APICORP: Annual Top Picks for Energy Investments in 2020

The Arab Petroleum Investments Corporation (APICORP) a multilateral financial institution for growth, released the Top Picks 2020 for Chief Economist of the annual APICORP. Assuming healthy markets and barring certain geopolitical events, Brent prices are expected to trade in the USD55-65 range. ‘Wait-and-see attitude’ on geopolitical and economic issues prevails over market and investors, natural gas, system flexibility and carbon capture, utilisation and storage (CCUS) solutions and the service sector need investment support to promote transitions in energy.

Despite recent regional geopolitical events and global health issues such as the coronavirus, which has affected China and prompted China’s Central Bank to inject $174 billion through reverse repo operations to support the economy, APICORP remains confident of projected committed and expected energy investments in the MENA region reaching $1 trillion, as reported in APICORP’s report. Coronavirus will have an effect on demand growth in 2020 but we still do not know by how much, with early estimates showing a downward revision of 300,000 barrels of global liquid demand per day by 2020.  We expect Brent prices to trade in the USD55-65 range, assuming certain other factors continue to balance each other out, particularly post-Q2 2020, “noted Dr Leila R Benali, chief economist at APICORP.

The main cause for concern is the prevalent ‘attentisme’ (wait-and-see attitude) on different key geopolitical and monetary policies, which in turn affects the mindsets of the market and investors. Market players are seeking clear signals on three controversial issues: macroeconomic complacency, climate change (i.e. carbon pricing), and the U.S.-Iran tit-for-tat retaliation. “As far as carbon pricing is concerned, the attentism recently converted into calls for hydrocarbon-free divestment. But as per our Gas Investment Outlook 2019-2023 compared to the previous 2018 report, we must highlight the USD 70 billion drop in investments, “she said. Moreover, as highlighted in APICORP’s November 2019 White Paper, “The Energy Transition: Reshaping Investments and Strategies,” carbon pricing contributes to a level playing field for energy technologies and gives greater visibility to finance stakeholders, particularly from the private sector. “In light of dwindling returns across investment assets, there is a fascinating transformation in the relationship between energy companies and investors that can shape what the future energy company looks like,” Dr Benali said.

He added that the current and future work of APICORP covers three areas where investment support is particularly required to promote sustainable energy transitions, including solutions for natural gas, system efficiency and carbon capture, use and storage (CCUS) and energy services, with a particular focus on value erosion and stranded assets.

About APICORP: The Arab Petroleum Investments Corporation (APICORP) is a multilateral development financial institution established in 1975 by an international treaty between the ten Arab oil-exporting countries. It aims to support and foster the development of the Arab world’s energy sector and petroleum industries. APICORP makes equity investments and provides project finance, trade finance, advisory and research. APICORP is rated  “Aa2” with a stable outlook by Moody’s and its headquarters is in Dammam, Kingdom of Saudi Arabia.

Data Source: Arab Petroleum Investments Corporation (APICORP)