LONDON: One of the big talking points in energy markets is how Qatar will handle the glut of liquefied natural gas (LNG) as the era of favorable long-term supply contracts comes to a juddering halt.
When Qatar came to prominence as the world’s largest LNG exporter in the early 2000s via a series of mega investments in resource-rich gas fields, it was a seller’s market and everything was to play for. Favorable 20-year contracts were par for the course and a seller’s dream.
Today, the globe is awash with gas as US shale producers and new Australian suppliers gatecrash the LNG market for the first time — throwing down the gauntlet to Qatar.
And buyers have become less accommodating. For illustration, in 2000 only about 5 percent of LNG deals were linked to spot prices or short-term contracts. But by last year that figure had risen to 28 percent, said Luis Barallat, global leader of the gas and LNG division at Boston Consulting Group.
Ten years ago, he adds, the average length of an LNG contract was 17 years; in 2016 it was seven years. You’ve got it: The buyers hold the whip hand.
Against this background, Qatar’s announcement in June that it intends to re-engage in new LNG projects by lifting the moratorium on its North Field development has come under scrutiny. Most gas analysts will tell you Qatar holds first-mover advantage and, as the world’s lowest-cost producer, remains a price setter, at least for now. Put another way, in any price war for market share, Qatar could more than hold its own.
But the International Energy Agency (IEA) has said the US is on course to challenge Australia and Qatar for global leadership among LNG exporters.
“The US shale revolution shows no sign of running out of steam and its effects are now amplified by a second revolution of rising LNG supplies,” said Dr. Fatih Birol, IEA director.
Still, the Oxford Institute for Energy Studies (OIES) said Qatar is in a prime position to compete with the established LNG exporters (as well as Russian pipeline gas): “The LNG market is decidedly different from that in which it concluded long-term contracts with Asian buyers in the 2000s,” it said. “Qatar is back in the business of new LNG supply, (but) in a more fractious market and with future price expectations somewhat foggy.”
But why is Qatar gearing up to furnish new supplies now? The OIES offers two theories. “On a ‘business as usual’ strategic/commercial level, the anticipated ‘gap’ for new LNG supply from the mid-2020s is an obvious enticement to Qatar. In response, competing higher-cost projects will either defer or cancel — especially if buyers are less likely to agree to the required (higher) break-even prices in anticipation of getting a better deal from Qatar.”
But there is a second, and arguably more intriguing possibility that may explain Qatar’s move, according to OIES — one that is more “existential” in nature.
Put simply, it says with LNG demand growth already less certain than in the past, in part due to the prevalence of coal and renewables in the planned future Asian energy mix, “the prospect of a plateau in gas and LNG demand in a world where there appears no shortage of gas as a resource must be of concern to Qatar.”
It added: “In which case, it may have revised its strategy of conserving its resource ‘for future generations’ — on the basis that within that timescale the market may be severely constrained.”
In an interview with Arab News, Bernadette Cullinane, Deloitte’s national oil and gas practice leader based in Perth, said a lot of LNG was about to hit the market, with the US and Australia bringing another 100 million tons per annum of new production between now and 2020.
Qatar had the potential to increase its output by some 30 percent, she said, with the country able to exploit an “amazing resource base as their gas was very condensate-rich which makes it attractive to produce — they have about 135 years of gas reserves.”
Put another way, Qatar has the ability to pursue a market share strategy similar to what the Saudis are doing with oil. In other words, their low cost of production allows them to push supply into the market and compete head-to-head with Australian and American suppliers.
But Cullinane points out Qatar is expected to lose its crown as the world’s largest LNG exporter before its expansion program is realized. Australia will hit 74 million tons exported in the year to the end of June 2019, following an investment of around $180 billion, according to the Australian authorities. That compares with Qatar’s 76.7 million tons last year.
Qatar, the US and Australia will be the LNG superpowers, and Cullinane said the US could one day become the marginal price setter for LNG due to low costs linked to shale production.
However, Chris Young, a director in the oil and gas team at KPMG UK, said Qatar has traditionally had a favorable cost position, “which should allow it to maintain market share with key buyers, with the flexibility to lock in longer term volumes.”
In the interim, one upshot of depressed prices is there are more buyers. An IEA report said in 2005 there were 15 LNG importing countries; now there are 39, including new buyers such as Pakistan, Jordan and Thailand.
Adrian Del Maestro, PwC strategy director and oil and gas specialist said, “Buyers have more commercial clout so some are looking to re-negotiate contracts they signed up to years ago.”
