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MENA construction boom with Saudi leading and Egypt, Ethiopia shining

MENA construction boom with Saudi leading and Egypt, Ethiopia shining

Seban Scaria, ZAWYA of October 3rd, 2019 reported that MENA construction boom with Saudi leading and Egypt, Ethiopia shining in Africa but according to GlobalData, construction in the same region has been relatively sluggish and is forecast to grow at 3.3% in 2019, with the pace of growth then accelerating throughout the forecast period to reach 4.9% by 2022 – 2023.  Whilst awaiting some more clarifications, here are Seban Scaria’s thoughts.

MENA construction boom: Saudi leads market, Egypt, Ethiopia shine in Africa

Significance of construction in Saudi Arabia is accentuated by key transport and mobility schemes

An Asian labourer looks on as he works at the construction site of a building in Riyadh, Saudi Arabia. Image for illustrative purposes.

An Asian labourer looks on as he works at the construction site of a building in Riyadh, Saudi Arabia. Image for illustrative purposes.

REUTERS/Faisal Al Nasser

Construction activity in the Middle East and North Africa (MENA) region has been relatively sluggish and is forecast to grow at 3.3 percent in 2019.

However, after a lacklustre 2019, construction growth in the region is forecasted to steadily improve in the next four years, to reach 4.9 percent by 2022-2023, data and analytics company GlobalData said in its Global Construction Outlook report.

Government revenues in the Gulf countries have been affected due to low oil prices. Assuming oil prices stay relatively high, large-scale investment in infrastructure projects – mostly related to transport – will be a key driving force behind the growth in the region, the report said.

Saudi Arabia remains the largest regional construction market in the Middle East, despite a contraction in construction in the kingdom in recent years. Construction output is forecast to recover in 2019, growing by 2.6 percent, before posting average growth of 3.8 percent in 2020-2023, the report said.

Yasmine Ghozzi, Economist at GlobalData, said: “The construction market started on a positive note in Saudi Arabia in 2019, growing by 1.3 percent year-on-year in Q1 in real value-add terms, attributed to rising oil prices and a surge in the non-crude sector.”

“The significance of construction in Saudi Arabia is accentuated by key transport and mobility schemes such as Riyadh Metro; social infrastructure developments such as the Ministry of Housing’s Sakani programme; and energy megaprojects such as the state-owned Aramco’s Berri and Marjan oil fields,” she added.

The report pointed out that construction boom in Qatar, that began almost a decade ago, seems to have run its course as major projects are largely completed.  Construction output decreased by 1.2 percent year-on-year in Q1 2019, a sharp deceleration after years of rapid expansion.

“The Qatari construction sector will slow relative to previous years, in general, but the turnaround will come from the North Field Expansion (NFE) project where Qatar Petroleum announced its aim to increase Qatar’s LNG production from current 77mtpa to 110mtpa within five years and has assigned Qatargas as the operator of the project. Meanwhile, work on the Hamad International Airport and New Doha Port will support growth in the airport and port sectors,” Ghozzi said.

However, one of the region’s brightest spots will be Egypt, where GlobalData predicts that construction will expand by an annual average of 11.3 percent between 2019 and 2023.

“Egypt’s economy is forecast to expand at a relatively rapid rate over the next two years, driven by sustained growth in natural gas production and a recovery in tourism. Delivering an ambitious renewable energy program is a priority for the government. Construction activity is also being driven by Cairo’s urban development program, which could involve building 23 new cities,” Ghozzi said.

The pace of growth in sub-Saharan Africa will be particularly strong, averaging 6 percent a year in 2019–2023, Global data said.

According to the report, construction activity in Nigeria will accelerate steadily, supported by government efforts to revitalise the economy by focusing on developing the country’s infrastructure.

But Ethiopia will be Africa’s star performer, with its construction industry continuing to improve in line with the country’s economic expansion, but the pace of expansion will ease back to single-digits, it said.

(Writing by Seban Scaria seban.scaria@refinitiv.com, editing by Anoop Menon)

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One of the Four Corners of the Arabian Peninsula

One of the Four Corners of the Arabian Peninsula

Despite or in spite of the far from peaceful happenings in one of the four corners of the Arabian peninsula, life carries on unperturbed elsewhere and the following is about what is happening in the opposite corner, i.e.:

One of the Four Corners of the Arabian Peninsula
Energy transition the buzzword, but a fossil future from the Gulf by ET Energy World

Energy ‘transition’ the buzzword, but a fossil future for the Gulf.

ABU DHABI, September 15, 2019  — In the vast air-conditioned halls of an Abu Dhabi conference centre, the world’s much-vaunted transition to clean energy is the buzzword in sessions of a top industry gathering.

But many executives and officials from oil-dependent Gulf states insist that while the change to renewables is essential, fossil fuels remain the future at least for the next few decades, despite the urgent need to fight climate change.

The debate has taken centre stage at this week’s World Energy Congress, with many officials calling for accelerating the process of moving to clean power sources and minimising carbon emissions.

Speakers addressed issues like the role of nuclear, hydrogen gas and other non-conventional sources of energy as a replacement for fossil fuels which currently account for over three-quarters of the world’s energy consumption.

However, delegates from oil-producing countries and particularly those in the Gulf argued that although the transition to clean energy sources must be supported, they will not be able to meet rising demand any time soon.

“For decades to come the world will still rely on oil and gas as the majority source of energy,” said the head of Abu Dhabi Oil Co. Jaber Sultan.

“About $11 trillion of investment in oil and gas is needed to keep up with current projected demand,” over the next two decades, he told the congress which was attended by representatives of 150 nations and over 400 CEOs.

Energy from increasingly competitive renewable sources has quadrupled globally in just a decade, but insatiable demand for energy particularly from developing economies saw power sector emissions rise 10 per cent, a UN report said last week. 

“All energy transitions — including this one — take decades, with many challenges along the road,” the CEO of Saudi energy giant Aramco, Amin Nasser, said at the conference.

Nasser said his country supports the growing contribution of alternatives, but criticised policies adopted by many governments that do not consider “the long-term nature of our business and the need for orderly transition”.

Addicted to oil 

Oil is still the lifeline for the Gulf states, contributing at least 70 per cent of national revenues across the region which has been cushioned by decades of immense profits from the flow of “black gold”.

Gulf nations have invested tens of billions of dollars in clean energy projects, mainly in solar and nuclear.

