Squeezed global spare oil capacity limits OPEC+ output hike
Updated 07 August 2022
Arab News
RIYADH:The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, has agreed to a further 100,000 barrels per day oil production hike from September as it warned of a lack of spare capacity for any greater increases.
The alliance, which includes Russia, held a meeting on Wednesday to discuss output levels amid calls from the US to ramp up production to cool the international oil market.
The increase will mean the 23-nation group, which includes Russia, will raise output by 748,000 bpd from next month.
In a statement after the meeting, OPEC+ warned that a lack of investment into the upstream sector will impact the availability of adequate supply “to meet growing demand beyond 2023 from non-participating non-OPEC oil-producing countries, some OPEC Member Countries and participating non-OPEC oil-producing countries.”
The next meeting is scheduled for Sept. 5.
OPEC+ decision to raise output by 100 kb/d is the 2nd smallest in OPEC's history after a 78 kb/d hike 1986. Very different contexts. Then- KSA threatened a price war to redistribute quota burden. Now- OPEC is nearly tapped out. See NYTimes Machine https://t.co/1BsxKRPq3c
White House Energy Advisor Amos Hochstein was reported as saying the US will monitor the oil market to see if the hike is adequate.
US wants to see even lower oil prices, oil companies need to reinvest record profits in production, US to monitor oil market to see if #OPEC+ production increase adequate - US state department energy adviser Hochstein #oott
The US has put OPEC leaders Saudi Arabia and the UAE under pressure to pump more oil to help rein in prices boosted by rebounding demand and Moscow’s invasion of Ukraine.
US and Western sanctions on Russia have caused prices of all types of energy to soar, resulting in inflation at multi-decade highs and central bank interest rate hikes.
US President Joe Biden used his visit to Saudi Arabia last month to raise the issue of energy supply, but the Saudi Crown Prince made it clear the Kingdom would not expand monthly production beyond 13 million barrels.
“Saudi Arabia’s policy on oil has been to try to seek balance in the energy markets, to make sure that the markets are adequately supplied and that there are no shortages,” Adel Al-Jubeir, Saudi Arabia’s minister of state for foreign affairs, told Arab News in an exclusive interview during Biden’s visit.
Biden Saudi trip was "not about oil," @amoshochstein says. "To be honest, we did not really discuss oil markets in that meeting" with MBS. He says US calling on OPEC & US oil industry to increase production and “to the degree that is necessary, to keep these prices coming down.” pic.twitter.com/hX7xsOn4Rf
In response to OPEC+ @amoshochstein tells me: “We saw that OPEC increased their supply in July and August, quite significantly… At the end of the day, we’re not looking at numbers of barrels, we’re looking at: Are oil prices coming down from their highs?”
Speaking after the meeting, Russian Deputy Prime Minister Alexander Novak said global oil demand has almost recovered to pre-pandemic levels,
He told state TV channel Rossiya-24 that uncertainties remained in logistic chains and possible further spread of the COVID-19 pandemic, adding that Russia and Saudi Arabia, two leading players in the oil output coordination deal, plan to hold an inter-governmental meeting in October.
The #OPEC decision to raise its output by only 100,000 mbd will...
Disappoint those looking for a meaningful and price-impactful increase in #oil supplies;and
Reinforce those arguing that there is minimal unused capacity around the world
Oil prices are now unchanged on the day pic.twitter.com/EYZ2i3hKzs
As reports of the OPEC+ decision began to circulate, oil futures turned positive.
Brent crude futures were up 0.47 percent at $101.01 a barrel at 02.50 p.m Saudi time, while West Texas Intermediate crude futures climbed 0.66 percent, to $95.08 a barrel.
Demand for oil to continue recovery albeit at slower pace, OPEC Sec Gen says
Demand for oil is expected to continue its recovery, albeit at a slower pace than earlier this year and last year, OPEC’s secretary general told Algerian state television ahead of Wednesday’s meeting.
