China will continue to be the dominant force in energy demand growth over the next couple of decades, said Mark Finley, BP’s head of global energy markets.

But one of the most profound predictions in BP’s latest global outlook programme launched last month, which Mr Finley was presenting to top Abu Dhabi government officials yesterday, is the changing pattern of energy demand in China over the next 20 years.

He said that while it was important to be humble about the accuracy of the company’s widely watched annual forecasts, there is one area that they generally get right – predicting demand patterns in the major economies.

China’s economic transformation – and the energy demand growth that went with it – has been one of the dominant global stories since the turn of the century and has already shifted the balance of energy power, and Arabian Gulf producers have been competing fiercely for a share of that market.

BP forecasts that China’s oil imports will more than double from 6 million barrels per day in 2013 to 13 million bpd by 2035.

By then, China will have surpassed the US as the largest single consumer of oil in the world as the latter’s oil demand continues to decline, and its dependence on oil imports will have increased from 60 per cent to 75 per cent.

“But we expect significant changes in the pace and form of economic growth and development in China,” Mr Finley said.

China made international commitments several years ago to reduce its energy intensity and carbon intensity – the measure of how much energy it consumes and CO2 it emits per unit of GDP, respectively – and despite widespread scepticism at the time it has delivered on both.

Mr Finley said these trends would continue while China moves its economic activity away from energy-intensive export industries and more towards delivery of domestic-focused goods and services.

But Mr Finley noted that the Middle East itself was “one of the foremost growth centres for oil demand … and this may present some strategic challenges in the future as well”.

The balancing act for Gulf producers is to stay competitive in a market that is moving more towards natural gas, where the competition – even with a slower growing China – will be almost entirely focused on Asian countries, and where it is also shifting downstream, towards refined products and petrochemicals.

One of the implications of the US shale oil revolution – together with the country’s declining domestic demand – is that it will be looking to compete more on international markets to sell its refined oil products, a trend already under way.

GCC countries also have been shifting resources downstream, so that future international competition will be more for petrol, jet fuel and other such markets, rather than purely for crude buyers.

Just as important is that the Gulf producers hold on to their strategic swing producer role, in which spare capacity (primarily in Saudi Arabia) has kept stability in the world oil markets. Mr Finley noted that the rate of disruption to the world oil market is at its highest level since the early 1990s, when the first Iraq war coincided with the collapse of the Soviet Union.

“Fortunately, countries such as the UAE, Kuwait and Saudi Arabia have invested over the years in having a robust oil sector and spare capacity,” Mr Finley said. “If the GCC sectors hadn’t invested then the world would be in recession right now, even with US shale production, because these massive supply disruptions would have resulted in sharply higher oil prices.”

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Egypt signed a number of deals with energy companies during its weekend Egypt the Future conference in the Red Sea resort of Sharm El Sheikh.

The agreements were part of attempts to address the country’s worsening energy crisis, which has been a major drag on the economy as well as a source of political unrest.

The centrepiece was the formal signing of a previously announced US$12 billion deal with BP to develop 5 trillion cubic feet of gas resources and 55 million barrels of condensate in the North Alexandria and West Mediterranean Deep Water areas in the West Nile Delta.

The deal represents the largest foreign direct investment in Egypt to date, according to a statement issued by BP chief executive Bob Dudley.

According to a separate BP statement: “The project envisages peak production of 1.2 billion cubic feet of gas a day, equating to a quarter of Egypt’s current gas production,” with the first gas expected in 2017.

The project would double BP’s current level of gas supply to a domestic market that has for years been chronically undersupplied, leading to regular power outages at times of greatest need during the summer heat.

BP also announced it had made another significant gas find in Egypt, in its North Damietta offshore concession, where the company estimated there is more than 5 trillion cubic feet of recoverable gas.

Meanwhile, Italian oil major Eni signed initial documents for a $5bn deal to develop several discoveries in Mediterranean, Western Desert, the Nile Delta and Sinai concessions that the company said would generate 900 million standard cubic feet of gas.

