The Planning and Statistics Authority’s recently released data shows 51% general increase in July 2019 in the number of building permits issued when compared to June this year.
The Planning and Statistics Authority (PSA) published the fifty-fifth issue of the monthly statistics of Building Permits and Building Completion certificates issued by all municipalities of the State.
According to PSA data on building permits issued during July 2019, Al Rayyan comes at the top of the municipalities where the number of building permits issued were 188, i.e. 27% of the total issued permits, while Doha municipality comes in second place with 151 permits, i.e. 22%, followed by Al Wakrah with 131 permits (19%), then Al Da’ayen with 85 permits, i.e.12%.
The rest of the municipalities are as follows: Umm Slal 58 permits (8%), Al Khor 39 permits (6%), Al Sheehaniya 31 permits (4%), and Al Shammal 15 permits (2%).
In terms of type of permits issued, data indicates that the new building permits (residential and non-residential) constitute 50% (352 permits) of the total building permits issued during the month of July 2019, while the percentage of additions permits constituted 48% (334 permits), and finally fencing permits with 2% (12 permits).
New residential buildings permits data indicates that villas top the list, accounting for 68% (198 permits) of all new residential buildings permits, followed by dwellings of housing loans permits by 24% (71 permits) and apartments buildings by 7% (20 permits).
On the other hand, governmental buildings were found to be in the forefront of non-residential buildings permits with 29% (17 permits), followed by industrial buildings e.g. workshops and factories with 27% (16 permits), then commercial buildings with 25% (15 permits).
Comparing the number of permits issued in July 2019 with those issued in the previous month a general increase of 51% was noted. The increase was noted in all municipalities as follows: Al Shammal (150%), Al Wakrah (68%), Al Sheehaniya and Al Khor (63%) each, Umm Slal (61%), Al Rayyan (50%), Al Doha (41%), Al Da’ayen (25%).
The press release added that a quick review of the data on building completion certificates issued during the month of July 2019, according to their geographical distribution, showed that Rayyan municipality comes at the top of the municipalities where the number of building completion certificates issued were 125 certificates, i.e. (33%) of the total issued certificates while municipality of Al Wakrah came in second place with 81 certificates, i.e. (21%), followed by municipality of Al Doha with 74 certificates (19%), then Al Da’ayen municipality with 53 certificates, i.e.(14%). The rest of the municipalities were as follows: Umm Slal 23 certificates (6%), Al Khor 11 certificates (3%), Al Sheehaniya 9 certificates (2%), and finally Al Shammal 7 certificates (2%).
In terms of the type of certificates issued, data indicates that the new building completion certificates (residential and non-residential) constitutes 76% (291 certificates) of the total building certificates issued during the month of July 2019, while the percentage of additions certificates constituted 24% (92 certificates).
Comparing the number of certificates issued in July 2019 with those issued in the previous month we noted an increase of 38%. This increase was clearly noted in most municipalities: Al Shammal (250%),Al Wakrah (103%), Al Doha (76%), Al Rayyan (25%), Al Da’ayen (18%), Umm Slal (5%), On the other hand, there was a clear decrease in the municipality of Al Khor (35%), while Al Sheehaniya municipality maintained the same number of issued certificates.
Ivy Heffernan is a student of Economics at Buckingham University. Junior Analyst at HeffX and experienced marketing director.
The state energy giant’s vast oil reserves – it can sustain current production levels for the next 50 years – make it more exposed than any other company to a rising tide of environmental activism and shift away from fossil fuels.
In the three years since Saudi Crown Prince Mohammed Bin Salman first proposed a stock market listing, climate change and new green technologies are putting some investors, particularly in Europe and the United States, off the oil and gas sector.
Sustainable investments account for more than a quarter of all assets under management globally, by some estimates.
Aramco, for its part, argues oil and gas will remain at the heart of the energy mix for decades, saying renewables and nuclear cannot meet rising global demand, and that its crude production has lower greenhouse gas emissions than its rivals.
But with the company talking again to banks about an initial public offering (IPO), some investors and lawyers say the window to execute a sale at a juicy price is shrinking and Aramco will need to explain to prospective shareholders how it plans to profit in a lower-carbon world.
“Saudi Aramco is a really interesting test as to whether the market is getting serious about pricing in energy transition risk,” said Natasha Landell-Mills, in charge of integrating environment, social and governance (ESG) considerations into investing at London-based asset manager Sarasin & Partners.
