Business

ADNOC awards artificial island contract

Abu Dhabi National Oil Company awards a Dh2.3 billion contract to National Marine Dredging as part of a project to build artificial islands in the Gulf.

Tamsin Carlisle

November 12, 2009

Abu Dhabi National Oil Company (ADNOC) has awarded a Dh2.3 billion (US$639 million) contract to National Marine Dredging as part of a project to build artificial islands in the Gulf. But these islands will support drilling rigs, not mansions. "This project is one part of Zadco's plans to advance petroleum operations at the Zakum field to increase oil production," said Mohammed al Rumaithi, the chief executive of National Marine, which is 40 per cent owned by the Abu Dhabi Government.

Zadco is the Zakum Development Company, the ADNOC unit in charge of developing the Upper Zakum oilfield, which is one of the largest in the Gulf. On Tuesday, Frank Kemnetz, the president of two ExxonMobil subsidiaries operating in the Gulf, told an Abu Dhabi conference Zadco would seek to cut costs by building four islands for drilling, instead of using platforms. ExxonMobil, the US oil company, holds a 28 per cent interest in Zadco, which has a 20-year concession to develop the Lower Zakum field that expires in 2026.

Mr Kemnetz said Zadco sought to raise the field's production to 750,000 barrels per day (bpd) by 2015, representing a 50 per cent rise from 500,000 bpd when the concession began three years ago. National Marine's contract is the largest for dredging work in the Emirates since the credit crisis ended the nation's property boom. The company, which was once ADNOC's dredging division and now has its shares listed on the Abu Dhabi Securities Exchange, is best known for recent work on developing the capital's corniche and Sir Bani Yas Island off the coast of the capital. National Marine has not suffered from the property downturn that upset plans for several luxury property developments in Dubai involving artificial islands and rivers. Yesterday, the company posted a third-quarter net profit of Dh237.7m, up 34 per cent from Dh176.9m a year earlier. It said it was executing a number of big industrial projects off the coasts of Abu Dhabi and Fujairah. ADNOC has announced plans to add nearly 800,000 bpd of new oil production capacity in the next few years, including 550,000 bpd from oilfields in the Gulf. It plans to raise crude output to 3.5 million bpd by 2018 or 2019. This year, due to reduced OPEC quotas, the UAE has been pumping about 2.2 million bpd of crude, of which ADNOC supplies more than 90 per cent. The UAE's oil production capacity is believed to be about 2.85 million bpd. tcarlisle@thenational.ae

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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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Unresolved crisis

Russia and Ukraine have been locked in a bitter conflict since 2014, when Ukraine’s Kremlin-friendly president was ousted, Moscow annexed Crimea and then backed a separatist insurgency in the east.

Fighting between the Russia-backed rebels and Ukrainian forces has killed more than 14,000 people. In 2015, France and Germany helped broker a peace deal, known as the Minsk agreements, that ended large-scale hostilities but failed to bring a political settlement of the conflict.

The Kremlin has repeatedly accused Kiev of sabotaging the deal, and Ukrainian officials in recent weeks said that implementing it in full would hurt Ukraine.

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