Monthly briefing: 20 key developments in the region
25 October 2022
By MEED staff
> Opec and its allies cut oil output
> Saipem wins $4.5bn North Field offshore gas contract
> Qatar to inaugurate 800MW solar farm
> Lebanon and Israel agree maritime border deal
> Aramco launches SME stimulator programme
> Region to be third-largest hydrogen source by 2050
> Egypt ready to supply natural gas to Lebanon
> Riyadh makes debt announcements
> Neom hydrogen project expected to close by year-end
> Abu Dhabi transfers ownership of Etihad Airways to ADQ
> Mipco secures $4bn to refinance Abu Dhabi plant
OIL OUTPUT CUTS
Opec+ to slash production from November to keep prices high
The Opec+ alliance of oil producers has decided to reduce oil production by 2 million barrels a day (b/d) from November to further shore up crude prices, which have fluctuated amid fears that a global recession could curb oil demand.
The decision, which was led by Saudi Arabia and Russia, was taken at a meeting of the group in Austria on 5 October.
The move represents a major reversal in production policy for Opec+, which slashed output by a record 10 million b/d in early 2020 when demand plummeted as a result of the Covid-19 pandemic. Since then, the group has gradually unwound those cuts. Read more
Tight oil market increases unease for stakeholders
The 33rd Opec and non-Opec ministerial meeting on 5 October. Credit: Opec
US FALLOUT
Saudi Arabia and UAE condemn US warning of ‘consequences’
Saudi Arabia and the UAE have rejected as baseless accusations that the Opec+ decision to reduce oil production from November was politically motivated against the US.
Riyadh has insisted decisions by Opec and its allies were taken “purely on economic considerations”, and said its economic advice had been to resist calls to delay the production cut.
The UAE issued a statement calling upon the US to refrain from “politicisation” of the Opec+ decision. US President Joe Biden had previously warned that there would be “consequences” for Saudi Arabia and the Opec+ members for their decision to cut oil output.
EGYPT
World leaders to gather for meeting on climate change
Leaders from almost 200 countries will meet in Sharm el-Sheikh, Egypt, on 6-18 November for the UN’s 27th Conference of the Parties (Cop 27) climate change summit.
Egypt’s International Cooperation Minister, Rania al-Mashat, has previously said that the focus of Cop 27 should be moving from “pledges to implementation”. The conference aims to deliver action on issues critical to tackling the climate emergency, from reducing greenhouse gas emissions, building resilience and adapting to the impacts of climate change, to delivering on the commitments to finance climate action in developing countries.
STEEL
Region could lead global steel decarbonisation efforts
As the global steel industry considers switching to direct reduced iron (DRI) production, the Middle East and North Africa (Mena) region is primed to start producing carbon-neutral steel, according to a report by the Institute for Energy Economics & Financial Analysis.
“The Mena region can lead the world if it shifts promptly to renewables and applies green hydrogen in its steel sector,” says Soroush Basirat, the author of the report.
“The region’s steel sector is dominated by direct reduced iron-electric arc furnace technology, which releases lower emissions than the … coal-fuelled blast furnace and basic oxygen furnace process used in 71 per cent of global crude steel production in 2021.”
The Mena region produced just 3 per cent of global crude steel last year, but accounted for nearly 46 per cent of the world’s DRI production.
Basirat adds: “Mena has an established supply of DR-grade iron ore and its iron ore pelletising plants are among the world’s largest.”
SAUDI ARABIA
Riyadh announces government spending increase in 2022-24
Saudi Arabia has announced increases in government spending in 2022-24 of more than 18 per cent, which is close to SR175bn ($47bn) or 4 to 4.5 per cent of GDP.
The rise in spending targets points to smaller fiscal surpluses in the coming years, according to Moody’s Investors Service.
Increased spending could contribute to reducing the kingdom’s economic reliance on hydrocarbons, provided the spending is successfully deployed to advance government-sponsored diversification projects.
Saudi Arabia’s finances and ambition align
IRAQ
Prime minister-designate vows to act against corruption
Iraq’s prime minister-designate Mohammed Shia al-Sudani has pledged to take action against corruption after authorities announced that ID3.7tn ($2.5bn) had been embezzled from the General Tax Authority’s trust account held by a branch of Rafidain Bank.
The Iraqi Integrity Commission has said it is opening an investigation into the theft
On 13 October, Iraq’s parliament elected Abdul Latif Rashid as the country’s new president. He then tasked Al-Sudani with forming a new government to end a year of political gridlock.
Al-Sudani faces a challenge in the coming weeks as he attempts to appoint a new cabinet of ministers. Members of the Iraqi political bloc led by Shiite cleric Moqtada al-Sadr have said that they will not join the new government.
YEMEN
Houthi rebels attack oil terminal in southern Yemen
Iran-backed Houthi rebels have claimed responsibility for an attack on a cargo ship at an oil terminal in the south of the country on 21 October. The group said the attack by explosives-laden drones was meant to prevent pro-government forces from using the Al-Dhabba terminal for oil exports.
The incident occurred in Ash-Shihr in the Hadramawt governorate, and targeted the Marshall Islands-flagged tanker Nissos Kea. The Greek owners of the tanker said it was undamaged.
The internationally recognised government of Yemen said that its forces had intercepted armed drones launched against the Al-Dhabba oil terminal.
UN special envoy for Yemen, Hans Grundberg, called the attack a “deeply worrying military escalation”. The Yemeni government sent a letter to the UN Security Council regarding the “threat to disrupt international maritime navigation and target ships and oil infrastructures”.
The attack was the first military action announced by the Houthis since a truce between Yemen’s warring sides expired on 2 October.
