UK-GCC trade talks make slow progress

11 December 2023

 

There may be some frustration creeping in over the pace of negotiations on a free trade agreement (FTA) between the UK and the GCC, with Gulf officials in particular calling for the process to be expedited.

The two sides launched the process in June 2022 and since then there have been five rounds of talks, the most recent of which wrapped up in Riyadh on 16 November.

The UK’s Department for Business & Trade said a few days later that technical discussions had been held on 21 policy areas and “good progress was made” with the draft text, with advances made in “the majority of chapters”.

The next round of talks is due to take place in the first quarter of 2024.

It is not clear how far the two sides are from reaching a deal, but Gulf officials have said they would like to see faster progress. At a meeting in Manama on 18 November, GCC secretary-general Jassem Mohamed Albudaiwi told the UK’s Minister of State for the Middle East Lord Ahmad of Wimbledon (pictured) of the “urgency of expediting the pace of negotiations”.

The UK, however, appears to be in less of a rush. Speaking at the Arab-British Economic Summit in London on 20 November, the country’s chief negotiator on the FTA, Tom Wintle, said: “It is fundamentally about the deal, not the date. We are absolutely committed to working at pace. We have huge political will and commitment on both sides to get this done. I can vouchsafe that both sides are working flat out. But it is about getting the right agreement.”

He declined to be drawn on how much longer the process might take but added: “We are starting to see what I believe will be a really remarkable free trade agreement emerging.”

The slow pace of the UK-GCC negotiations contrasts with the speed at which the UAE has been signing its own versions of bilateral FTAs.

Over the past few years, the UAE has launched negotiations on comprehensive economic partnership agreements (CEPAs) with several countries. The first four deals – with India, Israel, Indonesia and Turkiye – took an average of less than seven months from launch to conclusion.

At heart, what an FTA is looking to do is to make business easier, cheaper, more secure
Tom Wintle, the UK’s chief negotiator for the UK-GCC FTA

Gainful opportunity

Trade between the UK and the six GCC economies was worth £61m ($77bn) in 2022, according to the UK authorities, who suggest that the removal of tariffs and other barriers could increase trade flows by “at least 16 per cent”.

When the negotiations first began, the UK government pointed to the food and drink sector along with manufacturing and renewable energy as areas that stood to benefit from any deal.

In his most recent comments, Wintle emphasised potential gains in the digital realm, “and in particular the opportunity and potential to grow the transformational technologies like e-commerce, like AI [artificial intelligence]”. He went on to talk about “an FTA that really harnesses both what is happening today but importantly the forces that will shape the world of work and commerce in the future”.

In terms of specific demands, Wintle said the UK is looking to “lock in legal certainty on electronic transactions so businesses can make greater use of things like e-contracts, e-signatures, paperless trading”. 

“At heart, what an FTA is looking to do is to make business easier, cheaper, more secure,” he added.

While the talks continue, companies continue to trade. Speaking on the sidelines of the conference, an executive at a technology company that is already present in the UAE and is considering expanding into Saudi Arabia was cautious about the difference an FTA might make. “It is the market opportunity that is the driver,” he said.

Elsewhere in the Middle East, the UK already has FTAs in place with Egypt, Lebanon, Morocco and Tunisia, and has been on a push to sign more since leaving the EU. The talks with the GCC are just one of many sets of live negotiations, with others currently under way between the UK and South Korea, Canada and India, among others.

Trade issues also regularly come up in the strategic dialogues that the UK holds with countries from around the Middle East and North Africa region. In recent weeks, it has held them with Algeria, Bahrain and Tunisia.

Lord Ahmad told the Arab-British Economic Summit that in the recent meeting with Algeria, “we focussed on opportunities to increase our burgeoning trade relationship”, which he said had grown by 24 per cent in the past year to a value of £3bn.

Trade ties with Algeria go back a long way, with the two countries having signed a bilateral Treaty of Peace & Trade in 1682.

Lord Ahmad said the dialogues with Bahrain and Tunisia “focussed on areas such as climate, education, transport and much more as well”, and said in relation to the GCC trade talks that “we are progressing that well”.

“A trade deal with the GCC will boost our collaboration across a huge range of sectors, creating many business opportunities and importantly jobs on both sides, and attracting new investment,” he added.

