Energy capital investments in the Arab world will total USD 685 billion over the next five years, according to a new report.
Set against the backdrop of continuing regional turmoil, uncertainty in many global and regional economies, and a declining oil price, APICORP's latest Arab Energy Investment Outlook predicted lower investment levels compared to the previous year's report.
It stated that energy sector investments would have dipped even further had it not been for an apparent catch-up effect, particularly evident in the power sector, as well as ever-increasing project costs.
The report highlighted the growing divide between the GCC and rest of the Arab region in terms of their credit ratings, and it pin-pointed three primary constraints on energy investments including the unrelenting cost of project inflation, the paradoxical scarcity of fuel and feedstock such as natural gas and ethane and the accessibility of funding which will be exacerbated if oil prices remain low and below national break-even levels over the long term.
Ali Aissaoui, senior consultant at APICORP said: "The energy scene is changing rapidly but we expect oil prices to remain depressed for some time. The general macroeconomic and energy investment climate is already impacting on many Arab countries' ability to access the necessary funding for investment in energy related projects, but the lower price of oil will likely be an additional constraint on access to finance".
"While we are not a policy making organisation, given the investment outlook and current constraints, we would propose steps are taken by the relevant authorities to improve the overarching investment climate," Ali said.
