Improved Projects Outlook in the Middle East
The outlook for the Middle East economies seems brighter as we head into 2022. The effective management of Covid-19 and the recovery in oil prices in the second half of 2021 has led to renewed optimism for projects in the region.
Oil prices are trading higher than pre-Covid levels despite concerns over the latest COVID-19 variant ‘Omicron’ and global demand growth likely to hit around 1.5% in 2022. The rebound in energy demand saw oil prices surge above $85 a barrel in October, 2021.
Oil exporting countries to witness GDP growth in the 5-7% range in 2022-23 accelerating from a 3.8% bounce back estimated for 2021.
The projects market in the region is poised to see a ramp up in early 2022, which will provide further momentum for growth. Over $1.7tn-worth of projects are in pre-execution across the Mena region. The project spending in this and next year is likely to be as much as 20%.
After a severe impact in 2020 and 2021, the power sector is set for strong growth in current year as the demand is recovered; large-scale investments have been planned in new generation capacity and transmission and distribution networks.
The focus is on decarbonization and renewable energy. MENA region will add 20 GW in solar PV and wind-based generation over the next five years. Alternative energy sector comprising wind, solar, nuclear and hydrogen is moving faster than projected.
The oil and gas sector too is continuing on a rising trend. Over $471bn of oil, gas and petrochemicals projects are planned across the region. A steady flow of capital expenditure in upstream oil schemes will lead to a significant expansion of the oil production capacities. More than $200bn investment is expected into new refining and petrochemicals ventures in the GCC by 2025.
National oil and gas firms are diversifying investments into new technologies and fuels in response to the global energy transition. New policy focus is on conserving hydrocarbons reserves and on reducing greenhouse gas (GHG) emissions. Adoption of digital technologies and In-Country Value requirements are gaining prominence in oil and gas projects.
The outlook is on the upside for the year ahead. Abundant new opportunities are in place in the region’s energy sector.