In 2025, the Middle East solidified its role as the primary stabilizing force in a fragmented global energy system. While international markets faced geopolitical dislocation and divergent transition pathways, the leading Middle Eastern national oil companies (NOCs) adopted a consistent strategy of sustaining hydrocarbon primacy while systematically reducing costs and carbon intensity. More than $100 billion in upstream capital deployment enabled the NOCs to expand crude spare capacity and accelerate gas development, while selective international acquisitions and portfolio realignments extended their global footprints, strengthening access to advantaged resources across multiple basins. Collectively, these dynamics reinforced the region’s role as a critical buffer against market volatility while shaping the structural economics of global supply. Against this backdrop, we discuss six emerging trends from 2025 which are likely to continue shaping the regional energy sector in 2026.

Investment architecture: Disciplined expansion

The 2025 fiscal year marked a decisive inflection point as regional NOCs reconciled capital discipline with sustained capacity expansion. While Western majors prioritized shareholder returns, Middle Eastern NOCs sanctioned record volumes of long-cycle projects to reinforce structural supply leadership. Approximately $50 billion in conventional projects were sanctioned in 2025, marking three consecutive years of record spending on approvals, alongside unprecedented unconventional gas activity, led by Saudi Aramco’s Jafurah project. This methodical oil and gas expansion across Saudi Arabia, UAE, Kuwait, and Iraq reinforces the Gulf’s role as the world’s primary swing producer and provides a sovereign insurance mechanism against market volatility.

Natural gas was a central pillar of regional planning in 2025, with the Middle East capturing nearly a quarter of global upstream gas investment, tallying around $40 billion. The planned development is anchored by Qatar’s North Field expansion, Saudi Arabia’s Jafurah, UAE’s drive for gas self-sufficiency, and Iraq’s flared-gas capturing efforts. This regional pivot to gas serves a dual imperative: meeting rapidly rising domestic power demand from industrial growth and data infrastructure, while displacing liquid fuels to preserve higher-value crude exports.

Looking ahead to 2026, overall investment is set to grow by 10% to about $110 billion as several megaprojects move from final investment decision (FID) to execution. Competition will grow for EPC capacity, liquefied natural gas modules, subsea kit, and skilled labor, driving up cost and schedule risk. Domestic pricing reform and subsidy rationalization will be crucial to unlocking gas‑for‑power switching at scale and to free crude for export while meeting emerging climate constraints. Lastly, OPEC+ production policy decisions will define crude market dynamics and regional revenue stability ‒ and by extension, upstream capital outlay or tightening.

OPEC+ management: From cuts to controlled optionality

Throughout 2025, OPEC+ successfully transitioned from reactive production cuts to a sophisticated strategy of controlled optionality. This shift reflected an effort to reclaim market share from the Americas ‒ specifically, the US, Brazil, Guyana, and Canada ‒ while defending a critical price floor. By December 2025, the alliance had implemented a modest production increase of 137,000 barrels per day, to be followed by a pause in the first quarter of 2026, allowing the group to monetize capacity buffers when fundamentals were favorable while retaining flexibility for seasonal demand lulls. The maneuver signaled that OPEC+ had moved beyond simple volume management to using its massive spare capacity as a tool for economic leverage and market share diplomacy.

The primary factor to watch for in 2026 is a projected liquids surplus of over 3 million bpd, which could force the group to choose between defending a price floor or aggressively pursuing market share. The group’s response to a potential shale production plateau, shifting US trade policy, and rising buyer power from India and others, will determine whether 2026 is characterized by managed stability or renewed competition.

OPEC+ also will launch an independent audit of its member states’ production capacities that will redefine 2027 baselines and serve as a litmus test for alliance cohesion. High-investment members including UAE and Saudi Arabia likely will seek formal recognition of their expanded capacities during this assessment, as well as higher quotas.

Operational pressures: Supply chains, inflation, and AI adoption

Cost inflation in the Middle East energy sector had settled into a structurally higher baseline by 2025, with supply-chain costs rising at roughly 4% annually over five years and operating expenditure increasing 6-7% per year due to production growth, aging assets, and operational complexity. As mature and marginal fields claim a growing share of production, the system tilts toward more intervention-intensive and higher-cost barrels.

Inflation in 2025 was broad-based but uneven, hitting execution-heavy segments hardest. Globally, offshore vessel day rates climbed amid strong upstream demand and preference for high-spec tonnage, but the Middle East registered the sharpest increases as NOCs advanced ambitious offshore programs. Subsea costs surged, as brownfield-driven demand for specialized equipment led to limited regional supply and long lead times. Fabrication yard pricing stayed elevated, despite easing costs of materials and labor, due to tight Asian hub capacity and embedded risk premiums. Land rigs and equipment markets firmed on high utilization and robust order books, with suppliers retaining input-cost relief to safeguard margins via lump-sum contracts.

Short-lived tariff shocks created episodic volatility but did not shift the core trajectory, which was marked by sustained investments, execution capacity competition, and rising project complexity. At the same time, maturing AI technology went from pilots to industrial-scale adoption in key practices such as predictive maintenance, autonomous drilling, and production and emissions optimization, with efficiency gains helping offset cost inflation.

Cost discipline in 2026 will entail contracts with escalation indices and risk-sharing, portfolio rephasing to dodge peaks in constrained categories, and deeper ties with integrated EPCs and local joint ventures for bundled services. AI deployment will be crucial, unlocking productivity to preserve the region's cost advantages in megaproject execution.

