Cutting-edge technology is the key for maximising production in Abu Dhabi's maturing oilfields, the UAE's energy minister said as the renewal of Abu Dhabi's largest energy concession draws near.
Abu Dhabi National Oil Company (Adnoc) has started the tendering process for the Adco onshore concession, and a diverse set of international oil companies have been invited to prepare prequalification documents. They include oil majors, Asian national oil companies and smaller players with particular technical expertise.
"The optimal path forward is rooted in the employment of best international practices to improve enhanced oil recovery," said Suhail Mohamed Al Mazrouei, who assumed his new role last month, in one of his first public appearances as the Minister of Energy.
"In the UAE we are utilising the opportunities afforded to us by these new technologies to the utmost degree."
Adnoc hopes to award the new Adco concession by next year. The current structure includes the majors ExxonMobil, Total, Shell and BP, companies that can draw on huge technological expertise. All four are in the running for the new concession, alongside the national oil companies of China and South Korea.
Smaller outfits such as Norway's Statoil, which boasts specialised enhanced oil recovery (EOR) technology, are also part of the process. EOR is a method of producing at depleting oilfields that involves the injection of water, steam and other agents to maintain reservoir pressure.
The Adnoc-led Adco consortium produces about 1.4 million barrels per day (bpd), or half of Abu Dhabi's oil production. The 75-year concession expires next year and Adnoc's search for future partners reflects Abu Dhabi's modern energy priorities.
Over the course of the past few decades, the emirate's crude flows have increasingly been redirected from West to East, and Asia now accounts for the vast majority of oil exports. This has led to the inclusion of China National Petroleum Corporation and Korea National Oil Company in the bidding process.
But the new concession is likely to pump its fields until depletion, necessitating up-to-date methods of extraction to ensure production rates are as high as possible.
Abu Dhabi has set itself ambitious recovery rates. Ali Al Jarwan, the chief executive of the Adnoc subsidiary Adma-Opco, last year said the national oil company aimed to recover 70 per cent of oil in its reservoirs, a rate far above the industry average.
Such targets play into the hands of technology-savvy international oil companies, which will bring their latest EOR techniques to the negotiating table.
New technology will also help to meet Abu Dhabi's goal to increase production capacity from what is now about 2.8 million bpd to 3.5 million bpd by 2017. That target is warranted by increasing global demand and in line with Abu Dhabi's efforts to balance the market as part of Opec, said Mr Al Mazrouei.
"There is no doubt in my mind that this is the opportune moment for investment in the hydrocarbon industry," he said at the Middle East Petroleum and Gas Conference in Abu Dhabi. "Nonetheless, as a consequence of the fact that many oilfields in the world have reached maturity, many oil-producing companies will not be in a position to significantly increase their production."
Complex technology is also needed to add to Abu Dhabi's natural gas production. Conventional sources of gas are not sufficient to keep up with spiralling domestic gas demand and Adnoc has turned to unconventional sources to add to supply. Production at the Shah sour gasfield is expected to start at the end of next year and Adnoc is close to awarding another sulphur-rich gas project at the Bab field.
The award will be announced "in a couple of weeks", Abdulla Nasser Al Suwaidi, Adnoc's director general, said at the conference. It is believed Shell will clinch the deal after its competitor Total admitted it would not be selected.
"Shell has a good standing," said Mr Al Suwaidi.
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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.”
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Maradona Award for Best Goal Scorer of the Year: Robert Lewandowski (Bayern Munich)
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Top Goal Scorer of All Time: Cristiano Ronaldo (Manchester United)
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Best Sporting Director of the Year: Txiki Begiristain (Manchester City)
Player Career Award: Ronaldinho
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