Highlights
- Gas-for-power additions in Saudi Arabia, Qatar and Egypt will boost regional demand
- Algeria and Egypt are struggling to increase production despite an emphasis on bid rounds
- Regional LNG suppliers are receiving healthy orders from customers such as Turkey and Egypt
- Increased LNG exports from Algeria are helping it cap losses from reduced pipeline supplies to Europe
Economic overview
Low prices for oil and LNG are dampening Oman’s export revenue at a time when it is already grappling with a substantial fiscal deficit.
The International Monetary Fund warned in its latest review that the country is facing a double-digit fiscal deficit this year, and that it could last until 2020 without the necessary reforms. The agency said the recent declines in global oil prices were the main reason behind the problem.
Quarterly and annual year-on-year GDP growth rates
| Q3 2014 | Q4 2014 | Q1 2015 | 2015 | 2016 | 2017 | |
| Qatar | 6.0% | 6.7% | *7.1% | *7.1% | *6.5% | *5.6% |
| Egypt | 6.8% | 4.3% | *4.0% | *4.0% | *4.3% | *4.5% |
| Saudi Arabia | 2.4% | 2.0% | *3.0% | *3.0% | *2.7% | *3.1% |
| Nigeria | 6.2% | 5.9% | 4.0% | *4.8% | *5.0% | *5.3% |
| South Africa | 1.6% | 1.3% | 2.1% | *2.0% | *2.1% | *2.4% |
Oman LNG’s export revenue is already under pressure from weak LNG prices, having dropped by around 9% year on year in 2014, to $4.07 billion. LNG exports fell by 7.5% last year on an annual basis to 10.66 billion cubic metres. Exports rose by 4.3% year on year in the first five months of this year – to 4.59 bcm – but low prices will keep Oman’s export revenue under pressure.
The economic challenges facing South Africa are reflected in the weakness of the rand against the United States dollar, which is making its oil and gas imports more expensive. The dollar-rand exchange rate has averaged 12.38 so far this month – an all-time high for the monthly average. Some fear the country’s sovereign rating may be downgraded in the coming months by leading rating agencies. This would reduce upstream and infrastructure investment in the country’s oil and gas sector.
South Africa imports gas from Mozambique for use by the petrochemical sector. The government has plans to increase the role of gas in the power sector, but weakening macroeconomics are expected to delay the plans.