Turkish industry copes with abrupt cut of gas flow from Iran

Gas flares from an oil production platform at the Soroush oil fields in the Persian Gulf, south of the capital Tehran. (REUTERS file photo)
Gas flares from an oil production platform at the Soroush oil fields in the Persian Gulf, south of the capital Tehran. (REUTERS file photo)
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Updated 25 January 2022

Turkish industry copes with abrupt cut of gas flow from Iran

Gas flares from an oil production platform at the Soroush oil fields in the Persian Gulf, south of the capital Tehran. (REUTERS file photo)
  • Authorities should have taken necessary steps beforehand, energy expert tells Arab News
  • Record high losses for manufacturing facilities and disruption in export commitments feared

ANKARA: Following a decision by Iran to cut gas flows to Turkey last week, Ankara began ordering gas-fuelled power plants to decrease their gas use by 40 percent as of Monday.

The sudden move emphasized the need to diversify energy suppliers for the country. Households, schools and hospitals are, for now, exempt from the measures.

Iran’s natural gas consumption recently hit a record high at about 692 million cubic meters per day in households, commercial and smaller industries mainly because of harsh winter conditions, but the country cited a gas leak in a Turkish station for the disruption of exports to Turkey for up to 10 days.

Turkey is no exception to the record highs of daily gas consumption, which reached around 288 million cubic meters on Jan. 19.

Turkey is almost fully dependent on imported gas from Iran, Azerbaijan and Russia, while Iran alone provided about 16 percent of the country’s natural gas needs last year.

The decision worried several industrial representatives, as it did not discriminate between sectors with cold storage rooms or furnaces.

FASTFACT

Turkey is almost fully dependent on imported gas from Iran, Azerbaijan and Russia.

“Such a gas cut means greater financial loss for some key sectors such as glass, medicine and ceramic factories as well as those producing meat and dairy products,” Mehmet Ogutcu, a former diplomat and currently the president of London Energy Club, told Arab News.

The sectors that use the most electricity, namely the iron and steel sector, and the clothing industry, are expected to record high losses and will face disruption in export commitments.    

“The production could be at risk if the interruption continues to grow in the coming days,” Ogutcu said.

“It will damage the economy and industrial production especially at a time when exports and production were accelerating.”

Companies in industrial zones were notified of the three-day restriction on Friday and will be allowed to use gas only on allotted days.

The prospect of electricity cuts to industrial sites is also on the horizon, and might affect households as well, although gas prices have become discouraging for citizens, as they increased by 25 percent for residential use and 50 percent for industrial use in January.

Turkey’s domestic gas consumption rate increased from 48 billion cubic meters to 60 billion in a year, while there are some 18 million natural gas subscribers across the country.

“I have repeatedly warned about a potential outage for the last six months. It also happened in the European countries,” Ogutcu said.

“Turkey should have taken necessary measures beforehand when the first signs appeared.”

According to Ogutcu, Turkey either had to decrease gas demands and simultaneously develop plans to increase energy efficiency, or develop alternative energy resources like liquefied natural gas.

Turkey imports LNG from the US, Morocco, Qatar and Nigeria, but it still remains much more expensive than natural gas imports for Ankara.

About a third of Turkey’s natural gas needs are currently met through LNG deliveries.

“There are ongoing projects in the Black Sea for gas discoveries with some drilling testing. But it will take at least seven or eight years to reap the benefits of that project,” Ogutcu said.

Turkey’s 405 billion cubic meter gas discoveries in the Black Sea were accepted as the largest offshore gas discovery in the world in 2020.

Similar gas supply cuts have happened in the past, but did not result in power outages in the industrial sector on such a great scale.

Experts emphasized the need to learn lessons from this latest crisis and to design alternative energy sources.

Turkish President Recep Tayyip Erdogan recently announced that Turkey is still interested in transporting Israeli gas to Europe — a potential step to diversify much-needed gas sources.

Last week, a blast in the southeastern province of Maras resulted in another disruption in the flow of crude oil through the Kirkuk-Ceyhan pipeline.

