Mideast positioned to take a key role in energy transition

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.  Shuttertstock
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.  Shuttertstock
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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. 


FII Priority: Global South wants a more balanced world order, says Prof. Mohan Munasinghe

Prof. Mohan Munasinghe, founder and chairman of the Munasinghe Institute of Development, at the FII Priority conference
Prof. Mohan Munasinghe, founder and chairman of the Munasinghe Institute of Development, at the FII Priority conference
Updated 30 March 2023

FII Priority: Global South wants a more balanced world order, says Prof. Mohan Munasinghe

Prof. Mohan Munasinghe, founder and chairman of the Munasinghe Institute of Development, at the FII Priority conference
  • BRICS countries have overtaken the G7 countries in terms of their contribution to the global GDP

MIAMI: Countries in the Global South are increasingly asserting themselves and showing more independence, said Prof. Mohan Munasinghe, founder and chairman of the Munasinghe Institute of Development, at the FII Priority conference on Thursday.

“One of the important reasons is that there is a realization that 85 percent of the global population lies in these countries and only 15 percent in the so-called West,” he said.

BRICS countries — referring to Brazil, Russia, India, China and South Africa — in particular, have overtaken the G7 countries in terms of their contribution to the global gross domestic product.

As the BRICS countries expand with the potential addition of Saudi Arabia, Mexico, Indonesia and Bangladesh, the Global South is looking at a new world order, as opposed to the existing order, which has been more or less shaped by Western countries since the Second World War, said Munasinghe.

The new priorities for countries in the Global South are “sustainability, economic development, raising the poor out of poverty,” and they are “less interested in military interventions or economic sanctions — those kinds of confrontational approaches,” he added.

Munasinghe strongly recommended integrating climate change into the sustainable development strategy for these countries.

“There is a way to balance what I call the ‘sustainable development triangle’,” which calls for economic growth to improve poverty while protecting the environment, and the “social and cultural matrix,” he said.

These countries “are a little tired of 500 or more years of colonial interventions” and they still remember the aggressive interventions from the West, he pointed out.

As it gains more power, fueled by the emergence of BRICS countries, the Global South has more hope, signaling a shift away from the Western-led unipolar world order to a more balanced, multipolar world.

Now, with digital technologies and “other new methods,” there are more opportunities for these countries that will allow them to have a “level playing field” and have their “dignity and self-respect restored,” said Munasinghe.


Give youth tools to overcome cost-of-living crisis, Saudi envoy to US tells FII Priority conference

Give youth tools to overcome cost-of-living crisis, Saudi envoy to US tells FII Priority conference
Updated 30 March 2023

Give youth tools to overcome cost-of-living crisis, Saudi envoy to US tells FII Priority conference

Give youth tools to overcome cost-of-living crisis, Saudi envoy to US tells FII Priority conference
  • Princess Reema bint Bandar said that ‘having financial literacy and financial engagement at a younger age will allow us all to be more efficient citizens’
  • She highlighted the success of Saudi Arabia’s Vision 2030 national development project in engaging the Kingdom’s youth and the speed with which new opportunities have been created

MIAMI: Equipping the youth of the world with financial literacy and opportunities is vital if they are to overcome the growing cost-of-living crisis, Saudi Arabia’s ambassador to the US told the Future Investment Initiative’s Priority conference in Miami on Thursday.

Princess Reema bint Bandar was speaking during a panel discussion of what the UN has described as the “largest cost-of-living crisis of the 21st century,” and its disproportionate effects on young people around the globe, who are on the front lines of the crisis.

She said there certainly needs to be more personal accountability and understanding of what is needed at an individual level, but also at the national and international levels.

“We have all been overspending, overbuying and overconsuming and this ‘click button, immediate delivery’ has skewed our perception of what our personal costs are, personal needs and our engagement,” she said. “I think we have been thinking too macro; let’s go back to micro and have little bit more personal responsibility.

“I think (understanding) the concept of interconnectivity of our behavior and our actions, and having financial literacy and financial engagement at a younger age, will allow us all to be more efficient citizens, regardless of whether it’s in the Kingdom, the Middle East or the West.

“I think we’ve lost the concept of our personal impact on economies and other people’s lives,” she added.

The ambassador highlighted the success of Saudi Arabia’s Vision 2030 national development project in engaging the Kingdom’s youth and the speed with which new opportunities have been created outside of the traditional governmental and public sector.

Five years ago in Saudi Arabia, she said, very few young people had any desire to step outside the “comfort zone” of the government sector; now, 58 percent of young people aspire to entrepreneurship pathways, confident that a system is in place in the Kingdom to support them.

“The reason you’re seeing success among young people, not just entering the government but also the private sector, is because today every single young person knows their role in this vision of evolving our country,” she said.

“It is creating opportunity for the individual to be part of the collective and recognize that every piece or step of work or ambition they have adds to the collective well-being of everybody else. That is what’s really driving us as a nation.