Portfolio engineering: Capital recycling and infrastructure monetization

Middle Eastern NOCs transitioned in 2025 to a sophisticated capital recycling model, leveraging infrastructure monetization and over $22 billion in lease-and-leaseback deals to fund aggressive expansions while retaining operational control.

ADNOC, via its XRG arm, advanced its global gas strategy in 2025 with the acquisition of equity stakes in the Caspian region’s Southern Gas Corridor, following equity deals in 2024 involving Rio Grande LNG, in the US, and Mozambique’s Area 4, complemented by an $11 billion commitment to its Hail and Ghasha sour gas development. Also in 2025, QatarEnergy accelerated its 142 million tonnes per annum (Mtpa) by 2030 vision by advancing the North Field West project and securing a massive LNG shipping fleet. Saudi Aramco executed an $11 billion monetization of Jafurah midstream assets while scaling its international LNG footprint through MidOcean Energy. These maneuvers transitioned infrastructure from static cost centers to liquidity engines, effectively hedging against service inflation and funding low-carbon transition programs.

Heading into 2026, the strategy shifts toward digital technologies and equity globalization. Key developments will include QatarEnergy finalizing international partnerships for the North Field West project, ADNOC’s potential consolidation of Mubadala’s energy portfolio, and KUFPEC’s targeted equity expansion into North American gas. The new frontier is data-as-an-asset, led by Aramco’s HUMAIN AI initiative, which seeks to commercialize proprietary seismic and digital-twin data into tradable energy data hubs.

Success in 2026 will hinge on sustaining institutional investor appetite for these "yield plus growth" assets while balancing domestic decarbonization mandates with rapidly expanding global equity footprints.

Geopolitical hedging and operational resilience

For Middle Eastern producers in 2025, energy infrastructure served as both economic asset and diplomatic instrument amid US-China competition, Iranian supply uncertainty, and Red Sea security risks. Investments in bypass routes such as Saudi Arabia’s East-West pipeline, strategic storage in the UAE, and Omani export alternatives were designed to reduce dependence on the Strait of Hormuz while maintaining dollar pricing and diversified security partnerships.

Iranian exports, oscillating from around 1.5 million to 2 million barrels per day, functioned both as a competitive source of barrels and an embedded risk premium of roughly $3-5 per barrel in global pricing. Long‑term supply contracts into China and equity in Asian downstream systems deepened commercial interdependence without displacing US security ties, illustrating a hedging strategy that maximizes flexibility rather than alliance exclusivity.

Asia has become a central pillar of the Middle East energy equation. After the 2020 pandemic, while western players were busy balancing low-carbon and conventional investment priorities, Asian companies expanded equity positions and supply chain capacity in the region. By 2025, Chinese and Southeast Asian service firms represented around 15% of the region’s active supplier base, a share that continues to rise as these players deliver the compressed margins required to secure new bids. In markets such as Iraq, Asian companies, mostly Chinese, now account for a leading share of equity production. This growing operating presence supports an increasingly consolidated ecosystem led by CNPC, CNOOC, Sinopec, and their associated service providers. While alternatives exist, their cost-competitiveness is limited, effectively embedding Chinese participation across upstream development and contracting activities.

In 2026, Middle East energy stability hinges on competitive recalibration. Geopolitical volatility, driven by the renewed and aggressive US energy policies, Red Sea insecurity, and shifting Iran ties, will force producers to harden infrastructure and secure alternative export routes. OPEC+ cohesion faces tests from Russian production and growing buyer leverage in India. Amid this multipolar friction, success depends on maintaining operational flexibility and strategic hedging. Producers will prioritize extracting maximum value from fragmented global relationships while ensuring uninterrupted flows through a risk-embedded energy landscape.

Decarbonization: From pilots to commercial-scale partnerships

In 2025, Middle East decarbonization shifted from aspiration to execution. NOCs embedded emissions management in core operations via technologies including hub-based carbon capture, utilization, and storage (CCUS), methane abatement, and oilfield electrification using nuclear and solar power. Partnerships like Saudi Aramco’s Jubail CCS hub, ADNOC’s Habshan project, and ENEC’s small modular reactor (SMR) collaborations exemplified pragmatic approaches to energy transition, taking decarbonization from goals to measurable metrics.

Saudi Aramco’s 50% stake in the Blue Hydrogen Industrial Gases Company joint venture integrated blue hydrogen and CCS into Jubail’s industrial base, while ADNOC, Aramco, and partners advanced multimillion-tonne hub-based CCUS for LNG, hydrogen, steel, and chemicals infrastructure.

Hydrogen strategies grew selective in 2025, sidelining export-only models for cluster-based CCS, refining, and ammonia projects, while ADNOC’s XRG rebrand to broader “energy solutions” aligned with data-center and firm power demand.

The focus in 2026 will be on commercial viability amid material inflation, along with increased drilling efficiency and emissions reduction through AI. We expect to see investment decisions on CCUS projects, hydrogen to consolidate around industrial demand, and a solar-led renewables rollout that will transform the region’s power sector and increase demand for grid-integrated storage. On the sustainability front, the need to enhance transparency around CO2 and CH4 emissions will grow. The test for Middle Eastern NOCs will be scaling incremental, infrastructure-led transition economically without eroding production or competitiveness, delivering durability even as the region’s emissions intensity declines.

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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