Arab investments in energy plunge

Riyadh: Investments in the Arab energy sector, especially in the oil industry in the Gulf, have undergone a major decline due to the global financial crisis, which could endanger the future of the industry, according to a survey conducted by an Arab oil investment firm.

"The future of investments in the Arab energy sector would face a number of potential challenges over the coming five years. The most important among them is a fall of 19 per cent in the projected volume of investments in the energy sector, mainly in the oil sector of the Gulf region, from $650 billion to $450 billion over the period between 2009 and 2013," the report said.

The annual review was compiled by the Arab Petroleum Investment Corporation (Apicorp), an investment arm of the governments of the ten member states of the Organisation of Arab Petroleum Exporting Countries (Oapec).

The survey report, a copy of which was obtained by Gulf News, showed that the Gulf states would face special challenges as most of them are experiencing falling in gas supplies.

The report noted that investments in the Arab energy sector would not reach the predicted $650 billion.

But about 20 per cent of the projected investments will have to be deferred as a result of the financial crisis, the survey said, indicating that the percentage could vary from country to country. No projects in the oil industry in the Gulf region have been recently cancelled and the 20 per cent of delayed projects was less than delays of projects globally which is estimated at 30 per cent, according to the survey.

The review said that the cancellation or postponement of projects risked cutting oil supplies to the global market and could trigger sharp fluctuations in oil prices which would not be in the interest of the oil exporting countries in the long run.

The study recommended that the national oil companies should reschedule their projects instead of cancelling them unless there were technical obstacles.

The survey showed that a major portion (48 per cent) of Arab energy investments amounting to $450 billion needed by the oil recycling and petrochemical industries, while gas and fodder industries needed 35 per cent and the remaining 17 per cent required by the electricity generating sector.

"About 69 per cent of these investments concentrated in the GCC states, and more precisely more than half in Saudi Arabia, the UAE and Qatar.

The Al Khobar-based Apicorp estimated that financial and investment activities in the Gulf would not be hit adversely if crude oil prices range between $60 and $70 per barrel.

"Despite measures taken by Opec to maintain stability of oil prices through cutting oil output in December 2007 and December 2008, oil prices continued to fal,l reaching about $40 per barrel," the report said, adding that stocks and long term debts constitute 57 per cent and 43 per cent of the Arab investments in the energy sector respectively over the period 2009 to 2013.

• 19% expected fall in volume of investments in energy
• $650 projected expenditure in the sector to 2013
• 20% projects delayed due to global financial crisis