Saudi Aramco proceeds with its energy-trading unit’s IPO: Bloomberg

Aramco Trading was established in 2011. It buys and sells crude oil, diesel and liquefied natural gas.
Aramco Trading was established in 2011. It buys and sells crude oil, diesel and liquefied natural gas.
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Updated 19 October 2022

Saudi Aramco proceeds with its energy-trading unit’s IPO: Bloomberg

Saudi Aramco proceeds with its energy-trading unit’s IPO: Bloomberg

RIYADH: Saudi oil giant Aramco is proceeding with its plan for an initial public offering of its energy-trading unit, in a move that would be one of the largest share sales in 2022, Bloomberg reported citing people familiar with the matter.

The listing is planned for the end of the year or early 2023, they added.

The oil company is currently adding more banks to the IPO, they explained, adding that it could value over $30 billion.

However, Aramco declined to comment, the report said.

Aramco Trading was established in 2011. It buys and sells crude oil, diesel and liquefied natural gas.

 


Oil steady as Russian crude products ban looms

Oil steady as Russian crude products ban looms
Updated 02 February 2023

Oil steady as Russian crude products ban looms

Oil steady as Russian crude products ban looms
  • A EU ban on Russian refined products is set to take effect on Feb. 5, potentially dealing a blow to global supply

LONDON: Oil prices were steady on Thursday as looming sanctions on Russian oil products added uncertainty over supply but the dollar lost value in a boost to the oil trade.

Brent crude futures fell 18 cents, or 0.2 percent, to $82.66 a barrel by 1415 GMT while West Texas Intermediate US crude futures lost 3 cents to $76.38.

Both benchmarks plunged more than 3 percent overnight after US government data showed a large build in oil stocks. A EU ban on Russian refined products is set to take effect on Feb. 5, potentially dealing a blow to global supply.

EU countries will seek a deal on Friday on a European Commission proposal to set price caps on Russian oil products after postponing a decision on Wednesday because of divisions among member states, diplomats said. The European Commission proposed last week that from Feb. 5 the EU apply a price cap of $100 a barrel on premium Russian oil products such as diesel and a $45 per barrel cap on discounted products such as fuel oil.

Meanwhile an OPEC+ panel endorsed the producer group’s current output policy at a meeting on Wednesday, leaving production cuts agreed last year unchanged amid hopes of higher Chinese demand and uncertain prospects for Russian supply.

OPEC+ agreed to cut its production target by 2 million barrels per day — about 2 percent of global demand — from November last year until the end of 2023 to support the market.


Saudi Arabia and France sign cooperation MoU in the field of energy

Saudi Arabia and France sign cooperation MoU in the field of energy
Updated 02 February 2023

Saudi Arabia and France sign cooperation MoU in the field of energy

Saudi Arabia and France sign cooperation MoU in the field of energy
  • Agreement calls for increased focus on technologies which mitigate effects of climate change

RIYADH: Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman signed a memorandum of understanding on Thursday with Catherine Colonna, French minister of Europe and foreign affairs, to establish a framework for cooperation in the energy sector, the Saudi Press Agency reported.

The memorandum, which was signed in Riyadh, outlined cooperation between the countries in the fields of electricity, renewables, energy efficiency, storage, smart grids, oil and gas and their derivatives, refining, petrochemicals, and the distribution and marketing sector.

The agreement also calls for increased cooperation in technologies which mitigate the effects of climate change, such as carbon capture and hydrogen production.

The deal addresses areas of collaboration in digital transformation, localization of materials, products, and services related to the energy sectors, joint research, skill training, and cooperation between specialized companies.

Prince Abdulaziz and Colonna also discussed future opportunities in various fields of energy, as well as the prospects for cooperation in the peaceful uses of atomic energy.

 


Green-certified utility projects on the rise in Saudi Arabia

 Green-certified utility projects on the rise in Saudi Arabia
Updated 02 February 2023

Green-certified utility projects on the rise in Saudi Arabia

 Green-certified utility projects on the rise in Saudi Arabia
  • Saudi Arabia’s National Water Strategy is reshaping the private sector with a focus on ESG principles

RIYADH: When a consortium of water infrastructure companies closed green loans worth $480 million for three independent sewage treatment plants in Saudi Arabia last March, it was a harbinger of the verdant opportunity that awaited the Kingdom’s sustainable projects.

