Energy Trends in MENA Region 
Introduction
The Middle East and North Africa (MENA) economies are different in terms of their dependence on foreign resources, renewable energy and other trends that continue to reform the energy landscape. These differences have economic latent potential apparent through some trends that include renewable energy, public-private partnership reforms and changes in energy prices. At the current status, unsustainable increases in energy demand which account for more than 5% of the annual growth of MENA countries, have imposed more pressure on fossil fuel resources. This calls for a restructuring of the energy industry to rely more on alternatives.
Question 1: What are the current energy trends in the MENA Region?


  • The MENA region produces around 16% (2,148 Mtoe) of total world energy production in 2014. 45% of production is oil, 47%natural gas, share of coal is 5% and renewables account for 3%.
  • In 2016, Natural Gas and Oil contributed to the highest amount of energy production, of a total 1,066 Terawatt per hour.

  • Jordan use of Wind for energy production constitutes 58.33% of its total energy production.
  • 94.93% of Morocco energy production is constituted of Solar Production.
  • Jordan and Lebanon  energy production exceeds a 100% as they use wind for production.
  • The overall level of energy consumption increases at an unsustainable rate of 5% annually.


Question 2: What are the challenges for energy in the region?
Challenges
  • The increase in demand for energy, electricity, along with business confidence levels in the energy sector which have almost doubled from 34 % in 2017 to 64 % for 2018 have prompted an optimistic outlook for energy in the region. Yet, the relatively low oil prices, despite their recent increase have presented a set of challenges.
  • Fossil fuels (mainly oil and gas): dominate the production of energy. However, there remains an increase in risk of reduced oil and gas export due to increased domestic demand , which comes from the l ower oil price environment - relative to pre mid-2014 prices. Increased competition from other oil and gas producers (USA and China) , presents challenges for MENA region exporters. Such factors have made it critical  for many of the region's energy producers that are attempting long-term political and economic growth.
  • Renewables: in specific, wind and solar, in the electricity sector, have witnessed reforms with PPP projects, paving the way. Overall, there have been improvements in energy security and independence of some countries in the region, due to the increase of use of renewable resources.
  • Natural Gas: The shale gas revolution in the USA has substituted the supply of energy from GCC countries, this is accompanied by the declining demand growth from Asian markets. Such factors are changing strategic relationships and geopolitical power balances across global energy markets.
  • LNG: Qatar has been dominating the LNG (Liquefied Natural Gas) exports. Globally, the MENA region accounted for 6.5% of the world's demand for LNG, end of 2017.
  • Obtaining a diversified economy: The key milestone for the MENA region is to dissociate energy demand with economic growth. This will allow for a diversified economy with less risk and sustainable energy resources.
  • US Shale Gas and LNG: the abundance of shale gas (Shale Gas Revolution in the U.S) and the increase in Liquid Natural Gas trade which is impacting oil and gas prices, has shifted geopolitics in the gas market.
  • Renewables Low Persistent Demand: They account for around 3% of the total energy demand in the whole region, in 2014.
  • Energy Demand: Has pushed countries to reform their energy strategies. Most countries must adjust their policies to deal with this unsustainable gr
    owth in demand for energy (about     5% increase in demand, annually). Otherwise, this will lead to serious problems of having to reduce export levels of hydrocarbons, therefore putting limitations on governments' budgets.
  • Energy prices reforms (around subsidies) remain a key objective in order to move towards more efficient energy markets and help meet the unsustainable energy demand which has plummeted due to lower oil prices (compared to previous years). Alternative energy sources, in specific the use of renewable energy technologies on a larger scale, can help address this issue.
  • Two countries, Iran and Saudi Arabia, make up more than 66% of total fossil fuel subsidies in the region, with more than 52 BN USD and more than 48 BN USD, respectively. Iran still leads the region with 13.5 % as a share of GDP, followed by Libya 11%, Algeria 8.2%, Saudi Arabia 7.4% and Kuwait 5%.
  • Low oil prices have recently made way for alternative renewable energy sources. Subsidy cut reforms that have occurred in the region do not only act as strategies to remove the excess demand/low prices, but will allow for renewable energy penetration in the region.
Question 3: Why will energy prices reform and what are the consequences?


 
Question 4: What are the drivers and obstacles for renewables and alternatives?

