Electrical transmission line connecting Afar in Saudi Arabia to Yusufiya in Iraq inaugurated

Electrical transmission line connecting Afar in Saudi Arabia to Yusufiya in Iraq inaugurated
The power grid interconnection project with Iraq entails the implementation of a dual-circuit transmission line connecting the northern city of Afar in Saudi Arabia to Yusufiya in western Baghdad. (Reuters/File)
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Updated 25 June 2023
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Electrical transmission line connecting Afar in Saudi Arabia to Yusufiya in Iraq inaugurated

Electrical transmission line connecting Afar in Saudi Arabia to Yusufiya in Iraq inaugurated
  • Landmark project of GCC Interconnection Authority and Iraq offers an initial capacity of 1,000 megawatts
  • New power link aims to stabilize markets and offer tangible benefits for wider Middle East region

DUBAI: Aiming to step up energy security and usher in a new era in regional cooperation, Prince Saud bin Nayef bin Abdulaziz, the governor of the Eastern Province, inaugurated an electrical interconnection project between the Gulf Cooperation Council Interconnection Authority and Iraq.

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said the connection was a dream turned reality, in an interview with Al-Arabiya. He said this landmark deal could achieve tangible economic benefits and enhance energy security.

The announcement was made during a ceremony in Dammam that was witnessed by Prince Abdulaziz, Prince Saud and Eng. Ziyad Ali Fadel, the Iraqi minister of electricity, as well as a number of Gulf Arab ministers of electricity, Gulf ambassadors to the Kingdom and several officials from both the Gulf and Iraq.

The power grid interconnection project with Iraq entails the implementation of a dual-circuit transmission line connecting the northern city of Afar in Saudi Arabia to Yusufiya in western Baghdad and will offer an initial capacity of 1,000 megawatts and augment its capability to respond to the growing electricity demands of the Iraqi population in future years.

“The launch of the Iraq electrical interconnection project has thrown open abundant prosperity as well as extensive advantages to the entire region,” said Prince Saud during the launch of the historical project. “Additionally, this project serves as a catalyst for a new era, ushering in broader horizons and expanding market opportunities.”

The GCCIA aims to begin exporting electricity to southern Iraq by end of 2024. The project intends to support the Iraqi electrical grid and enhance energy security.

“This agreement holds great significance for Iraq as it marks a major turning point,” Ali Jasim Mohammed Al-Mitiwiti, Iraqi politician and a former parliament member, told Arab News.

The launch of the Iraq electrical interconnection project has thrown open abundant prosperity as well as extensive advantages to the entire region.

Prince Saud bin Nayef bin Abdulaziz, governor of the Eastern Province

He added: “Instead of a country monopolizing Iraq, including the electricity sector, which has caused significant hardship for Iraqi citizens, this agreement will contribute to the long-term improvement of the electricity network in southern Iraq.”

“This project,” continued Al-Mitiwiti, “aims to support the increasing demand for electricity in Basra Governorate through cooperation with the Cooperation Council for the Arab States of the Gulf. Furthermore, it lays the foundation for future exchange and trade of electrical energy between the countries of the Cooperation Council and Iraq within a regional and Arab market for electricity.”

The agreement for the project was signed by the GCCIA and Iraq on the sidelines of the Jeddah Summit for Security and Development in July 2022, while the framework agreement was sealed between the Iraqi Ministry of Electricity and GCCIA in 2019 for the establishment of the project.

The interconnection project marks the first to be implemented outside the electrical grid system of the GCC countries. It intends to meet some of the demand for electric power in southern Iraq.

The project necessitates the implementation of a 400 Kilovolt dual-circuit transmission line connecting the Al-Zour Substation, passing through the 400 kV Al-Wafrah unit and reaching the Al-Faw Substation, running 322 km long.

The anticipated capacity to be imported through this initiative is estimated at approximately 500 megawatts, which will cater to the electricity requirements of the Basra governorate, according to the statement from GCCIA.

Al-Mitiwiti underlined that the agreement “will ensure the sustainable supply of electrical energy at all times and contribute to achieving one of the sustainable development goals in Iraq and the region in the long term.”

“Since its establishment in 2009, when the Kingdom embraced it, the project has consistently demonstrated its impact year after year, generating numerous economic advantages for the GCC countries,” added Prince Saud. “Notably, it has substantially reduced both the capital and operational expenses associated with the Gulf electricity network.”

Prince Saud underlined that the project had furnished around one half of the overall required energy reserves in the countries prior to the finalization of the electrical interconnection.

