Regional Report: Mega-transitions are underway in the Middle East

GORDON FELLER, Contributing Editor    

Fig. 1. During the last year, Middle Eastern NOCs/OPEC members have shifted their strategy dramatically. To win long-term market share, regional producers are increasing output, embracing a lower-price environment. Image: OPEC.

The Middle East’s oil and gas industry is now in a highly dynamic and transitional phase. Over the past year, forces have been at work, which are shifting the underlying structure of the industry: big, new capital inflows, infrastructure deals, upstream expansions, and new decarbonization commitments—each of which sets the stage for change.  

Looking forward, analysts expect the region’s hydrocarbon and energy footprint to be redefined by expanded LNG capacity, midstream monetization, strategic global investments, and rapid technology adoption. National oil companies (NOCs) and sovereign investors remain at the center of these trends, leveraging their strategies in ways that aim to retain their operational command, while maximizing capital efficiency and long-term resiliency.  

REGION IN PERSPECTIVE 

We asked Hector Casas Gonzalez, Arthur D. Little’s principal in Riyadh, for an historical perspective: “Not long ago, Middle Eastern oil producers, primarily through OPEC (Fig. 1), were focused on maintaining price stability via agreed production quotas,” he observed. “Fast-forward a year, and the strategy has shifted dramatically. In a bid to win long-term market share, regional producers are now increasing output, embracing a lower-price environment while launching major digital and AI initiatives to improve operational efficiency.”  

Casas Gonzalez noted the past year’s heightened volatility in global oil markets, which has played a central role in this transformation: “Geopolitical tensions, including U.S. tariffs and ongoing regional conflicts, have kept Brent crude prices fluctuating between $60 and $80 per barrel,” he said. “For oil-dependent Middle Eastern economies, this uncertainty has strained national budgets, already under pressure from ambitious transformation initiatives.” This prompted a strategic rethink. Adding to the urgency is what Casas Gonzalez calls “the prospect of peak oil demand,” raising the stakes around how and when to monetize existing reserves to ensure value maximization.

Fig. 2. Key players in the region are pursuing higher oil production, targeting mid-to-long-term levels. Chart: Arthur D. Little.

Rather than defend high prices through production cuts, Casas Gonzalez sees key players, such as Saudi Arabia, the UAE, Kuwait, and Iraq, “pursuing higher output (Fig. 2), targeting mid-to-long-term production levels of 12 MMbpd, 5 MMbpd, 4 MMbpd, and 6 MMbpd, respectively.” Over the past year alone, he notes, “regional supply has grown by roughly 1 MMbpd, with Saudi Arabia contributing an increase of 670,000 bpd, followed by Iraq (+170,000 bpd), Kuwait (+ 160,000 bpd), and the UAE (+ 130,000 bpd).  

While volumes are rising, producers are bringing these extra barrels online gradually to avoid destabilizing the market.” This measured approach is also revealing real spare capacity, an area where Middle Eastern producers appear stronger than many of their OPEC peers, with the exception of Iran, whose output has declined 7%. 

Fig. 3. Middle Eastern NOCs continue to embrace advanced technologies, such as drilling optimization systems. Image: ADNOC.

In parallel, NOCs are accelerating digitalization and AI programs across their operations. Casas Gonzalez thinks such initiatives “are proving particularly beneficial in the current low-margin environment. Industry leaders like Aramco and ADNOC are rolling out advanced technologies in areas, such as drilling optimization (Fig. 3), predictive maintenance, and reservoir management.” According to Rystad Energy, these tools could increase production by up to 5% and help avoid losses exceeding $100 million annually. At the same time, localization efforts are gaining momentum, particularly in Saudi Arabia, the UAE, and Kuwait, where in-country value initiatives are helping diversify economies and build industrial resilience. 

Casas Gonzalez highlights the fact that natural gas is “becoming a central pillar of the regional energy strategy. While Qatar continues to expand its massive North field, countries such as Saudi Arabia (Fig. 4), the UAE, and Kuwait are investing heavily in gas infrastructure to meet growing domestic demand with lower emissions and to lay the groundwork for potential future exports, particularly in the case of the UAE. This pivot aligns with global decarbonization trends and underscores the region’s broader ambitions in the energy transition.” 

Fig. 4. Countries in the Middle East are committed to scaling up natural gas infrastructure. Image: Aramco.

Building on these strategic shifts, the region continues to channel significant capital into energy infrastructure. Over the past few years, more than $400 billion in oil and gas projects have been sanctioned across the Middle East, averaging approximately $50 billion/year. This sustained level of investment reflects not only the region’s determination to maintain its leadership in global energy markets, but also its commitment to scaling future capacity, Fig. 5. Casas Gonzalez sees “these capital flows being directed into complex upstream developments, integrated refining projects, and large-scale gas ventures, each aimed at supporting both domestic energy needs and expanding global supply.” 

