CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 28 January 2019
  • Published inJanuary 2019
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Country Risk Update - Saudi Arabia

Risk Indicator - DB3c
Risk Level - Slight
Ratings Trend - Deteriorating

The majority of the latest oil production cuts are likely to be borne by Saudi Arabia, curtailing its short-term growth prospects. Saudi Arabia’s oil reserves, which have allowed it to build up huge financial buffers, will support short-term government spending.
Market Overview
India’s Oyo Inks Deal With Ministry Of Haj Amidst Plans To Invest $50M In Saudi
India-based Oyo Hotels announced that it has signed a deal with Saudi Arabia’s Ministry of Haj to allow the latter access to its technology suite to improve the hospitality experience of the pilgrims. As per the agreement, the ministry will be offered the use of Oyo’s OS technology suite, which is an operating system that will assist them in managing inventory, procurement, and provide for express check-ins and check-outs in the accommodations under its purview. It also offers apps for housekeeping and audits and has solutions for multiple aspects like expense management, staff training and engagement along with performance management for the hotel staff.  The deal comes as Oyo – which received investment worth $100 million from Japan’s Softbank last year - is looking to invest close to $50 million in the Kingdom. The company said that its technology suite would create over 3,000 jobs locally and help it upgrade 15,000 rooms. “It is also noteworthy that OYO is one of the first Public Investment Fund of Saudi Arabia and a SoftBank Vision Fund backed company to start operations successfully in Saudi Arabia, with the support of Crown Prince Muhammad Bin Salman, the Public Investment Fund and Saudi Arabia’s General Investment Authority (SAGIA),” says Ibrahim bin Abdul Rahman Al-Omar, Governor of the General Investment Authority (SAGIA).
Dubai remains world's busiest international airport
Dubai International (DXB) retained its position as the world’s busiest airport for international customer numbers for the fifth consecutive year with annual traffic for 2018 surpassing 89.1 million. Passenger traffic at Dubai totalled 89,149,387 in 2018, a one percent increase on 2017, and ahead of London’s Heathrow, which reached the 80 million in the past 12 months. December saw a 1.7% decrease in passenger numbers, taking the average monthly traffic at the hub to 7.4 million for the year. India was the busiest destination by passenger numbers, reaching 12,279,485, with Saudi Arabia second with 6,471,142 customers, followed closely by the United Kingdom with 6,284,771 customers. Both Russia (1,533,654 – up by 14.5%) and China (3,512,075 – up 6%) saw significant growth during the year. Traffic from Eastern Europe was the fastest growing region with double-digit growth of 16.7%, followed by CIS at 12.9% and Africa growing 9.8%. The top three cities were London (3,817,889), Mumbai (2,540,750) and Kuwait (2,194,576). The introduction of more smart gates at DXB saw wait times were reduced by 28% in 2018.
Saudi Arabia Launches National Program To Attract $427 Billion
The Kingdom of Saudi Arabia plans to attract investments worth $427 billion through its new National Industrial Development and Logistics Program. The program has more than 330 initiatives and will achieve more than one third of the objectives of the Kingdom’s Vision 2030, according to Khalid bin Abdulaziz Al-Falih, Minister of Energy, Industry and Mineral Resources. "The basic rule for the success of any industrial and export country is the logistics sector, including roads, railways, ports, airports, free economic zones and intelligent logistics networks,” said Al-Falih. “These sectors are able to integrate and connect internally and externally with the economies of the world.” Saudi Minister of Transport, Nabil bin Mohammed Al-Amoudi, stated that the Kingdom plans to build infrastructure and other projects for digital transformation, with around 60 initiatives in logistics looking for investments of more than 165% or $9.3 billion, including five new airports and nearly 2,000 kilometers of new railways.The Kingdom is also in the process of establishing special economic zones with many characteristics, with the contribution of the General Customs Authority, to push the import and export movement in the Kingdom. The move comes under the initiatives of Vision 2030, in which the kingdom aims to diversify its oil-dependent economy to one that can rely heavily on a variety of non-oil exports.
ADNOC Inks $5.8 Billion Deal With Italy’s Eni And Austria’s OMV For Stake In Refining Business
Oil giant Abu Dhabi National Oil Company (ADNOC) has signed a strategic partnership with Italy’s Eni and Austria’s OMV in which both companies will acquire stakes in ADNOC refining. As per the deal, Eni and OMV will acquire a 20% and 15% equity interest in ADNOC Refining for $3.3 billion and $2.5 billion respectively. The state-owned oil producer will own the majority stake with 65% and will receive $5.8 billion for divesting its 35% share – making the deal one of the largest ever refinery transactions. The companies also agreed to establish a trading joint venture with the same shareholding proportion as in the refining business. This new JV will market export volumes and optimize the non-Abu Dhabi feedstock supply of ADNOC Refining. ADNOC Refining operates the world’s fourth-largest single site refinery complex (Ruwais East and West), with a total refining capacity in excess of 900,000 barrels per day. The trading joint venture will also be an international exporter of ADNOC Refining’s products, with export volumes equivalent to approximately 70% of throughput. The domestic supply within the UAE will continue to be managed by ADNOC. Trading activities are expected to begin as early as 2020. This meets the global fuels demand that will increase by 9% from 2017 to 2030 driven by the Asia Pacific region, according to World Energy Outlook 2018 by International Energy Agency (IEA). Last November, ADNOC revealed plans to increase oil production capacity to 4 million barrels per day by the end of 2020, and to 5 million barrels per day by 2030. 
Oman firm invests $400m in UAE private utility Utico
UAE-based private utility, Utico, has announced signing an investment agreement with Majis Industrial Services, a Government of Oman-owned entity with an investment deal value of $400 million. The company said the total value of investments secured by Utico over the past three years is about $740 million, which includes sovereign investments from the governments of Saudi Arabia, Bahrain and Brunei and Spain’s utility leader, Grupo Cobra, Announced on the sidelines of the World Future Energy Summit in Abu Dhabi, Utico said the deal was arranged by Emirates NBD Capital. “The Majis investment is one more testament of trust from our investors in our unique business model, expertise and the tremendous growth potential of the company. It is also an endorsement of our contribution to the social and economic fabric of countries where we operate,” said Rashed Mehran Al Balooshi, chairman of Utico. He said that investment also strengthened economic cooperation between Oman and the UAE. “We are very excited about the prospects the deal brings to the table and along with Utico we hope to work together to develop many projects and build on each other’s strength. The deal is supposed to close in the first quarter 2019," added Ahmed Mazroui, CEO of Majis Industrial Services. Utico also announced its intention to go public late last year and has appointed Emirates NBD as its advisor.
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Date: 11 February - 12 February 2019
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