“The longer that (the IPO) gets delayed, the less willing the market will be to price it favourably because gradually investors are going to need to ask questions about how valuable those reserves are in a world that is trying to get down to net zero emissions by 2050.”
Reuters reported on Aug. 8 that Prince Mohammed was insisting on a $2 trillion valuation even though some bankers and company insiders say the kingdom should trim its target to around $1.5 trillion.
A valuation gap could hinder any share sale. The IPO was previously slated for 2017 or 2018 and, when that deadline slipped, to 2020-2021.
Aramco told Reuters it was ready for a listing and the timing would be decided by the government.
The company also said it was investing in research to make cars more efficient, and working on new technologies to use hydrogen in cars, convert more crude to chemicals and capture CO2 which can be injected in its reservoirs to improve extraction of oil.
SELLING THE STORY
Some would argue this is not enough.
A growing number of investors across the world are factoring ESG risk into their decision-making, although the degree to which that would stop them investing in Aramco varies wildly.
Some would exclude the company on principle because of its carbon output, while others would be prepared to buy if the price was cheap enough to outweigh the perceived ESG risk – especially given oil companies often pay healthy dividends.
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At a $1.5 trillion valuation, Aramco would be the world’s largest public company. If it were included in major equity indices it would automatically be bought by passive investment funds that track them, regardless of their ESG credentials.
And as the world’s most profitable company, Aramco shares would be snapped up by many active investors.
Talks about a share sale were revived this year after Aramco attracted huge investor demand for its first international bond issue. In its bond prospectus, it said climate change could potentially have a “material adverse effect” on its business.
When it comes to an IPO, equity investors require more information about potential risks and how companies plan to deal with them, as they are more exposed than bondholders if a business runs into trouble.
“Companies need to lead with the answers in the prospectus, rather than have two or three paragraphs describing potential risks from environmental issues,” said Nick O’Donnell, partner in the corporate department at law firm Baker McKenzie.
“An oil and gas company needs to be thinking about how to explain the story over the next 20 years and bring it out into a separate section rather than hiding it away in the prospectus, it needs to use it as a selling tool. And also, once the IPO is done, every annual report should have a standalone ESG section.”
Unlike other major oil companies, Aramco doesn’t have a separate report laying out how it addresses ESG issues such as labour practices and resource scarcity, while it does not publish the carbon emissions from products it sells. Until this year’s bond issue, it also kept its finances under wraps.
The company does however have an Environmental Protection Department, sponsors sustainability initiatives and is a founding member of the Oil and Gas Climate Initiative, which is led by 13 top energy companies and aims to cut emissions of methane, a potent greenhouse gas.
On Aug. 12 Aramco published information on the intensity of its hydrocarbon mix for the first time. It disclosed the amount of greenhouse gases from each barrel it produces.
Aramco’s senior vice president of finance Khalid al-Dabbagh said during an earnings call this month that its carbon emissions from “upstream” exploration and production were the lowest among its peers.
A study published by Science magazine last year found carbon emissions from Saudi Arabia’s crude production were the world’s second lowest after Denmark, as a result of having a small number of highly productive oilfields.
THE OIL PRICE
Aramco says that, with the global economy forecast to double in size by 2050, oil and gas will remain essential.
“Saudi Aramco is determined to not only meet the world’s growing demand for ample, reliable and affordable energy but to meet the world’s growing demand for much cleaner fuel,” it told Reuters.
“Alternatives are still facing significant technological, economic and infrastructure hurdles, and the history of past energy transitions shows that these developments take time.”
The company has also moved to diversify into gas and chemicals and is using renewable energy in its facilities.
But Aramco still, ultimately, represents a bet on the price of oil.
It generated net income of $111 billion in 2018, over a third more than the combined total of the five “super-majors” ExxonMobil (XOM.N), Royal Dutch Shell (RDSa.AS), BP (BP.L), Chevron (CVX.N) and Total (TOTF.PA).
In 2016, when the oil price hit 13-year lows, Aramco’s net income was only $13 billion, according to its bond prospectus where it unveiled its finances for the first time, based on current exchange rates. Its earnings fell 12% in the first half of 2019, mainly on lower oil prices.
Concerns about future demand for fossil fuels have weighed on the sector. Since 2016, when Prince Mohammed first flagged an IPO, the 12-months forward price to earnings ratio of five of the world’s top listed oil companies has fallen to 12 from 21 on average, according to Reuters calculations, lagging the FTSE 100 and the STOXX Europe 600 Oil & Gas index averages.