The Future of Egypt summit is targeting $60bn of foreign investment to keep building momentum in the economy, which is forecast to grow 6 per cent a year over the next five years, and to reduce unemployment and the potential for political unrest.

The energy sector particularly has suffered from chronic underinvestment for decades, and was particularly badly hit by the unrest that followed the Arab Spring protests in 2011.

Last summer, power generation stood at only 70 per cent of capacity, and the government ordered cutbacks to various industrial sectors.

In the decade and a half to the end of 2013, Egypt added only about 10,000 megawatts (MW) of power-generating capacity to bring the total to 30,000MW a woefully inadequate level for a population of nearly 90 million, according to the Middle East Institute, a think tank.

Countries with half the population, for example South Africa and South Korea, have capacities of 44,000MW and 80,000MW, respectively.

The sector’s problems have been a significant contributor to unrest over the years. The former prime minister Hisham Qandil angered citizens during a crisis in the summer of 2012 when he advised them to conserve energy by congregating in single rooms and wear cotton clothes. The former president Mohammed Morsi blamed political enemies for cutting power lines to stir up trouble.

The North African country’s demand for electricity is growing by about 12 per cent a year.

In another energy deal at the conference, General Electric said it agreed to sell gas turbines worth $1.7bn, which it estimates will add 10 per cent to the country’s generating capacity.

“It’s one of the largest single power projects for the year globally,” Bloomberg News quoted GE’s head of power and water, Steve Bolze, as saying.

The GE order is for 46 turbines and will provide 2.7 gigawatts of electricity, enough to supply 2.5 million homes.

At current rates of growth, Egypt’s capacity will have to rise to 50 gigawatts by 2025 to meet the country’s needs, GE forecasts.

Last September, Egypt’s electricity and energy department said it also aims to garner 20 per cent of Egypt’s energy from renewable sources, 12 per cent of which would be from wind power.

Yesterday, the German engineering firm Siemens said it had reached a deal with Egypt to build a 4.4GW combined-cycle power plant and install wind power capacity of 2GW.

Siemens said it will build a factory in Egypt to manufacture rotor blades for wind turbines, creating up to 1,000 jobs and therefore nearly trebling the company’s footprint in the country.

Siemens said it also had an initial agreement to build additional combined cycle power plants with a capacity of up to 6.6GW and 10 substations for reliable power supply.

“Egypt has great potential for wind power generation, especially in the Gulf of Suez and the Nile Valley,” said Markus Tacke, the head of Siemens’s wind and renewables unit.

In an effort to secure more investment in its gas sector, Egypt last year began to reach deals with companies including BP, BG and the Sharjah-based Dana Gas, to pay back billions of dollars in arrears that had accumulated during the country’s political crisis.

It agreed an umbrella deal to pay a total of $1.5bn toward the more than $5bn owed.

The Dana Gas chief executive Patrick Allman-Ward said at the Egypt summit that arrears have been reduced from about $300m last October to $185m.

The company has agreed to invest $270m to drill 37 new development wells, which it expects to increase its production by 50 per cent and extend plateau production – expected to reach 250 standard cubic feet a day – by several years.

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A leading nuclear safety official said yesterday that the UAE has not yet established the infrastructure needed to deal with a nuclear emergency, with just over two years to go before the first of four nuclear reactors at Barakah, in the west of Abu Dhabi, is due to start operation.

Professor Tomihiro Taniguchi, a former deputy director general of the UN’s nuclear watchdog, the International Atomic Energy Agency (IAEA), who was in charge of safety there until 2009, says the lessons of the March 2011 nuclear disaster at Fukushima in Japan, where he was the top nuclear safety official in the 1990s, have still to be learnt by the worldwide nuclear industry.

“I do not think that in this country capacity to deal with a nuclear emergency is well built yet,” Mr Taniguchi said in an interview with The National.

“Experts are well prepared for the normal operations of the nuclear plant but not yet for the incidents of accidents.”

