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26 February 2024

UAE 2nd largest energy investor

In the UAE, revised potential investment totals $74 billion with projects made redundant amounting to 20 per cent, according to the study. (AGENCY)

By Nadim Kawach

Massive development plans in the hydrocarbon sector have catapulted the UAE to the second largest potential energy investor in the Middle East and North Africa (MENA) in the next five years, according to official data.

Energy investment requirements in the UAE are estimated at around $74 billion during 2011-2015 and nearly 80 per cent of them could be carried out, showed the figures by the Arab Petroleum Investment Corporation (Apicorp), an affiliate of the 10-nation Organization of Arab Petroleum Exporting Countries (OAPEC).

Saudi Arabia will remain the top investor in the region given its gigantic expansion programmes, with an estimated investment of $130 billion.

Iran, which had ranked second, had been overtaken by the UAE because of its poor investment resources as a result of US-led international sanctions.

The report by the Dammam-based Apicorp, sent to Emirates 24/7, showed growth in MENA’s investment requirements is expected to recover from the contraction recorded in the aftermath of the 2008 global fiscal crisis.

“Indeed, current review for the period 2011‐2015 points to a higher potential investment of $615 billion, compared to $550 billion in the last review,” it said.

“Furthermore, the total amount of investments shelved or postponed has dropped to 22 per cent of potential, compared to 30 per cent in the last review. As a result, actual capital requirements should amount to $478 billion for the period 2011-2015, compared to $385 billion in the last review.”

Nearly two thirds of the energy capital investment potential in MENA continues to be located in five countries namely Saudi Arabia, UAE, Iran, Qatar and Algeria.

“In the present review the UAE has taken over Qatar as the third biggest potential energy investor in the region. Furthermore, in terms of actual capital requirements, the UAE ranks second to Saudi Arabia, while Iran is relegated to the fourth place,” said the report by Apicorp chief economist Ali Aissaoui.

In Saudi Arabia, potential capital investment is estimated at $130 billion. With Saudi Aramco and SABIC reaffirming their commitment to implement their investment programs, shelved or postponed projects are expected to decline to six per cent of potential compared to 21 per cent in the previous review.

In the UAE, revised potential investment totals $74 billion with projects made redundant amounting to 20 per cent, according to the study.

“Iran’s potential investments amount to some $85 billion.  In this country, poor investment climate has been aggravated by tighter international sanctions targeting the energy sector. As a result, the ratio of shelved or postponed projects has increased to 45 per cent of potential.”

Potential capital investment in Qatar, the world’s dominant LNG exporter, is estimated at $70 billion, the study said. 

"In this country, we continue to assume that the moratorium on further development of the North Field gas reserves (beyond the Pearl and Barzan projects) will not be lifted during the review period,” it said.

“Accordingly, shelved projects, even though much below the 36 per cent found in the last review, remain relatively high at 32 per cent of potential.”

In Algeria, the state-run Sonatrach is anticipated to recover quickly from its recent paralysis and resume normal investment activities, it said.

“Hence, potential investment has been revised upward to $57 billion, while postponed and shelved projects are expected to drop to around 19 per cent of potential, compared to 31 per cent in the last review.”

Turning to Kuwait, the study said the emirate has the highest rate of postponed and shelved projects in the region after Iran of some 43 per cent.

But it noted that this postponement has more to do with the dynamics of domestic politics and policy than the effect of global uncertainties.

“In this context, it is difficult to estimate the country’s actual capital requirements as long as major components of the upstream program remain at a standstill, or

key downstream projects such as the al‐Zour refinery are undecided,” it said.

Conflict-battered Iraq, where the ambitions to achieve the full development of the country’s enormous hydrocarbon sector have been revived, the extent of foreign investors’ contribution will depend on the ability of the Iraqi authorities to provide an ultimate solution to recurrent security problems, Apicorp said.

Sector-wise, the report showed that of the $478 billion of actual capital requirements in MENA region, the oil supply chain accounts for 41 per cent.

It said the investments are needed to develop new production and transportation capacity, sustain current production through enhanced oil recovery (EOR) programs, and finalize the expansions in refining and petrochemicals.

The gas supply chain accounts for nearly 35 per cent of the total, the report said, adding that the amount will be needed to develop new production and transportation capacity for both natural gas and the associated NGLs, expand capacity to meet domestic requirements and finalize ongoing export based projects, including gas based petrochemicals and fertilizers.

Capital requirements in the oil, gas and nuclear fuelled power generation sector represent the remaining 24 per cent

“Contraction of some MENA economies, and the apparently lesser demand for electricity, may provide temporary respite to a constrained capacity. Yet, this sector needs to catch up with an unmet potential demand.”