News

The Energy Industry Council-led Energy Exports Conference held recently in Aberdeen was dominated by the ongoing energy sector opportunities in the Middle East and the EIC’s latest GCC project and market update is tracking over US$200bn projects in the UAE, dominated by ADNOC’s capex programme.

However, the UAE’s ICV localisation programme, initiated by ADNOC Group and now operating under the auspices of the Ministry of Industry & Advanced Technology | والتكنولوجيا الصناعة وزارة المتقدمة , has its challenges with the former lowest bid preference being replaced with a system that offers lowest price matching to the bidder with the highest ICV score.

New market entrants face a rigorous and time-consuming process of technology trials, vendor approvals and the need to build up competitive ICV scores and ICV improvement plans, as well as the challenge of rationalising the single supply nature of patented technology with ADNOC’s search for multiple bidding vendors for each tender.

Successful bidders then face the cash flow challenges of 10 per cent of contract value performance bonds and retention payments to secure compliance with ICV improvement plans. On the positive side, ADNOC’s reliability on payment terms and periods is fully recognised.

The Energy Exports Conference was proceeded by the latest Make it in the Emirates Forum in Abu Dhabi during which ADNOC announced it had signed agreements with more than 60 companies, bringing ADNOC closer to its target to locally manufacture US$20 billion of industrial products in its supply chain by 2027. However, international technology providers remain concerned that major investments into manufacturing facilities offer no guarantee of contract awards given the current ICV regime.

Foreign investors are also weighing up the advantages of increasing access to 100 per cent foreign ownership of business ventures with an increasing tax burden and regulatory challenges in opening and maintaining bank accounts.

These challenges and opportunities are driving joint venture activity with international players increasingly wishing to lever the existing infrastructure of local partners.

HFI is continually evolving its Abu Dhabi Ventures Initiative to support client ventures in the UAE and we anticipate increasing the focus on these challenges and opportunities as we head towards ADIPEC 2023 in October and COP28 in November.