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AN INFLUX OF CAPITAL
Using a broad measure, there was global sustainable investment of $30.1 trillion across the world’s five major markets at the end of 2018, according to the Global Sustainable Investment Review here, more than a quarter of all assets under management globally. That compares with $22.8 trillion in 2016.
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“Given the influx of capital into the ESG space, Aramco’s IPO would have been better off going public 5-10 years ago,” said Joseph di Virgilio, global equities portfolio manager at New York-based Romulus Asset Management, which has $900 million in assets under management.
“An IPO today would still be the largest of its kind, but many asset managers focusing solely on ESG may not participate.”
The world’s top listed oil and gas companies have come under heavy pressure from investors and climate groups in recent years to outline strategies to reduce their carbon footprint.
Shell, BP and others have agreed, together with shareholders, on carbon reduction targets for some of operations and to increase spending on renewable energies. U.S. major ExxonMobil, the world’s top publicly traded oil and gas company, has resisted adopting targets.
Britain’s biggest asset manager LGIM removed Exxon from its 5 billion pounds ($6.3 billion) Future World funds for what it said was a failure to confront threats posed by climate change. LGIM did not respond to a request for comment on whether it would buy shares in Aramco’s potential IPO.
Sarasin & Partners said in July it had sold nearly 20% of its holdings in Shell, saying its spending plans were out of sync with international targets to battle climate change. The rest of the stake is under review.
The asset manager, which has nearly 14 billion pounds in assets under management, didn’t participate in Aramco’s bond offering and Landell-Mills said they would be unlikely to invest in any IPO.
Additional reporting by Ron Bousso in London and Victoria Klesty in Oslo; Editing by Carmel Crimmins and Pravin Char
Doha – Many coastal cities in the Middle East and North African (MENA) region would be flooded if sea levels rise, the Al-Attiyah Foundation has said in its recent Sustainability Digest.
The literature on climate change risks in the MENA region has focused mainly on the issues of temperature increase and water scarcity, as both phenomena have been directly affecting the populations, it said.
“However, there are lesser known issues, such as sea-level rise. This is a risk to the population and national security challenge for Qatar since 96% of the population is living on coastal areas – with most in the capital city of Doha. Many coastal cities in the region would also be flooded if sea levels rise,” the Al-Attiyah Foundation said.
In the digest, the Al-Attiyah Foundation also explored the implications and challenges of the climatic impacts already evident in many regions of the world, with countless nations focusing on adaptation.
Adaptation is the process in which nations adjust to the current effects of climate change while preparing for future challenges. It refers to the practical actions, strategies, and processes that seek to lower the risks posed by these changes, as well as make the most beneficial opportunities, such as longer planting seasons or increased crop production in certain areas.
Climate change mitigation denotes actions that limit the magnitude and/or rate of long-term climate change and generally involves a reduction in human (anthropogenic) emissions of greenhouse gases (GHGs). The ever-growing threat of climate change requires strategic intervention on both fronts: Adaptation and mitigation.
“An abundance of evidence demonstrates that there is a need to urgently assess vulnerabilities and identify adaptation options. Early planning can help to reduce further the adverse impacts of climate change. Governments, society and individuals must work together to create a sustainable future which will inevitably require changes in behaviour, innovative technologies and practices,” the Al-Attiyah Foundation noted.
It said, “The two words that are hitting global headlines daily; causing huge concern for some and potentially ignored by many. The World Economic Forum (WEF) suggests we are sleep-walking into a catastrophe, whilst others believe innovation, collaboration and swift action now, could reverse the trend.”
In January this year, the WEF released its Global Risks Report 2019 on the major threats to the world economy. For the third year in a row, the report stated that environmental-related risks account for three of the top five global risks by likelihood, and four of the top five risks by economic impact, namely, failure of climate-change mitigation and adaptation; extreme weather events; water crises and natural disasters.
The report bleakly concluded that of all the risks, it is in relation to the environment that the world is most clearly not doing enough.
With a combination of scale, a growing population, outstanding irradiation, and available capital, solar PV should be a ‘no brainer’ for the Kingdom of Saudi Arabia. But early explorations of the technology have soured expectations, and progress has come in fits and starts.
Saudi Arabia’s renewable energy sector over the years can be best described as a roller coaster. Just when momentum seemed to be building, the ride came to a halt. Then it began to move, but never really gave potential investors the confidence needed for serious acceleration. Progress started to take shape in 2016 and has continued, showing that this time is different.