“In the past decade, Turkey has succeeded in further diversifying its energy sources with more energy suppliers, the growing use of LNG and renewables,” Gallia Lindenstrauss, a senior research fellow at the Institute for National Security Studies in Israel, told Arab News.

“The first unit in the Rosatom-built nuclear power plant in Akkuyu is expected to be operational in 2023 and Turkey has discovered gas reserves in the Black sea that will be another future source of energy.”

According to Lindenstrauss, the problem today is less related to the issue of diversification and more to the sharp devaluation of the Turkish lira alongside rising energy prices, which translates into difficulties for the purchase of LNG.

“Obviously, Turkey would also benefit if it were able to sign contracts to import gas, or be a transit route for gas, from the Eastern Mediterranean, but this has not been possible until today mainly because of political reasons,” she said.

Even in the unlikely scenario that neighboring states overcome the hurdles between them, Lindenstrauss thinks that it is still only part of the solution to Turkey’s growing energy needs, and short-term energy shortage problems from time to time will be a recurring problem.

This year, Turkey’s natural gas storage capacity has reached 3.8 billion cubic meters.


Egypt lowers its expected GDP growth to 4.5%

Egypt lowers its expected GDP growth to 4.5%
Updated 16 May 2022

Egypt lowers its expected GDP growth to 4.5%

Egypt lowers its expected GDP growth to 4.5%

CAIRO:Egypt has lowered its expected gross domestic product economic growth in the next fiscal year 2022/23, which begins in July, to 4.5 percent from 5.5 percent, a cabinet statement quoted the prime minister as saying on Monday.

Mostafa Madbouly was speaking during a meeting with an American businesses delegation organized by the American Chamber of Commerce in Egypt, the statement said.

In March, Egypt lowered the targeted real GDP growth for its upcoming fiscal year to 5.5 percent, citing the effects of the Russia-Ukraine conflict on its economy.


Bahrain state oil firm to appoint financial adviser, CEO says

Bahrain state oil firm to appoint financial adviser, CEO says
Updated 16 May 2022

Bahrain state oil firm to appoint financial adviser, CEO says

Bahrain state oil firm to appoint financial adviser, CEO says

Bahrain’s state oil firm nogaholding is in final talks to appoint a strategy consultant and financial adviser, its chief executive said on Monday, as the indebted country seeks to capitalize on high energy prices and sell or lease out assets.

Nogaholding, the parent of Bahrain’s main state energy companies, issued a request for proposal for an independent financial adviser last week and expects to award it in roughly eight weeks’s time, group CEO Mark Thomas told Reuters.

The aim is to develop an energy strategy within six months and an asset monetization program as soon as next year, he said.

“The independent financial adviser will be looking at asset monetization, our debt and our structure of our debt, looking at opportunities where we can use alternative forms of financing like sustainability-linked loans,” Thomas said.

The adviser will also help nogaholding with a possible national hedging strategy, in coordination with the finance ministry, to protect on the downside and unlock any upside, he added.

“We’ve got very attractive oil prices right now. We generally run a budget, a national budget, at an oil figure of $60-$65” per barrel to break even, he said. 

The strategy consultant, for which an RFP was issued in December, is expected to complete early in the fourth quarter a national energy strategy, a nogaholding operating strategy and a carbon strategy aligned with Bahrain’s goal of net-zero emissions by 2060.

Nogaholding will follow a monetization model similar to regional energy heavyweights Saudi Aramco and Abu Dhabi National Oil Co., Thomas said.


Saudi Arabia extends duration of 2018 deposit at central bank of Yemen

Saudi Arabia extends duration of 2018 deposit at central bank of Yemen
Updated 16 May 2022

Saudi Arabia extends duration of 2018 deposit at central bank of Yemen

Saudi Arabia extends duration of 2018 deposit at central bank of Yemen
  • Al-Rasheed stressed that the agreement is an extension of the Kingdom's support to the people of Yemen
  • He added that the support will enhance the financial and economic situation in Yemen

RIYADH: Saudi Arabia and Yemen have signed an agreement to extend the duration of the Kingdom’s 2018 deposit at Yemen’s Central Bank, Saudi Press Agency reported on Monday.

