Investments in the Middle East and North African region's gas sector have shown a steady surge to reach $126 billion, up 29 per cent in comparison to 2019, regardless of the current oil market crisis and the Covid-inflicted global lockdowns and economic recession, Arab Petroleum Investment Corporation (Apicorp) said.
"Contrary to overall global developments, the region's petrochemicals sector shows a year-on-year increase of $4 billion in planned projects in comparison to 2019. At the same time, total committed projects showed a decrease of $13 billion, this is largely caused by the completion of several projects in 2019," Apicorp, the investment fund of the Organisation of Arab Petroleum Exporting Countries, said in its Mena Gas & Petrochemicals Investments Outlook 2020-2024.
Apicorp's optimism is based on the ongoing downstream value chain integration. While the UAE is committed to its $22 billion gas development masterplan, which includes the well-covered unconventional and sour gas projects, main gas players such as Saudi Arabia, Iraq, and Iran are still committed to their respective gas investments. Saudi Arabia and Iraq are looking mainly at gas-to-power projects, while Iran is increasing its emphasis on petrochemicals, it said.
According to the International Energy Agency, despite some upswing in consumption in recent months, the world's demand for natural gas is set to see its biggest drop on record in 2020. "The global natural gas demand is set to decline by three per cent, or by 120 billion cubic metres, this year, the largest drop ever," the IEA said in its new report, Global Gas Security Review 2020.
At present, Apicorp assesses that global gas demand has decreased by four per cent, with Asia, the US, and Europe the most affected continents. "The 2020 situation stands in stark contrast with 2019, a record year for LNG Final Investment Decisions."
Apicorp CEO Dr Ahmed Ali Attiga, said the decline in gas demand has put fiscal pressure on governments and private sectors alike. "We expect a few committed projects to continue facing strong headwinds in terms of payments, supply chain issues and potential project delays."
Dr Leila R Benali, chief economist of Apicorp, said the impact of Covid-19 on Mena gas demand and the petrochemicals sector would accelerate the industrial share of domestic demand.
"Gas demand is expected to grow by approximately 3.8 to four per cent on average compared to six per cent in 2019. This downward revision is due to slower GDP growth and industrial output, the effect of price reforms, nuclear power projects coming online and the increased share of renewables."
Additionally, a prolonged depression of LNG prices will put further pressure on a few LNG exporters in the region during a time when pipeline exports were already taking a hit," said Benali.
Analysts said given the present global situation, the current and future investments in more upstream projects remain highly risky.
"Mena gas market investments are 100 per cent linked to global oil prices. The current oil price slump and the depletion of billions of dollars in revenues from the coffers of Mena governments will result in a lower appetite in the region for planned projects As long as oil prices are hovering below $55-60 per barrel, new gas projects will face increasing scrutiny."
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