NCB Capital Petrochemical Tracker (Saudi Arabia)

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The $ 14.5 billion 615,000 bbl / dayAl Zour refinery & Petrochem complex is given preliminary approval by Parliament in Kuwait. (The National)

• Al Neft is still skeptical about the prospect of getting anything through in a disjointed Parliament that has been gripped by infighting and political squabbling. We see further delays in the offings.

The National Newspaper reported that Al Gosaibi filed another law suit in NY, alleging fraud, against Maan Al Sanea. Last year, Awal Bank, a Bahraini Bank owned by Maan Al Sanea (which was ranked in top 10 wealthiest men in the Middle East according to Forbes) filed for bankrupcy. This sparked defaults by other entities with Maan’s group of companies and dragged with it Al Gosaibi Group and their Bank TIBC. Al Gosaibi is a respected old business family in Saudi Arabia with activities that include Pepsi Bottling and Large scale manufacturing and stakes in financial institutions. The total debt of both is estimated at US$ 20 billion.  Maan is married to Al Gosaibi’s daughter and was involved in Al Gosaibi business at start of his career.

The two have been embattled against each other with legal proceedings as well as with regional and international banks.  The Credit market in the region and in particular Saudi Arabia suffered as a result with provisioning and very tight credit lending criteria.

• It was not that far ago when banks salivated over lending to both entities based purely on name lending even as transparency and financials where opaque to say the least. How the times change. Nevertheless, the drama will continue to play in public.

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• Conglomerate feud tarnishes Saudi image (huffingtonpost​.com)
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Gulf News reports that the hydro-desulphuriser unit, part of the Aramco – Royal Dutch Shell Joint Venture, is postponed till March – April. The unit will produce 90,000 bbl / day of ultra-low sulphur diesel (10 ppm). The Unit was supposed to come on stream at end of 2009.

Dana Gas swung to a loss of US$ 53.5 m due to write offs related to unsuccessful exloration in Egypt. (The National Newspaper)

ADGAS not expanding LNG train – maintaining same capacity (ArabianOilandGas​.com).

Aramco to increase Arab Heavy & Medium prices in Asia by 12.5 cents a barrel higher to meet increased demand from Asian refineries (AMEinfo​.com)

FT reports on Damas saga and the poor governance related to unauthorised transactions by its former CEO / Chairman (FT​.com Damas saga)

The Energy Source reports that researchers have found a relation between newly found resources / oil wealth and poor governance – and the effect this will have on countries like Ghana, Uganada and Papua New Guinea (Being rich in resources really is a curse | FT Energy Source)

Tupras, the Turkish refinery company is set to increase its utilization / runs to average of 75% compared to 60% of their total capacity of 590,000 bpd. (Argus Media)

After 2 horrible years of negative refining margins, cracks are showing that the sector is set for recovery by the end of the year.

Refineries in US and Europe have been hurt on all fronts, namely from lower demand, higher competition from new complex super-refineries (Reliance in India and new ones in Saudi),devastated oil shipping market combined with a contango that made it profitable to ship in and store products from overseas than refine locally. It is no surprise that outdated and smaller scale (sub 150,000 bpd capacity) refineries in US and Europe are shutting down at their fastest pace in over 30 years. Some the likes of BP and Shell reportedly turned some of their European Refineries into storage as no buyers were found when it came to disposing of those assets.

This leaves the Asian Refineries in a sweet spot. Singapore refinery cracks (difference between value of fuel to cost of crude oil) is set to widen by 50% to $4.50 per barrel (according to bloomberg survey) while US refining margin is to drop by 30% as indicated by future contracts on NYMEX.

The future of refining will be dominated by the east of Suez in both the paper and physical markets. The likes of Saudi Aramco will be one of the winners with its new JV Refineries coming on stream.

YouTube - Davos Annual Meeting 2010 – Global Energy Outlook.

