Chevron, one of the monsters of U.S energy, is betting on natural gas assets in the Middle East, as the region is slowly going towards a “reconciliation” period, Reuters reported. The strategy points towards exploiting a pivotal moment in natural gas, as the demand will outstrip oil, as forecasted by some analysts.
Michael Wirth, Chevron’s CEO, told Reuters in an interview that the region has suffered a fundamental shift, and it is going to enter a reconciliation period with more robust ties with Israel, Egypt, Qatar, and other countries. “This is a trend that we think augurs well for the region,” he said.
In concrete, the strategy started with Chevron’s $11.8 billion purchase of Noble Energy earlier this month. Noble Energy holds a stake of 40% in the Leviathan gas field in the Mediterranean Sea, off Israel’s costs.
This deal puts Chevron in a position to make an alliance with Israel, which has strengthened its relations with the United Arab Emirates. With these economic and diplomatic forces together, Chevron would be able to export liquified natural gas to a plant in Egypt. Then export it to Europe or Asia, Wirth told Reuters in an interview.
The natural gas emphasis is also strategic, as the asset is getting more demand with the uprising of renewables. The analyst’s opinion is that the middle east will have a significant demand for natural gas and will remain dependent on the imports.
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Israel and Qatar as strategic points in the Middle East
Natural gas demand is projected to rise 1.5% per year through 2025, with largely growing purchases in China and India. On the other hand, oil demand and production are getting lower and lower, and it may sink to historic low levels in years to come.
Also, with the uncertainty that the elections in the U.S are causing to the energy sector, especially in the shale and natural gas productions, Chevron bets go overseas with the expectation to grow its assets in the middle east.
As Reuters reports, Chevron is the only major U.S company to have a constant and healthy relationship in the middle east region, despite its conflicts and security issues. For more than 70 years, the company has managed to work there with discretion.
“Chevron is extremely good at what I would call crown jewel government relations, big assets in challenging countries, they very quietly work away at things,” said Robin West, a board member of Repsol.
The Chevron and Noble deal will expand Chevron’s interests in the middle east with Qatar as a strategic point for the rest of the region. Meanwhile, its investments in shale gas at home have cut to around 2 billion this year.