Benefitting from The Middle Easts Drive to Diversify

Breakbulk Europe
21 May 2015
Teresa Lehovd
Head of Market Intelligence
Hegh Autoliners
1

/ 28 May 2015

Key Topics

Why diversify?

Current status

Project pipeline

Risks and Way Forward

1

The Scope
Saudi
Arabia
Egypt

UAE

Algeria

Qatar
Non-oil
sectors

Morocco

Kuwait

Bahrain

Oman

1
3

The Region in a Nutshell

53 %

80 %

100m

The (MENA)
regions share of
known world oil
reserves

Oil and Gas share

of the regions
exports

Expected
population growth
between 2014 and
2050

40 %

$73 000

$380 bn

Saudi Arabias
population
below 15 years

Gap between the

highest and lowest
GDP/Person (Gulf
countries)

Amount Gulf states

have lost in
revenue since oil
price fall
1

Why Diversify?

Reduce oilrelated risks

Create jobs
Ensure
sustainable
post-oil
growth

Prestige

1
5

Oil and Gas Dependency

Source: Economic Diversification in the GCC; Pascal Devaux

1
6

Areas of Comparative Advantage

Energyintensive
manufacturing

Mining and
mineral-based
industries

Secondary
sectors

Trade and
logistics

Tourism,
hospitality and
aviation

Petrochemicals

Aluminium

Automotive

Location

Location /
Climate

Downstream
conversion
industries

Steel

Paper

Low customs
duties

Plastics and
packaging

Fertilizers
Cement
Downstream
industries
related to
metals
production

Food
Agriculture
Agro-processing

Businessfriendly
environment

Attractive
hospitality
infrastructure
Attractive global
events

Biotechnology
Rapid port
Pharmaceuticals development
Telecom

Expansion of
the middle class
Transshipment in China, India
services / FTZ and Africa

Polysilicon
1
7

Infrastructure: Key to Diversification

Transport
Financial
services

Sports and
Culture

Power

Water

Catalysts

Consumer
goods

Healthcare
Education

1
8

$1,37 tn Total Project Investment

Projects in Execution, Planned and Un-awarded
Investment $ bn
Mining & Mineral-based

40

Petrochemicals

105

Oil & Gas

224

Infrastructure

1,000
0

200

400

600

800
1

1000
2

1200
4

$40bn Mining and Mineral-Based Projects (1)

Country

Project

Status

Value
($bn)

Award Date

S. Arabia

Jubail steel plant

Study

2,5

2015

S. Arabia

Rabigh steel plant

Study

1,7

2015

S. Arabia

Waad al-Shamal Phosphate City

Feed

1,5

2015

S. Arabia

Hail Integrated Steel Complex

Study

1,5

2015

S. Arabia

Copper and Zink Smelter

Study

1,5

2015

S. Arabia

Al-Jubail polysilicon plant

Design

1,2

2015

S. Arabia

Yanbu polysilicon and solar wafer plant

Main
contract

1,1

2014

S. Arabia

Yanbu Integrated Smelter Complex (copper,

lead, zink)

Study

1,0

2015

Projects over 1bn

10 / 28 May 2015

$40bn Mining and Mineral-Based Projects (2)

Country

Project

Status

Value ($bn)

Award Date

UAE

Abu Dhabi alumina refinery

Study

1,5

2015

UAE

Aluminium Rolling Mill

Study

1,5

2015

UAE

Abu Dhabi Steel Plant: phase 3

On hold

1,0

2015

Qatar

Ras Laffan Polysilicon Plant

Execution

1,0

2011

Oman

Duqm cement plant

Study

1,0

2015

Oman

Sohar aluminium smelter expansion

Study

2,4

2015

Oman

Sohar iron ore pelletising plant: phase 2

Study

1,0

2015

Bahrain

Sitra ammonia/urea plant expansion

Prequalification

2,5

2016

Bahrain

Alba Aluminium smelter expansion

Study

2,0

2015

Bahrain

Hidd Steel Mill

Execution

1,32

2010

Egypt

Beni Suef factory

Execution

1,2

2012

Algeria

Bellara Integrated Steel Complex

Study

3,2

2015

Algeria

Tebessa phosphate plant

Study

2,0

2016

Algeria

Oued Keberit fertilizer plant

Study

2,0

2016

Projects over 1bn

11 / 28 May 2015

$105bn Key Petrochemical Projects

Country

Project

Status

Value ($bn)

