Page 6 - DMEA Week 41

DMEA COMMENTARY DMEA

$95bn of MENA petchem

investments at risk

Saudi Arabia, Iran and Egypt account for the bulk of the projects

MENA PETROCHEMICALS producers in the Middle
East and North Africa (MENA) will face diffi-
culty in delivering on some $95bn of planned
investments between 2020 and 2024, energy
expert Mostefa Ouki said at a webinar hosted
by the Arab Petroleum Investment Corp. (API-
CORP) on October 15.
There was a $4bn increase in planned projects
for the period compared with APICORP’s fore-
cast of $95bn a year ago.
“If we look at the pattern of funding petro-
chemical projects, about 50% would be expected
to be financed by the private sector,” Ouki, a sen-
ior research fellow at the Oxford Institute for
Energy Studies (OIES), said. “The strategy is
pretty obvious; to capture more value, compared
to what used to be done in the past, exporting
bulk chemicals like methanol.”
“They are right in their idea of adding value,
Ouki said, but he warned that it was uncertain
whether there was justification for such large
investments, given that MENA countries lack
established petrochemical infrastructure.
“MENA is not a homogenous region,” he said. investments usually rely on a 70:30 or 80:20 ratio
“It will be challenging for even 60% of these pro- between debt and equity.
jects to be executed.” “The decrease in gas demand has put fiscal
The estimate for committed petrochemicals pressures on government and private sectors
projects in 2020-2024 slumped 37% from last alike, and we expect a few committed projects
year’s five-year outlook to $20.3bn, as several to continue facing strong headwinds in terms
investments were completed last year, APICORP of payments, supply chain issues and potential
said in its report. Egypt, Iran and Saudi Arabia project delays,” APICORP CEO Ahmed Ali
account for the bulk of committed investment, Attiga said. “Overcoming these challenges will
amid efforts to localise specialty chemical pro- undoubtedly require strong policy support from
duction and substitute feedstock imports. governments, as well as enhanced collaboration
More consolidation of the petrochemicals between the private and public sector. To this
sector is on the way, APICORP’s chief econo- end, APICORP has continued to play a critical
mist, Leila Benali, told the webinar. Saudi Ara- countercyclical role in alleviating these fiscal
mco completed its $70bn purchase of a majority pressures and bridging the financing gap caused
share in Saudi petrochemicals giant SABIC ear- by the pandemic to strengthen the energy sec-
lier this year. Two other Saudi players, SIIG and tor’s sustainability.”
Petrochem, are also considering a tie-up, they Gas demand will grow by 3.8-4.0% in 2020
said last month. in the MENA region, versus an increase of 6%
“We know that some other medium-sized last year, APICORP said. The rate will fall as a
players or even niche players are looking [at] result of the economic fallout from the corona-
potential merging and mergers and acquisitions virus (COVID-19) pandemic, the efforts of pric-
possibilities,” Benali said. “So this is a potential ing reforms and nuclear and renewable projects
change of additional consolidation in a relatively coming online.
fragmented petrochemical market in the region.” “Additionally, a prolonged depression of
While the share of government investments LNG prices will put further pressure on a few
in committed and planned petrochemical pro- LNG exporters in the region during a time when
jects stands at 72%, it sits at 92% for gas ventures, pipeline exports are already taking a hit,” Benali
APICORP estimates. Given their size, such said. ™

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