US president-elect Donald Trumps victory brings uncertainty for the Middle East; oil markets face supply crunch; opposition returns in Kuwait
Trumps victory brings uncertainty for region
Donald Trump
The arrival of a new president in the White House always has wide-ranging implications for the balance of power in the Middle East. But the shock win of Republican candidate Donald Trump on 8 November adds a whole new level of uncertainty to the US role as the most powerful external actor in the regions politics. The change in leadership comes at a time of unprecedented upheaval in the Middle East, with wars raging in a number of theatres and low oil prices damaging Gulf economies. As a politician, Trump is untested and unpredictable.
Oil markets face supply crunch
The Paris-based International Energy Agency (IEA) has cautioned that the increased slashing of spending by energy firms is setting the stage for a global supply shortfall in 2020. A price of about $80 a barrel is needed to ensure a matching of supply and demand by that time frame, it added. The volume of conventional crude oil resources receiving development approval in 2015 fell to its lowest level since the 1950s and the data for 2016 shows no sign of a rebound, the agency warned. Oil markets are risking losing the equivalent of Iraqs current oil output from the global balance every year. The IEA estimates that investments in upstream oil and gas production fell from historic highs of $780bn in 2014 by almost $200bn in 2015, and is expected to decline by a further $140bn in 2016.
The opposition returns in Kuwait
Kuwait parliament
A revived opposition seeking to abolish austerity measures for citizens swept most of the votes at the parliamentary election in Kuwait on 26 November. The polls, which were called after an emiri decree dissolved the National Assembly in October, saw opposition candidates win almost half of the 50 parliamentary seats and marked an end to their four-year boycott of the political process. Islamist, nationalist and liberal opposition won at least 15 seats, according to the local daily Kuwait Times. Only 20 former members of the assembly were re-elected. Kuwaits seventh general election in a decade saw a high turnout, with some polling stations reporting a showing of up to 80 per cent.
Rouhani confident on Iran deal
Saudi Arabias King Salman bin Abdulaziz al-Saud (left) with Irans President Hassan Rouhani
Irans President Hassan Rouhani does not expect the US president-elect to have any impact on the nuclear deal reached with Western powers last year. Irans understanding in the nuclear deal was that the accord was not concluded with one country or government, but was approved by a resolution of the UN Security Council, Rouhani said on state television. There is no possibility that it can be changed by a single government. The deal, signed in July 2015 and brokered by Washington, Moscow, and several Western states, curtailed Irans growing nuclear ambitions in exchange for lifting sanctions that had crippled its economy.
Egypt floats its currency
Egypts Central Bank Governor Tarek Amer
Cairo has successfully pressed ahead with a number of policies. The most recent was the flotation of the pound earlier this month, which has seen the currency devalue by about 50 per cent. Egypts economy has been struggling for several years following mass protests in 2011 that removed long-time president Hosni Mubarak. Since then, revenues from tourism, the Suez Canal and foreign investments have dried up, with economic and security issues causing problems for Cairo in recent years. In addition to this, the government also successfully secured a three-year $12bn loan from the Washington-based IMF. The first installment of $2.7bn has been received following the IMF executive boards approval, according to a statement from the Central Bank of Egypt. The remaining amount will be provided over a number of phases, which will be subject to five reviews over the three-year period. The loan, which was agreed earlier this year, has been subject to Cairo applying several key economic reforms such as the cutting of state subsidies, the floating of the Egyptian pound and the implementation of a new value-added tax (VAT).
Riyadh pays $10bn to contractors
Mecca
Riyadh has paid contractors some government payments owed to private sector firms, according to several local reports that have quoted officials from Council of Economic and Development Affairs (CEDA). The reports say Riyadh has made payments of up to $10bn to contractors operating in the kingdom. The government is likely to disburse another $26.6bn next month to pay up to 80 per cent of the total dues to contractors next month, reported local daily Arab News, citing Fahad al-Hammadi, CEO of the National Contractors Committee at the Council of Saudi Chambers of Commerce and Industry. The plans were approved during a meeting of CEDA, chaired by Deputy Crown Prince Mohammed bin Salman al-Saud in Riyadh on 7 November. Saudi Arabia also removed its finance minister, Ibrahim bin Abdulaziz al-Assaf, in a royal decree, replacing him with Mohammed bin Abdullah bin Abdulaziz al-Jadaan.
