Mubasher: The Arab Petroleum Investments Corporation (APICORP) estimates that planned and committed investments in the Middle East and North Africa (MENA) region will exceed $792 billion over the next five years from 2020 to 2024.
The estimated value marks a $173 billion decline from last year’s estimation, which is mostly in planned investments due to what APICORP calls the 2020 triple crisis.
The triple crisis is referring to the coronavirus (COVID-19) pandemic and its related health crisis, coupled with the oil crisis and the looming financial crisis, according to the MENA Energy Investment Outlook 2020-2024.
However, the outlook report mentioned that despite the difficulties, committed investments in the GCC region increased by 2.3% compared to a 6% overall decrease in the entire MENA region.
In addition, the report referred to the current dilemma in dealing with the consequences of the COVID-19 pandemic, emphasizing that the resumption of travel and trade will require international coordination.
APICORP estimates the price of Brent crude oil to average $30-40 in 2020 and 2021 before reflecting a more balanced market.
As for the financial crisis, the report noted that stimulus plans could create enormous unproductive debt that could negatively impact economic growth.
“The nature of this triple crisis and the profound restructuring in oil and gas will hit energy investments for a potentially long period of time, sowing the seeds of supply crunches and price volatility. Therefore, we expect a W-shaped recovery for the MENA region,” said Ahmed Ali Attiga, CEO of APICORP.
Attiga further noted that despite the positive effects of digitization and automation on efficiencies across the value chains, many fundamental questions remain, which will negatively affect investments.
“International collaboration between the private and public sector will, therefore, be critical to counter the expected shortfalls in investment,” the CEO added.
APICORP expects “a restructuring of the value chain, thus putting the strongest countries and companies from a total cost and leverage standpoint in the best position to preserve their long-term value proposition and return to their respective shareholders,” according to Leila R Benali, Chief Economist, Head of Strategy, Energy Economics and Sustainability of APICORP.
Investments in the energy sector are primarily driven by several countries, namely Saudi Arabia in the gas and power sectors, with $39 billion and $41 billion, respectively; the UAE’s oil capacity maximization, valued at $45 billion; Egypt’s new petrochemical projects with $38 billion in investments, and Iraq’s reconstruction efforts and gas-to-power projects worth $33 billion.
On the contrary, the power sector registered a decline of $114 billion in investments due to the commissioning of several projects during 2019 in Egypt, the UAE, and Saudi Arabia, the report noted.
Meanwhile, utilities’ share prices did not fall in the MENA region and around the globe as much as their counterparts in the oil and gas sector because of a milder decrease in demand for electricity and government utility subsidies in some countries.
