Energy 2017: Q&A with Shawn Davis

Shawn Davis

WWL: Have there been any recent changes to the legislative or regulatory landscape in your jurisdiction? If so, have they presented any particular challenges or impacted the scope of the work you have been seeing?

The introduction of value added tax (VAT) is anticipated in the UAE. Although in general, the scope of the VAT has been announced, the entire legislative framework and regulations concerning its application, procedures and related policies is in the process of being prepared for issuance. As such, while application of VAT is being finalised the full impact on governmental entities and contractors in the energy sector remains to be determined.

Frequently asked questions in this respect are included on the website of the Ministry of Finance of the UAE, which is the primary source of information regarding the UAE VAT Law.

WWL: What steps have been taken to encourage the growth of renewable energy in your jurisdiction?

Abu Dhabi reached financial closing of the world’s largest solar power plant (1177MW) in May 2017. The project is demonstrative of the emphasis placed by the government of Abu Dhabi on sustainability and diversifying its energy sources.

The International Renewable Energy Agency (IRENA) being permanently based in Abu Dhabi shows the commitment of the government of Abu Dhabi to sustainable energy and cooperation in this regard.

IRENA is an intergovernmental organisation that supports countries in their ongoing transition to a sustainable energy future. It acts as a forum for international cooperation, a repository of policy, technology, resources and financial knowledge on renewable energy. IRENA promotes the widespread adoption and sustainable use of renewable energy, including solar, wind, bioenergy, geothermal, hydropower and ocean energy

Additionally, the Abu Dhabi government utility (Abu Dhabi Water and Electricity Authority) has been involved in various smart grid initiatives and has a strong commitment to sustainability and the Dubai government utility (Dubai Water and Electricity Authority) has plans to increase the share of clean energy in Dubai to 7 per cent by 2020, 25 per cent by 2030, and 75 per cent by 2050. 

WWL: How is the energy project finance market responding to changes in commodity prices and OPEC’s move to control oil production? Have there been any noticeable changes in investor activity in recent months?

The Abu Dhabi National Oil Company (ADNOC), which is 100 per cent owned by the Abu Dhabi government, announced at the 2017 World Future Energy Summit its plans to improve its energy efficiency by 10 per cent by 2020 to increase profitability and reduce costs. ADNOC is seeking to reduce its gas consumption by approximately 156 million cubic feet per day, which would result in substantial savings in the coming years.

WWL: Many sources we spoke to have observed an uptick in projects involving LNG. Are there any particular types of projects which investors have been favouring in the past 12 months?

Reverse osmosis (RO) projects are also gaining favour in the Gulf Cooperation Council countries, including in light of recent enhancements in RO technology and related efficiencies. This becomes increasingly relevant if the decoupling of electricity generation and water desalination increases in the coming years as a consequence of an increase in electrical capacity from solar and renewable power plants.

WWL: How do you anticipate the energy market changing in the coming year?

Following the entry in February 2017 by Abu Dhabi Water & Electricity Company and a consortium comprising Marubeni Corporation and JinkoSolar into a power purchase agreement for the 1,177MW Sweihan Solar PV Independent Power Project in Abu Dhabi and closing of the related project financing, I anticipate a continued emphasis on renewable power projects in the Middle East. Saudi Arabia’s Renewable Energy Project Development Office (REPDO) tendered the 300MW solar PV project in Sakaka in April 2017, and in the third quarter of 2017 is likely to tender a 400MW wind project to be located in Midyan, Saudi Arabia.

The price of West Texas Inter mediate (WTI) has been oscillating in the range of US$42 to US$50 per barrel for several months. If WTI reaches US$60 per barrel and remains at that level or higher for a period of several months, companies not already committed to increasing exploration may decide to increase their capex and place a greater focus on exploration of oil.

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