As global oil majors become more selective with their investments and prioritize shareholder returns, Middle East national oil companies (NOCs) continue to play a pivotal role in global energy security amid shifting market dynamics and the energy transition. Leveraging their low breakeven costs, strong domestic bases, and strategic ambitions, they are well-positioned to meet growing international demand for energy.

With non-OPEC+ supply growth slowing and upstream investment hurdles mounting, these NOCs are expanding capacity and scaling international portfolios. Backed by over 6.5 million barrels per day of surplus crude capacity (1H25) and $400 billion worth of project sanctioning through 2020-2035, particularly in gas and offshore projects, the Middle East is poised to sustain its energy leadership while driving economic diversification and low-carbon growth.

Market dynamics

Since the Covid-19 pandemic, investment perspectives on conventional oil and gas have fluctuated. While oil and gas companies initially accelerated spending on renewables, many have since shifted their investment focus back toward hydrocarbons. The current slowdown in the transition may reverse in the coming years, potentially shifting market dynamics and investment sentiment. Non-OPEC crude supply is expected to peak around 2027 due to fewer new projects and reduced tight oil activity, while global demand continues to rise. This growing supply-demand gap places pressure on OPEC+ to augment production over the next decade.

Amid this tightening outlook, the Middle East’s surplus crude capacity is vital to balancing future supply and demand, reaffirming the region’s enduring strategic importance in global energy markets.

However, to realize their full capacity ambitions, OPEC+ core members in the Middle East must carefully navigate oversupplied markets and await the peak of non-OPEC+ supply. As non-OPEC+ investment slows, Middle Eastern countries have accelerated supply ramp-up, leveraging seasonal demand deficits and low inventories. Product exports grew from about 5.7 million barrels per day (bpd) in 1Q 2019 to 7.2 million bpd in 1Q 2025, now accounting for over a quarter of global product trade. This dual pressure of price dynamics and market demand may enable OPEC+ to flex capacity sooner than expected.

Ongoing crude oil expansion projects in the UAE, Saudi Arabia, Iraq, and Kuwait are focused on maintaining and further increasing capacity. For Saudi Arabia and the UAE, offshore developments at prolific fields like Upper and Lower Zakum, Berri, Marjan, and Zuluf are crucial for their targets of 12 million bpd and 5 million bpd, respectively. Additional expansions at Upper Zakum, Safaniya, and Manifa could provide further capacity boosts as both countries look to offset declines from their onshore assets, which have shouldered over half of the overall output up until now.

Addressing operational challenges, such as rising water cut and water management, is increasingly important, particularly at mature onshore fields like Ghawar and ADNOC’s Bab, Bu Hasa and Asab.  For Iraq and Kuwait, continued investment to expand production capacities from currently producing fields is crucial to reaching their respective 6 million bpd and 4 million bpd capacity targets. In the case of Iraq, infrastructure support in the form of export terminals, pipelines, refineries, and water injection is also critical.

International expansion

Given the ongoing OPEC+ production cuts, which limit Middle East NOCs from fully harnessing their domestic production potential, these companies have strategically pivoted toward aggressive international expansion to sustain growth. They are evolving into leading international companies (INOCs) through ambitious global strategies.

ADNOC’s launch of XRG, an $80 billion investment vehicle, exemplifies this trend, targeting global leadership in chemicals, integrated gas, and low-carbon energies, with major investments in Azerbaijan, Mozambique, Turkmenistan, and the US. Saudi Aramco is leveraging its stake in MidOcean Energy and expanding holdings in Peru LNG to become a global LNG powerhouse, with interests in the US and Australia. QatarEnergy is pursuing high-potential exploration blocks in Namibia, Brazil, and Suriname, diversifying its resource base. Collectively, these moves underscore their ambitions for energy security, portfolio diversification, and global low-carbon leadership.

Within the Middle East, investment trends suggest pivots toward gas and offshore developments. Furthermore, as most countries reach their stated capacity targets, the greenfield drive is set to peak soon, giving way to maintenance and brownfield projects to sustain investment. The region has developed a pipeline of announced expansion of over $400 billion between 2020 and 2035, about one-third of which is targeted toward offshore developments, with a similar share directed toward LNG and gas developments.

Natural gas powerhouse

Natural gas is becoming central to the region’s power generation mix, accounting for around 72% of current electricity production. Expected power demand growth, fueled by population increases, industrial expansion, and rising temperatures, will drive gas-fired generation up 12% by 2030. While the share of renewables is growing swiftly, forecasted to reach 20% by 2030, the reliability and flexibility of gas-fired power plants remain critical for grid stability and base-load supply.

