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Mideast project finance doubles to $70 billion

BY ISAAC JOHN (Chief Business Reporter)

14 December 2006 - Khaleej Times

DUBAI — The petrochemical sector in the Middle East is poised to capture a significant portion of the $70 billion project finance — almost double compared to 2005— to be raised by the region this year.

According to Hamad Al-Terkait, Vice Chairman of Gulf Petrochemicals and Chemicals Association (GPCA), the region's growing appetite for project finance, which is more than one-third — at $33 billion — of the global total of $98.5 billion raised in the first half of 2006, underscored the fast growing industrial prospects of a region currently emerging as the most vibrant base for the petrochemical industry.

"The GCC is expected to contribute more than 60 million metric tonnes of petrochemicals to the world in 2007. “The GCC is of great strategic importance to the global petrochemicals and chemicals industry. We are estimating that these sectors will grow another 13 per cent in the region by 2010,” he said.

Mohamed Al Mady, Vice Chairman and CEO of SABIC, who has been elected as the first Chairman of GPCA, said GCC petrochemical exports alone are expected to reach 50 million tonnes by 2008. Industry experts are increasingly looking at the region as the centre of gravity for the global industry. Part of the reason for GCC’s prominence can be attributed to easy access to feedstock, access to the latest technology, and strategic location at the intersection of the Americas, Asia and the rest of the world.

Al Mady said there is significant liquidity in this market place for project finance which gives it an added competitive edge. "Furthermore, construction and labour costs are relatively low and generous tax incentives for foreign partners.”

He said the first annual conference of Gulf Petrochemicals and Chemicals Association in Dubai will reveal insights into sector’s future development. More than 400 delegates are expected to attend the conference.

Thomson Financial estimates that the EMEA region accounted for 63.7 per cent or $56.6 billion of the global project finance loan volumes that grew 50.3 per cent in the first half. Another estimate said project finance in the Middle East would more than double to around $70 billion this year, indicating that around half the project finance deals in the world will be in this region.

In the first half, while the power sector remained industry leader, the petrochemical sector is expected to boost its share given the number of new projects under way, an industry source said.

Within the GCC, new and ongoing liquefied natural gas projects are gobbling up huge amounts of available global project finance liquidity. Last year's Qatargas 2 deal broke all project financing records. The overall deal, totalling $10.65 billion, involved 57 major lenders an unprecedented number.

Qatar's Minister of Economy and Commerce Shaikh Mohamed bin Ahmed bin Jassim Al Thani told the conference that Qatar would spend $130 billion on major projects over the next decade.

According to figures from Taylor-DeJongh, a merchant-banking firm specialising in the energy and infrastructure industries, the energy industry in the GCC is expanding rapidly with projects worth about $260 billion under development. The total estimated investment requirement for new projects in the region through to 2010 is over $50 billion, of which about $30 billion is concentrated in Saudi Arabia. Qatar and Oman have tapped most of the gas project finance available thus far but other parts of the region, in particular Saudi Arabia, are likely to be more prominent in future. Yemen is developing a $3 billion LNG project. Iran's Pars gas field LNG project is expected to involve work amounting to $4 billion.




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