Oil Prices, Other Factors Dampen Middle East-North Africa Energy Investment Forecast

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Energy sector investments for the Middle East-North Africa (MENA) region are expected to total $759 billion for 2015 through 2019, a drop of $6 billion from the 2014-18 forecast.

Projected energy sector investments would have dipped even further had it not been for an apparent catch-up effect, particularly evident in the power sector, as well as ever-increasing project costs, according to the latest Arab Energy Investment Outlook, which was presented by the Arab Petroleum Investments Corporation (Apicorp) (Dammam, Saudi Arabia) at the 10th Arab Energy conference in Abu Dhabi.

Apicorp's report highlighted the growing divide between the Gulf Cooperation Council (GCC) countries and the rest of the Arab region in terms of their credit ratings. It pinpointed three primary restraints on energy investments: unrelenting costs of project inflation; the paradoxical scarcity of fuel and feedstock, such as natural gas and ethane; and the accessibility of funding, which will be exacerbated if oil prices remain low and below national break-even levels over the long term.

"The energy scene is changing rapidly, but we expect oil prices to remain depressed for some time," said Ali Assaoui, Apicorp's senior consultant and author of the report.

"The general macroeconomic and investment climate is already impacting many Arab countries' ability to access the necessary funding for investment in energy-related projects, but the lower price of oil will likely be an additional constraint on access to finance.

"While we are not a policymaking organization, given the current investment outlook and current constraints, we would propose steps are taken by the relevant authorities to improve the overarching investment climate.

"They should consider methods to reduce the cost of projects and the impact of inflation, address the feedstock scarcity paradox, and promote the full sweep of equity and debt financing options available to the sector."

Apicorp Chief Executive Officer and General Manager Ahmed Al Nuaimi said: "With uncertainty around hydrocarbon futures, many in the region are looking to alternative sources of energy. Apicorp was a pioneer in financing renewable and is now helping investors make smart choices as countries in the region [looking to] increase their energy security. We had a lot of interest at this year's conference in our experience in this growth area."

Apicorp was established in 1975 by 10 member states of the Organization of Arabian Petroleum Exporting Countries (OAPEC).

For related information, see December 23, 2014, article - Falling Oil Prices Could Cost GCC Countries $350 Billion, Pressure Governments, and November 28, 2014, article - Policy Uncertainty Poses Risk for Renewables Investment in Saudi Arabia.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.