Shipping industry faces ESG heat from lenders

Shipping industry faces ESG heat from lenders
Short Url
Updated 19 October 2021

Shipping industry faces ESG heat from lenders

Shipping industry faces ESG heat from lenders

LONDON: Banks are demanding much stricter environmental criteria when financing shipping companies as investor pressure grows on the sector to accelerate going greener, according to Boston Consulting Group (BCG).

Shipping, which transports about 90 percent of world trade, accounts for nearly 3 percent of the world’s CO2 emissions and BCG forecast the industry will need $2.4 trillion to achieve net-zero emissions by 2050.

“ESG-driven requests are already prompting more action from banks. Shipping is already feeling it and they (shipping companies) are under pressure now,” said Peter Jameson, partner with BCG, which are consultants for the COP26 UN climate summit that starts on Oct. 31.

Standard Chartered has already provided loans linked to sustainability targets for drilling group Odfjell and the shipping division of Oman’s Asyad Group, the bank has said.

“When looking at lending on new assets, banks are going to create a bigger conduit for CO2 reductions through their policies,” Jameson told Reuters.

“The banks are also seeing insurance companies feeling shareholder pressure and this is also causing big pension funds to reassess.”

ESG-related assets under management are estimated to represent up to 80 percent of total lending to shipping by 2030, BCG said.

UN shipping agency the International Maritime Organization has said it aims to reduce overall greenhouse gas (GHG) emissions from ships by 50 percent from 2008 levels by 2050, but industry groups are calling for more progress from governments.

Shared modernizing vision, commitment to economic integration underlie latest Gulf trade deals

Saudi Crown Prince Mohammed bin Salman is welcomed by the Sultan of Oman, Haitham bin Tariq, upon his arrival at the airport in the Omani capital Muscat on December 6, 2021. (AFP)
Saudi Crown Prince Mohammed bin Salman is welcomed by the Sultan of Oman, Haitham bin Tariq, upon his arrival at the airport in the Omani capital Muscat on December 6, 2021. (AFP)
Updated 07 December 2021

Shared modernizing vision, commitment to economic integration underlie latest Gulf trade deals

Saudi Crown Prince Mohammed bin Salman is welcomed by the Sultan of Oman, Haitham bin Tariq, upon his arrival at the airport in the Omani capital Muscat on December 6, 2021. (AFP)
  • Saudi firms have signed agreements with partners in the Sultanate worth $10 billion 
  • Like Saudi Arabia, Oman has a strategy to build a post-oil economy with a strong fiscal base

DUBAI: The signing of new investment deals reportedly worth $10 billion between Saudi Arabia and Oman is no doubt a positive development for solidifying cooperation between the member countries of the Gulf Cooperation Council. Yet the first questions that spring to mind are: Why Oman and why now?

From a geopolitical perspective, Saudi Arabia’s move is important as the Kingdom is now using its immense economic clout to support its smaller neighbors, starting with Iraq to the north and now Oman to the southeast.

It is broadly accepted that the region’s future social and political stability require economic stability. Many of Saudi Arabia’s neighbors are oil-producing nations whose journeys towards diversifying their economies to embrace other industries and markets are only just beginning.

Investment is seen as an effective way to help these countries move away from oil and generate more jobs in other sectors. But for Saudi investments to be of any long-term positive significance, they must align with the national and strategic goals of both countries.

Much like Saudi Arabia, Oman has its own reform agenda known as Oman Vision 2040, which aims to turn the Sultanate into an economic powerhouse with a sustainable fiscal and economic base. What Oman needs to make this bold vision a reality is access to the financial capital needed to expand its economy.

With its aging wells and reservoirs, Oman’s oil industry will require massive investment to maintain current capacity. The Sultanate is clearly aware that oil will not be its sole source of revenue in the future. In fact, its 2021 budget was drafted on the basis of oil costing a paltry $45 per barrel.

To help Oman realize its post-oil potential, Saudi Arabian companies have signed a raft of trade and infrastructure deals with their Omani counterparts that will not only increase foreign direct investments into the Sultanate, but also enhance its economic diversification.

As part of the visit of Crown Prince Mohammed bin Salman, Saudi and Omani companies signed 13 MoUs related to joint work in economic sectors. (SPA)

Looking at energy investments in particular, the first agreement entails replicating what Saudi Arabia is doing in NEOM — its new high-tech smart-city on the Kingdom’s western Red Sea coast.

Omani energy provider OQ Group signed three of the agreements, the first of which was with Saudi Arabia’s ACWA Power and Air Products in the fields of petrochemicals, renewable energy and green hydrogen.

