The Greater Need for Diversity in Oil Investment

On January 28^th 2015, Royal Dutch Shell finalised a massive deal worth £11bn to build and operate a petrochemicals plant in Iraq. With the plant expected to be fully operational within 5 years. It represents a massive success in previous efforts and investments within Iraq, encapsulated by the ongoing struggle for regional stabilities by western powers.

The move also highlights the growing need for a return to the encouragement of emerging markets in both the Middle East and around the world, which are beginning to cool due to stumbling oil prices. Even Shell’s similar plans for a petrochemical plant in nearby Qatar had to be shelved due to dwindling oil costs, yet its plans in Iraq remain on track.

The move has been largely considered the biggest foreign investment in Iraq (not including the war of course) and has made Iraq the largest petrochemical producer in the Middle East. The plant that will eventually be built will lead to massive opportunities for oil and gas technology developers. There is almost no single greater opportunity for investment and business than in Iraq currently, which offers massive chances for the ongoing utilisation and development of oil technologies.

These developments are likely to advance petrochemical and oil technologies for Iraq, but as a result many other Middle Eastern ambitions will suffer. Instead of bringing further stability to the region, it should be expected to create a vast gulf of economic wealth and development. Many other Gulf nations, as well as nations in North Africa, are already experiencing tumultuous energy production periods. The once liberated Libya has experienced renewed conflict and infighting, Saudi Arabia refuses to budge on falling oil prices, whilst political instability and the continued downturn on production creates even further problems.

Many of these countries in the Middle East must find ways to better entice foreign investment opportunities to secure ongoing financial success as Iraq has, thus reducing the unreliability and volatility within the oil market by better spreading the responsibilities and capabilities across multiple nations. There are many solutions on the table; a better compensated and incentivised workforce, better oil based technologies and improvements in current operations such as the constant improvement of safety within the facilities used, regular wear debris analysis on machinery, and the continued testing of unconventional methods such as hydraulic fracturing and horizontal drilling.

 There are also many weaknesses within the current model of production and investment. Emerging economies could make great use of potential oil technologies, and with major production companies focusing this growth in Iraq, which has already been subject to years of western investment, they are creating a high risk environment. In this case, wherever production investment is headed, subsequent oil technology investment opportunities will follow.

The failure to increase exports and technologies to a wider range of nations will continue to stall growth for energy organisations, and further limit the diversification of investment opportunities around the world. Securing stable economies in the Middle East and around the world could support the progress of oil technologies such as petrochemical plants, and should be the first priority of corporations such as Shell, as well as oil dependent nations such as Iraq.

In order to secure a future in which these technologies are viable around the world, emerging economies and Middle Eastern nations may have to take this development into their own hands, foremost by collaborating with their neighbouring states as is the case with China and Myanmar.

Collaboration on this scale is more difficult for the volatile Middle Eastern region, but if resolved could set a course for a fairer distribution of oil production means, as well as grow economies, bring new investment revenues, and help build new technology.

As featured on Oil Voice