Completion

S. Arabia

Yanbu Oil-to-Chemicals plant

Plan

30

2020

Sadara Chemical Complex (Jubail)

Execution

20

2016

PetroRabigh phase 2

Execution

8,5

2016

On hold

2019

Execution

3,4

2016

Main contract

2018

Scrapped

2018

Al-Sejeel petrochemicals complex

Shelved

7,4

2018

Al-Karaana Petrochemicals Complex

Shelved

6,4

2018

Duqm Petrochemical Complex

On hold

2023

Feed

3,6

2018

Execution/Delays

2019

Satorp phase 2
Kemya elastomers

Ras Tanura expansion

Sadaf polyurethane expansion
Qatar

Oman

Liwa Plastics in Sohar

Egypt

Tahrir Petrochemical plant

1
12

$ 1 tn Infrastructure Project Investment

Investment $bn
Highways/Bridges
Maritime Infrastructure
Power & Water
Airports
Civil construction
Rail
0

50

100

150

200
1

13

250
2

300
4

Saudi Arabia Dominates Current $400bn-worth of

MEGA Infrastructure Project Investment
Top infrastructure projects by country
($bn)

1 Trillion
400 Bn

Saudi Arabia
Egypt
UAE
Qatar
Kuwait
Algeria
Oman
Bahrain
Morocco

50

100

150

200

Project packages excl. Oil/Gas, Chemical and Industrial

Stages: Contracts awarded, in design, study or main contract pre-qualification or bidding
1
14

Regional Transformation
Rail: Booming!
Metro networks in major cities
First high-speed rail
Regional rail network

Construction
New cities
Millions of homes
Healthcare & Education
Event-driven construction

Airports
Airports in major cities
Cargo hubs

Maritime
New ports and transhipment
hubs
Re-export facilities

Power & Water: Worlds

most attractive market
Nuclear, renewables
Pan-Arab grid
Desalination & Wastewater

Highways & Bridges

Expressways and causeways

Regional network
1

15

Signature Infrastructure Projects (1)

Saudi King Abdullah Economic City (93)
Arabia Nuclear power reactors (70)
Saudi Housing Project (68)
Sudair Industrial City (40)
Jizan Economic City (30)
Jeddah Economic City (30)
Jeddah Int. Airport (28)
+ 7 domestic airports
Riyadh metro (23)
Metro: Jeddah, Mecca, Dammam
Saudi Landbridge (7)
Haramain HS Rail (13,7) (Medina,
Mecca, Jeddah)
Riyadh Dammam HS Rail (14)

UAE

Dubailand (147)
Mohammed bin Rashid City (55)
Al-Maktoum Int. Airport (32)
Jumeirah Village (9,2)
Dubai Lagoon (4,5)
Al-Furjan Development (4)
Dubai Metro (14,4)
Emirates Roads Master Plan (12)
Etihad Railway Network (11)
Kizad Terminal (10)
Expo 2020 Masterplan (9)
Abu Dhabi Metro (7)
Abu Dhabi Airport Expansion (6,8)
Mall of the World (6,8)

Figures in brackets represent project value (BN USD)

1
16

Signature Infrastructure Projects (2)

Qatar

Lusail development (45)

Integrated Transport Project (incl.
Doha metro) (40)
Expressway program (20)
New Doha Int. Airport (15,5)
Local roads and drainage
program (14,6)
Education City (7,5)
New Port Project (7,4)
Hamad Int. Airport (15,5)

