Economic Commentary Volume 4 No 11/12 – November/December 2009: Powering the Arab Economies in a New, More Challenging Environment
Our Economic Commentary for November-December highlights the new, more challenging environment facing stakeholders in the power and power/water sector. Notwithstanding the current economic contraction, many Arab countries will need to continue to catch up with unmet potential demand for electricity and desalinated water. Rolling out the corresponding massive investment program should remain a priority for policy makers and project sponsors. The most critical challenge they face, however, is funding. Indeed, due to global economic conditions, public resources have been inadequate and private investment has somewhat retreated. As a result, Arab governments are faced with a difficult balancing act, stepping up to fill the current funding gap while providing the assurances critical to regaining private investment momentum….[Details]
Economic Commentary Volume 4 No 8/9 – August/September 2009: The Oil Price Dimension of the Producer-Consumer Dialogue: A Non-market Perspective
Our Economic Commentary for August-September explores the price preferences held by producers and consumers as they prepare for their forthcoming ministerial meeting (Cancun, 29-31 March 2010). We have already demonstrated, in previous comments, the inherent incapacity of the oil market to reveal such preferences and suggested a framework beyond the market for their determination.
From this perspective, the commentary is in three parts. The first part highlights the importance taken by oil prices in the producer-consumer dialogue. The second part reveals current oil price preferences and the suggestion of a price range. The third part provides a non-market evaluation of this range.…[Details]
Economic Commentary Volume 4 No 6/7 – June/July 2009 : The Challenges of Diversifying Petroleum-Dependent Economies: Algeria in the context of the Middle East and North Africa
Our June-July commentary aims to stimulate informed debate on the importance and urgency of diversifying MENA petroleum-dependent economies. Although the focus is on Algeria, the analysis provides a generic framework for developing a critical view of other countries’ situation as well.
The commentary is in three parts. The first part outlines a viable concept of diversification and measures, on this basis, the extent of the country’s dependence on a single source of income. The second part discusses the main arguments for an accelerated diversification. The third part brings in lessons from more aware and better-prepared MENA countries and identifies enabling factors and handicaps.…[Details]
Economic Commentary Volume 4 No 5 – May 2009: MENA Energy Investment Outlook Reassessed: Cost Uncertainties and Funding Challenges
Our May Economic Commentary, reproduces with permission an article published in the May 2009 issue of the Oxford Energy Forum, under the Editors’ title: Ali Aissaoui assesses the shrinking MENA energy investment outlook.
To cope with the global credit and oil markets crises, MENA energy policy makers and project sponsors have had little option but to reassess their investment strategies and scale down projects portfolios. As a result, the uptrend momentum achieved in recent years has reversed. Our current preview for the 5-year period 2010-2014 has revealed a lower potential capital investment, which stems largely from expected reduced costs of projects. The preview has also confirmed a further drop in actual capital requirements as a consequence of the continuing shelving and postponement of projects which are no longer viable and fundable. How quickly and at what cost will these projects be brought back when the investment climate improves depends very much on how the engineering and contracting industry is affected in turn and the ways it will itself be responding.
Our subscribers, and the media that relay our findings to a broader audience, should be aware that our framework analysis has been amended in an attempt to reflect the greater uncertainties surrounding the outlook. Our findings are now summarized into two categories: the potential capital investment, which takes in all FID-backed projects, and, deducting the projects shelved or postponed, the actual capital investment requirements. Lower potential capital investments result mainly from the anticipation of lower cost of projects; whereas lower actual capital investment requirements factor in anticipated lower demand and prices and the expectation that, despite assumed lower costs, projects may no longer be economically and financially viable. It may also be worth reminding our readers that the difference between MENA and the Arab world, in our regional aggregation, is Iran….[Details]
Economic Commentary Volume 4 No 4 – April 2009 : What Is A Fair Price For Oil And What Makes $75/B Seem Fair?
What Is A Fair Price For Oil And What Makes $75/B Seem Fair? is the theme of our Economic Commentary for April.
We attempt to bring substantive arguments to the current debate over what constitutes a fair price for oil. By taking a broader and longer-term perspective, we establish that, technology permitting, such a price lies at the confluence of oil companies’ investment options and oil-producing countries’ fiscal needs. The Saudi assertion, and its de facto OPEC endorsement, that $75 per barrel is fair, is firmly supported by this approach.
It is now fairly evident that the oil market needs an anchor price around which it can fluctuate less wildly. Whether or not $75 a barrel can currently serve such a purpose depends very much on how fair other market participants will perceive it to be. Our guess is that those preoccupied by a secure and stable long term oil supply must have already realized that it is fair enough….[Details]
Economic Commentary Volume 4 No 3 – March 2009 : Bringing Water into the Energy Equation: A Critical Review of the WEF-CERA Report and a Discussion of the Missing MENA Dimension
As its title suggests, our Economic Commentary for March critically reviews the WEF-CERA report: “Thirsty Energy: Water and Energy in the 21st Century”, and discusses further the missing MENA dimension. The commentary, which is attached, is concurrently published in the Middle East Economic Survey (MEES Vol. 52 No. 11, dated 16 March 2009).
The WEF-CERA report is the latest in a series of recent initiatives by policy research institutes and the international business community aimed at “bringing water into the energy equation”. The report explores the complexities and implications of the energy-water relationship in a context of a water-scarce, energy-constrained and carbon-restricted future. While making a stronger case for shifting the focus from operational management to strategy, the report‘s findings remain, however, confined to common policy principles. Furthermore, despite efforts to provide insights into some regional contexts and local experiences, the report overlooked the regional dimension.
This missing aspect has prompted us to outline the critical case of MENA for the edification of our readers. In this region, as with climate change issues, growing water shortage awareness is placing the energy industry under increasing pressure to play a more effective role. Firstly, by reducing the impact of its operations on water resources. Secondly, by cost-effectively and sustainably supplying energy for more water to be produced and delivered. To ensure balanced solutions, MENA decision-makers urgently need to integrate this energy-water nexus into a broader, policy-relevant framework….[Details]
Economic Commentary Volume 4 No 1/2 – January/Febtuary 2009 : APICORP’s Annual Review of the Arab Macro-economic and Energy Investments Outlooks: Heightened Risks in the Midst of a Dual Crisis
The subprime-mortgage-induced credit crisis that began in the United States has moved into a protracted and more severe phase. In spilling over to other sectors and spreading worldwide the crisis has thrown the global economy into what is feared to be a deep and severe recession. The Arab/MENA economies would have been more resilient if not for the subsequent collapse of oil prices. The credit market crisis and that of the oil market have now combined to heighten the downside risks to both the region’s macro-economic and energy investment outlooks.
This commentary delves into recent market developments and the medium term prospects. Part One outlines the contours of the dual crisis. Part Two tentatively assesses its macroeconomic impact. Part Three examines the extent the energy investment outlook is affected and the increasingly challenging funding environment. The commentary concludes by summing up important trends and offering key policy recommendations….[Details]