One of the unintended outcomes of Abu Dhabi's 70-year-old oil concessions is that some of the income from the emirate's exports now goes towards maintaining a Portuguese museum housing a collection of art ranging from 3,000-year-old Mesopotamian low-reliefs to modern Lalique jewellery.
The Calouste Gulbenkian Museum on the outskirts of Lisbon is a bequest of the oil entrepreneur of the same name, who became known as "Mr Five Per Cent" for his ability to cut himself into oil deals such as the Abu Dhabi concessions, signed from 1938.
Having amassed a huge oil fortune during his lifetime, Mr Gulbenkian left his oil company, Partex, and art collection to a charitable foundation that runs the museum.
Abu Dhabi's oil concessions, unlike others in the region, have survived seven decades including a world war, independence and a wave of nationalisation, so some of the money still flows into the coffers of Partex today.
The fact that these concessions have remained in place for so long has earned Abu Dhabi an enviable reputation in an industry with a very long memory. And today, the deals give the emirate unrivalled value for money, with just US$1 a barrel paid to its private sector partners, including ExxonMobil, Shell, BP and Occidental, that have a 40 per cent share in the concessions.
However, the 75-year concessions are due to expire within the next six to 10 years, and this is already causing problems for both sides.
The approaching deadline means the foreign partners are reluctant to invest in new projects because there is not enough time to reap returns, so investment has failed to keep up with expectations and production capacity has stalled at about three million barrels daily.
To compensate for the lack of incentives, the Government has offered its partners some extra revenue in the form of accelerated depreciation of assets, which allows them to recoup investments more quickly. But this stopgap measure only puts off the day when the Supreme Petroleum Council, chaired by Sheikh Khalifa bin Zayed, President of the UAE and Ruler of Abu Dhabi, will review the governance structure of the emirate's economic mainstay.
The review happens to come at a very advantageous time from the Government's perspective. Oil production in the North Sea and the Gulf of Mexico has peaked, increasing the global hunger for new oil assets. Resource nationalism, as seen in Russia and Venezuela, has limited the number of investment opportunities, while growing global demand for energy has pushed prices to a record high.
When the concessions expire, the Government would be within its rights to take back the pumping stations, pipelines and terminals at no charge and wave its foreign partners goodbye. But such a scenario is unlikely. Insiders expect the Government to renew alliances with multinationals to ensure access to the best technology and management expertise, particularly at a time when some of its older fields require the latest technology to maximise recovery of the remaining resources.
Historically, the involvement of the biggest names in Western oil and gas has also been seen as an important element of national security policy.
But there will undoubtedly be changes. The concessions could shrink. The foreign faces could change. The role of Adnoc, the national oil company that now holds 60 per cent of the sector, could be modified. The council could decide to stay with fixed-fee concessions, adopt elements of the production sharing model favoured by the private sector, or try service contracts more prevalent in nationalised oil industries.
One problem with these traditional solutions is that they all end up creating the same problem that Abu Dhabi has today - namely, a misalignment of incentives between the owner of the asset, in this case the Government, and the operators, who are Adnoc and its foreign partners, especially when the end of the concession nears.
If the emirate wants to maximise the value of its oil resources, some believe a new "life-of-field" concession would achieve the best outcome, particularly for the older fields. In the US, for example, some operators have achieved recovery rates as high as 80 per cent because they are also the owners of the asset, and therefore perfectly aligned. In the worst cases of misalignment, operators with expiring concessions have pushed production rates too far, violating the integrity of reserves and leaving large deposits with little prospect of ever being brought to the surface.
In the case of Abu Dhabi, with almost a century of reserves at current production rates, a "life-of-field" concession might not be appropriate for the largest, youngest fields, given that they might outlast the oil companies. And certainly it would go against the tide of resource nationalism now visible in Iraq, for example, where that government appears to be favouring fixed-term service contracts.
One thing is for sure, the ghost of Mr Gulbenkian will not keep his cut when these concessions expire. But from the art lovers' perspective all is not lost. Partex has branched out from its roots in Abu Dhabi and Oman in the past few years, and now has interests in Kazakhstan, Brazil and Algeria to keep the collection on show, Mesopotamian low-reliefs and all.
