How are energy projects being financed? Large-scale projects - whether they’re gas processing facilities, extraction of hydrocarbons or the development of wind and solar - usually run into the billions.
The development of such large facilities requires a massive amount of capital upfront. During the Pennsylvania oil boom of the late 1800s, steely-minded entrepreneurs such as John D Rockefeller and Henry Flagler used their own equity but also borrowed heavily from banks to finance the early start-up of the US oil industry. Big Oil companies would eventually grow to their size and scale by tapping their cashflows for investment and accessing bank credit.
National oil companies, particularly in the Middle East, have largely been self-funded. However, with the volatility in the oil markets and changes in consumption patterns, state oil companies are increasingly monetising parts of their business. Renewable energy projects are also seeking private credit and new ways of accessing capital.
This week, I take a look at how some critical energy projects in the region are being built.
Last week saw a few major deals in the region. Abu Dhabi National Oil Company raised $11 billion in structured financing from a consortium of 20 banks to develop gas processing facilities for its Hail and Ghasha concessions. The company will use the “pre-finance” amount to help construct facilities that will be used to process the ultra sour gas, which is expected to come online by the end of the decade. Hail and Ghasha are developed by Adnoc with its partners - Italy’s Eni and Thailand’s PTT. Russia’s Lukoil, which was one of the upstream stakeholders, exited the concession in November.
What does this financing model do?
It shifts repayment responsibility off Adnoc, Eni and PTT’s balance sheets, with the liability sitting entirely with the project.
Are the funds available immediately then?
According to sources close to the project, the funds will be available in “staggered phases” from the financiers, who also include Chinese banks
Adnoc also secured $2 billion for low-carbon energy projects from South Korea’s export credit agency last week. Asian investors including Japan Bank for International Co-operation have contributed to $5 billion in green financing to help Adnoc progress projects that will lower its carbon emissions.
ACWA Power, Saudi Arabia’s power developer, also secured an unspecified amount for a desalination project from KKR last week. It marked the asset manager’s first foray into the kingdom. Alterra, the UAE’s $30 billion climate fund, is meanwhile investing in a fund managed by Copenhagen Infrastructure Partners to support the global expansion of renewable energy.
Meanwhile, Libya is inviting foreign companies to invest millions of dollars in greenfield projects to help raise production capacity stalled due to years of fractious politics. An Opec member, Libya is opening its oilfields to new investment for the first time in more than 17 years, aiming to raise output to 2 million barrels per day by 2030 from about 1.4 million bpd.
Who has qualified?
International oil companies, including BP, Chevron, ExxonMobil, TotalEnergies, Eni, Shell and OMV, have qualified for a new licensing round covering 22 oil exploration and development areas, split evenly between offshore and onshore blocks.
What can we expect?
“It’s reasonable to expect several hundred million to be committed in the round, higher if companies bid up offshore blocks,” Martijn Murphy, principal analyst for North Africa Upstream at Wood Mackenzie, told my colleague Fareed Rahman.
Jargon buster
Non-recourse financing: In which lenders are paid directly from the project's cash flow and not from the balance sheet of concession operators.
Big number
$2.85 per gallon
US holiday makers are in for a treat as US petrol prices fell to the lowest so far this year on Monday. Petrol prices have remained below $3 per gallon this month.
Special mention
Big Oil has its first female chief executive. Meg O’Neill will become the first woman to lead one of the world’s five largest oil companies from April 1, as BP refocuses on oil and gas after its push into renewables
Meg O’Neill speaks at an energy conference in Kuala Lumpur, Malaysia, in June. Reuters
Emirates flies from Dubai to Phnom Penh with a stop in Yangon from Dh3,075, and Etihad flies from Abu Dhabi to Phnom Penh with its partner Bangkok Airlines from Dh2,763. These trips take about nine hours each and both include taxes. From there, a road transfer takes at least four hours; airlines including KC Airlines (www.kcairlines.com) offer quick connecting flights from Phnom Penh to Sihanoukville from about $100 (Dh367) return including taxes. Air Asia, Malindo Air and Malaysian Airlines fly direct from Kuala Lumpur to Sihanoukville from $54 each way. Next year, direct flights are due to launch between Bangkok and Sihanoukville, which will cut the journey time by a third.
