Energy project investment to fall short of $1trn

Energy project investment to fall short of $1trn
Oil prices could thwart regional investment in energy projects.
Published: 21 March 2018 - 4:02 a.m.
By: Oscar Rousseau

Planned and committed investment in Middle East and North African (MENA) energy projects will be below $1trn (AED3.6trn) over the next five years.

Arab Petroleum Investments Corporation (APICORP) claim total investment will hit $919bn(AED3.3btrn) across MENA, which is 4% below the figure experts predicted last year.

Saudi Arabia is expected to lead the way by investing heavily in energy projects, but the uncertainty of re-imposed sanctions on Iran means it could “struggle to attract foreign investment”, according to APICORP, a multilateral development bank focused on energy projects.

Saudi Arabia and the UAE collectively account for 38% of planned investments in the MENA region, with $149bn (AED547bn) and $72bn ($264bn) respectively.And while both are expected to continue investing large sums in energy infrastructure projects, there are three challenges that could hinder growth: oil prices, the rising cost of government capital, and geopolitical instability that could deter foreign investment.

Recovery in oil prices last year is only expected to have a modest impact of growth projects over the mid-term. But the introduce of VAT in countries such as the UAE will alleviate fiscal pressures and allow governments to increase spending in key projects.

We expect the MENA region to continue investing heavily as major energy-exporting countries expand the size of their energy sector and strengthen their positions in global markets,” said CEO of APICORP, Dr Ahmed Ali Attiga.

Senior economist at APICORP, Mustafa Ansari, added: "We see three important trends materialising in our outlook: the first is a transition towards the power sector, which now accounts for the bulk of planned investments as demand for the energy continues to increase. The second is the increase in committed investments, reflecting an improving investment climate and a healthy transition of projects from the planning phase towards execution. And third, the private sector has an increasing role to play in financing energy projects in the Middle-East that will help ease fiscal pressures on governments.”

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