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Continued disruption in the Strait of Hormuz continues to weigh on the oil markets. (Image source: Adobe Stock)

The IEA has revised down both its oil supply and demand forecasts as renewed hostilities and Strait of Hormuz disruption have derailed the hoped for recovery in the oil markets

In its August Oil Market report, the IEA forecasts that world oil demand will decline by 1.6mn bpd in 2026, 510,000 bpd more than its previous forecast, thanks to the closure of the Strait of Hormuz and continuing high oil prices, although it predicts a return to growth in Q4 2026 and 2027.

Global oil supply rose by 2.4mn bpd to 101.5mn bpd in July, but remained 6.3mn bpd below levels of a year ago, with 8.3mn bpd of Gulf output still shut in. After increasing by 3.7mn bpd in June, Gulf oil production rose by a further 2.5 mn bpd in July to 23.9mn bpd, still 8.3mn bpd below pre-war levels. Regional exports fell by 2.1mn bpd to 15 mn bpd after the Strait was effectively closed once again and tankers came under attack. With no end to hostilities in sight, the IEA now estimates global oil supply to fall by 4.3 mn bpd in 2026, to 102 mn bpd, as growth of 1.4 mn bpd from the Americas only partly offsets losses in the Middle East and Russia.

Refinery crude throughputs increased in July but remained nearly 5mn bpd below last year’s levels, with continued Middle East product export disruptions and attacks on Russian refineries reducing 3Q run estimates by a further 370,000 bpd. Global throughput is now predicted to decline by 2.5mn bpd in 2026 and rebound by 3.5mn bpd in 2027. Diesel, jet fuel and gasoline markets are tightened as reduced Gulf and Russian exports coincide with rising summer travel demand.

Global oil inventories fell in July by 69mn bbl, with renewed disruption to exports from the Gulf and Caspian Sea. Oil stocks now stand at just below 7.9 bbl bbl, down by 2.7mn bpd on average, for the first time since April 2025.

The global oil balance is now expected to show a deficit of 1.8 mn bpd in 3Q26, more than double the estimate of around 800,000 bpd in last month’s Oil Market Report.

“Although the market is projected to return to surplus towards the end of this year, risks remain substantial and the urgency of reopening the Strait has increased, as previously available inventory buffers are rapidly depleting,” the IEA warns.

Baker Hughes will leverage its portfolio of digital and AI automation solutions. (Image source: Adobe Stock)

Kuwait Oil Company (KOC) has signed a further technology collaboration contract related to its Ahmadi Innovation Valley initiative as it seeks to enhance upstream performance through the introduction of the most advanced technologies

Kuwait’s national oil company has signed a multi-year contract with Baker Hughes to accelerate technology innovation in the country’s upstream energy sector. It makes Baker Hughes a key technology collaborator in the Ahmadi Innovation Valley (AIV), KOC’s flagship initiative aimed at establishing an in-country research and innovation hub to address its strategic oil and gas development priorities, bringing together industry academic and technology providers to address upstream technical challenges.

Scalable technology solutions

Through the collaboration, Baker Hughes and KOC will focus on developing and deploying scalable, fit-for-purpose technology solutions that optimise production and flow assurance, while addressing other priorities across KOC’s technology roadmap. Baker Hughes will leverage its portfolio of digital and AI automation solutions that help operators increase recovery from existing wells, lower operating costs, reduce water production and minimise power consumption.

“Baker Hughes is committed to deeply understanding KOC’s development aspirations and providing the solutions needed to help achieve them,” said Baker Hughes Chairman and chief executive officer Lorenzo Simonelli. “Working together, we aim to deliver tailored technology solutions at scale that improve production performance and efficiency, supporting KOC’s goals to maximise value from their assets.”

As part of the agreement, Baker Hughes will build a dedicated research and technology development centre in the Ahmadi Innovation Valley to support the evaluation of new solutions, deliver technology solutions at scale and build local expertise.

