Andrew Horncastle is head of energy and natural resources, India, Middle East and Africa, at strategy and management consultancy Oliver Wyman
January 18, 2023
There is plenty of talk about energy “transition” in the current discourse around climate mitigation, but what is actually happening in the energy sector is going beyond that – our present trajectory is more akin to a “revolution”. A transition implies a clear and neat path from A to B, with defined milestones and a predetermined outcome; whereas with a revolution the journey is treacherous, the destination uncertain, and there is high risk of collateral damage along the way.
The current polycrisis of high inflation and interest rates, energy security issues, and the climate crisis, have made it clear that we cannot afford to focus on one or two prongs of the energy trilemma – security, affordability and sustainability – at the expense of the others.
While the desired destination is unequivocally a greener future, the journey ahead – if we are to sidestep a messy revolution – needs to be far more considered. A path towards as clean and green a transition as possible must involve building rational frameworks as well as a frank appraisal of the financial realities, while also leveraging expertise and innovation – including from the Middle East and Africa, and from the hydrocarbon sector itself, which has important depth and breadth of knowledge and skills.
From my vantage point of working strategically in the energy space across India, Middle East and Africa every day, I see two things as undebatable: first, we will depend on the entire energy mix going forward, certainly for the next few decades. We need to stop thinking that hydrocarbons and clean energy are mutually exclusive, and understand that we still need to employ oil, gas, renewables and clean energy in tandem. It is necessary to acknowledge that and work with it, rather than against it.
German Vice Chancellor and Economy Minister Robert Habeck speaks during an official ceremony to mark the first arrival of an ammonia delivery from Adnoc in Hamburg last October. Reuters
We need to stop thinking that hydrocarbons and clean energy are mutually exclusive
Second, it’s critical to ensure that all voices are heard, including those from emerging economies. It is after all the developing countries – which emit less carbon than the developed countries – that are suffering disproportionately from the effects of both climate change and inflation, further putting economies, communities and political stability at risk.
And, because of this, forums that are inclusive, rational and action-oriented are essential. The G20 is of course a leading forum, as is Cop; and the upcoming Cop28 being held in the UAE is important, as it is a regional hub for innovation and collaboration. At Cop28, we should see a focus on implementation of measures that balance the energy trilemma, while also moving us towards a greener future.
But while convening and agreeing on targets is one thing, one also needs to focus on measurability. That is why frameworks – such as those for transitioning companies by the Sustainable Markets Initiative Energy Transition Task Force – are so important. Developed to provide stakeholders with the information they need on performance and progress, this framework recognises the activities and impact of companies reducing and removing emissions, as well as those accelerating the development of low-carbon solutions at scale. Ultimately this will help to mobilise capital into transitioning companies.
This framework brings many perspectives together, as it was developed by the Sustainable Markets Initiative Energy Transition Task Force working group. This group includes parties from across the energy and utilities, sustainability, metals and mining, banking, insurance, and management consulting sectors. Rating agency Sustainable Fitch will utilise it to develop an independent transition assessment, illuminating the spectrum of companies in the undefined space between carbon intensive and net zero today.
High voltage electricity transmission towers beyond hydrogen storage tanks at a green hydrogen plant in Puertollano, Spain. Bloomberg
Focusing the lens back on the Middle East and Africa, it’s clear that this part of the world will continue to play a very important energy security role as we journey towards becoming green. For starters, much of both regions enjoy year-round sunshine, ample wind and plenty of space. There is also the matter of positioning, and the fact they sit between markets east and west of Suez. Specifically in the GCC, there is significant appetite for transition, the ability to scale infrastructure quickly, and the willingness and ability to invest. In parallel with providing the world with much-needed hydrocarbons, mega projects that are greening the energy mix are being undertaken already, and much more is planned.
It is also clear that policymakers in parts of Europe and East Asia are aware of the potential of this region to be better placed to produce green energy than they are. Germany recently took formal delivery of its first batch of ammonia from the UAE, and has also said it hopes to import green ammonia from a terminal due to open in Saudi Arabia in 2026. Meanwhile, South Korea and Saudi Arabia have entered into a multi-part agreement around the production of hydrogen in the kingdom.
Ultimately, it is a matter of looking at the entire energy mix to shift towards being as green as possible, and as quickly as is sustainable. This includes working with the promise of greener energy sources, including ammonia and hydrogen. Crucially, we must also reduce the globe’s coal consumption – it is our most polluting energy source after all. Then there is the act of making fossil fuels much greener through innovation; because while the region scales up green energy production, the GCC will continue to produce oil and gas, increasingly sustainably, to help meet today’s global energy demand affordably and securely, lest these two elements of the trilemma be forgotten as we transition.