Mr Taniguchi was the keynote speaker yesterday at a commemoration in Abu Dhabi of the fourth anniversary of the “triple disaster” Japan suffered when a huge earthquake in the Pacific ocean triggered a massive tsunami, which ultimately caused the Fukushima Daiichi nuclear plant to go into meltdown.

It was one of the worst nuclear disasters in history, which has left all of Japan’s 54 nuclear reactors still offline.

The disaster caused more than 18,000 deaths and there remains nearly a quarter of million Japanese who have not yet been resettled.

But while the nuclear disaster did not cause any direct deaths, its knock-on effects were a major source of displacement and contributed to some deaths.

“At Fukushima, no one died directly but more than 100 patients died when they had to be evacuated from hospitals,” Mr Taniguchi points out.

“The major lesson of Fukushima was that it is not confined to the plant site, but affects the whole community and beyond. There was major congestion on the roads and helicopters had to be used as the main means of transport.”

Leading Japanese and UAE nuclear officials followed yesterday’s commemoration with a workshop on The Lessons of Fukushima.

While Mr Taniguchi pointed out that there is still a lot of work to be done to coordinate a plan between the emirate’s National Emergency, Crisis and Disaster Management Authority, (NCEMA) the Federal Authority for Nuclear Regulation (FANR) and the Emirates Nuclear Energy Corporation, there are plans in place to develop it.

Ian Grant, director of nuclear safety at FANR, said the Barakah plants will not be granted their final licence to start operating without an “emergency preparedness and response” plan fully developed and approved.

“It is something that is being built in the country,” Mr Grant said.

“We are in the process of working with NCEMA to create an effective emergency management plan and indeed next week the IAEA will come visit FANR, NCEMA and its partners … The fact that we are having this mission at this point is a measure of our commitment to preparedness and it will give us a list of things to do.”

The UAE’s nuclear programme is being closely watched as the first due to come onstream in the region, where dozens of nuclear plants are at various stages of planning.

The first of four South Korean-designed plants is due on in 2017 in Barakah, with the others coming on every subsequent year to 2020, when total capacity is expected to be 5,600 megawatts.

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A leading nuclear safety official said yesterday that the UAE has not yet established the infrastructure needed to deal with a nuclear emergency, with just over two years to go before the first of four nuclear reactors at Barakah, in the west of Abu Dhabi, is due to start operation.

Professor Tomihiro Taniguchi, a former deputy director general of the UN’s nuclear watchdog, the International Atomic Energy Agency (IAEA), who was in charge of safety there until 2009, says the lessons of the nuclear disaster at Fukushima in Japan, where he was the top nuclear safety official in the 1990s, have still to be learnt by the worldwide nuclear industry.

“I do not think that in this country capacity to deal with a nuclear emergency is well built yet,” Mr Taniguchi said in an interview with The National. “Experts are well prepared for the normal operations of the nuclear plant but not yet for the incidents of accidents.”

Mr Taniguchi was keynote speaker yesterday at a commemoration in Abu Dhabi of the fourth anniversary of the “triple disaster” Japan suffered when a huge earthquake triggered a massive tsunami, which ultimately caused the Fukushima Dai Ichi nuclear plant to go into meltdown.

It was one of the worst nuclear disasters in history, which has left all of Japan’s 54 nuclear reactors still offline.

The disaster caused more than 18,000 deaths and there remains nearly a quarter of million Japanese who have not yet been resettled. But while the nuclear disaster did not cause any direct deaths, its knock-on effects were a major source of displacement and contributed to some deaths.

“At Fukushima, no one died directly but more than 100 patients died when they had to be evacuated from hospitals,” Mr Taniguchi points out. “The major lesson of Fukushima was that it is not confined to the plant site, but affects the whole community and beyond. There was major congestion on the roads and helicopters had to be used as the main means of transport.”

Leading Japanese and UAE nuclear officials followed yesterday’s commemoration with a workshop on The Lessons of Fukushima.

While Mr Taniguchi pointed out that there is still a lot of work to be done to coordinate a plan between the emirate’s National Emergency, Crisis and Disaster Management Authority, (NCEMA) the Federal Authority for Nuclear Regulation (FANR) and the Emirates Nuclear Energy Corporation, there are plans in place to develop it.