It comes after KOC’s signing of a seven-year contract with SLB in June, which will see SLB establish a dedicated AIV facility and support applied research, technology deployment and digital innovation programmes focusing on AI, IIoT applications, production optimisation, reservoir technologies, water management and energy transition initiatives. That was followed by a contract with Halliburton in July which will see Halliburton deploy key technologies to execute a tailored programme of projects and engineered solutions with a focus on digital capabilities through the application of data, scientific analysis, and artificial intelligence for the full field lifecycle.

Shift to collaborative arrangements

These arrangements mark a shift from traditional field services to collaboration and co-creation of technology and innovation. They reflect KOC’s focus on innovation and scaling digital solutions, as it seeks to lift crude oil production capacity to 4mn bpd by 2035, positioning the centre as a platform for applied research and upstream technology development.

ADNOC Gas is accelerating gas expansion. (Image source: Adobe Stock)

ADNOC Gas is accelerating major gas expansion plans in the wake of the UAE’s exit from OPEC, with US$28bn capex set to be invested between 2026 and 2030

Rich Gas Development Project

Announcing its results for the second quarter of 2026, the company confirmed the award of US$8.2bn in EPC contracts for Phases 2 and 3 of the Rich Gas Development (RGD) Project, one of the world’s largest gas growth programmes, with a view to driving 60% EBTIDA growth by 2030. ADNOC Gas sees the UAE’s exit from OPEC as a critical factor derisking this investment, enabling more rich gas production and further supporting profitability of the project.

With a total investment value of US$13.2 billion across three phases, the RGD project is expanding the company’s gas processing capacity. Phase 2, awarded to Wison Engineering, will add a new natural gas processing train at the Habshan facility, while Phase 3, awarded to Tecnimont, will add a new natural gas liquids (NGL) fractionation train at Ruwais, increasing the recovery of high-value liquids from rich natural gas for export.

Phase 1, which involves expanding key processing units to increase throughput and improve operational efficiency across multiple gas assets, is already underway.

The RGD project is one of four mega projects being progressed by ADNOC Gas to meet rising domestic and global energy demand and ensure energy security, as well as contributing to the UAE’s industrial development and economic diversification goals. The others are:

Ruwais LNG

Ruwais LNG, which comprises two LNG liquefaction trains with a total export capacity of 9.6mmtpa, will more than double ADNOC’s LNG production output, and help meet the growing global demand for natural gas, with global LNG demand forecast by Shell to rise by 65% by 2050.

Maximising Ethane Recovery and Monetisation (MERAM)

This will increase ethane extraction by 35 - 40%, from ADNOC Gas’s existing onshore facilities in the Habshan complex through the construction of new gas processing facilities as well as a dedicated 120 km natural gas liquids (NGL) pipeline

Estidama

This will extend the UAE’s natural gas pipeline network operated by ADNOC Gas from approximately 3,200 km to over 3,500 km, enabling the transportation of higher volumes of natural gas to customers in the Northern Emirates of the UAE.

In addition, ADNOC continues to invest across the gas value chain – including the recently announced Bab Gas Cap and Umm Shaif Gas Cap developments, which will bring more natural gas and associated gas liquids into ADNOC Gas’s integrated value chain, supporting additional feedstock, processing volumes, LNG exports and higher revenue streams.

Fatema Al Nuaimi, chief executive officer of ADNOC Gas said, “These strategic investments will significantly expand our natural gas processing and export capacity, unlock lasting value for our shareholders and position ADNOC Gas at the heart of the UAE’s energy future.”

Resilient operations

Despite the disruption arising from the hostilities in the region and the closure of the Strait of Hormuz, ADNOC Gas reported resilient results, delivering net income of US$665mn for the second quarter and approving a quarterly dividend of US$940mn. Recovery from the attack on its Habshan gas finality has proceeded ahead of schedule, with gas supply already restored to 85%, and full restoration to be completed by Q2 2027. The company highlights that it has worked closely with customers and partners to mitigate the impact of disruption and fulfil commitments wherever possible.

For the third quarter ADNOC gas projects net income between US$600-800mn, based on the assumption that maritime routes through the Strait of Hormuz continue to be disrupted. If maritime operations are fully restored by the fourth quarter, it expects full-year net income to be between US$3.5-US$4bn.

