Abu Dhabi National Oil Company awarded a $510 million contract to Italy's Saipem to expand production capacity at the Shah sour gas plant, as the UAE looks to increase its output of gas by 2030.
Adnoc Sour Gas, a subsidiary of the national oil company and a joint venture between Adnoc and US energy player Occidental, awarded the contract to Saipem after a competitive tender process, the company said in statement.
The contract will increase gas processing capacity at the Shah gas plant by 13 per cent to 1.45 billion cubic feet per day from 1.28 bcf/d by 2023 and supports Adnoc’s objective of enabling gas self-sufficiency for the UAE. The Shah gas plant meets 12 per cent of the UAE's total supply of natural gas.
The plant processes ultra sour gas, which refers to highly sulphurous fuel, which needs to be refined before use. The Shah gas plant processes 1 bcf/d of ultra sour gas and accounts for around 5 per cent of the world's granulated sulphur, which is a byproduct of the refining.
"Shah’s expansion will optimise the plant as well as improve both capacity and higher-end product recoveries, further growing our contribution as a safe and reliable supplier of gas to Adnoc and the UAE," said Tayba Al Hashemi, chief executive at Adnoc Sour Gas.
Adnoc Sour Gas covers upstream, midstream, and downstream activities. It operates the Shah field and is the only company in the world that processes more than 1 bcf per day of ultra-sour gas from a single gas plant, which also produces approximately 5 per cent of the world’s granulated sulfur.
The latest addition is a 145 per cent cumulative expansion of the plant, which became operational in 2015.
The UAE consumes around 7.4 bcf of gas per day largely to meet power demand, with the total share of imported fuel at 30 per cent, according to estimates by energy consultancy FGE.
The scope of the development work at the Shah gas plant includes engineering, procurement, construction, pre-commissioning, commissioning, and start-up of facilities to increase plant production capacity.
The Italian company will also extend existing gas gathering network and new pad facilities.
“This strategic Shah gas expansion project is an excellent example of how Adnoc is growing its gas production at existing fields to deliver more gas supply and support the UAE’s gas self-sufficiency objective," Yaser Almazrouei, Adnoc's upstream executive director, said.
Around 50 per cent of the value of the contract awarded to Saipem will flow back to the UAE economy under Adnoc's in-country value programme.
"The in-country value generated from the EPC contract award will help to stimulate the growth of the private sector and local economy as we navigate the post-Covid recovery," Mr Almazrouei added.
Saipem will also develop associated off-sites and utilities needed to integrate the new facilities with existing installations.
All products from the Shah gas plant are delivered to the Adnoc Group for further processing and distribution. However, the granulated sulphur byproduct is transported by rail to Adnoc's downstream hub in Ruwais for export.
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.”
