LONDON: Arab News has been told that 2018 is unlikely to see a massive ramp-up in US shale production that could potentially wreck attempts by Russia, Saudi Arabia and other producers to stabilize oil prices and shrink surplus inventories.
Speaking from Denver, Colorado, senior Wood Mackenzie energy analyst Ryan Duman said there were “headwinds” for the US shale industry which would hold back production next year, reducing the danger that the oil price would head south again.
Duman said: “US shale operators who don’t have rigs or crews under contract are going to have to pay dearly because the oil services industry is overstretched right now.”
That’s because it pared back considerably during the slump — building it up again is going to take time, he said.
There were plenty of wells, but the big question was how quickly can they come on line.
“One of the things we are looking for in 2018 is the rate of completions, whether they start to catch up to the rate of drilling. And then, how fast can the oil get to market.”
He added: “What we need to see is a massive rehiring to make up for the labor that was let go during the bad times, and operators need more equipment, such as pressure pumping and other assets, in order to push forward with hydraulic fracturing — in other words, the completion stage — which comes after the rigs have dug the wells.”
There were also infrastructure challenges in terms of transporting shale oil to refiners, some of which don’t process that type of crude.
Asked if he thought the US could overtake Saudi Arabia to become the world’s second-largest producer after Russia, Duman thought this was years away, “although I am not saying it won’t happen.”
The way he saw it, the obstacles for US shale currently were the following: Not having ample takeaway capacity — that is, pipelines and other equipment, essential to get crude to market; and a dearth of workers, both skilled and unskilled who were laid off three years ago.
Duman said: “We have seen rigs added back quickly this year, but operators can’t get the crude to customers fast enough — which has implications for costs.”
The outlook for 2019 was a different matter, as long as the oil price stayed between $60 and $65 — because at those prices the shale operators were in the money, he said.
“I think 2018 could be about hiring and rebuilding the sector that has been neglected in recent years. After that, a very strong production year in 2019.
One important factor was that technological improvements and efficiencies would gradually make the shale industry more profitable.
Operators today are able to drill and complete wells much faster than before thanks to developments in predictive analytics or big data — all of which propel optimization.
In the Permian Basin (the region of Texas and New Mexico at the center of the shale revolution), Goldman Sachs estimates that wells have become 50 percent more productive over the past two years.
And shale companies have locked in higher oil prices when they occur by turning to hedging contracts. More and more oil companies are using hedges to give them certainty.
“But the other part of it is the sheer learning curve … shale is still in its infancy if you think about how young the industry is compared with Big Oil,” said Duman.
But will huge quantities of US shale be cascading into the market next year?
Duman doesn’t think so — “We have growth rates almost equivalent for 2017 and 2018 at about 850,000-900,000 bpd.”
His overall analysis was echoed by BP CEO Bob Dudley who told the Financial Times that traditional producers such as Saudi Arabia would continue to exert more influence over crude prices.
Dudley said he was less worried these days about the extent to which US shale resources could hold down prices as more was learned about their geology.
He told the FT: “There are cracks appearing in the model of the Permian being one single, perfect oilfield.”
He warned of emerging technical challenges, and called into question the ability of shale companies to rival conventional producers over the long term.
Dudley was outspoken on another matter. While acknowledging that oil faced long-term competition from electric vehicles, he claimed the technology had been “hyped” and that environmental problems surrounding the mining and disposal of materials used in lithium-ion batteries that power electric vehicles had been underestimated.
On the issue of shale, however, the International Energy Agency (IEA) sees things differently to Wood Mackenzie, and — as we’ll see — OPEC as well.
In a report this month, IEA said the recovery in oil prices this year to about $63 per barrel had spurred growth in US tight oil output (which includes crude, condensates and natural gas liquids, which the IEA said would cause global supplies to exceed demand in the first half of 2018.
