Middle East, North Africa to see large energy investments

Jun 12, 2006, 13:43 GMT

Dubai - Energy investments in the Middle East and North Africa are expected to total 220 billion dollars over the next five years, with Gulf producers accounting for 62 per cent, according to an official Arab report.

Arab states are forecast to spend 80 billion dollars between 2006 and 2010 in the oil sector - of which 36 billion will be allocated to upstream exploration and development of new capacity, as well as sustaining current output through enhanced oil recovery programmes, according to the report by the Saudi-based Arab Petroleum Investment Corporation (Apicorp).

The midstream sector will require 6 billion dollars, while spending on capacity expansion and new projects in refining was put at 38 billion, said the Dubai-based Pipeline magazine in its June issue, citing the report.

Encouraged by a four-year oil price rally, many Gulf members of OPEC are building output capacity to keep up with global demand and investing in downstream development to diversify their economies.

The report estimated Arab investment in new energy projects in 2005 at 39 billion dollars, including petrochemicals and power.

'This level of investment is equivalent to 4 per cent of Arab gross domestic product and 18 per cent of Arab gross accumulation of fixed capital for 2005,' it said.

'Looking forward, these investment figures are set to increase rapidly. The resulting cumulative investment requirements, which stand at 220 billion dollars for the five-year period, represent a 26-per-cent increase over the last Apicorp annual survey of 175 billion dollars for the period 2005-2009,' said the report.

Of the 220 billion dollars, the gas sector would account for 103 billion - 12 per cent of which will go to the exploration and production of natural gas and associated natural gas liquids.

Spending on power generation was seen at 38 billion dollars, as demand rises on the back of increased urbanization, industrial expansion and GDP growth in many states. Regional generation capacity was expected to double within the next 12-15 years.

Apicorp said state oil firms would not need debt financing for upstream and midstream projects if oil prices stay strong.

Some international oil companies in upstream joint ventures may tap the debt market to help finance gas expansion, it added.

For the downstream sector, projects would typically rely on 30 per cent equity and 70 per cent debt, the report said.

The resulting overall capital structure for the Arab region for the period 2006-2010 would most likely be 53 per cent equity amounting to 23 billion dollars per year and 47 per cent debt, amounting to 21 billion per year on average.

The report covered Saudi Arabia, Qatar, Kuwait, Algeria, the United Arab Emirates, Libya, Oman, Egypt, Syria, Yemen, Bahrain, Iraq, Sudan, Tunisia, Morocco, Jordan, Lebanon and Mauritania.