The eyes of the Gulf oil community have been fixed recently on Iraq where the awarding of contracts for huge oil projects has excited geologists and chief executives alike.
But the same cast of characters are keenly interested in new licences in another country almost as rich in oil, much safer and more stable and with good infrastructure and business environment.
The prize in this case? The renewal of the major concessions in Abu Dhabi - the hot, if sometimes unspoken, topic of the Abu Dhabi International Petroleum Exhibition and Conference, which opened yesterday.
Almost uniquely in the Middle East, the holders of the original concessions, dating back as far as 1939, are still players in Abu Dhabi- leading international oil companies such as Shell, ExxonMobil, Total, BP, Japan's Inpex, and the inheritor of the interests of the late, famous Armenian dealmaker Calouste Gulbenkian, Portugal's Partex.
When other OPEC countries nationalised their petroleum industries in the 1970s, Abu Dhabi took a more moderate course. The Abu Dhabi National Oil Company (ADNOC) increased its equity share to 60 per cent and tightened terms so its partners took home just US$1 (Dh3.67) a barrel they produced.
But Abu Dhabi recognised the expertise of these foreign companies more than repaid their modest reward.
The three main entities in the emirate are the Abu Dhabi Company for Onshore Oil Operations (ADCO); and two players offshore, Abu Dhabi Marine Operating Company (ADMA-OPCO) and Zakum Development Company (ZADCO). ADCO's licence expires in 2014 and ADMA-OPCO and ZADCO's in 2018.
Since major oil developments can produce for two decades or more, it is a matter of urgency to sort out new arrangements beyond licence expiry.
Abu Dhabi has to balance four needs. First, of course, is getting the best financial reward for its citizens from its huge oil wealth. Contenders in the Iraqi auctions were willing to bid very aggressively and it should be no different in the emirate.
Second is the need for greater investment as Abu Dhabi progresses towards its target of raising output to 3.5 million from 2.75 million barrels of oil a day. The tough terms of the existing concessions, the sometimes convoluted decision making imposed by the shareholder structure and the imminent concession expiry have slowed development.
In particular, new gas developments must accelerate, helped by partners able to handle sour gas containing the toxic hydrogen sulphide. Total has pushed its case for working on the Bab field to the east of the capital.
And the country hardly conducts any exploration, despite considerable potential remaining. Increasing oil reserves may not be urgent but it gives Abu Dhabi a valuable option in the case of a renewed period of high prices. It can also serve to deter OPEC competitors, notably Iraq, from over-rapid expansion. And it assures the long-term future of this bedrock of the domestic economy.
Third, these giant fields merit the world's best technology for improving efficiency and increasing the percentage of oil and gas that can be extracted. Average global recovery is about 33 per cent but Saudi Arabia targets between 60 and 70 per cent, and Abu Dhabi, with comparable geology, should have similar long-term aspirations.
New marginal and difficult fields may cost more than $10 a barrel to develop, so picking the best operator could save billions.
Along with this goes expanding opportunities for talented national employees and considering the role of ADNOC - should it expand its operating capabilities, or should it be responsible more for monitoring and regulation?
And in a carbon-constrained world, new technologies such as carbon dioxide injection to improve oil recovery while reducing greenhouse gas emissions should be a priority. Companies such as BP, Shell and Occidental have particular expertise.
Continuity is paramount. Facilities have to continue operating without a hitch and the ambitious expansion plans at ADCO and ZADCO have to proceed without delay.
To achieve these aims, Abu Dhabi has two main options. It could simply renew the existing concessions, perhaps on more flexible terms and with some new partners, or it could dissolve the consortiums and allocate fields individually.
Breaking up the cosy oligopoly of the past could inject some dynamism and new ideas. New entrants could be traditional western international oil companies, such as Austria's OMV, owned 20 per cent by Abu Dhabi's International Petroleum Investment Corporation.
