The market for oil and gas projects in Abu Dhabi is set for a new burst of growth, according to executives, as the emirate invests billions of dollars to boost its production capacity.
“Abu Dhabi is going to be a big market when all the previous projects have ended, and six months from now there will be another boom of projects in oil and gas, said Muhammad Khan, the general manager of Descon Engineering, which has more than 5,000 workers in the emirate.
Mr Khan was speaking on the sidelines of the Adipec oil and gas conference in the capital.
He added: “Some power plants are coming, there are couple of projects coming in Fujairah as well, some refineries, LNG plants etc.
“We are doing EPC [engineering procurement construction projects], one is with Borouge and the other is with Gasco. The project with Gasco is already completed, and with Borouge it is around 20 per cent done.”
Mr Khan said the value of the work on Gasco’s Habshan acid gas flare recovery project was about US$50 million.
“In the Borouge EPC project we are modifying some old plants of the company. And it is more like an environment-friendly project worth $100m concerning flare recovery.”
Abu Dhabi National Oil Company (Adnoc)has plans to raise oil production capacity to 3.5 million bpd by 2020 – the offshore operator Adma-Opco is expected to contribute for half of this at about 1.75 million bpd.
“We hope, through an Abu Dhabi division, to open a new era in international business by an being open-minded, making the best of advantages and facing the global market,” said Zhou Xuezhong, the chief executive of China’s largest oil and gas contractor, the Chinese Offshore Engineering Company.
On Tuesday South Korea’s Hyundai Heavy Industries said it had signed a $1.94 billion deal to build offshore oil and gas processing platforms for Adma-Opco. The world’s top shipbuilder will build four giant platforms and underwater power cables as part of a new offshore oil and gas production complex in the second phase of the Nasr full field development project, 130 kilometres north-west off Abu Dhabi.
The project, to be completed by the end of 2019, will triple the area’s oil production to 65,000 bpd from the current 22,000 bpd, Hyundai said.
Another EPC contract for the same project, worth $800m, was awarded to Abu Dhabi’s National Petroleum Construction Company (NPCC). France’s Technip won a project management consultancy services job valued at more than $200m.
The Nasr development, to be completed in 2019, is a key plank in Adma-Opco’s initiative to add 270,000 bpd of additional production capacity from its Umm Lulu, Nasr and Satah Al Razboot (Sarb) fields, as part of Abu Dhabi’s overall efforts to raise oil production capacity.
NPCC also won a $494m contract for EPC work to boost gas supply from the offshore Umm Shaif Super Complex.
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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.”