India’s Petronet LNG, for example, recently reached an agreement with Exxon to cut the price of LNG from its Gorgon project in northwest Australia.
In the US, half of its gas production growth will be turned toward LNG exports, Del Maestro added. “That keeps downward pressure on prices, and reinforces the move toward a more liquid, flexible market,” he said.
That flexibility was core to an announcement this week from Japan’s power group JERA, which said it was poised to sign an LNG contract, free of destination restrictions that prevent buyers from reselling cargoes.
These restrictions are designed to secure the pricing power of sellers. But in the summer, the Japanese regulator outlawed destination restrictions, opening up the LNG market to more players and allowing JERA to become an international gas trader rather than purely a user.
JERA has said it wants to cut the volume of gas it buys under long-term contracts by 42 percent by 2030 from current levels.
Yuji Kakimi, JERA’s president, told Reuters he accepted new LNG projects need to lock in long-term deals to secure financing for their multibillion-dollar plans.
But he added, “Existing sellers (of long-term LNG), who have recouped their investments, can make various proposals to buyers not limited to long-term but also mid-term and short-term.”
One question for future Qatari energy policy may hinge on how accommodating it will be when buyers ask for short term contracts. That remains to be seen. Likewise margin erosion, in what is expected to be a ferociously competitive LNG market until the mid 2020s when demand is forecast to exceed supply once more.
Young concludes: “There will always be sufficient demand for Qatar to place its volumes in the markets, but the growing sophistication of buyers will limit its (and others) influence on pricing.”
Qatar faces fresh challenges to LNG dominance
Qatar faces fresh challenges to LNG dominance
Saudi Venture Capital invests in VC fund by Global Ventures
- Fund will include supply chain technology, agritech, enterprise software as a service, and emerging technologies
- Partnership underscores growing commitment to innovation and entrepreneurship
RIYADH: Startups in Saudi Arabia’s technology sector are poised to benefit from a new investment announcement by Saudi Venture Capital, which has committed funds to Global Ventures III, according to a press release.
The early-stage venture capital fund managed by Global Ventures exceeds $150 million in size and will primarily target investments in technology and tech-enabled sectors across Saudi Arabia, the Middle East and North Africa, and Sub-Saharan Africa.
The focus areas for the VC fund will include supply chain technology, agritech, enterprise software as a service, and emerging technologies such as artificial intelligence and deep-tech.
Established in 2018, SVC is a subsidiary of the Small and Medium Enterprises Bank, which is part of Saudi Arabia’s National Development Fund.
The investment is in line with SVC’s broader goal of boosting venture capital activity in the Kingdom and supporting the growth of startups and small and medium-sized enterprises in the region.
Nabeel Koshak, the CEO and board member at SVC, highlighted the strategic importance of this investment, saying: “Our investment in the venture capital fund by Global Ventures is part of SVC’s Investment in Funds Program, in alignment with our strategy to catalyze venture investments by fund managers investing in Saudi-based startups, especially during their early stage.”
Noor Sweid, founder and managing partner at Global Ventures, emphasized the significance of the investment in strengthening Saudi Arabia’s startup ecosystem.
“The market opportunity continues to be immense, with emerging technologies across platforms being built by exceptional founders continuing to shine through,” Sweid said.
The partnership underscores the growing commitment to innovation and entrepreneurship in Saudi Arabia’s rapidly evolving tech landscape.
Saudi Arabia allocates 5 sites for mining complexes to boost investments
RIYADH: Saudi Arabia has allocated five sites for establishing mining complexes in the Makkah and Asir regions as part of its strategy to attract quality investments, enhance transparency, and support local communities.
The initiative, led by the Ministry of Industry and Mineral Resources, aims to position mining as a cornerstone of the Kingdom’s industrial base.
The designated sites include four in Taif Governorate — North Nimran Mining Complex No. 1, covering 3.47 sq. km, North Nimran Mining Complex No. 2, covering 2.77 sq. km, South Nimran Mining Complex, covering 5.12 sq. km, and East Nimran Mining Complex, covering 15.76 sq. km.
Additionally, South Wadi Ya’ra Mining Complex in Khamis Mushait Governorate spans 15.08 sq. km.
This allocation is part of the Kingdom’s efforts to establish mining as the third pillar of its industrial economy, alongside oil and petrochemicals, the Ministry said in a post on X.
This initiative seeks to capitalize on the Kingdom’s mineral wealth, valued at approximately SR9.4 trillion ($2.5 trillion) and distributed across more than 5,300 identified sites. By safeguarding resources and ensuring regulatory compliance, the ministry aims to foster sustainable investment and deter unauthorized mining activities.