Dubai has launched the world’s largest solar energy project, with a price tag of $13.6 billion and the capacity to satisfy a quarter of the energy-hungry emirate’s current needs when it comes online in 2030.

But critics say the addiction to oil is a tough one to kick, particularly when supplies remain abundant and the massive investment in infrastructure necessary to switch to renewables is daunting.

“A global shift from dirty fossil fuel to renewable energy is economically, technically and technologically feasible… All that is missing is political will!” said Julien Jreissati from Greenpeace in the Middle East.

He said while the United Arab Emirates has put plans into action, “Saudi Arabia which has always made big announcements regarding their renewable energy ambitions is lagging behind as their projects and targets remain ink on paper.’

“There is no doubt that the world will leave oil behind. The only question remaining is when will this happen?”

Despite important technological advances made in the past decade, renewable energy sources still make up just around 18 per cent and nuclear adds another 6 per cent of the world’s energy mix. 

In the past decade, the adoption of wind and solar energy picked up rapidly as the production cost plummeted to levels close to that of oil and gas.

But the Abu Dhabi conference saw calls for accelerated innovation and “disruptive” technology to speed the transition as the world prepares for global energy demand to peak between 2020 and 2025, according to the World Energy Council.

Estonian President Kersti Kaljulaid said that sustainable and environmentally friendly energy practices must be aligned with national and global economic policies in order to have the required impact.

“It makes more economic sense to apply all green technologies globally, and if this happens we might go to being CO2-free energy users 5 or 10 or 20 years quicker,” she told the conference.

“I prefer that market forces, pushed by smart policymaking and legal space-setting, act quickly and save us all from the alternative.”

Related: Barkindo: Concept of what ‘peak oil’ means has shifted

Gulf wealth: all that glitters is not gold

Gulf wealth: all that glitters is not gold

Gulf wealth: all that glitters is not gold

Gulf wealth: all that glitters is not gold. Little suggests that fabulously wealthy Gulf states and their Middle Eastern and North African beneficiaries have recognized what is perhaps the most important lesson of this year’s popular uprisings in Algeria and Sudan and the 2011 Arab revolts: All that glitters is not gold.

Gulf wealth: All that glitters is not gold

by James M. Dorsey, Sep 5

Saudi Arabia, the United Arab Emirates and to a lesser extent Kuwait have in the last decade invested billions of dollars in either reversing or hollowing out the revolts’ achievements in a bid to ensure that political change elsewhere in the region does not come to haunt them.

Qatar, in a counterintuitive strategy that has earned it the ire of the rulers of Saudi Arabia and the UAE, has sought to achieve the same goal by attempting to be on the right side of the region’s forces of change.

The irony is that both approaches, despite also involving huge investments at home in economic diversification, education, and healthcare, could produce the very result Gulf states seek to avoid: a region that has many of the trappings of 21st century knowledge states but that is incapable of catering to the aspirations of a youth bulge expected to annually increase the work force by a million people over the next 12 years.

UNICEF, the United Nations Children’s Fund, concluded earlier this year, that the region’s youth bulge was a double-edged sword. It could either pose a threat to regional stability or be an asset for development.

Turning the youth bulge into an asset “requires urgent and significant investment to create opportunities for meaningful learning, social engagement and work, all of which are currently limited, particularly for young women and the most vulnerable,” the UN agency said in a report entitled MENA (Middle East and North Africa) Generation 2030.

UNICEF arrived at its conclusion even though Gulf states have adopted grandiose plans that envision them becoming within a matter of a decade or two diversified, knowledge-driven economies that enact the social reforms needed to create opportunity for all segments of society.

The group’s conclusion applies as much to the wealthy Gulf states as it does to the Arab beneficiaries of their politically motivated financial largesse.

The problems with the flexing of the Gulf states’ financial muscle as well as the implementation of reform plans are multi-fold.

They relate as much to quality of the upgrading of services such as education as they are about how political intent shapes development efforts and how high domestic debt in countries like Egypt, where 27 percent of government expenditure goes to interest payments, and Lebanon, which spends 38 percent of its budget on debt servicing, benefits Gulf banks and stymies social and economic development.

Credit rating agency Fitch recently downgraded Lebanon’s credit rating to CCC from B- because of “intensifying pressure on Lebanon’s financing model and increasing risks to the government’s debt servicing capacity.”

Gulf scholar Rohan Advani notes that Gulf institutions account for most of the financial sector investment in countries like Algeria, Egypt, Jordan, Iraq, Tunisia, Libya, Syria, and Yemen.

“In Lebanon, just over 50 percent of the country’s bank assets are held by GCC-related banks, in Palestine this figure is 63 per cent, and in Jordan it is as high as 86 percent,” Mr. Advani wrote in a review of political economist Adam Hanieh’s study of Gulf finance, Money, Markets, and Monarchies.

Mr Hanieh argues that the bulk of the debt payments are to financial establishments whose major shareholders include Gulf institutions in a process in which “the Arab state…increasingly mediates the transfer of national wealth to large Gulf-related banks.”

Mr Advani warned that “indebted governments are compelled to intensify a politics of austerity, further trapping these societies in cycles of debt. Investments in social programs or infrastructural developments are often stalled. Popular movements are unable to realize their demands at the state level due to the requirements of foreign creditors and domestic capitalists. The ensuing scenario is one where alternative politics are asphyxiated and increasingly circumscribed by an atrophied status quo.”

That may well be the purpose of the exercise with economic diversification efforts in the Gulf being driven more by the need of autocracies to upgrade their autocratic style and create opportunity for a restive youth in a bid to ensure regime survival rather than by the acknowledgement of a government’s responsibility to serve the people.

The result is a flawed approach to all aspects of reform.

In Saudi Arabia, Crown Prince Mohammed bin Salman’s Vision 2030 economic and social reform plan that calls for greater private sector involvement has turned into a top down effort that emphasizes state control with the government’s Public Investment Fund (PIF) as the key player.

A combination of depressed oil prices and the recent replacement of energy minister Khalid al-Falih as chairman of the board of Aramco by PIF head Yasir al-Rumayyan, a close associate of Prince Mohammed, raises questions about the state oil company’s positioning in advance of a much-touted initial public offering.

Ellen Wald, an energy analyst and author of a history of Aramco, the kingdom’s main source of revenue, noted that at PIF Mr. Al-Rumayyan had overseen investments more geared towards speculative gains than the sustainable growth of Saudi wealth.

Ms Wald said that raised the question whether Mr Al-Rumayyan’s objective with Aramco would be to serve the company’s long-term interests or those of the PIF.

