Middle East and North Africa set for energy investment boom

Solar Panels in the Desert

New APICORP report suggests investments will exceed $800bn over next five years, including a huge expansion in renewables.

The Arab Petroleum Investments Corporation (APICORP) has issued its MENA Energy Investment Outlook 2021-2025, projecting a increase in committed and planned investments to over $800bn. Behind this growth are a number of different factors ranging from rebounding economies to rapid adoption of renewables.

Gas investments
Committed gas investments between 2021 and 2025 are expected to total $75bn, a significant drop from the previous outlook. The decline is attributed to the completion of several megaprojects in 2020 and countries now being more cautious in relation to gas overcapacity.

Three countries where gas investments remain strong are Qatar, Saudi Arabia, and Iraq. This is a result of Qatar’s ongoing North Field East megaproject, Saudi Arabia’s gas-to-power drive and its massive Jafurah unconventional gas development, and Iraq’s gas-to-power projects along with its determination to cut flaring and greenhouse gas emissions.

While committed investments have dropped, planned investments have held steady. That suggests the region is prepared to resume natural gas capacity build-up if macro-economic conditions improve.

Power investments
Power investments are now the highest of all sectors covered by the report, with $93bn of investment committed and $157bn planned.
With a share of around 40%, renewables form a significant part of these investments as countries push ahead with their energy diversification.

Saudi Arabia’s Renewable Energy Project Development Office projects continue to progress while other strong developers of renewables include Algeria and Egypt. Algeria is establishing an independent authority to oversee the development of country’s strong pipeline of projects and Egypt is working to resolve regulatory issues related to its wheeling scheme and the unbundling of its power market.

This shift to renewables is also a major factor behind the rising share of investment in transmission and distribution projects in the power sector. The integration of renewables into power grids requires significant investment to enhance and digitise grid connectivity and establish storage systems to accommodate the surplus power capacity they generate.

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.”

Petrochemical investments
Planned investments in the MENA petrochemicals sector are also forecast to increase, rising to $109bn for 2021-2025 but committed investments have dropped recently to just $12.5bn.

Despite MENA petrochemical markets seeing an overall improvement in demand as the world recovers from the pandemic, MENA committed petrochemical investments are nonetheless being re-evaluated and rationalised due to financial challenges, cost efficiencies and evolving markets demand.