Surge in global oil supply may overtake demand in 2018

The sun sets over the Total refinery on the Loire River off Donges, western France. (File Photo: AFP)
Updated 13 February 2018

Surge in global oil supply may overtake demand in 2018

LONDON: The rise in global oil production, led by the US, is likely to outpace growth in demand this year, the International Energy Agency said yesterday.
The Paris-based IEA raised its forecast for oil demand growth in 2018 to 1.4 million barrels per day, from a previous projection of 1.3 million bpd, after the International Monetary Fund upped its estimate of global economic growth for this year and next.
Oil demand grew at a rate of 1.6 million bpd in 2017, the IEA said in its monthly market report.
However, the rapid rise in output, particularly in the US, could well outweigh any pick-up in demand and begin to push up global oil inventories, which are now within sight of their five-year average.
“Today, having cut costs dramatically, US producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth,” the IEA said.
“In just three months to November, (US) crude output increased by a colossal 846,000 bpd and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader.”
US crude output could reach 11 million bpd by the end of the year, according to estimates from the US Energy Information Administration.
OPEC, along with other exporters such as Russia, have agreed to maintain a joint restriction on crude supply for a second year running in 2018, to force inventories to drain and support prices.
Oil inventories across the world’s richest nations fell by 55.6 million barrels in December to 2.851 billion barrels, their steepest one-month drop since February 2011, the IEA said.
For 2017 as a whole, inventories fell by 154 million barrels, or at a rate of 420,000 bpd. By the year-end they were only 52 million barrels above the five-year average, with stocks of oil products below that benchmark, the IEA said.
“With the surplus having shrunk so dramatically, the success of the output agreement might be close to hand. This, however, is not necessarily the case: Oil price rises have come to a halt and gone into reverse, and, according to our supply/demand balance, so might the decline in oil stocks, at least in the early part of this year.”
Oil production outside OPEC nations fell by 175,000 bpd in January to 58.6 million bpd, but was still 1.3 million bpd higher than January last year, predominantly because of the 1.3-million-bpd year-on-year increase in US output.
OPEC output was largely steady at 32.16 million bpd in January and compliance with the supply deal reached 137 percent, due in part to declines in Venezuela, where economic crisis has paralyzed much of the country’s oil production capacity.
The IEA estimates demand for OPEC’s crude in 2018 will average 32.3 million bpd, after dropping to 32.0 million in the first quarter of the year.
The IEA said oil prices, which briefly touched a high of $71 a barrel in January, could be supported even if US production rises, provided global growth remains strong, or if unplanned supply outages persist.
“If so, most producers will be happy, but if not, history might be repeating itself,” the IEA said.


Saudi energy giant to invest $3bn in Bangladesh’s power sector

Updated 22 October 2019

Saudi energy giant to invest $3bn in Bangladesh’s power sector

  • Experts say deal will usher in more economic and development opportunities for the country

DHAKA: Saudi Arabia’s energy giant, ACWA power, will set up an LNG-based 3,600 MW plant in Bangladesh after an agreement was signed in Dhaka on Thursday.

The MoU was signed by ACWA Chairman Mohammed Abunayyan and officials from the Bangladesh Power Development Board (BPDB), officials told Arab News on Monday.

According to the agreement, ACWA will invest $3 billion in Bangladesh’s energy development sector, of which $2.5 billion will be used to build the power plant while the rest will be spent on an LNG terminal to facilitate fuel supply to the plant. Under the deal, ACWA will also set up a 2 MW solar power plant.

In recent months, both countries have engaged in a series of discussions for investment opportunities in Bangladesh’s industry and energy sectors. 

During the Saudi-Bangladesh investment cooperation meeting in March this year, Dhaka proposed a $35 billion investment plan to a high-powered Saudi delegation led by Majed bin Abdullah Al-Qasabi, the Saudi commerce and investment minister, and Mohammed bin Mezyed Al-Tuwaijri, the Saudi economy and planning minister.

However, officials in Dhaka said that this was the first investment deal to be signed between the two countries.

“We have just inked the MoU for building the LNG-based power plant. Now, ACWA will conduct a feasibility study regarding the location of the plant, which is expected to be completed in the next six months,” Khaled Mahmood, chairman of BPDB, told Arab News.

He added that there are several locations in Moheshkhali, Chottogram and the Mongla port area for the proposed power plant.

“We need to find a suitable location where the drift of the river will be suitable for establishing the LNG plant and we need to also consider the suitability of establishing the transmission lines,” Mahmood said.

“It will be either a JV (Joint Venture) or an IPP (Independent Power Producer) mode of investment, which is yet to be determined. But, we are expecting that in next year the investment will start coming here,” Mahmood said.

BPDB expects to complete the set-up process of the power plant within 36 to 42 months.

“We are in close contact with ACWA and focusing on the successful completion of the project within the shortest possible time,” he said.

Abunayyan said that he was optimistic about the new investment deal.

“Bangladesh has been a model for the Muslim world in economic progress. This is our beginning, and our journey and our relationship will last for a long time,” Abunayyan told a gathering after the MoU signing ceremony.

Economists and experts in Bangladesh also welcomed the ACWA investment in the energy development sector.

“This sort of huge and long-term capital investment will create a lot of employment opportunities. On the other hand, it will facilitate other trade negotiations with the Middle Eastern countries, too,” Dr. Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies (BIDS), told Arab News.

She added that Bangladesh needs to weigh the pros and cons before finalizing such contracts so that the country can earn the “maximum benefits” from the investment.

“It will also expedite other big investments in Bangladesh from different countries,” she said.

Another energy economist, Dr. Asadujjaman, said that Bangladesh needs to exercise caution while conducting the feasibility study for such a huge investment.

“We need to address the environmental aspects, opportunity costs and other economic perspectives while working with this type of big investment. Considering the present situation, the country also needs to focus on producing more solar energy,” Dr. Asadujjaman told Arab News.