OPEC bullish on post-pandemic recovery; warns investment shortfall could hit economic comeback

OPEC bullish on post-pandemic recovery; warns investment shortfall could hit economic comeback
Short Url
Updated 29 September 2021

OPEC bullish on post-pandemic recovery; warns investment shortfall could hit economic comeback

OPEC bullish on post-pandemic recovery; warns investment shortfall could hit economic comeback

LONDON: The Organization of the Petroleum-Exporting Countries has warned a lack of investment in new oil and gas supplies could lead to tighter supplies and price rises which could derail the fledgling post-pandemic global recovery.

The warning, published in the World Oil Outlook 2021 report released this afternoon, comes amid a sharp rebound in global demand for energy that has already led to a supply crunch and a surge in prices.

The report said the shift toward cleaner fuels and the impact of the COVID-19 pandemic has seen oil and gas investment fall around 30 percent last year.

"Cumulative investment requirements in the oil sector amount to $11.8 trillion in 2021–2045. Of this, 80% or $9.2 trillion, is directed towards the upstream, the bulk of which is in North America, as US tight oil, in particular, drives medium-term non-OPEC supply growth," OPEC said.

OPEC warned that without necessary investment the potential for further volatility and a future energy shortfall would hang over the global recovery.

Gas prices in Europe and Asia are at or near record highs, while those in the United States are at seven-year peaks. Coal prices are at record levels and Brent breached $80 per barrel, its highest level in three years.

While the report was relatively bullish about the wider post pandemic economic recovery, it warned the risk for oil demand over the medium-term is “skewed to the downside”, and added “worries persist about the pace and trajectory of this recovery”.

The report cited concerns about the spread of COVID-19 variants, inflationary pressures, and the ability of central banks to unwind the massive quantitative easing programmes that continue to underpin the current rebound.

OPEC forecast world oil demand will rise to reach a level similar to before the pandemic at 104.4 mb/d by 2026.

However, it added that almost 80% of this incremental demand will materialize within the first three years (2021–2023), primarily as part of the recovery process from the COVID-19 crisis.

OECD oil demand is expected to rise by almost 4 mb/d in the period to 2026, but OPEC added that this increase will not be sufficient to return to pre-COVID-19 demand levels.

Non-OECD demand, driven by increasing populations and growing economies in Asia, Africa and the Middle East, is expected to rise by almost 10 mb/d over the medium-term.  

 

China and Japan and the wider Asia-Pacific region, which is largely supplied by the Middle East, will see an increase in imports from around 23.5 mb/d in 2019 prior to the pandemic, to almost 30 mb/d by 2045.

Middle East exports to the region are forecast to increase  to above 19.5 mb/d by 2045, around 4.8 mb/d higher than levels in 2019.

Overall, OPEC forecast world energy demand will increase by 28% between 2020 and 2045, driven by an expected doubling in size of the global economy and population expansion.  

The report said all energies would see growth except for coal.

Renewables is forecast to enjoy the largest growth, followed by gas, but oil is expected to retain its number one position in the energy mix.

On the eve of COP26, which takes place in Glasgow in the United Kingdom four weeks, OPEC warned that tackling climate change should not increase energy poverty in developing countries.

The report said that amid the wider greening of the global economy, the UN’s Sustainable Development Goals have committed to ensuring access to affordable, reliable, sustainable and modern energy for everyone - a clear reference to the continuing role of oil and gas in the transition to cleaner energy.

The International Energy Agency (IEA) has called on investors to stop funding new fossil fuel projects to reach net zero emissions by mid-century. However, even the IEA’s sustainable development scenario states that oil and gas will account for 46% of the global energy mix in 2040.


Russia reiterates its offer to boost EU gas supplies

 Russia reiterates its offer to boost EU gas supplies
Updated 6 sec ago

Russia reiterates its offer to boost EU gas supplies

 Russia reiterates its offer to boost EU gas supplies

MOSCOW: Russian gas consumption is running at a record high but Moscow is still ready to increase supplies to Europe should it receive such requests, Deputy Prime Minister Alexander Novak said on Saturday.

