Mena energy investment put at $611 billion in 2016-2019

The UAE and other Middle East and North African (Mena) countries need to pump nearly $611 billion into energy projects during 2016-2019 but the investments face obstacles, according to an official Arab study.

Around $289 billion has already been committed to projects under execution in member states and leading the drive in such investments will be Saudi Arabia, which along with the UAE and Kuwait, will invest across the energy value chain, said the study by the Saudi-based Arab Petroleum Investment Corporation (Apicorp).
“Planned Mena investments in the energy sector are estimated at $611 billion for the five-year period. The power sector accounts for the largest share of investments, at $194 billion,” said the study, sent to Emirates 24/7.

It showed the oil and gas sector will represent $190 billion and $149 billion respectively, with the remaining investments in petrochemicals.

Projects under study represent by far the largest portion of planned investments, at about $262 billion, according to the study.

“Given the current investment climate and uncertain outlook, we do not anticipate that all projects under this phase will move to the execution phase, it said.

“In our view, contracts under design and contract-bidding phases are more likely to
materialise in the medium term. Projects under contract bid amount to $117 billion, while those under design reach $66 billion.”

The report showed planned investment in the UAE is $49 billion, of which $20 billion is at the contract-bidding phase.

In Kuwait, planned projects over the period stand at $36 billion, with over 30 per cent in the oil sector while in the remaining GCC countries they will reach $46 billion.

The report showed the GCC represents $170 billion in committed investments, nearly 60% of the Mena total.

Saudi Arabia leads the region with an estimated $53 billion for the outlook period, of which $22 billion will be in the power sector.
“While Mena is pushing ahead with its investment plans, we believe that several challenges and constraints will prove pivotal in the medium term,” it said.

“First, global investments in the oil and gas sector are closely interlinked with oil prices. Although some countries in the Mena region, including Saudi Arabia, Iran, UAE and Kuwait, announced that they would go ahead with investment plans despite low prices, other countries with low fiscal buffers and competing pressures on its revenues particularly Iraq will have to reconsider their capacity-expansion programmes.”

Second, financing projects has become more challenging.  Although recent efforts to attract foreign investment have seen some success, political and economic concerns mean investors will be cautious, according to the study.

“However, this environment also creates opportunities, as regional players would be forced to seek external finance,” it said.
 

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