It was a watershed moment for the consortium of Saudi companies Tawzea, Tamasuk, and Spanish firm Acciona when they secured the amount for three ISTPs — Madinah 3, Buraidah 2, and Tabuk 2 — in just six months of expressing their interest.

What made the project a prime beneficiary of green financing was its commitment to the sustainability goals envisaged by the Saudi Vision 2030 and the endeavors of Saudi Water Partnership Co., the state-run company which facilitates the commercialization of water and electricity in the Kingdom.

Saudi Arabia is making headlines by taking measures to ensure a smooth transition to green energy and fight climate change. The Kingdom will host the 44th International Association for Energy Economics International Conference from Feb. 4-9 to discuss the path for a sustainable future.

“The construction and operation of the ISTPs will aid in optimizing the use of water resources in Saudi Arabia by providing treated and renewable water to be used for agricultural purposes, therefore reducing the consumption of freshwater,” said María Ortiz de Mendivil, primary analyst, S&P Global Ratings, in a second-party opinion note certifying the projects as green.

Once completed, Madinah 3 will serve up to 1.5 million inhabitants of existing and future residential areas near the city of Madinah. It will have an initial treatment capacity of 200,000 m³ per day, which can be expanded to 375,000 m³ per day.

Buraidah 2 will serve up to 600,000 people and have a capacity of 150,000 m³ per day. Tabuk 2, serving up to 350,000 people, will facilitate 90,000 m³ per day.

The treated water will replace freshwater resources for farming, saving this scarce resource and contributing directly to the nation’s water security. Daily water savings are expected to amount to 190,000 m³ per day at Madinah 3, 142,500 at Buraidah 2, and 85,500 at Tabuk 2.

HIGHLIGHTS

Madinah 3 will have an initial treatment capacity of 200,000 m³ per day, which can be expanded to 375,000 m³ per day.

Buraidah 2 will serve up to 600,000 people and have a capacity of 150,000 m³ per day.

Tabuk 2, serving up to 350,000 people, will facilitate 90,000 m³ per day.

“We have a zero-sludge-dispatch policy, meaning that all the sludge that we produce in these wastewater treatment plants is either used by farmers to replace other fertilizers or sent to cement factories for the production of cement,” said Julio De La Rosa, the Middle East business development director of Acciona Agua, while speaking at an International Desalination Association’s forum held two months ago.

Additionally, the photovoltaic solar panels installed at each plant will generate renewable power that will partially cover their daily energy consumption.

The green-certified project drew the attention of the bigwigs of the finance world, such as Abu Dhabi Islamic Bank, Mitsubishi UFJ Financial Group, Alimna Bank, Riyad Bank, and Siemens Bank, which parked their investments at first blush.

Green loans for a greener planet

So, what exactly is a green loan? According to the World Bank, a green loan is a form of financing that enables borrowers to use the proceeds to exclusively fund projects that make a substantial contribution to an environmental objective.

It is similar to a bond. The only difference is that a loan is typically smaller than a bond and executed in private operations. Also, green loans and green bonds follow different but consistent principles: The Green Loan Principles and the Green Bond Principles of the International Capital Market Association.

This green financing assumes significance as investors worldwide are earmarking their funds into sustainable investment projects that neutralize greenhouse gases and run on renewable energy, making them attractive propositions in an environmentally conscious world.

Saudi Arabia, particularly, has been facing severe challenges due to the unsustainable use of water resources, and it has limited reserves of nonrenewable groundwater, which are depleting rapidly. In addition, high water demand in the agriculture sector has also exacerbated the water scarcity situation.

According to figures published by the Minister of Environment, Water and Agriculture, between 1985 and 2020, the water level in the Kingdom almost dropped by 90 meters. That led to the National Water Strategy, inspired by the Vision 2030 blueprint, which identified levers and enablers to fix the problem.

