Abu Dhabi- UAE Offset Group.

Established in 1998, UOG is controlled by the governments of Abu Dhabi and Dubai. The group is in charge of channelling defence-related investments into profitable projects in various sectors to help diversify the UAE economy. The funds emanate from the offset investment programme of the federal defence ministry, a programme which requires foreign defence suppliers to invest locally an important part of their UAE orders. UOG identifies to projects in which offset investments are to be placed by the foreign suppliers in partnership with local investors. Several huge defence companies have set up offices in Abu Dhabi to launch offset projects identified by UOG. These include Aerospatiale and Giat of France (which has a $3.75 bn tank deal), aircraft giant CASA of Spain and Newport Shipbuilding of the US. CASA is involved in a tile and bricks project in the Mussaffah industrial zone. Giat is participating in a range of ventures, and may take a share in the Emirates General Petroleum Corp. (EGPC) when it is privatised. UOG resulted from the integration of Dubai's armed forces into the federal General Headquarters of Abu Dhabi in 1997, which led to increased co-operation between the two emirates. In February 1998, the governments of Dubai (DNOC) and Abu Dhabi (ADNOC) signed a final agreement on the supply of Khuff gas to Dubai's Jebel Ali free zone (see Gas Market Trends No. 3). In December 1998 it reported that a new joint stock company to be based in Abu Dhabi city as part of UOG would develop gas in Qatar's North Field and supply it to Abu Dhabi and would have a marine pipeline built for the purpose. It was said that other UOG related firms would be set up to market the gas in Abu Dhabi and build distribution pipelines, with international engineering companies likely to be included as partners. It was also said that the project's technical and marketing studies have been completed by "Intec Engineering and Paragon of the US". Reportedly, UOG "signed a memorandum of understanding with the Qatari government" and "has identified a number of clients (in Abu Dhabi)" and got some "offtake guarantees". It was said the gas would be injected into an offshore Abu Dhabi field in the first phase and, by 2005 or a year later, Abu Dhabi's imports from Qatar would increase considerably. ADNOC is anticipating the likelihood of a gas shortage in the next decade, despite the fact that Abu Dhabi has about 185 TCF of proven gas reserves. Abu Dhabi's demand for natural gas is projected to rise from 2,500 MCF/day now to 3,900 MCF/day in 2002 and 5,000 MCF/day by 2007/8. UOG in early June 1998 announced a new energy strategy. Since then it has announced the creation of a joint stock company, Emirates Basic Industries (Sinaat Al-Emarat), to invest in heavy industry and petrochemicals. This resulted from another agreement between Dubai and Abu Dhabi to prevent duplication in major industries. The new company, controlled by the local governments of Abu Dhabi and Dubai, replaced Emirates Basic Industries Co. (Sinaat) which Dubai had formed in July 1998. The local government of Abu Dhabi had also formed a similar company, but this was cancelled after Sinaat Al-Emarat was established. Sinaat Al-Emarat will operate like the Saudi Arabian Basic Industries Corp. (SABIC). It will have shareholders from the UAE and the rest of the GCC. It would establish downstream chemical ventures in Abu Dhabi and Dubai which will take from the Borouge complex at Ruwais (see DT No. 2). UOG and the Abu Dhabi Chamber of Commerce and Industry co-organised a conference called "The Gulf Business Forum on Entrepreneurial Initiatives", held in Abu Dhabi on Nov. 22-23, 1998. The conference, addressed by UAE ministers, local businessmen and international experts, called for small and medium-sized enterprises (SMEs) to be established throughout the UAE. UOG is a main participant at the Offset & Business Development '99 conference to be held in Abu Dhabi on March 20-22, 1999. Dr. Amin Badr El Din, chairman of UOG, will give the keynote industry address at the March conference to explain the role of his group in diversifying the UAE economy. The main points he will raise are: "creating financial infrastructure" in the UAE, "working to improve the UAE commercial system, initiating privatisation and capital markets, and assisting SMEs". The other UOG speakers at the conference will include Obaid Al Khameeri and Mohammed Al Muhairi. UOG executives include Peter Eident, who is one of the group's project managers. Reportedly, UOG has acquired equities in gas marketing ventures in India and Pakistan. It is said to have signed MoUs with the Pakistani government to get shares in Sui Northern Gas Co. and Sui Southern Gas Co. It is said to be one of eight big companies shortlisted to acquire a stake in Karachi Electric Supply Corp. Oasis International Leasing Co., an offset JV between British Aerospace Asset Management and UAE investors grouped by UOG, was established in Abu Dhabi in early 1998. In late 1998 it was structuring a lease finance package for the LNG tankers of ADNOC's National Gas Shipping Co. (NGSCo). The deal will free up funds for ADNOC, enabling it to finance several expansions at the Ruwais industrial zone. Oasis was negotiating with Lehman Brothers, Merrill Lynch and Morgan Stanley to work out the details and the legal framework. The lease finance package, to be managed by a qualified international bank, will involve Oasis buying NGSCo's eight LNG tankers and then leasing them back to NGSCo. Oasis is to arrange syndicated loans from local and international banks for companies to be set up to own the NGSCo assets. Oasis is also considering an international bond issue for the deal. In another lease finance deal proposed, Oasis would own the 10 oil products tankers of ADNOC's other shipping unit ADNATCO and then lease them to the latter. Oasis has already bought and leased back six Airbus A320 aircraft of Gulf Air in a $195m deal.