The UAE Power Cable Market

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The UAE Power Cable Market The UAE Power Cable Market Edmund O’Sullivan Chairman, MEED Events Good morning, Thank you very much for inviting me to come here today to share some facts, information and perspectives on the cable markets of the UAE and a little bit on the region as well. I am Ed O’Sullivan, I am the chairman of MEED Events and I will now take you through a presentation on the UAE power cable market. I will talk about: • Review of trends 2003-08 • Key factors affecting the Middle East region to 2012 • Forecast for the Gulf Cooperation Council (GCC) • A look at the UAE power and energy market • A look at the UAE cable market The UAE Power Cable Market – Edmund O’Sullivan – page 15 Middle East growth 2003-07 (%) 25 IMF, June 2008 Current prices Constant prices 20 15 10 5 0 2003 2004 2005 2006 2007 Bahrain, Egypt, Iran, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Syria, UAE, Yemen On this chart from the IMF the black line shows the real growth in the Middle East as a whole. All these countries listed on the bottom have been in excess of 5% in real terms in the last 5 years. This made the Middle East one of the fastest growing regions in the world on average. The UAE Power Cable Market – Edmund O’Sullivan – page 16 Current account and external debt 2003-2007 ($ million) 400 Current account 350 International debt 300 250 200 150 Regional indebtedness 100 still growing 50 0 2003 2004 2005 2006 2007 IMF, June 2008 The black line again, shows that the balance of payments, the financial services in the Middle East as a whole, not just the Gulf corporations, have been heavily in surplus. There was lots of money in the banks throughout the region over the last 5 years, although the red line shows that the international indebtedness has also grown in this period. The UAE Power Cable Market – Edmund O’Sullivan – page 17 Overview of Middle East 2003-07 Solid growth, improving solvency, rising per capita income. However, Aggregation disguises sharp differences in performance between oil exporters and the rest and between high population nations and rest. Saudi Arabia $380 billion GDP Jordan $16 billion GDP Yemen $972 GDP per capita Qatar $73,000 GDP per capita In summary, the last 5 years for the Middle East as a whole, looking from Egypt to the Gulf, to Syria and down to Sudan, solid growth has taken place and is improving solvency and raising per capita income. But when you look at the Middle East you should always bear in mind that aggregation of the figures is misleading. There are sharp differences in performance between the oil exporting countries and the rest and between the high population nations and the rest. This is illustrated by one fact: Saudi Arabia, which is part of the Gulf Cooperation Council and is a neighbor of the UAE, has a GDP this year approaching $400 billion. Jordan, which has the smallest economy in the region has an economy of $16 billion. Yemen, the poorest country in the region with a GDP per capita of $972. Qatar, probably now one of the richest countries in the world has a GDP per capita of $73,000. There are enormous differences in these countries. It is wrong to treat them as one unit. The UAE Power Cable Market – Edmund O’Sullivan – page 18 UAE is at the heart of the GCC (1) • Six nation association of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE created in 1981 • Fourth growth factors • Energy • Economic diversification • Population growth • Globalisation GCC economic and business trends When I look at the Middle East, I start with the Gulf Cooperation Council, that means with the 6 countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. They have formed an association amongst themselves, which was created in 1981. It is a loose association, it is not like the European Union. There is no sacrifice of sovereign powers to the center. Each of these independent states is fully sovereign, they don’t have a council or a bureaucracy like that in Brussels. The decisions are made by the national governments on the national level. And yet they are beginning to coordinate their policies quite effectively. These 6 countries which occupy the majority of the Arabian Peninsula, are driven economically by 4 key factors: Energy. These 6 countries of the GCC have 40% of all the world’s proven crude oil reserves and 20% of all the world’s gas reserves. This alone is a very powerful impulse for growth. Since energy demand and world oil and gas demand is forecast to continue rising for the indefinite future, this remains one of the most important impulses for growth in the region. It is supplemented, however, by economic diversification. This is happening because the governments of the region need to do two things: One, they need to reduce their dependency upon oil and gas export and production. The UAE Power Cable Market – Edmund O’Sullivan – page 19 UAE is at the heart of the GCC (2) • Six nation association of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE created in 1981 • Fourth growth factors • Energy • Economic diversification • Population growth • Globalisation So they are diversifying for that reason. Secondly they need to create jobs. This is particularly pressing in Saudi Arabia, Bahrain and Oman. But it is a general issue. These economies need to create jobs. The third element is population growth. The natural growth in the 6 countries of the GCC is in excess of 2% a year, one of the highest in the world. This is being supplemented by a high rate of long-term migration into the region here in the UAE. The majority of people living here have been born elsewhere and will return eventually to their home countries. The fourth factor and the most important one, I believe, is globalization. Arabia sits perfectly halfway between the European Union, the largest economy in the world, and China and the Far East with the fastest growing economy in the world. The countries of Arabia are developing transport and logistic hubs to service the globalized flow of trade and services between these two great markets. I believe in due course logistics will be the largest employer of people in Arabia. The UAE Power Cable Market – Edmund O’Sullivan – page 20 The GCC is the world’s fastest growing economy 1100 $ billion 1000 900 Growth of 18 per cent recorded in 2008 800 700 600 500 400 300 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: MEED A quick snapshot on the economic trends in the last 5 years shows that the economy of the GCC is now almost $1 trillion. This is almost a tripling in dollar terms in the economy in the last 5 years, principally but not exclusively due to the very sharp increase in oil prices and the persistent increase in demand for Gulf oil. Growth this year in dollar terms may be 18%, in real terms, factoring out inflation and other factors, we talk about 6%. So this is the sixth consecutive year of very strong growth in the GCC. The UAE Power Cable Market – Edmund O’Sullivan – page 21 GCC oil production to 2012 (million b/d) 16.80 MEED August 2008 16.60 16.40 16.20 16.00 Capacity to be lifted to more than 20 million 15.80 b/d 15.60 15.40 15.20 15.00 2007 2008 2009 2010 2011 2012 The oil production in these countries in 2008 will be about 16 million barrels a day (b/d) of crude oil. The majority is exported. The GCC is the largest supplier of crude oil and refined products in the world market. It is likely that the world’s oil demand will be rather contained and because the market share accounted for by non-GCC countries will rise. My forecast is that oil production will not rise significantly over the next 4 years. Nevertheless, the countries in the region are investing in the largest energy capital investment program the world has ever seen, which will increase the oil production capacity in the 6 countries of this region to more than 20 million b/d. Very nearly 20% of all the crude oil production capacity in the world in about 5 years time will be in the countries of the GCC to insure there is going to be enough crude oil and refined products to meet world oil demand for the indefinite future. The UAE Power Cable Market – Edmund O’Sullivan – page 22 GCC population to 2012 (million) 46.00 MEED August 2008 44.00 42.00 40.00 38.00 36.00 34.00 32.00 2007 2008 2009 2010 2011 2012 This forecast, MEED has done, is based on the assumption that demand for Gulf oil will be flat and the oil price will hold at around $80 a barrel on average during the next 4 to 5 years. The UAE Power Cable Market – Edmund O’Sullivan – page 23 GCC GDP forecast to 2012 ($ million) 1,400 MEED August 2008 1,200 1,000 800 600 $ 1 trillion economy this year? 400 200 0 2007 2008 2009 2010 2011 2012 This shows that the GCC economies will grow from about $1 trillion this year to about $1.2 trillion in 2012. The growth will principally come from the non-oil economy. This means that the GCC economies will remain a growing market for goods and services.
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