LONDON, 14 April 2008 — Bahrain-based Gulf Finance House (GFH) is expanding its concept of developing energy cities to Central Asia with the announcement a few days ago that it is collaborating with the Kazakhstan government to launch the Caspian Energy Hub, which will be located at Aktau on the shores of the Caspian Sea.
GFH together with PFC International, an international energy-consulting firm, pioneered the energy city model in Qatar with the Qatar Energy City. Since then it has been developing similar infrastructure projects in India and Libya.
The energy city concept does not involve core energy activities such as exploration, refining or any downstream activities. It is more a real estate-cum-knowledge center project to serve the energy industry. The energy city, apart from the residential and leisure facilities, comprise a human resources and intellectual property center, technical education, training, research and development, intellectual property initiatives and even private energy exchanges.
Essam Janahi, chairman of GFH, confirmed that a memorandum of understanding (MoU) has been signed with the Kazakhstan Government to launch the Caspian Energy Hub, which will have an estimated total end value of $10 billion.
“This is an economic integrated project which encompasses energy-related allied services with broader development. The plan is to set up a Caspian Energy Hub Holding Company with a capital of between $400 million to $500 million, which will be the promoter of the project. We have just signed an MoU with the Kazakhstan government and have allocated $50 million in equity. We envisage the remaining equity for the holding company to be raised within the next three months,” explained Janahi.
GFH, which was incorporated in Bahrain as an Islamic investment bank in 1990 and which reported net profits of $340 million in 2007, expects the project to attract the biggest names in world energy and deliver high returns on equity for GFH investors.
GFH has already exited from other similar projects, such as the first Energy City in Qatar, with a 35 percent return on equity for investors. The project will be built in a number of clusters, which will have a total value of $10 billion.
The financing will be raised from the market over the next two years. The project promoters include GFH and its investors; PFC International; the Kazakhstan Holding for Management of State Assets (Samruk) and Kazany, the state development fund.
Kazakhstran is one of the more stable countries in Central Asia with huge oil and gas reserves. It has attracted the largest FDI inflows in the region, especially from the US and the EU.
The Caspian Oil Pipeline Project, which will see Caspian oil pumped to ports in the Black Sea for export to the US and other markets, is a controversial project because it bypasses Russia. Moscow is keen to promote the project to one of its Black Sea ports, while the US wants to diversify its sources and dependency on crude oil away from the GCC states.
And Kazakhstan President Nursultan Nazarbayev is eager to develop diversified economic relations with both traditional partners such as Russia but also with the West and Middle Eastern nations.
Kazakhstan is after all a member of the OIC and the Islamic Development Bank. Not surprisingly, President Nazarbayev is confident that “the Caspian Energy Hub is an important and integral part of the socio-economic development of Kazakhstan. We have the vision, the will, and the knowledge base to implement an industrial, service, research and educational center of excellence that will attract the biggest names in world energy.”
The Kazakh economy is also a fast-growing one with double-digit GDP economic growth in the last two years. GDP growth for 2008 is projected at 8.5 percent, although inflation is currently running at 8 percent per annum. The country has also attracted $45 billion in net FDI, which is 40 percent of GDP.
The Caspian Energy Hub, according to GFH, is expected to play a significant role in supporting the Kazakhstan government’s plans to double oil production and triple natural gas output by 2015.
The project aims to contribute to the overall economic and human capital development of Kazakhstan by creating a services hub that caters to every commercial, technical and human resource need of the oil and gas industry in the Caspian region. In addition, the Caspian Energy hub also aims to become a major global technical training center for the oil and gas industry.
According to PFC Energy International Chairman & CEO, Vahan Zanoyan, the Caspian Energy Hub will develop a full service economic and business center catering to every commercial, technical and human resource need of the oil and gas industry operating in Kazakhstan, and ultimately, in the entire Caspian region. The Hub will have an “HR and skills nerve center” that will facilitate Kazakhstan’s human development, and will position it as a leader in human capital within the region.
The Caspian Energy Hub will feature a Science and Technology Park; a Geophysical Data Laboratory; Advanced Technical Training Facilities; an Information Technology Development Center; an Environmental Research Center; and a Renewable Energy Center. According to Zanoyan, preliminary agreements have already been signed with Delf University of Technology in the Netherlands, a specialized provider of technical education in the oil and gas sectors. A similar agreement is being finalized with the Colorado School of Mines and another major Western technology university.
