Scanning the past decade of energy development, cooperation and governance in the Middle East-Arab countries

There is no doubt that the Middle East-Arab countries have always been the heart of global energy development and cooperation, and of course, it is also the focus of great power games and national conflicts.

By the end of 2021, the remaining recoverable reserves of oil and natural gas in the Middle East are 113.2 billion tons and 75.8 trillion cubic meters, accounting for 48.3% and 40.3% of the global total, respectively. In 2021, oil and natural gas production in the Middle East will reach 1.316 billion tons and 714.9 billion cubic meters, accounting for 31.2% and 17.7% of the global total, respectively. The Middle East is also the world's largest oil export market, with an average annual oil export of about 1 billion tons in recent years. The Middle East is also a high ground for international cooperation in global energy, with almost all global oil majors, international national oil companies and independent oil companies participating in investment operations, trade and engineering services in the Middle East region.

The past decade has seen the Middle East and Arab countries gradually emerge from the shadow of the "Arab Spring" events in November 2010, a decade in which countries in the region have paid more attention to their own economic development and moved from conflict to cooperation, and a decade in which the United States and other non-regional powers have gradually withdrawn from the Middle East and their intervention has continued to decline. It is also a decade in which countries such as Syria and Yemen continue to suffer from civil wars and "proxy wars". It is also a decade in which regional energy development and cooperation have stabilized and made a series of major progress.

In the past decade, at least six strategic breakthroughs in regional energy development, cooperation and governance have strengthened the region's position as an energy hub, made international energy cooperation more diversified, and demonstrated a more resilient Middle East-Arab energy market.

One of the strategic breakthroughs: the discovery of natural gas in the Eastern Mediterranean region. It should be said that in the past decade, the Eastern Mediterranean Sea and the South American Guiana Sea have respectively set a "miracle" of natural gas and oil discovery and development with the largest scale and impact in the world. Its Middle Eastern Mediterranean region is dominated by major natural gas discoveries and is expected to produce more than 100 billion cubic meters of natural gas by 2030. If this is achieved, it will replace Russia as the largest and closest supplier of gas to Europe.

The specific situation is that since 2010, the international oil companies represented by the Italian national oil company - ENI Group and bp Oil company have discovered a number of large and super-large oil and gas reservoirs in the Eastern Mediterranean Sea. According to IHSMarkit (now S&P Global), the Eastern Mediterranean region has proven recoverable reserves of about 3.5 trillion cubic meters of natural gas and 1.7 billion barrels of crude oil. Among them, the Levant basin and Nile Delta basin are the most abundant basins and main natural gas producing areas in this region.

Israel, Egypt, Cyprus, Greece and Lebanon stand to benefit from the discoveries in the Eastern Mediterranean, while Turkey and Syria join the race for gas and future pipelines in the region. The discovery of natural gas in the Eastern Mediterranean has become the biggest highlight of energy development in the Middle East-Arab countries in the past decade, and of course, it may also be the "tipping point" of another conflict and war.

Strategic breakthrough number two: Doubling oil production helped Iraq largely rebuild after the war. The story of Iraq's post-war reconstruction can be called the most magnificent and the most ups and downs in the "big article" on the development and construction of Middle Eastern countries since the 21st century.

Historically, Iraq's oil production peaked in 1979, when it reached 3.49 million barrels per day (175 million tons per year). With the outbreak of the Iraq War in 2003, the level of oil production in Iraq dropped to 1.34 million barrels per day (about 65 million tons per year). In 2008, the Iraqi market reopened to the outside world. In the three years from 2008 to 2010, Iraq has become the "Olympic" of global oil cooperation and competition, and powerful oil companies want to show their skills in Iraq, participate in and witness the post-war reconstruction of Iraq. It took almost a decade for Iraqi oil production to peak at 4.8 million barrels per day in 2019. This year, Iraq's oil exports were as high as 4 million barrels per day. Iraq is back among the top oil producers in the Middle East and the world. If the investment of $500 million per million tons of production capacity is calculated, in the past decade, Iraq has absorbed a total of $87.5 billion in oil development and construction investment, which is rare in the history of oil development in the Middle East.

