Egypt plans oil production development to boost economy

Despite concerns about unpredictable oil prices in the future, which have decreased the incentive for oil exploration and development, countries across the region continue to expand oil production. Indeed, according to IRN, which is organising the first Egypt Oil and Gas 2015 Summit next month, discussions will be held about the development of oil production in the country. The focus will be on the signing of new agreements amounting to $97 million in oil and gas investments with Dana Gas, BP and another British firm, as well as other gas exploration contracts worth hundreds of millions of dollars. Egypt is also in the process of setting up ties with Mediterranean and Red Sea countries such as Algeria in order to bolster oil production and distribution. The agreements come as part of the Cairo government's aim to move forward with gas exploration.

OPEC's decision not to cut production in order to increase oil prices following a marked reduction in global prices over recent months has caused much controversy across the Middle East. Saudi Arabia's commitment not to reduce oil production has been substantiated by the claim that a reduction in production would be met by non-OPEC producing countries such as the US and Iran, doing little to affect the price per barrel.

Riyadh's political motives are tied up with its economic motives; failing to cut production serves to maintain its dominant position and create barriers to entry in the market. Maintaining a high level of supply and a reduced price diminishes the potential gains for other current or prospective oil producers, and especially deters investment in oil production. Such a policy targets major producers such as the US, which has been experiencing a shale gas production boom, by decreasing the expected gains for US oil production. Iran, a major non-OPEC producer whose political differences with Saudi Arabia play out across the Middle East, has also been hit hard by the falling prices.