Ian Grant, director of nuclear safety at FANR, said the Barakah plants will not be granted their final licence to start operating without an “emergency preparedness and response” plan fully developed and approved.

“It is something that is being built in the country,” Mr Grant said. “We are in the process of working with NCEMA to create an effective emergency management plan and indeed next week the IAEA will come visit FANR, NCEMA and its partners … The fact that we are having this mission at this point is a measure of our commitment to preparedness and it will give us a list of things to do.”

The UAE’s nuclear programme is being closely watched as the first due to come onstream in the region, where dozens of nuclear plants are at various stages of planning. The first of four South Korean-designed plants is due on in 2017 in Barakah, with the others coming on every subsequent year to 2020, when total capacity is expected to be 5,600 megawatts.

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South Korea’s national oil company is deepening its relationship with Abu Dhabi as it awaits a decision on its bid for a stake in the emirate’s major onshore oil concession.

Korea National Oil Corporation (KNOC) is understood to be among the companies that have bid for a 5 per cent stake in the new Abu Dhabi Company for Onshore Oil Operations (Adco), the company formed to dole out concessions to operate the emirate’s 15 prime onshore oilfields for the next 40 years.

In January, France’s Total won the first 10 per cent stake and operating rights for the best of the fields. The deadline for submitting bids for the remaining 30 per cent of Adco was early last month. The remaining bidders include BP and Royal Dutch Shell, which were stakeholders in the old concession, as well as newcomers that include some of the biggest buyers of Abu Dhabi crude oil: KNOC, PetroChina and Japan’s Inpex.

Companies have been asked to submit bids for either 10 per cent or 5 per cent stakes. Abu Dhabi National Oil Company (Adnoc) will retain a 60 per cent stake in Adco.

Last week, as part of a major trade mission headed by the South Korean president Park Geun-hye and received by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, KNOC and the Korea Institute of Geoscience and Mineral Resources signed an initial agreement with Adnoc for wide-ranging cooperation on research and development for oilfields in the UAE, including enhanced oil recovery, which has been a key consideration for Adnoc in evaluating concession bids.

Suh Moon-kyu, KNOC’s chief executive, last week said the R&D deal is aimed initially at improving the development of the Haliba field, near Abu Dhabi’s southern border with Oman, which is one of three oilfields KNOC is developing with GS Energy, a unit of the Korean conglomerate GS Group.

Under the terms of a deal agreed three years ago, Adnoc, KNOC and GS Energy formed Al Dhafra Petroleum Operations Company to explore and develop the three fields.

KNOC last week said it had extracted 18,000 barrels of crude from appraisal wells in the Haliba field in tests last year and confirmed that its chemical component was close to Abu Dhabi’s flagship Murban crude. The company said it expected to have production there at 5,000 barrels per day by the end of 2017, rising to 40,000 bpd in 2019.

The consortium said it was continuing to collect seismic data and would this year drill appraisal wells on the offshore field, which covers about 4,800 square kilometres.

While the potential recoverable oil in the three fields of nearly 1 billion barrels is a relatively small proportion of the UAE’s estimated 98 billion barrels, both countries have been keen to deepen their oil industry ties.

South Korea is one of the world’s largest importers of oil – it has no domestic resources and consumes about 2.5 million bpd, with almost all of its imports coming from Arabian Gulf countries. It imported 12 per cent of its crude oil from the UAE in 2013, the last year of complete data, according to the International Energy Agency.

The UAE exports almost all of its oil to Asia, with long-term customers in China, Japan and South Korea accounting for the vast bulk of those exports.

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The market for petrochemicals seems to have turned the corner, according to the region’s largest petrochemicals distributor.

“The last three years have been challenging for the chemicals and energy sectors,” Yogesh Mehta, the managing director and joint owner of Petrochem, told The National following the completion of the fourth phase of its expansion at Jebel Ali Free Zone.