It added US oil output until 2025 will be the strongest seen by any country in the history of crude markets, making it the “undisputed” leader among global producers. “Technological advances that have enabled production from US shale oilfields to thrive will lead to growth of 8 million barrels a day between 2010 and 2025, surpassing expansion rates enjoyed by any other nation,” said IEA executive director, Fatih Birol.
In an interview with Bloomberg, Birol said the US would become the undisputed global oil and gas leader for decades to come and is expected to account for 80 percent of the increase in global supply over the same period.
US tight oil production will rise to 13 million bpd by 2025, out of total US output of 16.9 million bpd.
“The growth in production is unprecedented, exceeding all historical records, even Saudi Arabia after production from the mega Ghawar field or Soviet gas production from the super Siberian fields,” Birol said.
Moreover, if oil did settle at $60, we should expect a ramp up in US production which would stop inventories coming down, according to Birol. OPEC’s views are different still. At a recent forum in London, secretary general Mohammed Barkindo said the global oil market was tightening at an “accelerating pace,” and he cited a sharp reduction in worldwide inventories as evidence that last year’s agreement by producers to cut supply was having an effect.
He added: “OPEC stocks in September were about 160 million barrels above the five-year average, down from 340 million in January. There has been a massive drainage of oil tanks across all regions, a balanced oil market was fully in sight,” said Barkindo.
OPEC and other producers want to get stocks down to the five year average in order to remove the glut built up when the price was above $100.
Perhaps, the only thing one can say with any degree of certainty about the oil industry is that there is widespread disagreement about almost everything.
It was always thus.
Don’t panic! Oil price outlook improves as US shale faces headwinds in 2018
Don’t panic! Oil price outlook improves as US shale faces headwinds in 2018
Saudi Arabia, UAE poised to become trade ‘super-connector hubs,’ WEF panel hears
- Agility’s Henadi Al-Saleh highlights that innovation, investment help countries to capitalize on disruption in global trade
LONDON: Saudi Arabia is on track to emerge as a “super-connector hub,” leveraging ongoing global trade disruption to its advantage, according to experts speaking at the World Economic Forum in Davos on Thursday.
Henadi Al-Saleh, chair of the board of directors at Agility, a global leader in supply chain services, highlighted the Gulf Cooperation Council’s significant investments in infrastructure as a driving force behind this transformation.
She said: “(In) the past few years, the level of activity, especially around cargo, has increased several fold.
“If I look at the GCC, where we have invested in warehouses, and at the Emirates in Saudi Arabia, one of our key platforms, (they are) set to become super-connector hubs.
“These countries are investing in infrastructure, doubling down, and the level of activity is increasing.”
Al-Saleh identified digitalization as a key value in this development, saying that “in a time with so much uncertainty, having that clarity and understanding, even when changes take place, it gives me visibility. (With the digital tools) I know what the rules (are) and (how) I need to adjust.”
She added: “That’s one critical aspect in which you see these super hubs benefiting.”
While the level of trade has continued to grow since the end of the pandemic, socioeconomic and political factors have continued to disrupt industry.
Experts have said that US President Donald Trump’s second term is expected to exacerbate the disruption, with the president supporting potential trade tariffs on multiple exporting nations.
Chile’s Minister of Foreign Affairs Alberto van Klaveren acknowledged the challenges but also pointed to opportunities arising from these shifts.
He said: “There are possibilities. Some economies are opening up. We signed the CEPA Agreement (Comprehensive Economic Partnership Agreement) with the Emirates. We are interested in Saudi Arabia.”
He explained that the importance of diversification was not only in export markets but also in the types of goods and services traded.
However, experts cautioned that ongoing trade disruption could significantly impact the global energy transition, particularly in the green energy sector.
Al-Saleh said: “There are certain segments of people, businesses and technologies (in the green energy market) that are paying a price.
“But this is where, I think, from the private sector, it’s incumbent upon them to continue. This is irrespective of what happens today in terms of tariffs. There is a long view, and we need to all manage towards that long view.”