In November 2024, Saudi Arabia awarded 11 exploration licenses for six sites spanning a total of 850 sq. km across Riyadh, Makkah, and Asir. These permits, issued under the Accelerated Exploration Program, are part of a competitive initiative to unlock underutilized resources and attract domestic and international investors.
Earlier this week, the ministry launched the Innovative Industrial and Mining Products Program, described as a significant step toward enhancing development and supporting the digital transformation of these sectors.
The program “represents a key step toward fostering innovation in the industrial and mining sectors,” the ministry said on X, adding that it reflects its commitment to “developing innovative solutions that support the Kingdom’s industrial transformation and stimulate the growth and sustainability of the mining sector.”
Saudi Arabia’s measures highlight its ambition to diversify the economy, leverage untapped resources, and solidify its position as a global leader in mining and industrial development.
Closing Bell: Saudi Arabia’s key benchmark index begins 2025 with gains
RIYADH: Saudi Arabia’s Tadawul All Share Index began the year on a positive note, gaining 0.34 percent or 40.81 points to close at 12,077.31 points on Wednesday.
The total trading turnover for the benchmark index reached SR3.3 billion ($882.8 million), with 152 stocks advancing and 71 declining. The MSCI Tadawul Index also saw a slight increase, rising 5.30 points (0.35 percent) to finish at 1,514.61 points.
Meanwhile, the Kingdom's parallel market, Nomu, experienced a decline, falling 481.86 points (1.53 percent) to close at 30,993.86 points. The market saw 24 stocks gain, while 45 retreated.
Salama Cooperative Insurance Co. led the day’s gains, with its share price climbing 9.54 percent to SR19.98. Other top performers included Wataniya Insurance Co., which saw a 6.04 percent increase to SR26, and Allied Cooperative Insurance Group, which rose 5.65 percent to SR14.22. Fawaz Abdulaziz Alhokair Co. saw a 4.54 percent rise to SR13.82, while Shatirah House Restaurant Co. gained 3.44 percent, closing at SR21.68.
On the other side, Nayifat Finance Co. was TASI’s worst performer, with a 3.75 percent drop to SR14.88. Riyad REIT Fund fell 2.79 percent to SR6.61, and Al-Babtain Power and Telecommunication Co. saw a decline of 2.31 percent, settling at SR38.10. Savola Group and Gulf Insurance Group also posted losses, with their share prices falling by 1.91 percent to SR36 and 1.58 percent to SR31.20, respectively.
On the announcements front, the General Authority for Competition approved the economic concentration process for BinDawood Holding’s acquisition of 100 percent of Zahret Al Rawda Pharmacies Co. Ltd.
The decision, dated December 31, 2024, marks a significant step in the acquisition process. BinDawood has announced it will provide updates on the completion of the transaction and any material developments as they arise. By Wednesday’s close, BinDawood’s share price had risen 1.08 percent to SR6.54.
Separately, First Avenue for Real Estate Development Co. disclosed the signing of a non-binding Letter of Intent with Awj Real Estate Development and Investment Co. to establish a real estate fund focused on commercial, office, and hospitality projects.
The fund will invest in four key assets: West La Perle, East La Perle, La Perle Residential Land, and La Perle Hotel Land. First Avenue is expected to hold between 40 percent and 50 percent of the fund, with Awj holding between 50 percent and 60 percent. First Avenue’s shares dropped 1.71 percent, closing at SR8.60.
Egypt signs $120m deal to establish pharmaceutical industrial zone
RIYADH: Egypt is set to establish a $120 million pharmaceutical industrial hub in the Suez Canal Economic Zone, marking a significant move toward localizing medicine production and bolstering its regional manufacturing position.
The agreement was finalized between SCZONE’s investment arm, SCZONE Istithmar, and the Arab Pharmaceutical Materials Co., or Arab API, which will oversee the new facility. The deal was signed in the presence of Khaled Abdel Ghafar, Egypt's minister of health, alongside other high-ranking officials.
The deal outlines plans for a new facility in Sokhna Industrial Area, spanning 96,828 sq. meters. It will focus on producing key raw materials for the pharmaceutical industry, further strengthening Egypt's self-sufficiency in medicines. The site will produce active and inactive ingredients, intermediate materials, and chemicals essential for drug manufacturing.
“This project reflects SCZONE’s commitment to localizing the pharmaceutical industries in Egypt and strengthening its position in this field to become a regional hub for this industry based on the capabilities of SCZONE,” said Waleid Gamal El-Dien, chairman of SCZONE.
