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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MEED Editorial
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  • NWC seeks interest for privatisation programme

    21 May 2024

    Saudi Arabia's National Water Company (NWC) has invited interest from international and local water companies to bid for the second-phase packages of the state-backed utility's long-term operation and maintenance (LTOM) programme.

    NWC expects to receive responses to its expression of interest (EoI) request by 6 June.

    This phase is divided into 10 packages encompassing 116 existing sewage treatment plants with a total treatment capacity of about 2.47 million cubic meters a day (cm/d).

    Source: NWC

    NWC, which provides water distribution, sewerage collection and wastewater treatment services throughout Saudi Arabia, said the LTOM form of agreement is similar to a build-operate-transfer structure and risk allocation.

    Earlier this month, NWC announced the completion of contract awards for the first phase of the LTOM programme.

    According to NWC asset privatisation director, Richard Onses, the first phase comprises eight packages covering 4.2 million cubic metres of sewage water treated every day for the next 15 years.

    The average cost of a cubic metre of treated sewage is SR0.5, which is less than $c 15 cents including capital and operational expenditure and electricity costs.

    The LTOM programme aims to extend the remaining life of NWC's sewage treatment plant assets through rehabilitation and debottlenecking, as well as to upgrade and improve processes to comply with treated sewage effluent (TSE) quality standards.

    The projects also aim to reduce the environmental impact of the assets and processes on the community.

    NWC's advisory team for the first phase of its LTOM programme includes US/India-based Synergy International, Germany's Fichtner and UK-headquartered Clifford Chance as financial, technical and legal advisers, respectively. 

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  • SWCC receives bids for four desalination plants

    21 May 2024

     

    Saudi Arabia's main producer of desalinated water, Saline Water Conversion Company (SWCC), has received bids for four seawater reverse osmosis (SWRO) desalination plants with a total combined capacity of about 2 million cubic metres a day (cm/d)

    According to an industry source, bids were submitted on 14 May for the Yanbu SWRO project, which has a baseline capacity of 300,000 cm/d.

    Bids were submitted five days later for three SWRO facilities. The tendered projects and their water desalination capacities are:

    • Shuaiba 6 SWRO: 545,000 (cm/d)
    • Ras Al Khair SWRO: 600,000 cm/d
    • Jubail SWRO: 600,000 cm/d

    The four contracts are being procured using an engineering, procurement and construction model, in contrast to the SWRO facilities being procured on a public-private partnership basis by the state offtaker, Saudi Water Partnership Company.

    SWCC has tendered the contract to build the Shuaiba 6 SWRO before.

    It was most recently tendered in 2022, with a team comprising the local firms Wetico and Alfanar, and Italy's Fisia Italimpianti submitting bids for the contract.

    SWCC is the world's largest producer of desalinated water with a capacity of at least 6.6 million cm/d. Plants utilising older and energy-intensive techniques such as multi-stage flash technology account for the majority of its current capacity.

    According to data from regional projects tracker MEED Projects, SWCC has awarded several SWRO plants in the past few years, including:

    • Ras Al Khair production system expansion: 200,000 cm/d
    • Jubail SWRO plant: 1,000,000 cm/d
    • Shuqaiq 1 SWRO plant: 400,000 cm/d.

    MEED's April 2024 special report on Saudi Arabia includes:

    > GVT & ECONOMY: Saudi Arabia seeks diversification amid regional tensions
    > BANKING: Saudi lenders gear up for corporate growth
    > UPSTREAM: Aramco spending drawdown to jolt oil projects
    > DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector

    > POWER: Riyadh to sustain power spending
    > WATER: Growth inevitable for the Saudi water sector
    > CONSTRUCTION: Saudi gigaprojects propel construction sector
    > TRANSPORT: Saudi Arabia’s transport sector offers prospects

     

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  • Ambitious projects rebrand engineering

    20 May 2024

     

    Over the past two decades, the Middle East has undergone a significant transformation driven by rapid urbanisation, economic diversification and geopolitical dynamics. The region has emerged as a global hub for trade, investment and innovation, with infrastructure playing a central role in facilitating this growth.

    According to Pierre Santoni, president of Europe, Middle East and Africa for Parsons Corporation, ongoing infrastructure investment has created a market that continues to offer strong growth opportunities for the construction industry.

    “Parsons is one of the oldest firms operating in the Middle East, which is a growing and well-funded market, with a team that is executing at a high level and our company has continued to make investments to drive growth in the business,” he says.

