Despite the global demand shock, MENA committed gas investments are holding steady while planned gas investments reach USD126 bn, a 29% increase compared to last year, according to APICORPS’s MENA Gas & Petrochemicals Investments Outlook 2020-2024
The report features key regional developments in the regional gas and petrochemicals landscape and the dynamics shaping it over the short and medium terms.
2020 is witnessing one of the biggest gas demand shocks on record, with a year-on-year reduction of 4% globally. This stands in stark contrast to 2019, which was a record year for LNG Final Investment Decisions (FIDs). The 2020 global crisis is expected to reduce the annual growth rate for global gas demand during 2020-24 to 1.5% compared to the pre-COVID-19 estimate of 1.8%.
Planned investments meanwhile increased by 29% to reach US$126 bn, mainly due to the strong ongoing regional gas drive for cleaner power generation and improved monetisation as a feedstock for the industrial and petrochemicals sectors. Notably, the petrochemicals sector witnessed a y-o-y increase of US$4 bn in planned projects compared to last year’s outlook, while committed projects decreased by US$13 bn due to the completion of several projects in 2019.
Dr. Ahmed Ali Attiga, chief executive officer, APICORP, commented, “The decrease in gas demand has put fiscal pressures on government and private sectors alike, and we expect a few committed projects to continue facing strong headwinds in terms of payments, supply chain issues and potential project delays. Overcoming these challenges will undoubtedly require strong policy support from governments, as well as enhanced collaboration between the private and public sector. To this end, APICORP has continued to play a critical countercyclical role in alleviating these fiscal pressures and bridging the financing gap caused by the pandemic to strengthen the energy sector’s sustainability.”
Dr. Leila R. Benali, chief economist, Strategy, Energy Economics and Sustainability, APICORP, added, “The impact of COVID-19 on MENA gas demand and the petrochemicals sector will accelerate the industrial share of domestic demand. As outlined in our MENA Gas & Petrochemicals Investments Outlook 2020-2024, gas demand is expected to grow by approximately 3.8%-4% on average in MENA compared to 6% in 2019. This downward revision is due to slower GDP growth and industrial output, the effect of price reforms, nuclear power projects coming online and increased share of renewables. Additionally, a prolonged depression of LNG prices will put further pressure on a few LNG exporters in the region during a time when pipeline exports were already taking a hit.”
The integration of the downstream value chain is expected to continue in the region, in conjunction with Asia. Saudi Arabia, Iran and Iraq are leading the way in terms of committed gas investments. This is driven by the gas-to-power development drive in both Saudi Arabia and Iraq, as well as Iran’s South Pars programme and petrochemicals feed, while the UAE has allocated US$22bn to the country’s continued gas development masterplan realisation, which includes unconventional and sour gas development.