He added that SCZONE is dedicated to fostering an attractive investment environment with the infrastructure needed to ensure the success of such projects. “This project marks a significant shift in Egypt's pharmaceutical industry sector,” he continued.
“It is not just an industrial project, but it is an implementation of Egypt’s vision based on integration between all concerned parties to achieve self-sufficiency in essential medicines, and reduce the gap between supply and demand in the local market,” Gamal El-Dien said.
The partnership will see SCZONE Istithmar collaborate with Arab API to build, manage, and operate the plant. The contract was signed by Ahmed Saeed Kilani, chairman of Arab API, and Mohamed Abdel Gawad, SCZONE’s vice chairman for investment and promotion affairs, on behalf of their organizations.
The facility aims to meet local pharmaceutical needs while positioning Egypt as an exporter, strengthening the country’s manufacturing capacity.
Ghafar noted that the investment in the facility is a vital step in enhancing public health services and contributing to the national economy. He emphasized the government’s focus on achieving self-sufficiency and reducing pharmaceutical imports.
The new plant will support Egypt’s rapidly growing pharmaceutical industry, meeting rising domestic demand and positioning the country as a key player in the global market.
The $120 million investment is part of a broader pharmaceutical initiative within SCZONE, which includes other factories such as Ateco Pharma and Genavex Egypt, further strengthening local production capabilities.
In addition, SCZONE has earmarked 4 million sq. meters for the creation of a larger pharmaceutical industrial zone in partnership with the Egyptian Authority for Unified Procurement. This initiative underscores the government’s push for collaboration across stakeholders to achieve long-term self-sufficiency in medicine production.
The new plant is expected to reduce Egypt's reliance on imported pharmaceuticals, boost local production, and expand exports. It is part of the government’s broader strategy to modernize and expand the pharmaceutical sector, improve health services, and contribute to Egypt’s economic development.
SCZONE has played a key role in attracting investment to Egypt’s pharmaceutical sector, leveraging its strategic location and competitive advantages. The Sokhna Industrial Zone, where the new plant will be located, already hosts successful pharmaceutical projects, including Ateco Pharma’s intravenous injection drugs factory and Genavex’s vaccine manufacturing facility.
Saudi weekly PoS transactions close 2024 with $3.6bn in value: SAMA
RIYADH: Saudi Arabia’s consumer spending soared in the final week of 2024, with point-of-sale transactions climbing 17.2 percent week-on-week to SR13.8 billion ($3.6 billion), official data showed.
Figures from the Saudi Central Bank, also known as SAMA, revealed significant growth across all sectors between Dec. 22 and Dec. 28, with the total number of transactions hitting 211.97 million during the week.
The telecommunications sector led the growth in transaction value, reporting a 29.6 percent week-on-week increase to SR132.5 million.
The recreation and culture sector followed closely, with a 27.7 percent rise, amounting to SR286.3 million. Seasonal gifting trends also contributed to a 26.1 percent increase in the jewelry sector, which recorded SR315 million in transactions.
The food and beverage sector posted a 22.9 percent jump, reaching SR2 billion.
Other sectors also saw substantial increases in transaction values. The education sector rose 20.7 percent, while health and furniture reported growth of 16.4 percent and 16.2 percent, respectively.
Miscellaneous goods and services, as well as clothing and footwear, recorded similar growth at 16.2 percent and 16 percent. The restaurants and cafes sector grew by 14.4 percent, with transportation close behind at 14.2 percent.
In terms of transaction volume, the jewelry sector led with a 25.4 percent week-on-week increase, reaching 231,000 deals.
Telecommunications saw a 13.9 percent rise, followed by recreation and culture with a 13.3 percent increase, and transportation with an 11.8 percent growth.
Clothing and footwear transactions rose by 11.5 percent, furniture by 10.6 percent, and miscellaneous goods and services by 8.9 percent.
Regionally, Hail reported the highest growth in transaction value, with a 29.1 percent increase to SR218.9 million. The city also saw a 15 percent rise in the number of deals, reaching 3.65 million.
Tabuk followed, posting a 28.9 percent growth in transaction value to SR270.5 million and an 11.3 percent rise in the number of transactions, totaling 4.57 million.
Madinah recorded a 23.3 percent increase in value to SR594.8 million, alongside a 9.9 percent growth in the number of transactions.
Riyadh, however, saw the highest overall transaction value at SR4.7 billion, reflecting a 12.4 percent increase. The capital also recorded a 6.2 percent rise in transaction volume.
Jeddah followed with a 13.4 percent increase in transaction value and a 5.9 percent rise in transaction volume.