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MENA Committed Gas Investments Hold Steady in 2020

Two orkers seen walking at the gas plant in In Amenas, Algeria on January 16, 2018. (Getty Images)
Two orkers seen walking at the gas plant in In Amenas, Algeria on January 16, 2018. (Getty Images)
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MENA Committed Gas Investments Hold Steady in 2020

Two orkers seen walking at the gas plant in In Amenas, Algeria on January 16, 2018. (Getty Images)
Two orkers seen walking at the gas plant in In Amenas, Algeria on January 16, 2018. (Getty Images)

Middle East and North Africa committed gas investments held steady while planned gas investments reach USD126 billion, a 29 percent jump compared to last year, due to the increasing interest in clean energy projects.

The Arab Petroleum Investments Corporation (APICORP), a multilateral development financial institution, released its MENA Gas & Petrochemicals Investments Outlook 2020-2024 on the MENA region’s planned and committed investments for the period 2020 to 2024.

This year is witnessing one of the biggest gas demand shocks on record, with a year-on-year (y-o-y) reduction of 4 percent globally. This stands in stark contrast to 2019, which was a record year for liquefied natural gas (LNG) Final Investment Decisions (FIDs).

The 2020 global crisis is expected to reduce the annual growth rate for global gas demand during 2020-24 to 1.5 percent compared to the pre-COVID-19 estimate of 1.8 percent.

Despite the global demand shock, the MENA region’s committed gas investments held steady compared to last year. Planned investments meanwhile increased by 29 percent to reach USD126 billion mainly due to the strong ongoing regional gas drive for cleaner power generation and improved monetization as a feedstock for the industrial and petrochemicals sectors.

Notably, the petrochemicals sector witnessed a y-o-y increase of USD4 billion in planned projects compared to last year’s outlook, while committed projects decreased by USD13 billion due to the completion of several projects in 2019.

The share of government investments in committed and planned gas projects (92 percent) is higher than it is in the petrochemicals sector (72 percent). Given the increasing size of projects, such investments typically rely on a 70:30 or 80:20 debt/equity ratio.

Dr. Ahmed Ali Attiga, chief executive officer, APICORP, commented: “The decrease in gas demand has put fiscal pressures on government and private sectors alike, and we expect a few committed projects to continue facing strong headwinds in terms of payments, supply chain issues and potential project delays. Overcoming these challenges will undoubtedly require strong policy support from governments, as well as enhanced collaboration between the private and public sector.”

Dr. Leila R. Benali, chief economist, strategy, energy economics and sustainability, APICORP, added: “The impact of COVID-19 on MENA gas demand and the petrochemicals sector will accelerate the industrial share of domestic demand. As outlined in our MENA Gas & Petrochemicals Investments Outlook 2020-2024, gas demand is expected to grow by approximately 3.8 percent-4 percent on average in MENA compared to 6 percent in 2019.

This downward revision is due to slower GDP growth and industrial output, the effect of price reforms, nuclear power projects coming online and increased share of renewables. Additionally, a prolonged depression of LNG prices will put further pressure on a few LNG exporters in the region during a time when pipeline exports were already taking a hit.”

The integration of the downstream value chain is expected to continue in the region, in conjunction with Asia. Saudi Arabia, Iran, and Iraq leading the way in terms of committed gas investments. This is driven by the gas-to-power development drive in both Saudi Arabia and Iraq, as well as Iran’s South Pars program and petrochemicals feed.

The UAE has allocated USD22 billion to the country’s continued gas development masterplan realization, which includes unconventional and sour gas development.

In terms of committed petrochemicals investments, Egypt tops the region, followed by Iran and Saudi Arabia, owed to the localization of specialty chemical industries and feedstocks import substitution.

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Business

Fitch Affirms Saudi Arabia at 'A+', Outlook Stable

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)
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Fitch Affirms Saudi Arabia at 'A+', Outlook Stable

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)

Fitch Ratings has affirmed Saudi Arabia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at "A+" with a Stable Outlook, the agency said on Friday.