The renowned offshore operator Statoil from Norway and Germany's Wintershall have also publicly stated interest. They could be aggressive independents such as Occidental, which has already been awarded some small undeveloped fields.
Or, they could be national oil companies chosen to cement relations with key customers such as China or Japan, or competitors such as Russia's Rosneft, which is already drilling in Sharjah.
There is also the option of widening the circle to indigenous companies. Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, has a strong relationship with Occidental through partnerships in Qatar, Oman and Bahrain.
Unlike Iraq, which held public auctions, Abu Dhabi seems to prefer negotiating in private with the candidates. If this is the route chosen for the ADCO and ADMA renewals, the emirate needs to be careful not to get bogged down in endless negotiations, as Kuwait and Saudi Arabia have done in recent years.
Especially on gas, it cannot afford delay, or to have further withdrawals from projects after bidders over-commit, as with ConocoPhillips in April.
The aim is not to wring the last fils out of the contenders. Attracting the best partners, under terms that allow them to perform effectively, is the key to Abu Dhabi's petroleum future.
Robin M Mills is an energy economist based in Dubai and the author of The Myth of the Oil Crisis
Company%20Profile
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COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
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.”
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
Top New Zealand cop on policing the virtual world
New Zealand police began closer scrutiny of social media and online communities after the attacks on two mosques in March, the country's top officer said.
The killing of 51 people in Christchurch and wounding of more than 40 others shocked the world. Brenton Tarrant, a suspected white supremacist, was accused of the killings. His trial is ongoing and he denies the charges.
Mike Bush, commissioner of New Zealand Police, said officers looked closely at how they monitored social media in the wake of the tragedy to see if lessons could be learned.
“We decided that it was fit for purpose but we need to deepen it in terms of community relationships, extending them not only with the traditional community but the virtual one as well," he told The National.
"We want to get ahead of attacks like we suffered in New Zealand so we have to challenge ourselves to be better."
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
COMPANY%20PROFILE
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Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Despacito's dominance in numbers
Released: 2017
Peak chart position: No.1 in more than 47 countries, including the United States, the United Kingdom, Australia and Lebanon
Views: 5.3 billion on YouTube
Sales: With 10 million downloads in the US, Despacito became the first Latin single to receive Diamond sales certification
Streams: 1.3 billion combined audio and video by the end of 2017, making it the biggest digital hit of the year.
Awards: 17, including Record of the Year at last year’s prestigious Latin Grammy Awards, as well as five Billboard Music Awards
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Leaderboard
64 - Gavin Green (MAL), Graeme McDowell (NIR)
65 - Henrik Stenson (SWE), Sebastian Soderberg (SWE), Adri Arnaus (ESP), Victor Perez (FRA), Jhonattan Vegas (VEN)
66 - Phil Mickelson (USA), Tom Lewis (ENG), Andy Sullivan (ENG), Ross Fisher (ENG), Aaron Rai (ENG), Ryan Fox (NZL)
67 - Dustin Johnson (USA), Sebastian Garcia Rodriguez (ESP), Lucas Herbert (AUS), Francesco Laporta (ITA), Joost Luiten (NED), Soren Kjeldsen (DEN), Marcus Kinhult (SWE)
68 - Alexander Bjork (SWE), Matthieu Pavon (FRA), Adrian Meronk (POL), David Howell (ENG), Christiaan Bezuidenhout (RSA), Fabrizio Zanotti (PAR), Sean Crocker (USA), Scott Hend (AUS), Justin Harding (RSA), Jazz Janewattananond (THA), Shubhankar Sharma (IND), Renato Paratore (ITA)
Major honours
ARSENAL
BARCELONA
- La Liga - 2013
- Copa del Rey - 2012
- Fifa Club World Cup - 2011
CHELSEA
- Premier League - 2015, 2017
- FA Cup - 2018
- League Cup - 2015
SPAIN
- World Cup - 2010
- European Championship - 2008, 2012
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
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.
