The Arab Petroleum Investments Corporation (APICORP) issues a most valuable annual research of the Arab economic and energy investment outlook. The man in charge of preparing the review is Ali Issaoui, a consultant at APICORP and a senior Arab energy economist. In fact, APICORP has recently updated the study, which was released at the beginning of this year, to take into account the important political developments in the Arab region. Here is a summary of the most salient points mentioned in the report. The report mentions that growth in the Arab countries was put at 4.2 percent in 2010, i.e. in the year that immediately followed one of the sharpest financial crises the world has ever seen. Most Arab countries managed to weather the effects of the global recession, something that could lead to increased investments. However, social and political upheavals in parts of the region do not bode well for the prospects of achieving higher growth. The ability of the Arab world to sustain growth to the levels seen before the recent political crises depends on these countries maintaining social and political stability. This will be a major challenge, which will hinge on the capacity of the governments concerned to adopt and implement the necessary policy reforms to tackle the socio-economic problems facing them. The most pressing challenge facing Arab governments is the need to address the problem of unemployment among a rapidly expanding population and also the threat of inflation. The report also points at an important fact, namely, that the price of crude oil, despite improvement in the global economy, remained steady within the desired band (of 70-90 dollars per barrel). However, rapid growth in emerging countries has pushed prices to higher levels, exceeding one hundred dollars per barrel. In truth, the IEA reported that demand for oil grew by 2.8 million barrels per day in 2010, the strongest annual increase seen since 2004. This means, according to the report, that industrial and oil producing countries must face their responsibilities. In other words, regulating agencies in oil consuming countries must dampen speculative trading in their markets, while OPEC countries must balance supplies with the ever increasing level of demand. Based on the above facts, the value of Arab energy investments can be estimated over the foreseeable future. This mainly revolves around the increased demand for crude oil, with the assumption that crude oil prices will fall back to their desired range (70-90 dollars per barrel). Higher demand will encourage Arab oil-producing countries to bring back in line some of the projects they had previously shelved or postponed in light of the stifling atmosphere that prevailed during the global financial crisis, and to slate for development new projects that were planned in advance. On this basis, the report expects the number of new energy projects to increase, and for capital requirements for these projects to reach around 430 billion dollars for the period 2011-15. These investments will be most probably distributed in accordance with the size of petroleum reserves in the countries concerned. Thus, investments are expected to be mainly located in five countries, namely, Saudi Arabia, UAE, Qatar, Algeria and Egypt. The GCC area is expected to account for two thirds of these investments, and within it, the UAE will witness more energy investments than Qatar. In Saudi Arabia, potential investment is estimated at 130 billion dollar. In the UAE, potential investment totals 74 billion dollars, while investment in Qatar is estimated at 70 billion dollars. In Algeria, Sonatrach is anticipated to carry out new projects, after having gone through a period of a clear investment paralysis in 2010. New investments are thus estimated at 57 billion dollars. In Egypt, the value of potential investments amounts to 42 billion dollars, and are expected to remain on track despite current political turmoil in the country. The report devoted a special section for investments in the power generation sector, where it indicated that “as a result of high population growth rates and fast expanding urban and industrial sectors, many countries in the Arab world have been struggling to meet rapidly increasing demand for power. However, compared to recent trends, projected demand is expected to be slightly curbed as a result of current economic contraction. Also, expectation of gradual phasing out of price subsidies could help rein in excess demand growth.” Accordingly, the report predicts that power generation capacity will grow at a rate of 7.7% for the period 2011‐15, resulting in an additional capacity of 80.4 GW over that period. This means an investment of 92.9 billion dollars, with 60% of that expected to take place in the GCC, which remains the fastest growing area in the Arab region in terms of power generation capacity. The report concludes that “Notwithstanding the ongoing turmoil in parts of the Arab world, we expect global economic and financial fundamentals [with the ensuing increase in demand for oil and gas] to continue supporting the resumption of energy investment growth in the region. The impetus for recovery will be strongest in the GCC area”. *. Mr. Khadduri is an energy expert