The Middle East is no longer merely stabilizing oil markets; it’s actively reshaping them. Casas Gonzalez concludes that, “by expanding output, embracing digital transformation, and scaling up natural gas, the region is positioning itself to maintain long-term relevance in a lower-carbon, price-sensitive world. Adaptability and scale, rather than restraint, are now the cornerstones of its evolving energy playbook.” 

Fig. 5. As countries in the region put gas projects online, output continues to grow. Chart: Arthur D. Little.

A SHIFTING ROLE FOR SERVICE COMPANIES 

For another perspective, we consulted with Tarik Abdelfattah, energy advisory director for the MENATI region at Baker Hughes subsidiary GaffneyCline. His view is that “a quiet shift is being observed in the upstream landscape. New commercial and collaborative models are taking shape, as operators seek to become leaner and more agile, and practice increased capital discipline.”  

In this new environment, Abdelfattah sees “large oilfield service companies stepping into a broader role, one that extends beyond execution and a role centering around integrated field management and performance accountability. Service providers, in turn, are reimagining how value is created and captured. Models, such as Field Management Services and production-linked partnerships, are becoming central to their growth strategies.” 

Abdelfattah points to the Baker Hughes “Mature Asset Solutions” approach, which exemplifies this shift, targeting brownfields with aging wells and facilities and using advanced drilling, production, and digital technologies to stretch the economic life of assets once deemed mature. As Abdelfattah notes, “by integrating disciplines and scaling tailored recovery solutions, these initiatives push the frontier of what is technically and commercially recoverable. At the same time, IOCs and NOCs are prioritizing their most economic core projects, and deprioritizing marginal assets.” Baker Hughes concludes that this creates opportunities for new kinds of collaboration between operators and service companies with full-spectrum upstream capabilities. In some markets, these service companies are taking charge of such assets under “production performance” frameworks, where remuneration is tied to incremental output rather than traditional service fees.  

For Abdelfattah and Baker Hughes, this evolving dynamic “marks a pivotal inflection point in upstream collaboration. Service companies are no longer just enablers, they are emerging as co-stewards of production. And both operators and service providers appear one step closer to alignment on a redefinition of how value, risk and accountability are shared across the field life cycle.” 

The past twelve months in the region have clearly been a period of dynamic investment, high-profile infrastructure deals, strategic international partnerships, and heightened focus on decarbonization and diversification across the region’s oil and gas value chain. These developments shaped the sector in five important ways: infrastructure monetization; upstream expansion; midstream and downstream integration; energy transition; and some still-evolving international investment patterns. Let’s review each of these, one-by-one. 

INFRASTRUCTURE MONETIZATION AND CAPITAL RAISING 

Almost every one of this region’s NOCs has adopted the strategy of monetizing critical oil and gas infrastructure by selling minority stakes or launching IPOs, while retaining operational control. One key aim is that these transactions will free up capital for new investments and support broader economic diversification mandates. What follows are summaries of the most important types of deals in various countries. 

Saudi Arabia. In 2025, Saudi Aramco completed a lease-and-leaseback deal with Global Infrastructure Partners, worth $11 billion, for Jafurah gas project-related assets. This was a critical part of a larger program to unlock tens of billions of dollars by potentially selling additional midstream and power-generation assets. Aramco has maintained majority ownership and operational management through all deals.  

UAE-Abu Dhabi. The Abu Dhabi National Oil Company (ADNOC) has executed several landmark infrastructure deals in the last five years, including pipeline stake sales to BlackRock, KKR, and global pension funds, which cumulatively raised over $14 billion. In 2024, Snam sold its share in an ADNOC gas pipeline entity to the UAE’s sovereign holding company, consolidating local control of energy infrastructure.  

Oman's OQ Gas Networks sold 49% of its pipeline division through a $750-million IPO, with major international and Gulf investors (including Saudi Public Investment Fund and Fluxys) participating, and OQ retaining 51% and operational control  

Bahrain-based Bapco Energies executed its inaugural infrastructure monetization, selling a minority interest in the Saudi-Bahrain oil pipeline to BlackRock’s fund—marking a strategic move for the kingdom. Bapco remains the operator.  

Kuwait Petroleum is considering a lease-leaseback structure for its pipeline network, in line with evolving regional strategies (anticipated to raise up to $7 billion). BlackRock has been active in establishing a presence in Kuwait, reflecting continued foreign investor appetite for regional midstream assets.  

These transactions underscore a clear trend: Gulf NOCs are tapping global capital while retaining control, shoring up finances for new expansions and buffering national economies against fluctuating crude prices.  