“Furthermore, it has established dependable, sustainable, and competitive electricity transmission services, yielding a positive influence in supporting and streamlining all developmental endeavors in the region,” he added.

The project allows the creation of a GCC-augmented electricity market and electricity trading across borders. KSA, the UAE and other GCC countries are heavily investing in renewable energy.

Nasser Saidi, Lebanon’s former economy and trade minister

Crucially, the agreement underscores part of what Nasser Saidi, Lebanon’s former economy and trade minister and founder of Nasser Saidi & Associates, calls “the regionalized globalization by the GCC.

“Integrated electricity grids, such as between Saudi and Iraq, result in greater power efficiency, improved management of electricity grids and network economies, lowering costs for all the countries involved,” he told Arab News.

“It allows the creation of a GCC-augmented electricity market and electricity trading across borders. In parallel, Saudi, the UAE and other GCC countries are heavily investing in renewable energy (mainly solar) for their power generation,” he said.

“Eventually, the GCC can export solar-based electricity green energy to not only neighboring countries (Iraq, Jordan, Egypt and Yemen) but also to India and across North Africa into Europe. Already, a GCC-India undersea electricity connector is planned. A new energy infrastructure map is emerging.” 

There also, said Saidi, wider possibilities and vision for the agreement that have the potential as stated by Prince Saud and Al-Mitiwiti to garner greater energy security and economic benefits for the region.

“The integration of basic infrastructure — water, electricity, transport and logistics (ports and airports) — is a major building block of greater economic integration between the GCC and its regional partners, enabling the deepening of regional trade and investment links,” Saidi explained. 

He added: “Infrastructure integration fosters economic development. It creates jobs in countries such as Iraq, Jordan, Egypt, Lebanon and Syria that have traditionally been reliant on exporting labor, helping them combat the present brain drain.”

Moreover, as Saidi stressed, the greater integration of these countries with the GCC enables partners to participate in global value chains through the region, generating higher value exports (rather than low-value commodity exports such as phosphates) and diversify their economies.

All of this is taking place during a time of great change for world energy markets.

“The GCC countries are now pursuing an active international trade and investment strategy leading to ‘regionalized globalization’, at a time when the rest of the global economy is fragmenting and there is attempted US, EU and allies decoupling from China,” he added. “Strategically, regionalized globalization can lead to greater geopolitical stability.”


Oil Updates – prices set for second week of gains on signs demand improving

Oil Updates – prices set for second week of gains on signs demand improving
Updated 21 June 2024
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Oil Updates – prices set for second week of gains on signs demand improving

Oil Updates – prices set for second week of gains on signs demand improving

NEW YORK/SINGAPORE: Crude oil futures were little changed on Friday but were set to rise for a second week amid signs of improving demand and falling oil and fuel inventories in the US, the world’s biggest oil consumer, according to Reuters.

Brent futures for August settlement dipped 15 cents to $85.56 a barrel by 6:56 a.m. Saudi time after rising 0.8 percent in the previous session.

US West Texas Intermediate crude futures for August delivery was down 14 cents to $81.15 per barrel.

The July contract expired on Thursday at $82.17 a barrel, up 0.7 percent.

Prices have risen about 5 percent since the beginning of the month to the highest level in over seven weeks.

“The seasonal demand increase, as shown by the latest EIA (US Energy Information Administration) data, renewed confrontation between Israel and Hezbollah, and the hurricane season could sustain price strength into the summer,” Citi analysts said in a note.

US government data released on Thursday showed total product supplied, a proxy for the country’s demand, rose by 1.9 million barrels per day (bpd) on the week to 21.1 million bpd.

The data from the EIA showed drawdown in US crude stockpiles by 2.5 million barrels in the week ending June 14 to 457.1 million barrels, compared with analysts’ expectations for a 2.2 million-barrel draw.

Gasoline inventories fell by 2.3 million barrels to 231.2 million barrels, the EIA said, compared with forecasts for a 600,000-barrel build.​

Demand prospects elsewhere also helped push prices higher.

“Signs of stronger demand in Asia also boosted sentiment. Oil refineries across the region are bringing back some idled capacity after maintenance,” analysts at ANZ Research said.

Data released on Friday showed Japan’s core consumer prices last month gained 2.5 percent from a year earlier, growing from the previous month and keeping the country’s central bank on track to raise interest rates in the coming months.

Weighing on prices were US data released on Thursday that showed a decline in new unemployment claims, which may lead the Federal Reserve to keep interest rates unchanged. Higher interest rates typically limit economic growth and, in turn, oil demand.