He said oversupply and a market cluttered with too many players with wildly varying capabilities, together with softer demand, had eaten into margins.

“But the environment is getting better this year and we are having a good first quarter and hope to have a good year,” Mr Mehta said.

“Prices have bottomed out and that makes for a stable environment for energy and the chemicals industry,” he said, forecasting that oil prices – to which many chemicals’ end prices are linked – is likely to trade between US$50 and $60 per barrel this year.

He said gross margins on turnover are back to 2.5 to 3 per cent for Petrochem, which last year had global sales of about US$1.1 billion.

The company has been operating out of Dubai since 1995 and is ranked by ICIS, a chemicals industry data firm, as the top independent distributor in the region and No 11 in the world.

The expansion has grown the storage facility out to 10 tanks from seven at Jebel Ali. Together with the chemicals they contain – which are the raw material for a range of products in the paint and packaging industries – the asset there is now worth about $150 million, Mr Mehta said.

Jebel Ali is the largest of the two facilities – the other is near Cairo in Egypt – that distribute to 27 countries throughout Africa, the Middle East and Asia for the company.

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The European Commission yesterday proposed an ambitious plan to merge the energy markets of the 28-country bloc in a move billed as the sector’s biggest shake-up in half a century.

The plan would intensify efforts to open a “southern gas corridor” to bring pipeline gas from Central Asia, and perhaps eventually the Middle East, to ease the continent’s reliance on Russian gas.

The energy “blueprint”, put forward by Maros Sefcovic, the vice president in charge of energy policy at the EC, the Brussels-based executive branch of the European Union, contained proposals to fully integrate the energy markets of the EU’s member countries, a process that has been moving along gradually for decades.

“This is a broad statement of intent at the very top level in Brussels,” said Arno Behrens, the head of energy research at the Centre for European Policy Studies in Brussels.

“It is attempting to bring energy policy back to the top of agenda as the EU has not been converging toward a common energy policy but diverging in many respects, including doing individual national deals with Russia,” Mr Behrens notes.

“To reduce dependence on Russia a common voice is needed.”

The EC’s proposals face a long process before they can come to fruition. The discussion timetable alone runs to 2019, noted Mr Behrens

The proposals would need to be put in the form of legislation and have to hurdle both the European Parliament and the EU’s 28 national governments, a process that would take years and would be likely to face as much resistance as past efforts.

But the document provides a framework for the executive and the member states to set out energy priorities, especially for plans to continue to “decarbonise” the continent’s energy system, increase the share of renewable energy supplies, integrate power grids, and improve security of supply.

The EU is highly dependent on external sources of energy, particularly Russian gas, a problem that reached crisis point in the winter of 2009, when Russia cut off gas to Europe for weeks because of a dispute with Ukraine. This has again come to the fore amid the Ukraine-Russia territorial conflict.

The EU imports 53 per cent of its energy at a cost of around EUR 400 billion a year and, taken as a bloc, it is the largest energy importer in the world. Six member states depend on Russia’s Gazprom for their entire gas imports and “therefore remain too vulnerable to supply shocks,” the EC report said.

The EU successfully blocked Russia’s attempt to increase its stranglehold when its intense lobbying forced the cancellation in Decmeber of Russia’s proposed South Stream gas pipeline, which would have dominated gas supplies into southern Europe.

The centrepiece of Europe’s “southern corridor” dream had been the Nabucco pipeline. But since the decision in early in 2013 by Azerbaijan not to supply gas from its Shah Deniz field, that project has looked in jeopardy unless alternative supplies can be secured.

Given the politics of the region, supplies from Iraq or Iran seem unlikely in the foreseeable future, analysts say.

But the Middle East’s share of Europe’s gas market should increase significantly at the expense of Russia’s anyway, mainly through the large network of liquefied natural gas intake terminals built, or planned for construction. EU LNG imports from all sources will grow from 31 per cent next year to 48 per cent in 2040, according to the Brookings Institute, a think tank. Meanwhile, the share of Caspian and Middle Eastern countries (Azer­baijan, Iran, and Iraq) will nearly triple, from 3 per cent in 2015 to 10 per cent by 2040, with the share of pipeline gas supplies from Russia falling from 31 per cent in 2015 to 23 per cent by 2040, Brookings says.

