Arab energy investment marred by unrest

The ongoing unrest in parts of the Middle East and North Africa had married energy investment opportunities in many Arab countries but the UAE, Saudi Arabia and other Gulf states remain a strong destination for such capital, according to an official Arab energy group.

While Saudi Arabia is supported by a massive spending plan, the UAE is considered as having one of the strongest energy investment opportunities in the region, the Arab Petroleum Investment Corporation (Apicorp) said.

By contrast, the investment potential in the energy sector has deteriorated in such countries as Libya, Egypt, Bahrain, Yemen, Tunisia and Oman because of turbulence, Apicorp said in a study sent to Emirates 24/7.

“In challenging the political and social status quos, the ongoing turmoil has blurred the energy investment climate in the Arab petroleum-producing countries…..for the time being, we expect these changes to range from Saudi Arabia likely settling near the ‘ideal point’ benchmark, to a significant deterioration of the positions of Egypt, Tunisia, Yemen, Bahrain and to a greater extent Libya,” said the Dammam-based Apicorp, an offshoot of the Organization of Arab Petroleum Exporting Countries (OAPEC).

“As a consequence, Libya and Egypt break out of the Algerian cluster, while  Tunisia and Bahrain break out of the cluster previously formed around Oman.

Similarly, Yemen breaks out of the cluster formed of Mauritania and Sudan.”

The study said the remaining countries are in two contrasting positions. On the one hand, while maintaining their positions within the second most appealing cluster, Qatar, Kuwait and the UAE seem to be moving closer to each other.

One country, Saudi Arabia, continues to occupy a unique position in the most desirable quadrant, according to the study.

“For the time being, and as a result of substantial increase in public spending to forestall possible social unrest, Saudi Arabia has managed to retain its position near the Ideal Point. As a result, the country can still be viewed as a prime energy investment destination,” it said.

“Next is the cluster formed by Qatar, Kuwait and the UAE. As all three have largely avoided the turmoil, they continue to be perceived as having each a low country risk, in addition to a strong enabling environment. We expect these countries to move closer to each other with the UAE regaining its lead thanks to stronger energy investment opportunities.”

The study said the remaining countries are a series of three broken lusters where country positioning has greatly been affected by the turmoil and the resulting deterioration of country risk.

First is the cluster formerly composed of Bahrain, Oman and Tunisia, it said, adding that these nations are perceived as having a strong enough enabling environment for business, but a low energy investment potential for lack of sufficient hydrocarbon resources.

However, both Tunisia and Bahrain are breaking out of the cluster with Bahrain joining a less appealing one. Second is the cluster formed of Algeria, Libya and Egypt, which can be stretched to include Syria.

“Despite their greater energy investment opportunities, these countries are perceived as having a somewhat weaker enabling environment. Yet, Egypt, Libya and Syria are breaking out of the cluster with Libya relegated to a much less attractive quadrant,” the study said.

“Third is the cluster formerly composed of Sudan, Yemen, and Mauritania with modest to low investment potential, and somewhat a deficient enabling environment. In this group, Yemen has greatly regressed in terms of political risk and, as a consequence, has broken out of the cluster.”

Turning to conflict-battered Iraq, which controls the world’s third largest oil deposits after Saudi Arabia and Iran, Apicorp said the country still stands in what it described as an odd position, isolated and far from the “ideal point”.

“Obviously, it needs to further improve the perception of both country risk and the business enabling environment to better reflect its fourth-ranking in terms of energy investment potential.”

Apicorp gave no investment figures but in a recent study, it estimated the total energy capital requirements in the Arab region at around $530 billion during 2011-2015, far higher than its previous review which put it at $470 billion.

The study showed the UAE, the world’s fifth largest oil power, has overtaken Qatar to become the Middle East’s second largest energy investor with its potential capital in the sector totaling around $74 billion during 2011-2015.

Saudi Arabia, sitting atop more than 20 per cent of the world’s proven crude wealth, is expected to remain the dominant investor in the oil and other energy sectors in the region as it could pump nearly $130 billion in the same period.

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