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
THE SPECS
Engine: 3-litre V6
Transmission: eight-speed automatic
Power: 424hp
Torque: 580 Nm
Price: From Dh399,000
On sale: Now
The biog
Favourite colour: Brown
Favourite Movie: Resident Evil
Hobbies: Painting, Cooking, Imitating Voices
Favourite food: Pizza
Trivia: Was the voice of three characters in the Emirati animation, Shaabiyat Al Cartoon
Company Fact Box
Company name/date started: Abwaab Technologies / September 2019
Founders: Hamdi Tabbaa, co-founder and CEO. Hussein Alsarabi, co-founder and CTO
Based: Amman, Jordan
Sector: Education Technology
Size (employees/revenue): Total team size: 65. Full-time employees: 25. Revenue undisclosed
Stage: early-stage startup
Investors: Adam Tech Ventures, Endure Capital, Equitrust, the World Bank-backed Innovative Startups SMEs Fund, a London investment fund, a number of former and current executives from Uber and Netflix, among others.
Engine: Two permanent-magnet synchronous AC motors
Transmission: two-speed
Power: 671hp
Torque: 1050Nm
Range: 450km
Price: Dh601,800
On sale: now
German intelligence warnings
2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250
Source: Federal Office for the Protection of the Constitution
Nigel Farage told Reform's annual conference that the party will proscribe the Muslim Brotherhood if he becomes Prime Minister. "We will stop dangerous organisations with links to terrorism operating in our country," he said. "Quite why we've been so gutless about this – both Labour and Conservative – I don't know. “All across the Middle East, countries have banned and proscribed the Muslim Brotherhood as a dangerous organisation. We will do the very same.” It is 10 years since a ground-breaking report into the Muslim Brotherhood by Sir John Jenkins. Among the former diplomat's findings was an assessment that “the use of extreme violence in the pursuit of the perfect Islamic society” has “never been institutionally disowned” by the movement. The prime minister at the time, David Cameron, who commissioned the report, said membership or association with the Muslim Brotherhood was a "possible indicator of extremism" but it would not be banned.
The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
GOLF’S RAHMBO
- 5 wins in 22 months as pro
- Three wins in past 10 starts
- 45 pro starts worldwide: 5 wins, 17 top 5s
- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
Air Astana flies direct from Dubai to Almaty from Dh2,440 per person return, and to Astana (via Almaty) from Dh2,930 return, both including taxes.
The hotels
Rooms at the Ritz-Carlton Almaty cost from Dh1,944 per night including taxes; and in Astana the new Ritz-Carlton Astana (www.marriott) costs from Dh1,325; alternatively, the new St Regis Astana costs from Dh1,458 per night including taxes.
When to visit
March-May and September-November
Visas
Citizens of many countries, including the UAE do not need a visa to enter Kazakhstan for up to 30 days. Contact the nearest Kazakhstan embassy or consulate.
Gran Gala del Calcio 2019 winners
Best Player: Cristiano Ronaldo (Juventus) Best Coach: Gian Piero Gasperini (Atalanta) Best Referee: Gianluca Rocchi Best Goal: Fabio Quagliarella (Sampdoria vs Napoli) Best Team: Atalanta Best XI: Samir Handanovic (Inter); Aleksandar Kolarov (Roma), Giorgio Chiellini (Juventus), Kalidou Koulibaly (Napoli), Joao Cancelo (Juventus*); Miralem Pjanic (Juventus), Josip Ilicic (Atalanta), Nicolo Barella (Cagliari*); Fabio Quagliarella (Sampdoria), Cristiano Ronaldo (Juventus), Duvan Zapata (Atalanta) Serie B Best Young Player: Sandro Tonali (Brescia) Best Women’s Goal: Thaisa (Milan vs Juventus) Best Women’s Player: Manuela Giugliano (Milan) Best Women’s XI: Laura Giuliani (Milan); Alia Guagni (Fiorentina), Sara Gama (Juventus), Cecilia Salvai (Juventus), Elisa Bartoli (Roma); Aurora Galli (Juventus), Manuela Giugliano (Roma), Valentina Cernoia (Juventus); Valentina Giacinti (Milan), Ilaria Mauro (Fiorentina), Barbara Bonansea (Juventus)
What is a robo-adviser?
Robo-advisers use an online sign-up process to gauge an investor’s risk tolerance by feeding information such as their age, income, saving goals and investment history into an algorithm, which then assigns them an investment portfolio, ranging from more conservative to higher risk ones.
These portfolios are made up of exchange traded funds (ETFs) with exposure to indices such as US and global equities, fixed-income products like bonds, though exposure to real estate, commodity ETFs or gold is also possible.
Investing in ETFs allows robo-advisers to offer fees far lower than traditional investments, such as actively managed mutual funds bought through a bank or broker. Investors can buy ETFs directly via a brokerage, but with robo-advisers they benefit from investment portfolios matched to their risk tolerance as well as being user friendly.
Many robo-advisers charge what are called wrap fees, meaning there are no additional fees such as subscription or withdrawal fees, success fees or fees for rebalancing.