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With the oil price slump making financing even more difficult for small and medium-sized enterprises in the UAE, those looking for money to grow their businesses should tap into the region’s rich individuals, experts advised.

At a “masterclass” round-table discussion yesterday in Abu Dhabi organised by CPI Media, a group of prominent business leaders, advisers and bankers told entrepreneurs that the government’s aim to diversify away from oil, as set out in its Economic Vision 2030, is even more needed now that oil prices have more than halved since last summer’s high above $115 per barrel.

“When the vision was first launched, in the 2006 to 2008 period, it was a very different oil price environment,” said Yogesh Mehta, the managing director of Petrochem Middle East, a petrochemicals distributor.

“With oil prices lower and likely to remain there for the coming five or six years, SMEs ask ‘how will it affect me? What if bankers don’t look upon me kindly?’” said Mr Mehta. “I think that finance will be more difficult to find. Lending institutions will be more strict, possibly even cruel. As a business person, I say: ‘forget banks’. You will find many entrepreneurs in the world, rich individuals, willing to invest and risk their money. So SMEs must come to those entrepreneurs.”

The advice was echoed by financiers on the panel.

“The most common refrain I hear from budding entrepreneurs is: ‘I had an idea and the bank didn’t fund me’,” said Nilanjan Ray, the head of commercial banking at National Bank of Abu Dhabi. “But banks are not in the business of funding ideas. Banks provide debt, and debt is not necessarily the best finance for a business.”

He also recommended that growing young businesses look to rich backers for early-stage funds. “In the pecking order of capital, equity is the highest form of risk capital and has to be available, whether from an entrepreneur’s own sources, from a kick-starter fund, venture or angel investors, whatever you want to call it – it’s private capital,” Mr Ray said. “This region has some of the richest people in the world. You cannot tell me there isn’t private capital available.”

He and others recognise, however, that there is not the same kind of infrastructure in place to bring entrepreneurs and private capital together as there is in other parts of the world, especially the United States.

“I do not believe there is a dearth of funds available but there is a dearth of suitable vehicles to raise funds,” Mr Ray said.

The government in Abu Dhabi has taken initiatives to support entrepreneurs, especially via the Khalifa Fund for Enterprise Development. But more could be done, panellists said.

“Entrepreneurs must operate in an ecosystem of risk, and the ecosystem of risk in the UAE is one that needs to be developed,” said Anil Khurana, a partner at the consultancy PwC in charge of industrial products in the Middle East. “I think this is absolutely a great time to be an entrepreneur here, and not all opportunities are in oil and gas. There are opportunities in education, to provide good quality education for those that are not rich. And in health care, the same thing. SMEs have an advantage in that they don’t have the massive overhead larger companies have to carry. But here there are a lot of gaps in the ecosystem.”

Mr Khurana said that the UAE lacked a strong network of support for entrepreneurs. He observed that while working in Boston, he found entrepreneurs that come out of its world-class higher learning institutions could rely on an array of early stage investors, legal advisers, start-up accelerators and various other mentors.

“There must be an ecosystem that is not only established and seeded but developed that helps investors find good ideas and helps them to invest heavily in the Emiratisation of good ideas,” said Abdullah Abonamah, a professor of management sciences and the chief executive at Abu Dhabi School of Management.

Professor Abonamah said he was encouraged by the initiative launched by Sheikh Mansour bin Zayed, Deputy Prime Minister and Minister of Presidential Affairs, at the government summit this month, which included the appointment of innovation tsars at the various government departments.

But the government could do even more to nurture SMEs and make them attractive to investors, Mr Khurana argued. “One of the things government does, and I expect this government to do more of, is in its role of procurement. This worked well in the US in terms of quotas for SMEs in general and particularly minority-owned businesses,” he said. “It is something the government can, and should, do more.”

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