Mubadala's Petroleum and Petrochemicals division is finalising an investment decision on the planned Pak Arab Refinery in Pakistan by the end of 2019, a project that could cost up to $6 billion (Dh22.04bn), its chief executive said on Monday.
The hydrocarbons unit, which is a division of Abu Dhabi strategic investment fund Mubadala Investment Company, had earlier considered development of around 200,000 barrels per day of refining capacity,which has been since revised up, in the Pakistani port city of Karachi, with local developers.
"We are working with our Pakistani counterparts to progress on the engineering studies. We're expecting FID [final investment decision] in the near future. We're targeting end of 2019," the division's head Musabbeh Al Kaabi told The National.
"The base plan is 250,000 bpd of oil and we’re talking about $5.5 to $6bn."
In an earlier interview with The National, Mr Al Kaabi said the project would be "a massive investment in oil and gas in Pakistan" with the refinery likely to use Abu Dhabi crude. If the deal materialises, it would be one of the largest foreign direct investments for Pakistan.
Meanwhile, one of Mubadala's subsidiaries, Mubadala Petroleum on Monday said it had agreed to acquire a minority stake from Italian energy company Eni' in one of Egypt's offshore concessions, its second acquisition in the country.
The company will control 20 per cent of Egypt’s Nour North Sinai Offshore Area concession, which Eni operates through its subsidiary IEOC.
Mubadala Petroleum first entered North Africa’s biggest economy in June, when it acquired a 10 per cent participating interest in the Shorouk concession from Eni, which contains the massive Zohr gas field.
Russia, South East Asia and the Middle East will remain the priorities for upstream investment for Mubadala Petroleum and Petrochemicals, according to its chief.
Mubadala Petroleum and the Russian sovereign wealth fund finalised a deal to acquire 49 per cent in an oil venture from Gazprom Neft in September.
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Mubadala Petroleum and Petrochemicals, which has around $12bn worth of projects currently awaiting final investment decision, will only green light upstream projects that are lower-cost resources, said Mr Al Kaabi. The company was also pushing ahead with its downstream projects that are being developed on the back of the US shale gas boom.
"Currently we’re spending enough time to create more value from the transactions we have done," he said. "We’re talking about more than $12bn worth of investments that we took a final investment decision and I have a responsibility now to deliver them."
He cited the expansion of Nova Chemicals in Canada, which the firm said costs $1.8bn, as one downstream project they are currenlty seeing through to completion.
“[It will be] a nightmare for any investor [should] costs overrun on these projects. So we put all our efforts now to ensure we deliver these projects,” he added.
Its fully-owned subsidiary Cepsa, which earlier this year took a 20 per cent stake worth $1.5bn in Abu Dhabi National Oil Company's offshore SARB and Umm Lulu fields, was continuing to focus upstream as well as on the development of a linear alkyl benzene refinery with the state producer. LAB is a compound that finds uses in industrial detergents.
Plans for an initial public offering of Cepsa, which Mr Al Kaabi had disclosed to The National in an interview in March have been put on hold he said, citing "volatility in the global capital markets".
“We are a confident investor and we took the decision a few days before the deadline to pull the transaction and explore this sometime in the future, when the market is attractive to us,” he said.
The Bio
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Favourite place to relax in UAE: the desert around Al Mleiha in Sharjah or the eastern mangroves 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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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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