{"id":547971,"date":"2022-07-20T03:41:34","date_gmt":"2022-07-20T03:41:34","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/energy-investments-in-mena-are-on-the-rise-says-apicorp\/"},"modified":"2022-07-20T03:41:34","modified_gmt":"2022-07-20T03:41:34","slug":"energy-investments-in-mena-are-on-the-rise-says-apicorp","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/energy-investments-in-mena-are-on-the-rise-says-apicorp\/","title":{"rendered":"Energy investments in MENA are on the rise, says Apicorp"},"content":{"rendered":"

<\/a> MENA energy investments are expected to continue growing between 2022-2026, <\/strong>with fossil fuels accounting for the bulk: <\/strong>The MENA region is expected to see energy investments grow by some USD 879 bn between 2022 and 2026, according to Apicorp\u2019s most recent MENA Energy Investment Outlook (pdf)<\/a>. That\u2019s a 9% increase from the group\u2019s projection for 2021-2025<\/a>, which forecasted some USD 805 bn of investments during the five-year period.<\/p>\n

Caveat: A good chunk of that figure is planned, not committed: <\/strong>Some 70% of the projects that make up the USD 879 bn figure Apicorp forecasts over the coming five years are still in their planning phase. Only 30% are actually committed and have entered execution.<\/p>\n

Private sector contributions are growing but are still in the minority compared to government investment: <\/strong>The share of private investments in committed and planned projects across the region for 2022-2026 increased from 27% (2021-2025) to 30%. In Egypt, that share was about 32% owed to private sector entities, which amounted to a total of some USD 100 bn.<\/p>\n

What\u2019s underpinning the overall investment growth?<\/strong> The MENA region is expected to see solid growth in energy investments as energy exporters \u2014 primarily Gulf countries \u2014 look to capitalize on growing revenues they have enjoyed since Russia\u2019s invasion of Ukraine in March sent energy prices skyrocketing. \u201cAlthough the global growth momentum is experiencing a cyclical slowdown ahead, the outlook for the MENA region is relatively more positive than seen over the past two years, driven by the energy exporters, specifically the GCC,\u201d the report said.<\/p>\n

Unlike the Gulf, the Ukraine war hasn\u2019t been great for Egypt: <\/strong>Energy importers in the region \u2014 including Egypt \u2014 are expected to continue to \u201csuffer the most from the Russian invasion of Ukraine driven by the surge in commodity prices, elevated inflationary pressures and negative repercussions on private consumption and net exports,\u201d the report says. The report expects tightening monetary policy to restrain spending and investment over the next five years in countries like Egypt.<\/p>\n

On the other hand, the war in Ukraine has been good for our energy hub dreams: <\/strong>\u201cEgypt targets further consolidation of its role as an integrated energy hub via the EMGF (East Med Gas Forum), and also as a regional power hub through its plans to export electricity to Europe via subsea cables,\u201d the report said. Renewed interest in the East Med is \u201cin focus again, particularly in light of Europe\u2019s policy to replace Russian gas imports,\u201d the report said. We got a major shot in the arm last month<\/a> with the signing of a nine-year agreement that will see Israel ship more gas to our LNG facilities before it is exported on tankers to European shores, as the continent weans itself off Russian gas.<\/p>\n

And altogether, new energy projects are very much on the table here at home: <\/strong>Egypt ranks fourth in the region \u2014 behind Saudi Arabia, Iraq, and Iran \u2014 in terms of the value of its planned and committed energy projects over 2022-2026, with some USD 100 bn in the pipeline.<\/p>\n

Oil and gas projects are at the forefront of the region\u2019s energy investment boom: <\/strong>Oil and gas projects make up some 62% of committed projects over 2022-2026 and 55% of the planned projects for the same period. Crude oil saw a 3% increase y-o-y in 2022 mostly due to \u201cstrong capacity increment targets in KSA, UAE, Kuwait and Iraq,\u201d the report said. The 10 largest gas projects in Egypt tallied by the report are estimated to be worth a combined USD 14.11 bn. As for oil, the country\u2019s 10 largest projects make up USD 12.3 bn out of the total USD 168.6 bn Apicorp has tracked for the region.<\/p>\n

But the fastest growing sector in terms of investment value is petrochemicals<\/strong>, which saw the highest uptick (45%) in the investment outlook \u2014 after many projects frozen during the first two years of the pandemic started to come back online.<\/p>\n

Petrochem megaprojects in Egypt and Iraq are spearheading the growth<\/strong> as the two countries look \u201cto substitute hefty imports and supply the domestic markets,\u201d Apicorp says. Egypt\u2019s top petrochemical projects include the planned USD 8.5 bn Alamein Petrochemical Complex<\/a> from ECHEM, BSW Group, and Shard Capital; and the Red Sea National Refining and Petrochemicals Company\u2019s USD 7.5 bn Ain Sokhna complex<\/a>.<\/p>\n

The picture for renewables is hazy\u2026: <\/strong>Although the region is expected to add some 33 GW of renewables by 2026 (58% of which is expected to come from utility pv solar), renewable energy generation and investment face challenges from disruptions to supply chains and skyrocketing input costs that are making these projects more expensive to roll out, Apicorp says.<\/p>\n

\u2026Even though COP27 is right around the corner:<\/strong> The shift to green energy sources is being bogged down as \u201cgovernments face the challenge of balancing imperatives which are oftentimes very difficult to align: energy security, energy affordability, emissions reduction, and maximizing gains from core competitive markets to fund socioeconomic development targets,\u201d the report notes. Nonetheless, the COP27 summit in Sharm El Sheikh this November is expected to bring into focus a sustainable way forward on the transition for developing nations (including MENA countries).<\/p>\n

Where Egypt stands on renewables goals: <\/strong>Egypt plans to have renewables account for 20% of our power generation by 2022 and 42% by 2035<\/a>. Based on 2021 figures, we generate some 11% from renewables, according to the report\u2019s progress assessment. The slow green transition is part of a regional trend, the report argues, which anticipates that \u201cdue to the intermittency of renewable energy sources and the lack of utility-scale grid storage solutions to date, fossil fuels and nuclear will remain indispensable in the power supply mix in the foreseeable future,\u201d the report said.<\/p>\n

But some signs point positively on the sustainability front: <\/strong>\u201cMENA renewable energy projects refinanced under generous green and sustainable schemes, particularly projects that have been de-risked after uninterrupted commercial operations,\u201d are helping make these projects more viable. An example of this is how The World Bank\u2019s Multilateral Investment Guarantee Agency (MIGA) agreed to back<\/a> USD 98.3 mn worth of Scatec\u2019s USD 334.5 mn green bond issuance to refinance six solar plants in Benban.<\/p>\n

As for hydrogen, the potential is there but the scale isn\u2019t so clear: <\/strong>The region has registered over USD 26 bn in hydrogen projects \u2014 USD 3.99 bn of which are owed to Egyptian projects \u2014- but most are still in their planned phase. By our count, Egypt has signed more than USD 10 bn of preliminary agreements for green hydrogen projects. \u201cHydrogen will play a central role due to its versatility as a clean energy vector and \u2026 support the MENA countries\u2019 energy security by diversifying the energy mix and boosting the resilience of localized energy systems.\u201d the report said. Overall, the MENA region is \u201cwell-positioned\u201d to supply around 10%-20% of the global hydrogen market by 2050.<\/p>\n

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