Farewell 2021, the year that put OPEC+ back in driving seat: Year in Review

Special Farewell 2021, the year that put OPEC+ back in driving seat: Year in Review
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Updated 04 January 2022

Farewell 2021, the year that put OPEC+ back in driving seat: Year in Review

Farewell 2021, the year that put OPEC+ back in driving seat: Year in Review
  • Renewables were the only energy sector to see investment rise above pre-pandemic levels

LONDON: Greta Thunberg’s excoriating dismissal of world leaders over their promises to address global warming as “blah, blah, blah” wasn’t as it turned out, too wide of the mark in 2021.

Despite earnest commitments, from Washington to Beijing, to reduce fossil fuel consumption and cut planet-heating emissions, demand for crude oil soared in 2021 as the global recovery from the COVID-19 pandemic took off.

Don’t tell Greta, but oil prices are up around 50 percent this year, courtesy of increased demand and tight supply. 

In January, the month when Joe Biden was officially sworn in as president of the US and Washington rejoined the Paris Agreement on climate emissions, a barrel of Brent crude was trading at about $52.

By March it had spiked to $70.

Momentum in oil prices had been building since the last quarter of the previous year, but the immediate catalyst for March’s spike, and indeed this year’s increase in global crude prices, started with OPEC and its allies, who surprised the markets by agreeing to extend its production cuts into April.

Amid a nascent economic recovery, low inventories, and a lack of spare capacity, oil supply suddenly looked a lot tighter.

The sharp increase in oil demand as COVID-19 restrictions began to ease in the middle of the year took suppliers by surprise and led to tensions between the US and OPEC+.

As demand overwhelmed supply, domestic gas prices soared in the US President Biden called on OPEC+ to open up the pumps and boost production, a plea that fell on deaf ears as the group and its OPEC partners continued to opt for restraint.

In reality, like all global oil producers, OPEC+ struggled to increase output due to underinvestment. While oil investment increased about 10 per cent this year, spending has remained well below pre-pandemic levels as pressure remains on private companies to keep oil and gas portfolios in check.

FASTFACT

10%

In reality, like all global oil producers, OPEC+ struggled to increase output due to underinvestment. While oil investment increased about 10 per cent this year, spending has remained well below pre-pandemic levels as pressure remains on private companies to keep oil and gas portfolios in check.

In June, more than 400 blue chip investors controlling $41 trillion in assets called for governments around the world to end support for fossil fuels. Small wonder an International Energy Agency report released this year noted the “balance of investment in fossil fuels is shifting toward state-owned companies.”

Even the US shale industry, which a few years ago was seen as the swing producer for global oil, has reined in spending. As Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, succinctly put it in March: “Drill, baby, drill”, the mantra of the US fracking industry, “is gone forever.”

The International Energy Agency hardly helped investment when in May it demanded an immediate end to fossil fuel extraction, a demand Prince Abdulaziz bin Salman again succinctly described as a “la-la-land” scenario.

Against the backdrop of a hostile environment for fossil fuels, investment in renewables continued to grow this year. Indeed in 2021, renewables were the only energy sector to see investment rise above pre-pandemic levels, up around 10 percent since 2019.

But of course, the problem with calls for disinvestment in the oil industry is that attacking supply does absolutely nothing to curb consumer demand — the real driver of global warming. Thus, as the world tuned into the delayed Tokyo Olympic Games, which began in July, black gold was sprinting towards $75.

By October, just weeks before world leaders gathered to profess their commitment to tackle climate change at the UN COP26 Climate Conference in Glasgow, Brent crude hit a seven-year high at around $86 per barrel.

October’s price rise was largely attributable to forecasts of a supply deficit as demand continued to increase. At the same time, the sharp rise in global gas prices, and even coal prices, since August had forced many power generators to turn away from natural gas towards fuel oil and diesel. 

Wholesale European gas prices have increased more than 800 percent over 2021 due to a combination of global demand and competition between Europe and Asia for supplies.

European leaders also accused Russian President Vladimir Putin, whose country supplies around a third of Europe’s gas, of withholding supply to force the EU to approve its controversial pipeline Nord Stream 2. This pipeline is planned to supply oil to Europe, but bypasses Ukraine, which has longstanding territorial disputes with Russia.

October’s oil spike was again helped by OPEC+, which earlier in the month insisted they would stick to their July pact to gradually increase supply, ignoring fresh calls from President Biden to open the taps as US gasoline prices hit a seven-year high.

In response, and just days after demanding urgent action on climate change at COP26 in November, Biden announced the largest release of emergency oil reserves in US history from the country’s Strategic Petroleum stockpile. The release of 50 million barrels of oil had no impact on prices which jumped 2 percent on the news.