So, the next decade will certainly be interesting, but through inclusive dialogue, the use of strong frameworks that allow for measurability, and a recognition that we will need most forms of energy to power the journey ahead – there may be a chance we can avoid a revolution and achieve the transition we all aspire to, the one that the world deserves.
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
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
RACE CARD
6.30pm: Al Maktoum Challenge Round-3 – Group 1 (PA) $65,000 (Dirt) 2,000m
Founders: Amira Rashad (CEO), Yusuf Saber (CTO), Mahmoud Sayedahmed (adviser), Reda Bouraoui (adviser)
Based: Dubai, UAE
Sector: E-commerce
Size: 50 employees
Funding: approximately $6m
Investors: Beco Capital, Enabling Future and Wain in the UAE; China's MSA Capital; 500 Startups; Faith Capital and Savour Ventures in Kuwait
The National's picks
4.35pm: Tilal Al Khalediah 5.10pm: Continous 5.45pm: Raging Torrent 6.20pm: West Acre 7pm: Flood Zone 7.40pm: Straight No Chaser 8.15pm: Romantic Warrior 8.50pm: Calandogan 9.30pm: Forever Young
The specs
Engine: 2.5-litre, turbocharged 5-cylinder
Transmission: seven-speed auto
Power: 400hp
Torque: 500Nm
Price: Dh300,000 (estimate)
On sale: 2022
Sri Lanka-India Test series schedule
1st Test July 26-30 in Galle
2nd Test August 3-7 in Colombo
3rd Test August 12-16 in Pallekele
Teachers' pay - what you need to know
Pay varies significantly depending on the school, its rating and the curriculum. Here's a rough guide as of January 2021:
- top end schools tend to pay Dh16,000-17,000 a month - plus a monthly housing allowance of up to Dh6,000. These tend to be British curriculum schools rated 'outstanding' or 'very good', followed by American schools
- average salary across curriculums and skill levels is about Dh10,000, recruiters say
- it is becoming more common for schools to provide accommodation, sometimes in an apartment block with other teachers, rather than hand teachers a cash housing allowance
- some strong performing schools have cut back on salaries since the pandemic began, sometimes offering Dh16,000 including the housing allowance, which reflects the slump in rental costs, and sheer demand for jobs
- maths and science teachers are most in demand and some schools will pay up to Dh3,000 more than other teachers in recognition of their technical skills
- at the other end of the market, teachers in some Indian schools, where fees are lower and competition among applicants is intense, can be paid as low as Dh3,000 per month
- in Indian schools, it has also become common for teachers to share residential accommodation, living in a block with colleagues
FIXTURES
UAE’s remaining fixtures in World Cup qualification R2
Oct 8: Malaysia (h)
Oct 13: Indonesia (a)
Nov 12: Thailand (h)
Nov 17: Vietnam (h)
8 traditional Jamaican dishes to try at Kingston 21
Trench Town Rock: Jamaican-style curry goat served in a pastry basket with a carrot and potato garnish
Rock Steady Jerk Chicken: chicken marinated for 24 hours and slow-cooked on the grill
Mento Oxtail: flavoured oxtail stewed for five hours with herbs
Ackee and salt fish: the national dish of Jamaica makes for a hearty breakfast
Jamaican porridge: another breakfast favourite, can be made with peanut, cornmeal, banana and plantain
Jamaican beef patty: a pastry with ground beef filling
Hellshire Pon di Beach: Fresh fish with pickles
Out of Many: traditional sweet potato pudding
The Vile
Starring: Bdoor Mohammad, Jasem Alkharraz, Iman Tarik, Sarah Taibah
Director: Majid Al Ansari
Rating: 4/5
Key findings of Jenkins report
Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
If you go
The flights
Etihad (etihad.com) flies from Abu Dhabi to Luang Prabang via Bangkok, with a return flight from Chiang Rai via Bangkok for about Dh3,000, including taxes. Emirates and Thai Airways cover the same route, also via Bangkok in both directions, from about Dh2,700. The cruise
The Gypsy by Mekong Kingdoms has two cruising options: a three-night, four-day trip upstream cruise or a two-night, three-day downstream journey, from US$5,940 (Dh21,814), including meals, selected drinks, excursions and transfers. The hotels
Accommodation is available in Luang Prabang at the Avani, from $290 (Dh1,065) per night, and at Anantara Golden Triangle Elephant Camp and Resort from $1,080 (Dh3,967) per night, including meals, an activity and transfers.
