Kuwait Energy Company has completed its US$200 million (Dh734m) acquisition of the Middle East and North Africa unit of Oil Search, the latest in a series of purchases ahead of a planned public share offering next year.
As part of the sale, Oil Search, a company based in Papua New Guinea, gives Kuwait Energy stakes in five oil and gas exploration blocks offshore Yemen and three in Egypt.
The company has a growing portfolio of global energy assets, which includes producing properties in Yemen, Oman and Ukraine. The latest deal is helping to restore its planned geographical focus on the Middle East and North Africa, as well as central and east Asia.
Kuwait Energy said it planned to spend $100m in Yemen this year, and that its chairman, Manssour Aboukhamseen, had met Yemeni officials to discuss work programmes.
Kuwait Energy, a privately held company based in Kuwait City, last week signed an agreement with Somalia's transitional government and an Indonesian company, Medco Energy International, to establish and govern the activities of a Somalian state oil company, Somalia Petroleum Corporation.
The government said the agreement followed Somalia's adoption of a new petroleum law earlier this month and would provide the basis for developing an oil and gas industry in the country.
Under terms of the deal, the government would own 51 per cent of Somalia Petroleum, with Kuwait Energy and Medco each holding 24.5 per cent.
Somalia, which has been racked by civil war, has been without a fully functioning central government since 1991. This has held back the east African nation's hopes of developing its natural resources to generate revenue.
"We hope this collaboration will not only generate income for Somalia, but will also assist in building the infrastructure of the country," said Sara Akbar, the chief executive of Kuwait Energy.
Kuwait Energy also joined up with Polski Koncern Naftowy Orlen, a Polish refining group, in April to acquire stakes in two Latvian offshore oil exploration prospects. That transaction followed its acquisition in February of exploration assets in Pakistan and of the Ukrainian assets of Cardinal Resources, a UK gas producer, last December.
Last October, Kuwait Energy signed a letter of intent with Abu Dhabi National Energy Company, or Taqa, to pursue oil and gas investment opportunities in Egypt, Oman, Yemen, Syria, Iraq, Kazakhstan and Iran.
This June, Kuwait Energy said it planned to seek a listing on the London Stock Exchange and to sell a 25 per cent stake in the company in the initial public offering scheduled for next year.
Kuwait Energy was formed in 2005. Last year it had net profits of five million Kuwaiti dinars (Dh69.2m), up from 281,000 dinars in 2006.
Last year the company's oil and gas production averaged 4,630 barrels of oil equivalent a day (boed), mainly from Oman and the Ukraine, compared to 1,971 boed in the previous year. Since last year, it has increased its oil and gas output to around 7,000 boed.
tcarlisle@thenational.ae
A State of Passion
Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
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
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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.”