If nothing else, Biden’s action in November revealed that 2021 marked the year that OPEC and its allies found itself back in charge of setting the global price for crude oil.

Despite sliding back toward the end of the year, the decline was largely driven by fears that travel restrictions imposed by governments due to the omicron variant will hit the aviation industry, Brent crude is still trading at near $80 a barrel as December, and 2021, draws to a close.

Looking forward to 2022, a report by JP Morgan in December predicted that oil will hit $125 a barrel next year and, fasten your seatbelts, $150 in 2023, again due to capacity-led shortfalls in OPEC+ production.

“We think OPEC+ will slow committed increases in early 2022, and believe the group is unlikely to increase supply unless oil prices are well underpinned,” the bank said.

A slightly more conservative estimate by Goldman Sachs also predicts high oil next year and in 2023, with crude potentially rising to between $100 and $110 per barrel.

The IEA now predicts crude consumption will reach 99.53 million barrels per day in 2022, up from 96.2 million this year, and more or less back to pre-pandemic levels.

Consequently, carbon emissions are on track to rise by 16 percent by 2030 according to the UN, rather than fall by half, the reduction required to keep global warming below the Paris Agreement limit of 1.5C.

Happy New Year Greta — and all Arab News readers.


Iran’s top automaker sets sights on Russian market

Iran’s top automaker sets sights on Russian market
Updated 14 August 2022

Iran’s top automaker sets sights on Russian market

Iran’s top automaker sets sights on Russian market

TEHRAN: Iran’s leading automaker is seeking to prioritize exports to Russia, its CEO said on Sunday, as both countries reel under Western economic sanctions.

Iran Khodro unveiled the latest model of its crossover Rira vehicle at its factory west of Tehran, where CEO Mehdi Khatibi announced the manufacturer’s ambitions for the Russian market.

“We are going to pay special attention to the Russian market, and we are also thinking of partnering with Russian investors,” he said.

“We have held good negotiations with Moscow. The Russian market, with its capacities, will be one of our important markets,” Khatibi added.

“We will begin exporting this year” to Russia, he said.

Iran Khodro had previously exported vehicles to Russia, notably between 2007 and 2009, Iranian media said.

The two countries have responded to the sanctions by boosting cooperation in key areas to help prop up their economies.
The company’s vice president, Kianoush Pourmojib, struck an optimistic note on Sunday, pointing to increased exports to Azerbaijan over the past five years.

“We are ambitious about improving the quality of our vehicles,” he told AFP.

He added that while the manufacturer hopes to compete in markets such as Azerbaijan, Oman and Iraq, “in volume, it is of course Russia that is the most important.”

“This year, we will produce more than 500,000 vehicles and our goal within three years is to export 100,000 vehicles annually,” compared with fewer than 20,000 currently, he said.


Saudi Arabia’s Kingdom Holding unveils $3.4bn investment program

Saudi Arabia’s Kingdom Holding unveils $3.4bn investment program
Updated 14 August 2022

Saudi Arabia’s Kingdom Holding unveils $3.4bn investment program

Saudi Arabia’s Kingdom Holding unveils $3.4bn investment program

RIYADH: Kingdom Holding Co.unveiled its investment program worth SR12.8 billion ($3.4 billion), according to a bourse filing.

In June, the company announced that it completed its investment program during the period between the second quarter of 2020 and Q2 2022. The program invested in companies operating in diverse sectors with a proven track-record of growth and strong financial position.

The company’s total investments amounted to SR4.33 billion in 2020, SR3.75 billion in 2021 and SR4.73 billion in 2022.

 

 

 


UAE In-Focus — SWVL announces a $20m private placement; Dubai developer plans to raise $4.6bn loan

UAE In-Focus — SWVL announces a $20m private placement; Dubai developer plans to raise $4.6bn loan
Updated 14 August 2022

UAE In-Focus — SWVL announces a $20m private placement; Dubai developer plans to raise $4.6bn loan

UAE In-Focus — SWVL announces a $20m private placement; Dubai developer plans to raise $4.6bn loan

DUBAI: SWVL, Dubai-based mobility and transport solutions provider, announced on Wednesday that it had entered into a deal with US-based institutional investors to sell and buy over 12 million shares and securities for 73.4 million dirhams ($20 million) at 6.06 dirhams a share.

The sale of securities and private placement will take place on Friday, the statement said.

It said warrants issued under Series A and Series B will expire five and two years from the date of issuance, respectively.

The company will receive additional 110 million dirhams if the warrants are exercised during this period, it added.

Earlier this year, a special purpose acquisition company bought the transport startup.

Since its founding in Egypt in 2017, it has raised a total of 969 million dirhams.