“We are still seeing increased demand for oil... compared to the period of the COVID-19 pandemic in 2020 and 2021. There is post-pandemic recovery, and we are still seeing that but there is a relative decrease in its pace,” Haitham Al-Ghais told the Algerian news channel in remarks aired late Tuesday and posted on social media on Wednesday.
Production policies since COVID-19
OPEC has been increasing output in line with its targets by about 430,000-650,000 bpd a month in recent months and has refused to switch to speedier output increases.
Group sources have cited a lack of spare capacity among members to add more barrels as well as the need for further cooperation with Russia as part of the wider OPEC+ group.
By September, OPEC+ would have wound down all of the record production cuts it implemented in 2020 to deal with a collapse in demand caused by the coronavirus pandemic.
In June, OPEC+ produced almost 3 million barrels per day less crude than foreseen by its quotas as sanctions on some members and low investment by some others crippled its ability to assuage the worlds energy crisis.
Only Saudi Arabia and the UAE are believed to have some spare capacity left to increase production.
French President Emmanuel Macron has said he had been told that Saudi Arabia and the UAE had very limited ability to increase oil production.
RIYADH: Global investors can find a “safe harbor” in the Gulf Cooperation Council as the bloc’s public-private partnerships pipeline offers “compelling” opportunities, according to a new report.
The latest document from the Future Investment Initiative Institute highlights how economies in the region are currently driving the next wave of PPP growth.
It cites findings from Partnerships Bulletin, which ranks Saudi Arabia as second in the global emerging markets pipeline for PPP projects up to July 2025, and also places Dubai in the top 10.
While that analysis claims the Kingdom has 98 PPP projects either formally published or announced, FII says Saudi Arabia has a further 200 currently awaiting approval.
The findings align with the goals outlined in the Kingdom’s National Privatization Strategy, launched in January, which aims to raise satisfaction levels with public services across 18 target sectors, create tens of thousands of specialized jobs, and exceed 220 PPP contracts by 2030.
The strategy also aims to increase private sector capital investments to more than SR240 billion ($63.99 billion) by 2030.
The FII report says that around 90 percent of FDI into Saudi Arabia now flows into non-oil sectors, from advanced manufacturing and tourism to green energy and digital infrastructure.
“That shift reflects deliberate policy choices to open markets, standardize regulatory frameworks and use public capital to de-risk new value chains,” says the document, adding: “The result is a kind of safe harbor in an otherwise low-growth, high-uncertainty world.”
It continues: “While global FDI has stagnated or declined in many regions, the GCC’s pipeline of planned infrastructure and industrial projects now exceeds $2.5 trillion, according to Boston Consulting Group data, with PPPs playing a central role in structuring and financing them. For global investors searching for yield, diversification and inflation-linked income, this represents a compelling proposition.”
Commenting on the FII Institute report, Sally Menassa, partner at international management consulting firm Arthur D. Little, said PPPs are a strategic necessity for delivering infrastructure at speed and scale, and described Saudi Arabia’s pipeline as a “powerful execution and financing tool.”
She added: “The Kingdom’s PPP momentum must remain focused on impact, value creation and execution excellence. PPPs should not be viewed merely as a funding mechanism, but as a structural tool to enhance infrastructure performance, attract investment and support sustainable economic growth in line with Vision 2030.”
Menassa said that Saudi Arabia’s National Privitization Strategy marks a shift from a project-by-project approach to institutionalization of efforts and value creation.
“By clarifying sector priorities, strengthening project selection criteria, and formalizing governance and investor pathways, the Strategy reduces uncertainty. This clarity enhances investor confidence and improves pipeline quality,” said the Arthur D. Little official.
Sally Menassa, partner at international management consulting firm Arthur D. Little. Supplied.
She added: “PPP and privatization efforts in Saudi Arabia are not about divestment or the state shifting execution to the private sector, it is really about becoming more productive as a nation. It enhances efficiency, raises service standards, mobilizes private and SME participation, and attracts capital.”
Menassa further said that the strategy could help the Kingdom achieve stronger fiscal sustainability and higher private sector GDP contribution, both of which are critical components to accelerate the Kingdom’s economic transformation under Vision 2030.
