Gulf

1. ADNOC’s biggest deal
2. Warning to OPEC+ cheaters
3. Low growth, wider deficits
4. G42 likes US chips rule
5. Qatar Airways goes Aussie

Coldplay runs hot in Abu Dhabi.

ADNOC’s $13 billion chemicals bet

Abu Dhabi National Oil Co. is still on the hunt for acquisitions after its $13 billion deal to buy German chemical maker Covestro. The takeover — more than a year in the making — marks the UAE’s biggest global deal ever and is a decisive play in ADNOC’s $150 billion five-year investment plan. The spending sprint aims to boost production capacity to 5 million barrels per day by 2027 and diversify ADNOC’s energy mix amid the global energy transition.

Indeed, ADNOC has been on a tear in recent months. It plans to produce polymers in China, bought a stake in a gas field in Azerbaijan, invested in a liquefied natural gas field in Mozambique, partnered with Exxon Mobil in a US hydrogen project, and joined BP to take an Israeli oil and gas firm private. Covestro is ADNOC’s biggest move by far, giving it the capacity to extract greater value from hydrocarbons. While most experts — except OPEC — see peak oil on the horizon, there is consensus that demand for petrochemicals will grow, and probably double, by 2050.

$50 oil looms as OPEC+ ignores quotas

Saudi Arabia has had enough of OPEC+ cheaters. Countries producing over their self-imposed quota — in more polite terms — risk dragging crude below $50 a barrel, Saudi Arabia’s oil minister told the group members, according to The Wall Street Journal. OPEC+ has since 2022 agreed to limit supply, but members have instead pumped 600,000 barrels a day above their agreed limit this year, and Prince Abdulaziz bin Salman, the kingdom’s oil minister, singled out Iraq for its transgression.

Member states interpreted the Saudi position as a threat to open the spigots, reclaim market share, and ignite a price war if compliance continues to slip. Despite a recent surge to over $75 a barrel, oil prices remain far lower than what Saudi Arabia and many other exporters need to balance their budgets.

Saudi deficits deepen

Slower growth and deeper deficits: This is the consequence of Saudi Arabia’s leading role in cutting oil production and supporting crude prices. Riyadh now forecasts GDP growth of just 0.8% this year — a sharp downgrade from the most recent budget, which had pegged it at 4.4%. Growth is forecast at 4.6% in 2025.

Deficits are likely to persist as the kingdom invests in transforming its economy. They could even widen if planned spending cuts fall short, OPEC+ curbs continue, or oil prices drop, according to Justin Alexander, Director of Khaliji Economics. He estimates Saudi is assuming an average oil price of $78 in 2025, a conservative figure compared to the US Energy Information Administration’s forecast of $84 a barrel.

There is a silver lining: Saudi’s debt level stands at just 28% of GDP, providing ample room to borrow.

G42 ‘welcomes’ new US chips rule

G42 told Semafor it “welcomes” new US rules that could ease the flow of American-made advanced chips to the Gulf. The Abu Dhabi AI firm is open to US and UAE regulation, a spokesperson told Semafor, declining to comment on how the new rule might affect future commercial plans.

The new export rules will allow data center companies to receive chips under a general authorization, rather than requiring their US suppliers to get individual licenses to ship to them, Reuters reported.

G42 went through a years-long process to secure its data centers from being a possible backdoor to potential bad actors, and Nvidia has been able to gain an export license to sell some of its most advanced chips to Abu Dhabi as a result.

Qatar Airways seeks stakes in Virgin Australia

Qatar Airways plans to buy a 25% stake in Virgin Australia, a move that will boost flights via its hub in Doha. Qatar Airways is buying its stake in Virgin Australia from Bain Capital, which bought the airline after its bankruptcy during the pandemic. Virgin Australia will return to long-haul flying as part of the agreement, ferrying passengers between Doha and Australian cities Brisbane, Melbourne, Perth, and Sydney on leased aircraft starting next year. Qatar Airways has been expanding its portfolio of minority stakes for years.

The investments now include: British Airways’ parent company International Airlines Group, Hong Kong’s Cathay Pacific, Guangzhou-based China Southern Airlines, RwandAir, and Latam Airlines Group.

The Circuit is a daily newsletter providing insights and analysis on key business developments and market shifts in the Middle East. Trusted by a network of doers and dealers, The Circuit uncovers the latest deals and funding rounds shaping the business landscape — learn more here.

FDI

• Saudi Arabia will soon allow foreign investors to benefit from its SME Enterprises Loan Guarantee Program, in hopes that it entices foreign companies to invest in the local economy. The move comes as the kingdom ramps up efforts to increase foreign direct investment in order to hit its $29 billion target for the year.

SWF

• Gulf sovereign wealth funds are living up to their hype. Transactions in the first nine months of 2024 amounted to 40% of all deals by sovereign investors globally, industry tracker Global SWF reported. A total of $55 billion in capital was deployed by the GCC. Sovereign wealth funds in the region currently manage $4.9 trillion in assets, a figure expected to grow to $7.3 trillion by 2030.

Mining

• The Gulf’s most mysterious company, International Holding Co. — whose share price shot up 43,000% between 2019 and 2022 to become Abu Dhabi’s largest listed firm — is partnering with South Africa’s sovereign wealth fund for mining, green energy, and railway projects in Africa’s largest economy. IHC’s resources unit plans to invest in projects that move South Africa off coal-dominated power generation, according to a joint statement that was short on details.

Crypto

• Ripple, the digital asset infrastructure provider, received approval from the Dubai International Financial Services Authority to begin cross-border payment services. “Blockchain and crypto technologies are here to stay,” the company’s founder said, a sentiment shared by Dubai: The UAE has ambitions to become a global leader in regulating the sector.

The 100,000+ person queue on Ticketmaster this week for Coldplay’s Jan. 9 show in Abu Dhabi was a shock to denizens of the UAE capital. In a city accustomed to a certain amount of ease, where was this over-the-top demand coming from? A leading theory is that some Indian fans shut out from the Mumbai show — the next stop on the Asia leg of Coldplay’s Music of the Spheres world tour — are willing to hop on the three-hour flight to see the British rock band.

Another idea: Coldplay has recently attracted regional attention after collaborating on a song titled We Pray with artists including Elyanna, a Palestinian-Chilean singer who has been vocal about the humanitarian crisis in Gaza. Whatever the reasons, organizers were quick to capitalize: In what was meant to be a single performance in the Middle East for the band, Chris Martin will be belting it out for three more shows at the 45,000 seater Zayed Sports City Stadium.

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