    “We had an outstanding fourth quarter and full year in 2023 with record results for total revenue, organic revenue growth, adjusted Ebitda and operating cash flow, as well as major contract awards in countries such as Saudi Arabia, the UAE and Qatar.”

    Changing focus

    The region’s transformation has led to an adjustment in priorities as pressure on existing infrastructure mounts, he notes.

    In the UAE, the focus in the early 2000s was primarily on developing landmarks and megaprojects that showcased the region’s ambition and prosperity. This era saw the construction of iconic structures such as the Palm Jumeirah, Burj Khalifa and, more recently, Etihad Rail, symbolising the country’s aggressive development plans.

    Over recent years, there has been a shift towards more sustainable and resilient infrastructure development, with the UAE government prioritising investments in transportation, utilities and smart city initiatives to enhance residents' quality of life and improve mobility and infrastructure.

    “The demographic trends, including rapid population growth and urbanisation, are placing strain on existing infrastructure networks, necessitating investments in expansion and modernisation,” says Santoni.

    Robust infrastructure is required to support the regional government’s economic diversification efforts, which are driving investment and growth in sectors such as tourism, technology and renewable energy. This includes the development of new highways, ports and transportation systems to facilitate trade and tourism.

    “The UAE has outlined a stable investment programme that includes the development of large transportation and construction schemes,” says Santoni. “We are working with the Abu Dhabi government on Plan Capital 2040 and it promises tremendous growth opportunities for Parsons.”

    Dubai also offers opportunities for growth due to the property market boom and the government’s plans for new infrastructure projects. 

    “Government spending in Dubai has accelerated post-Covid. There is a renewed optimism in the market through large-scale infrastructure projects and major real estate schemes,” Santoni adds.

    “Parsons is working closely with some of the major real estate developers in Dubai, such as Emaar and Dubai Properties.”

    Santoni says that although the market has a strong pipeline of upcoming projects, there will also be a focus on improving the infrastructure that already exists.

    “There is a lot of focus on improving the existing infrastructure; hence, we have added operations and maintenance services into our portfolio.”

    Beyond the UAE

    The UAE is just part of Parsons’ work in the GCC. It also has a significant presence elsewhere in the GCC, including Saudi Arabia and Qatar. The company has been operating in Saudi Arabia for over 65 years and is working on a wide range of major programmes in the country, including The Line at Neom, Riyadh Sports Boulevard, King Salman International Park and Diriyah Gate, among others.

    Santoni says, “Saudi Arabia is the fastest growing market globally and is a key market for us. The Vision 2030 projects are a driving force for much of our business in the kingdom and we expect robust growth in coming years.”

    “We are investing significantly in enhancing our engineering capabilities catering to the Saudi market,” he adds.

    The firm has also played a key role in delivering major infrastructure development schemes in Qatar, including for the 2022 World Cup. After a strong decade during the build-up to the event, Parsons worked on several other major schemes in the country, such as the Doha Metro, Qatar Rail, Seef Lusail, Hamad International airport expansion and Pearl Qatar.

    Santoni expects Qatar’s growth to be more reserved over the next few years as the country develops a new long-term strategic development plan.

    Attracting talent

    With so many projects proceeding, the challenge for engineering companies such as Parsons is attracting talent.

    “We have done a lot over the years to make Parsons an employer of choice for Saudi and UAE nationals, and we’re making significant investments in training and retention programmes to continue offering outstanding career opportunities,” says Santoni.

    Construction now has to compete with other industries such as technology and IT, which are often considered more exciting places to work. 

    Santoni says that this may change in the future as the world realises that there is an infrastructure gap that needs bridging with new and exciting projects, especially in the Middle East region. 

    “Many people have left the industry over the past few decades, but with the planned infrastructure projects, engineering is starting to look cool again.”

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  • UAE forms EV joint venture

    20 May 2024

    Two government entities in the UAE have formed a company, UAEV, to develop electric vehicle (EV) charging infrastructure across the country.

    The joint venture aims to provide fast and affordable charging infrastructure, said Sharif Salim Al Olama, undersecretary for energy and petroleum affairs at the of Energy & Infrastructure Ministry.

    Al Olama is chairman of the newly formed joint venture.

    Etihad Water & Electricity (Etihad WE), the partner for the joint venture, provides utility services in the UAE's northern emirates.

    Etihad WE CEO Yousif Ahmed Al Ali is a board member of UAEV.

    "Our intention is for the first UAEV charging points to be operational this year," said Al Olama during the launch of the company at the ongoing Electric Vehicle Innovation Summit in Abu Dhabi.

