Recent years have seen a burst of activity in Egypt's energy sector as the government moves full speed into natural gas production, seeking to reduce a burgeoning oil import bill and achieve its wider ambition of becoming a regional energy player. Last month alone, Egypt announced new energy agreements worth US$2.3 billion (Dh8.49bn).
But despite the new deals and a further 11 blocks opened to international bidding, Egypt's natural gas output may struggle to meet the demands of a ravenous industrial base and a population grown used to cheap energy, thanks to a subsidy programme that reached 62.7 billion Egyptian pounds (Dh42.14bn) last year.
Oil and gas account for about 15 per cent of Egypt's GDP and are the country's major sources of foreign investment. The sector attracted $9bn in the last financial year according to the minister of petroleum, Sameh Fahmi, who announced last month that 17 energy agreements worth $3.5bn had been approved by the Egyptian cabinet in the five months up to August.
But despite several significant discoveries this year, including three by Dana Gas of the UAE, Egypt's sixth-largest natural gas producer, which pushed up the country's estimated gas reserves to 77.2 trillion cubic feet and oil reserves to 4.4 billion barrels, demand for energy is outstripping supply.
In 2007-2008, the country's oil import bill more than tripled to $5.1bn as a result of expanding industrial and domestic energy consumption.
A report by analysts at Business Monitor International (BMI) predicted Egypt's oil consumption would grow 37.3 per cent between now and 2018, at the same time as oil output falls. "We are forecasting a decrease in Egyptian oil and gas liquids production of 11.9 per cent," the report said.
BMI expects gas production to rise from 55 billion cubic metres (bcm) last year to 85 bcm in 2013, outstripping domestic demand, which it predicts will grow from 33 bcm to 42 bcm over the same period.
Ballooning gas production, together with memories of last year's oil price rises, have seen the government move quickly into gas, allocating $1.1bn to drill 23 new exploration wells this year, which are expected to produce about 800 million cubic feet per day.
But output growth is likely to disappear quickly as the country's insatiable energy appetite picks up again as the economy recovers from this year's downturn.
Capacity in the electricity sector, which consumes about 58 per cent of gas output, is expected to grow from 18,000 megawatts in 2005 to 32,000 by 2013, during which 11 thermal plants are planned for construction.
A programme to substitute natural gas for fuel oils across the economy will also consume its share. This year 500,000 houses will be added to the 3.1 million already connected to the gas grid, while everything from public transport to brick factories is converting to gas.
The Egyptian government is trying to reduce the pressure on gas through a big push into renewable energy, and also reviving the country's dormant nuclear programme, which was resurrected this year.
Renewables currently account for just over 10 per cent of total energy production, mostly from the Aswan Dam. The government aims to increase this to 20 per cent of total consumption by 2020, with about 12 per cent of that from wind.
A three-year plan is also trying to tackle the issue of industrial subsidies. Industry accounts for 26 per cent of gas consumption. The plan, launched in 2007, would have seen energy-intensive industry paying close to cost price for gas, estimated at $3 per million British thermal units (btus), but the programme was put on hold until the end of this year after enthusiastic energy sector lobbying.
What this means is that the government is likely to find its ambitions of becoming a regional natural gas exporter curtailed by the demands of its own economy.
"There's not enough available gas today to go around for everybody," says Reham el Desoki, the senior economist at the local investment bank Beltone Financial. "It would be very difficult to increase exports of natural gas at a time when you're trying to provide for domestic industry. It was already very challenging to meet the obligations for the Arab Gas Pipeline."
The Arab Gas Pipeline, connecting Egypt to Jordan and Syria, is expected to take up about 77.3 billion cu ft of gas by 2013. Egypt exports gas through the Arish-Ashkelon pipeline to Israel, and a third pipeline connecting offshore Mediterranean fields to Libya is scheduled for construction.
This year, Egypt also signed on to the Nabucco pipeline, which will connect the Middle East with Europe via Turkey, a move which led analysts at Cambridge Energy Research Associates to declare that "Egypt may have already committed its gas to other pipelines".
Pumping more foreign investment into the energy sector could be the answer to supply shortages, but heavy-handed state intervention is dampening foreign enthusiasm.
"There are a lot of different issues international companies have to deal with relating to the bidding [and] licensing process," Mrs el Desoki says.
Foreign investors are forced to form joint ventures with the notoriously opaque ministry of petroleum holding company Egyptian General Petroleum Corporation (EGPC).