The Middle East is home to many ageing oil and gas facilities. (Image source: ASCO)

With decommissioning still at an early stage in the Middle East, getting the model right now will reduce risk, protect schedules and build the local skills, infrastructure and supply chains needed for future projects, says Lee Vettese, regional manager – Middle East at ASCO

The Middle East has spent decades building energy infrastructure at exceptional scale. Decommissioning will test a different part of that system, with requirements that extend well beyond offshore removal.

Meeting those requirements is not simply about having contractors available when projects move into execution. It is about building the physical capacity, regulatory frameworks, specialist skills and operating models needed to manage decommissioning safely and efficiently.

Much of the technical debate centres on wells, structures and removal methodology. But the success of a decommissioning programme is also shaped by what happens once material reaches shore.

Closing the infrastructure gap

The quayside and laydown space needed to receive, process and store decommissioning material is often there. What is missing is the investment and technical preparation needed to turn that space into something that meets the sector’s requirements. That includes segregation areas, licensed waste-handling capability, contamination controls and established routes for reuse, recycling, treatment and disposal.

A single project can bring ashore multiple material streams, including steel recovered from equipment, topsides, jackets and tubulars, alongside residual hydrocarbons, produced water, hazardous coatings and NORM-contaminated material. Managing that mix involves assessment, classification, decontamination, heavy lifting, dismantling, segregation and specialist treatment.

Bringing different disciplines, permits and contractors into one programme makes consistent control across the material chain essential. Without reliable traceability and clear ownership, reusable equipment can be treated as waste, while changes in classification or delays in documentation can leave material sitting in storage, create additional handling and compliance issues, and put both cost and schedule under pressure.

The practical test is whether ports and supply chains are equipped to coordinate that complexity at volume. Over the last two years alone, ASCO has managed projects involving more than 30,000 tonnes of material. Managing that volume requires coordinated quayside operations, full traceability and specialist processing. Ports without the right facilities become bottlenecks rather than solutions. If material remains in storage longer than planned, costs rise and schedules come under pressure.

If accountability is fragmented, the interfaces between them become the weak point. An integrated delivery model does not mean one company performs every task. It means there is one clear line of accountability across the onshore chain, from receipt and handling through to dismantling, material recovery and certified disposal. Specialist partners can still be brought in, but safety, schedule, compliance and delivery remain under coordinated control.

The importance of that control becomes clearest when site conditions challenge the plan. On one recent North Sea project, ASCO managed the onshore recovery and downsizing of an approximately 400-tonne subsea isolation valve. When concerns arose around protecting the quayside during cutting, ASCO’s environmental and lifting-assurance teams developed a bespoke load-spreading solution that allowed the work to continue safely. The project achieved a 99% recycling rate, with zero contamination incidents and no damage to port infrastructure.

Building a regional model

The Middle East can learn from mature decommissioning markets without repeating the same learning curve. The North Sea spent years developing port capacity, waste routes, contractor capability and regulatory practice. The region can apply those lessons earlier.

But this is not about importing another market’s model wholesale. Local regulation, geography, infrastructure and commercial priorities differ across the Middle East. The right approach will combine international delivery experience with the knowledge of regional authorities, port operators, asset owners and supply-chain partners.

Local content is central to that. Building decommissioning capability means developing practical expertise in lifting assurance, materials control, radiological supervision, environmental management, dismantling and project coordination. International specialists can support the early phases, but the long-term value comes from growing capability that remains in the region for future projects.

The strongest investment case will come from planning for programmes rather than isolated assets. Greater visibility of likely volumes, timings and material types allows ports and service providers to invest with more confidence and develop complementary regional capabilities.

Early projects will shape the region’s decommissioning model for decades. The opportunity is to create a connected, locally anchored capability that brings ports, specialist skills and supply chains together, giving clients confidence that recovered infrastructure can be managed from quayside receipt to final recovery. Getting that model right now will reduce risk, protect schedules and build the local skills, infrastructure and supply chains needed for future projects.

About the author:

Lee Vettese has more than ten years' experience working across diverse international energy markets in complex, regulated environments, with a specific focus on environmental and decommissioning operations. As regional manager – Middle East at ASCO, he is based in Qatar, where he leads the company's market development, strengthens strategic partnerships, and supports the region's evolving energy and environmental needs.

