Total's agreement to build petchems plant in Iran makes headway

Total and Iran have reached a preliminary agreement to build three petrochemical plants in a deal that if finalised could see the French oil company invest up to US$2 billion in Iran, an Iranian oil industry official said yesterday.

"In the latest talks, the two sides have reached an agreement for construction of petrochemical plants with the total capacity of 2.2 million tonnes of petrochemical and polymer products per year," the managing director, Marzieh Shahdaei, of Iran's National Petrochemical Company (NPC) was quoted by the oil ministry's news agency Shana.

"We predict that Total would invest $1.5 to $2bn in Iran's petrochemical industry if we reach final agreement," Ms Shahdaei added.

A spokesman for Total said: "Total and Iran's NPC are currently working on an in-depth study of an ethane-based petrochemical project whose figures (Capex especially) have to be fine-tuned."

The preliminary deal on the petrochemical plants follows Monday's agreement by Total to go ahead with the phase 11 development project for Iran's South Pars offshore gas field, the first major Western energy investment in the Islamic republic since the sanctions against it were lifted.

Total's chief executive Patrick Pouyanne said after the signing of the South Pars deal that it would open the door for more business with Tehran.

South Pars is part of the world's largest gas field which is shared with neighbouring Qatar where development of the deposit known as the North Field has made the tiny Gulf state the world's biggest producer of liquefied natural gas.

Total is active in both Iran and Qatar as well as the UAE, which together with its bigger neighbour Saudi Arabia is in dispute with Qatar over its close ties with Iran.

Total's CEO said last month the petrochemical plants project in Iran was less advanced than South Pars 11 because Total would need to fund that project with loans from banks while South Pars could be developed with its own funds.

Iranian deputy oil minister, Amir Zamaninia said on Monday that Iran and Total have held "positive talks" to cooperate in petrochemicals but added that the deal was not final.

An oil industry official said in January that Iran plans to build 25 petrochemical plants and is currently seeking $32bn in foreign investment to fund projects.

Reuters

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UAE currency: the story behind the money in your pockets

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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.”