Vijay Valecha, chief investment officer at Century Financial, believes input from the private sector across all stages, from design to construction and operations, improves the efficiency of project delivery and long-term operations in Saudi Arabia.
“Tighter governance through centralized management at the National Center for Privatization and PPP and a more streamlined process, including template contracts, a clearer regulatory environment, and a transparent pipeline, is likely to improve delivery speed,” said Valecha.
He added: “This means faster delivery of big projects like Red Sea resorts or Neom, with private firms handling operations to drive innovation. Ultimately, the strategy supercharges diversification by making the private sector the main engine of growth, aligning perfectly with Saudi Arabia’s push for a vibrant, non-oil economy.”
The FII Institute added that the global flow of FDI is increasingly concentrated in the Gulf Cooperation Council region, driven by ambitious national transformation agendas and deep pools of sovereign wealth.
Tony Hallside, CEO of STP Partners, outlined several factors that are boosting the PPP landscape in the region, which include large infrastructure demand from Vision-level programs and urbanization.
“Government frameworks that standardise PPP procurement are making projects bankable. Strong regional capital pools and sovereign support will mitigate risk and attract global players. In the GCC, Saudi Arabia’s pipeline itself is one of the largest in the Middle East, indicating strong investor interest,” added Hallside.
Underscoring the role of growing PPP in Saudi Arabia, the FII report said: “A decade ago, the Kingdom’s solar capacity was negligible, despite its vast solar resource. Through early anchor investments, long-term power purchase agreements and support for national champions, the state seeded a competitive renewables market that now attracts global players on purely commercial terms.”
Valecha said that clearer PPP laws, standardised contracts and dedicated PPP units have reduced execution risks and made projects more bankable for global infrastructure funds and developers in the GCC region.
He added that rapid urbanization, a young and growing population, rising data center power demand and energy transition projects create predictable, long-duration cash flows in the region.
“This combination of policy support, fiscal necessity and structural growth is why the GCC is emerging as one of the fastest-growing PPP markets globally,” said Valecha.
Vijay Valecha, chief investment officer at Century Financial. Supplied
Key Saudi PPP projects
Yanbu 4 Independent Water Project - supplying water to Medina and Makkah
Location Yanbu, Red Sea coast
Companies involved: Engie, Mowah, Nesma, Saudi Water Partnership Co.
Cost: $826.5 million
Expected delivery date: Operational as of 2024
Hadda Independent Sewage Treatment Plant
Location: Makkah Province
Companies involved: Metito Utilities, Etihad Water and Electricity, SkyBridge Limited Co., Saudi Water Partnership Co.
Expected delivery date: 2028
As Sufun Solar PV Independent Power Project
Location: Hail region
Companies involved: TotalEnergies, Aljomaih Energy & Water, Saudi Power Procurement Co.
Expected delivery date: Expected to connect to the grid in 2027
Construction of greenfield international airports
Location: Taif, Abha, Qassim, and Hail
Companies involved: Currently in the planning stage; investors are being sought
One-Stop Station Project
Location: Intercity road network across the Kingdom
Companies involved: Saudi Arabia’s Roads General Authority and National Center for Privatization & Public-Private Partnership announced a full list of qualified bidders in February.
King Salman Park
Location: Riyadh
Companies involved: King Salman Park Foundation, Ajdan Real Estate, Sedco Capital
Cost: $1 billion
Project: Madinah-3, Buraydah-2, and Tabuk-2 Independent Sewage Treatment Plants
Location: Madinah, Buraydah, and Tabuk
Companies involved: Acciona Agua, Tawzea, Tamasuk, Saudi Water Partnership Co.
Cost: $627 million combined
Riyadh Metro Line 2 Extension
Location: Riyadh
Companies involved: Royal Commission for Riyadh City, Arriyadh New Mobility Consortium, led by Webuild. Riyadh Metro Transit Consultants (JV between US Parsons and France’s Egis and Systra) as project management and construction supervision consultant.