Egypt

Massive energy projects

1 million homes (40)
The Ayaat City (24,2)
Cairo Airport City (14)
New Suez Canal (12)
Cairo Metro (12)
AlexandriaAswan HS Rail (10)
Cairo monorail (1,5)

Kuwait

Duqm New Town (incl. Duqm

port) (20)
National Rail Network (15,6)
Muscat and Salalah Int. Airport
expansion (5,2)
Sohar, Duqm airports

Al-Khairan City (14)

Kuwait national railroad (10)
Mubarak al-Kabeer seaport (on
Bubiyan Island) (8)
Kuwait City Metro (7)
Kuwait Airport Expansion (6)
Bubiyan Island (6)

Light Rail Network (7,9)

Water Garden City (6,6)
Bahrain Int. Airport Upgrade (4,6)

Algeria

East-West Motorway (11,7)

Tramways (6)
Hassi Messaoud New City (6)

Oman

Bahrain

Figures in brackets represent project value (BN USD)

1
17

Diversification: Key Success Factors

Political stability
Predictable and efficient governance
Stable oil price
Infrastructure
Social and cultural reforms
Education and skills

1
18

High Vulnerability to Oil Price Trends

Budget Breakeven Oil Prices
120

OPEC
Basket Price

116.4

USD/B

111.5

107.5

110

USD 109
Jun 2014

100

90.7
90

77.6

80

USD 79
Nov 2014

73.3

70
60

USD 63
May 2015

53.3

50

2010
2014
2015

40
Saudi Arabia

Kuwait

Oman

UAE

Bahrain

Qatar

Algeria

Source: MEED

1
19

Downgraded Growth Outlook

Real 2015 GDP Growth Forecast Comparison
May 2015

May 2014
6,4
6,1

% change y-y

4,8
4,7
4,3
3,9
3,5
3,3

3,6

4,7
4,3

4,6

4,5

3,8

2,6

2,5
2,2
1,5

Algeria

Source: IHS
20 / 28 May 2015

Bahrain

* Estimate

Egypt*

Kuwait

Morocco

Oman

Qatar

Saudi
Arabia

United Arab
Emirates

Current Project Risk Assessment

Unchanged
Projects tied to major events (Qatar FIFA 2022, Dubai Expo 2020)
Mega-projects related to economic diversification
Infrastructure incl. transport (Power, Water, Rail, Ports, Airports)
Social infrastructure (housing, hospitals, education)
Renewables (North Africa)

Downsized, Delayed or Cancelled

Refining and petrochemical (Qatar, Oman)

Projects not strategically important, or in early planning phases
Commercial / Retail construction
High-end real estate projects
Renewables (S. Arabia, Abu Dhabi)
1

21

Project Risks by Country

(Relative Terms)

Moderate
Risk

Qatar
UAE (excl. Abu Dhabi)
Egypt
Morocco
Saudi Arabia

High Risk

Bahrain
Oman
Abu Dhabi
Kuwait
Algeria

1
22 / 28 May 2015

Improved Resilience, but Still Long Way to Go

Short term
Strong currency
reserves
Sovereign wealth funds
Petrodollar assests
Improved investment
portfolio
Non-oil sectors
Lower construction and
material costs
Focus on Asia

Longer term
Turn to private and
Islamic financing
Sell strategic assets
Remove government
subsidies and transfers
Introduce taxes
(income, property, VAT)
Further reduce project
spending
Deep structural and
social reforms

1
23 / 28 May 2015

Conclusions
Internal and external mega-forces put an increasing pressure
on the Region to invest in economic diversification
Low oil price is now testing the regions strategies showing
that Real diversification will require more deep-cutting
reforms
Prospects for the project cargo market remain good for now
But re-calibration or scaling back of ambition levels has
begun, and will accelerate if oil price stays low for long
Has the Region done Too little, too late?

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Thank you for your attention

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