@Email:tashby@thenational.ae
The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E77kWh%202%20motors%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E178bhp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E410Nm%0D%3Cbr%3E%3Cstrong%3ERange%3A%20%3C%2Fstrong%3E402km%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EDh%2C150%2C000%20(estimate)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ETBC%3C%2Fp%3E%0A
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
The specs: 2017 Dodge Ram 1500 Laramie Longhorn
Price, base / as tested: Dhxxx
Engine: 5.7L V8
Transmission: Eight-speed automatic
Power: 395hp @ 5,600rpm
Torque: 556Nm @ 3,950rpm
Fuel economy, combined: 12.7L / 100km
SERIE A FIXTURES
All times UAE ( 4 GMT)
Saturday
Roma v Udinese (5pm)
SPAL v Napoli (8pm)
Juventus v Torino (10.45pm)
Sunday
Sampdoria v AC Milan (2.30pm)
Inter Milan v Genoa (5pm)
Crotone v Benevento (5pm)
Verona v Lazio (5pm)
Cagliari v Chievo (5pm)
Sassuolo v Bologna (8pm)
Fiorentina v Atalanta (10.45pm)
The Brutalist
Director: Brady Corbet
Stars: Adrien Brody, Felicity Jones, Guy Pearce, Joe Alwyn
Rating: 3.5/5
if you go
The flights
Air Astana flies direct from Dubai to Almaty from Dh2,440 per person return, and to Astana (via Almaty) from Dh2,930 return, both including taxes.
The hotels
Rooms at the Ritz-Carlton Almaty cost from Dh1,944 per night including taxes; and in Astana the new Ritz-Carlton Astana (www.marriott) costs from Dh1,325; alternatively, the new St Regis Astana costs from Dh1,458 per night including taxes.
When to visit
March-May and September-November
Visas
Citizens of many countries, including the UAE do not need a visa to enter Kazakhstan for up to 30 days. Contact the nearest Kazakhstan embassy or consulate.
Fire and Fury
By Michael Wolff,
Henry Holt
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
RESULTS
Welterweight
Tohir Zhuraev (TJK) beat Mostafa Radi (PAL)
(Unanimous points decision)
Catchweight 75kg
Anas Siraj Mounir (MAR) beat Leandro Martins (BRA)
(Second round knockout)
Flyweight (female)
Manon Fiorot (FRA) beat Corinne Laframboise (CAN)
(RSC in third round)
Featherweight
Bogdan Kirilenko (UZB) beat Ahmed Al Darmaki
(Disqualification)
Lightweight
Izzedine Al Derabani (JOR) beat Rey Nacionales (PHI)
(Unanimous points)
Featherweight
Yousef Al Housani (UAE) beat Mohamed Fargan (IND)
(TKO first round)
Catchweight 69kg
Jung Han-gook (KOR) beat Max Lima (BRA)
(First round submission by foot-lock)
Catchweight 71kg
Usman Nurmogamedov (RUS) beat Jerry Kvarnstrom (FIN)
(TKO round 1).
Featherweight title (5 rounds)
Lee Do-gyeom (KOR) v Alexandru Chitoran (ROU)
(TKO round 1).
Lightweight title (5 rounds)
Bruno Machado (BRA) beat Mike Santiago (USA)
(RSC round 2).
Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
- Ovarian tissue surgically removed
- Tissue processed in a high-tech facility
- Tissue re-implanted at a time of the patient’s choosing
- Full hormone production regained within 4-6 months
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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.”
THE BIO
Favourite book: ‘Purpose Driven Life’ by Rick Warren
Favourite travel destination: Switzerland
Hobbies: Travelling and following motivational speeches and speakers
Favourite place in UAE: Dubai Museum
LUKA CHUPPI
Director: Laxman Utekar
Producer: Maddock Films, Jio Cinema
Cast: Kartik Aaryan, Kriti Sanon, Pankaj Tripathi, Vinay Pathak, Aparshakti Khurana
Rating: 3/5
Read more about the coronavirus
So what is Spicy Chickenjoy?
Just as McDonald’s has the Big Mac, Jollibee has Spicy Chickenjoy – a piece of fried chicken that’s crispy and spicy on the outside and comes with a side of spaghetti, all covered in tomato sauce and topped with sausage slices and ground beef. It sounds like a recipe that a child would come up with, but perhaps that’s the point – a flavourbomb combination of cheap comfort foods. Chickenjoy is Jollibee’s best-selling product in every country in which it has a presence.
Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5