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ICYMI: Green Islamic fund initiative launched

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The Shams Tower Solar project, developed by Enviromena Power Systems, is an example of a CEDC highlighted project in the Middle East.
Enviromena Power Systems

Shari’ah compliant investment securities, sukuks, are to be made available for renewable energy projects such as photovoltaics. A Green Sukuk Working Group has been established to identify such investment opportunities.

The Climate Bonds Initiative, the Clean Energy Business Council (CEBC) of the Middle East and North Africa, and the Gulf Bond and Sukuk Association have launched a Green Sukuk Working Group. This working group will identify green energy projects that fall under Shari’ah-suitable categories for potential investors. A sukuk is a financial certificate, similar to a bond, that complies with Islamic religious law. The law does not allow interest payments.

The non-govermental organisation, CEBC, represents the private sector involved in the clean energy industry across the MENA region and is actively involved in the promotion of photovoltaic projects in the region. Working with the CEBC, the initiative seeks to develop financial products that comply with Islamic shariah law. “We’re looking closely at a couple of prospective bond issuances,” says initiative chairman and co-founder Sean Kidney.

The initiative aims to channel its market expertise to develop best practices and promote the issuance of sukuk for financing of climate change investments and projects, photovoltaic projects being a component. Aaron Bielenberg of the CEBC states, “There are a significant and growing number of projects, for example in renewable energy in the Middle East, that are ideally suited to sukuk investors. This group will help investors more easily identify Shari’ah compliant, clean energy investment opportunities.”

Nick Silver of the Climate Bonds Initiative says that there is an urgent need to mobilise the finance for renewable energy and climate adaption projects in the region. “Green sukuk is ideally suited for the financing of many of these investments,” Silver adds.

The Climate Bonds Initiative receives its funding on a per-project basis, from foundations and banks, and has yet to obtain financing for the green sukuk plan. “If you look at current projects across the region, and if a fraction of those were to be financed with green sukuks, then you’re talking about $10 to $15 billion,” says Nasser Saidi, CEBC chairman. “The time is right for a green sukuk.”

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IEA Sees $150/Bbl If MENA O&G Spending Delayed

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Delaying expected oil and gas investment in the Middle-East and North Africa by just a third would push prices to $150 a barrel, the International Energy Agency warned Wednesday.

The warning lays bare the world’s heightened vulnerability to any hitch in what is still the world’s largest oil patch. The continued reliance on this region comes despite a push for increased independence from oil imports in North America with the extraction of domestic, more expensive hydrocarbons.

In its annual energy outlook, the IEA warns that “if between 2011 and 2015, investment in the MENA region runs one-third lower than the $100 billion a year required, consumers could face a near-term rise in the oil price to $150″ a barrel.

That’s because increased production in the Middle East and North Africa will cover more than 90% of the extra barrels needed worldwide through 2035.

Back in 2008, a spike to an all-time high of $147 a barrel blamed by some economists for exacerbating the global financial crisis.

Yet “it is far from certain that all of this investment [needed from the MENA region] will be forthcoming” to keep oil below that level, said the agency, which represents the world’s largest consumers. It cited increased political instability, conflicts damaging oil infrastructure, international sanctions and resource nationalism as key risks to spending.

This year, the overthrow of three Arab regimes and turmoil elsewhere in the region showed such risks are far from being academic.

In Libya, a civil war interrupted most production and investments for eight months and damaged key oil terminals. The increased emphasis on risk in the region underscores the lasting impact of the Arab uprisings on the oil-rich area.

Iraq will be the largest source of new production additions. Providing investments aren’t delayed, the IEA expects its output to reach 5.4 million barrels a day in 2020 and 7.7 million barrels a day in 2035, compared with about 2.7 million barrels a day today. The numbers are lower, however, than Iraq’s own plans to reach a capacity of 6 million-8 million barrels a day before 2020.

Production from the second contributor, Saudi Arabia, is expected to grow by almost 40% to nearly 14 million barrels a day by 2035, it said.

By contrast, the agency takes a bearish view on Libya’s output. It says could take two years to recover from war damage and won’t grow at all until 2030–in contrast with the view in Tripoli that no more than 15 months are needed to return to normal.

The IEA also predicts production in Iran will be hindered by sanctions and tough investment terms with the Islamic Republic only adding 600,000 barrels a day in production by 2035.

Western consumers are paying more for oil out of fear for their future supply. But at the same time, the Organization of Petroleum Exporting Countries acknowledged Tuesday that its members–the majority in MENA–needed higher oil prices to cover their social spending.

The agency’s main scenario sees oil-import prices still rising to $118 a barrel in real terms in 2020 and $140 a barrel in 2035.

Overall, the IEA, which represents the view of oil consumers, normally has higher oil-demand expectations than producers group OPEC. But under its main scenario, which takes into account new measures to cut energy consumption, the IEA sees global demand for oil at 92.4 million barrels a day in 2020 and 99.4 million barrels a day in 2035.

That’s less than OPEC’s working assumptions released Tuesday, with respectively 97.8 million barrels a day and 109.7 million barrels a day for these dates.

Copyright (c) 2011 Dow Jones & Company, Inc.

Source – RIGZONE

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