“For the economies of the Arab world to become less dependent on carbon and fossil fuels, we must open doors for entrepreneurs to take advantage of the technologies – opportunities we can only grasp by removing barriers and facilitating growth, and working with our Gulf partners.”

As the long history of UK-Algeria trade shows, FTA deals are not a new concept even if, as with the ongoing GCC talks, it can take time to frame an agreement that takes into account the fast-moving nature of commerce.

Image: UK Minister of State for the Middle East Lord Ahmad of Wimbledon at the 2023 Arab-British Economic Summit

https://image.digitalinsightresearch.in/uploads/NewsArticle/11350781/main0606.gif
Dominic Dudley
Related Articles
  • Dubai prequalifies developers for $22bn tunnels PPP

    6 February 2025

    Dubai Municipality has prequalified developers for the first four packages of the $22bn Dubai Strategic Sewerage Tunnels (DSST) project.

    According to industry sources, at least three companies have been prequalified as lead members of potential consortiums that can bid for the contracts.

    These include:

    • Etihad Water & Electricity subsidiary (local)
    • Itochu (Japan)
    • Vision Invest (Saudi Arabia)

    Other companies have been prequalified as technical members. 

    MEED reported in October that over a dozen companies were keen to prequalify as investors or sponsors of the planned public-private partnership (PPP) project.

    They included:

    • Abrdn Investcorp Infrastructure Investments Manager (UK)
    • Besix (Belgium)
    • China Railway Construction Corporation (CRCC)
    • China Railway Engineering Group (CREG)
    • China State Construction Engineering Corporation (China)
    • Itochu (Japan)
    • Nesma Company (Saudi Arabia)
    • Plenary (Australia)
    • Samsung C&T (South Korea)
    • Vision Invest (Saudi Arabia)
    • Webuild (Italy)

    The request for proposals for the project's first two packages is expected to be issued imminently.

    MEED previously reported that the bidders for the PPP packages will be prequalified consortiums comprised of sponsors or investors, EPC contractors, and operations and maintenance contractors.

    The overall project will require a capital expenditure of about AED30bn ($8bn), while the whole-life cost over the full concession terms of the entire project is estimated to reach AED80bn.

    The investor prequalification process for the scheme comes after the client prequalified EPC contractors that can partner with the developers or investors to bid for the contracts.

    MEED understands that packages J1 and W will be tendered together as separate contracts first, followed by J2 and J3, with the requests for proposals to be issued sequentially, staggered about six to 12 months apart.

    DSST packages

    Under the current plan, the $22bn DSST project is broken down into six packages, which will be tendered as PPP packages with concession periods lasting between 25 and 35 years.

    The first package, J1, comprises Jebel Ali tunnels (North) and terminal pump stations (TPS). The tunnels will extend approximately 42 kilometres (km), and the links will extend 10km. 

    The second package, J2, covers the southern section of the Jebel Ali tunnels, which will extend 16km and have a link stretching 46km.

    The third package, W for Warsan, comprises 16km of tunnels, TPS and 46km of links.

    J3, the fourth package, comprises 129km of links.

    J1, J2, W and J3 will comprise the deep sewerage tunnels, links and TPS (TLT) components of the overall project.

    J1, J2 and W will be procured under a design-build-finance-operate-maintain model with a concession period of 25-35 years.

    J3 will be procured under a design-build-finance model with a concession period of 25-35 years. Once completed, Dubai Municipality will operate J3, unlike the first three packages, which are planned to be operated and maintained by the winning PPP contractors.  

    The project’s remaining two packages entail expanding and upgrading the Jebel Ali and Warsan sewage treatment plants. MEED understands that these packages will be procured at a later stage.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13370610/main.jpg
    Jennifer Aguinaldo
  • Iraq and GE Vernova complete plants upgrade

    6 February 2025

    US-headquartered energy technology provider GE Vernova has completed the upgrades of “several key” power plants in Iraq.

    The firm and the Iraqi Ministry of Electricity (MoE) announced the upgrade’s completion on 5 February.

    The overall upgrade project, which GE Vernova previously announced, covers 46 gas turbines across 12 power plants, adding up to 500MW to Iraq’s national grid before the summer of 2025.

