Monthly briefing: 14 key developments in the region

21 November 2022

By MEED staff


Lukewarm Cop27 ends

UAE and US sign $100bn energy programme

BlackRock looks to invest in projects with PIF

Riyadh signs construction deals during Seoul visit

Middle East outpaces global economic growth

Riyadh Grade A office occupancy hits 98 per cent

Dubai developer plans world's tallest residential building

Saudi Arabia launches national automaker

Alba reaches Block 4 financial close

Partners award contracts for $8.5bn US chemicals project

Investors launch Sohar industrial projects

Aramco and IBM plan Riyadh innovation hub


COP27

Egypt climate conference ends with agreement on payout

Negotiators from nearly 200 countries at the 2022 UN climate summit Cop27, which took place in Egypt on 6-18 November, have agreed to set up a loss and damage fund aimed at helping vulnerable countries to cope with climate disasters. They also agreed that global greenhouse gas emissions need to be cut nearly in half by 2030. 

The agreement also reaffirmed the goal of keeping global warming to 1.5 degrees Celsius above pre-industrial levels. However, a deal to phase out the use of fossil fuels, and not just coal, could not be agreed upon after a number of nations, including China and Saudi Arabia, blocked the proposal. Read more




The Middle East was thrust firmly onto the global stage on 20 November when football’s 2022 World Cup kicked off in Qatar  

Region pitches to be global sporting hub


OIL

Opec and non-Opec partners cut 2 million b/d of production

Saudi Arabia, the world’s largest crude oil exporter, has started to cut its exports as Opec+ begins to reduce its overall target production by 2 million barrels a day (b/d).  

Saudi Arabia had cut its crude oil exports by more than 400,000 b/d by the third week of November, while exports from Opec could be on course to drop by 1 million b/d.  

In October, Opec+ announced it would slash its collective target by 2 million b/d from November. Although the actual reduction is expected to be about 1.1 million b/d, it is still the biggest cut since the record reduction announced in April 2020, when oil demand plunged at the start of the pandemic. 


UAE-US DEAL

UAE and US sign $100bn clean energy partnership

The UAE and the US have signed a partnership that aims to catalyse $100bn in financing and other support, in addition to deploying 100GW of clean energy in the US, UAE and emerging economies around the world by 2035. They also reaffirmed their commitment to climate action, in line with their 2050 net-zero goals. 

The two countries plan to stimulate private and public sector support in four areas: clean energy innovation, financing, deployment and supply chains; carbon and methane management; advanced reactors; and industrial and transport decarbonisation. Read more


PIF-BLACKROCK PARTNERSHIP

PIF and BlackRock agree to explore infrastructure projects 

Saudi Arabia’s Public Investment Fund (PIF) has signed a non-binding memorandum of understanding with US asset manager BlackRock to jointly explore infrastructure projects in the Middle East, with a majority of the investment activity focused on Saudi Arabia.

The target projects are in several sectors, including energy, power, utilities, water, environment, transportation, telecommunications and social infrastructure. 

BlackRock will look to build a dedicated infrastructure investment team in Riyadh to cover the Middle East region.

In a statement, the PIF said that the aim is to leverage positive Saudi and regional market dynamics to deliver sustainable long-term returns.

The sovereign wealth fund added that the two entities plan to work together to attract regional and international investors to participate in investment projects, and boost foreign direct investment into Saudi Arabia. 

This will add value to the Saudi economy and the wider market while facilitating knowledge and skills transfer. Read more

ECONOMIC OUTLOOK

IMF predicts economic growth for the Middle East in 2022

The real GDP of oil exporting countries in the Middle East is projected to grow at 5.2 per cent in 2022, up from 4.5 per cent in 2021, according to the Washington-based IMF. 

Growth is projected to slow to 3.5 per cent in 2023 as Opec+ production wanes, oil prices ease and global demand slows. 

Crude producers are projected to accrue a cumulative oil windfall of about $1tn in 2022−26, which the IMF said oil-exporting countries like Saudi Arabia and the UAE could use to continue to invest in projects that support future economic growth. Read more


SAUDI-KOREA PROJECTS

Deals worth $30bn signed during royal visit to Seoul

Agreements totalling an estimated $30bn were signed during Saudi Crown Prince Mohammed bin Salman al-Saud’s visit to Seoul, South Korea on 17 November. 

The biggest deal was a commitment from Saudi Aramco to invest $7bn in building an integrated refinery and petrochemicals complex in South Korea through its local affiliate S-Oil.

The new plant will have capacity to produce 3.2 million tonnes a year of petrochemicals.

