Global oil and gas demand is ‘fluctuating’ and incremental demand growth could come from China, India and the Middle East, according to a new report by the Arab Petroleum Investment Corporation (Apicorp).
Despite the recent improvement in oil prices, global credit tightness coupled with project delays could depress energy investments in the Arab World by nearly 15 per cent during 2010-2014, the report shows.
It also indicates that most regional nations have postponed hydrocarbon projects but the bulk of the investment reductions were in such key oil and gas producers as the UAE, Saudi Arabia, Kuwait, Qatar and Algeria.
“At present, we expect the capital investment potential to fall by nearly 15 per cent to around $470 billion (Dh1.7 trillion), and the actual capital requirements to fall by some 29 per cent below this potential to nearly $335 billion,” the Apicorp study said.
The report said its assessment for lower investment requirements was prompted by significant drop in actual capital requirements as a consequence of the continuing shelving and postponement of projects that are no longer viable.
“To cope with the crisis, Arab energy policy makers and project sponsors have had little option but to reassess their investment strategies and scale down projects portfolios,” the study said.
“Indeed, the current [seventh] review for the period 2010–2014 points to lower capital investment potential.”
Refinery expansions still on course
However individual companies indicated they are moving ahead with projects that were earlier planned.
Yesterday, a senior official at
Abu Dhabi’s National Oil Company (Adnoc) said he expected to boost production from its offshore fields by 1 billion cubic feet per day (cfd) by 2013.
Ismail Al Ramahi, the manager of gas processing division of Adnoc added that the state firm is expecting to see the first production from its Shah Gas project by late 2013 or early 2014.
Adnoc’s current gas output is around 6 billion cubic feet per day.
Similarly, Kuwait’s current crude output capacity stands at 3.15 million barrels per day (bpd), with around 2.85 million bpd of that capacity belonging to
Kuwait Oil Company (KOC) while the other 300,000 bpd belongs to Kuwait’s capacity in the Neutral Zone.
Elsewhere, Saudi Arabia’s oil output capacity stands at 12.5 million barrels per day (bpd), according to State-owned
Saudi Aramco. The kingdom pumped 8.18 million bpd in January and Aramco reported that the world’s top oil exporter has completed a number of refinery expansions and is now working at meeting gas demands in addition to moving downstream into production of petrochemicals.
The Apicorp report showed that in Saudi Arabia, potential capital investments have come down to $139 billion. Shelved or postponed projects are estimated at 21 per cent of this potential, mostly in the refining and petrochemical sectors.
In Qatar the potential capital investment is now estimated at $62 billion.
“In this country, we assume that the moratorium on further development of the North Field gas reserves will not be lifted during the review period. As a result, shelved and postponed projects are put at a higher rate of 42 per cent of potential,” it said.
Algeria’s postponed projects account for 18 pct
In the UAE the revised potential capital investment totals $51 billion with projects made redundant amounting to 16 per cent, according to the study.
In Algeria, which controls the world's sixth largest gas reserves, postponed projects account for 18 per cent of the revised investment of $38 billion.
Kuwait, which exhibits the same revised investment potential as Algeria, has by far the highest rate of postponed and shelved projects, the study said.
The report by Arab Petroleum Investment Corporation (Apicorp) said that although the overall capital structure of projects has slightly shifted to equity, the downstream industry remains highly leveraged.
“In a context of higher risk aversion and tighter credit conditions, securing the appropriate amount and mix of debt is likely to be considerably more challenging than any time before,” the report said.
However, a key Saudi bank said yesterday the economies of the UAE and neighbouring Gulf oil producers will rebound by nearly 5.1 per cent in real terms this year after growth in 2009 dipped to its lowest level in nine years.
Growth stimulation and public spending
Although the six Gulf Co-operation Council (GCC) countries are not expected to sharply increase their crude output in 2010, this will be offset by a rise of nearly 20 per cent in oil prices, allowing governments to keep up public spending and stimulate growth, the Saudi American Bank Group (Samba) said in a new study.
Samba said higher oil prices could fetch the six members about $64 billion (Dh234.88bn) in additional revenue this year and this will allow public spending to offset slackening domestic credit and private investment.
The report projected average oil prices at about $75 in 2010, nearly 20 per cent above their 2009 level of $60 but far lower than the record $95 average in 2008.
Although the credit and oil markets have stabilised, the speed at which redundant energy projects are likely to be brought back is still uncertain.
“The region’s investment recovery will ultimately depend on the revival of global and domestic growth,” said Apicorp, an investment arm of the 10-nation Organisation of Arab Petroleum Exporting Countries (Oapec).
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