Saudi Arabia and Switzerland strengthen economic ties at 4th Financial Dialogue in Zurich

Saudi Arabia and Switzerland strengthen economic ties at 4th Financial Dialogue in Zurich
Updated 20 June 2024
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Saudi Arabia and Switzerland strengthen economic ties at 4th Financial Dialogue in Zurich

Saudi Arabia and Switzerland strengthen economic ties at 4th Financial Dialogue in Zurich

RIYADH: Saudi Arabia and Switzerland are poised to deepen cooperation in finance and economics as top officials convened for the 4th Saudi-Swiss Financial Dialogue in Zurich.    

The event, inaugurated by Saudi Arabia’s Finance Minister Mohammed Al-Jadaan, focused on enhancing macroeconomic outlooks, fostering international multilateral cooperation, and advancing specific bilateral economic initiatives.    

It comes against the backdrop of a robust trade relationship between the countries. In 2023, Saudi Arabia exported $810.67 million worth of goods to Switzerland, while Swiss exports to the Kingdom totaled $6.77 billion, according to the UN’s international trade database.   

“The Saudi-Swiss relations have been growing for more than six decades, and our meeting ... for the 4th Saud-Swiss Financial Dialogue in Zurich embodies the two nations’ keenness to deepen cooperation between Saudi Arabia and Switzerland in various fields, most notably in finance and economics,” Al-Jadaan said in a post on X a day before the event.   

“Today, I was pleased to inaugurate the 4th Saudi-Swiss Financial Dialogue with the participation of the Head of the Federal Department of Finance & Vice President of the Swiss Federal Council, Ms. Karin Keller-Sutter. I emphasized on the Kingdom’s aspiration to explore new areas and markets that would deepen the existing cooperation between the two nations,” the minister added in another post.

In February, a high-profile delegation of Swiss business leaders visited Saudi Arabia to explore burgeoning trade and investment prospects in the Kingdom.   

Guy Parmelin, a Swiss Federal Councillor and head of the Department of Economic Affairs, Education and Research, led the delegation at the time.  

In an interview with Arab News during his visit, Parmelin highlighted the robust growth in trade between Switzerland and Saudi Arabia in recent years. “Swiss companies are very interested in investing in the Kingdom,” he added.   

He emphasized the eagerness of the accompanying business delegation to capitalize on Saudi Arabia’s rapidly transforming economic landscape.   

In November 2022, during an official visit to Riyadh, Swiss Finance Minister Ueli Maurer met with his Saudi counterpart, Al-Jadaan, and they signed a cooperation agreement to inaugurate the third Saudi-Swiss Financial Dialogue.   

Lauding the strength of the Saudi economy, Maurer stressed the importance of bilateral dialogues in developing economic activities in both countries and strengthening Switzerland’s role as a strategic partner for the Kingdom in achieving the goals of Vision 2030. 


Pakistan stocks hit record high on budget, IMF optimism

Pakistan stocks hit record high on budget, IMF optimism
Updated 20 June 2024
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Pakistan stocks hit record high on budget, IMF optimism

Pakistan stocks hit record high on budget, IMF optimism
  • Pakistan released tax-heavy budget last week which investors believe will strengthen case for new IMF bailout
  • Market breached 78,000 level for first time during intraday trade as it reopened after five-day break on Thursday

KARACHI: Pakistan’s benchmark share index rose 2.8 percent to a new record high on Thursday, driven by expectations last week’s budget will strengthen the case for a new bailout from the International Monetary Fund.

The government’s budget was welcomed by investors as it avoided an anticipated increase in capital gains tax, despite an ambitious tax revenue target.

The market extended its post-budget rally on Thursday when it reopened after a five-day break, which included a public holiday, and breached the key 78,000 level for the first time during intraday trade.

Foreign portfolio investment in the market is at the highest in almost ten years, with inflows of $83 million as of June 14, data compiled by Topline Securities and JS Global Capital showed.

Sohail Mohammed, CEO of Topline Securities, said that a statement from credit rating agency Fitch that the budget would strengthen the prospects for an IMF deal would help to bring more foreign inflows.

The benchmark share index is up 26.2 percent year to date and has almost doubled since Pakistan signed a nine-month standby arrangement with the IMF last summer.

“Pakistani equity investors are driving the PSX higher, continuing to unlock valuations on better sentiment, which is a trend that began when Pakistan signed its last IMF deal last summer,” said Amreen Soorani, head of research at JS Global Capital.