“We’ve been able to create education pathways; over $100 million has been spent not just on traditional education but expanding the pipelines of opportunity for young people in (sectors such as) hospitality, tourism and sport,” Princess Reema added.

She also refuted criticism from outside the Kingdom of investment and job creation in these sectors being “culture-washing” or “sport-washing” by pointing out it had created 3 million jobs so that young people can earn a decent living and wage, which could “help them uplift not just themselves but their households and their families and create opportunities for others.”

She said she feels the Saudi approach in this regard is what is “inspiring about being in the Kingdom today,” adding: “We have a moment to inspire young people to not just take, but to also give.”

On the growing engagement of young Saudi women in the process, she said: “You cannot create an opportunity for one gender and not the other, and that’s something we’ve been able to accomplish through Vision 2030.”


Saudi Arabia, Miami offering development blueprint for rest of the world: FII Priority panel

Saudi Arabia, Miami offering development blueprint for rest of the world: FII Priority panel
Updated 30 March 2023

Saudi Arabia, Miami offering development blueprint for rest of the world: FII Priority panel

Saudi Arabia, Miami offering development blueprint for rest of the world: FII Priority panel
  • FII Chairman and Saudi Public Investment Fund Gov. Yasir Al-Rumayyan joined Miami Mayor Francis Suarez to discuss how humanity can get through the challenges of a post-COVID world
  • Al-Rumayyan said progress could be achieved anywhere in the world by running full diagnostic of economy and society

MIAMI: Economic and social reforms being carried out on a national level in Saudi Arabia and on a city level in Miami offer a model for progress and development for the rest of the world, the FII Priority conference heard on Thursday.

FII Chairman and Saudi Public Investment Fund Gov. Yasir Al-Rumayyan joined Miami Mayor Francis Suarez to discuss how humanity can get through the challenges of a post-COVID world, marked by the war in Ukraine, potential economic crises across the world, catastrophic weather events and soaring costs of living.

Since his election as mayor, Suarez said he had transformed Miami’s economy through lower taxation, investment in public security and enticing the future technology industry to the city, telling the conference that parallels could be drawn with Saudi Arabia’s transformation through its Vision 2030 plan.

Al-Rumayyan agreed, adding that progress could be achieved anywhere in the world by running a full diagnostic of an economy and society, as happened in the Kingdom with the launch of its Vision 2030 plan, by setting benchmarks, targets and key performance indicators.

“(The plan) is very challenging, but achievable,” he said. “You need the political will, the right processes and the right people. That’s what has made it work so well, so far, and hopefully we will achieve all of our targets by 2030,” he added.

Al-Rumayyan highlighted progress already made ahead of schedule in certain metrics across the Kingdom, including having 37 percent female employment by 2020, 7 percent more than initially expected, as well as Saudi Arabia’s 8.7 percent gross domestic product growth in 2022, which was 1.2 percent more than predicted by the IMF, making the Kingdom’s economy the fastest growing in the G20.

This week, with nationwide unemployment falling below 9 percent in Saudi Arabia for the first time, Al-Rumayyan was also keen to stress that Vision 2030 does not set out simply to create jobs, but to create “good quality” jobs, which is key for engaging an ever-youthful workforce.

Calling PIF the “enabler of Vision 2030,” Al-Rumayyan added that a healthy investment portfolio such as the Kingdom’s was key to sustainable progress and development; he highlighted its assets are worth $650 billion today, but it plans to expand this to $1 trillion by 2025 and to between $2-$3 trillion by 2030.

As chairman of Saudi Aramco, Al-Rumayyan outlined the company’s green energy ambitions and its low-emission credentials, but warned that the approach of some countries toward fossil fuels threatened the likelihood of achieving real development as a result of chasing unrealistic clean energy goals.

“Oil, gas and fossil fuels is not such a bad thing,” he said. “I could talk for days about why we should really invest in exploration. We should have long-term views and not (follow) a certain ideal or ideology without thinking about the consequences of that,” he added.

Completely dropping fossil fuels is not a practical solution for global development and progress, Al-Rumayyan told the panel, adding that the shift from traditional to renewable sources of energy would be a slow process, especially considering that much of the net zero infrastructure still requires petrochemicals and fossil fuels to produce.

The PIF governor said: “Some of the governments around the world bullied the oil and gas companies (because of the climate mission) and instead of looking at the problem and trying to fix it, they just wanted to stop it, and what happened after that?

“It started with the oil crisis, because you have less exploration, less supply and demand is increasing, because we want to change to renewable. I understand that, but it takes time to have a transition from fossil fuels to renewables.

“Are we making things better, or worse? From two sides, first, (damage to) the environment and secondly the affordability of energy for the world’s people, and that’s the problem we are facing now,” he added.