According to World Trade Organization data, every nation relies on imports and exports for at least 25 percent of its goods. Given this interdependence, Al-Saleh argued, trade will remain indispensable despite ongoing disruption.
She said: “You need to focus on being agile and resilient. Those are critical elements, and the way to become agile and resilient is really to diversify and invest in technology.”
Saudi Arabia taking bold steps to test smart technologies as it embraces AI, says industry minister
- Kingdom has embarked on a transformation of traditionally industrial cities into modern smart cities, Bandar Alkhorayef tells World Economic Forum
- Nation’s businesses are increasingly adopting new technologies to help enhance productivity, he adds
DAVOS: Saudi Arabia is becoming a regional hub for testing the use of new technologies as efforts to diversify the national economy continue, the minister of industry and mineral resources, Bandar Alkhorayef, told the World Economic Forum in Davos on Thursday.
The Kingdom has established national organizations such as the Saudi Data and AI Authority and the Future Factories Program to regulate and help businesses adopt new technologies that utilize artificial intelligence, machine learning, 3D printing and robotics, he added.
This smart infrastructure market is projected to be worth $2 trillion within the next 10 years, up from an estimated $900 billion in 2024, driven by growth in the integration of physical and digital industrial operations.
Alkhorayef said Saudi Arabia places a priority on manufacturing and has embraced the use of the latest technologies in sectors such as renewable energy and electric vehicles, as the Kingdom embarks on ambitious plans to transform traditionally industrial cities into modern smart cities.
“The investors coming to these cities (will find) a ‘plug-and-play’ kind of support,” he said, as authorities take steps to attract businesses and global talent to work and invest, and to establish the country as a regional hub for technological research, development and innovation.
The Kingdom’s Future Factories Program, for example, aims to provide training initiatives and loans to help 4,000 factories adopt new technologies, embrace automation and improve manufacturing efficiency.
“We’re very bold when it comes to testing new ideas and technologies,” Alkhorayef added, which makes it “interesting for new players to see (Saudi Arabia) as a place where they can not only seek financing or investment but also a place to test and pilot certain ideas.”
Such endeavors are endorsed by some of the country’s biggest corporations, including the chemical manufacturing company SABIC, the petroleum company Aramco, and the mining giant Maaden. Aramco, for example, has already adopted new technologies, including AI, to enhance productivity and reduce carbon dioxide emissions.
Alkhorayef was speaking during a WEF discussion titled “Next-Gen Industrial Infrastructure.” The other panelists included representatives of the African Union Commission, businesses and consulting firms.
Currently, up to 50 percent of Saudi Arabia’s deep-tech startups are focused on the development of AI or the Internet of Things, Alkhorayef said, as the country increasingly adopts digitalization in the public and private sectors.
The Saudi Data and AI Authority, established in 2019 to regulate and promote the national agenda for a data-driven economy, has said that AI is making significant contributions to operational efficiency. In 2023, global spending on AI exceeded $120 billion, with more than 72 percent of organizations incorporating the technology into at least one business area.
“We believe that adopting technology in the mining sector will lead to safer, more productive and energy-efficient mines,” Alkhorayef said by way of an example, adding that it is essential that authorities consider environmental protection as they seek to strike the right balance between the interests of investors and the local community.
“Making digitalization accessible is an important part of what we do (in the Kingdom),” he said. “It involves regulation, cybersecurity, human capital training, and investing in incubators to work and learn.
“In every sector, such as food, energy or mining, (we always ask) the question of how technology could be helpful.”
Saudi economic success driven by ‘key North Star, not egos,’ says finance minister at WEF
- Mohammed Al-Jadaan highlights Kingdom’s shift from short-term budgets to longer-term fiscal planning, ensuring clear priorities and disciplined spending
- Transformation driven by clear decisions and significant investments led to strong economic performance, adds economic planning chief Faisal Al-Ibrahim
DAVOS: Saudi Finance Minister Mohammed Al-Jadaan on Thursday said that the Kingdom’s economic planners were being driven by their “North Star” and not egos as they look to maintain growth in the economy.