Yet, to understand how the country got to where it is today, it’s important to know where Saudi Arabia has been, and that stems all the way back to 1977.
Much like the creation of the national oil company Saudi Aramco — formed between the United States and Saudi Arabia — solar power has been explored as part of a bilateral partnership between the two countries. Saudi Arabia’s National Center for Science and Technology (now known as the King Abdulaziz City for Science and Technology or KACST) and the United States Department of Energy (DOE) struck a deal four decades ago for the Saudi Solar Village Project. The five-year agreement included $50 million from both countries and was extended for three more years. What resulted was a 350 kW solar PV system located 50 kilometers from Riyadh, as well as an additional 350 kW solar hydrogen demonstration plant.
The system operated well for its time, but the technology was nowhere near where it is today, which resulted in panel degradation of 20%. Operating temperatures were much higher than originally specified, and the heat sink insufficient for cooling.
From there continued a list of projects, including solar-powered water desalination, solar hydrogen utilization, solar water heating, and other PV research projects.
In 1990, the Persian Gulf War erupted and once again, Saudi Arabia saw solar power come via the United States. Solar panels were used to power GPS satellites, but just like the problem seen in the solar village, modules again quickly deteriorated in the harsh desert conditions.
There is little doubt that these observations helped shape the kingdom’s solar PV sector — and industry in general — but it would still take many years before substantial movement could be seen.
In April 2010, the King Abdullah City for Atomic and Renewable Energy (K.A.CARE) was established to be the “driving force for making atomic and renewable energy an integral part of a national sustainable energy mix.”
K.A.CARE’s target was to have 41 GW of renewable energy by 2032, with 16 GW of solar PV. In 2011, a contract was signed to establish a polysilicon plant in Jubail, which would begin the production of solar cell materials. Polysilicon Technology, alongside Hyundai Engineering and KCC Engineering and Construction, announced that it would build a $380 million plant to produce 3,350 metric tons of solar-grade polysilicon, with future expansion plans. This was one of many announcements that failed to materialize, as developer Polysilicon Technology later went bankrupt, according to local sources.
K.A.CARE went a step further in February 2013, when it published a white paper that announced a new renewable energy target of 54 GW by 2032 (41 GW was to be solar). And in the first five years, it planned for 5.1 GW to be installed, with 23.9 GW by 2020. The white paper has since been removed from the organization’s website, and K.A.CARE’s renewable energy ambitions disappeared along with it, as it began to focus more on nuclear power.
The new crown prince
Volatility in oil prices began in 2014, and it forced the country to broadly rethink its economic policies.
As Saudi Arabia grappled with the new normal of low oil prices, then deputy crown prince, Mohammed bin Salman, released a new economic vision for the country. The National Transformation Plan, part of the wider Vision 2030 agenda, was launched in 2016. It included a target to have 9.5 GW of solar and wind power feeding electricity into the national grid by 2023. It was understandable that the plan was met with leeriness, considering previous attempts to jump-start a renewable energy market in the country, but this time was different. This was the first time that Saudi Arabia had a government mandate to incorporate renewable energy into its overall energy mix.
In 2017, the Renewable Energy Project Development Office (REPDO) was created, featuring members from K.A.CARE, Saudi Aramco, Saudi Electricity Company, and the Electricity and Cogeneration Regulatory Authority. The new unit fell under the energy ministry’s oversight, and immediately began accepting applications from companies that were looking to participate in the development of 700 MW of solar and wind capacity projects.
Local company ACWA Power came in with the winning bid for the first utility-scale solar PV plant, Sakaka, at $0.0234/kWh. “PV is a no-brainer in our part of the world [to supply] a significant source of load,” said ACWA chief executive officer Paddy Padmanathan.
Yet what was also significant was how REPDO announced the winning bids, which was done via live stream. This showed a level of transparency that isn’t seen anywhere else in the region’s renewable energy sector.
In November 2018, Saudi Arabia’s first utility-scale solar PV project began construction, with more than 1.18 million modules and 1,200 new jobs. The Sakaka solar power plant began a new era in the kingdom, heralding a “more to come” drive with at least seven projects to be tendered in this year alone. And people started to believe it. In fact, Padmanathan said that throughout the region, more companies are jumping into the market — and they’re looking at Saudi Arabia. He estimates that over the past five years, there has been growth of 20% of new market players trying to get into the Middle East’s solar sector.
