Bank credit to Saudi public, private sector enterprises reaches SR1.417 trillion

Updated 18 July 2016
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Bank credit to Saudi public, private sector enterprises reaches SR1.417 trillion

JEDDAH: As oil revenue shrank on falling oil prices, the Kingdom, among other oil exporting Gulf countries, are increasingly taping capital markets in order to maintain and induce growth. This credit-induced growth comes at a time where widening fiscal deficits is adversely impacting sovereign credit ratings, according to Saudi Economic Review by the National Commercial Bank.
Moreover, with much of Saudi Arabian Monetary Agency’s (SAMA’s) monetary policy constrained to preserve the long-standing dollar peg, the Kingdom had to balance be- tween repatriating foreign assets and issuing debt.
In the month of April, the NCB report said, Saudi Arabia’s net foreign assets sank for the 15th consecutive month by 15.7 percent Y/Y, standing at a four-year low of SR2.14 trillion. As for debt issuance, the Kingdom began issuing sovereign development bonds in the second half of 2015 for the first time since 2007. The next move confirmed by the Saudi officials is the debut of the first international bond at about $15 billion possibly in July. The issuance will include several tenors up to 30 years in maturity and will be followed by an additional bond issuance later this year of a yet unspecified amount. Lower sovereign credit ratings will likely pressure the Kingdom’s debt pricing and place higher borrowing costs compared to other GCC countries. Early speculation suggests that the Kingdom’s 10-year yield could be around 4 percent which is higher than that of Qatar and Abu Dhabi which were issued earlier this year.
On the other hand, the National Transformation Program which was announced in June is considered to be credit-positive, and could lead to a swift recovery in the Kingdom’s credit rating which in turn would reflect on lower borrowing rates in the future.
As for the local credit market, the consolidated balance sheet of Saudi banks shows that growth in private sector credit remained strong at 10.4 percent Y/Y by the end of April. Bank credit to the private sector fell to single-digit growth rates during the second half of 2015, bottoming out in October of the same year at 5.5 percent Y/Y. However, since February of 2016, SAMA raised the cap on how much more lending banks can extend relative to their deposits. Previously, the loan-to-deposit ratio guidance limit stood at 85% but as banks started to face the prospects of a liquidity squeeze, SAMA allowed them to leverage an additional 5 percent to reach 90 percent which is still below the ceiling other GCC countries impose on their banks. In contrast, deposits marked the third consecutive monthly de- cline, shrinking by 1.7 percent Y/Y.
By the end of April, the NCB report said total bank credit extended to public and private sector enterprises amounted to SR1.417 trillion which is up 10.0 percent from a year ago. Total bank claims on the public sector marked the 13th month of decline, falling by 24.2 percent to SR250.5 billion.
As bank credit to the public sector does not exceed SR46.5 billion, the bulk of lending to governmental entities happens in the form of investments in government securities, bonds, and treasury bills.
Saudi banks’ holdings of SAMA bills dwindled by 72.3 percent Y/Y to SR64.2 billion, the largest annualized decline since October of 2005. On the other hand, the unutilized lending capacity from holding less SAMA bills helped banks absorb the government bond issuances which surged by 163.1 percent to SR139.9 billion.


‘Fuel of the future’ comes of age as Aramco opens first hydrogen filling station

Updated 17 June 2019
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‘Fuel of the future’ comes of age as Aramco opens first hydrogen filling station

  • Fatih Birol’s comments were a deliberate poke at those experts who think that the sheer logistics of hydrogen make it always an unlikely solution to global energy challenges
  • Birol’s article was followed by a report from the IEA that put some meat on the bones of the argument that hydrogen is key to solving problems such as global warming

DUBAI: Fatih Birol, executive director of the International Energy Agency, cracked a joke in the Financial Times a couple of weeks ago.
“Hydrogen is the fuel of the future, and it always will be,” he wrote about the fuel that many experts agree could hold the key to the world’s energy problems.
It was a deliberate poke at those experts who think that the sheer logistics of hydrogen — generation, storage, and transportation — make it always an unlikely solution to global energy challenges.
Birol’s article was followed by a report from the IEA that put some meat on the bones of the argument that hydrogen is key to solving such problems as global warming and environmental degradation.
“The world has an important opportunity to tap into hydrogen’s vast potential to become a critical part of a more sustainable and secure energy future … The world should not miss this unique chance to make hydrogen an important part of our clean and secure energy future,” the report said.
That argument will get a critical boost today, when Saudi Aramco, the biggest oil company in the world, opens its first hydrogen fueling station in Dhahran Techno Valley, in the heart of the Kingdom’s oil producing region.
Aramco has partnered with Air Products, a US company that has been a pioneer in the use of industrial gases, to produce a filling station for hydrogen-fueled vehicles.

 

It is very much a test. “The collected data during this pilot phase of the project will provide valuable information for the assessment of future applications of this emerging transport technology in the local environment,” Aramco said when the project was first announced.
But it is something Aramco has been investigating for a long time. Ahmed Al-Khowaiter, Aramco’s chef technology officer, said: “The use of hydrogen derived from oil or gas to power fuel cell electric vehicles represents an exciting opportunity to expand the use of oil in clean transport.”
Hydrogen — essentially what is left when you take the oxygen out of water — has been recognized as a potential fuel source for many decades. Motor manufacturers developed a hydrogen motor engine 50 years ago, but the ease and accessibility of hydrocarbon fuels — oil, gas and coal — made it uneconomic to develop this technology beyond the prototype stage.
Now, as the debate over the role of hydrocarbons in the global environmental balance has become ever more intense, some experts, including Birol and other influential parts of the thought-leadership establishment, believe hydrogen is the next Big Thing in global energy trends.
The World Economic Forum (WEF) said recently that “green” hydrogen offers a solution to the world energy challenge, and that is the problem the theoreticians are struggling with: Hydrogen is released naturally in the process of burning hydrocarbons, but it is self-defeating, in an environmental sense. if you have to burn oil, gas or coal to produce it.
On the other hand, renewable sources, like sun, wind and water, do not produce enough hydrogen to be practically or commercially viable, and not at the right times, when people actually need it.
But, as the WEF noted recently “low-cost green hydrogen is coming”, as technology advances mean the cost of renewable energy falls dramatically each year. The Middle East already has a very big and very cost-efficient program for solar energy generation.
The other challenges lay in how to store and transport hydrogen. It can be loaded onto a tanker like LNG, or pushed through pipelines, but it would require a huge investment to change current logistics systems — essentially designed for oil and LNG — to handle hydrogen.
Many countries, including Saudi Arabia, already have the infrastructure associated with oil and gas refining and petrochemicals production to be able to equip “hydrogen hubs,” as long as there is government will and commercial incentive to do so.
For the Kingdom, it looks like a no-brainer for the future. As Birol said: “So, hydrogen offers tantalising promises of cleaner industry and emissions-free power. Turning it into energy produces only water, not greenhouse gases. It’s also the most abundant element in the universe. What’s not to like?”

FACTOID

Technological advances mean low-cost ‘green’ hydrogen offers a solution to the world energy challenge, according to the World Economic Forum.