Five South Korean companies – Korea Electric Power Corporation (Kepco), Korea Southern Power Company, Korea National Oil Corporation, Posco Holdings and Samsung C&T Corporation – have also signed agreements with Saudi Arabia’s Public Investment Fund to build and operate a green hydrogen and green ammonia production facility in Saudi Arabia. Read more


RIYADH REAL ESTATE

Riyadh Grade A office occupancy hits 98 per cent

Occupancy levels for prime office space in Riyadh have risen by four percentage points to 98 per cent according to a report by property consultancy Knight Frank. 

Average lease rates for prime office space have increased by 18 per cent over the past 12 months to about SR1,775 ($473) a square foot. The company said there is unprecedented demand for Grade A office space. 

“As the kingdom’s economic transformation plan unfolds, business activity is rising at an extraordinary pace. Seventy firms have now committed to relocating their regional headquarters to Riyadh, including Aldeham Education Group and French rolling stock manufacturer Alstom,” Knight Frank said. Read more

UAE

Dubai developer plans world’s tallest residential building

Local real estate developer Binghatti and jewellery brand Jacob & Co have announced plans to build the world’s tallest residential structure in Dubai’s Business Bay district.

Known as Burj Binghatti Jacob & Co Residences, the tower will comprise more than 100 storeys and will offer two- and three-bedroom apartments. Amenities in the building will include an infinity pool, a spa and a gymnasium.

Companies recently moved onsite in Business Bay to work on a 116-storey tower for Binghatti. The contractor is Granada Europe Construction. The consultant is Silver Stone Engineering Consultants. Read more


ELECTRIC VEHICLES

Saudi Arabia launches electric vehicle manufacturer

Saudi Arabia’s Crown Prince Mohammad bin Salman al-Saud has announced the launch of Ceer, the first Saudi electric vehicle brand. Ceer is the first Saudi automotive brand to produce electric vehicles in Saudi Arabia.

The company is a joint venture of Saudi sovereign wealth entity the Public Investment Fund and Taiwan-based Hon Hai Precision Industry Company, which trades as Foxconn internationally.

Foxconn will license component technology from BMW for use in the vehicle development process, with the first vehicles – sedans and sports utility vehicles – expected to be available in 2025.

Foxconn will develop the electrical architecture of the vehicles, which will feature infotainment, connectivity and autonomous driving technologies.

Ceer is expected to attract over $150m in foreign direct investment and create up to 30,000 direct and indirect jobs. Read more


Further reading

Alba agrees Block 4 financing

Aluminium Bahrain (Alba) has reached financial close on the 681MW combined-cycle gas turbine plant that comprises Block 4 of the smelter’s Power Station 5. China Export & Credit Insurance Corporation (Sinosure) will provide a $225m facility.

Contracts awarded for US plant

QatarEnergy and Chevron Phillips Chemical Company have reached final investment decision on the Golden Triangle Polymers Plant, an $8.5bn integrated polymers facility in the US. The plant will include the biggest ethylene cracker in the world with a capacity of 2.1 million tonnes a year.

Investors launch Sohar projects

Investors have launched two non-oil industrial projects in Sohar Freezone in Oman. The sultanate’s first petroleum coke calcining facility will be built at a total investment of about $155.9m, while a titanium dioxide production facility will be established at a cost of $112m.

Aramco plans innovation hub

Saudi Aramco and US technology company IBM plan to establish an innovation hub in Riyadh. The hub will support tech-driven economic growth in Saudi Arabia with the help of emerging technologies in hybrid cloud, artificial intelligence and quantum computing.

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MEED Editorial
Related Articles
  • Net zero steps need recalibration

    22 April 2024

    After more than 100 countries supported a global commitment to triple renewable energy capacity by 2030 at Cop28, policy makers, offtakers and transmission system operators (TSO) are coming to grips with the hard questions implementing such commitment entails.

    Carlos Gasco Travesedo, energy policy executive director at the Department of Energy (DoE), told the World Future Energy Summit in Abu Dhabi in mid-April that a distinction must be made between tripling renewable energy capacity and increasing renewable power that can be absorbed and transported by electricity grids without compromising their efficiency and stability.

    There is a consensus among stakeholders that new technologies and approaches such as battery energy storage systems, international grid connectivity and a more pervasive use of digital technologies, particularly those powered by artificial intelligence, could provide some answers to enabling the successful integration of more clean energy into the electricity production mix.

    The adoption of technology is crucial towards meeting the 2050 or 2060 net-zero targets across jurisdictions as well as the intervening 2030 or 2035 lower greenhouse gas emissions commitments.

