· Region continues to prioritise investments in energy sector
· US$337 billion fully committed to projects under execution; US$622 billion worth of planned investments over the outlook period
· GCC countries driving investment; promising outlook for Iran and Egypt
Total energy investments in the Middle East and North Africa could approach the 1 trillion US$ mark over the course of five years, according to the latest edition of the MENA Energy Investments Outlook published by the Arab Petroleum Investments Corporation (APICORP). This is in spite of uncertainties that have been clouding the regional outlook.
While global investments in the industry continued their decline in 2016, down by 24% as compared to 2015, the MENA region is expected to see an increase of 7% in energy investment activity compared to data of the previous year.
Based on this evidence, the APICORP research team is cautiously optimistic for the MENA region. 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.
A total of US$337 billion had already been committed to projects under execution at the end of the previous year. With an additional US$622 billion worth of developments in the planning stage, the committed and planned investments could add up to US$959 billion over a five-year period, compared to US$900 billion in 2015.
Planned investments increased by 2%, whereas committed investments increased by 17%. This represents the transition of some projects and investments from the planned to committed phase.
The GCC countries are 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 into 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.
The total of US$337 billion of committed investments for the five-year period is divided into investments in the oil sector at US$121 billion, gas investments at US$108 billion, power investments at US$91 billion and chemicals at US$17 billion. The GCC represents US$174 billion in committed investments, more than 50% of the MENA total.
Among the US$622 billion worth of planned investments over a five-year period, the power sector accounts for the largest share at US$207 billion. The oil and gas sector will represent US$195 billion and US$159 billion respectively, with the remaining investments in petrochemicals. The APICORP report reveals that, at US$289 billion, projects under study constitute the largest portion of planned investments.
Saudi Arabia represents 19% of planned investments over the outlook period. As a result of concrete plans to increase gas production and the role of gas in its energy mix, Saudi Arabia has a large number of projects in the pipeline to add significant power-generating capacity. The Kingdom is also planning to continue investing in petrochemicals in its drive to diversify and create more value.
Commenting on the report, Dr Raed Al-Rayes, 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.”
Dr Bassam Fattouh, energy sector specialist and external advisor to APICORP, added:
“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.
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.”
The MENA Energy Investment Outlook report is published annually by APICORP and offers insight into the region’s most strategically important industry. Providing unique estimates for both committed investments and planned investments, it delivers a highly accurate indication of the execution likelihood of a given project. The publication is part of APICORP’s range of specialised research products catering to the needs of energy professionals in the private and public sectors and the wider financial community around the globe.
The Arab Petroleum Investments Corporation (APICORP) is a multilateral development bank established to foster the development of the Arab world’s oil and gas industries. The organization was created under the terms of an agreement signed by the 10 Member States of the Organization of Arab Petroleum Exporting Countries (OAPEC) in September 1974. APICORP’s vision is to transform the Arab energy industry into a powerful force for the region’s economic progress. Driven by this vision, APICORP seeks to make equity investments and provide project loans, trade finance, advisory and research to the energy industry.
APICORP is one of the five organizations established by OAPEC to promote cooperation and economic integration in the Arab hydrocarbon and petrochemical industry. Since its founding, APICORP has made significant contributions to the evolution of the region’s energy industry. It has made equity investments in 22 oil and gas joint venture projects worth over US$13 billion and participated in direct and syndicated energy finance transactions worth over US$126 billion. APICORP‘s aggregate commitments in these transactions, including both in equity and debt, are valued in excess of US$11 billion. Apart from this, it has provided advisory and treasury services related to financing and project development; and published highly regarded macro-economic research. These areas continue to define APICORP in today’s marketplace.
APICORP is independent in its functioning and carries out its operations on a commercial basis. The Corporation’s headquarters are located in Dammam, in the Eastern Province of Saudi Arabia. APICORP also operates a Banking Branch in Manama, Bahrain.
© Press Release 2017