hoegh lehovd
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/ 28 May 20151
Benefitting from The Middle East’s Drive to Diversify
Breakbulk Europe21 May 2015
Teresa LehovdHead of Market IntelligenceHöegh Autoliners
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Key Topics
2
2Current status
3 Project pipeline
4 Risks and Way Forward
1 Why diversify?
1 2 3 4
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The Scope
3
Non-oilsectors
SaudiArabia
UAE
Qatar
Kuwait
OmanBahrain
Morocco
Algeria
Egypt
1 2 3 4
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The Region in a Nutshell
4
$73 000Gap between thehighest and lowest
GDP/Person (Gulf
countries)
$380 bn Amount Gulf stateshave lost in
revenue since oil
price fall
80 %Oil and Gas’ share
of the region’s
exports
100mExpected
population growth
between 2014 and
2050
53 %The (MENA)
region’s share of
known world oil
reserves
40 %Saudi Arabia’spopulation
below 15 years
1 2 3 4
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Why Diversify?
Reduce oil-related risks
Ensuresustainable
post-oilgrowth
Create jobs
Prestige
5
1 2 3 4
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Oil and Gas Dependency
6
Source: Economic Diversification in the GCC; Pascal Devaux
1 2 3 4
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Areas of Comparative Advantage
7
Energy-
intensivemanufacturing
Mining and
mineral-basedindustries
Secondary
sectors
Trade and
logistics
Tourism,
hospitality andaviation
Petrochemicals
Downstreamconversion
industries
Plasticsandpackaging
Aluminium
Steel
Fertilizers
Cement
Downstreamindustries
related tometalsproduction
Polysilicon
Automotive
Paper
FoodAgricultureAgro-processing
Biotechnology
Pharmaceuticals
Telecom
Location
Low customsduties
Business-friendlyenvironment
Rapid port
development
Transshipmentservices / FTZ
Location /Climate
Attractive
hospitalityinfrastructure
Attractive globalevents
Expansion ofthe middle classin China, Indiaand Africa
1 2 3 4
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Infrastructure: Key to Diversification
8
Catalysts
Transport
Power
Water
Consumergoods
Education
Healthcare
Sports andCulture
Financialservices
1 2 3 4
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$1,37 tn Total Project Investment
1,000
224
105
40
0 200 400 600 800 1000 1200
Infrastructure
Oil & Gas
Petrochemicals
Mining & Mineral-based
Projects in Execution, Planned and Un-awardedInvestment $ bn
9
1 2 3 4
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$40bn Mining and Mineral-Based Projects (1)
Country Project Status Value
($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 plantMain
contract1,1 2014
S. ArabiaYanbu Integrated Smelter Complex (copper,lead, zink)
Study 1,0 2015
/ 28 May 201510
Projects over 1bn 1 2 3 4
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$40bn Mining and Mineral-Based Projects (2)
Country Project Status Value ($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
/ 28 May 201511
Projects over 1bn 1 2 3 4
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$105bn Key Petrochemical Projects
Country Project Status Value ($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
Satorp phase 2 On hold 5 2019
Kemya elastomers Execution 3,4 2016
Ras Tanura expansion Main contract 3 2018
Sadaf polyurethane expansion Scrapped 3 2018
Qatar Al-Sejeel petrochemicals complex Shelved 7,4 2018
Al-Karaana Petrochemicals Complex Shelved 6,4 2018
Oman Duqm Petrochemical Complex On hold 9 2023
Liwa Plastics in Sohar Feed 3,6 2018
Egypt Tahrir Petrochemical plant Execution/Delays 5 2019
12
1 2 3 4
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$ 1 tn Infrastructure Project Investment
0 50 100 150 200 250 300
Rail
Civil construction
Airports
Power & Water
Maritime Infrastructure
Highways/Bridges
Investment $bn
13
1 2 3 4
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Saudi Arabia Dominates Current $400bn-worth ofMEGA Infrastructure Project Investment
14
1 Trillion
400 Bn
Project packages excl. Oil/Gas, Chemical and Industrial
Stages: Contracts awarded, in design, study or main contract pre-qualification or bidding
1 2 3 4
0 50 100 150 200
Morocco
Bahrain
Oman
Algeria
Kuwait
Qatar
UAE
Egypt
Saudi Arabia
Top infrastructure projects by country($bn)
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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 transhipmenthubs
• Re-export facilities
• Power & Water: World’s
most attractive market
• Nuclear, renewables
• Pan-Arab grid
• Desalination & Wastewater
• Highways & Bridges
• Expressways and causeways
• Regional network
15
1 2 3 4
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Signature Infrastructure Projects (1)
SaudiArabia
• King Abdullah Economic City (93)• 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)
16
1 2 3 4Figures in brackets represent project value (BN USD)
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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)• Alexandria –Aswan HS Rail (10)• Cairo monorail (1,5)
Oman • Duqm New Town (incl. Duqmport) (20)
• National Rail Network (15,6)• Muscat and Salalah Int. Airport
expansion (5,2)• Sohar, Duqm airports
Kuwait • 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)
Bahrain • 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)
17
1 2 3 4Figures in brackets represent project value (BN USD)
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Diversification: Key Success Factors
18
Political stability
Predictable and efficient governance
Stable oil price
Infrastructure
Social and cultural reforms
Education and skills
1 2 3 4
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High Vulnerability to Oil Price Trends
90.7
53.3
107.5
73.3
116.4
77.6
111.5
40
50
60
70
80
90
100
110
120
Saudi Arabia Kuwait Oman UAE Bahrain Qatar Algeria
201020142015
19
Source: MEED
Budget Breakeven Oil Prices
USD 79Nov 2014
USD 109Jun 2014
USD/B
USD 63May 2015
OPEC
Basket Price
1 2 3 4
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2,5
3,3
4,3
1,5
4,7
4,3
6,1
2,2
2,6
3,9
3,5 3,63,8
4,84,7
6,4
4,6 4,5
Algeria Bahrain Egypt* Kuwait Morocco Oman Qatar Saudi
Arabia
United Arab
Emirates
Real 2015 GDP Growth Forecast Comparison
May 2015 May 2014
Downgraded Growth Outlook
/ 28 May 201520
Source: IHS
% changey-y
* Estimate 1 2 3 4
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Current Project Risk Assessment
21
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 2 3 4
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Project Risks by Country(Relative Terms)
/ 28 May 201522
• Qatar• UAE (excl. Abu Dhabi)• Egypt• Morocco• Saudi Arabia
ModerateRisk
• Bahrain• Oman
• Abu Dhabi• Kuwait• Algeria
High Risk
1 2 3 4
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Improved Resilience, but Still Long Way to Go
/ 28 May 201523
1 2 3 4
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 projectspending
• Deep structural andsocial reforms
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Conclusions
24
1 2 3 4
•
Internal and external mega-forces put an increasing pressureon the Region to invest in economic diversification
• Low oil price is now testing the region’s strategies showingthat «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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hank you for your attention