IMF plans more cuts to global growth outlook

The Washington-based IMF is expecting to cut its 2016 global growth forecast again as weaker demand dims its economic outlook, according to managing director Christine Lagarde.

The fund is due to revise its World Economic Outlook forecasts in early October, ahead of its annual meetings. Another cut would be the sixth straight growth markdown in about 18 months.

The leader of the G20 countries should do a lot more to increase demand, fight inequality and build the case for trade and globalisation, Lagarde told international media.

Lagarde described the overall outlook as “slightly declining growth, fragile, weak and certainly not fueled by trade”, despite the fact that some of the major threats to the global economy have yet to materialise, such as a recession sparked by Britain’s vote to leave the EU or a possible collapse in Chinese growth.

Saudi Arabia and Russia to form oil market task force

Saudi Arabia and Russia have agreed to form a working group to monitor the global oil market and draft regulations to stabilise crude prices, according to a joint statement made on the sidelines of the G20 summit in Hangzhou, China.

Russia’s Minister of Energy Alexander Novak said a production freeze would be the only way to stabilise prices.

The task force will meet for the first time in October. The joint statement said stabilising oil prices would ensure steady investment in the industry.

Saudi Arabia and Russia, along with other Opec and non-Opec producers, attempted to agree a production freeze at a meeting in Qatar in April, but talks broke down without a decision.

GCC oil refinery investment slows in 2016

Dubai government-owned Emirates National Oil Company (Enoc) announced on 19 September that it had awarded the main contract on its $1bn-plus refinery expansion project to France’s Technip, confirming a MEED report in August.

However, the deal represents the only major contract award in the GCC’s refining sector in 2016, as a raft of schemes face delays at the pre-execution phase.

It is unclear to what extent delays in downstream projects in the region are linked to the drop in oil prices, which started to fall in the second half of 2014. While projects such as the Dubai refinery expansion are based on meeting domestic demand, others, such as the UAE’s planned Fujairah scheme and Oman’s Duqm refinery project, are aimed at export markets.

Due to the scale of investment required to build new refineries and expand existing operations, uncertainty in the outlook for oil prices is likely to lead to further delays in final investment decisions for many GCC schemes.

Aramco IPO on track for 2018 listing

The initial public offering (IPO) of state oil company Saudi Aramco is on track for early 2018, as the government works on figuring out how best to sell stakes in the world’s biggest oil exporter.

Saudi Arabia’s energy minister Khalid al-Falih said the process will require sufficient time to allow the government to consider how to optimise Aramco’s value for both the kingdom and potential shareholders.

“We have to optimise, optimise for the kingdom’s interest as the owners of the company and the owners of the resource today, optimise for the investors who have to enter into this,” said Al-Falih.

Iraq oil minister calls for contract review

Iraq’s new oil minister, Jabar al-Luaibi, has said the ministry will review contracts with oil companies to cut fees when crude prices are low.

The Oil Ministry said in a statement that Al-Luaibi had discussed the contract review with Michael Townshend, head of Iraq operations for UK-based oil major BP.

Crude prices have dropped significantly since many production-sharing agreements were signed between Baghdad and international oil companies (IOCs) toward the end of the past decade.

An Iraqi energy sector official told MEED in February that the contracts need to be changed significantly to reflect lower prices.

Aramco to spend $334bn over the next decade

Saudi Aramco plans to invest $334bn over the next decade to sustain oil and gas production, an official from the firm has said.

Abdulaziz al-Abdulkarim, vice-president of procurement and supply chain management at Aramco, said 42 per cent of the total would be spent on drilling, with 31 per cent on surface facilities and 11 per cent on infrastructure. “That’s $33bn annually that will be progressively spent in the Saudi economy,” he told a conference in Bahrain on 26 September.

Aramco, the world’s largest oil exporter, plans to raise its oil well count to 1,000 by 2020, from about 850 in 2015. Wells producing gas will grow to 500 from about 300 during the same period.

Dubai ruler shakes up government bodies

Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum has issued a decree forcing several government executives into early retirement.

The decree comes after Sheikh Mohammed carried out a surprise visit to several government offices across the city in late August.

It was reported in local media that several high-ranking officials were not present when the ruler, who is also prime minister of the UAE, carried out spot checks. The same reports have also said up to nine executive directors from Dubai Municipality have been relieved of their duties.

The director-general of the Dubai Media Office told local media that the ruler “certainly wanted to send a message. Timeliness starts at the top, and we won’t go after the employees when their bosses aren’t there”.

UAE approves new bankruptcy law

The UAE Cabinet has approved the final draft of the federal bankruptcy law. The announcement was made by UAE Vice-President, Prime Minister, and Ruler of Dubai Sheikh Mohammed bin Rashid al-Maktoum.

“We have adopted today the final version of the federal bankruptcy law, designed to enhance the investment attractiveness of our economy and facilitate businesses,” Sheikh Mohammed said.

UAE Finance Minister Sheikh Hamdan bin Rashid al-Maktoum also issued a statement, saying: “The law contributes in strengthening the financial, economic and legislative system in the UAE, through putting in place a separate and modern law to avoid bankruptcy cases, including financial restructuring, composition procedures, restructuring debts and liquidation funds. Companies and individuals are now able to restructure their debt while avoiding bankruptcy liquidation.”

Analysts have previously critised the UAE for its lack of a bankruptcy law, which has led to the criminalisation of defaulting. The new law is expected to encourage the creation of new companies, with many potential business owners having previously feared the risk of bankruptcy and its legal ramifications.

RTA discusses Metro 2020 financing with banks

Dubai’s Roads & Transport Authority (RTA) is in discussions with local banks Emirates NBD and Dubai Islamic Bank (DIB) to borrow about $1.5bn to fund the construction of the Route 2020 metro link, according to sources familiar with the matter.