The Middle East continues to solidify its position as a global powerhouse in natural gas production, poised to become the world’s second-largest gas producer by 2025, surpassed only by North America. Since 2020, the region’s gas production has increased by roughly 15%, with projections indicating a further 30% rise by 2030 and a 34% rise by 2035. Key developments across Saudi Arabia, Iran, Qatar, Oman, and the UAE are driving this surge. Qatar’s expansive North Field LNG projects are set to nearly double its liquefaction capacity from 77 million tonnes per annum (Mtpa) to 142 Mtpa by the end of the decade, reinforcing its position as a dominant global LNG supplier. Saudi Arabia aims to increase output by over 40% by 2030, primarily driven by the Jafurah unconventional gas field, supporting the country’s energy diversification plans.

Supply chain transformation

The Middle East’s oil and gas supply chains are undergoing a strategic transformation, driven by the region’s long-term energy expansion plans amid cost inflation. NOCs, such as Saudi Aramco, ADNOC and QatarEnergy, are leading localization initiatives to boost supply chain resilience and in-country value. Saudi Aramco’s In-Kingdom Total Value Add (IKTVA) program aims to increase local procurement to 70%, fostering domestic manufacturing and technology transfer. ADNOC’s in-country value (ICV) program has awarded billions in contracts to regional suppliers, creating thousands of local jobs and enhancing supply network agility. QatarEnergy’s Tawteen initiative similarly promotes upstream localization and partnership development.

These localization efforts are key for the region to build a robust supply chain network capable of withstanding global disruptions and geopolitical uncertainties. Collaboration between international and local firms, adoption of advanced technologies, and long-term contracting strategies are enhancing operational efficiency and flexibility. This approach also supports the region’s broader industrial diversification and energy transition ambitions. The goal for this transformation is to ensure the region can support current megaprojects and future expansions, maintaining competitiveness despite inflationary pressures.

Low-carbon investments

Simultaneously, these NOCs possess significant financial capacity to advance low-carbon investments, although such spending often represents a smaller share of their free cash flow compared to conventional investments. National decarbonization targets and economic diversification ambitions are driving deals in technology, sustainability and alternative energy, positioning the region as a cost-efficient, low-carbon barrel exporter with a diversified domestic energy mix that can meet growing global liquids and gas demand under evolving sustainability requirements.

In the region, we are seeing different approaches. The UAE, Saudi Arabia and Oman are aggressively pursuing integrated strategies, expanding both clean energy generation and hydrocarbon capacity. Conversely, Kuwait, Qatar, and others emphasize optimizing oil and gas assets for cost and emissions efficiency, focusing on maximizing fiscal returns while gradually advancing sustainability efforts.

The Middle East is crucial for the global energy system, supplying about one-third of the world’s crude oil and one-fifth of its natural gas. Additionally, a quarter of global energy demand is met by the region, underscoring its critical role amid rising geopolitical tensions that threaten trade flows.

Geopolitics and security

This strategic importance is further complicated by the region’s complex geopolitical landscape and key maritime chokepoints, such as the Strait of Hormuz, the Suez Canal, and the Bab al-Mandeb Strait. These vital trading routes make regional stability essential for global supply security. The Strait of Hormuz alone handles roughly 20% of the world’s petroleum liquids and LNG trade, and it remains a hotspot due to Iran’s strategic posture and ongoing regional tensions. While a full closure is unlikely, intermittent disruptions can elevate market volatility, prompting Gulf states like Saudi Arabia and the UAE to invest in alternative pipeline routes to mitigate these risks and ensure uninterrupted energy flows.

Concurrently, conflict zones in Yemen and Syria continue to degrade vital oil and gas infrastructure, halting reconstruction and upstream investment. Yemen’s prolonged civil war and ongoing hostility from Houthi rebel groups have repeatedly impacted maritime trade through the Gulf of Suez and Bab al-Mandeb Strait, disrupting shipping and threatening the flow of energy supplies. Similarly, the Iraq-Turkey pipeline shutdown has severely affected Kurdish crude exports, a critical economic lifeline. These compounded geopolitical and security challenges require Middle East and North Africa (MENA) states to manage risks carefully, protect essential trade chokepoints, and pursue diplomatic efforts to maintain stable energy supplies and market confidence amid persistent uncertainties.

Navigating the transition

The Middle East stands as a vital pillar of global energy security amid shifting market dynamics and the ongoing energy transition. Sustained investments by MENA’s NOCs in both traditional oil and gas and emerging low-carbon technologies are essential to balancing growing energy demand with supply resilience.

The region’s strategic surplus capacity, diverse energy portfolios, international expansion ambitions, and commitment to technology adoption and localization equip it to navigate fiscal, geopolitical, and operational challenges effectively. Access to capital and robust fiscal health underpin these efforts, enabling NOCs to invest confidently and maintain economic diversification. As geopolitical tensions persist around critical chokepoints, collaborative risk management will ensure that the MENA region remains a reliable, competitive, and innovative energy supplier for decades to come.

Disclaimer: The opinions expressed in this article are solely those of the author, and do not necessarily represent the views or beliefs of Rystad Energy. 

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