Qatar to relinquish hold as world leader in LNG exports

Qatar to relinquish hold as world leader in LNG exports
Updated 01 September 2014

Qatar to relinquish hold as world leader in LNG exports

Qatar to relinquish hold as world leader in LNG exports

Over the last decade, the discovery of massive quantities of unconventional gas resources around the world has spurred a renaissance within global energy markets, redirecting international attention to natural gas as a leading source of energy supply.
Modern technology allows natural gas to be chilled at ultra-low temperatures to a liquid state, called liquefied natural gas or LNG, making it easier to store and transport.
Buyers of LNG process the gas through specialized import facilities that convert it back into its gaseous state.

Qatar: The king of LNG
Since 2006, Qatar has led the world in annual LNG exports, producing a volume of 77 million tons per year (MTPY) at its 14 gas processing and liquefaction facilities, known as “trains” in industry lingo.
RasGas and Qatargas, joint venture companies with state-owned Qatar Petroleum, produce the country’s LNG at the Ras Laffan Industrial City, a compound of gas processing facilities that is home to the largest LNG export terminal in the world and located around 50 miles outside of Doha.
Qatar boasts the third largest natural gas reserves in the world and has a vast resource wealth that makes the nation of around 280,000 citizens the richest in the world in terms of GDP per capita.
The North Field offshore Qatar is the largest non-associated gas deposit in the world and the country’s primary hydrocarbon asset, which it shares with its neighbor across the Arabian Gulf, Iran.
The Gulf nation meets most of its domestic energy consumption through its gas resources, which provide for over 60 percent of government revenues.
Nearly all of the natural gas exported from Qatar takes the form of LNG, with the remainder transported by pipeline to the UAE and Oman.
Early market entry and heavy investment in LNG infrastructure has allowed Qatar to become an LNG powerhouse and the world’s largest exporter of the product.
Of the 29 LNG importing nations, 26 buy from Qatar. In 2005, Qatar halted further development of its North Field, imposing a moratorium on new projects in order to maintain supply stability over the near term.
With no further LNG projects planned in the near term, the emergence of high-capacity LNG projects around the world threatens Qatar’s supremacy as the current market leader as new projects prepare to go online.

New supply from international markets
The bulk of new LNG capacity in the near future will come from Australia, the US, Canada, and East Africa. Regional economics and geographic advantages will make these countries solid competitors for a share of the global LNG market.
Japan, South Korea and Taiwan are the largest buyers of LNG — together importing over half of the supply in the market.
These countries are dependent on imported energy as they have highly industrialized economies and lack domestic energy resources.
China and India will lead LNG demand growth in the future as the countries import greater quantities of LNG to fuel their rapidly expanding economies.
Following the 2011 tsunami that devastated Japan’s Fukushima-Daiichi nuclear power facility, the country decommissioned its nuclear energy program and turned to increased hydrocarbon imports.
Japan currently is the largest buyer of LNG in the world, importing 35 percent of global supplies at its more than 30 re-gasification facilities.
By default, the Asia Pacific region has become the largest market for LNG in the world.

Australia takes the lead
Australia is the frontrunner in the race to overtake Qatar as the world’s leading LNG exporter.
Nearly $200 billion invested in current LNG projects in Australia are set to come online from 2014 to 2017, boosting the country’s export capacity from 2013 levels of 24.2 MTPY to around 85 MTPY by 2017, well above Qatar’s current capacity.
Most of Australia’s LNG is sold to Japan, which buys from both Qatar and Australia on near-equal footing.
Closer proximity to Japan allows Australia to benefit from shorter shipping routes and lower transport costs than Qatar, providing a geographic advantage.
Despite this benefit, Australian LNG projects suffer extreme cost overruns as high as 50 percent, largely driven by expensive labor costs and a stronger Australian Dollar.
“Australia is about cost-competitiveness at the moment,” says Stephen Craen, head of energy project finance at Paris-based investment bank Societe Generale.
“Costs in Australian LNG have been extremely high and it puts new projects in a position that is difficult to compete on price with LNG exports from the US and other emerging LNG exporting countries like Mozambique in East Africa.”
Large-scale LNG projects are underway in Mozambique and Tanzania, seeking to bring as much as 20 MTPY of LNG to market as soon as 2018.