“The National Water Strategy reshaped the private sector, which has started to think about how to be efficient and contribute to the water strategy, gain benefits as per their sustainability roadmap and accommodate the environment, social and governance in their strategies,” said Mohammed Al Halawani, CEO of Tawzea.

This public-private partnership has spawned many efficient independent water and power projects and desalination plants that are fast becoming textbook case studies for sustainable projects worldwide.

An excellent case study of the PPP is the Taif Independent Sewage Treatment Plant, which was developed by Cobra & Tawzea and had a treatment capacity of 1,00,000 m³ per day.

It is the first ISTP that reached commercial operation in Saudi Arabia from the private sector under the build-operate-transfer model.

The plant has less than 0.35 kilowatt-hour per m³ electricity consumption. About 30 percent of the electricity was recovered by biogas cogeneration. Even the residual output was 90 percent dry solids and beneficial class-A sludge.

“Over 210,000 sq. m of trees will be introduced as part of the project with the support of the Saudi Green Initiative, which is equivalent to approximately sequestering 136 tons of carbon dioxide per year,” said Al Halawani.

Sustainable to the core

Another example is the Shuaibah 3 Water Desalination Co., a special-purpose vehicle created to finance and develop the Shuaibah 3 Independent Water Project.

The company was launched by Saudi utility developer ACWA Power and Water & Electricity Holding Co., also known as Badeel, both owned in part or whole by the Public Investment Fund.

The project aims to replace a thermal desalination plant, the Shuaibah 3 IWPP, powered by fossil fuels. The use of reverse osmosis technology makes the proposed plant more energy efficient than the previous thermal desalination plant that will come offline.

The conventional thermal desalination process, multi-stage flash distillation, and multiple-effect distillation produced nearly 20 kg of carbon dioxide equivalent per m³. However, the carbon footprint for the RO process could be anywhere from 0.4 to 6.7 kg of carbon dioxide equivalent per m³.

According to ACWA Power, this technology shift could accrue savings of about 45 million tons of carbon dioxide yearly.

That’s not all. Green financing is greenlighting a host of projects worldwide, and for the first time, more money was raised in the debt markets in 2022 for climate-friendly projects than fossil-fuel companies.

According to a Bloomberg report, roughly $580 billion was arranged in 2022 for renewable energy and other environmentally responsible ventures, while the oil, gas, and coal industries turned to lenders and underwriters for closer to $530 billion. 

While it may not indicate that green financing is finally having an upper hand on oil lenders, the well-trodden bazaars of fossil fuel funding have become eerily cold after the global pushback on loss and damage during the UN Climate Change Conference in Egypt last year.

Saudi Arabia, on its part, lives by the age-old adage: You never miss the water till the well runs dry. While going to press, Saudi power juggernaut ACWA Power announced that it added 2.4 million m³ day of water desalination capacity across four reverse osmosis megaprojects in 2022, the largest in a calendar year in the company’s history.

This achievement brings the company’s total water capacity under management to 6.4 million m³ across 16 projects in four countries, producing water at less than $0.50 per m³, which is up to three-quarters lower than the tariff of $2 per m³ just a few years ago.

Ergo, the message is loud and clear: The future of infrastructure financing is green, or there’s no future at all.


Saudi Aramco slashes supply chain emissions by 23% since 2015, chairman reveals

Saudi Aramco slashes supply chain emissions by 23% since 2015, chairman reveals
Updated 02 February 2023

Saudi Aramco slashes supply chain emissions by 23% since 2015, chairman reveals

Saudi Aramco slashes supply chain emissions by 23% since 2015, chairman reveals

RIYADH: The Saudi Arabian Oil Co., also known as Saudi Aramco, has reduced material and logistics supply chain emissions by 23 percent since 2015, the chairman Yasir Al-Rumayyan revealed in an exclusive interview with Arab News.

Aramco’s iktva program is playing a key role in helping the oil giant achieve its long-term sustainability goals by making sure that its suppliers are evaluated and rewarded for their local environmental, social and governance contribution.

“Sustainability has always been part of the iktva model. We are embracing new technologies, harnessing the Circular Carbon Economy framework and empowering people to enhance our sustainability and reduce our environmental impact,” said the Aramco chairman.

