GCC cement sector outlook – Hettish Karmani, Global Investment House

Video recorded at Cemtech MEA 2015, 8-11 February 2015, Grand Hyatt Dubai, UAE

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Thank you, Keith. Good morning ladies and gentlemen. The topic I'll be covering today will be on GCC, mainly in light of oil, and the budget for the recent countries have announced. I'll be giving a much brighter outlook on the smaller countries, and I'm living the UAE part mainly to be covered by our next speaker.

I'll start with the recent economic outlook the time issue has shaped up the global economy. Okay, thank you. Global growth in 2015 and 2016, projected by MF 3.5% and 3.7%. As per IMF global growth will receive a boost from low oil prices which reflects to an important extent to the increase in supply from across the globe, and real terms growth and GCC is expected to be positive because of the increased supply, but in nominal terms it could be negative, and it could range between a negative of 3% to 15% from across the border DCC.

Qatar should be slightly less affected because of long term gas contracts, their contracts from companies to their input in five or 10 years. So, we expected a little lesser back on Qatar. Like you see the chart the Russia is the one which is expected to the most impacted because of the oil prices, they say that their break even on oil prices is above $100 so this is the country which will be most impacted. The only country IMF recently updated its outlook was U.S only because their shell production is catering to their demands, and that's where the main impact is coming in.

In Saudi Arabia, you see the little decline in the growth focus mainly because of oil prices. Now, the main reason for the oil prices decline this is what the oil prices have been in the last 10, or five years. They've been on an average there has been around $100 per barrel in last four or five years.

But, recently they have seen a bigger decline. What happened in the last four or five years is that, the oil prices remain at $100 per barrel this increase the countries to increase the supply. They increase in investment in oil, and the oil supply increase gradually, which is the reason why we see that the oil production globally rose from 90 million barrels to 93 million barrels.

Another reason for the decline into oil presence have been in Libya and Iraq. Many assume that Libya and Iraq will not be able to catch up after the war very gradually, but they picked a very good pace, and they increased the production very gradually, and they are not a very sustained level they're producing. Other reason is the main shale oil. Shale oil has been doing very well in the last five years. Their capacity has grown from two million barrels to six million barrels as of now. So, this is one of the main concern facing the GCD as of today. What we expect in terms of oil that very will be in the next five years like you the current table, it tells you where does the oil come from, and what is the cost of production of those sources? And if you see that 20 million barrels of oil comes from Middle East, this is from the land sources. The cost of production ranges between $15-40 per barrel, so in average around $29 per barrel is the cost of 20 million barrels. Now, if you go to 20 million barrels globally from offshore shelf areas which are a little costly in terms of production.

So, the average production $43 per barrel. Then 10 million barrels comes globally from extra heavy oil and oil from deep water sources. The cost of production is $51 billion, $51 million per barrel. Then 11 million comes from onshore sources of Russia, 12million from Inland productions globally five million barrels from ultra d forters[sp?]. So, on an average the sum product if you take, the total

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