LEBANON-ISRAEL
Lebanon and Israel reach maritime border deal
Lebanon and Israel have forged a deal to end a long-running maritime border dispute in the gas-rich Mediterranean Sea. Lebanon’s deputy speaker Elias Bou Saab said that an agreement had been reached that satisfies both sides.
It is hoped that the new deal will resolve the two countries’ dispute over a swathe of territory in the Mediterranean Sea in an area where Lebanon aims to explore for natural gas, and near waters where Israel has already found commercially viable quantities of hydrocarbons. Read more
GCC
Region faces green hydrogen production challenges
GCC governments including Oman, Saudi Arabia and the UAE are developing zero-carbon green hydrogen and low-carbon blue hydrogen schemes. However, achieving large-scale production, especially of green hydrogen, will be challenging in the coming years, according to Moody’s Investors Service.
While both green and blue hydrogen will play a role in reducing the global carbon footprint, only green hydrogen has the potential to reduce the reliance of GCC countries on hydrocarbons, but this will take several years, Moody’s says.
In the short to medium term, GCC countries’ access to cheap domestic natural gas, their carbon capture and storage expertise, and the limited availability of infrastructure make blue hydrogen production a more viable option than the more expensive and challenging production of green hydrogen.
Region to be third-largest hydrogen source by 2050
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Exclusive from Meed
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Decarbonising the global energy grid3 May 2024
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GE Vernova invests in Xlinks2 May 2024
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Awards buoy Oman’s green hydrogen strategy2 May 2024
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Further challenges emerge when we take trading into account. This is where regulation can act as an enabler, facilitating the flow of electricity between countries. The European Union’s efforts to co-ordinate the design of its member state’s energy markets enables an increasingly smooth transmission of energy across the continent. Alongside this, existing infrastructure is outdated, requiring significant upfront investment to upgrade. Clarity on regulatory requirements and more transparency around plans for grid buildout, derisk funding for capital-intensive mega projects.
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Positive benefits
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Political, technical and market hurdles can be overcome through collaboration and partnerships. Leveraging the collective expertise and resources of governments, regulators and the private sector can help ensure interconnections are developed quickly enough to support the energy transition. Grid buildout takes time. We have the resources required to meet ambitions, but stopping now is not viable. We must continue planning, building and maintaining large-scale infrastructure projects to meet the rising demand.
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Libya allocates $1.2bn for upstream oil project
3 May 2024
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Libya has allocated LD6bn ($1.23bn) to develop the Hamada NC-7 concession in its latest budget, which was approved by Libya’s eastern-based parliament on 30 April, according to industry sources.
The field development project was previously estimated to be worth between $4bn and $5bn.
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GE Vernova invests in Xlinks
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US-headquartered GE Vernova has invested $10.2m in Xlinks First, the investment company established by UK-based startup Xlinks to deliver the $18bn Morocco-UK power project.
This investment equates to a minority shareholding in the company, which is developing a project comprising wind and solar generation as well as battery storage, with a total combined capacity of 3,600MW, to be transmitted from Morocco to the UK.
Xlinks said the investment will “further accelerate delivery and buildout of the project”.
GE Vernova joins at least four other investors in the project.
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Awards buoy Oman’s green hydrogen strategy
2 May 2024
Commentary
Jennifer Aguinaldo
Energy & technology editorOman has awarded two additional land blocks designed to develop green hydrogen projects.
The latest land block concessions in Dhofar were awarded to two consortiums. One comprises a team of France's EDF Group and EDF Renewables, with partners Japanese Electric Power Development Company (J-Power) and the UK-headquartered Yamna Company.
Another team comprises UK investment firm Actis and Australian metals firm Fortescue.
This brings the total number of land blocks awarded through the public auction process spearheaded by Hydrogen Oman (Hydrom) to four, exclusive of the four legacy initiatives signed or agreed upon already.
*Budgets are MEED estimates if not publicly disclosed. Sources: MEED, HydromA limited gas supply and network strongly incentivises Oman to build a green hydrogen-centric downstream sector that will provide feedstock to domestic industrial plants and generate derivatives for the local and export markets.
Stakeholders have implemented a strategy, including setting up an infrastructure company catering to these projects. The target is to generate 1 to 1.5 million tonnes a year (t/y) of green hydrogen by 2030 and 7.5 to 8.5 million t/y by 2050.
The blueprint envisages a complete green hydrogen ecosystem, from the production of renewable energy and its distribution to electrolysis plants and hydrogen derivatives conversion plants to storage and export terminals.
Omani ports' existing relationships with European stakeholders and growing alliances with other countries could also help seal future offtake agreements for the planned facilities.
As things stand, the consortiums that won the land auctions and the legacy initiative partners provide much gravitas to Oman's green hydrogen programme. They comprise energy old guards such as BP and Shell that are keen to decarbonise, private companies aiming to balance their investment portfolios with clean energy investments, and offtakers or trading companies that are grappling with net-zero targets.
Yet the most obvious question remains. Given the eye-popping foreign direct investments these complex projects entail, not all are likely to achieve a final investment decision within three years. This seems to be the window required for the projects to start production before 2030.
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Operationalise loss and damage fund says Al Jaber
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Steps must be taken to ensure a fully functioning Loss and Damage Fund, following an agreement at Cop28 to operationalise the fund, according to Cop28 President Sultan Al Jaber.
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The Loss and Damage Fund, which was first proposed in the 1990s, aims to help developing countries cope with the impact of extreme global warming events such as droughts and floods.
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"While it took over three decades to establish this Fund, climate change has not stood still. Every region of the world is now vulnerable…the impacts of climate change are a clear and present danger to lives and livelihoods everywhere."
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