Apicorp forecasts $792bn investment in Mena energy sector over next five years
The Arab Petroleum Investments Corporation (Apicorp) estimates that planned and total investments in the Middle East and North Africa (Mena) energy sector will reach $792bn in the 2020-2024 period, marking a $173bn drop on the group’s last five-year forecast.
The Arab Petroleum Investments Corporation (Apicorp) estimates that planned and total investments in the Middle East and North Africa (Mena) energy sector will reach $792bn in the 2020-2024 period, marking a $173bn drop on the group’s last five-year forecast.
Apicorp largely attributes the $173bn reduction on the 2019-2023 forecast to the combination of the Covid-19 pandemic, fall in oil prices and the looming financial crisis. The group estimates that brent crude oil prices will average $30-40 a barrel (bbl) in 2020 and 2021, significantly down on the $60-70/bbl forecasted for 2019 in its last forecast.
The Saudi-based investment group believes the economic impact of the Covid-19 outbreak will result in a global liquidity crunch. As central banks and multilateral financial institutions take significant steps to try and mitigate some of the financial impact of the pandemic, Apicorp raises concerns that the massive stimulus plans being proposed and implemented have the potential to create major debt overhangs that will slow economic growth.
Prospects for the GCC’s energy sector are more positive than in the rest of the Arab world. Apicorp forecasts that the GCC’s committed investments over the next five-year period will increase by 2.3 per cent, compared to the overall 6 per cent fall for the wider Mena region.
Regional drivers
In its latest forecast, Apicorp identifies Saudi Arabia, UAE, Iraq and Egypt as the primary drivers behind the expected $792bn investment over the next five years. The group highlighted the following planned investments as playing a key role in driving investment in the region’s energy sector:
- Saudi Arabia’s gas and power sectors, $39bn and $41bn respectively, the UAE’s
- UAE’s oil capacity expansion, $45bn
- Iraq’s reconstruction and gas-to-power programmes, $45bn
- Egypt’s petrochemical sector expansion, $38bn
Apicorp has reduced the private sector’s share of planned investments over the next five years to 19 per cent, falling from 22 per cent in last year’s report.
Gas gains
In terms of planned investments by sector, the largest increase in planned expenditure on the 2019 forecast was the gas sector, with planned investments increasing by $28bn over the next five years. This marked a 13 per cent increase on last year’s outlook. Apicorp highlighted the planned development of unconventional gas reserves in the GCC, particularly in the Jafura and Hail fields in Saudi Arabia and the Ghasha fields in the UAE, as key drivers behind the expected increase in gas spending.
Upstream decline
Apicorp noted that planned upstream spending had been cut by 20-30 per cent for the region’s National Oil Companies (NOCs) and large private oil firms as a result in the drop in demand and fall in hydrocarbon prices since the onset of Covid-19 in January.
However, Apicrop believed the unconventional and non-associated gas developments will offset the significant drop in planned upstream investments.
In the downstream sector, the investment group expects the region’s energy firms to push ahead with plans to develop their petrochemicals sectors, with some of the largest projects including the $8.67bn Duqm and $6.73bn Sur petrochemicals projects in Oman and the $6.5bn Al-Zour and $6.34bn Satorp Amiral projects in Kuwait and Saudi Arabia respectively.
Power sector
Planned investment in the Mena region’s power sector over the next five years was cut by $114bn from Apicorp’s last forecast, with the commissioning of several large projects in Egypt, Saudi Arabia and the UAE contributing to the fall in future investments.
Expenditure on power projects in 2020 has unsurprisingly fallen due to the restrictions and expectations of lower demand as a result of the Covid-19 outbreak. However, Apicorp notes that progress is being made with large-scale renewable projects, highlighting Saudi Arabia’s progress with the second and third rounds of its ambitious National Renewable Energy Programme (NREP).
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