Share

Region’s gas sector investments to fall by $70bn until 2025

Out of the nine countries with committed upstream investments in the 2018 outlook, seven of them saw a y-o-y decline, including Iran, which saw its share of projects under execution fall by 77 percent

Share
Gas, Apicorp
AFPGetty Images

Total committed and planned investments in the Mena region’s gas sector is expected to decline by $70 billion year-on-year (y-o-y) over the next five years, said the Arab Petroleum Investments Corporation (Apicorp) in a new report.

Apicorp’s research titled “Gas Investments Outlook 2019-2023” indicates that the total committed and planned investments fell largely due to Saudi Arabia successfully commissioning major projects and lower prospects for Iran’s gas sector.

Out of the nine countries with committed upstream investments in the 2018 outlook, seven of them saw a y-o-y decline, including Iran, which saw its share of projects under execution fall by 77 percent.

The UAE and Qatar are expected to see an increase in their downstream gas investments. Overall, the decline in Mena committed investments was most notable in Kuwait (close to 80 percent), Saudi Arabia (60 percent) and Algeria and Iran at around 50 percent.

In terms of total gas consumption at the Mena level, the report indicates that the industrial sector currently accounts for roughly 30 percent of the region’s total gas consumption.

By contrast, Apicorp’s Annual Mena Gas Investments Outlook shows petrochemical investments as a bright spot, with a 50 percent 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 programs, there is still a risk of under-investment in upstream gas. A fair number of the Greenfield power projects – in Saudi Arabia (12GW) and Egypt (9GW) – will undoubtedly require additional gas supplies. Major upsides will come from Qatar, where tenders for additional LNG processing trains (estimated at $15 billion) - have recently been issued.

Dr. Ahmed Ali Attica, chief executive officer, Apicorp, said: “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 percent of committed upstream gas investments compared to just 29 percent 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 $134 billion - or 71 percent - 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 Saudi Arabia for example, it actually indicates a deceleration from a heavy upstream activity and the commissioning of major projects such as Wasit and Fadhili gas processing plants.”

“Nevertheless, with some countries struggling to attract private sector investment, the risks of supply crunch materializing 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. Benali added.

Newsletter

Most Popular