Oman considers privatising oil subsidiaries
Hamad al-Rumhy
Oman Oil Company (OOC) and Petroleum Development Oman (PDO) are planning higher levels of private sector investment in oil and petrochemicals subsidiaries, according to the local Oman Observer. PDO is studying the unbundling of non-core subsidiaries for eventual privatisation, Oil & Gas Minister and chairman of PDO Mohammed al-Rumhy told a seminar organised by the Oman-French Friendship Association. He suggested PDOs logistics arm and the main oil line could be restructured and corporatised. This would prepare them for equity investments by strategic investors or for initial public offerings.
Saudi and UAE investors form $1bn e-commerce venture
Mohammed Alabbar
UAE and Saudi investors will launch a $1bn e-commerce company for the Middle East in January. Known as Noon, the company is backed by Saudi Arabias Public Investment Fund (PIF) which has a 50 per cent stake in the company and UAE investors, led by Emaar Properties chairman Mohamed Alabbar. Headquartered in Riyadh, the company will initially launch in the UAE and Saudi Arabia, and plans to cover the entire Middle East region soon after. It aims to grow online sales in the region from 2 per cent of the total market ($3bn) to 15 per cent ($70bn) within a decade. The e-commerce platform will offer 20 million products covering fashion, books, home and garden, electronics, sports and outdoor, health and beauty, personal care, toys, child and baby products. The service is enabled by more than 10 million square feet of warehousing, including a 3.5 million-square-foot logistics centre in the UAE, same-day delivery through Noon Transportation an in-house express delivery service and payments with a secure gateway known as NoonPay.
Saudi IPP developer prepares to sign finance deals
UK/French Engie is preparing to sign a project finance agreement imminently for its $1.2bn Fadhili independent power project (IPP) in Saudi Arabia. Spains Banco Santander and Frances Credit Agricole are not participating in the transaction as previously announced by Saudi Electricity Company (SEC). A joint venture of SEC and state-owned oil and gas giant Saudi Aramco awarded the main contract to Engie to develop the power and steam plant in July. The special project vehicle is 30 per cent owned by SEC, 30 per cent by Aramco and 40 per cent by the private sector partners.
Middle East contracts awarded: October 2016
Middle East Contract Awards to October 2016
A sharp decline in contract awards in Qatar set the tone for overall deal activity in the region in October.
October contract awards by country | |
Country | Award ($m) |
Bahrain | 154 |
Egypt | 779 |
Jordan | 86 |
Kuwait | 527 |
Oman | 398 |
Qatar | 15 |
Saudi Arabia | 1021 |
UAE | 1,708 |
The value of contract awards in the region fell steeply to $4.9bn, the lowest ever value this year, from $7.1bn in September a 31 per cent drop. The value awarded in September was itself the second-lowest value of contract awards in 2016.
The worst-performing market, Qatar, recorded a whopping 99 per cent decrease, from $1.5bn of deals let in September to $15m in October. The only award was made by state-owned Qatar Petroleum for a fire station in Ras Laffan industrial city.
Egypt made a huge turnaround in contract activity, with $779m of deals let in October compared with $65m in September. The country awarded the second-largest deal, with a $300m contract awarded to UK-based Subsea 7 by the local Pharaonic Petroleum Company for the installation of pipelines and associated infrastructure at the Atoll offshore field.
Further reading
UAE firm to set up $1.6bn steel unit in Algeria
Emarat Dzayer Group, a Dubai-based conglomerate whose business interests span oil and gas, transport, agriculture and healthcare, has signed an agreement with the Algerian government-controlled GroupeImetal to create a joint venture to produce steel in the North African country.
Contractor selected for Qatars largest World Cup stadium
Qatars Supreme Committee for Delivery & Legacy has selected a joint venture of Beijing-based China Railway Construction Corporation and the local HBK for the QR2.8bn ($769m) contract to build the World Cup football stadium at Lusail.
Saipem bags two Aramco deals worth $1bn
Italys Saipem has won two deals with a combined value of $1bn from Saudi Aramco for the development of the Marjan, Zuluf and Safaniya offshore oil fields. Saipem has received the notification of award for the two engineering, procurement, installation and construction (EPIC) contracts.
Work starts on $3.4bn Dubai coal project
A consortium led by Saudi Arabias Acwa Power and Chinas Harbin Electric has started construction work on the 2,400MW Hassyan coal-fired power plant in Dubai. The GCCs first coal-fired power plant is being developed under the independent power project (IPP) model, with the developer consortium having signed a 25-year power purchase agreement (PPA) with Dubai Electricity & Water Authority (Dewa).
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