With this deal, Saudi Arabia is expanding its green hydrogen plan beyond its own borders and into Oman, which will boost the overall supply of hydrogen coming from the GCC.


This section contains relevant reference points, placed in (Opinion field)

Hydrogen has become a viable contender for energy transition away from environmentally harmful fossil fuels. Oman is ideally located to supply hydrogen to southeast and east Asian markets, while NEOM is better placed to ship it to European markets.

The second energy deal, relating to oil storage, was signed with Saudi Aramco, and the third, involving development of Oman’s Duqm Petrochemical Complex project, with SABIC.

Saudi Aramco’s strategy is to expand storage beyond the Strait of Hormuz. Bypassing the narrow waterway will help reduce the threat to shipping posed by blockades and even piracy, which risk wreaking havoc for global oil prices.

As for SABIC’s deal, Duqm is attracting more attention now that the joint Kuwait-Oman refinery is nearing completion. This will allow SABIC to have better access to feedstocks while utilizing Omani products. The impact of this will be reflected in job creation, a new petrochemical hub in Duqm and valuable knowledge transfer. 

Sultan of Oman presents Oman Civil Order of the First Class to HRH Crown Prince, in recognition of brotherly ties, excellent relations and constructive cooperation. (SPA)

It is not just the energy sector that has benefited from the deals. The tourism industry in Oman can also expect a flood of new investments. Omran Group has signed a memorandum with the Saudi Dar Al-Arkan Real Estate Development Company for the development of the Yetti Beach in Oman.

Omran is known for creating sustainable and authentic tourism assets and lifestyle communities and destinations designed to drive economic growth and contribute to the diversification of the economy.

Oman-based firm Asyad, a logistics group, has signed an agreement with Saudi Bahri, a transportation and logistics company, while Minerals Development Oman signed a deal with the Kingdom’s Maaden Phosphate Co. to boost cooperation in the mining sector.

As for the timing, both counties have the means and the will to invest for the future. Oil prices are high, giving both countries the resources they need to support their shared national visions.

If all goes according to plan, Oman could be on track to realize its national goals well in advance of 2040, allowing it to join the 2030 club.

Amazon launches Arabic-speaking Alexa in Saudi Arabia

Amazon launches Arabic-speaking Alexa in Saudi Arabia
Updated 07 December 2021

Amazon launches Arabic-speaking Alexa in Saudi Arabia

Amazon launches Arabic-speaking Alexa in Saudi Arabia

RIYADH: Amazon on Tuesday launched Alexa in Saudi Arabia offering customers an all-new, localized language experience in an Arabic Khaleeji dialect.

Alexa, the brain that powers the Echo device family, has unique new features built with Saudi customers in mind, new smart home integrations with compatible devices, and nearly 200 Alexa skills.

It seeks to deliver a localized experience, including a local dialect voice with a local personality that will surprise and delight customers—local pronunciations and intonation; local knowledge; and nearly 200 Alexa skills with favorites from Saudi developers and regional brands including Anghami, AlArabiya, MBC, Careem, Fatafeat, Al Baik, Sabq, and more.

“We’re incredibly excited to bring Alexa and the Echo family of devices to Saudi Arabia,” said Tom Taylor, senior vice president, Amazon Alexa. 

“The team has worked hard to create an all-new experience designed from the ground up for our customers in Saudi Arabia, reflecting the Kingdom’s rich heritage, traditions, and culture while celebrating the uniqueness of the Arabic language.”

Commenting on the launch of Alexa, Nawaf Alhoshan, deputy minister for technology development at the Saudi Ministry of Communications and IT, said Amazon Alexa will contribute to our goals and help drive the adoption of IoT and artificial intelligence in the Kingdom.

Saudi Arabia is building an infrastructure with international standards that will pave the way to make it a leading digital nation and be among top 20 digital economies and a hub for technology investments in the region.

Support growing to add WTI oil to Brent benchmark to improve liquidity

Support growing to add WTI oil to Brent benchmark to improve liquidity
Updated 07 December 2021

Support growing to add WTI oil to Brent benchmark to improve liquidity

Support growing to add WTI oil to Brent benchmark to improve liquidity

LONDON: The UK North Sea has been in a state of perpetual transformation in recent years. As oil majors left the aging basin for less expensive and larger fields across the globe it has been forced to sharply cut costs to compete for investment.

