Warnings at FII about risks of saving the environment and ignoring the economy

Warnings at FII about risks of saving the environment and ignoring the economy
Riyadh is now home to the regional headquarters of 44 multinational companies — an increase of 20 since a drive was launched in January. (Twitter)
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Updated 28 October 2021

Warnings at FII about risks of saving the environment and ignoring the economy

Warnings at FII about risks of saving the environment and ignoring the economy
  • ‘Energy supply crunch is looming if underinvestment in oil and gas projects continues’

RIYADH: It was surprising to see that the big deal makers and large asset managers are so displeased with the fast pace of the environmental action at the expense of global economic recovery.
For years, oil-producing countries such as Saudi Arabia have warned that the world is moving too fast to reduce carbon emissions, with the result that less money is being channeled into hydrocarbon projects.
These concerns were made clear by Prince Abdulaziz bin Salman, Saudi energy minister, and other leading Saudi officials.
Warnings from oil producers are rarely welcomed but as the reality bites, big investors are now making it clear that an energy supply crunch could be just around the corner if the underinvestment in oil and gas projects continues.
At the Future Investment Initiative Forum in Riyadh, top Wall Street firms warned of the risk of a sustained increase in oil prices.
BlackRock’s Larry Fink, the world’s top asset manager, said there is “high probability” of oil hitting $100 a barrel.
He reiterated the concerns he raised during the recent Middle East Green Initiative Summit, when he made it clear that he supports investment in hydrocarbons because the world needs affordable energy sources.
Prominent players from Saudi Arabia’s Public Investment Fund, asset-management firm Ninety One, and HSBC Holdings all called for the pace of investment in hydrocarbons to increase.
Fahad Al-Saif, the head of Global Capital Finance at the PIF, told delegates: “The essence of the urgency is not there yet. There has to be collaboration, across global institutions; it is a trust problem in delivering.” He added: “I worry about the balance of the pace at which we are moving.”
His concerns were echoed by John Green, chief commercial officer at Ninety One, who said between 60 and 70 percent of the conversations he has with clients are about energy.
Prince Abdulaziz bin Salman said Saudi Arabia’s ambitious plans to cut carbon emissions to net zero by 2060 do not mean there will be less investment in oil.
Despite the pledges to reach net zero and become a global leader in renewable energy, the nation wants to remain one of the leading oil-producing countries in the world, according to a strategy announced by the minister.
The “Claim and Retain Leadership” blueprint reflects the Kingdom’s desire to maintain its dominance in the oil sector, with “preeminence in energy markets” listed as one of its top goals.


Saudi Arabia’s $100-billion plan to become largest shale gas producer outside of the US

Saudi Arabia’s $100-billion plan to become largest shale gas producer outside of the US
Updated 13 sec ago

Saudi Arabia’s $100-billion plan to become largest shale gas producer outside of the US

Saudi Arabia’s $100-billion plan to become largest shale gas producer outside of the US
  • Jafurah is expected to contribute to Saudi Arabia’s goal of producing half of its electricity from gas

LONDON: Saudi Aramco’s award of $10 billion worth of contracts on its giant Jafurah project has finally fired the starting gun to develop what is thought to be the world’s biggest shale gas field outside of the US.

Having battled with America’s shale oil producers for market share over the last decade, the Kingdom is now adopting the advanced low-cost techniques of its fracking rivals and is set to spend up to $100 billion on Jafurah to rapidly increase its domestic gas production.

The Kingdom is estimated to be sitting on the fifth largest shale gas reserves in the world.

Saudi Energy Minister Prince Abdulaziz bin Salman earlier said the Jafurah gas field will place the Kingdom third in the world in natural gas production by 2030.

But does Saudi Arabia really have the potential to replicate the soaring success of US shale gas development?

Saudi Aramco Chief Executive Amin Nasser certainly thinks so. Announcing the contracts this week, he said: “It is a breakthrough that few outside the Kingdom thought was possible and which has positive implications for energy security, economic development and climate protection.”

Production is scheduled to begin within the next three years. The field will supply cleaner natural gas for domestic use in the Kingdom, along with feedstock for both petrochemical production, and crucially, low carbon hydrogen power.

Jafurah is expected to contribute to Saudi Arabia’s goal of producing half of its electricity from gas and half from renewables as it pursues its 2060 net-zero target. Indeed, Jafurah alone is forecast to replace up to 500,000 barrels of oil a day that would otherwise be used for domestic consumption.

All this serves the goals of the Kingdom’s Vision 2030 program to diversify the economy from crude oil and sharply reduce its carbon footprint, even if the scheme will enable the Kingdom to increase its crude exports. But it was thought that fracking in Saudi Arabia will be more expensive than it is in the US, not least because the Kingdom is not renowned with an abundance of natural water, a critical component in the fracking process.

HIGHLIGHTS

• Production at Jafurah is expected to commence in 2024 and is forecast to reach up to 2 billion cubic feet per day of sales gas, 418 million cubic feet per day of ethane and about 630,000 barrels per day of gas liquids and condensates by 2030.