    They did not specify which power plants have completed upgrade works.  

    According to GE, some of the power plants included in this project already transitioned from heavy fuel oil (HFO) to natural gas, with a capacity increase of approximately 260MW. These plants include Ninawa, Al-Diwaniyah, Hilla, Karbala, Shat Al-Basra, Najibiya, Samawa, Dhiqar, Al-Khairat and Al-Haidariya.

    GE Vernova added: “The other plants are expected to be modernised within the summer of 2025, with an expected additional increase in capacity of approximately 250MW.

    “This modernisation is expected to improve operational flexibility and boost output, efficiency and availability of the power generation assets.”

    In addition, the firm announced the successful installation of its Advanced Gas Path (AGP) upgrades on several 9. E gas turbines powering the Al-Quds and Dhiqar power plants, and MXLII upgrades on 13E2 gas turbines powering the Al-Mansouriya power plant.

    According to GE Vernova, the expected output increases of up to 6% for each power plant will enable the MoE to generate more electricity using the same amount of fuel.

    In addition, as part of the services and upgrade agreement announced in 2024 with the MoE to enhance the availability of power plants across the country, GE Vernova completed comprehensive maintenance projects across several of these power plants, corresponding to a total capacity of 3.7GW.

    These power plants include Qayyarah, Diwaniyah, Al-Haydariyah and Baghdad South. 

    Iraq periodically suffers from power outages, especially during the summer months, when increased cooling requirements overwhelm its power plants and electricity grid.  


    READ THE FEBRUARY MEED BUSINESS REVIEW

    Trump unleashes tech opportunities; Doha achieves diplomatic prowess and economic resilience; GCC water developers eye uptick in award activity in 2025.

    Published on 1 February 2025 and distributed to senior decision-makers in the region and around the world, the February MEED Business Review includes:

    > WATER & WASTEWATER: Water projects require innovation
    https://image.digitalinsightresearch.in/uploads/NewsArticle/13370380/main.jpg
    Jennifer Aguinaldo
  • Bankability remains hydrogen’s unbreakable challenge

    6 February 2025

    Commentary
    Jennifer Aguinaldo
    Energy & technology editor

    There is some indication that green hydrogen as an industry has arrived at the valley of disillusionment if the Gartner hype cycle is anything to go by.

    This is evident with the dwindling number of attendees and absence of offtakers – global commodity trading companies that are expected to buy premium green hydrogen and derivative products – at previously well-attended green hydrogen summits in major cities in the Gulf.

    Following frenzied announcements of multibillion-dollar integrated green hydrogen and ammonia plants in the Middle East and North Africa region, particularly Egypt, Morocco, Oman and the UAE, between 2021 and 2023, it appears that key stakeholders have started coming to grips with reality.

    Of the close to 80 green hydrogen projects that MEED and MEED Projects track, only three have so far signed an offtake agreement, and only one has managed to reach financial close.

    The $8.4bn Neom green hydrogen project in Saudi Arabia reached financial close in March 2023, nearly two years after it was announced.

    The project, the largest of its kind requiring over 4GW of renewable energy and 2GW of electrolyser capacity, managed to reach financial close based on one of the three co-developers, the US’ Air Products, assuming the full offtake and construction risks for the project, note some experts.

    A project’s bankability ultimately relies on suitable stakeholders taking on the risks for every aspect of the project, from construction to operations.

    Currently, the risks or threats include evolving global regulations related to consumption and carbon emissions pricing; lack of technology maturity; supply and demand uncertainty; and the lack of mainstream demand, according to Wael Almazeedi, chief executive at Abu Dhabi-based International Renewable Energy Certification (I-rec) certified firm Avance Energy.

    Almazeedi said these risks “need to be mitigated to the satisfaction of project lenders” if the planned green hydrogen projects in the region are to secure financing and reach the construction phase.

    The challenges do not necessarily mean all projects will fail, however.

    Similar to predecessors such as solar and electrification technologies, the hope is for the planned green hydrogen projects to eventually emerge out of the realm of disillusionment and reach the so-called enlightenment slope and, ultimately, plateaus of productivity, using Gartner’s hype cycle model.

