Changes in the oil-field services and equipment sector in Saudi Arabia are calling into question the future of partnerships between multinationals and local partners. Those local firms that proactively develop and adapt their capabilities will be best positioned to retain their existing partnerships and attract new multinational partnerships, or they can become independent suppliers of oil-field services and equipment.
Energy, chemicals and utilities
The following articles were written by Strategy& partners and other senior professionals on key topics in the energy, chemicals and utilities sector.
From technology adopters to innovators: How R&D can catalyze innovation in Middle East national oil companies
Investing in a lean, efficient, and collaborative R&D setup offers Middle East national oil companies many opportunities to build long-term stability, offsetting the effect of volatile oil prices. R&D can act as a differentiating capability to help them improve recovery, increase production, boost operation efficiency, unlock resources, and reduce costs.
Gulf Cooperation Council countries should reform how they price domestic natural gas to incentivize upstream gas investments. Reforms should define a mechanism that prices natural gas closer to its true market value and that in some manner reflects the global and regional dynamics of supply and demand.
The United Arab Emirates needs a coherent energy-efficiency strategy. This should include a tailored regulatory framework; a communications and information initiatives to persuade residents, builders, and other stakeholders to reduce their energy consumption; and research and development to ensure that the UAE is capitalizing on emerging technology to boost efficiency.
Oil and gas companies need a dynamic strategy that is flexible enough to adapt to changes in the operating environment. Differentiating capabilities set the broad direction of travel, but companies will be able to adapt, as sailors do, in response to changes in the prevailing wind.
The global chemicals industry has undergone large-scale disruptions over the last few years which are challenging the business models for the industry’s five key building blocks: methanol, ethylene, propylene, butadiene, and aromatics. Petrochemicals companies are responding by adapting their business models and building new and lasting capabilities.
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GCC countries increase the sustainability of their water sectors by addressing three issues: excessive water demand, inadequate water supplies, and ineffective institutional frameworks. Steps to manage the water sector must occur in an integrated fashion because of the impact that water has on multiple industries, including energy, agriculture, and recreation.
All players in the chemical value chain will be impacted by recent feedstock developments. However, growth opportunities are particularly important for global producers of propylene, butadiene, and benzene in those parts of the world where feedstock is available for on-purpose production.
MENA energy companies must transform how they operate if they are to cope with today’s challenging business environment. Critically, this requires them to efficiently capture their data so that they have a stronger basis for decision making. An IT-enabled transformation is key to help build such capabilities.
Air conditioning is a costly necessity in the Arab Gulf, consuming half of total electricity output. A more economical and sustainable method is district cooling, which allows businesses and residences in dense areas to share a pooled cooling facility.
During the coming decade, the energy industry in the Middle East is expected to execute projects worth approximately $1 trillion across the energy value chain. In order to manage these megaprojects more effectively, energy companies must master seven key habits.
Managing emissions and making profits: The opportunity for carbon-intensive sectors in the Middle East
National oil companies and companies in other carbon-intensive industries, such as chemicals and utilities, can not only profit from returns on investments in energy efficiency; they can also improve their image, access carbon finance, and contribute to the long-term competitiveness of fossil fuel resources and hydrocarbon-based products and services.
In recent years, countries in the GCC have increasingly turned to independent power projects (IPPs) as alternatives to government-financed power plants. But the IPP model being used in the region, while serving to augment and diversify investment resources, presents long-term risks. Changes in the way that IPPs are structured can preserve the benefits of the IPP model while substantially reducing these risks.