APICORP 2019 outlook: MENA investments in energy sector estimated at $1tn

APICORP 2019 outlook: MENA investments in energy sector estimated at $1tn
Published: 23 May 2019 - 4 a.m.
By: Martin Menachery

The Arab Petroleum Investments Corporation (APICORP) unveiled its MENA Annual Energy Investment Outlook 2019. The Outlook provides estimates for both planned and committed investments for the period 2019 to 2023.

The APICORP research forecasts that total planned and committed MENA investments in the energy sector over the next five years will amount to $1tn and will require significant support from private sector financing.

Notably, the report found that this investment matches the large financial reserves held by the MENA countries, with some being under leveraged. Committed investments are defined as investments in energy projects currently under execution, whilst planned investments represent a country’s spending target to develop its energy sector.

APICORP’s MENA Annual Energy Investment Outlook is published as a neutral fact-based contribution to enhance understanding and provide a more precise outlook on future capacity and possible production levels for the energy industry in the region.

Private sector plays an increasingly vital role

The APICORP Outlook noted that the share of overall non-government led investments have increased to 22% from the year before, as the private sector plays an increasingly vital role in supporting energy projects, particularly in countries with weaker fiscal reserves and/or higher share of power sector projects.

Tunisia and Morocco rank the highest with the private sector accounting for 68% of total planned and committed energy investments, followed by Jordan at 46%. UAE, Oman and Egypt also exhibit a greater penetration of private sector participation, rising to 30%, 29% and 28% respectively.

Dr Leila Benali, chief economist at APICORP, said: “We are pleased to unveil the latest edition of our MENA Annual Energy Investment Outlook, the only publication providing an integrated and sectoral view of energy investments in the MENA region.Over the last year, there has been a number of important developments in energy investments, driving overall developments in the sector. One trend is the continued momentum of investments in renewable energy.These were spearheaded by governments but, benefitting from tailored and flexible funding mechanisms, which enabled more private sector involvement.”

“It is high time that the rest of the energy sector (oil and gas) innovates in its own funding mechanisms to ensure sustainable development of projects throughout the supply chain. We see notable progress on that front, with innovative structures and PPP in upstream and midstream, but for now it is confined to the high credit rated companies and countries.”

Dr Ahmed Ali Attiga, CEO, APICORP, said: “While all MENA countries continue to push on with investment in the energy space, there will be several challenges and constraints over the medium term. We see the private sector as a critical player in financing the region’s energy investment plans going forward, while freeing up revenues for other areas in the economy.Multilateral financial institutions, such as APICORP have a critical role in bridging investment and funding gaps. The energy sector is reinventing itself, and APICORP is committed to being at the forefront of this change.”

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“It is high time that the rest of the energy sector (oil and gas) innovates in its own funding mechanisms to ensure sustainable development of projects throughout the supply chain,” comments Dr Leila Benali, chief economist, APICORP.

Petrochemical investments amounting to $123bn
Interestingly, investments in the petrochemical sector continue to rise, with total investments marking over $123bn, which includes $33bn for projects currently under execution. This is the largest increase in committed investment relative to the previous edition of the investment outlook report. Egypt alone accounts for just under half the investment.

Completing the remaining list of committed investments in petrochemicals are Iran and Saudi Arabia, and Oman’s $6.7bn Liwa plastics plant. ORPIC estimates that around $1.5bn of the project costs will support the In-Country Value (ICV) development programme – reinforcing and developing businesses by achieving authenticated ‘Made in Oman’ products and ensuring at least 30% Omanisation in the companies working on the project.

Projects also increased in size and complexity. The first crude-oil-to-chemicals (COTC) in MENA will be the $20bn Saudi Aramco/SABIC complex, with nine million tonnes per annum olefins (mtpa) and 20mtpa in refining capacity, likely to be commissioned in 2025. It is expected to significantly alter the global supply and demand balance of major petrochemicals, despite an emerging drive for plastics recycling.

Saudi Arabia has the largest committed and planned investments
According to the Outlook, within the MENA region, Saudi Arabia has the largest committed and planned investments in the medium-term while the UAE and Kuwait have ambitious programmes throughout the value chain. Looking ahead, Iraq will focus on rebuilding its energy infrastructure. Egypt will prioritise upstream gas and power sector investment to meet rising demand. Notably, most of the MENA region will see a greater transition towards gas, downstream and petrochemicals sector, and significant renewable energy additions.

The APICORP research showed that power projects currently constitute 36% of total investment in the region as the demand for electricity rises, with 34% of this making up investments in renewables due to its continued momentum.

Total investments in the gas sector will amount to $186bn, just under half of which is committed. Furthermore, the demand for gas will continue to grow 2% per year over the next five years in the MENA, as a primary growth region.

Speaking about the specific case of the gas upstream sector, Mustafa Ansari, senior economist at APICORP, explains that “Iraq leads with over $16bn committed to capture flared gas; the Basra Gas Company (BGC) south gas utilisation project makes up the lion’s share.”

APICORP’s MENA Annual Energy Investment Outlook has been published using multiple insights from an engaged community and a variety of sources.

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