Highlights

  • Russia's decision not to go ahead with South Stream will only reduce Turkey's reliance on Russian gas via Ukraine in the long term
  • Low oil prices are making LNG imports attractive for consumers such as Kuwait and the UAE
  • Neutral Zone production issues will increase Kuwait's reliance on imported LNG

Economic overview

Falling global oil prices are reducing the export revenues of several countries in the Middle East and North Africa, which may limit much-needed investment in their upstream sectors.

Prices have declined further since OPEC left its oil output target unchanged at 30 million barrels per day at its November 2014 meeting. Consequently, in December the front-month Brent crude futures price reached its lowest level since the beginning of May 2009, at around $59 per barrel.

Quarterly and annual year-on-year GDP growth rates

  Q1 2014 Q2 2014 Q3 2014 2014 2015 2016
Qatar 6.2% 5.7% *6.5% *6.5% *7.7% *7.8%
Egypt 2.5% 3.7% *2.2% *2.2% *3.5% *3.8%
Saudi Arabia 5.1% 3.8% *4.6% *4.6% *4.5% *4.4%
Nigeria 6.2% 6.5% 6.2% *7.0% *7.3% *7.2%
South Africa 1.9% 1.3% 1.4% *1.4% *2.3% *2.8%
Source: Regional government sources, *IMF WEO projections

Weak oil prices have prompted several Gulf Cooperation Council countries to cut spending. Oman is considering sweeping cuts and tax rises for 2015, including a levy on LNG exports. In November, the Shura Council – an advisory body to the Omani government – suggested imposing a “fair tax” on LNG exports, without quantifying the level. The council also advised a 5% spending cut on oil and gas production.

Meanwhile, Kuwait’s budget surplus over April-September 2014 fell by 25.5% in real terms on an annual basis, and the situation is expected to continue to deteriorate in the following six months. Petroleum product exports account for 94% of the country’s total revenue, and falling oil prices are forcing the government to introduce structural economic reforms. The government has already embarked on energy subsidy reforms and further spending curbs are forthcoming.