Speaking on a panel about the Saudi economy at the annual meeting of the World Economic Forum, Al-Jadaan highlighted Saudi Arabia’s shift from short-term budgets to longer-term fiscal planning, ensuring clear priorities and disciplined spending.
He said that there was flexibility and a readiness within the government to adapt plans based on global circumstances. “I’ve said this repeatedly, we don’t have egos. We are willing to change depending on circumstances and we will continue to do that. We will prioritize what matters,” he said.
“Our key North Star is what is driving us, and the tools can change, the means can change. It’s really that North Star that we are looking forward to,” he said.
He emphasized the progress and resilience of Saudi Arabia’s economy under Vision 2030, noting that the plan had mobilized the entire nation — government, businesses, right down to citizens — toward clear, long-term goals.
He attributed this success to visionary leadership, tough decision-making and consistent execution, adding that this approach could be a universal “recipe” for unlocking global potential.
On the Saudi-US relationship, Al-Jadaan highlighted its strategic importance over the past eight decades, emphasizing that Saudi Arabia had maintained strong economic, diplomatic and security ties with Washington, regardless of the administration in power, whether Republican or Democrat.
He described the partnership as a “win-win situation” that remained vital and was likely to endure into the foreseeable future.
Al-Jadaan was joined on the panel by Saudi Minister of Economy and Planning Faisal Al-Ibrahim, who attributed the Kingdom’s strong economic performance to a first wave of transformation driven by clear, courageous decisions and significant investments, not only financially but also in terms of effort and planning.
Looking ahead, Al-Ibrahim stressed that the next phase of Vision 2030 would focus on addressing more complex challenges, particularly in enabling the private sector.
He emphasized the goal of increasing the private sector’s contribution to 65 percent of GDP by fostering collaboration, co-developing opportunities and creating an environment where private enterprises could take the lead in driving economic growth.
Key priorities include enhancing institutional capabilities, ensuring policy clarity and predictability, and addressing barriers to innovation-driven entrepreneurship, he said.
Al-Ibrahim also underlined the government’s commitment to working closely with the private sector, noting that ministers and their teams often worked long hours to respond to and engage with private enterprises. This collaborative approach, he said, was deeply embedded in the country’s Vision 2030 blueprint for economic transformation.
IMF Chief Kristalina Georgieva, who was also on the panel, praised Saudi Arabia’s transformation efforts, highlighting the country’s ability to create an appealing environment for business and tourism.
She commended its forward-thinking approach in engaging the private sector to diversify experiences and attract repeat visitors. Referring to her visit to AlUla, she said: “I didn’t know what to expect, but I came out thinking it was great we decided to open our regional office in Riyadh.”
Georgieva also noted Saudi Arabia’s strategic planning to host global events and foster economic growth. She described the country as a “good example of transformation” that others could look to for inspiration in creating dynamic, sustainable growth through proactive planning and investment.
Lebanon’s inflation rate drops to 45% in 2024, marking a return to double-digit figures
- Monthly inflation also increased by 2.38% in December, marking the third consecutive monthly rise
- Key contributors included miscellaneous goods and services, which rose 39.69% annually
RIYADH: Lebanon’s economic landscape showed signs of stabilization in 2024, with inflation rates returning to double-digit levels after three years of hyperinflation that had exceeded 200 percent.
The annual inflation rate stood at 45.24 percent last year, a substantial drop from the staggering 221.3 percent recorded in 2023, according to data from the Central Administration of Statistics.
Lebanon has endured prolonged economic instability, with the Lebanese lira losing 90 percent of its value since the crisis began in 2019. The drop in inflation aligns with the International Monetary Fund’s October forecast, which projected inflation in the Middle East and North Africa region to ease to 3.3 percent in 2024.
Last year represented a period of relative calm in terms of price volatility. Monthly inflation indices revealed a deceleration in price growth. The index for December reached 30,936.02, compared to 30,147.41 in November, showing a modest increase compared to the unpredictable fluctuations of prior years.