    Government support in terms of regulatory frameworks, inevitably including some form of subsidies to bridge the so-called green premium, as well as global certification standards, are at the top of suppliers’ agendas. 

    Across the key aspiring Mena clean hydrogen hubs, like the UAE in particular, clearer regulatory frameworks have started to emerge, which could encourage more cohesive cooperation and enable projects to get off the ground.

    Key EU countries also appear to remain committed to clean and green hydrogen imports as part of the green deal, while at least one power plant in Japan has completed a three-month trial of co-firing green ammonia with coal “with positive results”.  

    But until all these come together to ensure an unencumbered global supply chain, offtakers and project financing deals will likely remain elusive. 

    Related reads:


    READ THE FEBRUARY MEED BUSINESS REVIEW

    Trump unleashes tech opportunities; Doha achieves diplomatic prowess and economic resilience; GCC water developers eye uptick in award activity in 2025.

    Published on 1 February 2025 and distributed to senior decision-makers in the region and around the world, the February MEED Business Review includes:

    > WATER & WASTEWATER: Water projects require innovation
    https://image.digitalinsightresearch.in/uploads/NewsArticle/13370135/main.gif
    Jennifer Aguinaldo
  • Morocco explores salt caverns for hydrogen storage

    6 February 2025

     

    A feasibility study is under way for a project to explore underground salt cavern sites for green hydrogen storage in Morocco.

    According to Samir Rachidi, director-general at Iresen, the underground salt caverns are located near the capital Casablanca.

    “There is already an existing cavity used to store natural gas,” Rachidi told MEED.

    It is understood the same process or principle will be used to store green hydrogen in salt caverns.

    The potential storage capacity of the salt caverns for green hydrogen can only be determined once the feasibility study is completed.  

    Photo credit: Shutterstock

    Underground salt caverns offer an option for the bulk storage of very large amounts of gaseous hydrogen.

    According to Ireland-headquartered chemicals firm Linde, which operates the world’s first commercial hydrogen high-purity cavern in Texas, the gas has to be purified and compressed before it can be injected into a cavern.

    It added that hydrogen-filled cavities can act as a backup for a pipeline network.

    First green ammonia project

    Rachidi also said that Moroccan phosphate specialist OCP is in the advanced stages of studying a project to produce 1 million tonnes of green ammonia annually by 2027.

    The planned facility, which will cater to export markets, will include a 200,000 tonne-a-year (t/y) green hydrogen production plant and 4,000MW of renewable energy plants.

    It will also include an electrolyser plant with a capacity of 2,000MW.

    At least seven other green hydrogen or ammonia projects are under study or in the pre-front-end engineering and design stage in the North African state.

    In April 2023, a team led by China Energy International Construction Group signed a memorandum of cooperation to develop a green hydrogen project in a coastal area in southern Morocco.

    A year earlier, Serbia-headquartered renewables developer and investor CWP Global appointed US firm Bechtel to support the development of large-scale green hydrogen and ammonia facilities in Morocco and Mauritania.

    The Amun green hydrogen project, which CWP Global plans to develop in Morocco, is understood to require 15GW of renewable energy and has an estimated budget of between $18bn and $20bn.

    Morocco established a National Hydrogen Commission in 2019 and published a green hydrogen roadmap in 2021. 

    The roadmap entails the production of green hydrogen for local ammonia production and export between 2020 and 2030; the production and export of green hydrogen, green ammonia and synthetic fuels between 2030 and 2040; and the global trade of these products between 2040 and 2050.   

    Main photo: For illustrative purposes only (Adnoc)


    READ THE FEBRUARY MEED BUSINESS REVIEW

    Trump unleashes tech opportunities; Doha achieves diplomatic prowess and economic resilience; GCC water developers eye uptick in award activity in 2025.

    Published on 1 February 2025 and distributed to senior decision-makers in the region and around the world, the February MEED Business Review includes:

    > WATER & WASTEWATER: Water projects require innovation
    https://image.digitalinsightresearch.in/uploads/NewsArticle/13369568/main.jpg
    Jennifer Aguinaldo
  • Qatar maintains stable growth heading

    6 February 2025

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13369431/main.gif
    MEED Editorial