European spot gas prices have surged by 800 percent this year as demand has recovered after the coronavirus pandemic. Prices eased earlier this month after Russia, Europe’s key gas supplier, said it could deliver more, but these supplies have yet to materialize.

“I want to underline that we in Russia have record high gas consumption figures this year, which is also due to active economic recovery,” Novak said in an interview with the Rossiya 1 TV channel broadcast, according to Russian news agencies.

Russia, whose gas production and exports to EU are already near record highs, has said it needs to finish filling its own gas storage reserves before it increases supplies to Europe’s spot market. It plans to complete this by the end of October.

Novak did not say how large Russia’s gas reserves were but estimated that European underground facilities were short of around 25 billion cubic meters of gas.

He insisted high domestic demand would not stop Russia offering more supplies to Europe if it received such requests.


China’s central bank says Evergrande risks ‘controllable’

China’s central bank says Evergrande risks ‘controllable’
Updated 8 min 28 sec ago

China’s central bank says Evergrande risks ‘controllable’

China’s central bank says Evergrande risks ‘controllable’

BEIJING: China's central bank said on Friday that financial risks from China Evergrande Group’s debt problems are “controllable” and unlikely to spill over, amid growing investor concerns that the crisis could ripple through other developers.
Evergrande is the world's most indebted developer, with over $300 billion in liabilities. The company missed a third round of interest payments on its offshore bonds this week, spooking investors globally and sparking concern that other companies in the sector may also default on payments.
“Of the total liabilities of Evergrande Group, financial liabilities are less than one-third. Creditors are also relatively dispersed, and individual financial institutions have little risk exposure,” People’s Bank of China official Zou Lan said at a news briefing on Friday.
“Overall, the risk of the spillover to the financial industry is controllable,” he added.
Evergrande came under pressure after Chinese authorities ordered property developers to reduce their debt levels. The authorities are trying to direct the industry toward a more sustainable pace of development after many years of stimulus-fueled growth.


PIF to use oil platforms to attract tourists through 'The Rig' project

PIF to use oil platforms to attract tourists through 'The Rig' project
Updated 12 min 35 sec ago

PIF to use oil platforms to attract tourists through 'The Rig' project

PIF to use oil platforms to attract tourists through 'The Rig' project

RIYADH: Saudi Arabia’s Public Investment Fund on Saturday launched “THE RIG,” first-of-its-kind tourism destination inspired by offshore oil platforms.

Located in the Arabian Gulf, the innovative project will span a combined area of more than 150,000 square meters, said a statement issued by the sovereign wealth fund.

The tourist destination will provide a multitude of hospitality offerings, adventures, and aquatic sporting experiences.

 

The PIF said to ensure sustainable preservation of the environment, the project will follow global standards and best practices in line with the Kingdom’s efforts to ensure preservation of environment.

“THE RIG” will feature a number of touristic attractions, including three hotels, world-class restaurants, helipads, and a range of adventurous activities, including extreme sports.

The project is in line with PIF’s strategy 2021-2025 to modernize Saudi Arabia’s tourism and entertainment sectors and introduce innovative ideas to boost the number of local, regional and international tourists in the Kingdom.


El Salvador explores bitcoin mining powered by volcanoes

 El Salvador explores bitcoin mining powered by volcanoes
Updated 40 min 51 sec ago

El Salvador explores bitcoin mining powered by volcanoes

 El Salvador explores bitcoin mining powered by volcanoes
  • Geothermal power accounts for about a quarter of the country’s total energy mix

