MUSCAT, MAY 4 - The Arab Petroleum Investments Corporation (APICORP), a multilateral development financial institution, estimates in its MENA Energy Investment Outlook 2021-2025, that overall planned and committed investments in the MENA region will exceed $805 bn over the next five years (2021–2025) – a $13 bn increase from the $792 bn estimate in last year’s five-year outlook.
The report attributes this modest rise to four factors: A strong confidence in the rebound of global GDP, rising energy demand, the comeback of Libyan projects – which alone accounts for around $10 bn in planned projects – and the accelerated pace of renewables in the region. Per current estimates, MENA will add 3GW of installed solar power capacity in 2021 alone – double that of 2020 – and 20GW over the next five years.
The region’s economic forecasts suggest that commodity prices and exports will drive the rebound expected for most MENA countries in 2021. However, economies remain under fiscal strains due to unprecedented high debt levels and decline in oil prices, tourism/Hajj revenues, and personal remittances.
Dr Ahmed Ali Attiga, Chief Executive Officer of APICORP, said: “APICORP’s MENA Energy Investment Outlook 2021-2025 indicates that energy industries are entering a period of relative stability in terms of investments as most MENA countries return to GDP growth in 2021 and the energy transition showing no signs of slowing down. We anticipate a slow but steady recovery of the energy sector from the fallout of the COVID-19 pandemic, supported by continued investment from the public sector and an upswing in demand.”
Committed gas investments in MENA for the period 2021-2025 are expected to total $75 bn – $9.5 bn less than the previous outlook. The decline is attributed to the completion of several megaprojects in 2020 and countries being more cautious to new project commitments in an era of gas overcapacity.
Planned investments meanwhile held relatively steady at $133 bn for 2021-2025, signalling the region’s appetite for resuming its natural gas capacity build-up – particularly the ambitious unconventional gas developments in Saudi Arabia, UAE, Oman, and Algeria – once macro conditions improve.
As a whole, the MENA region expects to add an estimated 3GW of solar power in 2021 – doubling its total from 2020 – and almost 20GW by 2025. Wind and other sources such as hydropower are also coming into their own as countries step up their energy diversification plans.
Power investments in MENA for 2021-25 remain largely unaffected compared to APICORP’s 2020-24 outlook. Notably, the sector’s total investment amount of $250 bn is the highest of all energy sectors – with an estimated $93 bn and $157 bn in committed and planned projects, respectively, over the next five years.
With a share of around 40 per cent, renewables form a significant part of those investments as countries push ahead with their energy diversification agendas.
This shift to renewables is a chief factor behind the rising share of investments in transmission and distribution (T&D) in the power sector value chain, as the integration of renewables into power grids requires significant investments to enhance and digitize grid connectivity, not to mention storage to accommodate the surplus power capacity they generate.
Planned investments in the MENA petrochemicals sector are forecast to increase to $109 billion in 2021-2025, a $14.2 bn jump compared to last year’s outlook. By contrast, committed investments dipped by $7.7 bn to around $12.5 bn due to the completion of several megaprojects in 2020.
Despite MENA petrochemical markets seeing an overall improvement in demand owed to the increased consumption of basic materials as vaccination drives continue and economies recover, some MENA committed petrochemical investments are nonetheless being re-evaluated and rationalized due to fiscal strains, capital discipline and cost efficiencies and evolving market dynamics.