Fujairah-based Brooge Energy has signed an agreement to develop a 25,000 barrel per day fuel refinery with an oil trading company.
Nasdaq-listed Brooge did not disclose the name of the trading company, which will sublet the site and foot the full cost of constructing the refinery, it said.
Brooge will assume responsibility for the operations and will earn revenue from tolling fees on a take-or-pay basis. The tolling contract with the oil trader is valid for 20 years.
“The modular refinery will be focused on producing very low sulphur fuel oil and will be fully compliant with the new IMO [International Maritime Organisation] 2020 very low sulphur rule," said Nicolaas Paardenkooper, chief executive at of Brooge Energy.
The IMO reduced the limits on the amount of sulphur allowed in shipping fuel in January last year to 0.5 per cent, from 3.5 per cent previously, as it looked to lower the volume of the toxic chemicals released into the world’s oceans.
Although demand for shipping fuel is estimated to have fallen 4.3 per cent last year due to the Covid-19 crises and a decline in international trade, the market for very low sulphur fuel increased by 1.4 million barrels per day as a result of the new rules, according to the International Energy Agency.
The outlook for very low-sulphur fuel oil is expected to increase over the coming years as countries look to decarbonise the energy sector amid global efforts to reach net carbon neutrality by mid-century.
"With the UAE adding to its oil production capacity, which we anticipate will drive demand for refining services for both the domestic and export market, we believe this is an opportune time to enter this segment of the oil industry," Mr Paardenkooper said.
Brooge will focus on the operational aspect of the plant, with the additional revenue earned from the toll fees helping to boost its revenue.
The midstream storage provider said in April that it planned to issue $500 million worth of new shares to fund its phase three expansion plans.
Last year, Brooge Petroleum and Gas Investment Company, a subsidiary of Brooge Energy, signed a land lease deal with the Fujairah Oil Industrial Zone for a 450,000 square metre plot of land on which the firm plans to develop its phase III refinery.
Brooge's phase three project is set to be around three-and-a-half times the size of its operations once work on phase two work completes, by which time it will have a storage capacity of 1 million cubic metres.
BPGIC intends to use the land to house extra storage and refinery facilities and that initial studies suggest the land could house storage tanks with a capacity of 3.5 million cubic metres and a refinery capable of handling up to 180,000 barrels per day.
Brooge Energy reported a profit of $17.2 m on revenue of $41.8m for 2020, compared to a loss of $75.3m on revenue of $44.1m in 2019.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
GOLF’S RAHMBO
- 5 wins in 22 months as pro
- Three wins in past 10 starts
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- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)
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The drill
Recharge as needed, says Mat Dryden: “We try to make it a rule that every two to three months, even if it’s for four days, we get away, get some time together, recharge, refresh.” The couple take an hour a day to check into their businesses and that’s it.
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Be a team, suggests Addo: “When training together, you have to trust in each other’s abilities. Otherwise working out together very quickly becomes one person training the other.”
Pull your weight, says Thuymi Do: “To do what we do, there definitely can be no lazy member of the team.”
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Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