    MEED understands the company aims to install 100 EV chargers across the UAE by the end of the year, starting in the Northern Emirates of Ajman, Ras Al Khaimah, Umm Al Quwain, Fujairah and Sharjah.

    UAEV also plans to invest in similar infrastructure in Dubai and Abu Dhabi.

    It expects to roll out 1,000 charging stations by 2030.

    The company aims to set up several tiers of EV charging stations.

    The initial tier caters to locations such as mosques and supermarkets, while another set of chargers will be installed in parking areas and on streets to ensure that drivers can top up their batteries whenever necessary.

    UAEV also aims to build what it calls "EV hubs", catering to cities and larger communities with wider services.

    UAEV will use fast and ultra-fast charging solutions to accelerate EV adoption. "We will provide advanced charging options to make EV ownership more appealing," said Al Ali.

    The initial phase of the infrastructure rollout will cater to passenger vehicles.

    Plans could extend the services to commercial vehicles and maritime fleets, as well as potentially providing hydrogen fuel to trucks and other types of fleet.

    Al Olama confirmed that discussions are under way to unify EV charging tariffs between the emirates.

    "This partnership is part of a clear mandate to deliver green mobility. There is a great potential and need from end-users," Al Olama said. "It is also an important step to help meet the UAE net-zero target by 2050."


    MEED's April 2024 special report on the UAE includes:

    > COMMENT: UAE rides high on non-oil boom
    > GVT & ECONOMY: Non-oil activity underpins UAE economy

    > BANKING: UAE banks seize the moment
    > UPSTREAM: Adnoc oil and gas project spending sees steep uptick
    > DOWNSTREAM: UAE builds its downstream and chemical sectors

    > POWER: UAE marks successful power project deliveries
    > WATER: Dubai tunnels project dominates UAE pipeline
    > DUBAI CONSTRUCTION: Dubai real estate boosts construction sector

    > ABU DHABI CONSTRUCTION: Abu Dhabi makes major construction investments

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  • WTTCO conducts Ras Mohaisen pipeline study

    20 May 2024

     

    State-backed Water Transmission & Technologies Company (WTTCO) is undertaking a feasibility study for the preferred procurement model and project structure for the contract to build or develop Saudi Arabia's water transmission pipeline project linking Ras Mohaisen, Al Baha and Mecca.

    The responsibility to procure the project has been transferred from Saudi Water Partnership Company (SWPC), which planned to implement the project on a build, own, operate and transfer (BOOT) basis, to WTTCO.

    The final procurement model for the scheme will be decided once the feasibility project is completed, according to a source close to the project.

    The 300-kilometre water transmission scheme linking Ras Mohaisen, Al Baha and Mecca will have the capacity to transmit up to 400,000 cubic metres a day (cm/d) of water.

    In February 2022, SWPC prequalified the following 13 companies for the contract to develop the project:

    • Abdul Aziz Al Ajlan Sons Company for Commercial & Real Estate Investment (local)
    • Abu Dhabi National Energy Company (Taqa, UAE)
    • Al Bawani Water & Power (local)
    • Al Yamama Company (local)
    • China Gezhouba Group Overseas Investment Company (China)
    • China Harbour Engineering Company
    • Cobra Instalaciones y Servicios (Spain)
    • Gulf Investment Corporation (Kuwait)
    • Marubeni Corporation (Japan)
    • Mutlaq Al Ghowairi Company (local)
    • Mowah Company (local)
    • Utico (UAE)
    • Vision International Invest Company (local)

    The project aligns with the kingdom's National Water Strategy 2030, which aims to reduce the water demand-supply gap and have desalinated water account for 90% of the national urban supply to reduce reliance on non-renewable ground sources.

    The transaction advisory team for the first four independent water transmission pipeline projects in Saudi Arabia, which previously included the Ras Mohaisen project, comprised India's Synergy Consulting as financial adviser and the local Amer Al Amr and Germany's Fichtner Consulting as legal and technical advisers, respectively.


    MEED's April 2024 special report on Saudi Arabia includes:

    > GVT & ECONOMY: Saudi Arabia seeks diversification amid regional tensions
    > BANKING: Saudi lenders gear up for corporate growth
    > UPSTREAM: Aramco spending drawdown to jolt oil projects
    > DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector

    > POWER: Riyadh to sustain power spending
    > WATER: Growth inevitable for the Saudi water sector
    > CONSTRUCTION: Saudi gigaprojects propel construction sector
    > TRANSPORT: Saudi Arabia’s transport sector offers prospects

     

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