Dubai developer plans to raise $4.6bn loan

The developer of Dubai’s artificial palm-shaped islands, Nakheel, plans to refinance existing debt by raising 17 billion dirhams ($4.6 billion), according to Bloomberg.

In addition to Dubai Islamic Bank and Emirates NBD, Mashreqbank is seeking financing from the company, the people said, asking not to be identified because the information is confidential.

Aside from regional and global lenders, the banks arranging the loan are also asking them to participate.
 
Emaar reports $1.8bn in H1 revenues

Emaar Development had its highest property sales during the first half of 2022, supported by recent successful launches that will create value for years to come, according to Emirates News Agency, known as WAM.

Compared to 2021, real estate sales increased by 10 percent to 15.216 billion dirhams ($4.143 billion) in the first half of 2022, WAM said.

It added that the Emaar Properties-owned build-to-sell business launched 15 projects in different master plans during the first half of 2022.

The earnings before interest, taxes, depreciation, and amortization at Emaar Development was 2.564 billion dirhams in the first half of 2022, up 15 percent from the same period in 2021, while revenue was 7.282 billion dirhams, WAM said.

Emaar now has a robust backlog of 32.753 billion dirhams, which will be recognized as future revenue for the company.

Over 3,100 residential units have been delivered by Emaar Development across prime locations, including Dubai Hills Estate, Dubai Creek Harbor, Downtown Dubai, Emaar Beachfront, Arabian Ranches, and Emaar South. 

Currently, Emaar is developing over 26,100 residences in the UAE, with more than 55,100 being delivered as of June 2022. 


Saudi Arabia’s Halwani Bros posts 65% decline in profits as inflation bites

Saudi Arabia’s Halwani Bros posts 65% decline in profits as inflation bites
Updated 14 August 2022

Saudi Arabia’s Halwani Bros posts 65% decline in profits as inflation bites

Saudi Arabia’s Halwani Bros posts 65% decline in profits as inflation bites

RIYADH: Saudi food manufacturer Halwani Bros Co. has reported a 65 percent drop in profit in the first half of the year, due to increased costs resulting from global inflation.

The company’s net profit fell to SR18 million ($5 million) compared to SR52 million in the same period last year, according to a bourse filing.

Halwani Bros attributed the lower profits to rising raw material costs and increased marketing costs due to global inflation.

The devaluation of the Egyptian currency also weighed on profits from its subsidiary in Egypt, it added.

Founded in 1952, Jeddah-based Halwani produces and distributes a wide range of food products in Saudi Arabia as well as around the world.


NRG Matters — UAE to hold 8th green economy summit in September; Egypt joins Power Reactors Information System database 

NRG Matters — UAE to hold 8th green economy summit in September; Egypt joins Power Reactors Information System database 
Updated 14 August 2022

NRG Matters — UAE to hold 8th green economy summit in September; Egypt joins Power Reactors Information System database 

NRG Matters — UAE to hold 8th green economy summit in September; Egypt joins Power Reactors Information System database 

RIYADH: The UAE will hold the eighth World Green Economy Summit at Dubai World Trade Centre in September, as the Gulf state prepares to host COP28 next year, Emirates News Agency reported. 

Alongside promoting a green economy, the WGES plays a key role in supporting UAE’s climate action efforts and its commitment to sustainability. 

It also reflects the country’s support for energy and climate change issues and developing sustainable solutions to environmental challenges, according to the statement. 

Egypt's nuclear power plant 

The International Atomic Energy Agency has officially included Egypt among the countries that have a nuclear plant under construction, according to the Nuclear Power Plants Authority. 

The country is now included in the Power Reactors Information System PRIS database, which focuses on nuclear power plants worldwide. 

This happens as Egypt started the construction of the El-Dabaa plant, located in the northwestern governorate of Marsa Matrouh, which aims to generate a total of 4,800MW via four reactors.

Through a micro lens

Oman’s Sur Industrial City, affiliated to the Public Establishment for Industrial Estates, has signed an over $40 million investment contract with Al Ghaith for Chemical Industries to establish a chemical plant on a 60,000 sq. m. site.

The project aims to promote the growth of chemical industries and supply the oil and gas, petrochemical and water treatment industries with basic chemicals and raw materials, according to Trade Arabia. 

Also, China’s CATL said it would build a €7.3 billion ($7.6 billion) battery plant in Hungary, Europe's largest so far, as the electric vehicle battery maker gears up to meet growing demand from global automakers.

The construction of the 100GW plant in the eastern Hungarian city of Debrecen, is the firm’s biggest overseas investment, according to Reuters. 

It would start this year after receiving approvals and should last no more than 64 months.