A pair of large deals in India and China underline the changing landscape of Asian oil refining, which is poised to see intensifying competition over the next several years.
In China, the government is considering a merger of Sinochem Group and ChemChina to create a US$100 billion petrochemicals conglomerate that could offer some competition to the country’s two dominant domestic oil refining giants, Sinopec and PetroChina, according to news reports there.
Meanwhile, Russia’s Rosneft and Netherlands-based Trafigura, the world’s third largest commodities trading house, have combined to buy almost all of India’s Essar Oil, a division of the billionaire Ruia family’s Essar Group. The group owns India’s second-largest refinery – a 405,000 barrels per day plant at Vadinar, in Gujarat – as well as one of the UK’s largest refineries, the 210,000 bpd former Shell plant in Stanlow.
Shashi Ruia, Essar Group’s chairman, said the sale will help the group to grow its other businesses, which range from steel to shipping.
Meanwhile the China deal, which has not been confirmed by the government nor either of the companies, has long been talked about as part of the government’s drive to liberalise the domestic market and break up the dominance of the two big players.
Sinochem has three refineries with capacity of about 480,000 barrels per day, while ChemChina’s nine facilities have the same overall capacity.
The merged group would still be dwarfed by Sinochem, which has about five times their combined capacity, while PetroChina’s refining mass is about three times the combined group’s.
Asia’s refined oil products market has became saturated after a period of rapid expansion, with China aggressively marketing its oversupply.
BMI Research, a division of Fitch Group, forecast diesel demand – of which China is the world’s second largest consumer after the US – will slow markedly over the next five years, to average 0.2 per cent a year versus 2.8 per cent in the five years to 2014.
“As domestic demand will prove increasingly insufficient to absorb the large quantities of diesel produced, we anticipate Chinese diesel will continue to flood the regional market,” BMI predicts. “Supply-side growth will be rampant, as despite the apparent lack of sufficient demand for the fuel domestically, Chinese refineries appear content to abide by a policy where over production is exported rather than cut.”
Meanwhile, the Indian purchase is partly driven by Russia’s efforts to deepen ties with a market that is expected to take over from China as the fastest growing for refined products in coming years. Essar itself has already taken stakes in Russian oilfields that Rosneft is developing and may buy a part of the further 20 per stake in Rosneft that the government is expected to sell to strategic investors.
The Gujarat refinery is one of the most sophisticated in the world, giving it the flexibility to handle a wide variety of crude oil grades and produce a big slate of products to meet India’s growing demand.
amcauley@thenational.ae
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Company profile
Name: Fruitful Day
Founders: Marie-Christine Luijckx, Lyla Dalal AlRawi, Lindsey Fournie
Based: Dubai, UAE
Founded: 2015
Number of employees: 30
Sector: F&B
Funding so far: Dh3 million
Future funding plans: None at present
Future markets: Saudi Arabia, potentially Kuwait and other GCC countries
Company profile
Company: Rent Your Wardrobe
Date started: May 2021
Founder: Mamta Arora
Based: Dubai
Sector: Clothes rental subscription
Stage: Bootstrapped, self-funded
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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Fight card
1. Bantamweight: Victor Nunes (BRA) v Siyovush Gulmamadov (TJK)
2. Featherweight: Hussein Salim (IRQ) v Shakhriyor Juraev (UZB)
3. Catchweight 80kg: Rashed Dawood (UAE) v Khamza Yamadaev (RUS)
4. Lightweight: Ho Taek-oh (KOR) v Ronald Girones (CUB)
5. Lightweight: Arthur Zaynukov (RUS) v Damien Lapilus (FRA)
6. Bantamweight: Vinicius de Oliveira (BRA) v Furkatbek Yokubov (RUS)
7. Featherweight: Movlid Khaybulaev (RUS) v Zaka Fatullazade (AZE)
8. Flyweight: Shannon Ross (TUR) v Donovon Freelow (USA)
9. Lightweight: Mohammad Yahya (UAE) v Dan Collins (GBR)
10. Catchweight 73kg: Islam Mamedov (RUS) v Martun Mezhulmyan (ARM)
11. Bantamweight World title: Jaures Dea (CAM) v Xavier Alaoui (MAR)
12. Flyweight World title: Manon Fiorot (FRA) v Gabriela Campo (ARG)
England World Cup squad
Eoin Morgan (capt), Moeen Ali, Jofra Archer, Jonny Bairstow, Jos Buttler (wkt), Tom Curran, Liam Dawson, Liam Plunkett, Adil Rashid, Joe Root, Jason Roy, Ben Stokes, James Vince, Chris Woakes, Mark Wood
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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Gully Boy
Director: Zoya Akhtar
Producer: Excel Entertainment & Tiger Baby
Cast: Ranveer Singh, Alia Bhatt, Kalki Koechlin, Siddhant Chaturvedi
Rating: 4/5 stars
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