Amin H. Nasser, CEO of Aramco. (Image source: Aramco)

Aramco has recorded a sharp increase in Q2 profits thanks to elevated oil prices as a result of the Middle East crisis and its ability to bypass the Strait of Hormuz by diverting exports via the East-West pipeline

Highlights of Aramco’s Q2 /H1 results

• Aramco recorded Q2 profits of US$33.4bn compared with US$25.2bn in the first quarter of 2025, a rise of 33%. Profits for the first six months stood at US$67.2bn compared with US$52bn in the corresponding period of 2025.
• Revenues for the second quarter of 2026 were US$139. 146bn compared with US$124.496bn for the first quarter, mainly due to higher prices of refined and chemical products and crude oil, partially offset by lower volumes sold of crude oil and refined and chemical products.
• The board declared a second-quarter base dividend of US$21.9bn, payable in the third quarter.
• Oil production stood at 9.5mn bpd in the second quarter compared with 12.6mn bpd in the first quarter, reflecting the shutting in of production as a result of the closure of the Strait of Hormuz
• Capital expenditure for the first half of 2026 was US$20.175bn, an increase of 5.3% compared with 2025, mainly due to continuing development activity on major strategic gas projects to increase gas production capacity by around 80% by 2030 compared with 2021 levels, and phasing of crude oil increments related to maintaining maximum sustainable capacity (MSC) at 12mn bpd.

Resilience in the face of regional disruption

Aramco’s CEO Amin H. Nasser commented that the company’s performance has been defined by the resilience of its people and the agility of its business and operations to withstand and respond to rapidly changing market conditions.

“Despite the unprecedented supply disruption through the Strait of Hormuz, we continued to demonstrate our ability to maintain business continuity by capitalising on our diverse asset base and multi-decade planning, including strategic infrastructure such as the East-West Pipeline, storage capacity, and export terminals.

“That enabled us to sustain production and exports while advancing key projects, despite the challenging regional environment.”

Aramco was able to keep the oil flowing by redirecting around 70% of its oil through the East-West pipeline which runs from the Abqaiq oilfield in Eastern province to Yanbu on the Red Sea, maintaining exports at a maximum capacity of 7mn bpd. Aramco maximised throughput and exports from its west coast refineries and terminals to capture higher margins.

Through its operational flexibility, extensive domestic and international infrastructure, integrated supply chain capabilities and well-established business continuity plans, Aramco effectively managed regional challenges while maintaining operations.

“We have entered the second half of the year with solid financial and operating momentum with one of the strongest balance sheets in the sector, sustainable and progressive base dividend distributions, and a clear focus on our strategic growth objectives,” Nasser continued. “Even through periods of uncertainty, Aramco has stayed anchored to its long-term priorities. Our disciplined execution, combined with our lower-cost and higher-reliability operations, has supported our profitability.”

Aramco comments that the market demand for liquids remains resilient, and as oil flows improve, previously constrained demand is expected to recover, supporting stronger oil demand. Additional call for crude is expected from inventory replenishment and the filling of new commercial and strategic storages. The company is well-positioned to capture higher demand post-Strait of Hormuz opening for inventory replenishment and offsetting lost supply, it says.

Operational highlights

Oil

• Construction activities continued on the Zuluf crude oil increment, which is expected to process 600mn bpd of crude oil from the Zuluf field in 2026
• EPC activities progressed for phase two of the Dammam development project, which is expected to be onstream in 2027, adding crude oil production capacity of 50mn bpd.

Gas

• Phase one of The Jafurah gas plant maintained steady production of sales gas and condensate, while procurement and construction continued for Phase 2, including the construction of the Riyas NGL fractionation plant targeted for completion in 2027
• The Fadhili gas plant expansion construction activities continued, which is to provide an additional gas processing capacity of 1.5bscfd by 2027.

Downstream

• Aramco continued to leverage the East-West pipeline and enhance its west coast export infrastructure to increase supply flexibility, and the Yanbu export terminal was repositioned as a strategic hub for western regional shipments. Aramco continued to pursue major downstream projects.

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