    Each solution requires regulations and investments that may guarantee they will remain relevant 10 or 20 years down the road as new technologies emerge.

    For example, while some experts say that grid connectivity is essential to load balancing and in achieving sustainability in power systems, others say that such a solution is not commercially viable and will also require unifying grid codes between countries.

    Battery energy storage systems, long seen as a solution to the intermittency of solar and wind farms, are now being positioned to address spinning reserves due to their ability to store and discharge energy from various sources when needed. Yet, batteries remain relatively expensive, negating to a large extent one of the key energy security pillars.

    These scenarios reinforce the role of natural gas – which has half the polluting capacity of coal – as a transition fuel, in view of the costs and risks associated with another competing technology, nuclear energy. Note must be made, however, that natural gas itself is part of the fossil fuel troika that countries have committed to transition away from at Cop28.

    By all accounts, the perfect solution to ensure future power systems dominated by clean energy that are affordable and reliable remains elusive and will likely remain so for a while longer.

    As one senior executive with an international utility developer tells MEED, there is no playbook that exists, which someone can follow confidently.

    This implies that the transition must proceed gradually from the current environment. Only such process can prove, or disprove, that a mix of solar, nuclear, wind and hydrogen is indeed the holy grail of energy transition.

    Related reads:

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    Jennifer Aguinaldo
  • Rainmaking in the world economy

    19 April 2024

    Commentary
    Edmund O'Sullivan
    Former editor of MEED

    The biennial IMF World Economic Outlook released on 16 April forecasts that global growth will hold steady at just over 3% in 2024.

    That is despite Russia’s war on Ukraine and the risk that Israel’s war on Gaza will trigger a regional conflict and jeopardise oil exports from the region.

    This is an unexpected prospect – rather like a meteorologist forecasting that the UAE will get the equivalent of a year’s rainfall in a single day, as it did in mid-April.

    A soft landing for the world economy despite the risks is by that standard less surprising. But these things don’t just happen.

    Just as the UAE’s greatest flooding incident since records began was exacerbated by creeping climate change, according to experts, global growth is believed to be robust because of determined action to keep prices down, cut inflation and boost the supply of goods and labour.

    The challenge to the rosy outlook, however, is not hard to find. Several key stress factors are in the US.

    The biggest threat to the IMF’s forecast is from events in the Middle East

    American fiscal policy under President Joe Biden has been extremely loose. The US budget deficit to 2030 is forecast to average 6% of GDP. Its debt-to-GDP ratio – now above 100% – will rise for the foreseeable future.

    Even the IMF, always reluctant to criticise its biggest shareholder, says this looks unsustainable. 

    More than 3 million migrants arrived in the US last year and the proportion of foreign-born residents in America is approaching an historic high. A more contentious issue is that more than 2 million undocumented migrants also entered the US in 2023 and the figure is rising.

    Donald Trump is making migration an issue in his campaign to regain the White House. This is fuelling concern among US voters that could precipitate restrictions on immigration.

    The biggest threat to the IMF’s forecast is from events in the Middle East. On the night of 13 April, Iran launched drones and missiles on Israel in retaliation for its attack on Tehran’s Damascus consulate two weeks earlier.

    Oil prices spiked ahead of Iran’s attack and eased back on expectations that there would be no wider regional conflagration. But higher levels of risk are being built in to forecasts of oil prices, which are around a quarter higher than they were in January. Even without an escalation, oil is heading towards $100 a barrel this summer.

    This doesn’t have to happen, however. With concerted international diplomatic efforts on stage and behind the scenes, the world has the capacity to block the path to a new Middle East war and all it entails. 

    But does it have the will? 

    Main image: Flooding in Dubai remains three days after the severe storm on 16 April  


    Connect with Edmund O’Sullivan on Twitter

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    The Holy Land and delusions it inspires
    Region to mark golden jubilee of 1973 war
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    Edmund O’Sullivan
  • Masdar and Etihad plan pumped hydro project

    19 April 2024

    Abu Dhabi Future Energy Company (Masdar) and Etihad Water & Electricity (Ethad WE) have signed a memorandum of understanding (MoU) to develop several clean energy projects in the UAE's northern emirates.

    The planned projects include a solar photovoltaic (PV) project, a pumped hydro storage project and a potential battery energy storage system facility.

    The two companies signed the MoU on 18 April, the final day of the World Future Energy Summit in Abu Dhabi.

    "This agreement aims to formalise the intention of the parties to further discuss the potential areas of collaboration and possible projects," Masdar said in a social media post.

