A Bharat Petroleum fuel station in Maharashtra. India is expected to be the largest source of oil demand growth until 2030, the International Energy Agency says. Bloomberg
A Bharat Petroleum fuel station in Maharashtra. India is expected to be the largest source of oil demand growth until 2030, the International Energy Agency says. Bloomberg
A Bharat Petroleum fuel station in Maharashtra. India is expected to be the largest source of oil demand growth until 2030, the International Energy Agency says. Bloomberg
A Bharat Petroleum fuel station in Maharashtra. India is expected to be the largest source of oil demand growth until 2030, the International Energy Agency says. Bloomberg

Business

Energy

Abu Dhabi awards oil and gas block to Bharat Petroleum and Indian Oil joint venture

Urja Bharat granted production rights for onshore Block 1 in Al Ruwais

John Benny

September 12, 2024

  • English
  • Arabic

Abu Dhabi has awarded an onshore oil and gas block to an Indian joint venture, as part of efforts to deepen energy ties between the UAE and India.

Urja Bharat, a venture between state-run energy companies Bharat Petroleum and Indian Oil, has been granted production rights by the Supreme Council for Financial and Economic Affairs (SCFEA) for onshore Block 1 in Al Ruwais, after completion of the exploration phase awarded in 2019, the Abu Dhabi Media Office reported on Wednesday.

Early exploration in the block, especially in the 38-square-kilometre Al Ruwais area, showed positive results, it said.

“The award of the production concession affirms our efforts to advance the emirate's hydrocarbon sector while ensuring the long-term economic prosperity of Abu Dhabi,” said Jassem Al Zaabi, secretary general of the SCFEA.

“This concession is part of our broader strategy to enhance the resilience and sustainability of our economy.”

Earlier this week, India and the UAE signed several major agreements covering crude oil storage, long-term supply of liquefied natural gas and co-operation in the civil nuclear energy sector.

Abu Dhabi-based Adnoc signed a preliminary 15-year agreement with Indian Oil to supply 1 million tonnes a year of LNG to India. Indian Oil is set to become the largest buyer of LNG from Adnoc by 2029. The annual purchase will reach 2.2 million tonnes, with 1.2 million tonnes coming from Adnoc's Das Island operations and one million tonnes from Ruwais LNG.

Adnoc also signed an agreement with the Indian Strategic Petroleum Reserve to extend its existing oil storage agreement.

The announcements came after a meeting between Sheikh Khaled bin Mohamed, Crown Prince of Abu Dhabi, and Indian Prime Minister Narendra Modi, in New Delhi.

India, the world’s third-largest crude importer, is expected to be the largest source of oil demand growth until 2030, the International Energy Agency said in a report earlier this year.

In the next three decades, the South Asian country is poised to experience the “largest energy demand growth” of any country in the world as industrialisation and urbanisation surge, the agency said at the time.

The UAE is among the world’s largest oil producers, and more than 95 per cent of the country’s roughly 100 billion barrels of proven oil reserves are in Abu Dhabi.

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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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Updated: September 12, 2024, 10:26 AM
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