Aramco this year bought a 70 per cent stake in petrochemicals maker Saudi Basic Industries Corp for US$ 69 billion in an effort to raise funds for PIF and delay the Aramco IPO that had originally been scheduled for 2018 but has since been delayed until 2020 or 2021. The megadeal is expected to boost the oil company’s downstream growth plans.

Nonetheless, Ms Wald cautions that Mr Al-Rumayyan’s appointment “doesn’t necessarily bode well for Aramco, which is a different kind of company. It has to make stable decisions for the long term,” she said.

By the same token, UNICEF warned that poverty, violent conflict, restrictive social norms, patriarchy, rights violations and lack of safe spaces for expression and recreation were limiting opportunities as well as civic adolescent and youth engagement.

Gulf emphasis on geopolitical dominance, regime survival and return on financial investment produces short term solutions that often exacerbate conflict, produce little trickle-down effect and few prospects for long-term stability.

“As a result, adolescents and youth in MENA (the Middle East and North Africa) feel disillusioned, with girls and young women, refugees, those with disabilities and the poor being particularly marginalised and underrepresented,” the UNICEF report said.

“Youth unemployment in the region is currently the highest in the world. Education systems are failing to prepare adolescents and youth for the workplace, and markets are not generating urgently needed jobs,” the report warned.

Gulf wealth glitters but if the UNICEF report is anything to go by, it has yet to demonstrate that it can produce the gold of a development that is sustainable and benefits not only all segments of Gulf societies but also of those across the region that have become dependent on it.

Gulf wealth: all that glitters is not gold

James M. Dorsey

Written by James M. Dorsey, an award-winning journalist covering ethnic and religious conflict. He blogs using soccer as a lens on the Middle East and North Africa’s fault lines. The Turbulent World of Middle East Soccer

Dr James M. Dorsey is a senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, an adjunct senior research fellow at the National University of Singapore’s Middle East Institute and co-director of the University of Wuerzburg’s Institute of Fan Culture.

A podcast version of this story is available on Soundcloud, ItunesSpotifyStitcherTuneInSpreakerPocket CastsTumblrPodbean and Castbox.

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OPEC members could see profits decrease in 2019

OPEC members could see profits decrease in 2019

Which oil countries are stealing the spotlight? per Hadi Khatib who writes on August 22, 2019, that OPEC members could see profits decrease in 2019.

OPEC members could see profits decrease in 2019
  • OPEC earned about $711 billion in net oil export revenues (unadjusted for inflation) in 2018
  • Saudi Arabia accounted for the largest share of total OPEC earnings, $237 billion
  • India only imports between 4.5 and 5 million barrels per day of oil, but it is shaping up to be the biggest competitive space for producers

OPEC is still making money, despite challenges coming from every which way.

Be it falling prices, market volatility, regional insecurity, trade wars, armed conflict, talks of recession, US production, electric vehicles and renewable energy, or US Iranian sanctions, OPEC still finds a way to generate billions in revenues.

Now, mixed with current production leaders are a few new players making a splash.

OPEC net oil export revenues
 The U.S. Energy Information Administration (EIA) estimates that members of the Organization of the Petroleum Exporting Countries (OPEC) earned about $711 billion in net oil export revenues (unadjusted for inflation) in 2018.

OPEC members could see profits decrease in 2019

The 2018 net oil export revenues increased by 32% from the $538 billion earned in 2017, mainly as a result of the increase in average annual crude oil prices during the year and a slight increase in OPEC net oil exports.

 Saudi Arabia accounted for the largest share of total OPEC earnings, $237 billion in 2018, representing one-third of total OPEC oil revenues.

EIA expects that OPEC net oil export revenues will decline to about $604 billion (unadjusted for inflation) in 2019, based on forecasts of global oil prices and OPEC production levels in EIA’s August 2019 Short-Term Energy Outlook (STEO), according to Hellenic Shipping News.

EIA’s forecasts that OPEC crude oil production will average 30.1 million barrels per day (BPD) in 2019, 1.8 million BPD lower than in 2018.

For 2020, OPEC revenues are expected to be $580 billion, largely as a result of lower OPEC production.

Important countries to watch for in the oil sector

Forbes lists 5 Most Important Countries To Watch For Oil Markets

5. India—Right now India only imports between 4.5 and 5 million barrels per day of oil, but it is shaping up to be the biggest competitive space for producers. 

India is the third-largest oil consumer in the world. Previously, the biggest competition ground for oil producers was for sales to China, but with 1.37 billion people, India has the potential to impact the market much like China has.

4. Saudi Arabia—This Arab Gulf nation owns the world’s most profitable (oil) company, houses the second-largest proven oil reserves in the world, and has the most spare capacity of any country. Oil from Saudi Arabia fuels much of east Asia. Aramco is also expanding its exports to India to compensate for lost Iranian oil.  

3. Russia—Russia can produce in excess of 10 million barrels per day, or one-tenth of the world’s oil production. Russia is not a member of OPEC, but as the vital piece in the OPEC and Non-OPEC Declaration of Cooperation.

Read: Global Oil Markets – OPEC vs US shale rivalry escalates

2. China—This country is the second-largest consumer of oil and is the largest oil importer in the world at around 10.64 million barrels per day. China is such an important oil consumer that any indication that economic growth in China is slowing sends oil prices tumbling.  

1.  United States –The U.S. is currently producing oil at record levels (12.3 million barrels per day according to the EIA). This is being driven by the shale oil industry. The U.S has shown its ability to impact other countries’ oil business, as it did with Iran’s exports in recent months. Presidential tweets also impact prices.

Author Hadi Khatib is a business editor with more than 15 years’ experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.

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Unsteady progress of a potential MENA solar superpower

Unsteady progress of a potential MENA solar superpower

PV MAGAZINE dated August 17, 2019, proposed for The weekend read, this Unsteady progress of a potential MENA solar superpower article by Author
LeAnne Graves
is from pv magazine, July edition.

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.

Memory lane

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.

Broken promises

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.