Then the US fracking boom upset global prices. If that wasn’t enough, investment, which has fallen by more than a third, is also under threat from lukewarm support from the UK government amid the global transition to greener energy. Oil major Shell last week pulled out of a large-scale development in the aging basin amid accusations that government pandering to environmentalists was behind delays in formally licensing the scheme and had made it uneconomical.

Now it appears the very definition of the black gold extracted from the forbidding waters of the North Sea is also under threat with the news that UK oil major BP is backing calls to add US West Texas Intermediate Midland crude to the global Brent benchmark index.

Brent is the benchmark for almost two thirds of the world’s oil — around 100 million barrels per day (bpd) — including African, European, and Middle Eastern crude.

These days it is based on five North Sea crudes — Forties, Brent, Osebe Ekofisk and Troll — all of which are in long-term decline.

However, now BP, one of the UK’s biggest companies and an oil major with a long and profitable North Sea history, believes Brent should now include WTI.

BP discovered the Forties field in 1970. The Brent field was discovered by Royal Dutch Shell a year later.

In an internal document quoted by Reuters news agency this week BP said it “strongly believes that the inclusion of WTI Midland, properly executed, is the best solution to improve liquidity and retain Brent as a well-supplied and reliable sweet and light benchmark”.

BP declined to comment. 

Adding WTI to Brent poses a problem in that their prices are based on two different markets, with different price drivers.

However, the move, which was first put forward by S&P Global Platts — the energy prices agency which first established the Brent benchmark — is becoming widely seen necessary because falling North Sea supplies have made it difficult to rely on the benchmark as a reliable indicator of the price of light, sweet crude oil preferred by refiners.

WTI, the benchmark used in much of North America, refers to the gathering point in West Texas where pipelines from fields in the American interior converge. Like North Sea oil, WTI is defined as light sweet, which is low in sulphur.

While quality and the location of where oil is drilled are key factors in valuations, there are essentially just three types of oil in terms of global prices. Brent, the most heavily traded, WTI, and Dubai/Oman.

The percentage of sulfur in crude determines the amount of processing needed to refine the oil into energy products. Brent and WTI sweet crude both contain less than 1 percent sulfur making them easier to refine, particularly for diesel and gasoline.

Dubai/Oman has a much higher sulfur content but is the main benchmark reference for Persian Gulf oil delivered to the Asian market.

However, analysis carried out by S&P Global Platts indicates North Sea crude is getting heavier and more sulfurous. It adds medium sour crude will make up around 30 percent of the basin’s volumes by 2040 compared to just over 2 percent in 2010.

Thus another solution to declining production of North Sea light sweet crude is to include heavier oil from Norway’s massive North Sea Johan Sverdrup field, oil which is in demand in Asia.

However, BP states in the leaked document that it does not support the idea of adding the Sverdrup field to Brent because it’s a too sour grade of crude and it wants to maintain the lighter, easier to refine market.

Thus, the momentum to include WTI to keep Brent sweet and provide liquidity to the market is growing and is likely to prevail.

And in words that show sentiment plays no part in business, the BP document added: “BP also believes that in the medium term, Forties and Brent (the two cornerstones of North Sea development) should be removed from the benchmark, as their values are becoming increasingly difficult to assess due to declining volumes.”

Markets bullish on continuing uncertainty surrounding omicron

Markets bullish on continuing uncertainty surrounding omicron
Updated 07 December 2021

Markets bullish on continuing uncertainty surrounding omicron

Markets bullish on continuing uncertainty surrounding omicron

LONDON: Is everyone buying the dip? Global equity markets have bounced back, recovering last week’s omicron-driven losses, as fears about the impact of the latest coronavirus variant on economic growth ease.

Oil prices joined the party after plunging last week on omicron fears. Gas prices also pushed higher though that is more linked to Washington’s warning of “nuclear” sanctions against Russia if it decides to invade Ukraine.

But whatever the markets are saying right now, it is clear the number of omicron cases is rising quickly and governments are worried enough to have imposed fresh restrictions on at least some — mostly leisure related — economic activity to combat the increase.

Financial markets have perhaps bullishly interpreted the WHO declaration that it is too early to determine whether omicron causes more serious illness, or whether it is immune to current vaccines. The WHO also pointed out that no one has so far died with the variant despite its existence in 38 countries.

Against that, a study from South Africa, published on Friday, found omicron is 2.4 times more likely than previous variants to reinfect someone who has already had COVID-19. Jeremy Farrar, director of the medical research group Wellcome Trust, commented recently that the “variant reminds us all that we remain closer to the start of the pandemic than the end.”

This is why, unlike financial markets, governments are currently hedging their bets.

