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Mena eyes $1 trillion energy investments

April 2017

Total energy investments in the Middle East and North Africa (Mena) region are likely to hit the $1-trillion mark over the five years with the GCC countries spearheading the growth, according to a report.

While global investments in the industry continued their decline in 2016, down by 24 per cent as compared to 2015, the Mena region is expected to see an increase of seven per cent in energy investment activity compared to data of the previous year, stated Arab Petroleum Investments Corporation (Apicorp) in its latest edition of the Mena Energy Investments Outlook.

The bright outlook is in spite of uncertainties that have been clouding the regional outlook, stated the top Arab bank.

Governments continue to make investments in the energy sector a priority, and it is expected that a number of critical projects will be executed and completed successfully over the course of the next five years. Plans for power projects are at the top of the five-year agenda in many countries, it added.

Apicorp pointed out that a total of $337 billion had already been committed to projects under execution at the end of the previous year.

With an additional $622 billion worth of developments in the planning stage, the committed and planned investments could add up to $959 billion over a five-year period, compared to $900 billion in 2015.

Planned investments increased by two per cent, whereas committed investments increased by 17 per cent. This represents the transition of some projects and investments from the planned to committed phase, it stated.

Apicorp pointed out that the GCC countries are presently driving investment in the region and will be well positioned when oil prices begin to increase.

Iran and Egypt also enjoy a promising outlook, with the former having vowed to make heavy investments in the upstream sector and the latter facing the challenge to meet rapidly rising power demand.

Renewable energy projects will be at the forefront of efforts to meet power demand that is also increasing in Morocco, Tunisia and Jordan, said the top Arab bank.

Of the $337 billion of committed investments, about $121 billion will be pumped into oil sector, $108 billion into gas sector, $91 billion for power and $17 billion into chemicals.

The GCC boasts about $174 billion, more than 50 per cent of the Mena’s total committed investments.

On the planned investments worth $622 billion, Apicorp said, the power sector accounts for the lion’s share of $207 billion, while the oil sector has $195 billion and gas sector $159 billion, with the remaining investments in petrochemicals.

The top Arab bank revealed that, at $289 billion, projects under study constitute the largest portion of planned investments.

In the region, Saudi Arabia dominates the investment scenario with 19 of the planned projects over the next five years.

As a result of concrete plans to increase gas production and the role of gas in its energy mix, the kingdom has a large number of projects in the pipeline to add significant power-generating capacity.

Saudi Arabia is also planning to continue investing in petrochemicals in its drive to diversify and create more value, it added.

Commenting on the report, Dr Raed Al Rayes, the deputy chief executive and general manager of Apicorp, said: “Having recently witnessed one of the biggest drops in history, investments in oil and gas are still struggling to recover on a global level. However, there are clear signs for an upturn, and we have found that energy investments in the Mena region over a five-year period are ahead of the trend.”

“Our unique mission as a multilateral development bank for the Arab world puts us at the epicentre of the regional energy market, and our reputation as a trusted partner for financing projects is stronger than ever. With our detailed insight into the nature and amount of required investment in the region, we are well placed to support governments and private sector organisations seeking to execute landmark energy projects,” he added.

Dr Bassam Fattouh, energy sector specialist and external advisor to Apicorp, said: “Budget deficits and tightened public expenditure are a reality across the region.”

“However, our research suggests that governments still prioritise critical investments in their energy sectors – some of them to maintain their position as global energy suppliers, some of them in response to local energy supply shortfalls,” stated Fattouh.

“Overall market growth in the medium term will depend on improving geopolitics, the speed of the oil-price recovery and governments’ ability to rationalise spending and continue their efforts to introduce much-needed structural economic reforms,” he added.




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