In recent years, Iraq's oil export revenue accounted for more than 40% of its domestic GDP, accounting for more than 90% of the country's total export, and Iraq's post-war reconstruction would be impossible without oil production and export. On the other hand, Iraq successfully achieved post-war reconstruction with the help of foreign oil companies, which in itself is a "miracle" in international energy cooperation and national development.

The third strategic breakthrough: The "OPEC+" mechanism led by Saudi Arabia has exerted a great influence on international oil prices. Since the second half of 2014, this round of sharp decline in international oil prices has given birth to a new international oil cooperation mechanism: OPEC countries led by Saudi Arabia and non-OPEC countries led by Russia (that is, OPEC+), through reaching a "joint production reduction agreement" to control the "flood" of global oil production, so as to achieve the purpose of stabilizing oil prices. In the face of the "winter" of the oil market, Saudi Arabia and Russia can be said to be "hit it off", during the G20 Summit held in Hangzhou, China, in October 2016, the heads of state of the two countries reached a consensus on "joint production reduction", and reached a joint production reduction agreement for the first time in Vienna on December 10, 2016. The "Vienna Union" was born.

In particular, since the outbreak of the epidemic in 2020 and before the outbreak of the Ukraine crisis in February 2022, the mechanism has played a key role in responding to major crises. In the first half of 2020, the global economy fell into "acute shock" due to the novel coronavirus epidemic, and international oil prices even fell to negative oil prices. In April 2020, OPEC and the non-OPEC alliance (OPEC+) reached a two-year production cut agreement, with the first cut of 9.7 million barrels per day, accounting for about 10% of the global daily supply, which is the largest production cut agreement since the establishment of the mechanism. Since then, the United States, Canada, Brazil, Mexico and other countries have also joined the production cuts, and the total global output has exceeded 20 million barrels per day, equivalent to 20% of global supply, more than four times the scale of production cuts during the 2008 financial crisis. In the past two years, the super-strong production reduction execution shown by "Opec +" has been rare since its establishment, which has effectively enhanced the international voice of oil producing countries.

The "Opec +" mechanism has reshaped and enhanced Saudi Arabia's mission and status as a global "mobile producer" of oil, and also highlighted the position of Middle Eastern oil producers in the global energy landscape.

The fourth strategic breakthrough: Chinese energy enterprises represented by CNPC gallop the market of Gulf countries. The reconstruction of Iraq after the war and the re-opening of the oil market, as well as the landing of the "Belt and Road" Initiative in the Middle East, have created huge opportunities for Chinese energy companies to deeply cultivate the Middle East energy market. The fruitful results of oil and gas cooperation between Chinese enterprises and Middle East-Arab countries have also become a highlight of energy cooperation and diversification in the region in the past decade.

Among them, the story of the three major oil companies entering the Middle East market is the most wonderful. China National Petroleum Corporation (CNPC) took the lead in opening up the situation in Syria and Oman, seized the fleeting window of opportunity for Iraq's post-war opening up in 2008, and jointly invested and developed several large-scale oil field projects in Iraq with its international first-class counterparts. Through this, CNPC became the largest foreign investor in Iraq. The annual output of the oil fields invested and constructed by the company is more than 120 million tons. Moreover, with the help of the "Belt and Road" construction Dongfeng, CNPC broke through the UAE oil market, successfully obtained part of the equity in the joint venture development of two ultra-large oil field projects with an annual output of 40 million tons and participated in the project operation. The second is Sinopec, which has made a major breakthrough in Saudi Arabia's downstream refining industry. In 2016, Yanbu Refinery in Saudi Arabia with an annual capacity of 20 million tons was successfully completed and put into operation, which is China's largest overseas joint venture refining project. In addition, Sinopec has always been the main force of China's import of Saudi crude oil. In addition, CNOOC also won the right to operate in the southern Iraqi oil field project cluster, which reached a peak production level of 300,000 barrels per day at the end of October this year. Through the efforts of the three major oil companies, the Middle East-Arab countries have become the highland for Chinese enterprises to "go out" and implement international cooperation, and half of China's overseas oil and gas production is in the Middle East.