List of solar energy projects executed by KACST
ProjectsLocationYearsApplications
350 kW PV systemSolar Village1981-87DC/AC electricity for remote village
350 kW PV hydrogen production plantSolar Village1987-93Demonstration plant for hydrogen production
Solar coolingSaudi Universities1981-87Development of solar cooling laboratory
1 kW solar hydrogen generatorSolar Village1983-93Hydrogen production, testing, measurement laboratory scale
2 kW solar hydrogen (50 kWh)KAU, Jeddah1986-91Testing electrode materials for solar hydrogen plant
3 kW PV test systemSolar Village1987-90Demonstration of climactic effects
4 kW PV systemSouth of Saudi Arabia1996DC/AC grid connected
6 kW PV systemSolar Village1996-97Grid connection
Water desalination with PV (0.6m3/hour)Sadous Village1994-96PV/RO interface
PV in agriculture (4 kWp)Muzahmia1996DC/AC grid connected
Long-term performance of PV (3 kW)Solar VillageSince 1990Performance evaluation
Fuel cell development (100 – 1000 W)Solar Village1993-95Hydrogen utilization
Internal combustion engine (ICE)Solar Village1993-95Hydrogen utilization
Solar radiation measurement12 stations1994-95Saudi Solar Atlas
Wind energy measurement5 stations1994-95Saudi Solar Atlas
Geothermal power assessmentVarious locations1995-96Establishment of accurate resource data
Solar dryersAl-Hassa, Latif1988-93Food dryers (dates / vegetables etc.)
Solar thermal dishes (2×50 kW)Solar Village1986-94Advanced solar Sterling Engine
Energy management in buildingsDammam1988-93Energy efficiency
Solar collector developmentSolar Village1993-97Domestic, industrial, 
Saudi Arabia struggles to end oil addiction

Saudi Arabia struggles to end oil addiction

Reuters’ BUSINESS NEWS on July 25, 2019, posted this article titled Old habits die hard: Saudi Arabia struggles to end oil addiction written by Rania El Gamal and Saeed Azhar to clearly show us how things of fossil fuels nature tend not to change a bit if not at all and despite all efforts to the contrary.

DUBAI (Reuters) – When Saudi Aramco was on the verge of a deal last year to buy a stake in an Indian oil refinery, its boss quickly boarded a company jet in Paris and flew to New Delhi.

FILE PHOTO: Saudi Energy Minister Khalid al-Falih addresses the media flanked by India’s Oil Minister Dharmendra Pradhan (L) and Saudi Aramco Chief Executive Officer Amin Nasser (R) during International Energy Forum (IEF) to announce Saudi Aramco’s participation in a planned refinery project in the western state of Maharashtra, in New Delhi, India, April 11, 2018. REUTERS/Altaf Hussain/File Photo

Chief executive Amin Nasser arrived unannounced early on April 11, 2018, finalised the agreement and signed it later that day. Negotiators had just finished hammering out the details.

His last-minute flight, after a business trip to France with Crown Prince Mohammed bin Salman, underlined the importance of the deal both to Saudi Arabia and its huge state oil firm.

The planned investment in the $44-billion (£35 billion) refinery and petrochemical project on India’s west coast is a prime example of how Aramco is trying to squeeze value out of each barrel of oil it produces by snapping up refining capacity, mainly in fast-growing Asia.

But it also underlines the challenge Saudi Arabia faces in reducing its heavy economic reliance on oil. The results of its programme to diversify have been mixed, some projects are moving slowly and others are too ambitious, economic and energy analysts say.

Prince Mohammed’s stated goal of being able to “live without oil” by as early as 2020 looks set to be missed.

“Saudi Arabia’s oil addiction is as strong as ever…economically, of course, the Saudi economy runs on oil. Oil still dominates GDP, exports and government revenues,” said Jim Krane, energy fellow at Rice University’s Baker Institute.

“That said, Saudi Arabia is changing its relationship with oil. The dependence remains. But the kingdom is squeezing more value out of its oil,” he said.

The slow progress means the Saudi economy is likely to remain hostage to oil prices for longer than planned. Any delay in implementing change also risks denting Prince Mohammed’s image as a reformer.

SECURING THE FUTURE

Announcing his plan three years ago, the Crown Prince said Saudi Arabia must end its “oil addiction” to ensure the world’s biggest oil exporter and second largest producer cannot be “at the mercy of commodity price volatility or external markets.”

He spoke after a fall in crude oil prices boosted the Saudi fiscal deficit to about 15% of gross domestic product in 2015, slowing government spending and economic growth.

This year the deficit could hit 7% of GDP, according to the International Monetary Fund, as oil-related growth slows following production cuts led by the Organization of the Petroleum Exporting Countries.

Aramco is central to the Crown Prince’s reform plan in several ways, not least because its planned partial privatisation will generate income for the reforms.

The company has also been involved in most of the kingdom’s high-profile deals in the last two years as it increased investment in refining and petrochemicals.

In that time, Aramco has announced at least $50 billion worth of investments in Saudi Arabia, Asia and the United States. It aims to almost triple its chemicals production to 34 million metric tons per year by 2030 and raise its global refining capacity to 8-10 million barrels per day (bpd) from more than 5 million bpd.

In March last year, Aramco finalised a deal to buy a $7 billion stake in a refinery and petrochemicals project with Malaysia’s Petronas. A month later, Nasser and a consortium of Indian companies signed the initial deal that would give Aramco a stake in the planned 1.2 million bpd refinery in India’s western Maharashtra state.

In February of this year, Aramco signed a $10 billion deal for a refining and petrochemical complex in China. Last month it signed 12 deals with South Korea worth billions of dollars, ranging from ship building to an expansion of a refinery owned by Aramco.

“This is what I call the back to basics approach to economic diversification in the Gulf,” said Robin Mills, chief executive of energy consultancy Qamar Energy in Dubai. “The energy industry has the assets, capital and skills, so it’s the engine of new projects – refining, petrochemicals, gas and so on.”

MR UPSTREAM LOOKS DOWNSTREAM

In March, Aramco said it was acquiring a 70 percent stake in petrochemicals firm Saudi Basic Industries (SABIC) (2010.SE) for $69.1 billion from the national wealth fund, known as the Public Investment Fund (PIF).

Aramco is gaining new markets for its crude and building a global downstream presence – the refining, processing and purifying end of the production line. Its aim is to become a global leader in chemicals.

“We are not investing left and right, we are investing in the right markets, we are investing in the right refining assets, we are investing where we create value from fuels to chemicals,” Abdulaziz al-Judaimi, Aramco’s Senior Vice President for Downstream, told Reuters in May.

Nasser, previously known by Aramco employees as Mr Upstream, is leading the downstream expansion. He wants to bring Aramco’s refining capacity closer to its oil production potential, which is now at 12 million bpd.

Aramco wants gradually to match the downstream presence of its big competitors and, like Saudi Arabia as a whole, to reduce its vulnerability to any downturn in demand for crude oil or oil price volatility.

