APICORP forecasts MENA energy spend at US$1 trillion over next five years

port arthur 1584098 640Planned and committed energy investments will amount to US$1 trillion in the MENA region over the next five years, according to the Arab Petroleum Investments Corporation (APICORP), a multilateral development bank

APICORP’s MENA Annual Energy Investment Outlook 2019 provides estimates for both planned and committed investments for the period 2019-2023.

The research forecasts that total planned and committed MENA investments in the energy sector will require substantial funding from the private sector. Notably, the report found that this investment matches the large financial reserves held by MENA countries, some of which are under-leveraged.

Committed investments are defined as investments in energy projects currently under execution, while planned investments represent the spending target of a country to develop its energy sector, he added.

The APICORP outlook noted that the share of overall non-government-led investments has increased from the previous year to 22 per cent, 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 ranked the highest with the private sector accounting for 68 per cent of total planned and committed energy investments, followed by Jordan at 46 per cent. The UAE, Oman and Egypt also exhibit a greater penetration of private sector participation, rising to 30 per cent, 29 per cent and 28 per cent respectively.

Leila Benali, the chief economist at APICORP, said, “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.”

Ahmed Ali Attiga, CEO, APICORP, added, “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.

According to the outlook, Saudi Arabia has the largest committed and planned investments in the MENA region in the medium term, while the UAE and Kuwait have ambitious programmes throughout the value chain. With a view to the future, Iraq will focus on rebuilding its energy infrastructure.

Egypt will prioritise investments in the upstream gas and power sector to meet rising demand. Most of the MENA region will see a greater transition to the gas, downstream and petrochemical sectors, as well as significant renewable energy additions.

APICORP research has shown that power projects currently make up 36 per cent of the region’s total investment as demand for electricity rises, with 34 per cent of this making up investments in renewables due to its continued momentum.

Total investments in the gas sector will amount to US$186bn, of which just under half is committed. In addition, gas demand in the MENA, as a primary growth region, will continue to grow by two per cent per year over the next five years.

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

Investments in the petrochemical sector continue to rise, with total investments marking more than US$123bn, which includes US$33bn for projects currently under execution. This is the largest increase in committed investment compared to the previous edition of the investment outlook report. Egypt alone accounts for just under half of the investment, the report concluded.

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