A new study published by consulting firm IHS CERA says that the Middle East and North Africa (MENA) region is on the cusp of an “unprecedented” investment boom in power and natural gas.
According to IHS, over $1 trillion in investment will be required in the region by 2030 to meet rising demand for both electricity and natural gas. Driving the investment boom are factors such as an urgent political imperative to address population needs and a buildup of capital in certain MENA countries as a result of increasing oil prices over the last decade.
“The political imperative comes from the need for countries in the region to develop their national economies in order to deliver a higher standard of living to what are young, increasingly urbanized and growing populations,” said Leila Benali, director for Middle East and Africa energy at IHS CERA. “At the same time, there is a growing determination of governments to invest domestically or regionally rather than outside the region, which is what they have traditionally done.”
IHS expects total natural gas demand in the region to grow from 750 billion cubic meters (bcm) in 2011 to 1140 bcm by 2030. An additional 310 GW of electrical capacity will need to be added over that same period. Moreover, there are strong commercial drivers toward increasing connectivity to balance supply and demand mismatches.
The study also projects that MENA will be the most electricity-intensive region in the world. Its currently high levels of intensity are expected to continue over the next two decades as a result of relatively low tariffs, a growing export-oriented industrial sector, plus local factors such as the need for air conditioning, desalination and upstream energy use. The Middle East will remain a globally competitive source for gas-based feedstock industries, viable even within a context of rising tariffs.
The potential for private investment in MENA’s power sector is on par with other emerging regions, the study says. Out of the estimated 310 GW of electricity capacity that will need to be added between 2011 and 2030, at least 190 GW – $155 billion worth of investment – are expected to be available for the private sector.
Oil and gas-fueled power generation will continue to be the most cost-competitive baseload technology, while solar photovoltaic could soon be cost competitive for peak generation, and concentrating solar power will find niche applications, the study concludes.
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