BERLIN, EL SALVADOR: At a geothermal power plant near El Salvador’s Tecapa volcano, 300 computers whir inside a trailer as they make complex mathematical calculations day and night verifying transactions for the cryptocurrency bitcoin.
The pilot project has inspired a rash of volcano emojis from President Nayib Bukele, who made bitcoin legal tender in September, and promises of cheap, renewable energy for so-called bitcoin “mining.” Bukele and others say El Salvador’s geothermal resources — generating electricity from high-pressure steam produced by the volcano’s subterranean heat — could be a solution. But the picture in the tiny Central American country is more complicated.
“We don’t spend resources that contaminate the environment, we don’t depend on oil, we don’t depend on natural gas, on any resource that isn’t renewable,” Daniel Alvarez, president of the Rio Lempa Hydroelectric Executive Commission, which oversees the plant, said during a tour on Friday.
Cheap power and a supportive government are the two critical factors for attracting bitcoin mining operations, said Brandon Arvanaghi, a bitcoin mining consultant.
Two years ago, China provided about three-quarters of all the electricity used for crypto mining, with operations flocking to take advantage of its cheap hydroelectric power. But the government began restricting mining and in September declared all transactions involving bitcoin and other cryptocurrencies illegal.
That has led to a scramble to set up mining operations in other countries.
It would appear to be fortuitous for Bukele, who shocked the nation and many around the world with his announcement last summer that bitcoin would become legal tender beside the US dollar in El Salvador. The president sold the plan in part as a way for Salvadorans living overseas — mostly in the US — to send money home to their families more cheaply. It also made him a darling of the bitcoin world.
Bitcoin mining in El Salvador would appear to have a supportive government in Bukele, but cheap electricity is so far just a promise.
El Salvador imports about one-fifth to one-quarter of its electricity. The rest of production is divided among hydroelectric, geothermal and plants fired by fossil fuels.
Geothermal accounts for about a quarter of the country’s energy. El Salvador has 23 volcanoes.
“When you add these renewable sources like these vast abundant areas, a ton of renewable sources and a friendly regime it can be very attractive and El Salvador may very well fit that model,” Arvanaghi said.
Right now, El Salvador’s electricity is not considered particularly cheap.
The website GlobalPetrolPrices.com, which publishes retail energy prices around the world, puts electric costs to households and businesses in El Salvador well above the global average.
Arvanaghi said that bitcoin mining incentivizes the expansion of renewable energy production by providing high demand for cheap power and that miners have shown themselves to be willing to pause a portion of their machines at times when there is less power available from the grid.
Bukele’s promise of cheap power for bitcoin mining then would have to involve a subsidy, at least until renewable capacity expanded and rates declined.
 


US regulators slap $41m fine on company behind Tether ‘token’

US regulators slap $41m fine on company behind Tether ‘token’
Updated 16 October 2021

US regulators slap $41m fine on company behind Tether ‘token’

US regulators slap $41m fine on company behind Tether ‘token’

NEW YORK:The company behind a digital token called Tether has agreed to pay $41 million to settle charges that it misled investors by claiming the token was fully backed at all times by US dollars and other fiat currencies.

The Commodity Futures Trading Commission said on Friday it charged Tether Holdings Limited with making untrue or misleading statements and omissions in relation to its claims. Specifically, the US regulator found that since launching the token in 2014, Tether Holdings represented that its was a “stablecoin” with its value pegged to fiat currency, including US dollars and euros.

A stablecoin is a digital currency backed by real-world assets such as national currencies or other commodities. Unlike Bitcoin and other cryptocurrencies, stablecoins are designed to not fluctuate wildly in value.

However, the CFTC determined that at least from June 1, 2016 through Feb. 25, 2019, Tether misrepresented to customers and the market that it maintained sufficient US dollar reserves to back every Tether token in circulation with the equivalent amount of “corresponding fiat currency.”

The agency also found that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves, and that the company falsely represented it would undergo regular audits to prove it was maintaining the fiat currency reserves it needed to back Tether tokens.

In a statement, Tether, which is headquartered Hong Kong and maintains an office in Santa Monica, California, said the CFTC’s findings pertained to certain disclosures about the company’s reserves that were “fully resolved” in February 2019, when the company updated its terms of service.

“As to the Tether reserves, there is no finding that Tether tokens were not fully backed at all times — simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times,” the company said, noting that it has “always maintained adequate reserves and has never failed to satisfy a redemption request.”

Separately, the CFTC also ordered Bitfinex to pay a $1.5 million civil penalty after finding that the cryptocurrency trading platform made illegal, off-exchange retail commodity transactions involving digital assets with US investors and operated as a futures commission merchant without registering to do so.