Middle East governments will have some tough calls to make about committing new investments into energy space. Image Credit: Reuters

Dubai: Investments in the Middle East energy sector will see a $173 million decline between 2020-24 to $792 billion. This according to the latest outlook from Arab Petroleum Investments Corporation (Apicorp), which had projected investments of $965 billion in last year’s five-year outlook for the region’s energy industry.

It expects Brent prices remain in the $30-$40 a barrel range through this year and the next.

“With regards to the decline in oil prices, Apicorp expects that it will lead to a restructuring of the oil and associated gas industry, as well as an accelerated closure of the lowest efficiency parts of the capital stock, and mergers and acquisitions (M&A),” the report states.

“The impact of COVID-19 is already deeper and longer lasting than past downturns,” said Dr. Ahmed Ali Attiga, CEO. “Indeed, the profound restructuring in oil and gas will hit energy investments for a potentially long period of time, sowing the seeds of supply crunches and price volatility.

“Therefore, we expect a W-shaped recovery for the MENA region.”

A liquid crunch
Apart from uncertainty over demand, a potential global liquidity crunch can also get in the way of new investments finding their way into the energy sector.

"Although central banks and multilateral financial institutions are stepping up, concerns linger that such massive stimulus plans might create enormous unproductive debt overhangs that will slow economic growth," the Apicorp outlook says.