The rating reflects strong fiscal and external balance sheets, with government debt/GDP and sovereign net foreign assets (SNFA) considerably stronger than the "A" and "AA'" medians, and significant fiscal buffers in the form of deposits and other public sector assets, it added.

"Oil dependence and World Bank Governance Indicators (WBGI) have improved but remain weaknesses. Geopolitical risk is high, but the economy and public finances have been resilient to the US-Iran war," it stressed.

"Fitch forecasts real GDP growth will slow to 0.6% in 2026 due to disruption to trade caused by the closure of the Strait of Hormuz," it continued.

"Flows through the East-West pipeline supported oil production during the war and we expect output to be ramped up to meet external demand following the reopening of the Strait and to rebuild domestic stocks, but at an annual average of 9m b/d it will be below the 2025 level," it said.

"Non-oil growth will be hit by an inability to export petrochemicals during the closure of the Strait, but consumer spending held up and business confidence is recovering."

"Growth will rebound in 2027 as the normalization of flows through the Strait allows higher oil and petrochemicals production, before easing to 2.9% in 2028 The phased opening of gigaprojects (many of which have launched initial operations), the proximity of key events and guidance that the Public Investment Fund will keep domestic spending largely unchanged in its new five-year plan, will also support growth," Fitch noted.

The King Fahd Industrial Port in Yanbu, Saudi Arabia (SPA)

"The fiscal deficit is projected to narrow in 2026 owing to higher oil revenues, as prices will offset lower volumes. Spending will also rise, reflecting the impact of the war, but much of the jump in 1Q was the precautionary frontloading of spending from later in the year," it said.

Fitch forecasts that lower oil revenues will widen the deficit to 4.7% in 2027, consistent with a fiscal breakeven oil price of USD94/b.

Spending is expected to decline in 2027, due to an easing of war-related pressures, lower capex and ongoing efforts to reduce rigidities in current spending. Expenditure adjustment will allow the deficit to narrow in 2028 despite a projected further fall in oil prices.

"Our fiscal projections are consistent with a further increase in debt/GDP, which we project at 41.3% at end-2028 (projected peer median of 58.1%), from 31.8% at end-2025. based on deposits remaining around 10% of GDP," said Fitch.

"Fitch forecasts a small current account surplus for 2026 due to higher oil export revenues. Lower oil prices and ongoing domestic demand growth that has a heavy component of imported goods, services and labor, will lead to a deficit of 5% of GDP by 2028. Current account deficits will be financed by external borrowing and the ongoing reorientation of public assets to domestic from foreign investments," it continued.

"Banks have been resilient to the war and did not require any support measures from the central bank," it stressed. "At end-1Q, non-performing loans were 1.1% and the Tier 1 capital ratio 19.2%, both improved from end-2024. Credit growth has slowed, particularly mortgages, in response to policy measures, and is being outpaced by deposit growth."

Fitch maintained its mid-year 2026 sector outlook for Saudi banks at "neutral".

Business

Renewed US-Iran Conflict Narrows Egypt’s Economic Growth Prospects

 A traditional market in Egypt’s Giza Governorate. (Asharq Al-Awsat) 
 A traditional market in Egypt’s Giza Governorate. (Asharq Al-Awsat) 
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Renewed US-Iran Conflict Narrows Egypt’s Economic Growth Prospects

 A traditional market in Egypt’s Giza Governorate. (Asharq Al-Awsat) 
 A traditional market in Egypt’s Giza Governorate. (Asharq Al-Awsat) 

The renewed US-Iran conflict in the Middle East is expected to further curb Egypt’s economic growth prospects as global oil prices are forecast to rise again, while several sectors of the economy continue to grapple with the effects of months of conflict, analysts say.

In its latest World Economic Outlook report released days ago, the International Monetary Fund (IMF) lowered its forecast for Egypt’s economic growth in fiscal year 2026-27 to 4.4 percent, down from the 4.8 percent projected in April. The IMF cited “the continuing impact of the Iran conflict — particularly the closure of the Strait of Hormuz — on the Middle East, weaker investment, higher financing costs, and persistent uncertainty.”

