France rolls out big gun for UAE energy summit

Abu Dhabi Sustainability Week: When the French president François Hollande arrives in Abu Dhabi this week for the World Future Energy Summit, he won't just have renewable energy on his mind - he will also be here to sell jets and missiles.

When the French president François Hollande arrives in Abu Dhabi this week for the World Future Energy Summit, he won't just have renewable energy on his mind - he will also be here to sell jets and missiles.

The UAE has a requirement for 60 next-generation strike fighters, and is looking to upgrade its missile defence arsenal.

Which is why Mr Hollande is on a mission from the French defence industry, to convince the Emirates that it should buy the Dassault Rafale fighter, and should then turn to MBDA, France's missile makers, for its new rocketry.

The British prime minister David Cameron has already stolen a march on Mr Hollande. During his visit last November he was pushing Europe's Typhoon fighter, fresh from its successful deployment over Libya, and now basking in the glory of having sold 12 to the Royal Air Force of Oman.

In response, French diplomats are briefing in advance of Mr Hollande's visit that Rafale is still a runner.

"The file is still on the table, it is obviously of great interest for French industry, it is being followed closely. It has chances of succeeding. I don't know if we should be optimistic or pessimistic. At one point we did have hopes that were disappointed," reported the French news agency AFP yesterday, quoting a "source" from the Quay d'Orsay.

The disappointmentreferred to was a statement in November 2011 by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, on the Rafale deal then on offer.

"Regrettably," said Sheikh Mohammed, "Dassault seem unaware that all the diplomatic and political will in the world cannot overcome uncompetitive and unworkable commercial terms."

The UAE, with its reputation for getting the best, for the cheapest, deal when it comes to defence procurement, asked for a counter-offer from the Eurofighter consortium - made up of Britain's BAE Systems, Italy's Finmeccanica and the European Aeronautic Defence and Space Company (EADS) - for the Typhoon.

Since then, however, Dassault has been made preferred bidder for the contract to supply the Indian Air Force with 126 Rafales, with a potential second batch bringing the total to 206. The total order could be worth US$20 billion (Dh73.46bn).

France is keen to make its first foreign sale of the Rafale, which has struggled to find buyers. However, the Indian deal has gone into the black hole that is the country's parliamentary bureaucracy, and has yet to be formally signed.

And Brazil, which requires 36 new fighters and became interested in Rafale after the Indian talks, might be having second thoughts.

"Objectively, the Rafale faces obstacles to becoming Brazil's official selection," said Antonio Ramalho, an expert on Brazil-European Union relations at Brasilia University yesterday in World Politics Review.

"The alternatives to the Rafale are far cheaper in their maintenance and in their operational capacities over the long run. Both Boeing and Saab have signalled a willingness to transfer more sophisticated technology - or are in favour of its development in Brazil.

"Meanwhile, though updated, the Rafale is an old project whose prospects are not encouraging even for the French military, which has placed its main bets elsewhere. Finally, the fact that Brazil already has an important cooperation agreement with France on defence highlights the importance of diversifying partners in this sector, for strategic reasons."

So Mr Hollande is under some pressure to get results.

As for missile sales, MBDA has already outlined the threats the UAE faces.

"Small boats, low-profile surface craft, armed with who knows what. To counter them you need small systems with fast reaction," said Florent Duleux, the vice president of regional sales for MBDA at a missile symposium in Abu Dhabi in the summer. And with the Aster 30 system designed to meet any air threat, intercepting at speeds of up to Mach 4.5, he has the kit to meet those challenges, he said.

"This is a very important region for us, and accounts for between 25 and 30 per cent of our turnover," added Mr Duleux. "We already have €11 billion [Dh53.92bn] worth of orders in the pipeline and we see the future market being worth €3bn to €5bn over the next five years."

Mr Hollande will reportedly also lead a charm offensive to help France's Total to position itself ahead of Royal Dutch Shell and other international major oil companies, in the race to win a slice of the 2014 renewal of the UAE's largest onshore oil concession, Adco.

"Hollande is set to have a three-hour meeting with the country's ruler, Sheikh Khalifa," a French diplomatic source told Reuters last week. The meeting will be the centrepiece of Mr Hollande's lightning one-day visit on Tuesday.

"You have to stop being so Europe-centric. The challenge for the Emiratis is to rebalance their economic relations towards other partners such as the [South] Koreans and the Chinese. They want to rebalance what they give to each and every one," the source said.

Adco, which has been in place since 1939, is up for renewal in 2014 and includes the Asab, Bab, Bu Hasa, Sahil and Shah fields. Abu Dhabi's national oil company, Adnoc, has a 60 per cent stake; Total, BP, Shell and ExxonMobil each have 9.5 per cent.

Adnoc has launched a tender to award in 2014 a 30-year licence to develop the multibillion dollar, ultra-sour Bab gasfield, which is included in the 1.5 million barrels per day (bpd) concession.

The Bab project's ultra-sour gas contains about 30 per cent deadly hydrogen sulphide, making it more dangerous and complex to operate than conventional gas reserves.

Being awarded the project, therefore, could help the winner to remain in the larger oil concession when it is renewed.

"Winning the contract would allow Total to promote its expertise to Abu Dhabi and to position itself as a technological leader for the [Bab] field as part of the renewal of the Adco concession in 2014," another diplomatic source told Reuters.

This will also allow Total, which draws about 10 per cent of its 2.4 million bpd of global production in the UAE, to promote its know-how globally.

To win the deal, Total will highlight the expertise it gained at the highly corrosive Lacq field in France and then applied around the globe including at its Elgin/Franklin gas platform in the North Sea, where the fields were shut after a leak in May.

Shell and Exxon also can offer technologies of their own to remove sulphur and carbon dioxide from gas.

"Total is wheeling out the big gun in the shape of president Hollande to support their bid, but Shell seems to be confident it can win," one industry source told Reuters without elaborating.

Mr Hollande will also be accompanied by the heads of other companies including Suez Environment, Areva, EDF and Veolia. More than 500 French companies operate in UAE, giving France a €2.5bn trade surplus with the country, its fourth-biggest in the world.