Cost: Up to $900 million
Expected delivery date: 2032
The crucial role of emerging markets
According to the FII Institute report, the ability to deliver resilient infrastructure, expand digital connectivity and accelerate the energy transition will increasingly depend on the strength and legitimacy of PPPs, as fiscal space tightens and investment needs rise.
FII estimates a $5 trillion global infrastructure financing gap by 2040. It also points to significant regional shortfalls, including an estimated $3.7 trillion gap in the US and an annual $130 billion to $170 billion gap across Africa. In this context, PPPs are moving from a transactional procurement route to a central model for financing and delivery.
The report highlighted that emerging markets, including Saudi Arabia, are currently driving the next wave of PPP growth, with spending across low-and middle-income countries reaching $100.7 billion in 2024, up 16 percent year on year, according to figures from the World Bank.
Moreover, emerging markets now represent around 61 percent of global PPP activity by gross domestic product share.
According to Partnerships Bulletin’s findings up to July 31 2025, the Philippines leads the emerging-market pipeline with 230 projects, followed by Saudi Arabia with 98, Kyrgyzstan with 80, Bangladesh with 71, and Peru with 54 projects.
Greece has 42 projects in the pipeline, followed by Dubai at 28, Kenya at 25, Colombia at 24, and Pakistan at 14.
PPP: An engine of growth
When capital was cheap, PPPs were often treated as an optional extra – a way to shift specific projects off the public balance sheet, or to import private-sector efficiency into construction and operations, the FII report said.
However, now, nations consider PPPs as a central hub of their economic strategy, as they enable the state to stretch every dollar of public investment using private capital, while retaining strategic control over what gets built, where and to what standard.
“The real differentiator is complexity. When a project presents significant financial uncertainty or unpredictable demand, or if there’s a high level of climate exposure or technological risk, a PPP can give leaders the tools to manage those issues without slowing things down,” said Bob Willen, global managing partner and chairman of Kearney, said in the FII report.
Erik Ringvold, chief business development officer at Regional Voluntary Carbon Market Co., was quoted in the report as saying that carbon markets will benefit through PPPs, as deepened public-private partnerships could help achieve progress toward national emissions targets, while simultaneously creating economic opportunity and catalyzing new green industries.
“Saudi Arabia has made large strides toward an emissions compliance system, with an operational carbon standard in place, and an emissions trading system announced to be launched over the coming few years,” said Ringvold.
He added: “At VCM, we see a clear future carbon vision for Saudi Arabia. One ecosystem. One marketplace. One iconic collaboration – with the PPP model at the heart of its success.”
PPPs for investors and citizens
For investors, infrastructure-backed PPPs offer long-duration, often inflation-linked cash flows at a time when public markets are volatile and dominated by a narrow set of mega-cap technology stocks.
For citizens, well-designed PPPs can mean better services, more resilient infrastructure and faster progress toward climate and development goals, without unsustainable tax rises or austerity.
FII, however, cautioned that public consent is becoming decisive. Across seven countries, only 23 percent of citizens agree that PPPs “equally benefit everyone”, compared with 41 percent of business and government leaders.
Tony Hallside, CEO of STP Partners. Supplied
Hallside said that public consent hinges on transparency, accountability, and visible service outcomes.
He added that governments should publish clear procurement frameworks, communicate cost-benefit and performance expectations in plain language, and measure user satisfaction and service quality over time — “reinforcing that PPPs deliver tangible improvements in infrastructure and services.”
Menassa echoed similar views and said that communication with the public is not sufficient, but the performance and execution phase holds the key to PPP projects.
“Winning public opinion for PPPs is rather a marathon not a race. It starts with building awareness and trust by providing transparency and demonstrating value for money, ensuring affordability and service quality of public services is maintained through strong regulatory oversight, and ensuring competitive, transparent procurement processes,” added Menassa.
According to the Arthur D. Little official, the public must see tangible improvements in service reliability, efficiency and accountability, and acceptance will follow.
“The world can’t afford to delay the infrastructure and energy transition investments that will determine prosperity – and planetary stability – for decades to come. Nor can it fund them through public budgets alone. Financing the future is, by definition, a joint endeavour,” added the FII report.