Oil rises on US crude draw and Iraqi supply risks

Oil rises on US crude draw and Iraqi supply risks
Updated 30 March 2023

Oil rises on US crude draw and Iraqi supply risks

Oil rises on US crude draw and Iraqi supply risks
  • US crude oil stockpiles fell unexpectedly in the week to March 24 to a two-year low
  • Crude inventories dropped by 7.5 million barrels, compared with expectations for a rise of 100,000 barrels in a Reuters poll of analysts

LONDON: Oil prices rose on Thursday as a surprise drop in US crude stockpiles and a halt to exports from Iraq’s Kurdistan region offset a smaller than expected cut to Russian supplies.
Brent crude futures rose 57 cents, or 0.73 percent, to $78.85 a barrel by 1327 GMT, while West Texas Intermediate crude rose 82 cents, or 1.12 percent, to $73.79.
US crude oil stockpiles fell unexpectedly in the week to March 24 to a two-year low, the Energy Information Administration said on Wednesday.
Crude inventories dropped by 7.5 million barrels, compared with expectations for a rise of 100,000 barrels in a Reuters poll of analysts.
The continuing halt to exports from Iraq’s northern region provided further support.
Producers have shut in or reduced output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq after the northern export pipeline was shut, with more outages on the horizon, company statements showed.
But the Kurdistan-Iraq premium in oil prices could vanish sooner than expected, Citi analysts said Thursday.
The “changes in Iraq’s domestic politics may lead to a durable political settlement very soon,” Citi said, estimating that pipeline flows could increase by 200,000 barrels per day (bpd).
These factors offset bearish sentiment after a lower than expected cut to Russian crude oil production in the first three weeks of March.
The 300,000 bpd production decline compared with targeted cuts of 500,000 bpd, or about 5 percent of Russian output, sources familiar with the data told Reuters.
Markets are now waiting for US spending and inflation data due on Friday and the resulting impact on the value of the US dollar.
Meanwhile, OPEC+ is likely to stick to its existing deal on reduced oil output at a meeting on Monday, five delegates from the producer group told Reuters.
“While we think oil prices may remain volatile in the near term, we still expect rising Chinese crude imports and lower Russian production to lift prices over the coming quarters,” UBS said on Thursday.
China’s refined fuel consumption this year is likely to grow 3 percent from 2019 pre-COVID levels, state energy giant PetroChina said on Thursday.
“If all goes as expected, and we manage to avoid a recession, oil prices will dance around $75-$85/bbl in the coming months,” FGE analysts said in a note.


Closing bell: Saudi bourses edge up 

Closing bell: Saudi bourses edge up 
Updated 30 March 2023

Closing bell: Saudi bourses edge up 

Closing bell: Saudi bourses edge up 

RIYADH: Saudi Arabia’s Tadawul All Share Index rose for the sixth session in a row on Thursday, up by 86.92 points – or 0.83 percent – to 10,590.10, driven by favorable market conditions. 

Parallel market Nomu also went up by 288.68 points – 1.47 percent – to close at 19,892.03, while the MSCI Tadawul 30 Index rose 1.09 percent to 1,435.05.

The total trading turnover of the benchmark index was SR6.2 billion ($1.65 billion).

The top gainer of the day was Gulf Union Alahlia Cooperative Insurance Co. whose shares went up by 9.93 percent to SR9.74. 

Other top gainers of the day were BinDawood Holding Co. and Batic Investments and Logistics Co. whose share prices rose 8.39 percent and 5.99 percent respectively. 

Meanwhile, Red Sea International Co. announced that it will not be able to publish its annual financial results ending on Dec. 31, 2022 as the firm is still working with the external auditor to issue the annual financial statements. 

It also noted that it will complete the audit work and publish the annual financial statements before April 27, 2023. 

Red Sea International Co. was also the worst performer on Thursday, as the company’s share prices dropped by 3.82 percent to SR25.15. 

On the announcements front, Saudi Real Estate Co., posted a net profit of SR110.5 million in 2022, almost double the earnings of SR 54.9 million in 2021. As the profits surged, the company’s share prices ticked up on Thursday by 0.16 percent to SR12.38. 

Raydan Food Co. also announced its financial report. The company narrowed its 2022 net losses to SR 24.6 million, from SR 42.2 million in 2021.The shares of the firm, however, dropped by 2.69 percent to 25.35. 

Horizon Food Co. reported a 12 percent dip in its earning to SR8.88 million in 2022, compared to SR10.16 million in 2021. The company attributed the decrease in net profit to a rise in selling and marketing expenses due to increased sales and geographical expansion. Horizon Food Co.’s share prices remained unchanged on Thursday at SR40.35. 

Another company which announced its financial report was MOBI Industry Co. The firm reported a 13.68 percent fall of net profit year-on-year to SR13.92 million. Despite a fall in net profit, the company’s share prices rose 0.35 percent on Thursday to SR58. 

Fesh Fash Snack Food Production Co. reported that its net profit surged 54.67 percent to SR2.16 million in 2022, compared to SR1.40 million in 2021. Amid a rise in profit, the company’s share prices dropped 1.2 percent to SR144 million. 

Natural Gas Distribution Co. also announced its financial results. The firm’s net profit rose by 32.66 percent in 2022, compared to SR2.48 million in 2021. The company’s share prices fell by 0.97 percent SR51.