UAE energy investment at $107bn

The UAE is expected to pump nearly $107 billion into the energy sector in the next five years to emerge as the second largest investor in the sector in the Middle East after Saudi Arabia, according to official data.

Saudi Arabia, the world’s dominant oil supplier, is projected to invest nearly $165 billion in the oil, gas and power sector during 2013-2017, showed the figures by the Dammam-based Arab Petroleum Investment Corp (Apicorp).

Apicorp, which is affiliated to the 10-nation Organization of Arab Petroleum Exporting Countries (OAPEC), estimated the total MENA investment in the energy sector at around $740 billion during that period. It said investment would be affected in countries rocked by political turmoil but that they are on the rise in key oil producers.

“Investment has fallen below potential in countries where investment decisions and project implementation have been hampered by continuing turmoil. This has somewhat distorted the geographical pattern of investment,” Apicorp’s chief economist Ali Aissaoui said in a study sent to Emirates 24/7.

He said over 75 per cent of energy capital investment are shared by seven countries among the biggest holders of oil and gas reserves which have not faced such turmoil. These exclude Libya but include Iraq, notwithstanding its enduring troubles.

Saudi Arabia, investment is projected to reach $165 billion, mostly engendered by Saudi Aramco, SABIC and its affiliates as well as Saudi electricity company (SEC), as stand‐alone domestic private investors have continued to struggle to attract capital, Aissaoui said in his study, presented to an Apicorp board meeting this week.

“The UAE has established itself for the second consecutive review as the region’s second largest investor, with projects worth $107 billion.”

Pending further implementation decisions Algeria has jumped in the region’s rankings, overtaking both Qatar and Iran as the third potential investor, the study said.

As investment readiness has gained momentum in the wake of the restoration of good governance within the Algerian state firm Sonatrach, capital requirements – largely the result of catch‐up investment – have reached $71 billion, said Aissaoui, an Algerian.

In contrast, tighter international sanctions, and the retreat of foreign companies, have ended up taking a toll on Iran’s elusive energy investment program, which has tentatively been put at $68 billion, he added.

Finally, despite moving up the rankings ahead of Qatar and Kuwait, Iraq with $56 billion worth of capital requirements is still far below its huge potential, he said.

“In Iraq, the reaffirmation of the vital need to achieve the full development of the oil and natural gas sectors has yet to be translated into coherent policies and actions. In particular, the Iraqi Federal Government (IFG) has to pass a long‐awaited package of hydrocarbon legislation,” he said.

“This will hardly be possible if IFG and the Kurdistan Regional Government (KRG) fail to come up with a complete and thorough understanding of their pending oil issues. Furthermore, IFG needs to alleviate infrastructure bottlenecks and develop better solutions to counter recurrent security threats.”

The four-page study said that under‐investment, which has been particularly apparent in Kuwait, is now the case in Qatar as well.

In Kuwait, government policy has often been at odds with parliamentary politics and efforts to align the two have been repeatedly frustrated.

“As a result, major components of the upstream development continue to be questioned and key downstream projects such as the long‐delayed giant al‐Zour refinery are still striving for materialization,” the report said.

In contrast, Qatar’s stagnation is solely the result of policy on whether or not to extend the ongoing moratorium on further development of the North Field, beyond the domestic market oriented Barzan project.

“ As a result, and despite a shift in emphasis on enhancing oil recovery and expanding the petrochemical industry, energy investment in Qatar has lost momentum.”

By Staff, April 30, 2013