Investments in MENA gas sector see $70bn fall over next 5 years

Investments in MENA gas sector see $70bn fall over next 5 years
Investments in MENA gas sector see $70bn fall over next 5 years

We show you our most important and recent visitors news details Investments in MENA gas sector see $70bn fall over next 5 years in the following article

Hind Al Soulia - Riyadh - DAMMAM — The Arab Petroleum Investments Corporation (Apicorp), a multilateral financial development institution, said on Wednesday that investments in the MENA gas sector sees $70 billion y-o-y decline over the next five years.

In its Gas Investments Outlook 2019-2023 report, Apicorp said the decrease is driven by high global gas output, slowing regional demand and financing issues.

The industrial sector accounts for roughly 30% of total gas consumption in Middle East, the report added, while liquefied natural gas continues to benefit from the very low regional gas connectivity.

The report noted that two-thirds of MENA countries expect lower planned investments in their upstream gas sectors, with share of government investments in committed upstream gas projects stands at just under 92%.

However, petrochemicals investments for 2019-2023 increase 50% from previous 2018-2022 outlook.

Apicorp’s research indicates that the total committed and planned investments fell largely due to Saudi Arabia successfully commissioning major projects and lower prospects for Iran’s gas sector.

Out of the nine countries with committed upstream investments in the 2018 outlook, seven of them saw a year-on-year (y-o-y) decline, including Iran, which saw its share of projects under execution fall by 77%.

The UAE and Qatar are expected to see an increase in their downstream gas investments. Overall, the decline in MENA committed investments was most notable in Kuwait (close to 80%), Saudi Arabia (60%) and Algeria and Iran at around 50%.

By contrast, APICORP’s Annual MENA Gas Investments Outlook shows petrochemicals investments as a bright spot, with a 50% y-o-y increase compared to its 2018-2022 outlook.

Two-thirds of the MENA countries will record lower planned investments in their upstream gas sectors, the report revealed.

Even though reforms have contributed to the reduction in energy subsidies and improved energy efficiency and renewables programs, there is still a risk of under-investment in upstream gas. A fair number of the greenfield power projects – in Saudi Arabia (12GW) and Egypt (9GW) – will undoubtedly require additional gas supplies. Major upsides will come from Qatar, where tenders for additional LNG processing trains (estimated at $15 billion) - have recently been issued.

Dr. Ahmed Ali Attiga, Chief Executive Officer, Apicorp, said: “Due to higher upfront risks associated with exploration activity, we are seeing governments shouldering the majority of the investments on the upstream side. Currently, government investments account for a little under 92% of committed upstream gas investments compared to just 29% for petrochemicals projects where we are seeing more private sector involvement. This involvement is expected to expand given the increasing share of planned petrochemicals and other downstream gas projects estimated at $134 billion - or 71% - in the overall gas value chain versus upstream and midstream.”

Dr. Leila Benali, Chief Economist and Head of Strategy, Apicorp, said: “The downward shift is not necessarily an indication of low investment appetite. In Saudi Arabia for example, it actually indicates a deceleration from a heavy upstream activity and the commissioning of major projects such as Wasit and Fadhili gas processing plants.”

“Nevertheless, with some countries struggling to attract private sector investment, the risks of supply crunch materializing increase again in the region. The other interesting development is that with global gas prices dropping, investors in the gas value chain are using a variety of financing strategies and commercial schemes to get project FIDs,” Dr. Leila continued.

In the UAE, industrial needs will become main driver for gas consumption over the coming years – especially in petrochemicals.

Gas demand for power generation purposes is expected to slow down to less than 1% p.a. to 2024 compared to the 6% rate over the past six years, due primarily to the commissioning of nuclear power units at Barakah and solar power projects.

On the upstream side, the UAE announced a 1.6 trillion cubic metres (tcm) addition to its conventional gas reserves in November 2019, catapulting it to sixth place globally in terms of gas reserves. It also became the first country in the region to list unconventional gas reserves of 4.5 tcm.

In Saudi Arabia, gas demand is set to grow at a historically lower annual average rate of 1.8% to 2024, with medium-term consumption largely driven by power generation and industrial activities.

Investments in Saudi Arabia’s gas sector are projected to decline relative to previous outlooks as major projects are commissioned. The country has gone from gas tightness to excess gas and has ambitious plans to boost sales gas output from 89 billion cubic metres per annum (bcma) in 2017 to 164 bcma by 2026.

Egypt expects continuous growth of gas consumption at an average rate of about 4% p.a. for the next five years owed to power generation, gas exports and industrial development.

Egypt’s Industrial Development Plan 2016-2020 forecasts domestic annual gas consumption to reach 72 billion cubic metres (bcm) in 2020 and 92 bcm in 2021. There are concerns about Egypt turning into net gas deficit as soon as 2025, owing to high domestic consumption and once its 12 Mtpa LNG trains operate at full capacity. An analysis on the Egypt Gas Hub initiative shows that some key elements of the gas hub concept are still to be developed.

Oman underwent a period of limited gas rationing for industries as well as electricity reform, but its production is expected to increase.

Oman continues its upstream reform drive by awarding three blocks to international IOCs in 2019. Over the next five years, the Sultanate’s gas production is expected to increase by 47 bcma from its current level of 40 bcma. This increased production will underpin the 15% increase in the share of gas in the country’s fuel mix (from 35% in 2015 to 50% by 2025).

Algeria’s domestic demand continues to grow, jumping by 70% from 2008-2018 due primarily to the power sector which relies on natural gas to feed 98% of the country’s total generated electricity. Gas-fired capacity will continue to feature heavily in the Algeria’s estimated $31 billion of new power generation projects over the next five years, which equals 56% of the country’s total energy investment. — SG

These were the details of the news Investments in MENA gas sector see $70bn fall over next 5 years for this day. We hope that we have succeeded by giving you the full details and information. To follow all our news, you can subscribe to the alerts system or to one of our different systems to provide you with all that is new.

It is also worth noting that the original news has been published and is available at Saudi Gazette and the editorial team at AlKhaleej Today has confirmed it and it has been modified, and it may have been completely transferred or quoted from it and you can read and follow this news from its main source.

PREV How to protect your account via WhatsApp from fraud?
NEXT “Emirates Airlines” reopens its lounges around the world, starting in Cairo...