(MENAFN- The Peninsula) The Peninsula
Doha: The Arab Petroleum Investments Corporation (APICORP), a multilateral development financial institution, yeserday released its MENA Gas & Petrochemicals Investments Outlook 2020-2024 on the region's planned and committed investments for the period. The report features key regional developments in the gas and petrochemicals landscape and the dynamics shaping it over the short and medium terms.
Compared to last year's Gas Investment Outlook 2019-2023, committed gas investments held steady, while planned investments increased by 29 percent to reach $126bn. This increase is due mainly to the strong ongoing regional drive for cleaner power generation and improved monetisation of gas as a feedstock for the industrial and petrochemicals sectors.
In terms of regional developments, 2020 is witnessing one of the biggest gas demand shocks on record, with a year-on-year (y-o-y) reduction of 4 percent globally. This stands in stark contrast to 2019, which was a record year for liquefied natural gas (LNG) Final Investment Decisions (FIDs). The 2020 global crisis is expected to reduce the annual growth rate for global gas demand for the period 2020-24 to 1.5 percent compared to the pre-COVID-19 estimate of 1.8 percent.
Despite the global demand shock, the MENA region's committed gas investments held steady compared to last year. Planned investments meanwhile increased by 29 percent to reach $126bn, owed mainly to the strong ongoing regional gas drive for cleaner power generation and improved monetization as a feedstock for the industrial and petrochemicals sectors. Notably, as part of this increase, Qatar's North Field Expansion
(NFE) project accounts for $20-22bn of the total planned gas investments.
The petrochemicals sector meanwhile witnessed a y-o-y increase of $4bn in planned projects compared to last year's outlook. By contrast, committed projects decreased by $13bn due to the completion of several projects in 2019.
The share of government investments in committed and planned gas projects (92 percent) is higher than it is in the petrochemicals sector (72 percent). Given the increasing size of projects, such investments typically rely on a 70:30 or 80:20 debt/equity ratio.
Dr. Ahmed Ali Attiga, Chief Executive Officer, APICORP, said: 'The current decrease in gas demand has put fiscal pressures on government and private sectors alike, and we expect a few committed projects to continue facing strong headwinds in terms of payments, supply chain issues and potential project delays. Overcoming these challenges will undoubtedly require strong policy support from governments, as well as enhanced collaboration between the private and public sector. To this end, APICORP has continued to play a critical countercyclical role in alleviating these fiscal pressures and bridging the financing gap caused by the pandemic to strengthen the energy sector's sustainability.
Dr. Leila R Benali, Chief Economist, Strategy, Energy Economics and Sustainability, APICORP, added: 'The impact of COVID-19 on MENA gas demand and the petrochemicals sector will accelerate the industrial share of domestic demand. As outlined in our MENA Gas & Petrochemicals Investments Outlook 2020-2024, gas demand is expected to grow by approximately 3.8-4 percent on average in MENA compared to 6 percent in 2019. This downward revision is due to slower GDP growth and industrial output, the effect of price reforms, nuclear power projects coming online and increased share of renewables. Additionally, a prolonged depression of LNG prices will put further pressure on a few LNG exporters in the region during a time when pipeline exports were already taking a hit.
Qatar Petroleum (QP) is the largest equity LNG holder in the world, with ownership of stakes ranging from 63 percent and 70 percent in QatarGas and RasGas projects, respectively. As the country faces increasingly stiff competition in the global LNG markets, the NFE megaproject is a cornerstone of its drive to regain its title as the world's top LNG exporter and keep it well into the next decade. The final investment decision (FID) for the NFE megaproject is expected to be pushed well into 2021.
In June 2020, QP also signed various agreements with Korean shipyards worth $19.2bn to reserve construction capacity for up to 100 new LNG carriers through 2027, the largest such order in history. Qatar's shipbuilding ambition is aimed at facilitating its LNG export quest by providing shipping for QP and also ExxonMobil's Golden Pass LNG. The vessels are expected to be completed between 2023 and 2027, with the with the first delivery scheduled for Q1 2024.
Qatar's LNG business is highly attractive for potential investors due to factors such as its low-cost resources, associated liquids and brownfield economics. QP anticipates making a decision on partners by Q4 2020, though delays in the EPC tender process and depressed gas prices are expected to push the decision further into 2021. Such a circumstance would make the possibility of solely funding the full project more likely if needed.
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