Saudi Arabia outperforms MENA in upstream risk-reward: BMI

Saudi Arabia dominates the upstream oil & gas risk/reward index (RRI) in the MENA region, thanks to its large proven reserves, a high rate of discoveries, strong production growth forecasts, along with a developed infrastructure base and low above-ground risk, BMI Research, a unit of Fitch Group, said in a report.

The monopoly of state-run oil giant, Saudi Aramco, however, limits opportunities to outside investors.

The United Arab Emirates (UAE) and Qatar followed as the region’s outperformers, backed by their broad political and economic stability, low operating risks and a strong rule of law support.

Both countries were also backed by large reserves and output, although growth outlooks are somewhat weaker.

Despite bearish outlook for Oman’s reserves, output and growth, the Sultanate outperforms in the political and operational risk categories. It is also supported with one of the better bureaucratic and legal frameworks in the Middle East.

Kuwait underperforms in the index despite its extensive oil and gas reserves, as the country is impacted by its bureaucratic inefficiencies, which are high even by regional standards, BMI added.

Elsewhere, Egypt is supported by a healthy production growth outlook and a g rowing gas resource bas e. However, it suffers from elevated political, economic and operational risks.

Tunisia and Bahrain are among the region's underperformers due to their small resource base. Libya and Yemen are also underperforming peers, dragged by their domestic conflicts.

“Endowed with the largest resource base in the world, MENA substantially underperforms its vast potential. Restrictions on foreign participation, unfavourable fiscal and licensing terms and a high level of risk above ground substantially outweigh the prospective rewards.

“The region outperforms the global average in only one category - Industry Rewards - which reflects the scale of its resources and strong forecast production growth,” the report added.