The standard model used by EGPC allocates 35 per cent of production to the foreign contractor as cost recovery. Of the remaining 65 per cent, up to 83 per cent for oil production (the share increases with the price of Brent crude), and 85 per cent for gas, goes to the state.
The contracts also give Egypt a right to purchase the foreign contractors' share of production, a right the state is increasingly exercising to meet growing local demand.
While exact prices for state purchases (in fact all contract details) are not publicly disclosed, last year gas purchases were made at $2.65 per million btus, a figure that has probably moved closer to $3 since, but is still significantly below market price.
Oil executives say that, contracts aside, the biggest disincentive to energy investment is the substantial arrears on payments accrued by EGPC. "Generally, the arrears issue previously existed in a number of different sectors," Mrs el Desoki says. "With regards to petroleum companies, we have no idea how much the arrears are and who they are owed to."
A big overhaul of the entire energy sector is slated, aimed at reducing the state's position in the sector, "separating its role as regulator and the role it currently has, which is also commercial, in terms of production and distribution," Mrs el Desoki says.
The government is hoping this will improve EGPC's access to credit, to help resolve the arrears issue. It may also pave the way to privatisation within the sector and the introduction of market-based pricing to attract foreign companies. Whether it will be sufficient to prevent Egypt becoming an energy importer remains to be seen.
business@thenational.ae
What are the GCSE grade equivalents?
- Grade 9 = above an A*
- Grade 8 = between grades A* and A
- Grade 7 = grade A
- Grade 6 = just above a grade B
- Grade 5 = between grades B and C
- Grade 4 = grade C
- Grade 3 = between grades D and E
- Grade 2 = between grades E and F
- Grade 1 = between grades F and G
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
T20 World Cup Qualifier fixtures
Tuesday, October 29
Qualifier one, 2.10pm – Netherlands v UAE
Qualifier two, 7.30pm – Namibia v Oman
Wednesday, October 30
Qualifier three, 2.10pm – Scotland v loser of qualifier one
Qualifier four, 7.30pm – Hong Kong v loser of qualifier two
Thursday, October 31
Fifth-place playoff, 2.10pm – winner of qualifier three v winner of qualifier four
Friday, November 1
Semi-final one, 2.10pm – Ireland v winner of qualifier one
Semi-final two, 7.30pm – PNG v winner of qualifier two
Saturday, November 2
Third-place playoff, 2.10pm
Final, 7.30pm
Women’s T20 World Cup Asia Qualifier
ICC Academy, November 22-28
UAE fixtures
Nov 22, v Malaysia
Nov 23, v Hong Kong
Nov 25, v Bhutan
Nov 26, v Kuwait
Nov 28, v Nepal
ICC T20I rankings
14. Nepal
17. UAE
25. Hong Kong
34. Kuwait
35. Malaysia
44. Bhutan
UAE squad
Chaya Mughal (captain), Natasha Cherriath, Samaira Dharnidharka, Kavisha Egodage, Mahika Gaur, Priyanjali Jain, Suraksha Kotte, Vaishnave Mahesh, Judit Peter, Esha Rohit, Theertha Satish, Chamani Seneviratne, Khushi Sharma, Subha Venkataraman
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Abu Dhabi GP schedule
Friday: First practice - 1pm; Second practice - 5pm
Saturday: Final practice - 2pm; Qualifying - 5pm
Sunday: Etihad Airways Abu Dhabi Grand Prix (55 laps) - 5.10pm
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
North Pole stats
Distance covered: 160km
Temperature: -40°C
Weight of equipment: 45kg
Altitude (metres above sea level): 0
Terrain: Ice rock
South Pole stats
Distance covered: 130km
Temperature: -50°C
Weight of equipment: 50kg
Altitude (metres above sea level): 3,300
Terrain: Flat ice
U19 WORLD CUP, WEST INDIES
UAE group fixtures (all in St Kitts)
- Saturday 15 January: UAE beat Canada by 49 runs
- Thursday 20 January: v England
- Saturday 22 January: v Bangladesh
UAE squad:
Alishan Sharafu (captain), Shival Bawa, Jash Giyanani, Sailles
