Abu Dhabi will continue to attract huge capital intensive projects. This represents a major prize for EPC contractors and their supply chain.
The retreat of IOCs from the region, seen in the 1970s, when a major nationalization program pushed them out, has been reversed. Perhaps the most important development anticipated in the region in a generation is the expiration and replacement of the ADCO onshore concessions in Abu Dhabi, which could bring in a host of new IOC operators, including Statoil. The petroleum industry is balancing the politics of “resource nationalism” with the need for IOCs and their technology. It can be expected that there will be an increasing use of enhanced technical services agreement (ETSA) contract models, as a partial solution to this challenge, such as the ETSA Kuwait Oil Co. placed with Shell to develop its tight gas Jurassic Field in the north of the country.
A further drive to advanced technology will follow if the current and prospective Red Sea and East Mediterranean exploration and appraisal programs bear fruit and bring deepwater fields into play in a region dominated by onshore and shallow water production.
While clearly a region of opportunity, those seeking to play to their innovative technology strengths will have to minimize the risks that proprietary technology and knowledge is exploited by others.
Conventional thinking has been to focus IP protection in the US and Europe, but the Middle East provides unique protection for technology, brands, engineering designs, and software. There are a range of options available within the six Gulf Cooperation Council countries and the position is improving in Iran.
As the technology needs across the region become increasingly complex, it will incumbent on companies to ensure that they have the appropriate strategies and protections in place for their IP, as part of their overall risk and reward assessments.