2020 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) 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 $126 bn, 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 $4 bn in planned projects compared to last year’s outlook, while committed projects decreased by $13 bn 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 per cent).
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 sectors. To this end, APICORP has continued to play a critical countercyclical role in alleviating these fiscal pressures and bridging the financing gap caused by the pandemic to strengthen the energy sector’s sustainability.”
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 per cent-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.”
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