The Arab world will see a total of $685bn in energy investments over the next five years- lower from estimates made in 2014, a new report has found.
The five-year outlook by the Arab Petroleum Investments Corporation (APICORP) cited continuing regional turmoil, uncertainty in many global and regional economies, and a falling oil price as the main factors in play.
It added that energy sector investments would have dipped even further had it not been for an apparent catch-up effect, particularly evident in the power sector, and ever-increasing project costs.
Authors of the report highlighted a growing divide in credit ratings between the GCC and the rest of the Arab region.
Presenting its findings at the 10th Arab Energy Conference in Abu Dhabi last week, experts cited the following three main constraints on energy investments:
• the unrelenting cost of project inflation;
• the paradoxical scarcity of fuel and feedstock such as natural gas and ethane;
• the accessibility of funding, which will be exacerbated if oil prices remain low and below national break-even levels over the long term.
Ali Aissaoui, senior consultant at APICORP and author of the reprot, said: “The energy scene is changing rapidly but we expect oil prices to remain depressed for some time.
“The general macroeconomic and energy investment climate is already impacting on 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 policy making organisation, given the investment outlook and current constraints, we would propose steps are taken by the relevant authorities to improve the overarching investment climate.”
Aissaoui said that energy officials 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”.
