The arab energy investment outlook what policies for the new normal a presentation by ali aissaoui senior consult
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9 th Arab Energy Conference Doha, 9-12 May 2010 2nd Panel Discussion. The Arab Energy Investment Outlook What policies for the “New Normal”? A presentation by Ali Aissaoui Senior Consultant Arab Petroleum Investments Corporation. The framework of our presentation.

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9th Arab Energy Conference

Doha, 9-12 May 2010

2nd Panel Discussion

The Arab Energy Investment Outlook

What policies for the “New Normal”?

A presentation by Ali Aissaoui

Senior Consultant

Arab Petroleum Investments Corporation


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The framework of our presentation

9th AEC, Panel II - Doha


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Main areas and issues of focus

  • Are the credit and oil market crises over?

  • What impact on economic growth?

  • What implications for energy investment?

  • What policies for the “New Normal”?

9th AEC, Panel II - Doha


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Is the credit market crisis over?

Focus on interest rates as a key determinant of investment

9th AEC, Panel II - Doha


Hyper accommodative us monetary policy has resulted in near zero rates on the fed funds market l.jpg
Hyper accommodative US monetary policy has resulted in near zero rates on the Fed Funds market

9th AEC, Panel II - Doha


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Against this backstop and further injections of equity and liquidity the stress in the Eurodollar market has finally been taken out

9th AEC, Panel II - Doha


But will debt markets ever return to the old normal l.jpg
But will debt markets ever return to liquidity the stress in the Eurodollar market has finally been taken out the “old normal”?

9th AEC, Panel II - Doha


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Is the oil (and gas) market crisis over? liquidity the stress in the Eurodollar market has finally been taken out

Focus on oil and gas prices as key determinants of investment

9th AEC, Panel II - Doha


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OPEC (Saudi Arabia) has been able to anchor oil market expectations around $75/bbl. For how long?

9th AEC, Panel II - Doha


Is the us gas market a harbinger of more troubles to come for arab gas exporting countries l.jpg
Is the US gas market a harbinger of more expectations around $75/bbl. For how long?troubles to come for Arab gas-exporting countries?

9th AEC, Panel II - Doha


Our adaptative expectation of oil prices lies in the range of 70 90 bbl what about gas prices l.jpg
Our “adaptative expectation” of oil prices lies expectations around $75/bbl. For how long?in the range of $70-90/bbl. What about gas prices?

9th AEC, Panel II - Doha


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What impact on economic output? expectations around $75/bbl. For how long?

Focus on growth as a key determinant of investment

9th AEC, Panel II - Doha


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The challenging task of economic forecasting : expectations around $75/bbl. For how long?The “IMF-DOPPLER shift” of world growth for 2009

9th AEC, Panel II - Doha


And the current voluntary optimism of an ending to the great recession is the worst really over l.jpg
… and the current voluntary optimism of an ending to the Great Recession. Is the worst really over?

9th AEC, Panel II - Doha


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What is driving Arab growth? Great Recession. Is the worst really over?Oil or non-oil? Government or private-sector?

9th AEC, Panel II - Doha


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What impact on energy investment? Great Recession. Is the worst really over?

9th AEC, Panel II - Doha


Our approach a real world project based along key links of the oil and gas supply chains l.jpg
Our approach : A real-world project-based, Great Recession. Is the worst really over?along key links of the oil and gas supply chains

9th AEC, Panel II - Doha


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Latest 5-year reviews highlight a broken momentum and three challenges: factor cost, funding, feedstock

9th AEC, Panel II - Doha


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Factor cost : Uncertain outlook for key components challenges: factor cost, funding, feedstock

9th AEC, Panel II - Doha


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Funding : More challenging than any time before challenges: factor cost, funding, feedstock

9th AEC, Panel II - Doha


Feedstock are some arab countries using more gas than they could afford l.jpg
Feedstock : Are some Arab countries using challenges: factor cost, funding, feedstockmore gas than they could afford?

9th AEC, Panel II - Doha


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Has the energy investment climate deteriorated? challenges: factor cost, funding, feedstock

9th AEC, Panel II - Doha


All sovereign rated arab countries have retained stable or improved rating and outlook l.jpg
All sovereign-rated Arab countries have retained challenges: factor cost, funding, feedstockstable or improved rating and outlook

9th AEC, Panel II - Doha


But our region broader and energy business focused perceptual mapping tells a different story l.jpg
But our region-broader and energy business-focused “perceptual mapping” tells a different story

Framework

Strong enabling

environment

IDEAL POINT

Vast

Low

investment

country risk

potential

Limited

High

investment

country risk

potential

Weak enabling

environment

APICORP Research

9th AEC, Panel II - Doha


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A pre- and a post-crisis snapshots point to significant position changes vs. the “ideal point”

9th AEC, Panel II - Doha


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What energy investment policies position changes vs. the “ideal point”

for the “new normal”?

A panel discussion starter

9th AEC, Panel II - Doha


We need to better understand what the new normal is and how to carry on in this context l.jpg
We need to better understand what the position changes vs. the “ideal point”“new normal” is and how to carry on in this context

  • Potential further lagged effects of the financial crisis

  • Drivers of growth shifting to key emerging markets

  • Traditional energy pricing paradigms challenged

  • Debt markets settling at higher equilibrium rates

  • Risk-return assumptions and methodologies questioned

  • Greater commitment to responsible investing and sustainability

  • Requirements for higher governance and transparency standards

9th AEC, Panel II - Doha


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Some issues for the panel to ponder on position changes vs. the “ideal point”

  • Are shrinking capital inflows a demand or a supply problem? If it is supply, can the local currency debt markets fill the gap?

  • How will new gas pricing patterns influence investment decisions?

  • In the current uncertain/confused environment, the value of the “option to wait” continues to be positive for many energy projects

  • Is it the case for the following projects:

    • Power and power/water?

    • Regional natural gas pipelines?

    • Energy efficiency, solar, nuclear and CCS?

  • With lower leverage, shorter maturity and higher cost of borrowing can the private sector still deliver on energy cost effectiveness?

9th AEC, Panel II - Doha


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Post Scriptum position changes vs. the “ideal point”

  • APICORP’s full report on the Arab energy investment outlook is available in the conference documents, and on www.apicorp-arabia.com

  • Further comments and feedback, beyond the panel and audience discussions, may be sent to aaissaoui@apicorp-arabia.com

9th AEC, Panel II - Doha