Arabs to invest $220 billion in energy projects 2006-2010: report

Amman (Platts)--16May2006

Arab oil producing states invested some $39 billion in energy projects in
2005 and will need to invest a cumulative $220 billion in the next five years,
a 26% increase over an original forecast as a result of an upsurge in project
activity, the Arab Petroleum Investments Corporation said in a report
presented to the Eighth Arab Energy Conference.
"Of the expected $220 billion energy investments in the Arab world, the
oil chain will account for $80 billion, representing 36% of total projected
investments, the gas chain (including gas-based petrochemicals) will account
for $103 billion representing 47 and the power generation sector from both
oil-product and natural gas sources will account for the remaining $38 billion
representing 17% of the total," said the report presented by Ali Aissaoui,
head of APICORP's research unit, on Monday.
The level of investment in 2005 was equal to 4% of Arab GDP but is set to
rise to 6% in the 2006-2010 period.
"Indeed APICORP's latest prospective review of energy investment in the
Arab world for the period 2006-2010 highlighted an upsurge in project activity
throughout the region. The resulting cumulative investment requirement, which
stands at $220 billion for the five-year period, represents a 26% increase
over the last APICORP annual survey of $175 billion for the period 2005-2009,"
the report said.
One of the reasons for the higher investment requirement is the size of
some of the planned projects and the "huge" cost increases, said the report,
giving as an example the $9.8 billion price tag of Saudi Arabia's Pertrorabigh
integrated oil refinery and petrochemicals, from an original estimate of $4.5
billion.
In fact, Saudi Arabia will account for $58 billion of total projected
investments, up from earlier estimates of $37.5 billion. Qatar is the second
biggest with projected investments of $31.1 billion and Algeria third with
$24.1 billion. The combined investments of the three OPEC producing countries
will account for 51.5% of the total investment requirement.
"Along the oil chain, 16% of total energy investments -- or $36 billion --
will be needed to explore, develop and produce natural gas and the associated
natural gas liquids (NGLs). The midstream sector -- basically transportation
and storage -- will need $36 billion or 6% of the totaol. The remaining $38
billion, which represent 17% of total energy investments, are related to
capacity expansion and new projects in the refining sector."
Provide oil markets remain "supportive" Arab national oil companies will
not need debt-financing for the oil upstream and midstream developements,
Aissaoui said.
"The involvement of international oil companies in the region does not
imply debt financing either. However, some of the IOCs partnering in upstream
joint ventures may call on the debt market to finance part of their gas
expansion schemes," he said.
On this basis, the resulting overall capital structure for the whole Arab
region would most likely be 53% equity amounting to $23 billion per year and
47% debt amounting to $21 billion per year on average," the report said.
APICORP is a joint stock company set up by the 10 members of the
Organization of Arab Petroleum Exporting Countries.

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