Saudi Electricity to set up power generation subsidiary

Under the government’s reform drive solar power is viewed as a way to trim the amount of crude used to generate power at home. (File/AFP)
Updated 28 November 2018

Saudi Electricity to set up power generation subsidiary

  • The company, the Gulf’s largest utility, said in a bourse filing on Monday that it called shareholders for a meeting on Dec. 18 “to vote on the establishment of a power generation subsidiary”
  • Saudi Arabia is embarking on a push to raise around $200 billion in the next several years through privatization programs in 16 sectors

RIYADH: Saudi Electricity Co. plans to establish a power generation subsidiary, pending shareholder approval, a step viewed by analysts as a sign the state-controlled power giant is pushing ahead with a long-awaited restructuring.
The company, the Gulf’s largest utility, said in a bourse filing on Monday that it called shareholders for a meeting on Dec. 18 “to vote on the establishment of a power generation subsidiary,” without giving further details.
The Public Investment Fund, the kingdom’s sovereign wealth fund, owns a 74 percent stake in Saudi Electricity. The other major shareholder is state oil giant Saudi Aramco , which owns a stake of almost 7 percent.
Saudi Arabia is embarking on a push to raise around $200 billion in the next several years through privatization programs in 16 sectors ranging from oil to health care, education, airports and grain milling.
The unbundling of SEC is a centerpiece of Saudi Arabia’s energy reforms and restructuring of the power sector.
At least as far back as 2008, Riyadh had been considering splitting SEC into separate companies that would be offered either to local citizens through initial public offerings or to local or international corporate partners.
But the plan stalled as the government focused on other proposals, including a potential listing of Aramco.
Earlier this month, two sources told Reuters that SoftBank had hired Deutsche Bank to advise on its power investment plans in Saudi Arabia. The Japanese firm has shown interest in electricity distribution in the world’s top oil exporter, the sources said, with one adding that SoftBank could consider purchasing a minority stake in SEC from the PIF.
An industry analyst, who asked not to be identified, said the new subsidiary could be an indicator that the company will go ahead with its long awaited restructuring and privatization plan.
“They could transfer all generators under the new subsidiary’s assets, then privatize it,” he added.
Under the government’s reform drive, aimed at transforming the kingdom’s economy and cutting its dependence on oil, solar power is viewed as a way to trim the amount of crude used to generate power at home, leaving more available for overseas shipments.


Russia vows cooperation with OPEC to keep oil market balanced

Updated 21 November 2019

Russia vows cooperation with OPEC to keep oil market balanced

  • Moscow not aiming to be world’s No.1 crude producer, Putin tells annual investment forum

MOSCOW: President Vladimir Putin said on Wednesday that Russia and the Organization of the Petroleum Exporting Countries (OPEC) have “a common goal” of keeping the oil market balanced and predictable, and Moscow will continue cooperation under the global supply curbs deal.

OPEC meets on Dec. 5 in Vienna, followed by talks with a group of other exporters, including Russia, known as OPEC+.

“Our (common with OPEC) goal is for the market to be balanced, acceptable for producers and consumers and the most important — and I want to underline this — predictable,” Putin told a forum on Wednesday.

In October, Russia cut its oil output to 11.23 million barrels per day (bpd) from 11.25 million bpd in September but it was still higher than a 11.17-11.18 million bpd cap set for Moscow under the existing global deal. Putin told the forum that Russia’s oil production was growing slightly despite the supply curbs deal but Moscow was not aiming to be the world’s No. 1 crude producer. Currently, the US is the world’s top oil producer.

“Russia has a serious impact on the global energy market but the most impact we achieve (is) when working along with other key producers,” he said. “There was a moment not that long ago when Russia was the world’s top oil producer — this is not our goal.”

Russia plans to produce between 556 million and 560 million tons of oil this year (11.17-11.25 million bpd), Energy Minister Alexander Novak said separately on Wednesday, depending on the volume of gas condensate produced during cold months.

Russia will aim to stick to its commitments under the deal in November, Novak told reporters.

Russia includes gas condensate — a side product also known as a “light oil” produced when companies extract natural gas — into its overall oil production statistics, which some other oil producing countries do not do.

As Russia is gradually increasing liquefied natural gas production (LNG), the share of gas condensate it is producing is also growing. Gas condensate now accounts for around 6 percent of Russian oil production.

Novak told reporters that in winter, Russia traditionally produces more gas condensate as it is launching new gas fields in the freezing temperatures.

“We believe that gas condensate should not be taken into account (of overall oil production statistics), as this is an absolutely different area related to gas production and gas supplies,” he said.

Three sources told Reuters on Tuesday that Russia is unlikely to agree to deepen cuts in oil output at a meeting with fellow exporters next month, but could commit to extend existing curbs to support Saudi Arabia.

On Wednesday, Novak declined to say that Russia’s position would be at upcoming OPEC+ meeting. Reuters uses a conversion rate of 7.33 barrels per ton of oil.