OPEC urges producers to increase oil capacities

Retail fuel prices in India recently touched record levels due to high oil prices and a weakening rupee. (AFP)
Updated 17 October 2018
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OPEC urges producers to increase oil capacities

  • Oil prices have rallied this year on expectations that US sanctions on Iran will strain supplies by lowering shipments from OPEC’s third-largest oil producer
  • Crude oil demand is expected to increase by 14.5 million barrels per day (bpd) from 2017 to 111.7 million bpd in 2040

NEW DELHI: OPEC Secretary-General Mohammad Barkindo on Tuesday urged oil-producing companies to increase capacities and invest more to meet future demand as spare oil capacity shrinks worldwide.
Oil prices have rallied this year on expectations that US sanctions on Iran will strain supplies by lowering shipments from OPEC’s third-largest oil producer. Brent crude breached four-year highs to reach $86.74 a barrel earlier this month, the highest since 2014.
“Countries that are holding spare capacity are now shrinking because there has been less investment in exploration,” Barkindo said on the sidelines of the IHS CERA conference. The global oil sector needs about $11 trillion in investment to meet future oil needs in the period up to 2040, Barkindo said, adding that import-dependent countries such as India were concerned about future oil supply.
Crude oil demand is expected to increase by 14.5 million barrels per day (bpd) from 2017 to 111.7 million bpd in 2040, OPEC said in its September report.
Saudi Arabia is the only oil producer with significant spare capacity on hand to supply the market if needed, and the Kingdom plans to invest $20 billion in the next few years to possibly expand its spare oil production capacity.
Barkindo said the oil markets were currently adequately supplied and balanced, but cautioned against a potential imbalance in 2019 owing to higher supply.
“We will continue to ensure that the balance that we have attained after four years will be sustained going forward,” he said.
Members of OPEC and non-OPEC countries participating in a supply-reduction agreement are on course to reach 100 percent compliance, Barkindo said, calling it a “work in progress.”
OPEC and allied producers — not including the US — agreed in June to return to 100 percent compliance with output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 percent.
India is expected to account for about 40 percent of the overall increase in global demand for the period ending 2040, Barkindo said. Demand for oil in the world’s third-largest oil importer is expected to rise by 5.8 million barrels per day (bpd) by 2040.
“India is projected to see the largest additional oil demand (3.7 percent per annum) and the fastest growth in the period to 2040,” said Barkindo in his speech to the conference.
Indian officials have flagged worries about the outlook for crude supply though oil producers have downplayed a potential shortfall.
India, which imports more than 80 percent of its oil needs, shipped in 4.2 million barrels per day (bpd) of crude in 2017.
India has sought easier payment terms from oil suppliers to combat higher crude prices.
Retail fuel prices in India recently touched record levels due to high oil prices and a weakening rupee, leading to protests across the country.


UAE’s Network International shrugs off Brexit to list shares in London

Updated 21 March 2019
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UAE’s Network International shrugs off Brexit to list shares in London

  • The planned share sale comes at an uncertain time in the UK
  • The company, which operates hospitals in the Middle East, was said to be also considering listing in the US or Singapore

DUBAI: Network International, the UAE payments processor, has committed to a London IPO next month in what would be the UK’s first big share sale of the year.
The company intends to have a free float of at least 25 percent and admission to the London Stock Exchange is expected to take place in April, Network International said in a regulatory filing on Thursday.
The planned share sale comes at an uncertain time in the UK where there is still no clarity around whether Britain will leave the EU or not at the end of the month.
VPS Healthcare, the Abu Dhabi-based hospital operator, is reconsidering plans to list in London due to uncertainty surrounding Brexit, Bloomberg reported on Thursday citing a person familiar with the matter.
The company, which operates hospitals in the Middle East, was said to be also considering listing in the US or Singapore.
Emirates NBD, Dubai’s biggest bank, owns 51 percent of Network International while Warburg Pincus and General Atlantic jointly own the rest.
The share sale will be a key test of investor demand for new listings in London after a subdued 2018 across most European markets.
“Volatility has continued in recent months, driven by the uncertainty around trade between the US and China, the wider geopolitical climate and the potential end of the current bull run,” said Peter Whelan, partner and UK IPO Lead at PwC in a recent report.
“We are seeing a healthy number of companies preparing for an IPO in 2019 despite the ongoing Brexit negotiations which have clearly impacted IPO activity on the London market.”
The payment processor reported earnings of $298 million last year according to its website, up from $262 million a year earlier. It does not disclose net income figures.
The company handles digital payments across the Middle East, which generate three quarters of its total earnings.
Last year it processed some $40 billion in payments for more than 65,000 merchants.
Its key markets in the region include the UAE and Jordan it says that Saudi Arabia offers “significant opportunities.” It also offers services in 40 African countries with Egypt, Nigeria and South Africa being its most important segments on the continent.