The Arab Petroleum Investments Corporation (APICORP), a multilateral financial development institution, released its Gas Investments Outlook 2019-2023 on the MENA region’s planned and committed investments for the period 2019 to 2023.
In addition to detailed country-by-country analysis, the report also highlights interesting trends and dynamics shaping the gas landscape over the short and medium terms, including the energy transition, gas pricing, private sector participation and emergent technologies.
REGIONAL HIGHLIGHTS
USD 70 billion y-o-y decline in MENA’s total committed and planned investments
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%. Notably, Qatar is one of the exceptions, and the country is expected to see an increase in its downstream gas investments. Overall, the decline in MENA committed investments was most notable in Kuwait (close to 80%), with Algeria and Iran at around 50%. In terms of total gas consumption at the MENA level, the report indicates that the industrial sector currently accounts for roughly 30% of the region’s total gas consumption.
Declines in gas investments largely offset by significant increases in petrochemicals
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
Even though reforms have contributed to the reduction in energy subsidies and improved energy efficiency and renewables programmes, there is still a risk of under-investment in upstream gas. A fair number of the greenfield power projects will undoubtedly require additional gas supplies. Major upsides will come from Qatar, where tenders for additional LNG processing trains (estimated at USD 15 billion) - have recently been issued.
Dr. Ahmed Ali Attiga, Chief Executive Officer, APICORP, commented: “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 USD 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 some countries it actually indicates a deceleration from a heavy upstream activity and the commissioning of major projects.” “Nevertheless, with some countries struggling to attract private sector investment, the risks of supply crunch materialising 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.
Country Highlights
On the supply side, Qatar continues to retain its position as the MENA’s top gas exporter.
The country is moving ahead with upgrades that will see its liquefaction capacity rise from current 77 Mtpa to 126 Mtpa by 2027. Qatar has plans to nearly double its 65-strong LNG fleet by adding at least 60 new carriers at an estimated cost in excess of USD 12 billion, growing the current global LNG fleet of 525 carriers – as of Q4 2018– by 11-19%.
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 rising domestic challenge
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 USD 31 billion of new power generation projects over the next five years, which equals 56% of the country’s total energy investment.
For more information and to see the full findings of the report, please visit: http://bit.ly/2sz42r7
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