Economist Wael El-Nahas said the downgrade is “not limited to Egypt but reflects the global economy as a whole in light of the conflict’s repercussions,” describing the revision as both natural and expected.

Speaking to Asharq Al-Awsat, El-Nahas noted that the current period of skirmishes between the two sides could be viewed as a period of tacit understandings, allowing oil supplies to keep flowing while limiting sharp increases in food prices and other commodities. However, he warned that a renewed conflict would bring “a much worse period.”

Financial markets researcher Mohamed Mahdy Abdulnabi told Asharq Al-Awsat that geopolitical tensions are the main driver behind the weaker growth outlook.

He said Egypt faces several challenges under the current circumstances, including higher borrowing costs, greater reluctance among lenders to extend new financing, declining foreign investment, stagnation in the private sector, and continued losses at the Suez Canal.

President Abdel Fattah al-Sisi has previously estimated the canal’s losses at $10 billion, citing regional tensions and their impact on Red Sea shipping.

Abdulnabi warned that if the conflict persists, pressure on Egypt’s economy will intensify. “When global oil prices fell below $70 a barrel, the Egyptian government did not cut domestic fuel prices. But as soon as prices began rising again, discussion resumed over the automatic fuel pricing mechanism and the need to increase fuel prices,” he remarked.

The government raised fuel prices by between 14 and 30 percent last March, just 10 days after the US-Iran conflict erupted, amid rising energy import costs.

El-Nahas warned that global oil prices could climb above $100 a barrel, noting that Egypt’s current state budget is based on an assumed oil price of about $75 a barrel. Any increase, he said, would raise the country’s energy import bill and widen the budget deficit. He also cautioned that it could trigger another round of fuel price hikes, further worsening the cost-of-living crisis.

Egypt’s annual inflation rate stood at 14.3 percent in June, down slightly from 14.6 percent in May.

Despite the risks, El-Nahas stressed that some sectors, particularly tourism, still have strong growth prospects despite the renewed US-Iran conflict.

 

 

Business

China Temporarily Bans Helium Exports as US-Iran Tensions Flare Again

Ships and containers at a Chinese port (Reuters)
Ships and containers at a Chinese port (Reuters)
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China Temporarily Bans Helium Exports as US-Iran Tensions Flare Again

Ships and containers at a Chinese port (Reuters)
Ships and containers at a Chinese port (Reuters)

China announced on Friday a temporary export ban on helium, effective immediately, as resumption of military conflict in the Middle East threatens to trigger new shortages of the gas critical for chip manufacturing.

Earlier this year, the US-Israeli war on Iran led to helium shortages, disrupting companies globally, including in China, where the AI industry increasingly relies on domestic chips for training and ⁠running AI models. Helium is essential for heat management in semiconductor production.

The helium ban is the latest example of Beijing seeking to prevent domestic shortages of critical materials by curbing exports. It has previously imposed similar measures on fuel, fertilizers and sulfuric acid.

China is also looking to boost domestic chip manufacturing capacity and reduce the industry's dependence on cutting-edge Nvidia semiconductors that fall under US export controls.

China is heavily ⁠dependent on overseas helium despite efforts to expand domestic production.

Still, the export ban could squeeze global supply further because Chinese companies have increasingly acted as intermediaries, importing Russian helium and re-exporting some volumes to overseas markets, including Europe.

According to Reuters, analysts ⁠estimate China imports around 85% or more of its helium requirements. Qatar accounts for a major share of global helium output and has supplied more than half ⁠of China's imports in recent years.

Helium is extracted from natural gas fields with unusually high helium concentrations and cannot be quickly manufactured from ⁠other industrial processes.

In chipmaking, it is used for wafer cooling, plasma etching, chemical vapor deposition, atomic layer deposition, lithography support and leak detection.