North America is pulling Its LNG Weight
A large resource base and high-capacity export projects in the US position the country to become an LNG leader.
Lower regional gas prices in North America provide a significant cost advantage to both US and Canadian gas producers, making it economical for them to buy and liquefy gas, and then transport it to buyers as LNG.
Although the US possesses the credentials to emerge as a leading exporter of LNG, many regulatory hurdles exist.
Senator Lisa Murkowski of Alaska, who is the Ranking Member of the US Senate Energy and Natural Resources Committee, recognizes the potential of American LNG projects as an opportunity that should not be missed.
“The window for the US to join the global gas trade will not be opened indefinitely. In fact, it is narrowing, and there is a real possibility that the nation will miss out on a historic opportunity.”
The US Congress is evaluating measures that will expedite the regulatory approval process for American LNG projects in order to make them more competitive.
Obtaining authorization to export LNG to countries that do not share a Free Trade Agreement with the US remains a significant challenge.
LNG export projects in the US are mostly located along the Gulf Coast, providing a logistical challenge in accessing Asian markets.
Potential delays in a current expansion of the Panama Canal threatens to interfere with trade routes as American LNG projects come online during the next 3 years.
A typical journey for LNG to reach Japan from the US takes roughly 30 days via the Panama Canal, and up to 50 days around South Africa.
LNG vessels sailing from Qatar and Australia are able to reach Japan in approximately 20 days and 10 days, respectively.
Despite longer trade routes to Asia, the US.is well positioned to supply much closer neighbors in Latin America and Europe.
Canadian LNG export projects are primarily located along the country’s West Coast, providing faster access to Asian markets.
Canada benefits from the same LNG price differentials as the US, with both countries each representing a component of a greater North American market.
Although Qatar is set to abdicate its position as the nation with the greatest volume of annual LNG exports, it will continue to remain a dominant energy player.
Qatar has taken measures to diversify its global energy portfolio and expand its reach to new markets through a series of aggressive investments.
State-owned Qatar Petroleum maintains a 70 percent stake in the Golden Pass LNG project in Texas, which was initially developed with the intent to supply LNG produced in Qatar to the US.
Following the US shale gas revolution, Qatar and its partner in the venture, ExxonMobil, have decided to seek approval from US regulators to convert the existing import facility into a liquefaction terminal.
Outside of LNG, Qatar has invested heavily in oil fields in Brazil and the Democratic Republic of the Congo.
The country has further expanded its global reach by acquiring significant stakes in international oil companies including Royal Dutch Shell and Total S.A.
Global demand for LNG is expected to rise from 2013 levels of 240 MTPY to an estimated 465 MTPY by 2025.
A majority of this demand will be met by ample supply provided from North America, Australia, and projects in East Africa, which together will put downward pressure on international LNG prices and narrow the spreads between them.
With no future LNG projects planned in Qatar as new competitors flood the market, it is reasonable to conclude that as soon as 2018 Qatar will relinquish its claim as the largest LNG exporting nation, with Australia as the most likely contender to surpass its productive capacity.
Despite Qatar’s apparent demotion on the LNG hierarchy, the country will continue to maintain an integral role in global energy markets for years to come.


Changan sees boom in demand as Saudis fall in love with Chinese car brands

Changan sees boom in demand as Saudis fall in love with Chinese car brands
Updated 28 July 2021

Changan sees boom in demand as Saudis fall in love with Chinese car brands

Changan sees boom in demand as Saudis fall in love with Chinese car brands
  • ‘Prices and technology are among the factors behind rise in popularity’

DUBAI, RIYADH, JEDDAH: A decade ago, if you would have asked a Saudi whether he would consider buying a Chinese car, the answer most likely would have been no, but this has now changed.

Saudi Arabia is emerging as one of the most attractive markets overseas for Chinese car brands as they grab the attention of dealers and drivers in the Kingdom.

Car sales in China, the world’s biggest market, were down 3 percent year-on-year to 2.13 million in May, ending a streak of 13 months of growth, mainly due to a global chip shortage and increased raw material prices. Last year, despite the coronavirus disease (COVID-10) pandemic, the data showed that sales continued to surge, and at the end of 2020, Changan’s share of the market had risen to 4.3 percent, moving it two places up in the annual car brand rankings to eighth most popular.

Mohammed Ramady, an independent economist and former professor of finance and economics at King Fahd University of Petroleum and Minerals, believes Chinese cars are proving popular because they appeal to medium- and lower-income families. He said the data showed that last year, around one in 10 Chinese cars were shipped to Saudi Arabia. A clear example of the growing popularity of Chinese cars in the Kingdom is the experience of the Changan brand. According to sales data compiled by Bestsellingcarsblog.com, the carmaker, which is owned by the Chinese state, captured 2.3 percent of the Saudi market in 2019, making it the 10th most popular car brand in the Kingdom just a few years after it was introduced to Saudi drivers.

