Shale energy unlikely to influence commodity market in long term

 07 Feb 2013 - 6:41

Gary Dugan, Managing Director and Chief Investment Officer, Asia & Middle East, Coutts, speaking to The Peninsula. shaival Dalal

By Satish Kanady

DOHA: The story of  ‘US shale energy revolution’ sounds little bit exaggerated; and the question of the resource becoming a game-changer in the commodity market risking the region’s long-term development projects is far from reality, a top investment expert has said.

“The US is basically looking the shale for pushing its environment agenda. The possible environment impact of the energy production is still a big concern for the countries which have potential reserves.  Complexities of technology are another issue. For instance, the UK is going very slow on its production,” Gary Dugan, Managing Director and Chief Investment Officer Asia & Middle East, Coutts, told The Peninsula in a one-on-one Tuesday.

Gary, who has got a 30-year experience in wealth management, said the Middle East market is one of the most consistent one and Qatar is one of the five core markets of Coutts.   “I would not say the Middle East story would be spectacular. But the growth will be consistent. With the US and Eurozone showing signs of strong recovery, the long term outlook for the energy market is stable”.

Asian growth story will be a further boost to energy exporting countries like Qatar.  China demand is growing again. India’s projected demand has also multiplied. World’s third largest economy Japan is starting to be seen in industrial confidence levels. The latest survey of industrial confidence showed a marked improvement in its future activity indicator, indicating stronger energy demands. There is a substantial increase in the government spending.

Though global markets are in a generally positive mood, this has not been reflected by the financial markets in the Middle East. In particular, the Saudi equity market has had two weeks of poor performance against a backdrop of disappointing fourth quarter 2012 corporate results. In aggregate, profits were down 10 percent quarter on quarter and 5 percent below the same period of 2011. Indian story is also inspiring for the energy exporting region which would have a broader and deeper growth. 

“The region’s financial market is complex. It’s not liquid and not attractive to the international investors. The Middle East has some dollars but not in bulk”. There are signs of M&A businesses picking up. But the IPO market is still weak. There is no significant growth in the market. But six months away from here, we are expecting a more vibrant market in the region.

Gary noted Qatar’s “East Looking” policy wise in terms of investment.  “Qatar’s Asian focus is really sensible. If you look at the Western world, it is growing just one percent but the East is growing by 5 percent. The much of South Asia is going to provide an underlying growth rate for a number of companies. The leisure industry and consumer sector is set for a huge growth in the region, where the countries are looking for huge investments.”

The Peninsula