Big Oil keeps brakes on spending even with crude rally windfall

Big Oil keeps brakes on spending even with crude rally windfall
US shale producers have promised investors they will keep a tight rein on spending in 2021. (AP)
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Updated 12 July 2021

Big Oil keeps brakes on spending even with crude rally windfall

Big Oil keeps brakes on spending even with crude rally windfall
  • Benchmark crude oil prices more than doubled in the second quarter of 2021 from a year earlier and have risen further in recent weeks to close to $78 a barrel

LONDON: Leading international energy companies are resisting the temptation to rush and spend an unexpected windfall from rallying oil and natural gas prices as they focus on longer-term energy transition challenges, executives and analysts said.
Benchmark crude oil prices more than doubled in the second quarter of 2021 from a year earlier and have risen further in recent weeks to close to $78 a barrel, their highest in almost three years as OPEC and other major producers failed to strike an agreement to lift output.
That, along with higher global natural gas prices because of supply issues, will boost the coffers of oil companies after firms like Exxon Mobil, Royal Dutch Shell and BP sharply cut costs in the wake of the coronavirus pandemic last year.
“The cash flow for majors is looking very strong, they’re certainly firing on the oil and natural gas cylinders,” Redburn analyst Stuart Joyner said, adding that things could improve further once demand for refined products fully recovers.
The companies are expected to provide updates on their spending plans in second quarter earnings reports over coming weeks, but are unlikely to significantly shift tack with investors laser-focused on securing higher returns from the sector after a disappointing decade.
While the heads of top energy companies said last month $100-a-barrel oil was achievable again in coming years, they added prices would be volatile, meaning there is little incentive, at least for now, to commit billions to projects that could take a decade or more to show a return on investment.
Also dampening the bullish mood is huge uncertainty over near-term energy demand due to the resurgence of COVID-19 in parts of the world and longer-term with the shift to lower carbon fuels to fight climate change.
“The international oil companies are still rebuilding their balance sheets,” Brian Gilvary, CEO of INEOS’ oil and gas division INEOS Energy and a former BP chief financial officer told Reuters.
Shell said last week it will increase returns to shareholders earlier than expected thanks to higher revenue, holding its annual capital expenditure at no more than $22 billion.
For companies such as BP and Shell, France’s TotalEnergies and Spain’s Repsol, the coronavirus crisis has already accelerated the roll-out of new strategies aimed at lowering carbon emissions and growing renewables businesses.
So, unlike previous cycles when rising oil prices loosened purse strings, executives will likely stick to their spending discipline and focus on their energy transition strategies.
“Higher oil prices allow us to extract more value from our existing businesses, which in turn will generate more resources for our spending on transformation in line with our energy transition roadmap,” Repsol Chief Executive Josu Jon Imaz told Reuters in a statement.
BP will stick to its plan to reduce oil output by 40 percent, or roughly 1 million barrels per day, by 2030, including through the sale of oil and gas assets, CEO Bernard Looney said at the Reuters Energy Transition conference last month.
“Strong oil prices are very positive for our strategy,” Looney said. “Those assets that we sell, will be selling in a much higher price environment, potentially, and therefore will generate more proceeds.”
A commodity price rally in the late 2000s drove oil prices to record highs above $140 a barrel and sparked a wave of investments including in huge, complex deepwater oilfields, giant gas liquefaction plants and a US shale drilling boom that upended oil supplies.
Capital spending by the majors is likely to edge up from next year as companies pay down debt and fully recover from the pandemic, Redburn’s Joyner said.
“There will be more capex, but not much of the increase will go into upstream (oil and gas production), it’s going to go into renewables.”
US shale producers have also promised investors they will keep a tight rein on spending in 2021.
In contrast, smaller international oil and gas drillers are expected to slowly ramp up spending in response to the higher prices, INEOS Energy’s Gilvary said.
“Smaller exploration and production companies will increase spending but in a more measured way because they tend to be more focused on the short- to medium-term.”


Cryptocurrencies slide as market selloff deepens

Cryptocurrencies slide as market selloff deepens
Updated 26 sec ago

Cryptocurrencies slide as market selloff deepens

Cryptocurrencies slide as market selloff deepens
  • Digital currencies gaining popularity among Indians in smaller cities

RIYADH: Prices of cryptocurrencies plunged on Monday as concerns over the spillover risk to the global economy from Chinese property group Evergrande’s troubles rippled over to wider markets.

Bitcoin tumbled 7.33 percent to $43,804 at 4:29 p.m. Riyadh time. Its rival Ether, the coin linked to the Ethereum blockchain network, fell 8.74 percent to $3,050.45, according to data from CoinDesk.

The loss in the value of cryptocurrencies comes at a time when institutional interest in the space has surged and some investment banks have ramped up their forecasts for cryptocurrencies in the coming months.

“Their fate seems a little tied to equities at the moment, and the price action is incredibly similar too,” said John Marley, CEO of forexxtra, a London-based FX consultancy. 

Ether price

Nikolaos Panigirtzoglou, managing director of JPMorgan said that the fair value of Ether is much lower than its current price.

According to a set of measurements based on the network’s activity, it calculated the value of the digital coin at $1,500, 55 percent below its market price.

One of the reasons cited was that Ethereum was not unique anymore, and it faced stiff competition from other chains such as Solana and Avalanche.

“We look at the hash rate and the number of unique addresses to try to understand the value for Ethereum. We’re struggling to go above $1,500. There is a question mark here. The current price is expressing an exponential increase in usage and traffic that might not materialize,” he stated.