Similarly, data from Google showed that searches for the term Changan increased nearly 50 percent year-on-year in the first half of 2021, peaking in January when the brand opened its service center in Riyadh. 

Riyadh-based Wafi Al-Ghanim, marketing communication manager at Almajdouie Changan, the official distributor of the brand in Saudi Arabia, told Arab News there are three reasons the brand has quickly proved so successful: “Prices, quality, and warranty periods.”

“When you think about quality and specifications compared to the price in the car sector, you will definitely find that Chinese cars are far ahead of their counterparts in general, Japanese and Korean cars in particular,” Al-Ghanim said.

Looking to the future, he believes that Chinese cars across the board will continue to see strong growth and by 2022 will have captured 15 percent of the Saudi market, which “in a huge regional market is very good.”

One of the ways to boost sales is physical visibility. In January, Almajdouie built a 2,640-square-meter service center in Riyadh.

“We have had to raise the level of our services to match the high level of Changan cars, as well as to enhance the growing demand for Changan cars in the local market,” Yousef bin Ali Almajdouie, president of Almajdouie Group, said in a press statement at the time.

A report by the China Daily newspaper estimated that around 55,000 Changan cars have been sold in Saudi Arabia up to May this year, but it is not the only Chinese brand that has captured the attention of drivers in the Kingdom.

FASTFACTS

• Last year, despite the coronavirus disease (COVID-10) pandemic, the data showed that sales continued to surge, and at the end of 2020, Changan’s share of the market had risen to 4.3 percent, moving it two places up in the annual car brand rankings to eighth most popular.

• According to data, the carmaker, which is owned by the Chinese state, captured 2.3 percent of the Saudi market in 2019, making it the 10th most popular car brand in the Kingdom just a few years after it was introduced to Saudi drivers.

• An example of the growing popularity of Chinese cars in the Kingdom is the experience of the Changan brand.

Hongqi, one of China’s oldest luxury car brands, this month opened its first sales center in Riyadh, with plans to expand the network to Jeddah and Dammam.

“The market in the Middle East is key for Hongqi. And the Saudi market is crucial in the region,” Ma Zhenduo, general manager of Hongqi’s Middle East division, told Xinhua, the Chinese state news agency. “The sales have exceeded all our expectations across all the models,” said Mohammed Abduljawad, chairman of Universal Motors Agencies, Hongqi’s local partner in Saudi Arabia.

Hatem Khattab, the first marketing manager for FAW Bestune in Saudi Arabia, which sells the Chinese brands FAW, Bestune and Hongqi, told Arab News that the secret to the success of Chinese brands was the combination of price and technology.

“The manufacturers are very good at incorporating the latest technology in their cars. These are economic cars with state-of-the-art technology,” Khattab said. “The reason behind their popularity is their features, and now that they are seen more commonly on the streets, it has had a domino effect. Seeing the cars makes people think they are more reliable. They are affordable as well; we recently had a customer who bought 10 cars just for his family,” he added.

In addition to increased visibility on the roads, Khattab pointed out that Chinese brands also offer more options in terms of the range of models on offer.

“The competition in the automotive market here is huge, and I feel like the Chinese brands stepped up their game to meet the requirement of this cut-throat market. Currently, in Saudi Arabia, we have almost 20-25 Chinese brands as compared to brands of other countries that offer up to 10,” he said. Ramady said engine size was another big catalyst. Western, American, Japanese and South Korean models in the 2,500 to 3,000 cc engine sector still dominate the market, Chinese brands have positioned themselves in the 1,000 to 2,000 cc engine range, which is a growing segment in Saudi Arabia. He believes these models appeal “to a low to middle-income Saudi consumer market, especially during the ongoing COVID-19 pandemic and economic uncertainties, as well as a new niche market for Saudi female drivers owning their first cars.”

The statistics also back this up, according to Motory.com, one of the largest specialized car websites in Saudi Arabia. “Over the last few years, we have seen Chinese cars become increasingly popular with consumers, especially in Saudi Arabia. Online searches for Chinese cars on our Motory.com website have increased by around 400 percent between 2018 and 2020,” a spokesperson told Arab News.

