APICORP: Energy investments in Middle East and North Africa (MENA) to exceed USD 805 billion over next five years



APICORP (www.APICORP.org), The latest investment outlook in the MENA region projects a slight increase of US $ 13 billion in committed and planned energy investments compared to the outlook for the previous year; Renewable energies represent a significant share of nearly 40% of the estimated USD 250 billion in investments in the electricity sector; Investments in gas are expected to drop from $ 9.5 billion to $ 75 billion after the completion of several megaprojects in 2020; Changes in regulations are necessary for the MENA region to realize its energy storage potential; Additional capacity – especially renewables – will make electricity trading a more commercially viable option in the MENA region; The MENA region can become a great exporting region of blue and green hydrogen thanks to low cost gas resources and strong progress in renewable energy.

The Arab Petroleum Investments Corporation (APICORP), a multilateral development financial institution, estimates in its MENA Energy Investment Outlook 2021-2025, https://bit.ly/3nO69jw, which he launched today according to which the overall planned and committed investments in the MENA region will exceed $ 805 billion over the next five years (2021-2025) – an increase of $ 13 billion compared to the estimate of $ 792 billion in the five-year outlook last year.

The report attributes the modest increase to four factors: strong confidence in the rebound in global GDP, rising energy demand, the return of Libyan projects – which alone account for around $ 10 billion of planned projects – and l acceleration of the pace of renewable energies in the region. . Current estimates are that the MENA region will add 3 GW of installed solar power capacity in 2021 alone – double that of 2020 – and 20 GW over the next five years.

The region’s economic forecast suggests that commodity prices and exports will drive the expected rebound for most MENA countries in 2021. However, economies remain under fiscal strains due to debt levels. unprecedented and declining oil prices, tourism / Hajj income and personal remittances.

Dr Ahmed Ali Attiga, Director General of APICORP, said: “APICORP MENA Energy Investment Outlook 2021-2025 indicates that energy industries are entering a period of relative stability in terms of investment, with most MENA countries returning to GDP growth in 2021 and the energy transition showing no signs of slowing down. We anticipate a slow but steady recovery in the energy sector from the fallout from the COVID-19 pandemic, supported by continued public sector investment and rising demand. “

Gas investments

Gas investments in the MENA region for the period 2021-2025 are expected to total USD 75 billion – USD 9.5 billion less than previous forecasts. The decline is attributed to the completion of several megaprojects in 2020 and countries being more cautious about new project commitments at a time of gas overcapacity.

Qatar, Saudi Arabia and Iraq are the top three countries in the MENA region in terms of committed gas investments. This is due to Qatar’s North Field East megaproject, Saudi Arabia’s gas-to-electricity propulsion, and massive unconventional gas development from Jafurah – which is poised to make the kingdom a global exporter of blue hydrogen – and Iraq’s gas-to-power plans and its determination to reduce flaring and greenhouse gas emissions.

Planned investments have remained relatively stable at USD 133 billion for 2021-2025, signaling the region’s appetite to resume the development of its natural gas capacity – in particular the ambitious unconventional gas developments in Saudi Arabia, in the United Arab Emirates, Oman and Algeria – once macroeconomic conditions improve.

Energy investments

Energy investments in the MENA region for 2021-25 remain largely unchanged from APICORP’s 2020-24 outlook. Notably, the sector’s total investment amount of $ 250 billion is the highest of any energy sector – with respectively $ 93 billion and $ 157 billion of committed and planned projects over the next five years.

With a share of around 40%, renewable energies constitute an important part of these investments as countries continue their energy diversification programs. In the GCC, the projects of the Renewable Energy Project Development Office and the Saudi Arabia Public Investment Fund continue to advance. North African countries are also showing measurable development in renewable energy, with Algeria establishing an independent authority to oversee the development of the country’s strong pipeline of projects, and Egypt striving to resolve regulatory issues. linked to its transfer system and the unbundling of its electricity market.

This shift to renewable energies is one of the main factors behind the growing share of transmission and distribution (T&D) investments in the power sector value chain, as the integration of renewable energies in power grids requires significant investments to improve and digitize network connectivity, not to mention storage. to accommodate the excess power capacity they generate.

Petrochemical investments

Planned investment in the MENA region’s petrochemical sector is expected to reach USD 109 billion in 2021-2025, a jump of USD 14.2 billion from last year’s outlook. In contrast, committed investments fell from $ 7.7 billion to around $ 12.5 billion due to the completion of several megaprojects in 2020.

Although the petrochemical markets in the MENA region are seeing an overall improvement in demand due to the increased consumption of basic materials as vaccination campaigns continue and economies recover, some petrochemical investments made in the MENA region are nevertheless reassessed and rationalized due to budget constraints, capital discipline and profitability. changing market dynamics.

Investments in renewable energies

Overall, the MENA region expects to add around 3 GW of solar power in 2021 – doubling its total from 2020 – and nearly 20 GW by 2025. Wind and other sources such as Hydropower is also taking its place as countries step up their energy diversification plans.

Jordan, for example, has managed to increase the percentage of electricity produced from renewables from just 1% in 2012 to around 20%. Morocco‘s 4 GW of renewable energies (wind, solar and hydroelectric) constitute around 37% of the country’s total production mix and nearly 90% of its current 3.5 GW pipeline. The total renewable energy capacity installed in Egypt is around 2.3 GW, including 1 GW of solar photovoltaic and 1.3 GW of onshore wind.

In the United Arab Emirates, renewables accounted for around 6% of total installed capacity and 3% of electricity produced as of 2020. Although it may miss its short-term targets, the UAE‘s solar capacity is expected to grow over time. faster in the region with nearly 5 GW. solar projects in progress.

In Saudi Arabia, only 330 MW of utility-scale solar PV projects and a single 2.5 MW wind demonstration project jointly developed by Saudi Aramco and General Electric were operational as of 2020. Even when they are Combined with tenders under its National Renewable Energy Program, the Kingdom’s total renewable energy capacity stands at 3.3 GW, or around 24 GW below its stated target of 27 , 3 GW by 2024.

Despite the ongoing acquisition of large-scale utility projects, Oman is also far from meeting its short-term goal of producing 10% of its electricity from renewables by 2025, with just one project. 105 MW solar photovoltaic and a 50 MW onshore wind project commissioned over the past 2 years. years.

As for Iraq, the first solar tender for projects with a total capacity of 755 MW was announced in May 2019 and the bids of the shortlisted companies were published in September the following year. Overall, the country aims to reach 10 GW of solar power generation capacity by 2030 and generate 20% of its energy from solar.

Expand Energy storage is the key

The growing share of renewable energies, the growth in demand for electricity and the balance between supply and demand in real time require the integration of modern and digitized energy storage solutions. Despite its significant potential in this area, the MENA region suffers from the limited role of storage in networks. To overcome this, regulations will need to evolve to reflect the current functions of energy storage, including taking advantage of the flexibility of consumer aggregation or grid congestion.

The race for hydrogen and ammonia

The MENA region is also a strong candidate to become a major hydrogen exporting region thanks to its combination of low cost gas resources and renewable energies. A few countries, such as Saudi Arabia and Morocco, have already made strides as low cost exporters of blue and green hydrogen, net zero ammonia and other low carbon products, while that other countries, like Oman, the United Arab Emirates and Egypt are trying to catch up.

For more information, please see the full report https://bit.ly/3nO69jw.

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