UAE Offsets Group (UOG)-the Abu Dhabi-based, government-backed group sponsoring the Dolphin natural gas megaproject in the Persian Gulf region-is making further plans, this time for an innovative retail marketing project in Europe and the US. The project is of similar scope to the Dolphin initiative but is designed to take the United Arab Emirates petroleum sectors both downstream and westward.
UOG has formed a UK-registered company called Summit Corporate Services Ltd. to undertake this initiative, senior UAE government officials told Oil & Gas Journal. The project is designed to provide the UAE with an integrated oil and gas position in the West to complement its upstream position in the Middle East.
The Summit scheme is the brainchild of Amin Badr-el-Din, senior advisor to UOG Chairman Sheikh Mohammed bin Zayed al Nayhan. The sheikh replaced Badr-el-Din as chairman of UOG last year, but Badr-el-Din remains an important force by virtue of his key advisory role. In fact, Badr-el-Din has relocated to London in order to implement Sheikh Bin Zayed al Nayhan's Summit energy strategy for UAE.
The Summit downstream project will be led by both men-the duo that brought the mammoth Dolphin initiative to life.
Project details
Through Summit Corporate Services, UOG plans to acquire a controlling position in the retail marketing arm of a major European integrated oil company.
"At this stage, who the energy partners are is confidential," said one official, "but Summit has secured initial agreements with blue-chip energy partners."
Following this equity acquisition will be a "purchase and lease-back arrangement" that will involve leasing some 10,000 fuel retail sites to the acquired business. The sites will be purchased and upgraded in a multistage program, beginning in Europe, then expanding to the US and possibly Asia.
Summit will enhance these fuel forecourts through:
- Formation of a strategic joint venture or alliance with a hypermarket chain.
- Provision of on-line banking through a JV or alliance.
- Development of the retail sites into electronic communications hubs.
- Formation of partnerships with web-based and catalogue retailers, enabling so-called "microdistribution."
- Introduction of new-generation point-of-sales systems.
The Summit scheme goes beyond retail marketing, however. "To enhance the economic robustness of the project," said the official, Summit will buy into a European refiner, through a joint venture if necessary.
One source said the firm has "initiated agreements with certain potential partners." The refining partner will not necessarily be the same company as the retail partner, he noted.
Project impetus
UOG is a UAE government-sponsored group conceived as an economic promotion association but now considered more of a venture capital or think-tank organization. For about 2 years, the group has been putting together the pieces of a growing jigsaw puzzle that will include delivery of gas from Qatar's supergiant North field via trunk lines to industrial centers in the UAE, Oman, and possibly Pakistan.
The Dolphin initiative encompasses an array of projects along the entire gas value chain. It will include: further development of North field; construction of an 800-km pipeline; transmission, distribution, and storage of gas in local markets to feed the expansion of existing gas grids in the region; and investments in gas-based petrochemical and power generation facilities.
The initial phase of the Dolphin scheme involves building a 30-48 in. diameter pipeline to transport and distribute 3 bcfd of natural gas. This phase alone will require an investment of about $4 billion. A further $4-6 billion will be spent on downstream developments over a period of 6-7 years.
UOG has made significant progress in the past 2 years on this daunting project. The group has signed seven deals to deliver Qatari gas to Dubai and Oman. And it has inked a project development agreement with Enron Corp. and TotalFinaElf SA subsidiary Elf, in which UOG will hold a 51% interest and Elf and Enron, 24.5% each. Elf will focus mainly on upstream project development, while Enron will concentrate on pipeline development, gas marketing, and project risk management.
Now that UOG's enormous Middle East midstream project is beginning to take shape, the group is seeking to diversify by branching into other regions and other industry sectors.
"There will naturally be synergies between the relationships that UOG has formed through Dolphin-both publicly and privately-and the Summit strategy," he added.
The group is hoping its preliminary success with Dolphin will lend it the credibility it needs to tie up key deals with major European refining and marketing firms.
Total investments in the Summit project are expected to exceed $12 billion over a period of several years. Funding will be provided by both UOG and the Summit partner companies.
