Gas Investments Declining in MENA: Saudi Fund

Investment in natural gas is declining in the Middle East and North Africa, the Arab Petroleum Investment Corp. (Apicorp) has warned, potentially leading to future domestic supply shortages.

Committed and planned gas investments in the region will total $259bn between 2019 and 2023, the Saudi government fund said in an outlook report published on December 19, down 27% from the forecast it made last year for 2018-2022.

Driving the reduction is lower spending in Iran and Saudi Arabia, Apicorp said.

“These declines are not necessarily an indication of low investment appetite, but – in certain cases such as Saudi Arabia – rather a deceleration from a period of heavy activity,” it said, citing Saudi Arabia’s recent completion of the Wasit gas plant.

But the fund also warned that private investors continued to “shy away” from major upstream gas projects, with Iran and Algeria in particular struggling to bring in private investment. The risk that projects will fail to materialise therefore remains high.

“The low gas prices are prompting investors to adopt a wait-and-see approach before committing to large-scale projects, including LNG facilities,” it said.

While reforms such as cutbacks in subsidies and improved energy efficiency have restrained gas demand growth, large new power plants are being built that will require extra supplies.

“There is still a risk of under-investment in upstream gas, as a fair number of the greenfield power projects – Saudi Arabia (12GW) and Egypt (9GW) – will undoubtedly require additional gas supplies,” Apicorp said.

Lower gas spending has partly been offset by a 50% growth in projected petrochemical investments to $123bn in 2019-2023, compared with 2018-2022.