2nd Annual Project Finance Conference in Dubai
Project Finance in the Middle East
29th & 30th May 2006
Dubai, UAE
With the unprecedented growth in projects in the Middle East, project finance has been gaining increasing popularity.
The general shift of approach towards project finance can be attributed to a number of factors, a prime one being that most countries today rely on market mechanisms to guide their economic activity and on the private sector to supply investment.
More focus on the private sector has necessitated major regulatory reforms, which in turn have created new markets in areas previously preserved for government activity. A reasonably high level of liquidity is poured into investments mainly in infrastructure, oil & gas and petrochemical projects.
In the MENA region, domestic energy demand is driven by surging populations, economic growth and heavy energy subsidies. Primary energy demand more than doubles by 2030.
At the same time, MENA oil production is predicted to increase by 75% by 2030 and natural gas production will treble, allowing more gas exports.
The region’s share in global oil production will increase from 35% today to 44% in 2030, which means the countries of the Middle East and North Africa would need to invest, on average, $56 billion per year in energy infrastructure.
Ali Aissaoui, a senior researcher with APICORP shares his view on the Issue and challenges in financing Oil & Gas Projects in the MENA region such as the perpetual mapping of investment environment and issues on equity and debt financing.
Khalil Al Salmi, Head of Project and structured finance, Ministry of Oil & Gas from Oman is open to discuss the past, present and future of financing Oil & Gas projects in Oman
As the world watches crude oil prices fluctuate at high levels, attention is inevitably drawn to the Middle East for any signals regarding the potential direction for this basic resource.
Similarly, participants in the global petrochemical industry must consider the changes brought about by the capacity growth in the Middle East and the subsequent impact on global markets. This region is poised to become a larger factor in the world of petrochemicals such that its petrochemicals market share could ultimately rival its share of world oil and gas production.
CMAI estimates that by the year 2010, the countries of the Middle East will produce about 20% of the world’s basic petrochemicals and polymers like ethylene and polyethylene.
The Middle East is probably the most important influence on the global petrochemical industry today and will remain so for many years to come.
The region's unparalleled production cost advantage and the willingness of its governments to diversify their oil-based economies have fostered exponential growth of an industry that may forever change the commodity petrochemical business.
Prospects for the Middle East in this respect are very good, especially in Qatar and Saudi Arabia. Private investments in the petrochemical industry have been on an increase recently – a fine example is the JV of Qatar Petroleum with Chevron Phillips for the Q-Chem II project and the JV of Qatar Petrochemical with Arkema Group for the Qatofin Project.
The financing of Q-Chem 2 and Qatofin has applied project financing to what has long been practice between the oil majors on industrial sites across the world. Saudi Arabia on the other hand has the industrial cities of Jubail and Yanbu in playing a major role in the country’s economic development.
SABIC is involved in many projects in the two cities and it has recently signed many deals with both international and local firms in the petrochemical sector with SAMBA as their main financial advisors for project financing.
The rapid pace of industrialization, and the demands of growing populations, leave no doubt that the Middle East needs to develop more infrastructure for the provision of basic services like water, electricity, telecommunications, petrochemicals, gas and other energies.
In the infrastructure sector in particular, the unprecedented levels of economic activity in the Middle East coupled with an increasing and youthful population, give rise to the need for additional capacity and modernization of the region's roads, rail systems, airports and ports.
The opportunities for private sector involvement and public private partnerships, which bring the prospect of efficient infrastructure development, are starting to gather pace.
Among the major infrastructure projects encouraging private participation are the first independent water and power project (IWPP) Shuaiba-3 in Saudi and the Sulaibaiya Water treatment project in Kuwait.
Muscat is undergoing a complete restructuring and development of its sewage system undertaken by Oman Waste Water Services Co. Work on the multibillion-dollar GCC power grid project, which is to link the six-member Gulf Cooperation Council with an integrated electricity network by the year 2010, has started in September last year.
Dr. Abdul Majeed, Advisor to The Undersecretary Office, Ministry of Electricity and Water, Bahrain, said the project, which is to reduce the cost of power generation in the six GCC states of Saudi Arabia, Qatar, Bahrain, Kuwait, Oman and the United Arab Emirates, would be carried out in three phases.
Islamic finance is developing at a remarkable pace. Since its inception three decades ago, the number of Islamic financial institutions worldwide has risen from one in 1975 to over 300 today in more than 75 countries.
They are concentrated in the Middle East and Southeast Asia (with Bahrain and Malaysia being the biggest hubs), but they also appear in Europe and the United States. Total assets worldwide are estimated to exceed $250 billion, and are growing at an estimated 15 percent a year (although cross-border data remain scarce).
Nassim Faiz, Vice President of Projects & Syndication, Dubai Islamic Bank speaks about how Islamic Finance is redefining the Market in the Middle East. Al Ali Abdul-Razaq Al-Ghamdi, President, Al Waha Petrochemicals gives an insight to their project which is a fine example of one of the very few 100% Islamic financed projects, this particular one being privately sponsored by the Al Zamil group and Basell.
Japanese and Korean Banks are also returning to the international finance market, particularly in project finance. The project area is very busy with competition for oil and gas resources.
Innovations include the entrance of Japanese banks into regional project finance, and the successful mix of long and short-term loans on recent infrastructure projects. These developments show that the industry is changing, and that bankers realize the scale of project opportunities here, and the deal structuring imagination needed to exploit them.
Middle East stands second in the share of project finance in the world -there is huge need of business networking between the involved parties (both public and private) to maximize their opportunities for business connections.
Providing key strategic business information and the best networking opportunities will prepare grounds for focused dialogue on a concrete subject and personal contacts that will foster future activities is always of importance to the parties involved .
Following the great success from last year and increasing demand, Fleming Gulf - a Jacob Fleming Group, based subsidiary in Dubai has prepared a second annual conference on Project Finance in the Middle East, to be held 29th & 30th of May 2006 in Dubai.
Their excellent relations with local governments give them the opportunity to host very senior representatives from the public sector and creating an exclusive forum focusing on quality and superior networking, providing grounds for future negotiations of project finance deals in the region.
For more information see http://www.fleminggulf.com/
Posted by Richard Price, Editor EnergyME.com
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