Against a backdrop of exponentially high oil prices and an ever growing demand for fossil fuel, a new multimillion energy financial services company was launched here on Wednesday to tap into the “lucrative energy market.” At a press conference held at the Gulf Convention Center, The Gulf Hotel Bahrain, the chief executive officers of the three companies involved in the joint undertaking launched the Gulf Energy Financial Services Co. (GEFSCO) to be based in Bahrain. GEFSCO, a strategic alliance between Global Banking Corporation (GBCorp) and a leading energy industry investment banking firm, Washington DC and London based Taylor-DeJongh (TDJ), offers a comprehensive portfolio of Shariah-compliant energy-related services. The creation of the new firm is aimed at capturing a significant share of the $750 billion global Islamic market. GEFSCO will provide advisory services to GBCorp's projects in the energy sector. It will identify and capitalize on investment opportunities in the oil & gas and power sectors, from upstream E&P to refining, petrochemicals, power generation, and other related industries. The energy industry continues to grow strongly and it has been forecast that the world's total energy demand will grow 40 percent by 2030, Mark Hanson, CEO, GBCorp, said. The vast majority of this increase will take place in developing countries, where economies and populations are expanding rapidly and modern energy supplies are still a scarce commodity for millions of people. This has fueled a growth in energy infrastructure companies, creating a strong market for well structured private equity deals. Given this scenario and the objectives of setting up such an operation, he said, it was imperative that GBCorp look at strategic partnerships. “The expertise and synergy that both GBCorp and TDJ will bring to the market will help address the growing need for an industry specialized organization with an inherent understanding of market dynamics and the ability to advise on energy investments in a Shariah-compliant environment.” The energy industry is facing dramatic shifts on the demand-side, Hanson further said. “Emerging markets like China and India are developing into some of the largest energy consumers in the world, placing increasing strains on energy supplies and demanding new investments in energy infrastructure throughout the value chain. This means that new opportunities are developing around the world, providing GEFSCO with the chance to diversify its investments in a number of high-growth markets.” Terry Newendorp, chairman and CEO of TDJ, said that since oil prices may reach as high as $200 a barrel in the next two years as some analysts have forecast, then GEFSCO will seek to take advantage of these developments by leveraging its partners' experience in “challenging political environments to implement appropriate risk mitigation measures and to effectively identify and develop projects to take advantage of the strong price environment.” “By doing so, GEFSCO seeks to provide strong returns to its investors,” he added. Hanson explained further that GEFSCO was formed as a specialized entity run by industry experts to help execute GBCorp's projects across the hydrocarbon value chain - from upstream oil exploration & production to natural gas, refining, petrochemicals, marketing of refined products and power generation. And “to achieve this objective, GBCorp has entered into a strategic partnership with leading energy industry specialists, the investment banking firm TDJ … to build a comprehensive portfolio of Shariah-compliant services specific to the energy industry.” On possible investment in renewable energy, Hanson noted the challenge with renewable energy, saying that for many technologies, there continues to be a strong reliance on subsidies and government incentives to ensure economic viability. “Although technologies continue to improve and the challenges in the sector are slowly being overcome, renewables remain a very small portion of the world's energy portfolio,” he said. At a forecast growth rate of 2 percent to 6.7 percent per annum, depending on the type of renewable energy source, the IEA forecast earlier that by 2030, renewable energy sources will still only meet 4 percent of global energy demand. “Hydrocarbons, therefore, continue to offer a wider selection of economically attractive investments than renewable energy sources. However, high energy prices are making more and more renewable projects attractive and GEFSCO will be open to pursuing investments in renewable projects that use proven technologies and provide attractive returns,” he pointed out. Newendorp moreover said the establishment of GEFSCO and TDJ's partnership with one of Bahrain's leading Islamic investment banks to make investments as a principal “will nicely complement TDJ's existing advisory business while allowing our firm to maintain its commitment to independent, objective advice.” TDJ has developed, structured, negotiated and financed more than $50 billion of international capital investments in 100 countries. TDJ is a global leader in energy sector with 25 years of experience in financing, including upstream and midstream oil & gas, LNG refineries, petrochemicals, pipelines, power plants and related infrastructure in both the industry sectors and emerging/developing markets. Newendorp said the present record high oil prices momentum will stay. “As we all know, oil prices are at record-breaking levels, and prices in the natural gas markets are progressively increasing. These trends are expected to continue, with some analysts predicting that oil prices could reach $200 per barrel within the next two years. With continued economic growth in China, India, the GCC, and other emerging markets, energy demand will continue to rise. The strong price environment has increased the attractiveness of a host of new projects, companies and technologies and has the potential to provide exceptional returns to investments in the right energy opportunities. GEFSCO will identify high quality investment opportunities, execute the transactions and monitor the investments through to exit.” Newendorp moreover said that it has been involved in Saudi Arabia's petrochem industry through the private sector, carefully avoiding to go into the details. However, opportunities in the energy sector do not come without challenges. The industry is inherently complex, and markets are driven by both economic and political forces which are interacting on both global and regional levels. Other trends, such as rising construction costs and increased political risk, are adding to the challenges. Therefore, even though there are some that may justify energy investments solely on the basis of headline figures from organizations such as the IEA, the reality is that investors must engage in extensive analysis and seek creative ways to capitalize on industry growth while mitigating risk. GEFSCO will help in reducing the risks of investing in the energy sector by providing a team that can professionally assess potential investments and structure transactions to mitigate risk and maximize returns. At the open discussion, Ahmed Al-Khan, head of Investment Banking at GBCorp, said “the launch of GEFSCO with the expertise of a strategic alliance and an industry leader TDJ will be integral to the future growth of energy-related projects in GBCORP's diverse Shariah-compliant portfolio. The alliance will offer us an increased amount of choice in one of the fastest growing sectors in the Gulf.” Timothy Holder, a veteran and with an excellent track record in his field, is appointed CEO of GEFSCO. __