Speaking last week, US Treasury Secretary Janet Yellen, warned the variant could slow global economic growth by exacerbating existing pandemic induced supply chain problems and choking consumer demand.

Her view was echoed by International Monetary Fund chief Kristalina Georgieva.

Further disruption to supply chains will intensify existing record inflationary pressures in the global economy amid the still tentative vaccine induced recovery.

Thus, along with the risk omicron poses, there are concerns about central bank tightening, primarily from the US Federal Reserve.

Mark Haefele at UBS Global Wealth Management is optimistic about growth but cautioned: “We see two bear cases: First, that omicron has sufficiently severe symptoms and transmissibility that governments turn to lockdowns to control the outbreak. The second bear case is that government restrictions delay a normalization of supply chains and drive fears of stagflation and monetary tightening.”

Commenting on omicron impact on the oil market, JP Morgan analyst Natasha Kaneva said she expected a 650 kbd (1,000 barrels per day) impact to oil demand, with reduction almost evenly split in percentage terms among jet fuel, diesel and gasoline. “However, our models suggest that, once potential omicron-related lockdown measures ease heading into summer 2022, there will be a bounce-back effect, likely indicative of pent-up demand,” she said.

Based on the current omicron infection rates the best case scenario at the moment is that while the variant is highly transmissible, those infected will continue to show only mild symptoms.

So far, the response from governments in Europe and the US has been largely limited to restricting travel from abroad — including arrivals from some countries being forced to quarantine in hotels —  and increased testing for travelers, to try and stop the spread.

This week, energy ministers from oil producing countries, including Saudi Arabia and Qatar, decided not to travel to the US for the delayed World Petroleum Congress in Houston due to omicron concerns.

However, the omicron variant is now increasingly found in people who haven’t traveled anywhere, or in many cases, had any connections with travelers.

Governments, reluctant to embark on another round of fresh domestic restrictions, have focused on ratcheting up vaccination programs encouraging people to get booster jabs.

But restrictions are being slowly reintroduced.

All international travelers to the US are now required to test within one day of their departure.

In Germany, Europe’s biggest economy, the government has banned unvaccinated people from most public spaces, prohibiting them from entering  all premises apart from grocery stores and pharmacies. It is also plans to make vaccination compulsory next year.

Belgium’s government has told people to work from home and will close its schools a week earlier for Christmas. In Italy unvaccinated people are prohibited from certain leisure activities. France and Ireland have closed night clubs and restricted gatherings.

Austria is back in lockdown and unvaccinated people who breach lockdown rules face fines of up to €500 ($562). Anyone refusing to comply with vaccination status checks could be fined up to €1,450.

The new crackdown, though in most cases mild compared to earlier lockdowns, has resulted in a number of protests over the last two weeks in some countries.

Against that backdrop, the current bull market in the midst of uncertainty that omicron is causing to governments is surprising.

Despite fears about tighter monetary policy, Barclays Capital’s managing director Emmanuel Cau summed up the current confidence in financial markets. He said: “We remain of the view that overall macro and liquidity conditions are supportive of equities, and advise to add on weakness, looking for the bull market to carry on.”

For once financial institutions appear to have confidence in uncertainty. 

Over 170 companies delisted from major US stock exchanges in a year, says report

Over 170 companies delisted from major US stock exchanges in a year, says report
Updated 07 December 2021

Over 170 companies delisted from major US stock exchanges in a year, says report

Over 170 companies delisted from major US stock exchanges in a year, says report

RIYADH: Major US stock exchanges delisted 179 companies between 2020 and 2021, according to a report carried by

Citing data the report said in 2021, the number of companies on Nasdaq and the New York Stock Exchange stands at 6,000, dropping 2.89 percent from last year’s figure of 6,179. In 2019, the listed companies stood at 5,454.

“NYSE recorded the highest delisting with companies on the platform, dropping 15.28 percent year-over-year from 2,873 to 2,434. Elsewhere, Nasdaq listed companies grew 7.86 percent from 3,306 to 3,566,” it added.

As of 2021, it said, Nasdaq had 2,819 listed domestic companies, while foreign entities stood at 747. NYSE accounts for 1,848 domestic companies, with the foreign entities standing at 586.

The report attributed the delisting to the emergence of alternative markets.

"Furthermore, the delisting on US major exchanges might be due to the emergence of new alternative markets, especially in Asia. China and Hong Kong markets have become more appealing, with regulators making local listings more attractive. Over the years, exchanges in the region have strived to emerge as key players amid dominance by US equity markets."

It, however, said the number of foreign companies listing on US exchanges also surged.