“Within the next five years, there will be a real race to deploy as much PV as possible throughout the region,” Padmanathan added.
And Saudi Arabia is a market mover for any sector, given its size and population of almost 33 million. So much so that many companies separate Saudi Arabia from their regional reports so that its size doesn’t skew results. The potential for the kingdom’s solar industry, coupled with its goal of creating a manufacturing hub, is enough to once again entice investors.
“We’ve been pushing anyone we’ve worked with for many years saying, ‘If you want to work with us and want to capture meaningful volumes — industrialize inside the kingdom,’” said Padmanathan.
Earlier this year, a Saudi consortium made up of the National Industrial Clusters Development Program and petrochemical giant SABIC, signed a memorandum of understanding with Longi Group and OCI for the development of a fully integrated solar manufacturing facility in the country. And such decisions may create momentum for others to move, particularly considering a potentially more favorable policy framework.
Gus Schellekens, a partner at the clean energy division of the consultancy EY, said that Saudi Arabia today is very different than pre-Vision 2030.
“New businesses are being set up that are very different to the old world that delivered success for the past 40 years,” Schellekens explained. Yet Saudi Arabia is still finding its footing. The head of REPDO, Turki Al Shehri, recently left the organization to join France’s Engie as the chief executive of Saudi Arabia. There has so far been no announcement about a replacement and sources have said that the energy ministry is instead looking to create a more centralized system.
It’s never an easy road when introducing a new model or system on a large scale, especially if people continue to focus on previous mistakes. “In the long run, there remains huge potential for Saudi Arabia, but it’s important to acknowledge practical challenges, and build on a robust plan that is integrated with other initiatives,” Schellekens concluded.
The global energy economy is undergoing a rapid transition from ‘hydrocarbon molecules to electrons’: in other words, from fossil fuels to renewables and low-carbon electricity. Leading energy industry players and analysts – the energy-forecasting ‘establishment’ – are seriously underestimating the speed and depth of this transition. This in part reflects the vested interests that dominate that establishment. By contrast, the financial sector – which has little or no vested interest in fossil fuels – understands what is going on and is taking the transition on board.
The history of past energy transitions – including the US’s shift from wood to coal in the late 19th and early 20th centuries, and the French adoption of nuclear power on a wide scale in the 1980s – provides useful context for analysis of this trend. Such transitions have been triggered by factors ranging from market upheaval to technological change, with the technological element typically reinforcing the transition.
A similar dynamic, involving triggers and reinforcing factors, is in evidence today. The current transition in the global energy system has been triggered, in the first instance, by concerns over climate change and recognition of the imperative of shifting to a lower-carbon economy. In some places, growing concerns over urban air quality have overtaken climate change as a driver of government policy in support of the transition. The reinforcing factors include the falling costs of renewables and the rapid market penetration of electric vehicles (EVs). To these factors can be added ongoing uncertainty over the possibility of another oil price shock; and rises in oil product prices that are independent of movements in crude oil prices – a phenomenon sometimes known as ‘OECD disease’.
If the transition to renewables and low-carbon electricity happens faster than the energy establishment anticipates, the implications for exporters of oil and for the geopolitics of oil will be very serious. For example, the failure of many oil-exporting countries to reduce their dependence on hydrocarbon revenues and diversify their economies will leave them extremely vulnerable to reduced oil and gas demand in their main markets. The countries of the Middle East and North Africa (MENA) region will be particularly exposed, with the possible consequences including an increase in the incidence of state failure in a region already suffering the fallout from having signally failed to address the causes of the Arab uprisings since 2011. Increased political and economic turbulence in the MENA region would also have the potential to create serious migration problems for Europe.
The geopolitics of oil over the past 120 years have played a central role in international relations. Indeed some would argue that geopolitical rivalry over access to, and control of, oil supplies has been the source of much of the conflict witnessed in the 20th century (Yergin, 1991). The rise of renewables implicit in the current energy transition could well change this status quo. Renewables are widely used and widely produced. Currently, their availability is constrained neither by the agendas of dominant fuel suppliers nor by the threat of physical disruption to the strategic transit routes along which traded resources are typically shipped. There are certainly supply constraints associated with some minerals required for renewable energy technologies, but these hardly compare with the conflicts around oil supply, and most such constraints, in any case, are easily managed. Thus, as this energy transition proceeds, oil geopolitics will begin to fade away as an issue of concern.