UPSTREAM EXPANSION AND INTERNATIONAL PARTNERSHIPS 

Fig. 6. Ongoing projects in Saudi Arabia require significant amounts of drilling. Image: Aramco.

Despite heightened price volatility and geopolitical risk, the region has aggressively expanded domestic and global production capacity: 

In the GCC, ADNOC’s XRG subsidiary announced a partnership with ADQ and Carlyle to acquire Australia’s Santos and its LNG portfolio, establishing a foothold in the fast-growing Asia-Pacific LNG supply chain.  

QatarEnergy joined with TotalEnergies to split a 49% stake in Algeria’s Ahara license, deepening regional links and leveraging leading technology for enhanced recovery. Algeria awarded five new upstream licenses in June 2025 as part of a sweeping $50 billion hydrocarbon investment program for the next four years—the largest licensing surge in North Africa.  

U.S. shale player EOG Resources entered the Abu Dhabi upstream sector in 2025, marking the first significant U.S. shale company partnering Gulf NOCs to accelerate unconventional gas resource development, supporting ADNOC’s ambition for gas self-sufficiency by 2030.  

MENA-wide, upstream investment exceeded $600 billion in 2024, reflecting both recovery from the COVID-19 downturn and response to strong global demand. The MENA region remains crucial to global supply, and the ongoing rollout of megaprojects in Saudi Arabia (Fig. 6), the UAE, and Qatar are testament to the region’s robust upstream investment appetite  

ENERGY TRANSITION, ESG AND TECHNOLOGY 

Decarbonization and green energy are no longer peripheral; they are central to both regional strategy and capital allocation. Consider just three of the indicators for this trend: 

ADNOC signaled a multibillion-dollar commitment to carbon capture, utilization, and storage (CCUS) facilities in both domestic and U.S. markets in 2025, reinforcing its intent to diversify and comply with global climate commitments.  

The market for blue hydrogen, GTL (gas-to-liquids), and downstream battery storage is rapidly expanding: Abu Dhabi’s government issued a tender for a 400-MW / 800-MWh battery system to strengthen grid reliability, marking one of the largest utility-scale battery initiatives in the GCC.  

Flare gas analytics, AI-enabled control systems, and portable recovery units are rolling out across oil fields, especially in Saudi Arabia’s Eastern Province, the Burgan basin in Kuwait, and the Zakum field area in the UAE.  

EVOLVING INTERNATIONAL INVESTMENT FLOWS 

The last year has seen reciprocal foreign direct investment. Notably, Gulf NOCs increased outbound ventures to the U.S., Europe, Asia and Africa; the UAE aims to grow its U.S. energy asset portfolio to $440 billion by 2035. At the same time, international majors—especially U.S. firms—expanded their larger-scale projects in the region, diversifying supply chains amid geopolitical volatility and regulatory shifts.  

FINANCING, IPOs AND M&A ACTIVITY 

The GCC IPO market broke records in 2024, with 53 listings raising $13.2 billion, up 25% year-over-year. Infrastructure, energy, and midstream assets accounted for a significant share of this activity, signaling both strong demand for regional assets and NOCs’ desire to monetize non-core holdings.  

Across the first three quarters of 2024, the region saw 522 M&A deals, including both assets and whole companies, as local champions consolidated and international investors deepened engagement.  

PREDICTIONS AND LIKELY TRENDS FOR 2025–2026 

Looking ahead, there is a broad consensus from analysts, institutional investors, and policymakers about continued deal activity. Many of them see interlocking trends: sustained capex; ongoing energy diversification; a shifting geopolitical context. All of these, taken together, would have the effect of defining the region’s oil and gas sector in the coming year.  

National oil companies—especially in Saudi Arabia, UAE, Kuwait and Oman—are likely to proceed with additional lease-and-leaseback transactions, partial divestitures, and strategic partnerships targeting midstream and downstream assets. Kuwait’s KPC will likely finalize its pipeline monetization in 2026. Aramco’s anticipated sale of multiple gas-fired power plants is expected to raise billions and may prompt similar moves elsewhere in the GCC.  

Major upstream projects will drive regional supply growth—even as OPEC+ may keep output caps in place to stabilize prices. Algeria will continue rounds of licensing and investment to deliver on its $50 billion plan. The focus will remain on natural gas—especially unconventional—as local economies place a premium on gas-to-power and LNG exports, leveraging abundant reserves and advancing self-sufficiency goals.  

Qatar, Saudi Arabia, the UAE, and Oman are poised to ramp up LNG megaprojects, aiming to solidify the region’s status as a critical global LNG supplier, especially amid growing Asian and European demand. Middle East LNG export capacity is set to more than double by 2050, with new plants and expansions in Qatar (North Field), Oman (Duqm), UAE (Ruwais), and Egypt.  