“The trend paused briefly on anticipation of stricter capital gains taxes, which did not materialize,” she said, adding that the index is trading at a four times price to earnings ratio despite the recent rally and offers attractive dividend yields.

The financial sector was up 4.4 percent, with banks like UBL, HBL, MCB, Bank Alfalah, Habib Metropolitan Bank, Allied Bank, up more than 4 percent.

Adnaan Sheikh, assistant vice president of research at Pak Kuwait Investment Company, said that foreign investor interest and the central bank’s decision to cut its key rate by 150 basis points last week — its first rate cut in nearly four years — had pushed the market up.

Apart from the capital gains tax, analysts said the budget and other revenue measures were in line with expectations and key to sealing a new IMF program. This will include a challenging tax target of a near-40 percent jump from the current year and a sharp drop in the fiscal deficit to 5.9 percent of GDP from 7.4 percent for the current year.

Sheikh said the strict budgetary measures to secure new IMF funding will be likely to attract more foreign investors to the market, in addition to the current inflows.

Pakistan’s lower house of parliament is set to meet later on Thursday to debate the budget that the government presented last week. 


Giga-projects propel Saudi Arabia’s construction boom amid global interest, study says

Giga-projects propel Saudi Arabia’s construction boom amid global interest, study says
Updated 20 June 2024
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Giga-projects propel Saudi Arabia’s construction boom amid global interest, study says

Giga-projects propel Saudi Arabia’s construction boom amid global interest, study says

RIYADH: Saudi Arabia’s state-backed initiatives, including NEOM and Vision 2030, are driving growth in the construction sector, attracting substantial domestic and international investments, an analysis showed.    

In its latest report, global consultancy firm Turner & Townsend highlighted that the construction activities are also driven by the Kingdom’s preparations for EXPO 2030 and the 2034 FIFA World Cup.   

This comes as Saudi Arabia emerged as the leader in global construction activity for the first quarter, with the Kingdom having $1.5 trillion of projects in the pipeline, according to a report released earlier this month by real estate services firm JLL. 

The JLL analysis further highlighted that the Kingdom accounted for a 39 percent share of the total construction projects in the Middle East and North Africa region, valued at $3.9 trillion. 

“The stand-out story is the accelerated development of Saudi Arabia, where vast ambitions are being realized via projects like The Line, King Salman Park and Diriyah Gate,” said Mark Hamill, director and head of Middle East real estate and major programs, at Turner & Townsend.   

The Line is a linear smart city currently under construction in Saudi Arabia’s $500-billion megacity NEOM, while King Salman Park is a 4102-acre large-scale public park and urban district which is being developed in Riyadh.   

The report highlighted that despite political uncertainties, substantial investments are driving growth in the Gulf region as countries seek to diversify beyond traditional energy sources.  

This occurs against the backdrop of Turner & Townsend ranking the Kingdom as the 19th most expensive country for construction globally, contrasting sharply with the US, which dominated the top 10 list. 

The report further noted that construction cost inflation in Riyadh is easing from the highs of 7.0 percent seen in 2023, but is forecasted to remain high at 5.0 percent through 2024.   

The analysis also highlighted Saudi Arabia’s efforts to attract global corporate occupiers through its Regional Headquarters Program.  

It added: “This scheme encourages companies to launch offices in Saudi Arabia and there are cost advantages to office investment with an average high-rise central business district office in Riyadh costing a relatively low $2,266 per sq. m.”   

The UK-based company also pointed out that Saudi Arabia is also facing a shortage of skilled labor which is crucial to materialize and fulfill construction activities as planned.   

“Skilled labor shortages are also keeping costs elevated as Saudi Arabia suffers from a distinct shortage of skilled labor that is vital to deliver its most ambitious programs. The talent and resources needed for giga-projects in the country are also stretching overall supply chain capacity across the Middle East,” said the report.     

Regional insight  

According to the report, Qatar’s capital city Doha is the second most expensive market in the region at $2,096 per sq. m.   

However, following the high output in the lead-up to the 2022 FIFA World Cup, construction cost inflation is projected to fall from 3.5 percent in 2023 to 2.5 percent in 2024, the study said.   

On the other hand, Dubai has an average cost to build of $1,874 per sq. m., supported by high tourism activity and residential sector development.  

“The UAE has been a hotspot for tourism in the region in recent years and its relatively low cost of construction, when compared with Western markets, still makes it an attractive place to build the hubs and amenities for international visitors,” said the report.     

It added: “In Dubai, residential development is buoying the local market as the city aims to support its growing population. Its attractiveness as a market is bolstered by its comparably low cost of construction.”   