    Etihad WE is responsible for the procurement and offtake of water and power production services in Umm Al Quwain, Ras Al Khaimah, Ajman and parts of Sharjah.

    Masdar and Emirates Global Aluminium (EGA) announced an agreement to work together on aluminium decarbonisation and low-carbon aluminium growth opportunities during the same event.

    As part of the agreement, Masdar and EGA will also work together internationally to find opportunities through which Masdar will support EGA to power new aluminium production facilities with renewable energy sources.

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  • Ewec signs Ajban solar PV contract

    19 April 2024

    Abu Dhabi state utility Emirates Water & Electricity Company (Ewec) has signed an agreement for the development and operation of Abu Dhabi’s third utility-scale solar photovoltaic (PV) independent power project (IPP).

    A team led by French utility developer EDF Renewables and including South Korea's Korea Western Power Company (Kowepo) won the 1,500MW Al Ajban solar PV IPP contract.

    Ewec announced the official signing of the contract on 18 April, the final day of the World Future Energy Summit in Abu Dhabi.

    As with previous solar PV projects in the emirate, Abu Dhabi Future Energy Company (Masdar) will own a stake in the special purpose vehicle that will implement the project.

    It is the second major contract won by the French-South Korean team in the GCC since March last year. The team previously won the contract to develop and operate the 500MW Manah 1 solar IPP in Oman.

    EDF, along with Masdar and Saudi contracting company Nesma, also won the contract to develop and operate the 1,100MW Hinakiyah solar IPP project in Saudi Arabia in November.

    The EDF-led team submitted the lowest levelised electricity cost of 5.1921 fils a kilowatt-hour (kWh) or about 1.413 $cents/kWh for the Al Ajban solar PV IPP contract, as MEED reported in July 2023.

    Japan’s Marubeni submitted the second-lowest bid of 5.3577 fils/kWh.

    Ewec requested proposals for the contract in January 2023 and received bids in late June 2023. It qualified 19 companies to bid for the contract in September 2022.

    Delivering goals

    The Al Ajban project – similar to the 1,584MW Al Dhafra solar IPP, which was inaugurated in November, and the operational 935MW Noor Abu Dhabi plant – supports the UAE Energy Strategy 2050 and the UAE Net-Zero by 2050 strategic initiative.

    Ewec aims to install up to 17GW of solar PV capacity by 2035.

    The plan will require the procurement of about 1.5GW of capacity annually over the next 10 years. Over the intervening period, ending in 2030, Ewec plans to have an additional 5GW of solar capacity, reaching a total solar installed capacity of 7.3GW by 2030.

    Ewec expects its first battery energy storage system to come online in the late 2020s to boost balancing the grid's load as more renewable energy enters the system.

    The UAE published its updated national energy strategy in July last year. It includes a plan to triple the nationwide renewable energy capacity to 19GW by 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11697793/main.jpg
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  • Egypt resumes power cuts

    18 April 2024

    Power cuts resumed across Egypt on 15 April, with scheduled power outages lasting a maximum of one hour per grid zone between 11am and 5pm daily.

    The scheduled power outages began last year and were suspended during Ramadan.

    The electricity ministry has confirmed that, since no new amendments to the load reduction plan have been issued, the power cut plan will continue indefinitely, adding that the outages are expected to last "until at least the end of summer, due to increased grid demand during the hotter months".

    The government-initiated load-shedding programme initially aimed to rein in rising electricity consumption and reduce pressure on the country's gas network.

    According to the country’s Electricity & Renewable Energy Ministry, national electricity consumption reached 43,650MW in mid-July last year, up significantly from previous highs of about 31,000MW.

    While the record-high consumption level is still below the official generation installed capacity of close to 60,000MW, consumption levels of 34,000MW–36,000MW will require about 129-146 million cubic metres of gas and diesel a day.

    Barring load-shedding, any increase in consumption beyond 36,000MW will require a commensurate increase in gas and diesel, which is understood to be beyond the government’s capacity to procure.

    Crucially, the other side of the electricity rationing initiative has to do with the need to save gas for exports, to boost the government’s dollar reserves in the face of the ongoing currency crisis.


    MEED’s latest special report on Egypt includes:

    Cairo secures a cumulative $54bn in financing
    Egypt faces political and economic trials

    Cairo beset by regional geopolitical storm
    More pain for more gain for Egypt
    Egypt oil and gas project activity declines
    Familiar realities threaten Egypt’s energy hub ambitions
    Egypt’s desalination projects inch forward
    > Infrastructure carries Egypt construction

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11694938/main5714.jpg
    Jennifer Aguinaldo