Investment assessment

Abu Dhabi

Eyas Alhomouz, the CEO of Petromal, talks to TOGY about the investment climate, technology in the UAE market and the potential of marginal fields. Abu Dhabi-based Petromal, a subsidiary of National Holding, participates in oilfield services and energy investments in the UAE and Africa. Petromal manages National Holding’s interests in two producing oilfields and five exploration blocks in Egypt and a producing asset in Pakistan. The company also forms partnerships to provide oilfield services throughout the Middle East and North Africa region.

• On investment: “The UAE government and the ADNOC Group of companies have done a tremendous job in positioning the UAE as a premier destination for investment.”

• On technology: “In today’s market, smaller companies with a focus on technologies have more of an advantage in breaking through some barriers.”

• On smaller fields: “If you look at the shale revolution in the USA today, it was spearheaded by smaller companies – technologically advanced companies that went after assets that were abandoned by the multinationals. This could be an area of review where you see a lot of the tight reservoirs or the smaller fields in the UAE Oman, Saudi or Kuwait that the government has an interest in exploring, but which are too small for a big company to go after.”

Alhomouz went in depth with TOGY about regional investment opportunities and the potential for further geographical expansion. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of the interview with Alhomouz below.

What new services are you looking at introducing to the UAE market?
The UAE market is very mature in terms of the conventional services such as drilling, logging and coil tubing. We are evaluating some niche technologies that may be of value to the UAE and trying to see how we can bring those to market over here. Mergers or acquisitions [are possible]; we can go and acquire a company or we can form a joint venture.
There are several technologies that have caught our attention, mainly from the USA, and that we feel may be of value over here – technologies to do with gas development and the best profile for drilling. We are currently assessing the market potential, conducting the necessary due diligence and holding meetings with people within the ADNOC Group of companies.

How does the UAE attract investors from abroad?
Luckily, the UAE government and the ADNOC Group of companies have done a tremendous job in positioning the UAE as a premier destination for investment. The oil and gas industry here started 60 or 70 years ago, and since then major players have been here, from Exxon to BP to Shell and Total.
However, in today’s market, smaller companies with a focus on technologies have more of an advantage in breaking through some barriers. This is where groups such as ours and local companies may add value by attracting some of these companies. We are well positioned in the market. We have the know-how and have established a sustainable relationship with the players in the market over here. A company in Texas that has tremendous breakthrough in developing shale oil will not come to the UAE on their own. This is where a group like ours needs to be out there scoping for these niche technologies and bringing them into the market.

What kind of investment opportunities are you looking for?
Several factors determine our decision whether to pursue an opportunity or not. First and foremost, it has to make economic sense. Second, we evaluate the potential risks: technical, geopolitical, etc. The decision would be easier if we are in with partners whom we know and have worked with in the past. Another factor would be to see if there are opportunities for other members of the National Holding group. National Holdings is a diversified holding group with subsidiaries in different sectors, so if we go to an area where we see an opportunity for other sectors, then this is something that we assess.
In terms of ticket size, we are probably looking at no more than USD 50 million.

Where are you looking for as regards to geographical interest?
Definitely, our priority would be our own backyard in the UAE and the wider GCC. Otherwise, we can increase the radius a little bit more, perhaps to the Indian subcontinent and East Africa. Maybe after that, we can look at further expansion.
In reality, however, you never say no to any good opportunity that presents itself, but there are other risks you consider, such as the geopolitical risks that you may be exposed to, the fiscal regimes in different countries in which you are working and the stability of these countries. That’s why we’d like to stay close, but definitely if there’s a good opportunity outside these parameters, then it will be considered.

Are you looking at those smaller offshore fields in the UAE?
We would love to work with ADNOC on something like this, but as a UAE-based company I think the chances are probably limited to having an ownership in a concession.
That’s why the relationship we have with ADNOC is something that will probably be in the service-oriented field. We will look at maybe drilling, consulting or integrated projects. But as far as owning an asset itself, it’s not something we want to do in Abu Dhabi.

Where do you see opportunities for investing in the local region?
If you look at the shale revolution in the USA today, it was spearheaded by smaller companies – technologically advanced companies that went after assets that were abandoned by the multinationals. This could be an area of review where you see a lot of the tight reservoirs or the smaller fields in the UAE Oman, Saudi or Kuwait that the government has an interest in exploring, but which are too small for a big company to go after. Maybe then, you’ll see the market opening up for smaller companies to invest in.

Are you considering India or other countries in the region?
India has a very vibrant oil and gas sector. It’s small compared to what you have elsewhere, but nonetheless it’s very dynamic. They recently changed their oil and hydrocarbon law and launched a couple of bidding rounds for companies to participate in.
Definitely, India is on our radar to expand into. I’m not sure if it will be ownership of certain assets, but maybe we can go into the service sector. It’s something we are assessing and reviewing.

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