Strategic Breakthrough # 5: The role of the Middle East-Arab countries in the global energy landscape will become more important under the Ukraine crisis in 2022. The position of Middle Eastern oil producers in the global energy landscape is obvious, which mainly stems from the oil embargo initiated by the Organization of Arab Petroleum Exporting Countries (AOPEC) in the 1970s, led by Saudi Arabia, against the United States, Europe and Japan and other Western countries, resulting in the first oil crisis. The "oil weapon" has been made famous by Saudi Arabia. Coupled with the subsequent decades, Saudi Arabia continued to become the world's largest oil producer and exporter, and its position in the heart and soul of OPEC, its voice in international oil prices after the United States. However, since the 1990s, with the outbreak of the Gulf War and many geopolitical events, OPEC's oil market share has been squeezed, and the Middle East's energy status has declined. Especially since 2010, with the great success of the shale revolution in the United States, the United States has returned to the world's largest oil and gas producer, and the share and discourse power of the Middle East in the global oil and gas market has further declined.

However, since the Ukraine crisis, the "energy power" in the Middle East has been on the rise significantly, the United States, Russia, the European Union and other non-regional powers have paid more attention to Saudi Arabia, and the bargaining power and strategic autonomy of the Middle East-Arab countries have been significantly enhanced. For example, in mid-July this year, Biden set down his body to visit the Middle East, one of the important purposes is to persuade Saudi Arabia led by the Arab countries to increase oil exports and supply, calm the rising oil prices. Just before Biden left, Russian President Vladimir Putin visited the Middle East. Another example is that in late September this year, German Chancellor Schulz visited Saudi Arabia, the United Arab Emirates and Qatar in the Middle East, with the purpose of searching for oil and gas. It can be seen that the status of the Middle East in this round of global geopolitical game is constantly improving, which will have a profound impact on the global energy market and power pattern. One of the typical manifestations is the strategic adjustment of Arab countries from "looking east" in the past decade to "looking east and west" at present.

Strategic breakthrough # 6: The International Renewable Energy Agency will locate its headquarters in ABU Dhabi, UAE. The International Renewable Energy Agency (IRENA) is currently an international energy organization ona par with the International Energy Agency (IEA). The International Renewable Energy Agency (IRENA) was launched in Bonn, Germany, on January 26, 2009 with the commitment of some 80 organizations, including founding members Turkey, Egypt, India, Chile, Colombia and others. On 29 June 2009, the Preparatory Committee held a meeting in Sharm el-Sheikh, Egypt, and decided to locate the headquarters of the organization in Bonn, Germany; Vienna, Austria; or ABU Dhabi, the capital of the United Arab Emirates.

The headquarters of a global new energy international governance body is located in a country dominated by traditional energy - the UAE, which cannot but be said to be a "surprise". But that may be the genius of the UAE or IRENA leaders. On the one hand, ABU Dhabi of the United Arab Emirates, together with Dubai, the financial and trade center next to it, is a hub city in the Middle East and even Eurasia, at least in terms of location, providing convenient conditions for global new energy governance; On the other hand, as a country that has long relied on oil and traditional energy sources, if the UAE actively promotes the energy transition (in fact, the UAE has planned to invest hundreds of billions of dollars to build a "smart" and "zero-carbon" city of the future of mankind), and successfully achieves carbon peak and carbon neutrality, then what region and country in the world can not achieve the "dual carbon" goal?

Finally, it needs to be explained that the use of the expression "Middle East-Arab countries" in this paper is actually to highlight the status and role of Arab countries in the global oil and gas market and energy pattern over the past decade, as well as the great success achieved by China and Arab countries in energy cooperation, and the necessity of building a community of shared future for China-Arab energy cooperation in the next step. The article also mentioned non-Arab countries such as Israel, and used the expression "Middle East-Arab countries" in order to be comprehensive.