Sultan Ahmed Bin Sulayem, chairman and CEO of DP World, is not interested in running a port operator. One might think that moving 190,000 containers per day and serving 70,000 vessels per year would be enough to keep his hands full, but industry veteran Sulayem has his sights set further, having built a logistics and trading giant since he took the helm of the company in 2006. He wants to enable smarter trade.
As such, DP World’s entrance into the energy sector, with the acquisition of Topaz Energy & Marine (Topaz) in July 2019 for $1bn, makes sense. “We have the experience to contribute measurably to the success of businesses in the energy industry through innovations that deliver safer, faster, and more efficient sector-specific logistics solutions,” Sulayem says. “The energy sector has substantial and very complex logistical requirements, and as the leading global trade enabler, DP World has the experience and know-how in the dynamic connectivity of global cargo movement to provide the solutions the energy industry needs.”
It takes a fair amount of bravery to delve into an industry that, despite its high potential and logistics opportunities, is fraught with uncertainty.
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But Sulayem is accustomed to uncertainty—he served as the first chairman of the Jebel Ali Free Zone when it was founded in 1985, and oversaw its development into a logistics hub. He pioneered the development of the Dubai Multi Commodities Centre, a trading centre for international commodities ranging from gold to tea. He founded and led Istithmar World, a global investment company. In his current role, he deals with risk every day. The ongoing US-China trade war, and a recent spate of tanker attacks and seizures, have raised regional tensions.
“Despite uncertainty from the trade war and challenging regional geopolitical realities, DP World has been able to excel, delivering a broadly impressive performance in the first half of 2019,” he writes in a statement announcing DP World’s H1 2019 results. DP World posted $3.4bn in revenue for H1 2019, a 10.8% rise, supported by its acquisitions. Meanwhile, Topaz Energy & Marine generated $235mn revenue in the same period, up 56% from the previous year. It raked in $42mn in profit, a leap from the $4mn loss it reported in H1 2018.
With a contract backlog of $1.6bn, Topaz should bring in consistent business in the coming years. A large part of Topaz’s potential for DP World lies some 2,000km away from the UAE, in the Caspian Sea. “The Caspian Sea is the largest inland body of water in the world, and one of the most strategic oil basins,” Sulayem says. “Long-term contracts and high barriers to entry characterise the basin, which holds approximately 6% of global oil reserves.”
Topaz’s close ties to energy companies operating in the Caspian, including BP, Dragon Oil, and Dubai Petroleum, among others, will put DP World close to the action. “It positions DP World very robustly as a leader in an area with continued potential for growth,” Sulayem adds. “The Caspian Sea is also strategically important for the Belt and Road Initiative (BRI) given its gateway position between Europe and China. The BRI is an essential area of focus.”
The BRI was first proposed by China in 2013 to improve international cooperation along BRI ‘transport corridors,’ which the World Bank says could reduce travel time along those corridors “by 12%, increase trade between 2.7% and 9.7%, increase income by up to 3.4% and lift 7.6mn people from extreme poverty.”
Trade and logistics companies like DP World which have investments along the corridors can reap some of the benefits of these improved channels. Within the 70 economies in BRI corridors, the World Bank estimates that $575bn worth of projects are planned, in progress or have been executed across sectors.
Topaz operates a fleet of 117 vessels in the Caspian Sea, MENA, and West Africa, which Sulayem says will put DP World in a strong position within the energy sector. He wants to “re-think” offshore logistics for oilfields, and sees module carrying vessels as an opportunity—transporting modular units to Kazakhstan to be installed in the Tengiz field.
The Topaz acquisition is strategic on more than one front—it places DP World in the Caspian, which affords the company its own set of opportunities, but also places it close to its other investments in Kazakhstan and Kyrgyzstan, where Sulayem hopes to use the company’s relationships in the Caspian to develop new trade.
“With this strategic acquisition, we gain a strong foothold in the sector and substantial capabilities that will augment our energy industry experience,” he says. But it is not simply about the energy sector—investing in the maritime industry is clearly key. “DP World understands that economies cannot grow without the maritime industry,” Sulayem adds. “The company has in recent years been investing wisely in the marine logistics sector as part of its strategy. The latest acquisition complements the operations of our P&O Maritime Services (POMS) business, which maintains over 300 vessels globally.”
DP World bought UK shipping and logistics company P&O Ferries briefly in 2006, before selling it along with some assets. It reacquired the company from Dubai World in February 2019 for $393.8mn, and P&O provides services to maritime and energy companies internationally.
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“DP World aims to integrate its new acquisitions and deliver synergies that provide efficient and smart solutions to customers, further improving our earnings and drive returns,” Sulayem says. “We are confident that a sound strategy will make it possible for us to deliver full-year results slightly ahead of market expectations.”
Sulayem is quick to note that his interest does not solely lie in the oil and gas industry, but the wider energy sector, including renewables. Sustainability is a key focus for the company, as a part of DP World’s initiative to develop smarter trading globally.
The company is working on CargoSpeed, a collaborative effort with Virgin Hyperloop One, which would offer ultra-fast, sustainable and efficient hyperloop-enabled shipment. This could fundamentally change shipping and logistics, and would have a ripple effect into the oil and gas sector.
DP World has also dived into another new technology—blockchain. The company has partnered with the Dubai Chamber of Commerce and Industry to collaborate on the Digital Silk Road, a blockchain platform which would improve the transparency and efficiency of supply chains, eliminating some trade barriers. Blockchain can produce efficiency gains from upstream through downstream, and has the potential to reduce costs at a time when oil prices have been less than stable.
“We continue to focus on maintaining our disciplined approach to investment to ensure that we remain the trade partner of choice as well as strengthening our product offering to play a broader role in the global supply chain.
“The group has evolved from a terminal operator to a trade enabler.”
