Savings to help oil-exporters maintain spending, run deficits

The current account surplus of $400 billion among the Middle Eastern and North African oil-exporting states will turn into a deficit of $30 billion this year, according to the latest IMF report, which classifies said exporters as Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Sudan, the U.A.E. and Yemen.

That said, according to IMF Middle East and Central Asia Department Director Masood Ahmed, “for most countries, this deterioration is from a position of significant strength, and thus can comfortably be sustained by the large stock of reserves that these economies have built up.”  Riyadh-based investment bank Jadwa Investment, for example, stated that Saudi Arabia’s net foreign assets of roughly 433 billion dollars gives the Arab world’s largest economy “an advantage over most other countries in alleviating the impact of the extreme financing pressures.  It can push ahead with strategic projects such as key infrastructure, oil, power and water, and support the private sector where necessary.”

But this is not to suggest the collective regions are in the clear.  Risks to the outlook for the countries in the region include the following, said Ahmed:

“First, if oil exporters cut their long-term oil price expectations and, consequently, their spending, growth prospects would be weaker for the entire region. Second, a more prolonged global recession would imply even weaker exports, tourism, and remittances for most emerging markets and developing countries. Finally, if asset price corrections deepen and the impact of asset price corrections feed through to corporate and, ultimately, bank balance sheets, some financial institutions in the region may be under stress.”

Algeria’s Sonatrach mentioned in Saharan gas venture

Algeria’s Energy and Mines Minister, Chakib Khelil, and Holland’s Economic Affairs Minister, Maria van der Hoeven, are negotiating a potential project to pipe Nigerian gas to Europe across the Sahara, according to the official Algerian news agency APS. The idea centers around a partnership between Algeria’s Sonatrach, the Nigerian hydrocarbon company NNPC, and Royal Dutch Shell to develop a “mega-project” of the Trans Sahara Gas Pipeline that would transport Algeria’s gas to the ever gas-dependent hostages customers in Europe.

European Union (EU) Energy Commissioner Andris Piebalgs apparently “welcomes” the project as being in “the interests of European energy security and the environment and of Africa’s development”. Piebalgs has also indicated that the EU would help finance it. The talks come in the midst of a “gas war” between Moscow and Kiev that has implications across the continental Europe. That said, Russian gas monopoly Gazprom said last year that it was holding preliminary talks with Nigeria about participating in the venture, so let’s see what happens.

As frontier companies go, Algeria’s Sonatrach is one of the more stable and appealing, especially in the energy sector. Per one analyst:

Arguably the largest company in all of Africa, state-owned Sonatrach oversees Algeria’s oil and gas exploration, production, and marketing activities. In addition to its exploration, refining, and pipeline operations, the company also invests in electrical power and in desalination projects. Sonatrach may lose some of its its power as a monopoly as legislation passed by Algeria’s parliament allows more foreign players in Algeria’s energy sector. The company also has exploration and production activities in other countries, including Libya, Mali, Niger, and Peru.