Mena region’s energy sector investments to cross $792bn

MANAMA: Total committed and planned investments for 2020-2024 in Mena region’s energy sector are in excess of $792 billion, according to Arab Petroleum Investments Corporation (Apicorp).

The multilateral development bank, in which Bahrain owns three per cent stake, yesterday launched its Mena Energy Investment Outlook 2020-2024, which found that the amount marks a $173 million decline from the $965bn in last year’s five-year outlook.

The overall decline in the investment outlook – mostly in planned investments – is largely attributed to the 2020 triple crises: the Covid-19-related health crisis, the oil crisis and a looming financial crisis.

Despite these difficult circumstances, however, the GCC region’s committed investments increased by 2.3pc compared with a 6pc overall decrease in the Mena region as a whole, indicating a higher project execution rate in the GCC.

Apicorp expects that the decline in oil prices will lead to a restructuring of the oil and associated gas industry, as well as an accelerated closure of the lowest efficiency parts of the capital stock, and mergers and acquisitions (M&A).

The bank projects average Brent oil prices to stay in the $30-40 range in 2020 and 2021 before reflecting a more balanced market.

Apicorp chief executive Dr Ahmed Ali Attiga said: “The impact of Covid-19 is already deeper and longer lasting than past downturns. Indeed, the nature of the crises and the profound restructuring in oil and gas will hit energy investments for a potentially long period of time, sowing the seeds of supply crunches and price volatility. Therefore, we expect a W-shaped recovery for the Mena region.”

The third episode of the triple crisis is a potential financial crisis, manifested by a global liquidity crunch that is taking hold as more financial assets shed their value.

Although central banks and multilateral financial institutions are stepping up, concerns linger that such massive stimulus plans might create enormous unproductive debt overhangs that will slow economic growth.

Dr Leila Benali, chief economist and head of strategy, energy economics and sustainability at Apicorp, said: “The impact of the triple crises has led to sharp cuts in capital expenditures and restrictions to projects and supply chains.”

Compared with initial figures for 2020, planned upstream spending has been cut by 20-30pc across the board by oil majors, national oil companies and large independents as a result of the decline in oil and gas prices and unprecedented drop in demand.

However, unconventional gas and non-associated gas developments aimed at domestic consumption and strategic market share positioning for exports are expected to offset the impact on the upstream sector in the Mena relative to the rest of the world.




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