• Investment over that period will amount to $68 billion, but is expected to total more than $100 billion overall.

• The Jufarah project will create more than 200,000 direct and indirect jobs in the Kingdom.

The fracking process requires pumping water, sand and chemicals into the fields at high pressure which fractures the shale rock and allows the hydrocarbons to escape.

“We managed to reduce drilling cost by 70 percent and stimulation cost by 90 percent since the 2014 cost benchmark, while increasing well productivity sixfold compared with the start of the program,” Nasser said on Monday. 

Aramco plans to use seawater for fracking at Jafurah. Earlier this year, the company also invited bids for a water desalination plant at the field. Desalinated water is used in gas processing plants. An earlier bidding process was abruptly canceled last year and the current tender process has reduced the capacity of the desalination plant by around 20 percent.

However, former Aramco Executive VP Sadad Husseini insists the “water issue” is a red herring.

He told Arab News: “The water issue was resolved years ago. We have aquafiers that hold saline water and the Saudi oil industry has a long history of using this water for drilling.” Husseini also dismissed cost comparisons with the US shale industry.

He said: “The cost of fracking depends on the depth of the reservoir. In the US, they work with shallower reservoirs, around 3,000 to 4,000 feet deep, which makes fracking less costly. In Saudi Arabia, the reservoirs will be 9,000 to 10,000 feet deep. It’s technically more challenging, but unlike the US, those deep wells are not just producing gas, they’re also producing a lot of condensates, most notably ethane, along with gas, and that is profitable and makes the economics of this field work.

Ethane feeds the petrochemical industry.” He added: “It’s a challenging development but it wouldn’t have advanced if the issues hadn’t been resolved.

Developing shale gas reserves outside the US has not been particularly successful, partly due to environmental concerns — particularly in large population centers in Europe, a lack of infrastructure, and difficulties accessing and disposing of water used in the process.

However, Jafurah is close to the Gulf coast with relatively easy access to seawater, and is also adjacent to the world’s largest oilfield, Ghawar, and its substantial energy infrastructure.

Production at Jafurah is expected to commence in 2024 and is forecast to reach up to 2 billion cubic feet per day of sales gas, 418 million cubic feet per day of ethane and about 630,000 barrels per day of gas liquids and condensates by 2030. Investment over that period will amount to $68 billion, but is expected to total more than $100 billion overall.

Domestic employment, another key plank of the Kingdom’s Vision 2030, is also central to the scheme. It is understood that along with fields under development in North Arabia and South Ghawar, the Jufarah project will create more than 200,000 direct and indirect jobs in the Kingdom.

The scheme will also incorporate new technology, most notably using industrial internet of things and video analytics.

The Jafurah project will not only aid the Kingdom’s environmental ambitions but will also support its petrochemicals industry. “Its ethane and liquified natural gas are highly valuable feedstocks for the Kingdom’s petrochemical’s industry,” the Aramco chief said.


China links key to success of African free trade initiative: Egyptian president

Egyptian President Abdel-Fattah el-Sissi. (AP file photo)
Egyptian President Abdel-Fattah el-Sissi. (AP file photo)
Updated 30 November 2021

China links key to success of African free trade initiative: Egyptian president

Egyptian President Abdel-Fattah el-Sissi. (AP file photo)
  • El-Sisi pointed out the importance of the forum in strengthening joint trade and investment initiatives, including debt relief programs and help for small- and medium-sized enterprises

CAIRO: Egyptian President Abdel Fattah El-Sisi has highlighted the importance of working with China to the success of an African free trade initiative.

Speaking virtually during a meeting of the Forum on China-Africa Cooperation — attended by Chinese President Xi Jinping and a number of African leaders — he said that effective partnership with China was vital to implementing the African Continental Free Trade Area agreement.

The Egyptian leader noted that under its current presidency of the Common Market for Eastern and Southern Africa organization his country would be looking to attract foreign investment, promote integration between African and foreign private sectors, and expand digital transformation and e-commerce.

In a statement, an official spokesperson for the Egyptian Presidency said that forum members had discussed ways to consolidate links between the African continent and China, including cooperation on economic recovery schemes following the coronavirus disease (COVID-19) pandemic.

El-Sisi pointed out the importance of the forum in strengthening joint trade and investment initiatives, including debt relief programs and help for small- and medium-sized enterprises to overcome the economic crises brought about by the global virus outbreak.

He told the meeting that further investment in infrastructure projects was needed to complete the continental linkup between African countries and added that it was important to learn from the experiences of other nations in tackling the COVID-19 pandemic through prevention, biotechnology, and pharmaceutical manufacturing.

The Egyptian president lauded the vaccine manufacturing work of Egypt and China that had seen his country become the first African nation to possess the capabilities to produce vaccines against COVID-19. And he also stressed the need for joint coordination between Africa and China on issues related to strengthening peace and security.