Some of the highlights of the World Energy Outlook Panel (Watch full session) that included the CEO of Aramco, Khalid Al Falih, Tony Howard (CEO BP), Peter Voser (CEO Royal Dutch Shell) Andrew Liveris (CEO Dow Chemical), Ilham Aliyev (President Azerbijan) and Thierry Desmarest (Chairman Total).

• Khalid Al Falih dismissed peak oil and see no difficulty in world producing above 100 m bpd. Saudi Arabia has almost 4 m bpd of spare capacity and brought 2 m bpd onstream last year. Mentioned that cost is escalating (takes 6-7 times what they used to in 2000) and projects getting longer (7-10 years) to bring new oil production onstream. Does not see the world moving away from fossil fuel any time soon.
• Tony Howard is cautiously optimistic on Iraq (can reduce 10 m bpd by 2020) but sees challenges with regard to execution. “If you assume world requires 100mb/d in 2030, then with 4-5% decline rate in existing fields, we need to find 50mb/d (4 Saudi Arabias). Resources there but need investment.” Shale gas will be a game changer – altering the US energy outlook for next 100 years.
• Shell’s CEO reiterated the huge investment needed to meet rising demand from non-OECD countries.  ”Incremental supply of 1% extra world energy takes 25-30 years to fully develop.”
• Dow Chemical CEO also sees the difficulty with long term investment in energy taking into account enegy volatility.  views Alternative energy as a physical hedge against oi & gas and would like to see cap & tarde to incentivise effeciency.
• The President of Azerbaijan sees the country as becoming one of the major gas exporter to Europe and in last 6 years, Azerbaijan’s GDP grew by 300%.

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Saudi’s Oil Minister, Ali Al-Naimi, reiterated that current price levels are good for both the consumer and the producer.  The comments were posted on the International Energy Forum. He also added interestingly that one of the challenges is to deal with “artificial fear about availability” of production and supplies and how this is creating a of perception of scarcity.  He touched also on Financial players in the market and their impact of oil prices (paper trading has grown 45 times faster than physical trading in oil).  (Al-Naimi IEF)

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Saudi Aramco & Total secured $6 billion bank financing for the $12 billion Jubail Export refinery. The refinery will be located in Eastern Province with capacity of 400,000 bpd and fully operational by second half of 2013.  Aramco and Total will each have 37.5% shareholding with 25% sold to the public. (AMEinfo​.com)

IPIC’s proposed refinery and Petrochem facility in Pakistan is to go ahead following prolonged delays. (The National Newspaper)

Turkey is becoming a target for Middle East Investment flows. (FT​.com )

Kuwait trying to resolve penalty payment ($2.5 bn) following cancellation of the Dow Chemical Petrochemical complex.(AMEinfo​.com)

Dubai to import up to 37 billion cubic feet per year of natural gas from Qatargas 4 (JV between Shell & Qatar Petroleum) as more LNG cargos are diverted from North America. China will take 40% and Dubai 10% of Qatargas 4. … Continue Reading

Yemen’s oil revenue is down from $4.2 billion in 08 to US$ 2 billion in 09. Doing a bit of number crunching on Yemen’s production, it means that the Gov share of exported production accounted to 115,000 bpd in 08 compared to 85,000 bpd in 09 out of total of 300,000 bpd (Gov & Concessions) taking into account price variation on grades / Brent – WTI.

Alarmingly, local consumption is rising fast – importing around 150,000 bpd in refined products (source: EIA) and growing at approx. 7% annually between 1994 & 2008. … Continue Reading

Shell’s new CEO sheds light on development in Iraq.  They see Shell’s Iraq project as producing a good IRR and NPV even though it is perceived by analyst as not lucrative for the company. Shell’s focus is on gas for domestic market and LNG and played down gas pipeline via the north.  He cites that the amount of associated gas (produced as by-product of oil extraction) that is being flared is “mind boggling“.    [more on Qatar, Nigeria & E&P] … Continue Reading