“It’s worth noting that our material and logistics supply chain Scope 1 and 2 emissions have been reduced by 23 percent since 2015,” he added.

Scope 1 emissions refer to the direct emissions from owned or controlled sources, whereas Scope 2 emissions relate to the indirect emissions that come from the generation of electricity, steam, heating, and cooling used by a firm.

As well as having an impact on sustainability, iktva also plays a role in backing the growth and development of the local economy, Al-Rumayyan noted.

As of today, Aramco has a local supply chain comprising an estimated 1,000 local manufacturers and more than 2,000 service providers, the chairman disclosed.

“The program creates an ecosystem of integrated value chains that help businesses operate efficiently in Saudi Arabia. In addition, iktva rewards suppliers for establishing regional headquarters in Saudi Arabia,” he said.

With regards to efficiency, the chairman noted that it all goes back to investment in a skilled network of local suppliers which automatically leads to resilience when it comes to supply chain matters.

Both local and international suppliers are required to meet certain criteria in order to be able to work with the oil and gas giant. The criteria includes establishing local manufacturing facilities, recruiting Saudi employees, investing in research and training, among others.

“This steady progress towards supply-chain localization has not only benefited our company, but also the local and national economy. The impact is expected to continue through growth in exports and increased employment opportunities,” the chairman told Arab News.

Speaking of milestones, Al-Rumayyan emphasized that Aramco achieved a 63 percent iktva score, implying that 63 percent of the firm’s expenditures on suppliers has remained within the Kingdom.

Moreover, Aramco also recorded a 40 percent surge in suppliers’ spend on Research and Development in the Kingdom compared to 2021 levels.

Meanwhile, suppliers’ expenditure on small and medium enterprise development rose 120 percent between 2021 and 2022, thereby propelling supply chain evolution, he exposed.

“Since 2015, we have signed 182 agreements with a total value of $31 billion to build long term collaborative relationships with strategic suppliers, drive further investments, and promote local content,” Aramco chairman stressed.

The goal of those agreements, which pose as Corporate Purchase Agreements, is to provide suppliers with long-term visibility of demand; therefore, enabling them to forecast and project future growth and drive localization efforts accordingly, he explained.

The iktva program was launched with the vision of building a diverse and internationally competitive industrial base in Saudi Arabia. Looking at the bigger picture, this annual gathering is also designed to help the community further innovate, collaborate, and network.

In terms of investments, the event has managed to identify over 200 investment opportunities with an annual market share estimated to stand at $16 billion across 10 different sectors.

“We are continuously looking for companies who share our vision of sustainable growth, and to build win-win strategic partnerships. Together, we aim to stimulate innovation, diversify industry, and produce quality jobs for a growing Saudi population,” Al-Rumayyan concluded.


Mideast positioned to take a key role in energy transition

Mideast positioned to take a key role in energy transition
Updated 02 February 2023

Mideast positioned to take a key role in energy transition

Mideast positioned to take a key role in energy transition
  • Renewables are gaining momentum in addition to local green agendas, says report

CAIRO: A leader in global oil production, the Middle East is positioned to take an important role in energy transition, according to a report by McKinsey & Co. 
The Middle East currently produces almost a third of global oil supply with 48 percent of proven global oil reserves and 40 percent gas reserves, the report stated.
“Today, the Middle East accounts for 1.9 gigatons of equivalent carbon dioxide of energy emissions, nearly 5.5 percent of global energy-related emissions. The region is also home to several of the world’s top 10 per capita carbon-emitting nations,” it added. 
What’s more, countries in the Middle East are powered almost exclusively on oil and gas, making 98 percent of energy consumption. 
The Middle East exported 22 million barrels of oil per day and 127 billion cubic meters of gas, representing 34 percent and 26 percent, respectively, of global energy exports in 2020, the report indicated. 
However, the region also has some of the lowest cost and least carbon-intensive extraction basins, which are source rocks where oil and gas are born, in the world.
For example, the carbon intensity of upstream operations in Saudi Arabia of 4.6 grams of carbon dioxide equivalent per megajoule of energy is less than half the global average of 10.3g CO2e/MJ. 
This is one of the major advantages the region enjoys to enable it to play a prominent role in global energy transition landscape.
But that’s not all. As the region currently also has among the lowest solar bid prices globally, renewables are gaining momentum in addition to local green agendas like the UAE’s plan to invest $160 billion in clean, renewable energy sources in the next 30 years. 
Several other countries have announced giga-projects including Saudi Arabia’s Vision 2030 program, which is targeting the installation of about 60 GW of renewables by 2030. 
The Kingdom has also launched the Saudi Green Initiative alongside the Middle East Green Initiative to fortify the region’s commitment to a greener world in addition to hosting the 44th International Association for Energy Economics Conference on Feb. 4-9, 2023. 