        Overview
  • The MENA region is well suited to the development of renewable energy technologies for different applications. For example, for Solar Energy technologies, most of the countries are located by the Sunbelt, with suitable GHI and DNI values at the Mediterranean and Desert. It is considered as of the best endowed areas of the world for solar energy.
  • The potential for wind energy is high in several countries of the Mediterranean region. Morocco, Egypt and Turkey, as well as Iran have potential for wind energy. Moreover, GCC and Iraq have more moderate potential
  • Countries that constitute most renewable energy production in the region are Egypt, Tunisia, Turkey, Morocco and Jordan. Their renewable energy accounts for about 6.3% of total electricity production in 2014.
  • Turkey leads the region, with a share of 21% of the 6.3% (half of the electricity production from renewable energy sources in the region), Syria 17 % of the 6.3%, Morocco 14% of the 6.3%, Egypt 8% of the 6.3%, Palestine 8% of the 6.3%, and Tunisia 7% of the 6.3%. The rest of the countries in the region share from 5% to less than 1%.
  Current Drivers
  • Whilst low oil prices provide a risk to exports and government budget burden, there seems to be a persistent growing demand for electricity: The growing demand is driven by economic development, industrialization, population growth, and the increasing necessity for water desalination. Electricity consumption is forecasted to be tripled by 2030.

    Obstacles
  • Nevertheless, the pace of utilization of renewable energy has been very slow in most countries. Renewables role in energy production has accounted for 32.60 Mtoe (Million Tons Oil Equivalent), which is about 3% of total production of energy supply of the region in 2017.
  • The slow pace of utilization of Renewables is due several obstacles:
  • Weak grid infrastructure,
  • Regulatory barriers,
  • Access to finance,
  • Subsidies to conventional energy. In the GCC countries, for example, the low usage of renewable energy technologies is attributed to the subsidies that constitute a major challenge for countries in the region to shift to renewable alternatives.
New Alternatives
  • A new alternative, other than renewables, is nuclear energy. Although it is almost non-existent in the energy mix of the region, yet the political choice to invest in nuclear energy is still an option for the future.
  • Countries including the UAE (soon to initiate its first nuclear plant, Barakah), Saudi Arabia,Egypt, Jordan and Turkey, have plans to construct nuclear power. In contrast, Algeria, Morocco and Tunisia are still considering nuclear energy into their energy production.
  • The nuclear option will help advance efficiently in:
  1. Meeting the rising electricity demand,
  2. Sustaining export levels to guarantee a sustained stream of revenues,
  3. Energy security concerns (diversification)
  4. Heading towards a low-carbon economy
  5. Overall, it offers other benefits as a contingency plan

 

Question 5: What is the future outlook for energy given the recent reforms?

In response to the reform in energy prices, PPPs for renewables have paved the way. Public-Private Partnership (PPP) has become the most valuable instrument for green energy projects financing. Available public financial resources makes it possible for the development of energy infrastructures. Cooperation between private and public actors is often critical in green energy investment decisions, since cooperation parties compensate each other by carrying the risk together. Below is a SWOT analysis for Public-Private Partnerships in the Renewables sector. It provides deeper assessment on PPPs in renewables for the MENA region.

Tafila Wind and The Renewable Energy Program - Jordan
  • It is worthy to note that an evident case and one of the biggest renew
    able energy     sources in the MENA region is Jordan Tafila Mill.
  • Jordan has a strong solar and wind energy resources, which the government is moving actively
  • In the Master Strategy of Energy Sector in Jordan issued in December 2007 the Government of Jordan aimed to increase the participation of renewable energy sources in generation, from the current 1% to 7% in 2015 and to 10% in 2020
  • This shows the cost-competitiveness of renewable energy, and the need for diversification and energy security. The costs are at 12 US cents/kWh for wind and 17 US cents/kWh for Solar Photovoltaics.


 
Conclusion
The role of private funding and growth of public-private partnership is needed to be sought with the concurrent subsidy cuts on oil and fuel across the region. Renewable energies have been proven cost-effective in the long-run. There are several projects under-construction across the MENA that would help mitigate the risk of reduced exports from unsustainable energy demand and budgetary deficits. Overall, the region is experiencing a growing demand for LNGs as it faces an unsustainable consumption need. Renewable energy still constitutes a low value of this demand. However with subsidy cuts on oil and fuel, a way has been paved for renewables.
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