“You want to secure your demand in key markets,” said an industry source familiar with Saudi Arabia’s oil plans. “You have to become more dynamic, to become more adaptable, you have to make sure that you secure your future. Malaysia was one example, India was another.”

For years, Aramco has been a regular crude supplier to Indian refiners via long-term crude contracts.

Yet while it has stakes in refineries or storage assets in other important Asia markets such as China, Japan and South Korea – and owns the largest refinery in the United States – it has not secured that same access in India, a fast-growing market for fuel and petrochemicals.Slideshow (2 Images)

“India is a market that you just can’t ignore anymore,” an industry source said.

Aramco has also shifted its marketing strategy in China. It is now more oriented towards independent refiners to boost Saudi crude sales after years of dealing almost exclusively with state-owned Chinese firms.

SLOW PROGRESS

But overall, plans to wean Saudi Arabia of oil have advanced slowly.

Few details have emerged of a $200-billion solar power-generation project announced by the PIF and Japan’s SoftBank in March 2018. It is unclear how or when the project will be executed, and Saudi’s Arabia’s energy ministry is moving ahead with its own solar projects.

In a blow to potential investment, the image of Saudi Arabia and the reputation of the Crown Prince have been damaged by the murder of journalist Jamal Khashoggi in the Saudi consulate in Istanbul last year.

Leading businessmen and politicians boycotted an investment forum meant to showcase the kingdom’s new future away from oil, and it was only big deals with Aramco that saved it.

Also, the partial privatisation of Aramco has been delayed since it set out its plans to acquire the stake in SABIC, though senior Saudi officials including Energy Minister Khalid al-Falih have said it could now happen in 2020-2021.

The PIF, chaired by Prince Mohammed, was meant to receive around $100 billion from the flotation. Instead it will get around $70 billion from the sale of its SABIC stake.

The PIF made its mark on the global stage three years ago by taking a $3.5- billion stake in Uber Technologies. But since 2016, the PIF’s direct investments overseas stand at just $10.5 billion, according to Refinitiv data, and many of the fund’s announced commitments have yet to materialise.

The funds’ main investments over the past two years were inequity shares in companies such as electric car makers Tesla (TSLA.O) and Lucid Motors and Gulf e-commerce platform Noon.com.

Such deals would not necessarily attract inward foreign investment, help develop industries or create jobs.

Additional reporting by Marwa Rashad and Hadeel Al Sayegh; writing by Rania El Gamal; editing by Ghaida Ghantous and Timothy Heritage

Our Standards: The Thomson Reuters Trust Principles.

A Saudi push to become a major natural gas player

A Saudi push to become a major natural gas player

A Saudi push to become a major natural gas player is as much about diversifying the kingdom’s domestic consumption and export mix as it is about taking advantage of harsh US economic sanctions against Iran designed to force a change of the Islamic republic’s policy, if not its regime.

Saudi gas ambitions likely to have geopolitical impact

By James M. Dorsey, April 29, 2019

Saudi Arabia scored an initial success with the sale of its first Liquified Natural Gas (LNG) cargo in Singapore, the trading hub for Asia and the Pacific, the world’s largest LNG market.

The sale speaks to the ambitions of Saudi Arabia’s national oil company, Aramco, that seeks to become a major gas player by partnering with producers across the globe, including in the Russian Artic, and developing its own reserves.

Aramco expects the partnerships to position it as major marketer and trader, primarily in the spot and short-term markets.

An Aramco delegation visited Pakistan earlier this month to discuss gas sales as a way of addressing the South Asian country’s energy shortage as it opens its multiple gas fields to foreign investors.

At the same time, Saudi Arabia is looking to become a gas exporter in its own right in the next five to six years after recently discovering major reserves in the Red Sea.

Saudi Energy Minister Khalid al-Falih said earlier this month that the kingdom was already in discussion with other Gulf states about building natural gas pipelines and would soon be commissioning feasibility studies.

Those discussions are certain not to include Qatar and Iran, two of the region and the world’s foremost producers and the kingdom’s primary regional bete noirs.

If anything, the Saudi move is not only part of its longer-term efforts to reduce its dependence on oil exports and diversify its economy but also an attempt to take advantage of the fact that Iran is severely hampered by the Trump administration’s ‘maximum pressure’ campaign against it.

The administration said earlier this month that it intended to reduce Iranian energy exports to zero by cancelling waivers it issued to eight buyers, including China, India, Turkey, Japan and South Korea.

The waivers granted the eight countries exemptions to sanctions imposed last year after the United States withdrew from the 2015 international agreement that curbed Iran’s nuclear program.

Similarly, with the development of Saudi gas exports and sales also intended to chip away at Qatar’s market share, the Gulf state is not an option.

Qatar’s diversification of its exports was a key factor in its ability to so far fend off a 23-month old Saudi-UAE-led economic and diplomatic boycott that, like in the case of Iran, is designed to force it to change its policies.

The two sides’ entrenched positions offer no prospect of a resolution of the dispute any time soon.

Saudi long-term gas ambitions could have shorter term consequences for its regional policies, particularly with regard to Iran.

The kingdom, perceived to be a proponent of regime change in Tehran, may prefer a substantial weakening of the Iranian government that keeps it contained and struggling to make ends meet, rather than the rise of a leadership acceptable to the West that would be allowed to quickly regain its place in global energy markets.

Striving for regime collapse rather than regime change would also allow Saudi Arabia to dampen prospects for Iran’s Indian-backed port of Chabahar, a mere 70 kilometres down the Arabian Sea coast from Gwadar, the Chinese-supported port in Pakistani Balochistan.

Saudi Arabia has pledged to build a US$10 billion refinery in Gwadar.

Saudi plans to develop its gas industry suggest that the kingdom needs a decade to realize them.

Aramco chief executive Amin Nasser said he expected US$150 billion to be invested in the Saudi gas sector over the next ten years. Mr. Nasser envisioned gas production increasing from 14 billion standard cubic feet to 23 billion by 2030.

“We are looking to shift from only satisfying our utility industry in the kingdom, which will happen especially with the increase in renewable and nuclear to be an exporter of gas and gas products,” Mr. Nasser said.

“Aramco’s international gas team has been given an open platform to look at gas acquisitions along the whole supply chain. They have been given significant financial firepower — in the billions of dollars,” he added.

The kingdom has expressed an interest in acquiring a 30 percent stake in Russia’s Novatek Arctic LNG project.

