By Daniel Canty
Energy Bank aims to capitalise on anticipated industry growth.
The first Sharia'a compliant bank focused on the investment, financing and service needs of the energy sector is under formation with paid-up capital of US$750 million. First Energy Bank has been launched by Gulf Finance House, and is hoping to capitalise on the huge anticipated demand for investment in the global energy industry.
According to the International Energy Agency's World Energy Outlook 2007, the energy infrastructure for the MENA region alone requires approximately US$56 billion per year from now through 2030. This implies the region's energy sector will need $280 billion in investment within the next five years.
"A great opportunity comes from the significant demand that is projected for investment in the global energy sector over the next 25 years," said Esam Janahi, chairman of the founding committee for First Energy Bank. "We're proud to be associated with a Sharia'a banking concept that will be the very first to offer exclusively tailored investment, and financing solutions to the energy industry," he added.
According to International Energy Agency (IEA) estimates, world energy demand will increase by 1.8% annually through 2030. Demand is anticipated to grow from 83.6 million bbl/d in 2005 to 91.3 million bbl/d in 2010 and to 116.3 million bbl/d in 2030. Natural gas demand is expected to rise by 2.0% per year over this time period, more rapidly than any other fossil fuel. To meet this demand, US$4.3 trillion of new investment will be required globally in the oil sector through 2030, and approximately US$3.9 trillion is projected to be invested in the gas sector.
Approximately half of these investments will be in emerging market countries, in particular India and China. More than three-fourths of the investments in oil will be in upstream projects. In addition, upstream investments are projected to account for 60% of investments in the natural gas sector.
"A substantial number of these new energy projects will be implemented by private developers who have a sound project concept, yet lack capital and extensive development expertise - two crucial elements that First Energy Bank can provide, thus adding significant value," explained Peter Panayiotou, acting CEO of GFH.
The bank will also target regional companies that focus their business primarily on the energy sector, such as local oil services firms that lack the resources to fully capitalise on the current growth in the sector as potential acquisitions.