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19 March 2024

GCC power investment put at $150 billion in 2016-2020

Gulf hydrocarbon producers need to pump nearly $150 billion into projects to expand their electricity networks to meet growing needs. (Supplied)

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By Staff

Gulf hydrocarbon producers need to pump nearly $150 billion into projects to expand their electricity networks to meet growing needs, accounting for nearly a third of the total power investment in the Middle East and North Africa (Mena), an official study says.

While most members of the six-nation Gulf Cooperation Council (GCC) have sufficient resources for such investments, other Mena countries are facing serious challenges, including poor investment climate as well as funding and gas shortages, according to the study by the Saudi-based Arab Petroleum Investment Corporation (Apicorp), an affiliate of the Organisation of Arab Petroleum Exporting Countries (Oapec).

The study, obtained by Emirates 24/7 on Tuesday, showed total power investment in Mena, including Arab states and Iran, is estimated at $416 billion during 2016-2020.

A breakdown showed GCC countries need to pump nearly $94 billion into power generation projects, $19.2 billion into transmission and the rest in distribution.

The study put total power investment in Mashreq, covering Egypt, Iraq, Jordan, Lebanon, Syria and the Palestinian territories, at around $123 billion. Investment in Maghreb countries — Algeria, Tunisia, Morocco, Mauritania and Libya—was put at around $70 billion and the rest in Sudan and the remaining Arab nations.

“Investment of such magnitude will not materialise without addressing critical issues including investment climate improvement, fuel availability and access to funding. The challenges each presents are beyond the capabilities and resources of any public utility or private power developer,” said the study, authored by Ali Aissaoui, senior consultant at Apicorp, which coordinates energy investments in the Arab world.

Regarding the investment climate, persistent political turmoil in parts of Mena has adversely impacted the region’s energy investment climate, the study said.

“The most critical issue is access to funding. Many governments in the region have long embarked on power sector reforms with the aim of improving efficiency and competitiveness as well as shifting the financing burden to the private sector,” it said.

It noted that these reforms, which had originally some common features, have evolved in unexpected ways. It cited Oman, which has in recent years required private power developers to raise capital in the domestic stock market through initial public offerings.

The study said the aim of such measures is to promote the participation of equity investors and free up capital for other projects.

Otherwise, the emphasis has consistently been on a phased approach to competitive markets, allowing independent power or power/water producers (IPPs or IWPPs) in the generation segment whereas public utilities retain regulated monopoly over transmission and distribution, it said.

“These issues cannot be resolved without supportive policies in the corresponding areas: first, by improving the investment climate and the enabling environment for private investment; second, by providing the power generation sector with stable and affordable fuel options; and third, fiscal space permitting, by increasing state budget funding of public utilities, which have become the investors of last resort.”