Access to the project’s gas would allow Saudi Arabia to negotiate long-term deals and/or sell cargoes on the spot market or increase domestic supply.

Saudi Arabia is also looking to buy natural gas assets in the United States.

A Saudi-Russian deal in the Artic would likely not only enhance the kingdom’s position but also bring Saudi Arabia, a member of OPEC, and Russia, which is not formally part of the cartel, closer together in their joint management of global oil supplies.

In a world of rising economic nationalism, Saudi gas ambitions are not being universally welcomed.

While there is little doubt that the Trump administration will look favourably at Saudi investment, some analysts are raising red flags.

Said Jude Clemente of JTC Energy Research Associates: “We simply cannot hand the quickly globalizing (via LNG) gas market to more risky exportersthat often have political goals that are contrary to ours (to put it politely).”

Dr. James M. Dorsey is a senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, an adjunct senior research fellow at the National University of Singapore’s Middle East Institute and co-director of the University of Wuerzburg’s Institute of Fan Culture.

A podcast version of this story is available on Soundcloud,ItunesSpotifyStitcherTuneInSpreakerPocket Casts and Tumblr

Middle Eastern economies more of a political than economic challenge

Middle Eastern economies more of a political than economic challenge

Al Jazeera’s Business & Economy produced this article on how and why Diversification of Middle Eastern economies is more a political than an economic challenge.

Why are Middle Eastern economies struggling to diversify?

by Adeel Malik

Why have Middle East’s oil-rich economies failed to diversify despite their tall promises and grandiose plans? The answer lies not in the absence of good technical plans or weak implementation, but in political incentives. If many other countries have been successfully able to diversify their economies it was not merely a result of good policies but the right political incentives of those who were in the driving seat.

General view of Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018 [File: Ahmed Jadallah/Reuters]

An enabling political framework has been a common denominator in all successful diversification experiments. Botswana’s experience underscores the role of stable political coalitions and favourable initial and external conditions. At its independence, Botswana inherited multiple constituencies representing divergent economic interests. This was complemented with the presence of political competition and stable coalitions. A third important factor was a favourable external environment. Botswana’s membership in the South African Customs Union served as a positive inducement for sensible macroeconomic reform. Together, all these factors played a part in protecting the interests of non-resource sectors.

The Malaysian experience reinforces the same message. At Malaysia’s independence, the Chinese community represented a powerful de facto economic force by virtue of their control of the Malaysian private sector. Their continued presence counter-balanced any tendencies for the natural resource sectors to grow at the expense of the private sector. In the political domain, the consociational agreement between the ethnic Malay and Chinese communities fostered a system of power sharing that protected the economic interests of Chinese businessmen. Bad macroeconomic policy – especially an overvalued exchange rate – was politically unacceptable to Chinese interests. It was both bad policy and bad politics. If domestic political economy was helpful, so was the country’s insertion into the regional trade circuit, which created positive regional spillovers that supported private sector development.

Clearly, each case is different and must be analysed on its own merit. But politics provides a common thread across these accounts. And, this is where Arab economies are especially challenged. Saving a few cases, most countries in the region did not inherit strong and diverse economic constituencies that could have gained political voice after independence, and counterbalanced the dominance of the oil economy. An unfavourable external environment, resulting in negative spillovers from regional conflict and instability, served as another impediment to diversification. The Middle East thus lacked all three factors that facilitated economic diversification in other countries: strong political coalitions, diverse economic constituencies and positive neighbourhood effects. With this adverse legacy, is there any real hope for diversification? In this regard, I have the following three points to make:

  • Successful diversification requires a new political settlement that allows elites to concede greater space to the private sector;
  • Diversification is unlikely to succeed without a regional vision that fosters complementarities among Arab economies and creates a shared economic space to deal with emergent economic challenges common to all states;
  • Sustained economic change in the Middle East requires a wider set of concessions that go beyond domestic and regional political elites. It also requires a candid and constructive geopolitical discourse that reconsiders the trade-off between a narrow, short-term, vision of geostrategic stability and long-run development.

Let me briefly explain these in turn.

Given the primacy of the political, the debate on diversification must begin with a discussion of elite incentives and political concessions. If a closure of the economy benefits rent-seeking elites, what will persuade them to concede greater economic space? What concessions are needed from the ruling elite and what will persuade them to surrender their control of the economy and the associated rents? Perhaps, they need to be compensated for the loss of rents from a levelling of the economic field. After all, new growth strategies in emerging markets are built on a happy (even if fragile) coexistence of economics and politics.

The Chinese example serves to illustrate how economic reform can be aligned with the interests of political elites. The Chinese political experience is decidedly based on centralised authoritarian control. But the system allows a balancing of competing interests. It co-exists with considerable regional decentralisation where local leaders derive strength from patronage – just as in any other developing country – but are equally strongly incentivised to ensure economic growth in their localities. Economic growth yields clear political dividends for local elites. And bureaucrats face strong performance incentives. As a result, growth of the economy has become an integral component of the political objective function. 

Beyond the oft-cited example of China, Africa’s recent success stories confirm the importance of elite incentives. Consider Ethiopia‘s recent economic transformation, which has placed it in the list of the 10 fastest growing economies of the world. Central to this growth experience has been the role of public investment in infrastructure and public enterprises, and the changing political orientation of state elites. The ruling political party managed to set up its own enterprises supported by specialised endowments geared towards promoting investment in underdeveloped regions. Although this model of party capitalism poses serious questions about market competition, it goes to shows that elites can favour an expansion of the economic pie when they are among its lead beneficiaries. This is, after all, a key point of North, Wallis and Weingast’s treatise on Violence and Social Orders. Change often begins with small outcomes and processes that are compatible with elite incentives. But, what begin as privileges for insiders can ultimately become universal rights for everyone else.

In short, the idea is not to search for the ideal growth experience that will uniquely fit all Arab contexts. Rather, it is to emphasize that whichever growth strategy the Middle East embarks upon should consider and accommodate political incentives. And, elites have rarely surrendered their economic control unless it became essential for their survival. The so-called “Arab Spring” was a recent tapping on the doors of power. Unfortunately, rather than resulting in any genuine economic concession, what we have instead seen, is business as usual. The only concessions that came through were financial concessions in the guise of cheap loans, salary hikes and free bonuses. But such temporary appeasement without changing the underlying rules of the game is unlikely to work for too long. And, the rules remain rigged in the favour businessmen in and around the royal circle. In North Africa, crony capitalism is rearing its head again, and insider deals continue to thrive across much of the region. In this backdrop, economic diversification will be difficult, if not impossible, to realise without a new political settlement that caters for a future beyond oil and conflict. At the very minimum, the region needs a new discourse on economic reform that mobilises public support for two or three fundamental concessions that elites must surrender for long-term economic revival.

