Page 9 - DMEA Week 01

DMEA POLICY DMEA
MENA gas investments in decline: Saudi fund
A bright spot in Middle Eastern gas investment is petrochemicals.
MENA
INVESTMENT in natural gas in the Middle East and North Africa is waning, Saudi Arabia’s Arab Petroleum Investment Corp. (APICORP) said in a recent report, raising the risk of future domestic supply shortages.
In a five-year outlook report, APICORP predicted that committed and planned gas investments would come to $259bn in 2019- 2023, down 27% versus its forecast last year for 2018-2022.
The reduction is the result of lower spending in Saudi Arabia and weaker prospects in Iran, according to the report. Committed projects were down 17% in value compared with APICORP’s previous five-year outlook, owing to $11bn and $5bn declines in Iran and Egypt, it said.
Upstream, seven of the nine countries reviewed saw a fall in committed investments.
Moving downstream, committed invest- ments were down in all countries save Qatar and UAE. The former is preparing for a major expansion in its LNG capacity. Saudi expend- iture slumped 60%, while Kuwaiti spending plunged 80%. Investments also fell 40% in Alge- ria and Iran.
“These declines are not necessarily an indica- tion of low investment appetitie, but – in certain cases such as Saudi Arabia – rather a deceleration from a period of heavy activity,” APICORP.
The fund drew attention to the kingdom’s
recent completion of the Wasit gas plant. “Nevertheless, the private sector continues to shy away from major upstream projects, and with countries such as Iran and Algeria struggling in general to attract private sector investment, the risks on upstream development materialising will continue to be high,” the fund said. “The low gas prices are prompting investors to adopt a wait-and-see approach before committing to
large-scale projects.”
Reforms, notably the reduction in energy
subsidies, improved energy efficiency and a growth in renewables, have put downward pressure on gas demand, holding back growth. But large new power plants are also coming on stream, including 12 GW of capacity in Saudi Arabia and 9 GW in Egypt.
“There is still a risk of under-investment in upstream gas, as a fair number of the greenfield power projects ... will undoubtedly require addi- tional gas supplies,” APICORP said.
The upside is Qatar, which has recently issued tenders worth $15bn for additional LNG pro- cessing trains.
“Iraq meanwhile will continue its efforts to capture more flared gas and ramp up exploration for non-associated gas,” APICORP said.
A bright spot in Middle Eastern gas invest- ment is petrochemicals, set to see a 50% growth in project expenditure to $123bn. ™
Week 01 11•January•2020 w w w. N E W S B A S E . c o m
P9