Saudi Arabia’s Assistant Minister for Macro Fiscal Policies and International Relations, Abdulaziz Al-Rasheed, and the central bank of Yemen’s governor Ahmed bin Ahmed Ghaleb signed the agreement in Riyadh.

Al-Rasheed stressed that the agreement is an extension of the Kingdom's support to the people of Yemen.

He added that the support will improve the financial and economic situation in Yemen, especially the exchange rate of the Yemeni riyal, which will have a positive effect on the living conditions of Yemenis.

The two officials also discussed a deposit that was announced in April 2022.


Oil prices rise on China demand optimism, gasoline strength

Oil prices rise on China demand optimism, gasoline strength
Updated 16 May 2022

Oil prices rise on China demand optimism, gasoline strength

Oil prices rise on China demand optimism, gasoline strength

NEW YORK: Oil prices rose on Monday on optimism that China would see significant demand recovery after positive signs that coronavirus pandemic was receding in the hardest-hit areas.

Brent crude rose $1.34, or 1.2 percent, at $112.89 a barrel at 12:10 p.m. EDT (1710 EDT) 1342 GMT, while US West Texas Intermediate crude rose $2.22, or less than 0.1 percent, to $112.71 a barrel.

Shanghai aims to reopen broadly and allow normal life to resume for the city’s 25 million people from June 1, a city official said on Monday, after declaring that 15 of its 16 districts had eliminated cases outside quarantine areas.

However, it is estimated that 46 cities in China are under lockdowns, hitting shopping, factory output and energy usage.

“We are seeing a lot of signals that demand will start returning in that region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.

In line with the unexpected industrial output decline, China processed 11 percent less crude oil in April, with daily throughput the lowest since March 2020.

US gasoline futures set an all-time high again on Monday as falling stockpiles fueled supply concerns.

“Oil prices will remain bullish, especially WTI’s near-term contract, as US gasoline prices continued to rise amid weaker imports of petroleum products from Europe,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

Oil prices also found some support as the EU’s diplomats and officials expressed optimism about reaching a deal on a phased embargo of Russian oil despite concerns about supply in eastern Europe.

Austria expects the EU to agree on the sanctions in the coming days, Foreign Minister Alexander Schallenberg said on Monday.

German Foreign Minister Annalena Baerbock said the bloc would need a few more days to find agreement.

“With a planned ban by the EU on Russian oil and slow increase in OPEC output, oil prices are expected to stay close to the current levels near $110 a barrel,” said Naohiro Niimura, a partner at Market Risk Advisory. 


Saudi-Thai MoUs to boost two-way trade, investment opportunities

Saudi-Thai MoUs to boost two-way trade, investment opportunities
Updated 16 May 2022

Saudi-Thai MoUs to boost two-way trade, investment opportunities

Saudi-Thai MoUs to boost two-way trade, investment opportunities

RIYADH: Five memorandums of understanding were signed on the sidelines of the Saudi-Thai Investment Forum in Riyadh on Monday. 

The first MoU was signed between the Saudi Federation of Chamber and the Board of Trade of Thailand to explore investment opportunities in the private sector. 

The second MoU signed between the Saudi Ministry of Investment and Gulf Energy Development Public Co. aims at evaluating and exploring investment opportunities in the field of petrochemicals industries. 

The third deal between the Diriyah Gate Development Authority and Minor Group aims to launch multiple hotels in the region. 

The fourth MoU between the Saudi Investment Ministry and Indorama Ventures is aimed at exploring petrochemical and conversion opportunities such as polymers, and fiber surfactants. 

The fifth deal was signed between the Saudi Ministry of Investment and SCG and Dusit International. This deal is aimed at increasing foreign direct investments in Saudi Arabia.