Let me turn to the second idea. The argument, in brief, is that national diversification plans that disregard regional linkages in development are doomed to fail. It is important to recognize that, in the Middle Eastern case, the questions of national and regional development are closely interwoven. While national initiatives can kick-start economic revival, it will be difficult to sustain without regional market access. Few countries have effectively diversified without expanded markets and deeper trade reforms that regional trade liberalisation affords. Turkey’s recent economic success is built on a strategic cultivation of regional trade linkages. In Asia and Latin America, regional market connections offer an additional avenue for industrialisation through entry into global supply chains, which tend to conglomerate spatially. Arab countries are clearly disadvantaged in this regard. A larger coordinated effort is needed at the regional level to foster trade complementarities, establish regional public infrastructure, and relax trade barriers. Given the history of repeated failures at regional economic cooperation and the adverse security climate, this seems like a pipe dream. No matter how impractical, it will be difficult to sidestep the regional question in any new vision for Arab development. In political economy terms, the rationale for this is even stronger, since it is only through a regionally integrated merchant class that a stable constituency for economic and political reform will emerge. If the broader economic challenges faced by the Arab states are common, they also deserve a common response. Even if a cooperative solution does not serve the narrow factional interests of political elites, the Arab civil society must lend its weight behind the regional project.

This brings me to the role of geopolitics, the final element of my argument. In a region that has historically remained a hotbed of conflict and violence, it is difficult to conceive economic diversification in isolation from geopolitics. The powerful negative externalities emanating from regional instability have scaled back even the modest gains achieved on the economic front. Prior to the recent upsurge in violence, countries in the Levant had begun to witness falling trade costs and growing regional trade. These limited gains have been washed off by regional violence. Foreign military interventions in the guise of regime change have eroded state capacity, demolished public infrastructure and ripped apart the very social fabric of Arab societies. The region has been set back by decades.

If conflict retards development a genuine economic renaissance in the Arab world will also have geopolitical repercussions. Foreign powers have a deep economic, political and military footprint in the region. An economically independent Middle East can challenge the established patterns of external hegemony and undermine the prolonged legacy of divide and rule. In this milieu, structural economic change also requires a geopolitical concession from regional and global powers that have high stakes and influence in the Middle East. As the recent refugee crisis has shown, the spillovers from regional conflict are difficult to contain within Arab borders. This is an opportune moment to talk about concessions. A peaceful and prosperous social order is now of direct interest for the global community, especially Europe.

Foreign powers face a deep trade-off between narrow short-term strategic interests and long-term development. The human and economic cost of this policy trade-off is rising by the day. Yet an effective global response has been noticeably lacking. Since the start of the Arab Spring, economic development has been conspicuous by its absence in western policy discourse. There has been no grand vision for regional development on the part of multilateral institutions or Western governments. Initiatives such as Deauville Partnership and the Arab Partnership Fund were minuscule efforts both in size and significance, and simply substituted talk for action. On the other hand, we have seen a major escalation in the sales of military hardware to Arab states. Rather than using their “convening authority” to organize regional funding for a major development initiative, Western powers have instead sold billions of dollars in worth of arms to the GCC states since 2011.

In closing, economic diversification in the Middle East – far from being purely a technocratic affair – carries deep power implications, involving all three inter-locking spheres in the domestic, regional and geopolitical domains. By producing a greater number and variety of products, diversification not only increases the complexity of economic exchange but also risks generating independent constituencies whose political economy effects are neither neutral for domestic power structure nor for the prevailing geopolitical order. This calls for a more holistic understanding of the challenge of diversification.


Adeel Malik, is Globe fellow in the economies of Muslim Societies at the University of Oxford.

@ AdeelMalikOx

Transitioning the Grid to Renewables

Transitioning the Grid to Renewables

One of the ongoing arguments that the forces opposed to dealing with climate change make is that transitioning the grid to renewables will be economically devastating.  A nuance that’s emerging is that a mixed grid with lots of fossil fuels is economically superior.  It isn’t, and it’s worth pulling together the set of arguments for why.

An All-Renewable Grid Is Economically Superior To Mixed Generation

January 23rd, 2019 by Michael Barnard 


We have to start by asking ourselves what we mean when we say ‘economically superior’. The Exxon-Valdez disaster of 1989 spilled 35,000 metric tons of oil into sensitive waters off of Alaska. Was that an economic benefit or negative? It depends on what lens you use. One of the odd impacts of the spill was a short-term economic uptick in jobs and business due to the massive oil spill cleanup efforts. In the long term, tourism, fisheries and related industries have continued to be impacted, but if you picked your timeframe the disaster could be read as an economic benefit.

Similarly, the US healthcare system has a very high per-capita cost with poorer outcomes than other roughly equivalent societies, yet the healthcare industry in the USA is a massive economic driver. Is the poor structuring and payment system in the USA a net economic benefit or a net economic negative?

In context of economic benefits, we have to cast our nets across a broader rather than narrower set of topics and a broader rather than narrower timeframe in other words.

Power generation mixes

The question boils down to whether a solely renewable grid is superior to a grid with a remaining substantial percentage of fossil fuel generation mitigated with carbon capture and sequestration.

The first contains a couple of variants that are worth exploring a bit. The first variant is a fully electrified economy, with industry, agriculture, transportation and the like all using electricity generated by renewables and stored in some interim form, mostly batteries but also hydrogen in some cases and (cleaner) manufactured hydrocarbons in others. The second variant adds biofuels from woodchips, biodiesel, and biomethane sources to the mixture with continued thermal generation of electricity and greater continued use of internal combustion and diesel engines for transportation.

The partially fossil fuel grid assumes that the negative externalities of fossil fuel generation and transportation fuels can be managed. The expectation is that these will be internalized in the cost rather than remain uncosted negative externalities. This includes carbon dioxide and methane emissions which cause global warming, with the Pigovian tax being some combination of a straight carbon tax, cap and trade, and regulation. This would enforce carbon capture and sequestration in theory, although the practice remains so uneconomic it’s hard to see it working. Pollution negative externalities include loss of productivity via multiple causal mechanisms, additional burdens on healthcare systems and premature loss of life.

