The Middle East includes five of the top ten oil-producing countries and is responsible for producing about 27% of world production. While state-owned enterprises produce much of the oil, many international oil companies engage in oil production and related activities in the Middle East through joint ventures, production-sharing agreements, and other business models.
1. Saudi Arabia
Saudi Arabia produces almost 12 million barrels of oil per day and nearly 12% of world output. The country ranked as the largest oil producer in the decade from 2003 to 2012, after which it fell to second place due to surging oil production in the United States. Saudi Arabia remains the world's largest petroleum exporter. With proven oil reserves of about 337 billion barrels and relatively low production costs, Saudi Arabia should maintain its position as a top-three oil producer for the foreseeable future.
Key Takeaways
- Many of the largest oil producers are in the Middle East, including Saudi Arabia, UAE, and Iraq.
- Saudi Arabia is the world's largest oil producer and accounts for roughly 15% of global output.
- Iraq has increased production since the end of the Iraq War and is now the second-largest producer in the Middle East.
- Iran is one of the world's largest oil producer, but output is below potential due to economic sanctions.
- Kuwait is the world's ninth-largest producer, with output between 2.5 million and 3 million barrels per day for more than a decade.
Saudi Arabia's oil and gas industry is controlled by Saudi Aramco, which is controlled by Saudi Arabia's Ministry of Petroleum and Mineral Resources and the Supreme Council for Petroleum and Minerals. Saudi Aramco is mostly state-owned, but had an initial public offering (IPO) of 1.5% of the company in Dec. 2019.
Meanwhile, although international oil companies do not participate in oil production in Saudi Arabia, several partners with Saudi Aramco in joint-venture refineries and petrochemical plants in the country—partners include Exxon Mobil, Royal Dutch Shell PLC, Sumitomo Chemical Co., and Total S.A.
94.2 Million
The number of barrels of crude oil produced each day globally as of 2020.
2. Iraq
Iraq produces about 4.8 million barrels of oil per day and is the sixth-largest producer in the world. The country has achieved substantial production gains since 2005, two years after the start of the Iraq War. However, the country faces challenges that could limit production toward these goals, including political instability, continuing violence, and inadequate infrastructure.
Oil production in most of Iraq falls under the control of the Ministry of Oil in Baghdad. The Ministry operates through several state-owned companies, including the North Oil Company, the Midland Oil Company, the South Oil Company, and the Missan Oil Company. In the autonomous Kurdistan region of Iraq, oil production is controlled by the local Ministry of Natural Resources.
More than a dozen major international oil companies are involved in Iraqi oil production. U.S. and European oil majors include Exxon Mobil, Occidental Petroleum, BP, Royal Dutch Shell, and Total S.A. Other international oil giants in Iraq include China National Petroleum Corporation, known as CNPC; China National Offshore Oil Corporation, known as CNOOC; Malaysia's Petroliam Nasional Berhad, known as Petronas; and Gazprom Neft OAO.
3. United Arab Emirates
The United Arab Emirates (UAE) is a federation of seven emirates, including Dubai and the capital of the federation, Abu Dhabi. UAE produces just over 4 million barrels per day to rank as the world's seventh-biggest producer. Each of the seven emirates controls oil production within its borders. However, Abu Dhabi is home to most of the proven oil reserves in UAE territory and, thus, it has an outsized role in establishing the federation's oil policy.
The state-owned Abu Dhabi National Oil Company (ADNOC) controls oil production operations in Abu Dhabi under the direction of the emirate's Supreme Petroleum Council. Most oil production in Abu Dhabi is organized under production-sharing agreements between ADNOC and international oil companies. Other emirates use similar production-sharing agreements and service contracts to organize oil production. Some of the biggest international companies involved in UAE oil production include BP, Royal Dutch Shell, Total S.A., and ExxonMobil.
4. Iran
Iran is the ninth-largest oil-producing nation in the world, at nearly 3.2 million barrels per day, but the effects of economic sanctions placed on Iran have kept production levels below true potential. According to the U.S. Energy Information Administration (EIA), sanctions have had especially severe effects on upstream oil and gas investment, including numerous canceled investment projects.
In July 2015, Iran came to an agreement with the permanent members of the U.N. Security Council and Germany on the Joint Comprehensive Plan of Action (JCPOA), in which Iran agreed to strict limits on its nuclear program in exchange for the removal of international economic sanctions. However, the U.S. withdrew from the deal in 2018, as former President Donald Trump fulfilled a campaign promise to exit JCPOA, which he labeled a "disaster" and the "worst deal ever." Then, in 2019, the U.S. imposed additional economic sanctions in response to a drone attack on an oil facility in Saudi Arabia, which U.S. officials blamed on Iran.
Oil and gas production in Iran is controlled by the state-owned National Iranian Oil Company (NIOC) under the direction of the Supreme Energy Council. While the Iranian constitution bans private or foreign ownership of the country's natural resources, international companies have historically participated in oil exploration and development in the country through buyback contracts, a contract model that does not convey equity rights to the international company.
5. Kuwait
Kuwait produces almost 3 million barrels of oil per day, placing it just inside the top 10 oil producers in the world. It has maintained consistent production of between about 2.5 million and 3 million barrels per day, but, according to the EIA, Kuwait has been struggling to raise production to 4 million barrels per day during this period, falling short due to inadequate foreign investment and related delays in new oil production projects.
The Ministry of Oil carries out oil policy in Kuwait through the state-owned Kuwait Petroleum Corporation and its subsidiaries. International oil companies have long been denied access to Kuwait because the Kuwaiti constitution does not allow foreign companies ownership stakes in Kuwaiti natural resources or the revenues associated with those resources. This means standard joint ventures and production-sharing agreements used in other countries are outlawed in Kuwait.