On the other hand, Abu Dhabi is the fourth most expensive market in the Middle East at $1,844.2 per sq. m.   

Hamill noted that there are considerable real estate opportunities in the UAE and Qatar as inflation cools.   

He added: “Nevertheless, with labor capacity being stretched across the region, clients will need to review their procurement and contracting models to help mitigate supply chain disruption and maximize the potential opportunities on offer.”   

Global outlook  

The report revealed that construction pipelines globally are set to grow this year, but skill shortage could remain a major concern.   

“The global real estate market is emerging from a challenging period of inflationary pressures, volatility and disruption. Our sector has proved resilient, and a focus on building new approaches to procurement and supply chain development to drive efficiency and productivity is opening new opportunities across many markets,” said Neil Bullen, managing director, global real estate at Turner & Townsend.   

He added: “Clients need to understand where labor bottlenecks may constrain their capital investment programs and work collaboratively with the supply chain to understand how best to mitigate the risk to delivery.”   

The US dominated the rankings of the most expensive places to build, with six cities from the country grabbing their spots in the top 10 list.   

New York retained its position as the most expensive market to build in for the second year running at an average cost of $5,723 per sq. m., closely followed by San Francisco at $5,489.   

Zurich came in the third spot as it surpassed Geneva in the ranking with an average cost of $5,035 per sq. m. Geneva, which came in the fourth spot, averaged $5,022 per sq. m.   

US cities Los Angeles, Boston, Seattle and Chicago came in the fifth, sixth, seventh and eighth spots respectively in the list.   

From Asia, Hong Kong came in the ninth spot with an average cost of $4,500, followed by London at $4,473.   

The report also highlighted that implementing technology in the construction sector could help overcome various challenges faced by the industry.   

“Accelerating digitalization also presents a huge opportunity, but this requires us to keep up with the demand for skilled labor, and persistent shortages risk constraining potential growth,” said Bullen.   

He added: “As interest rate cuts become an increasing possibility for many markets, and pent-up investor appetite can be unlocked, capacity could be tested still further.” 


Credit facilities for UAE’s business and industrial sectors exceed $206.2bn

Credit facilities for UAE’s business and industrial sectors exceed $206.2bn
Updated 20 June 2024
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Credit facilities for UAE’s business and industrial sectors exceed $206.2bn

Credit facilities for UAE’s business and industrial sectors exceed $206.2bn

RIYADH: The cumulative credit balance in the UAE’s business and industrial sectors rose to 757.4 billion dirhams ($206.2 billion) in the first quarter of the year, up from 741.8 billion dirhams at the end of 2023.

A release from the Central Bank of the UAE showed that credit facilities extended just by the country’s national banks to these sectors reached 15.6 billion dirhams in the three months of the year.

Comparing month-on-month figures, the credit balance saw a rise of 9.3 billion dirhams in March compared to the previous month, reflecting a steady upward trend in lending activities, the Emirates News Agency said.

Year-on-year, the sectors experienced a substantial 3.02 percent increase in credit availability, amounting to 22.2 billion dirhams from 735.2 billion dirhams in March 2023, showcasing sustained financial support over the past year.

National banks emerged as the primary financiers, contributing 841.7 billion dirhams or 90 percent of the combined credit balance for these sectors by the end of the first quarter of 2024, according to WAM.

In contrast, foreign banks held a smaller share, providing 84.3 billion dirhams, highlighting the dominant role of domestic financial institutions in driving economic growth.

Geographically, Abu Dhabi-based banks played a significant role by extending credit amounting to 374.1 billion dirhams, while Dubai-based banks provided 363.3 billion dirhams. 

Additional Emirates banks collectively contributed 104.3 billion dirhams to support business and industrial activities during the same period, underscoring the balanced regional distribution of financial resources.

In terms of banking preferences, conventional financial institutes continued to be the preferred choice for credit financing, accounting for approximately 694 billion dirhams or 82.5 percent of the total credit extended to the trade and industry sectors by March 2024. 

Islamic banks, reflecting their growing influence in the financial sector, contributed approximately 147.7 billion dirhams, constituting 17.5 percent of the financing provided, reflecting their expanding role in catering to diverse financial needs.

In 2023, the UAE’s industrial sector alone contributed $54 billion to the country’s gross domestic product, up 9 percent compared to 2022 figures.     

The boost was attributed to four main pillars, including providing a business-friendly environment that supports the growth and attractiveness of UAE firms, the Emirates News Agency reported.