Chinese carmakers saw exports increase by 103 percent year-on-year in the first five months of this year, according to a report by the South China Morning Post, citing data from the China Passenger Car Association. The way trends are going, many will find their way into Saudi garages and carparks, as the Kingdom continues to be a dominant source market. Fahad Al-Arjani, a member of the Saudi Chinese Business Council, echoed the view that technology was at the key factor, as Chinese brands have been “injecting investments in clean energy cars supported by the smartest technologies.” He pointed to the partnership between technology giant Huawei and the state-owned Beijing Automotive Industry Holding Co., Ltd. (BAIC) as an example.

“In addition to developing a highly efficient battery system, as well as emerging technologies, Huawei and BAIC’s first car will offer level three autonomous driving and will include 5G connectivity, which isn’t necessarily surprising given the Chinese company is a leader when it comes to the rollout of this new standard, which will make Chinese cars highly likely to lead the future of this sector for ages,” he told Arab News.


Lucid is ‘key step’ in PIF’s strategy after market debut

Lucid is ‘key step’ in PIF’s strategy after market debut
Updated 28 July 2021

Lucid is ‘key step’ in PIF’s strategy after market debut

Lucid is ‘key step’ in PIF’s strategy after market debut
  • PIF is believed to hold more than 60 percent of the stock after its 2018 cash injection into the start-up, giving it a paper profit of at least $15 billion

DUBAI: Saudi Arabia’s Public Investment Fund (PIF) has already made billions of dollars in profit on its investment in Lucid Motors, the California upmarket electric vehicle (EV) manufacturer, and could earn many billions more over the next five years.

PIF announced its first investment of SR3.75 billion ($1 billion) in Lucid in September 2018.

The sovereign wealth fund congratulated Lucid on its market debut and said on Twitter: “Our investment in Lucid Motors and the production of Lucid Air is a key step in the strategy for long term growth opportunities, supporting innovation and technology development, and doing revenue and sectoral diversification in Saudi Arabia.” Shares in Lucid raced to an 11 percent premium on the opening day of trading on New York’s Nasdaq Global Select Market on Monday, valuing it at more than $24 billion.  

PIF is believed to hold more than 60 percent of the stock after its 2018 cash injection into the start-up, giving it a paper profit of at least $15 billion.

This could go significantly higher if Lucid follows the model of rival EV maker Tesla. Elon Musk’s high-flying company reported better than forecast profits earlier this week, and saw its share price leap 2 percent, giving it a market value of $633 billion.

Lucid is at a much earlier stage of the EV road, but projections made by its management foresee a big rise in sales and profits ahead.

The company sees revenues of $2.2 billion next year after it has begun selling cars in substantial numbers, rising to $22.8 billion in 2026. By then, it will be selling 250,000 cars a year, making a profit of nearly $3 billion and generating free cash of $1.5 billion, according to the forecasts.

Peter Rawlinson, CEO and CTO of Lucid Group, who was a former chief engineer at Tesla, said that the company was “on track” to meet its projections after the Nasdaq debut.

“Lucid Air (the launch model) represents the next generation of electric vehicles and creates new standards for interior comfort, range, efficiency, and power,” Rawlinson said. 

“We are on track to meet our projected deliveries for the next two years, and we look forward to delighting our customers around the world with the best electric vehicles ever created.”

Lucid is likely to face more intense competition in the EV space than Tesla did when it launched its first model more than a decade ago, with other “legacy” manufacturers across the world launching electric products.

But Rawlinson is confident that superior design will give it an edge in the premium market segment. 

“We have got the best car in the world,” he told Arab News earlier this year.

Success for Lucid will be a big boost for PIF’s investment strategy, but it could also have significant industrial and commercial implications for the Kingdom. Lucid is likely to open a showroom in Saudi Arabia and there has been intensifying speculation that it will eventually build a production plant in the Kingdom, too.

Rawlinson said of PIF: “They put their faith in us, that is why we are here today thriving.”


Amazon denies plans to accept bitcoin payments

Amazon denies plans to accept bitcoin payments
Updated 27 July 2021

Amazon denies plans to accept bitcoin payments

Amazon denies plans to accept bitcoin payments
  • The electric carmaker’s balance sheet for the second quarter of 2021 showed a net digital asset value of $1.311 billion as of June 30

RIYADH: Bitcoin traded higher on Tuesday, rising 0.55 percent to $38,379.02 at 5:02 p.m. Riyadh time. Ether, the second most traded cryptocurrency, was down 1.3 percent to $2,298.85, according to data from CoinDesk.