Regional governments and companies are likely to pursue new opportunities for trading carbon offsets, entering voluntary and compliance markets as part of their broader climate diplomacy strategies.  

Gulf NOCs and sovereign funds will both deepen their cross-border investments, focusing on supply security, technology transfer, and portfolio diversification—especially in the U.S., Europe and, increasingly, new African upstream plays. Growing U.S.-GCC bilateral investment in energy, especially in unconventional gas, CCUS, and petrochemicals, will further anchor strategic ties, particularly in the context of the Trump administration’s renewed diplomatic and economic engagement.  

U.S.- and European-headquartered companies are expected to continue jockeying for access and partnership in MENA’s new megaprojects—tempered by regulatory, security, and political risk considerations.  

Expect a continued robust pipeline of energy-related IPOs and asset-backed securities, reflecting strong equity capital markets and global investor demand. New M&A may focus on distressed or underperforming assets, as well as technology-driven consolidation in decarbonization, digital oilfield solutions, and renewable integration projects.  

The sector will operate amid moderate economic growth (IMF expects 3.2% for GCC in 2025), price volatility, and rising priorities for “smart spending” and diversification. OPEC+ production policy, local subsidy reforms (especially in Egypt), and regional project financing dynamics will continue to influence strategic decision-making and investment pacing.  

One major transaction in Iraq 

ExxonMobil signed preliminary agreements on Oct. 8, 2025, for exploration and development of Majnoon oil field in Iraq. This marks the company’s re-entry into Iraq after exiting the West Qurna project two years ago. Iraq holds some of the largest oil reserves in the world. The country currently produces nearly 4 MMbopd. By 2029, Iraq plans to raise production levels to 6 MMbopd. 

The vast Majnoon oil field, located toward the south of Iraq, is about 37 miles from Basra and is estimated to hold 38 Bbbl of oil—one of the largest oil fields in the world. As described in an announcement by Iraq’s prime minister, ExxonMobil intends to sign “heads of agreements” with Basra Oil Company and SOMO, the Iraqi oil marketing company, to develop the massive oil field and boost the country’s export capacity.  

The agreement includes sharing profits on the sale of crude oil and refined products, and aims to upgrade Iraq's export infrastructure in the south. Specifically, the deal includes discussions regarding potential oil marketing projects in southern Iraq. According to an article published by Iraq’s state news agency, INA, SOMO and ExxonMobil are also discussing how SOMO can secure additional storage capacity in Singapore, to enhance access to Asian markets. 

History runs in cycles: In 2010, ExxonMobil was one of the first Western oil companies to enter Iraq to strengthen the country’s energy sector after the downfall of Saddam Hussein, and after the years of conflict that followed. However, the company later decided to pull back from exploration projects in Basra and Kurdistan, citing what it determined were weak returns. The company also handed over its stake in the West Qurna 1 oil field in southern Iraq to PetroChina, which later became that field’s operator. 

Fig. 7. The Golden Pass LNG facility in Texas is an example of Middle Eastern investment flowing out to other regions. Image: Golden Pass LNG.

Iraq signed several recent agreements with other oil majors that had previously exited the country, including U.S. oil major Chevron and UK-based energy giant BP. Over the past five decades, Majnoon has attracted several oil majors. However, political turmoil and unfavorable investment terms in the country, including government profit sharing, have hampered development progress. In recent arrangements with Chevron and BP, Iraq allegedly offered somewhat more favorable investment terms.  

Middle Eastern Investment in Texas  

Not all of the relevant Middle Eastern oil and gas events of the past 12 months have been centered in the Middle East, itself. QatarEnergy co-owns the Golden Pass LNG terminal (Fig. 7) in Texas, which is in the final stages of commissioning and startup after experiencing significant delays. QatarEnergy is a 70% partner in the venture and will be responsible for off-taking, transporting, and trading its share of the project's LNG output.  

The project is expected to see full production by early 2026. The terminal, co-owned with ExxonMobil, is on the verge of beginning operations after the successful import of a "cool-down" cargo in October 2025 to prepare for production, a crucial step before beginning operations and start-up for its first export train.  

The terminal, located near Sabine Pass, Texas, is undergoing an historic transformation to add liquefaction and export capabilities to an existing import facility. Once complete, it will have the capacity to export approximately 18 million tons of LNG per year. The project has faced numerous setbacks, primarily due to the bankruptcy of its lead contractor, Zachry Holdings—which added $2.4 billion in additional costs. This led to the project being behind schedule.  Zachry was replaced by McDermott International as the first train’s lead contractor. The Federal Energy Regulatory Commission (FERC) granted a three-year extension, due to delays stemming from Zachry’s bankruptcy. Golden Pass was built on the site of a former gas import terminal that was converted to process natural gas for export.