The slowdown in inflation is largely due to the stabilization of the Lebanese lira, driven by Banque du Liban’s monetary policies since 2023. By the spring of last year, the exchange rate had settled at around 89,500 Lebanese liras per dollar, following a sharp rise from 40,000 to 140,000 earlier in 2023.
This stability helped bring annual inflation below 100 percent in April, reaching 18.1 percent by December, though the same month’s inflation rose slightly from November’s 15.38 percent.
Monthly inflation also increased by 2.38 percent in December, marking the third consecutive monthly rise, following 2.02 percent in October and 2.30 percent in November.
Key contributors to inflation in December included miscellaneous goods and services, which rose 39.69 percent annually, education fees at 31.27 percent, and health care at 22.93 percent. Only communications and furniture saw price declines at 2.99 percent and 1.99 percent, respectively.
Lebanon’s state-owned telecom firm, Ogero, said it is working to restore and expand its connectivity. The firm’s Chairman and Director General Imad Kreidieh announced in a live broadcast on Jan. 21 that the company’s expansion plans will resume, supported by funding from multiple donors.
North Lebanon recorded the highest monthly increase in December at 3.79 percent, followed by Beirut and Nabatieh at 3.59 percent, and South Lebanon at 2.97 percent.
The drop in inflation offers some relief to the Lebanese people, but with the election of former army commander Joseph Aoun as president on Jan. 9 and the appointment of the Chief Judge of the International Court of Justice, Nawaf Salam, as prime minister on Jan. 13, the need for comprehensive reform remains urgent.
The political breakthrough has also sparked a rally in Lebanon’s government bonds, which have nearly tripled in value since September. The election of Aoun, following 12 failed attempts to choose a president, has raised hopes that Lebanon might finally address its economic challenges.
Most of the country’s international bonds, in default since 2020, rallied further after Aoun’s election, rising by nearly 0.9 cents on the dollar to around 16 cents — a modest recovery that underscores investor optimism despite Lebanon’s ongoing struggles.
Saudi Arabia’s Kingdom Holding terminates $1.8bn fund deal with Sumou, JEC
JEDDAH: Saudi-based conglomerate Kingdom Holding Co. has confirmed the termination of its SR6.8 billion ($1.8 billion) fund agreement with Sumou Holding Co. and Jeddah Economic Co., following a mutual decision by all parties.
In a filing with the Tadawul stock exchange, KHC said the move, effective Jan. 23, imposes no obligations on any party, adding that this decision was reached as the primary purpose of the fund is no longer applicable.
Progress continues on the fund’s main asset, Jeddah Tower, with the Saudi Binladin Group reinstated and work resuming at an accelerated pace. Technical and consulting teams are now in place and have commenced on-site operations.
The release added that the Alinma Jeddah Economic City Fund, fully owned by JEC – an associate firm – remains operational, saying that KHC continues to support the project’s development.
In July, the three firms signed an agreement to establish a new fund to acquire the Alinma Jeddah Economic Fund, whose investors would include the three companies, with KHC owning 40 percent of the new fund.
In a Tadawul announcement, KHC said last year that the financial impact of the agreement would be disclosed once JEC completed updating its accounting records.
The latest announcement said the concrete was poured for the 64th floor of the tower in the presence of the partners, headed by Prince Alwaleed bin Talal, KHC’s chairman of the board of directors.
It added that the partners were giving their utmost attention and oversight to this global symbol, which aligns with Saudi Vision 2030.
Jeddah Economic City aims to showcase its pioneering ambitions through the Jeddah Tower, envisioned as a new wonder of the world and a symbol of Jeddah’s renaissance. The tower also reflects the city’s rich commercial heritage spanning thousands of years, according to the company’s website.
Set to stand over 1 km. tall, the tower will be the centerpiece of the Jeddah Tower Waterfront District.
