The Arab Petroleum Investments Corporation (APICORP), a multilateral development financial institution, forecast in its MENA Annual Energy Investment Outlook 2019 that current and planned energy investments in the region add up to $1trn for the next five years.
Notably, the report found that this investment matches the large financial reserves held by MENA countries, with some being under leveraged.
Share of overall non-government led investments have increased to 22% from 2018
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.
“Over the last year, there has been a number of important developments in energy investments, driving overall developments in the sector," said Dr. Leila Benali, chief economist at APICORP. "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," she added. "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.”
“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," said Dr. Ahmed Ali Attiga, CEO of APICORP. "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.”
Saudi Arabia has the largest committed and planned investments in the medium-term followed by UAE and Kuwait
According to the report, 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 MENA region will see a greater transition towards gas, downstream and petrochemicals sector, and significant renewable energy additions.
Power projects currently constitute 36% of total investment in the MENA region
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.
Even if gas investments are prioritized in many countries, oil sector investments remain high, at $304bn
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, explained 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.”
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 thelargest increase in committed investment relative to the previous edition of the investment outlook report. Egypt alone accounts for just under half the investment.