UK’s AI plan
AI ambassadors such as MIT economist Simon Johnson, Monzo cofounder Tom Blomfield and Google DeepMind’s Raia Hadsell
£10bn AI growth zone in South Wales to create 5,000 jobs
£100m of government support for startups building AI hardware products
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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.”
What does the S&P 500's new all-time high mean for the average investor?
Should I be euphoric?
No. It's fine to be pleased about hearty returns on your investments. But it's not a good idea to tie your emotions closely to the ups and downs of the stock market. You'll get tired fast. This market moment comes on the heels of last year's nosedive. And it's not the first or last time the stock market will make a dramatic move.
So what happened?
It's more about what happened last year. Many of the concerns that triggered that plunge towards the end of last have largely been quelled. The US and China are slowly moving toward a trade agreement. The Federal Reserve has indicated it likely will not raise rates at all in 2019 after seven recent increases. And those changes, along with some strong earnings reports and broader healthy economic indicators, have fueled some optimism in stock markets.
"The panic in the fourth quarter was based mostly on fears," says Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management Company. "The fundamentals have mostly held up, while the fears have gone away and the fears were based mostly on emotion."
Should I buy? Should I sell?
Maybe. It depends on what your long-term investment plan is. The best advice is usually the same no matter the day — determine your financial goals, make a plan to reach them and stick to it.
"I would encourage (investors) not to overreact to highs, just as I would encourage them not to overreact to the lows of December," Mr Schutte says.
All the same, there are some situations in which you should consider taking action. If you think you can't live through another low like last year, the time to get out is now. If the balance of assets in your portfolio is out of whack thanks to the rise of the stock market, make adjustments. And if you need your money in the next five to 10 years, it shouldn't be in stocks anyhow. But for most people, it's also a good time to just leave things be.
Resist the urge to abandon the diversification of your portfolio, Mr Schutte cautions. It may be tempting to shed other investments that aren't performing as well, such as some international stocks, but diversification is designed to help steady your performance over time.
Will the rally last?
No one knows for sure. But David Bailin, chief investment officer at Citi Private Bank, expects the US market could move up 5 per cent to 7 per cent more over the next nine to 12 months, provided the Fed doesn't raise rates and earnings growth exceeds current expectations. We are in a late cycle market, a period when US equities have historically done very well, but volatility also rises, he says.
"This phase can last six months to several years, but it's important clients remain invested and not try to prematurely position for a contraction of the market," Mr Bailin says. "Doing so would risk missing out on important portfolio returns."
RACE SCHEDULE
All times UAE ( 4 GMT)
Friday, September 29
First practice: 7am - 8.30am
Second practice: 11am - 12.30pm
Saturday, September 30
Qualifying: 1pm - 2pm
Sunday, October 1
Race: 11am - 1pm
Who has been sanctioned?
Daniella Weiss and Nachala Described as 'the grandmother of the settler movement', she has encouraged the expansion of settlements for decades. The 79 year old leads radical settler movement Nachala, whose aim is for Israel to annex Gaza and the occupied West Bank, where it helps settlers built outposts.
Harel Libi & Libi Construction and Infrastructure Libi has been involved in threatening and perpetuating acts of aggression and violence against Palestinians. His firm has provided logistical and financial support for the establishment of illegal outposts.
Zohar Sabah Runs a settler outpost named Zohar’s Farm and has previously faced charges of violence against Palestinians. He was indicted by Israel’s State Attorney’s Office in September for allegedly participating in a violent attack against Palestinians and activists in the West Bank village of Muarrajat.
Coco’s Farm and Neria’s Farm These are illegal outposts in the West Bank, which are at the vanguard of the settler movement. According to the UK, they are associated with people who have been involved in enabling, inciting, promoting or providing support for activities that amount to “serious abuse”.
Tips to stay safe during hot weather
Stay hydrated: Drink plenty of fluids, especially water. Avoid alcohol and caffeine, which can increase dehydration.
Seek cool environments: Use air conditioning, fans, or visit community spaces with climate control.
Limit outdoor activities: Avoid strenuous activity during peak heat. If outside, seek shade and wear a wide-brimmed hat.
Dress appropriately: Wear lightweight, loose and light-coloured clothing to facilitate heat loss.
Check on vulnerable people: Regularly check in on elderly neighbours, young children and those with health conditions.
Home adaptations: Use blinds or curtains to block sunlight, avoid using ovens or stoves, and ventilate living spaces during cooler hours.
Recognise heat illness: Learn the signs of heat exhaustion and heat stroke (dizziness, confusion, rapid pulse, nausea), and seek medical attention if symptoms occur.