Unique advantages
The region attracts huge investment opportunities for renewable energy thanks to its geographical location. 
The Middle East and North Africa region receives 22 to 26 percent of all solar radiation on earth in addition to average wind speeds that exceed the minimum threshold for utility-scale wind farms. 
These unique advantages present an opportunity for the region to reduce carbon emissions on a global scale. 
Promoting investments to scale the supply of carbon capture, utilization and storage, which is the capture and effective use of high concentrations of CO2 emitted by industrial activities, can be one of the major steps towards a greener region. 
The untapped potential in CCUS is large because of sectors like refining, steel and cement which could use CCUS to decarbonize at scale. 
The current pipeline of committed projects to 2030 still has a considerable share of gray-hydrogen projects at 45 to 50 percent capacity, rather than blue-hydrogen projects, which use CCUS to mitigate emissions, or green-hydrogen projects, which use even less carbon, according to McKinsey & Co.’s report. 

FASTFACTS

The Middle East exported 22 million barrels of oil per day and 127 billion cubic meters of gas, representing 34 percent and 26 percent, respectively, of global energy exports in 2020.

The region also has some of the lowest cost and least carbon-intensive extraction basins, which are source rocks where oil and gas are born, in the world.

The region currently also has among the lowest solar bid prices globally.

Several countries have announced giga-projects including Saudi Arabia’s Vision 2030 program, which is targeting the installation of about 60 GW of renewables by 2030. 

Middle Eastern countries currently use large quantities of gray hydrogen based on natural gas, about 8.4 megatons a year, or approximately 7 percent of the world’s total. 
Scaling up both blue and green hydrogen as well as ammonia production could drive international partnerships and investments in hydrogen exports. 
Moreover, the Middle East is a suitable region for carbon storage, with a vast and accessible underground storage potential of about 30 gigatons. 
The report further indicated that the region is among the lowest-cost in the world for green hydrogen production with a potential cost below $2 per kilogram compared to the global cost range of $2.8 to $6.3 per kilogram. 
Boosting renewables development as well as facilitating integration by upgrading supporting infrastructure is much needed in order to support the region’s transition. Investment in renewables has been quite low compared to oil, gas and petrochemicals as Middle Eastern countries’ power-generation mix remains low in terms of the region’s ambitious goals. 
On average, a solar project takes three to four years to be complete in the Middle East. Given that the average size of the installed projects is currently only about 500 to 800 MW, the uncertainty risk is increased for long-term investments, according to McKinsey analysis. 

Way forward
Incentivizing electrification and energy efficiency also plays a huge role in the development of a net-zero region. 
According to McKinsey research, 44 percent of the energy consumed globally is fuel based, and half of the fuel consumed for energy could be electrified with technologies that are available today. 
In the Middle East, 95 percent of the energy-related consumption in industry is currently fossil fuel based and only 4 percent of the energy consumed is electricity. 
The electrification of upstream assets could reduce emissions in oil and gas operations. Research and development of electric industrial equipment and processes could significantly reduce capital costs and increase the energy efficiency of electric equipment. 
Promoting clean technology businesses that are building new energy solutions to diversify the local economy and capture new economic opportunities from the transition will greatly encourage other companies to follow through. 
Empowering the non-energy private sector, entrepreneurship could result in faster economic diversification.
Entrepreneurs face challenges such as high incorporation costs, lack of financing for small and medium size ventures, and difficulties with licensing. 
Creating a clean technology startup ecosystem powered by incentive schemes and innovation can attract both local and international investment.