February 18, 2020

Relevance of MENA in energy investment, trade, and innovation for energy sector transformation

Fourth IEF-EU energy day

The green new deal and circular economy: Session I

Dr Ivan Marten

BCG Senior Partner Emeritus. IEF Knowledge Partner

1

MENA is a very diverse region

Source: IMF

AlgeriaLibya

Saudi

Arabia

UAE

Kuwait

Bahrain

IraqIran

Qatar

Yemen

Oman

Oil Exporters

Oil Importers

Egypt

Sudan

Tunisia

Morocco

Mauritania

Syria

Lebanon

Jordan

Afghanistan

Pakistan

2

MENA holds 1/3 of global oi&gas production and resources

0

1,000

500

1,500

Crude oil

B boe

Gas

43%27%

1,097

965

Global Oil & Gas Production Global Oil & Gas Resources

Source: Rystad Energy; BCG analysis

80

0

20

40

60

100

37%

Mboed

Crude oil

21%

Gas

77

62

RoW

MENA

3

>50% of all seaborned traded oil transits through MENA

0

25

50

Strait of

Bab el-

Mandab

Mbbld

Strait of

Hormuz

Suez Canal Turkish

Strait

Panama

Canal

4.5

Strait of

Malacca

Total

16.5

3.3

0.5

2.4

15.0 42.2

The Suez Canal

The Panama Canal

Strait of Bab el-Mandab

The Turkish Strait

The Strait of Hormuz

Strait of MalaccaMENA region

Oil transit through chokepoints

4

Growing interconnections with Europe

Sources: Entsoe, press research

Power interconnections' capacity, GW

Completed

Ongoing

Planned

Natural gas

Hydrogen

Existing Natural Gas infrastructure &

outline for Hydrogen backbone

5

1. New petchem capacity for plants already in place2. Not probability weightedSource: GlobalData; BCG analysis

Petrochemical plants capacity

additions, 2017-2025

35

71

36

0

50

100

150

Planned Announced

MTPA

Extensions1 Total

142

-1

0

1

2

3

0.8

FSU Africa

∆ Million barrels per day

Europe LATAM Middle

East

NAM Other

Asia

-0.1

China

0.8 0.90.6

0.2

2.2 2.3

Expected global crude distillation

capacity ∆ 2015 - 2021

Investing heavily in Refining and Petrochemicals

6

MENA oil is on average cleaner than global oil

Note: Selected countries considered

Source: M.S. Masnadi et al. Science 361, 851 (2018)

Global volume weighted carbon intensity

Oil Prod.

(Mboed)

Average crude oil upstream GHG intensity

454239 57240 3 6 9 12 15 18 21 27 30 33 36 48 51 54 60 63 66 69 72

0

5

10

15

20

25

10

AlgeriaUnited StatesBrazilMexico Indonesia

Iran CanadaNigeriaRussian Federation

Colombia

IraqVenezuela

United Arab EmiratesAngola

KuwaitChina

United Kingdom

g CO2 eq./MJ

KazakhstanNorwaySaudi Arabia

7

MENA oil is the most resilient to price crashes

70

0

400 20 60 80 100

10

20

30

USD/bbl

Liquids global production (Mbbld)Note: Analysis based on 2017 dataSource: Rystad Energy

MENA region Rest of World

Iraq

Kuwait

UAE

Saudi

Arabia Russia

United

StatesMexicoNorway

China

Canada

UK

Cash costs without royalties

8

Power sector in MENA is becoming greener

Ambitious

renewable

targets

Competitive

renewable

tenders

Energy price

reforms

Distributed

generation

policies

Energy

efficiency

initiatives

9

MENA has embarked on ~67GW of clean energy projects

Source: MEED; IRENA, REN 21

Morocco

3,263

52%

(2030)

100%

(2050)

Algeria

67327%

(2030)

Tunisia

358

30%

(2030)

100%

(2050)

Jordan

1,13020%

(2025)

Egypt

4,81342%

(2035)

Saudi Arabia

4929,500MW

(2023)

Kuwait

904,000 MW

(2030)

Iran

7654,000MW

(2021)

Oman

83,050MW

(2025)

UAE

2,24650%

(2050)

Target

MWxx

(20..)

Installed renewables capacity (MW)

10

EU determined to be at the forefront on Circular Economy

Municipal

Waste

2025

2030

2035

55%

60%

65%

All

packaging

65%

70%

Plastics

50%

55%

Wood

25%

30%

Ferrous

Metals

70%

80%

Aluminium

50%

60%

Glass

70%

75%

Paper and

carboard

75%

80%

Landfills

10%1

All waste

suitable for

recycling/

recovery

won't be

admitted

Hazardous

& textiles

Separate

collection from

households

Biowaste

2023:

Either

collected

separately

or recycled

at source

(compost)

1. 1. Amount of MW landfilled 2. Source: European Council of the European Union (after Dec 2017 revision)

11

A very diverse region…

... that plays a key role in the global security of supply...

... requiring high investments in energy and industry in pursuit of

economic development and stability...

... and rightfully addressing the challenge of energy sustainability

energy efficiency and circular economy

Summary

February 18, 2020

Relevance of MENA in energy investment, trade, and innovation for energy sector transformation

Fourth IEF-EU energy day

The green new deal and circular economy: Session I

Dr Ivan Marten

BCG Senior Partner Emeritus. IEF Knowledge Partner