October 2019 Board Report: Top stories at a glance

24 September 2019
Iran accused of attacks on Saudi oil facilities; Oil prices surge following incident; Riyadh pledges to restore lost output by September; Abu Dhabi sets up UAE export finance office
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Saudi Arabia and US blame Iran for oil facility attacks


Board Report October 2019 - MEEDRiyadh has rejected the Houthi rebels’ claim of responsibility for the 14 September attacks on oil production facilities at Abqaiq and Khurais, and instead blamed Iran.

Saudi Arabia says the attacks, which knocked out 5.7 million barrels a day of oil output, came from the north and used Iranian-made weaponry.

Both France and the US have expressed support for the kingdom’s position, with US secretary of state Mike Pompeo stating: “The Iranian regime’s threatening behaviour will not be tolerated.”

Iran’s Foreign Minister Javad Zarif has denied any involvement.



Oil prices surge following Saudi attacks

Oil prices jumped 17 per cent to $71.2 a barrel following the attacks on the Khurais oil field and Abqaiq processing facility in the Eastern Province of Saudi Arabia. 

After the initial jump when markets opened in the early hours of 16 September, the price fell back to $66 a barrel following a tweet from Donald Trump saying the US would open its strategic reserves to meet any shortfalls.

The price hike marked the largest intra-day increase in crude prices since 1988. The price of crude had fallen to $60 before the attacks as a result of slowing demand.


Second presidential poll held since 2011 uprising

On 15 September, Tunisians voted in the second free election since the 2011 Jasmine Revolution.

In the first round, two political outsiders won the right to contend the final ballot. Kais Saied, an independent candidate and law professor, won the first poll with 18.4 per cent of the votes cast. He will contest the second round with jailed media mogul Nabil Karoui, who received 15.6 per cent of the vote. 

The two contenders saw off competition from 24 candidates for the election, which was brought forward following the death of Beji Caid Essebsi in July.

They both campaigned on populist platforms, capitalising on widespread dissatisfaction with the political establishment.


Riyadh pledges to have lost output online by September

Saudi Arabia expects Saudi Aramco to fully restore its crude oil processing capacity by the end of September, energy minister Prince Abdulaziz bin Salman al-Saud said in a statement delivered, as promised, 48 hours after Riyadh’s initial assessment of the damage to its oil infrastructure.

Speaking on 17 September, the minister noted that 50 per cent of the 5.7 million barrels a day (b/d) of lost production capacity had been restored, and stated that the kingdom’s output would return to 11 million b/d by the end of September, before rising to 12 million b/d by the end of November.

He confirmed that Saudi Arabia will be drawing on its oil inventory to meet its export commitments.

The majority of the outage comes from Abqaiq, where 4.5 million b/d of production was suspended.


Abu Dhabi sets up UAE export finance office

The Abu Dhabi Fund for Development (ADFD) has established the Abu Dhabi Exports Office (Adex), which provides financing and guarantees to overseas buyers seeking to import goods and services from the UAE.

The move contributes to raising the volume of national exports and facilitates entry into new markets, says Mohammed Saif al-Suwaidi, director-general of ADFD.

Adex, like most export credit agencies, will provide UAE-based exporters with tools to mitigate potential trade risks including non-payment. This is expected to encourage UAE exporters to enter new markets within the region and globally. It is understood Adex will be looking to finance suitable goods and services being exported from the UAE, with the exception of crude oil.

ADFD revealed that financing offered by Adex could reach up to 100 per cent depending on the type of financing provided, associated risks and the nature of each export operation.


Middle East air freight market declines in first half of 2019

MEED Board report oct 2019Airborne cargo shipments have fallen by 2.7 per cent this year, according to Hong Kong-based Airports Council International (ACI).

The deterioration in air freight volume was felt most in June, when the Middle East recorded declines of 7.1 per cent.

ACI attributed the decline to escalating trade tensions between China and the US, which put pressure on exports and manufacturing activities in both the Asia Pacific and Middle East regions.

Airport passenger traffic in the region, however, registered brisk growth in June at 8.1 per cent. The region’s overall year-to-date growth in passenger volume stood at 2.5 per cent.



Saudi Aramco selects banks for initial public offering

International and local banks have been chosen to handle Saudi Aramco’s planned initial public offering (IPO). The banks are the US’ Bank of America Merrill Lynch, Citi, Goldman Sachs, JPMorgan and Morgan Stanley, Switzerland’s Credit Suisse, the UK’s HSBC, and the local National Commercial Bank and Samba.

Aramco recently accelerated its IPO plans and is understood to be planning its local listing within 12 months. This could initially involve listing 1 per cent of the firm, followed by another 1 per cent next year and an international listing by early 2021. Tokyo is the leading contender for the international listing over the bourses of New York, London and Hong Kong.


National Oil Corporation restricts fuel supplies

Libya’s state-controlled National Oil Corporation (NOC) has limited the supply of oil products amid concerns that the fuel is being used by militias as they attack Tripoli, the country’s capital.

“NOC has stopped all additional fuel supplies until such time that assurances can be met that fuel is only being used for domestic and civilian aviation purposes, and reflects real consumption,”

the oil company announced in a statement.

NOC data shows that kerosene supplies to airport warehouses in Libya’s central and eastern areas, which are controlled by rebel commander Khalifa Haftar, fell to about 5.3 million litres in August 2019.



IMF recommends Saudi Arabia doubles VAT to 10 per cent

MEED Board report oct 2019The Washington-based IMF has revealed its recommendations on its latest Article IV consultation report on Saudi Arabia, which was released on 9 September.

The financial body says an increase in VAT would result in a 2 per cent positive impact on the kingdom’s economy by 2024, which would be significantly greater than reforms of the wage structure or subsidy reform of the water sector. 

The IMF predicted that Saudi Arabia’s budget deficit will increase to 6.5 per cent of GDP in 2019 due to increases in government spending. Riyadh managed to reduce the budget deficit to 5.9 per cent in 2018



Egypt’s National Authority for Tunnels has awarded a team comprising Japan’s Mitsubishi Corporation and the local Orascom Construction an £E85.1bn ($780m) contract for the railway system, track and depot works package for the first phase of Line 4 of the Cairo Metro.

Egypt’s $2bn Ain Sokhna Petro-Refinery project team is working towards financial closure. An engineering, construction, procurement and financing contract for the project was awarded to China’s state-owned Sinohydro Corporation in October 2017, but sources say the contractor is yet to deploy. 

Iraq's electricity minister has signed a deal with Jordan’s Mass Group Holding and US-based GE to develop the third phase of the Bismaya independent power project. Mass Group Holding will develop the plant under a 20-year power-purchase agreement with the ministry. The phase will increase the Bismaya plant’s capacity to 4.5GW. 

Italy’s SICIM has won a $45m contract for a natural gas liquids (NGL) pipeline in Iraq, according to industry sources. The pipeline will extend from the Al-Ratawi NGL plant to the port city of Khor al-Zubair in southern Iraq. The contract’s scope consists of three pipelines with a total length of about 105 kilometres.


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