By Jonas Ramos
Private sector investment in the oil and gas market grows as specialist energy fund buys into the industry
The GCC Energy Fund has announced it has acquired a 33% stake in the Sharjah-based Gulmar Offshore Group, in an attempt to further its investment in Middle East oil and gas projects and energy intensive industries.
Executives from the fund hope that the investment in the group, which specialises in subsea services, engineering, pipeline maintenance and underwater technology, will help capitalise on the recent rise in demand for support services in the offshore energy business, as well as providing the company with essential funds for expansion.
The GCC has obtained one third of the company, while Gulmar shareholders will retain one third, leaving a third strategic partner, which is yet to be disclosed. It has been divulged, however, that it is a little-known investment arm of a European-based entity.
The GCC is sponsored by Gulf International Bank (GIB) and Standard Bank, and is co-sponsored by Emirates National Oil Company (ENOC), owned by the Dubai government.
“One of the core objectives of the fund is to realise value at every stage of the supply chain of the energy sector and Gulmar represents an excellent example of a regional company which has realised major successes on the services side of the industry,” said Adil Toubia, CEO of the GCC Fund.
“The opportunities are there but you have to know what you are looking for. We would like to see more privatisation. It is coming, but it is slow. We saw the trend coming two or three years ago, which is why we launched the Fund,” explains Toubia.
“Some countries are faster than others: Kuwait has done very little so far, whereas Oman and the UAE have done quite a bit. Saudi is also pushing, but we would like the pace to accelerate because that would create more opportunities for us. Saudi Arabia remains the key market for us due to its sheer scale. We have yet to invest in a Saudi company, but that is something we would be very interested in.”
Toubia is keen to stress that the GCC is not a typical private equity company in the sense that it is explicitly focused on energy.
“For an oil and gas company, we are a true partner and not just one which is pumping money in and sitting back and watching. We work with our partners on strategies,” he said.
Gulmar has been in operation for nine years. The company has experienced significant growth in the oil and gas sector in recent years, both locally and nationally, mainly because the industry has remained so buoyant. But in addition to fluctuating oil prices, there has been a lag between the high price of oil and what the oil and gas companies have been spending on new discoveries and infrastructure, said Toubia.
It has only been in the last twelve months that oil companies have started to increase their spending to bolster reserves and better their infrastructure, such as undertaking pipeline repairs. Up to eighteen months prior to this, companies were simply stocking up their coffers, uncertain as to how long oil price would remain at such a high level, he explained.
“We recognise the ongoing opportunities for strong companies like Gulmar in this market and are confident that our investment will provide them with the resources needed to expand globally,” said Toubia.
He attributes Gulmar’s rapid expansion to two things. First, high demand allowed the company to increase its prices. Second, Gulmar has been forced to find additional resources to capitalise on the amount of work that has recently been made available. It wanted to be able to expand its equipment, vessels and staff base, and required a cash injection to do so.
Through companies like Gulmar, the GCC feels it can address the problems facing refineries, which are fast approaching capacity.
“We are in a position to provide Gulmar with the opportunity to buy new equipment and as a result, provide the kind of services which are badly needed,” added Toubia.
A new vessel, after all, takes around two years to build. This is compounded by the fact that the industry is experiencing a markedly busy period, which has stretched already dwindling human resources. Toubia suggests that the human aspect of the industry is even more time consuming, given the time it takes to train workers to industry standards.
With revenues having grown by over 330% over the last three years, Gulmar has benefited significantly from the rise in offshore exploration and development in territories as diverse as the Middle East, Iran, the Gulf of Mexico and South East Asia.
“Our partnership goes beyond capital,” said Jean Michel Tissier, chairman of Gulmar. “The fund has strong value assets in terms of strategic thinking and an embedded knowledge of the energy sector, which we consider invaluable.”
Toubia is confident that without the GCC investment, Gulmar would not have had the resources to buy new resources and capitalise on the opportunities they are seeing globally. Since the GCC made the investment in Gulmar, it has acquired two new vessels and is expected to announce new investments in building vessels from scratch.
When speaking of the main challenges facing the Middle East oil and gas industry, Toubia cites lack of opportunities as a particular issue, resulting from the region’s largely government-owned oil reserves. Yet Toubia is attracted to the region by prospects in the service sector and potential oil and gas field developments in Oman, Qatar and the UAE.
Toubia alluded to an imminent announcement likely to be made in early January, pertaining to an investment in another oil and gas company. He assured the company’s business is very relevant to the GCC because of the current Middle East climate, and claims that it will be offering a first for the Gulf oil and gas market.