Timeframe

The timeframe is important. Carbon emissions today create economic impacts 20–100 years from now. Pollution emissions today create economic impacts that are both immediate and long-term, as the Exxon Valdez example shows. Burning fossil fuels for transportation and generation, in other words, requires us to view longer term, not quarterly or annual economic cycles.

Viability

There are a couple of additional pieces to the puzzle. A key one is viability. Can we actually transform our global economy to one powered by renewable energy, regardless of storage?

Yes, we can. The go-to source for this is the work of Dr. Mark Jacobsen out of Stanford. The Solutions Project he spearheads looks at the transformation globally through 2050. That gives us the timeframe necessary, but to be clear, Jacobsen is only looking at direct economic impacts of jobs and the like. He’s ignoring negative externalities in his work.


As the infographic shows, across the largest 139 countries in the world, there are two primary economic metrics he calls out.

Jobs

Renewables create a lot more jobs than the increasingly capital-intensive fossil fuel industry. Putting up 100 3.3 MW wind turbines across a few dozen square miles of Idaho and then maintaining them takes more people than the equivalent generation in gas or coal.

This can perhaps be most clearly seen in the jobless recovery in Canada’s oil sands, where economic recovery did not see a return of the thousands of jobs for workers whose jobs had been automated in the efficiency drive of the recession. Traveling to Brazil is instructive, as Petrobras remains a governmentally-owned oil company and is vertically integrated. There are half-a-dozen service people at every gas station and it takes four times as much labor per barrel in their refineries. This is because Petrobras is a governmental mechanism for balancing employment numbers, not an efficiently run organization. It’s a dying breed globally, when even Saudi Aramco has floated shifting to private ownership.

Right now in the USA, there are more people employed in the solar industry alone than in the entire fossil fuel industry. Add in wind generation and the necessary transmission and distribution of electricity. Add in Tesla’s employees and all of the businesses working on the transition to electrified transportation. There’s a big jobs gain to be had in the transition.

Read more on the CleanTechnica original document.

Eight factors determining the price of oil

Eight factors determining the price of oil

As put by Kimberly Amadeo in her article on The Behind-the-Scenes Role of Commodities Traders,  Oil prices are controlled by traders who bid on oil futures contracts in the commodities market. That’s why oil prices change daily. It all depends on how trading went that day.

Other entities can only affect the traders’ bidding decisions. These influencers include the U.S. government and the Organization of Petroleum Exporting Countries. They don’t control the prices because traders actually set them in the markets.

The oil futures contracts are agreements to buy or sell oil at a specific date in the future for an agreed-upon price. They are executed on the floor of a commodity exchange by traders who are registered with the Commodities Futures Trading Commission (CFTC). Commodities have been traded for more than 100 years. The CFTC has regulated them since the 1920s in the US and by equivalent institutions in every developed and / or developing country.  It is also function of the following:

The eight factors determining the price of oil

According to the September monthly report of the International Energy Agency (IEA), in August 2018, for the first time, the bar of 100 million barrels produced per day was crossed. World oil consumption represented 97.4 million barrels per day (MBJ) in 2017 (including 57 MBJ by non-OPEC countries), equivalent to 1,127 barrels or 179,000 liters per second. Also, despite the commitments of the Paris Agreement (COP21) of December 2015 (entered into force in November 2016), global awareness for the climate does not seem to reach the oil sector. A list of eight reasons that determine the current course.

  • The first reason, as noted in international reports would be a recovery of growth for 2018, but with a slowdown forecast for 2019 and 2020. Many international experts, as well as international institutions such as the IMF and the World Bank, foresee a possible global crisis horizon 2020/2025 in case of acceleration of protectionist measures between the US and Europe, as well as between the US and China.  Moreover, the latest report of the IEA of October 2018 warns the countries dependent on the oil revenues, due to a change in the trajectory of growth based on a new configuration of the global energy demand (Energy efficiency, renewable energies, hydrogen inlet horizon 2030 all based on the Knowledge economy) that will impact the demand for traditional hydrocarbons.
  • The second reason is respect for the quota of each member of the OPEC as decided upon in December 2016 in Vienna with notably Saudi Arabia representing 33% of OPEC’s. It is worth noting that OPEC in its entirety represents 33% of global marketing, even though the current tensions between Iran and Saudi Arabia can lead to a disagreement between unsatisfied OPEC’s members.
  • The third reason is the agreement between OPEC’s Saudi Arabia and non-OPEC Russia; these two countries producing each more than 10 million barrels per day. Moreover, any different decisions from these two countries would impact the price of hydrocarbons downwards.
  • The fourth reason is the political situation in Saudi Arabia, the world not seeing yet evident in the action of the kingdom’s Crown prince, with the fear of internal political tensions, but above all the sale of 5% shares of the country’s largest company ARAMCO, to maintain its shares at a high level; sale that has been postponed.
  • The fifth reason is the tension in Kurdistan (this area producing about 500,000 barrels/day), declining Venezuelan production, socio-political tensions in Libya and Nigeria.
  • The sixth reason is the American president’s speech on the US having second thoughts on the agreement on Iran nuclear deal; with sanctions beginning to be applied on November 5th, 2018. This would certainly be mitigated by the European position that decided to set up a barter system to circumvent the transactions in Dollars, and the Chinese market or the Iranians can get paid in Yuan.
  • The seventh reason is the weakness of the Dollar in relation to the Euro.
  • The eighth reason is the decline or rise of US stocks, while not forgetting the Chinese stocks.

In the short term, the above eight reasons may influence the price of oil either upward or downward, with some factors being more predominant than others.  The Minister of Energy of Saudi Arabia reported on October 30th, 2018, under American pressure to raise its oil production to 12 million barrels per day against 10.7 million currently, to fill in for the Iranian production and in this case, it will be followed by Russia that does not want to lose market share.  In this hypothesis, the price of Brent should, except for a significant global crisis where the prize could fall below 60 Dollars, fluctuate between 65 and 75 Dollars, 70 Dollars a barrel, being the price of equilibrium in order not to penalise either the consumer countries or the producing ones.  The oil price went lower than $60 mainly as consequent to the massive entry of U.S. shale oil and gas with a production exceeding 10 million barrels/day.

In August 2018, according to the US Energy Information Agency (EIA), the US has even turned into the world’s leading producer of oil, in front of Russia and Saudi Arabia, with 10.9 million barrels per day and this production should even exceed 11.5 million barrels per day in 2019.