Below is the latest cryptocurrency news:

Amazon has denied a British newspaper report that it plans to accept bitcoin payments this year. “Notwithstanding our interest in the space, the speculation that has ensued around our specific plans for cryptocurrencies is not true,” an Amazon spokesperson said on Monday. “We remain focused on exploring what this could look like for customers shopping on Amazon.”

According to a report from Bloomberg, the popular stablecoin Tether is under criminal investigation by the US Justice Department. Prosecutors are looking into whether Tether’s executives committed bank fraud, a development with potentially seismic consequences for the broader crypto market. Tether released a statement saying that the Bloomberg report follows a pattern of repackaging old claims as news, but did not deny awareness of the pending charges, according to CoinDesk.

Goldman Sachs is liquidating and settling cryptocurrency traded products for some of its hedge fund clients in Europe, it was reported last week. The investment banking giant has submitted an application to the US Securities and Exchange Commission for an exchange-traded fund (ETF) that would showcase public companies in decentralized finance and blockchain around the world. The filing indicated that the fund plans to invest at least 80 percent of its assets in companies that are developing blockchain technology and digitizing funding. The Securities and Exchange Commission is currently reviewing more than a dozen Bitcoin ETF applications and has approved decisions on several of them, CoinDesk reported.

Tesla released its second quarter earnings report on Monday. The electric carmaker’s balance sheet for the second quarter of 2021 showed a net digital asset value of $1.311 billion as of June 30. It also showed that Tesla owns $1.311 billion in bitcoin. The company did not buy or sell any bitcoin during the second quarter, but it did report a bitcoin depreciation of $23 million. Tesla’s action reaffirms Musk’s prior statement that neither he nor Tesla had sold their coins, according to Bitcoin News.

A survey conducted by the cryptocurrency exchange of the Independent Reserve Asia Pacific found that 43 percent of respondents said they own cryptocurrency, while 46 percent plan to purchase digital assets in the next 12 months.

The survey of 1,000 Singaporeans from a representative background of gender, age and location, also found that two-thirds of respondents in the 26-45 age group said they own cryptocurrency. Nearly 40 percent of respondents described bitcoin as an investment asset and 25 percent described it as a store of value. Three-quarters of respondents aged between 26 and 35 said they believe that cryptocurrency will become more widely accepted. Singapore’s financial authorities have confirmed that they are working with their French counterparts to explore cross-border applications of central bank digital currencies, according to a report by Cointelegraph.


Fitch revises Saudi Aramco’s outlook to stable, affirms IDR at ‘A’

Fitch Ratings, the leading global credit rating agency, has revised its Saudi Aramco outlook to stable from negative. (Reuters/File Photo)
Fitch Ratings, the leading global credit rating agency, has revised its Saudi Aramco outlook to stable from negative. (Reuters/File Photo)
Updated 27 July 2021

Fitch revises Saudi Aramco’s outlook to stable, affirms IDR at ‘A’

Fitch Ratings, the leading global credit rating agency, has revised its Saudi Aramco outlook to stable from negative. (Reuters/File Photo)

RIYADH: Fitch Ratings, the leading global credit rating agency, has revised its Saudi Aramco outlook to stable from negative while affirming the company’s long-term issuer default rating (IDR) at ‘A.’

The revision of the outlook on Saudi Aramco’s IDR is driven by a similar action on the sovereign, the rating agency said in its new report published on Tuesday.


Fitch lifts 6 Saudi banks outlooks to stable from negative

Fitch lifts 6 Saudi banks outlooks to stable from negative
Updated 27 July 2021

Fitch lifts 6 Saudi banks outlooks to stable from negative

Fitch lifts 6 Saudi banks outlooks to stable from negative
  • These ratings follow a similar action on Saudi Arabia’s sovereign rating on 15 July 2021 that was attributed to better fiscal management and an increase in oil prices

RIYADH: Ratings agency Fitch has revised six Saudi banks’ credit outlooks to stable from negative and affirmed their international ratings at BBB+.

The banks are Arab National Bank (ANB), Banque Saudi Fransi (BSF), Alinma bank (Alinma), Saudi Investment Bank (SAIB), Bank Aljazira (BAJ) and Gulf International Bank - Saudi Arabia (GIB SA).

These ratings follow a similar action on Saudi Arabia’s sovereign rating on 15 July 2021 that was attributed to better fiscal management and an increase in oil prices.

“Fitch’s assessment considers the authorities’ strong ability to support the banking system, given large, albeit reduced from their historical levels, external reserves,” Fitch said in the statement.

“It also reflects a long record of support for Saudi banks, irrespective of their size, franchise, funding structure and level of government ownership.”