 


ENGIE to train Saudi Industrial Development Fund’s employees

ENGIE to train Saudi Industrial Development Fund’s employees
Updated 30 November 2021

ENGIE to train Saudi Industrial Development Fund’s employees

ENGIE to train Saudi Industrial Development Fund’s employees

RIYADH: The Saudi Industrial Development Fund on Tuesday signed a memorandum of understanding with Paris-based ENGIE to provide training to the fund’s employees, the SIDF tweeted.

Under the deal, the French multinational utility company will train the fund’s employees at its headquarters in Paris. The SIDF employees will receive training in business development, commercial activities, and project implementation. 

ENGIE operates in the fields of energy, transition, electricity generation and distributions.  


Developmental Opportunities sells shares in Theeb Rent a Car

Developmental Opportunities sells shares in Theeb Rent a Car
Updated 30 November 2021

Developmental Opportunities sells shares in Theeb Rent a Car

Developmental Opportunities sells shares in Theeb Rent a Car

RIYADH: Developmental Opportunities Trading Co. sold its 21percent shares in Theeb Rent a Car Co. to institutional investors, Al-Arabiya reported on Tuesday.

EFG Hermes and Saudi Fransi Capital, in their capacity as bookrunners and brokers, executed the sale for the trading company.

According to a joint press statement, the total number of offered and sold shares reached 9,030,000.

The shares were offered to a group of institutional investors, and they were implemented through 19 negotiated deals at a price of SR53 per share, so that the value of the deal amounted to SR478.6 million ($127.57 million).


Gold miners keen on going green

Gold miners keen on going green
Updated 30 November 2021

Gold miners keen on going green

Gold miners keen on going green
  • In eight countries gold mining firms account for more than 5% of all government income



LONDON: The gold mining industry is keen to show off its green credentials.
The World Gold Council has revealed that of the $60.1 billion its 33 members generated in revenue in 38 countries around the world last year, 63 percent, or $37.9 billion of it remained in the nations where the mining operations were based.
The trade body, whose members account for around 40 percent of the global output, pointed out that in five countries the industry supported more than 3 percent of the nation’s gross domestic product, roughly the size of internationally recognized overseas development assistance levels.
In eight countries gold mining firms accounted for more than 5 percent of all government income, the association said in a recent report titled, “The Social and Economic Contribution of Gold Mining.”
WGC Chief Financial Officer Terry Heymann said in an interview: “In Suriname the contribution is as high as 16.3 percent, Malawi its 8 percent and 6.6 percent in Burkina Faso.
“These contributions come as tax. But they also come in the form of new roads built into the site, or energy sources to power it, which can be more than the mine needs. The surplus energy is then pumped into the local community.”
One council member, Canada’s Barrick Gold, uses hydroelectric power plants at its Kibali gold mine in the Democratic Republic of the Congo, which it shares with residents of the African country’s northeastern province Haut-Uele.
In Burkina Faso, UK-based Nordgold powers its Bassi and Bouly mines with solar power, which also supplies the local towns and villages in the Centre-Nord region.
“Mines often help fund schools, hospitals and health clinics, because a site needs a healthy and educated workforce,” Heymann added.
The WGC report added: “Host nations and communities might therefore come to regard responsible and sustainable gold mining operations as representing of a ‘window of opportunity’ for development.”
Such windows can last for sustained periods. It can take a decade to fully explore a mining site, and five years to build, with a lifecycle of 30 to 50 years.
However, the world’s biggest producers of the precious yellow metal are mature countries that do not rely on its production for development.
China is currently the world’s largest miner, producing around 368.3 tons last year, followed by Russia with 331.1 tons, Australia with 327.8 tons and the US with 190.2 tons.
Gold production was not greatly affected by the coronavirus disease hitting 3,400.8 tons last year, just 4 percent down on 2019.
In the third quarter of this year, gold production increased 4 percent year-on-year to 960 tons, the largest quarterly production level on record and 3 percent higher than the same period in 2019.
Gold demand jumped by almost 25 percent last year, rising above $2,000 an ounce for the first time last August, as investors looked for a safe haven during the pandemic.
But the metal has given back those gains as the health crisis shows signs of easing, despite the emergence of the omicron COVID-19 variant, and is just under 6 percent lower than it was 12 months ago at around $1,793 an ounce.
Analysts are split on whether gold will jump to $3,000 an ounce in 2022. Some predict a rise due to persistent negative real interest rates, inflationary pressures and US dollar weakness as a result of COVID-19 pandemic. Others believe its price could fall to around $1,700 an ounce next year, due to rising supply and an easing of political tensions between China and the US as the health crisis subsides.
Heymann noted that gold remained a store of value, particularly when compared with newer digital currencies, such as Bitcoin and ether, that have grabbed headlines in the financial press in recent years.
He said: “There is a place in investors’ portfolios for gold. It is a stable long-term store of value, the pandemic has shown that. It is very liquid, it’s a physical asset, you know exactly what it is. And it’s a market that has been around for thousands of years.”