Jaishankar, Nilansh Keswani, Aayan Khan, Punya Mehra, Ali Naseer, Ronak Panoly,
Dhruv Parashar, Vinayak Raghavan, Soorya Sathish, Aryansh Sharma, Adithya
Shetty, Kai Smith
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
JOKE'S%20ON%20YOU
%3Cp%3EGoogle%20wasn't%20new%20to%20busting%20out%20April%20Fool's%20jokes%3A%20before%20the%20Gmail%20%22prank%22%2C%20it%20tricked%20users%20with%20%3Ca%20href%3D%22https%3A%2F%2Farchive.google%2Fmentalplex%2F%22%20target%3D%22_blank%22%3Emind-reading%20MentalPlex%20responses%3C%2Fa%3E%20and%20said%3Ca%20href%3D%22https%3A%2F%2Farchive.google%2Fpigeonrank%2F%22%20target%3D%22_blank%22%3E%20well-fed%20pigeons%20were%20running%20its%20search%20engine%20operations%3C%2Fa%3E%20.%3C%2Fp%3E%0A%3Cp%3EIn%20subsequent%20years%2C%20they%20announced%20home%20internet%20services%20through%20your%20toilet%20with%20its%20%22%3Ca%20href%3D%22https%3A%2F%2Farchive.google%2Ftisp%2Finstall.html%22%20target%3D%22_blank%22%3Epatented%20GFlush%20system%3C%2Fa%3E%22%2C%20made%20us%20believe%20the%20Moon's%20surface%20was%20made%20of%20cheese%20and%20unveiled%20a%20dating%20service%20in%20which%20they%20called%20founders%20Sergey%20Brin%20and%20Larry%20Page%20%22%3Ca%20href%3D%22https%3A%2F%2Farchive.google%2Fromance%2Fpress.html%22%20target%3D%22_blank%22%3EStanford%20PhD%20wannabes%3C%2Fa%3E%20%22.%3C%2Fp%3E%0A%3Cp%3EBut%20Gmail%20was%20all%20too%20real%2C%20purportedly%20inspired%20by%20one%20%E2%80%93%20a%20single%20%E2%80%93%20Google%20user%20complaining%20about%20the%20%22poor%20quality%20of%20existing%20email%20services%22%20and%20born%20%22%3Ca%20href%3D%22https%3A%2F%2Fgooglepress.blogspot.com%2F2004%2F04%2Fgoogle-gets-message-launches-gmail.html%22%20target%3D%22_blank%22%3Emillions%20of%20M%26amp%3BMs%20later%3C%2Fa%3E%22.%3C%2Fp%3E%0A
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
The most expensive investment mistake you will ever make
When is the best time to start saving in a pension? The answer is simple – at the earliest possible moment. The first pound, euro, dollar or dirham you invest is the most valuable, as it has so much longer to grow in value. If you start in your twenties, it could be invested for 40 years or more, which means you have decades for compound interest to work its magic.
“You get growth upon growth upon growth, followed by more growth. The earlier you start the process, the more it will all roll up,” says Chris Davies, chartered financial planner at The Fry Group in Dubai.
This table shows how much you would have in your pension at age 65, depending on when you start and how much you pay in (it assumes your investments grow 7 per cent a year after charges and you have no other savings).
|
Age
|
$250 a month
|
$500 a month
|
$1,000 a month
|
|
25
|
$640,829
|
$1,281,657
|
$2,563,315
|
|
35
|
$303,219
|
$606,439
|
$1,212,877
|
|
45
|
$131,596
|
$263,191
|
$526,382
|
|
55
|
$44,351
|
$88,702
|
$177,403
|
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.”
AIDA%20RETURNS
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3ECarol%20Mansour%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%20%3C%2Fstrong%3EAida%20Abboud%2C%20Carol%20Mansour%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%203.5.%2F5%3C%2Fp%3E%0A
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
Thank You for Banking with Us
Director: Laila Abbas
Starring: Yasmine Al Massri, Clara Khoury, Kamel El Basha, Ashraf Barhoum
Rating: 4/5
Omar Yabroudi's factfile
Born: October 20, 1989, Sharjah
Education: Bachelor of Science and Football, Liverpool John Moores University
2010: Accrington Stanley FC, internship
2010-2012: Crystal Palace, performance analyst with U-18 academy
2012-2015: Barnet FC, first-team performance analyst/head of recruitment
2015-2017: Nottingham Forest, head of recruitment
2018-present: Crystal Palace, player recruitment manager
THE DETAILS
Kaala
Dir: Pa. Ranjith
Starring: Rajinikanth, Huma Qureshi, Easwari Rao, Nana Patekar
Rating: 1.5/5
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