Dubai: The Arab Petroleum Investments Corporation (Apicorp) said on Wednesday that critical energy projects pushed through over the next five years, despite the uncertain geopolitical backdrop with $345 billion (Dh1.2 trillion) committed to projects under execution while an additional $574 billion worth of development is being planned in the Mena region.

The overall economic outlook remains similar to the forecasts estimated this time last year, with growth of around 3.2 per cent forecast for both 2018 and 2019. Global investment in the industry is expected to pick up and parts of the Mena region are expected to see a corresponding improvement in investment, the multilateral development bank focused on the energy sector said in an emailed statement.

“We see three important trends materialising in our outlook: the first is higher allocation of capital towards the power sector, which now accounts for the bulk of planned investments as demand for electricity continues to increase. The second is the increase in committed investments, reflecting an improving investment climate and a healthy transition of projects from the planning phase towards execution. And third, the private sector has an increasing role to play in financing energy projects in the Middle-East, that will help ease fiscal pressures on governments,” Mustafa Ansari, Senior Economist at Apicorp, said.

Saudi Arabia and the UAE represent 38 per cent of planned investments, with $149 billion and $72 billion respectively, over the outlook period, as both countries look to boost their upstream oil and gas sectors. For Egypt, the main focus isramping-up of gas production and meeting rising power demand. Planned investments in the country are $72 billion, with the power sector making up over 50 per cent of the total.

Elsewhere planned projects in Kuwait stand at $59 billion over the same period, with over 50 per cent in the oil sector. More specifically, the country intends to increase oil output to 4 million of barrels per day within the next few years. Similarly, in Algeria planned projects stand at around $58 billion with the Hassi Messaoud Peripheral Field Development accounting for a significant portion of investments in upstream oil.

Challenges

There are three main challenges that could potentially hinder the growth of investment in the region. The first is that the global investment in the oil and gas sector are closely interlinked with oil prices, and though the situation as a whole is improving, prices are not expected to return to the high levels seen prior to the sharp drop in 2014.

Another challenge to growth is the rising cost of capital, as some governments will find it harder to attract foreign investment. However, supported by its high reserves, and low debt to GDP ratios, the GCC was successful in issuing record debt of over $50 billion in 2017, surpassing the previous year’s record of $37 billion. Saudi Arabia represents the bulk of this, with over $21 billion of debt raised, followed by Abu Dhabi and Kuwait with $10 billion and $8 billion respectively. Oman ($8 billion) and Bahrain ($3 billion) also tapped the international market.