Export credit agencies will arrange a second tranche of about $1.5bn, the sources said, declining to be named.

The local bank tranche will have a 28-year tenor. The RTA is expected to secure preferential rates from its relationship banks. The funds will be lent to a blanket special-purpose vehicle, with sovereign guarantees.

The RTA awarded the AED10.6bn ($2.9bn) contract to design and build the Red Line extension to a consortium of Spain’s Acciona, Turkey’s Gulermak, and France’s Alstom in June.

The scheme, known as Route 2020, involves building a 15-kilometre-long line branching off the existing Red Line at the Nakheel Harbour & Tower station, between the Ibn Battuta Mall and Jumeirah Lake Towers stations. The line will also connect to Al-Maktoum International airport. About 11km of the line will be elevated, with five elevated stations and two underground stations.

Nakheel becomes debt-free

Dubai property developer Nakheel became a debt-free company in late August, when it paid its AED4.4bn ($1.2bn) trade creditor sukuk (Islamic bond).

“It was a challenging period we went through, we achieved it in a quick manner and managed to deliver on all of our commitments ahead of time and to launch new projects,” said Nakheel chairman Ali Rashid Lootah.

The firm’s journey to clear its debts began in January 2014, when it shocked many in the market by saying it would pay off its bank debt four years ahead of time.

This was made possible by outperforming the restructuring plan drawn up for the developer in 2010. The plan was created after Nakheel was forced to default on its debts following the crash of Dubai’s property market in 2008. “We achieved the initial restructuring plan years ahead of time with significant savings of AED25bn,” said Lootah.

Ultra-competitive solar market is a win for Abu Dhabi

Abu Dhabi is challenging Dubai’s regional solar crown after receiving world record-low bids for Abu Dhabi Water & Electricity Authority’s (Adwea’s) 350MW photovoltaic (PV) solar project.

The low bid from Japan’s Marubeni Corporation and China’s Jinko Solar was just AED0.08888 ($0.0242) a kilowatt hour (kWh). This is 16.8 per cent below the previous world record tariff of $0.0291 a kWh received in Chile in August.

France’s EDF and the local Masdar were also below the previous world record offer, at AED0.09304. This was 15.4 per cent lower than the world record Masdar set in Dubai in May, although they cannot be directly compared as the Abu Dhabi project uses seasonally weighted levelised costs of energy.

That said, the speed with which solar tariffs are falling is incredible; so incredible that many analysts and financiers are questioning whether these prices are sustainable for developers. The decreases are based on falling PV solar panel prices, as well as savings in engineering, procurement and construction (EPC) costs.

UAE offers Egypt’s central bank $1bn

The UAE has offered a deposit of $1bn to the Central Bank of Egypt.

The cash deposit has been offered for a period of six years, as the UAE continues its “unwavering stand in support of Egypt and its people”, said a statement published by UAE state-controlled Emirates News Agency (WAM).

The UAE has been a strong supporter of the current Egyptian government, and has offered several financial aid and investment packages to the country since President Abdul Fatah al-Sisi came to power in 2014.

During the Egypt Economic Development Conference in March 2015, the UAE pledged $4bn of financial support to the North African country.

Egypt looks to China and Saudi Arabia for financing gap

The $6bn-worth of bilateral financing that the IMF has told Egypt it needs in order to receive a $12bn loan is expected to be provided by Saudi Arabia and China.

Following meetings between the three countries at the G20 leaders’ summit earlier in September, the Washington-based fund released a statement saying Cairo has had “very productive discussions” with authorities in China and Saudi Arabia regarding this matter.

In August, Egypt and the IMF signed a staff-level agreement for a $12bn loan. At the time, it was agreed the loan would be subject to Cairo’s ability to press ahead with economic reforms as well as secure an additional $6bn in bilateral financing.

Egypt has already approved a new law to adopt a value-added tax (VAT) of up to 14 per cent by 2017. The authorities have also pledged to phase out large state subsidies and further devalue the currency.

The central bank also recently announced it has received the first $1bn installment of a $3bn loan from the Washington-based World Bank.

It is understood the World Bank loan and a $1.5bn loan from the African Development Bank do not count as part of the $6bn required.

Egypt’s foreign reserves have witnessed a drastic decline over the past few years as revenues from tourism, the Suez Canal and foreign investment fall. Foreign reserves were estimated at $16.6bn in August this year, compared with $30bn-plus in 2011.

Middle East contracts awarded: August 2016

August was marked by a noticeable drop in contract awards in the region’s biggest projects market, Saudi Arabia. The kingdom awarded deals worth a total of $518m, compared with $1.8bn in July.

Despite this, the overall value of contract awards in the region increased in August to $9.4bn, from $8.3bn in July. The number of contracts let rose in this period to 51 from 45 last month. However, August’s contract awards value is still well below the $12bn recorded in June, when Iran, the UAE and Qatar signed multibillion-dollar single deals.

Qatar overtook the UAE, which had been leading the index for several months, in terms of contract awards in August, due mainly to the award of a $2.1bn construction deal for the Al-Khor Expressway project. The country awarded five deals, compared with the UAE’s 21.

The award of the $900m contract for Emirates National Oil Company’s (Enoc’s) Jebel Ali refinery expansion propelled the UAE to second in the contract awards ranking. This was followed by the $408m contract awarded by local developer Nakheel for the Al-Khail Avenue mall in Dubai.

Kuwait followed the UAE in the value of contracts awards, with a total of $2.4bn of deals awarded. The largest contract signed was for a $494m project on the Northern Regional Road. Kuwait has launched numerous road projects in the past year to address traffic congestion, particularly in Kuwait City, and to facilitate the smoother flow of passengers and goods by road across the country.