 

Lawsuit

In the midst of an ongoing lawsuit with the US Securities and Exchange Commission, Ripple's legal team said they have no plans to settle with the SEC.

They are confident that SEC President Gary Gensler will be convinced that pursuing the case is to pick winners and losers in the crypto space based on innovation.

"Ripple’s legal team told Fox Business they have no plans to settle with SEC over lawsuit on XRP, confident they can show Gary Gensler in pursuing the case is picking winners and losers in the crypto business to the detriment of innovation,” Charles Gasparino tweeted.

 

Indians embrace crypto

Indian citizens are embracing cryptocurrencies to invest and earn extra money after the pandemic, according to reports from the regional media.

But what is even more interesting is that this growth has been greater in smaller cities, where interest in cryptocurrency is at its peak.

The profile of these participants was also interesting, as they are highly educated and open to diversifying their investment portfolios and not only focus on Bitcoin.

 A local exchange, Wazirx, has reported astonishing levels of new customers coming from these small towns, classified as Tier 2 and Tier 3 cities.

“Tier 2 and Tier 3 cities have driven almost 55 percent of the total user signups on Wazirx in 2021, thereby overtaking Tier 1 cities, which demonstrated a signup growth of 2,375 percent,” Wazirx CEO Nischal Shetty was quoted as saying in local media reports.


Saudi top 10 banks see robust growth in financing and deposits

Saudi top 10 banks see robust growth in financing and deposits
Updated 20 September 2021

Saudi top 10 banks see robust growth in financing and deposits

Saudi top 10 banks see robust growth in financing and deposits

RIYADH: Saudi Arabia's top 10 banks saw robust quarter-on-quarter growth in financing and deposits in the second quarter of 2021, Zawya reported, citing management consulting firm Alvarez & Marsal (A&M)'s KSA Banking Pulse.

Core operating income increased by 8.4 percent, compared to 1.2 percent in the first quarter of the year, in what is considered the fourth increase in a row, while loans and advances (L&A) increased by 13.1 percent and deposits by 12.6 percent.

L&A and deposit growth were primarily supported by the merger of National Commercial Bank and SAMBA to form Saudi National Bank (SNB), according to the report.

Operating expenses rose by 13.7 percent quarter-on-quarter and impairments jumped by 81.6 percent, affecting the second quarter's overall operating efficiency for the banking sector. This affected net profit for the top ten banks in the Kingdom.

Aggregate net income decreased over the same period by 8.1 percent to SR11 billion ($2.93 billion), while the fall in net profit was partially offset by a 11.1 percent increase in net interest income.

The top 10 banks in the report are SNB, Al Rajhi Bank, Riyad Bank , Saudi British Bank, Banque Saudi Fransi, Arab National Bank, Alinma Bank, Bank Albilad, Saudi Investment Bank and Bank Aljazira.


Blossoming Saudi fragrance market to hit over $3.8bn by 2030

Blossoming Saudi fragrance market to hit over $3.8bn by 2030
Updated 20 September 2021

Blossoming Saudi fragrance market to hit over $3.8bn by 2030

Blossoming Saudi fragrance market to hit over $3.8bn by 2030

DUBAI: The Saudi fragrance market is poised to reach $3.8 billion by 2030, according to a market report, with an annual growth rate of 8.2 percent from last year.

India-based P&S Intelligence said a growing trend in grooming and personal care will drive this performance of the Kingdom’s perfume sector, which in 2020 was valued at $1.74 billion.

The predicted growth follows a challenging year for industry, as manufacturing plants were shut down due to the COVID-19 pandemic.

The report said luxury product bifurcation will witness the fastest growth in the sector, as more consumers opt for high-end brands.

The parfum category, which uses the highest concentration of essential oils, took most of the market share in the past.

Demand for natural and organic perfumes will also increase, the report said, amid increasing brand consciousness among consumers.


Innovation zone aims to transform Cairo’s Bab al-Azab 

Innovation zone aims to transform Cairo’s Bab al-Azab 
Updated 20 September 2021

Innovation zone aims to transform Cairo’s Bab al-Azab 

Innovation zone aims to transform Cairo’s Bab al-Azab 

RIYADH: Egypt's Sovereign Fund plans to transform the historic Bab al-Azab area in Cairo’s Salah Al-Din Al-Ayoubi Citadel into the first integrated innovation zone in the Middle East and North Africa (MENA).

The fund signed a Memorandum of Understanding with Bidayat Investment company, under which the company will explore opportunities for cooperation in developing Bab Al-Azab and turning it into an innovation center to embrace Egyptian youth creators, founding partner Rachid Mohamed Rachid told Asharq Business.

The center also aims at embracing startup owners in fields such as engineering design, furniture manufacturing, jewelery, fashion, as well as films, he said.

Bidayat Investment Group has already established innovation centers in several international markets, such as Italy, France and Turkey.


Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistan's Maqsad raises $2.1m pre-seed funds
Updated 20 September 2021

Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistani e-learning platform Maqsad has raised USD$2.1 million in its latest funding round, just months after being created.

The edtech company offers after-school academic support to youngsters in English and Urdu, and the company aims to reach 100 million students in Pakistan.

The company will use the cash to fund a production studio, academics and animators in order to develop in-house content.

Maqsad co-founder Rooshan Aziz said: “Struggles of students during the early days of the pandemic motivated us to run a pilot program. With promising initial traction and user feedback, the potential to digitize the education sector became very clear.”