Saudi Arabia FDI up in first half of 2020 as economy shows resilience

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Saudi Arabia’s Minister of Investment Khalid al-Falih said on Saturday foreign direct investment (FDI) increased by 12% in the first half of 2020 compared with the same period last year.

The Saudi government, which is hosting this year’s G20 summit, has made attracting greater foreign investment a cornerstone of its Vision 2030 plan to diversify the economy of the world’s largest oil exporter away from oil revenues.

“I’m glad to say that FDI, my area of focus, in the first half has been reported to increase by 12% compared to last year,” Falih, who previously chaired state oil company Saudi Aramco, told a G20 conference.

Falih said in September the kingdom had experienced a slowdown in FDI this year due to the global disruption caused by the COVID-19 pandemic.

“When I mentioned the 12% increase I wanted to assure people that there was no decline, our FDI target is much higher,” Falih said on Saturday.

As part of efforts to attract foreign investors, Saudi Arabia will launch next year special economic zones dedicated to several sectors, Falih said.

In addition to attracting higher investment volumes, it will focus on “qualitative growth”, he said, mentioning areas such as cloud computing, renewable energy, tourism, culture, entertainment, and logistics.

“These investments may have lower investment volumes but higher impact on the economy.”

Saudi Arabia is chairing a two-day summit this weekend of leaders of the 20 biggest world economies, who will debate how to deal with a pandemic that has caused a global recession and how to manage the recovery once it is under control.

Falih said the Saudi economy, which has been hit by the double blow of the pandemic and lower oil prices, had shown resilience this year and had a proven ability to withstand shocks.


Yemen rebels claim attack on Saudi oil facility in Jiddah

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Yemen’s Houthi rebels said they struck a Saudi oil facility in the port city of Jiddah on Monday with a new cruise missile, just hours after the kingdom finished hosting its virtual Group of 20 leaders summit.

The kingdom did not immediately acknowledge any attack as videos on social media suggested a fire at an Aramco oil facility.

Brig. Gen. Yehia Sarie, a Houthi military spokesman, tweeted that the rebels fired a new Quds 2 cruise missile at the facility. He posted a satellite image online that matched Aramco’s North Jiddah Bulk Plant, where oil products are stored in tanks.

That facility is just southeast of Jiddah’s King Abdulaziz International Airport, a major facility that handles incoming Muslim pilgrims en route to nearby Mecca.

Online videos appeared to show a tank farm similar to the bulk plant on fire. Details of the videos posted predawn Monday matched the general layout of the bulk plant.

Saudi state-run media did not immediately acknowledge the Houthi claim. Saudi Aramco, the kingdom’s oil giant that now has a sliver of its worth traded publicly on the stock market, did not immediately respond to a request for comment.

The claimed attack comes just after a visit by outgoing U.S. Secretary of State Mike Pompeo to the kingdom to see Crown Prince Mohammed bin Salman. The kingdom also just hosted the annual G20 summit, which concluded Sunday.

A Saudi-led coalition has been battling the Iranian-backed Houthis since March 2015, months after the rebels seized Yemen’s capital, Sanaa. The war has ground into a stalemate since, with Saudi Arabia facing international criticism for its airstrikes killing civilians.


Fuel supplies not affected by oil facility attack in Jeddah

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Saudi Aramco said that the terrorist attack on its petroleum products distribution terminal in the port city of Jeddah had no effect on the company’s fuel supplies.

During a media visit to its oil facility in northern Jeddah, Aramco on Tuesday told reporters that the tank fire caused by the attack was put out in about 40 minutes and the operation resumed in about three hours, confirming there had been no casualties, Xinhua news agency reported on Wednesday.

“The supply to the customers was not affected at all. It only demonstrated the resilience and reliability of the company to ensure the energy’s continuous supply to its domestic and international customers,” said Abdullah al-Ghamdi, manager of the North Jeddah Bulk Plant.

According to al-Ghamdi, a projectile hit one of the 13 tanks in the facility, causing major damage to the tank roof with a hole of almost two by two meters.

The damaged tank remains out of action, he noted.

Serving diesel, gasoline and jet fuel, the North Jeddah Bulk Plant is a “critical facility” in the area that distributes around 120,000 barrels of products per day, al-Ghamdi said.

The Saudi Ministry of Energy said on Monday that a terrorist attack created an explosion and caused a fuel tank fire in the oil facility in Jeddah. The Saudi-led coalition later accused Yemen’s Houthi rebels of being behind the attack.


Saudi Arabia may raise Asia crude prices in January – survey

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Top oil exporter Saudi Arabia is expected to raise its official selling prices (OSPs) for Asian buyers in January, tracking stronger benchmark prices as some refiners increase output to meet higher winter demand, a Reuters survey showed.

Six sources at Asian refiners expect the January OSP for Saudi flagship crude grade Arab Light to rise by 65 cents a barrel on average, with their forecasts ranging between an increase of 50 cents and 85 cents.

Two of the sources forecasted bigger price increases for Saudi lighter grades than heavier ones, as they contain more middle distillates, gasoil and jet fuel, which were more profitable for refiners this month.

Strong demand for spot crude pushed up November’s average differentials to Dubai swaps for benchmarks cash Dubai and DME Oman by around 80 cents a barrel from last month, data compiled by Reuters showed.

Refiners such as Indian Oil Corp stepped up crude purchases in November as fuel demand recovered while weather forecasts were pointing to a harsher winter.

For other oil products, Asia’s cracks for very low sulphur fuel oil margins also strengthened in November , while gasoline and naphtha weakened due to ample supply.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.

State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.


Saudi Aramco and Baker Hughes JV to develop non-metallic products


Oil giant Saudi Aramco and energy services company Baker Hughes have formed a 50/50 joint venture, Novel, to develop a broad range of non-metallic products for multiple applications in the energy sector.

Novel’s new plant is being constructed at Saudi Arabia’s King Salman Energy Park (SPARK), a 50 sq km energy city aimed at making the kingdom a global energy, industrial and technology hub.

The new facility will not only create jobs, it will also help to foster growth of an emerging sector in line with Saudi Arabia’s Vision 2030 to diversify the economy away from oil, the companies said in a statement without disclosing the size of their investment.

Saudi private sector rebounds in November as growth rate hits 2020 high

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Business activity in Saudi Arabia grew at the fastest pace since the beginning of the year in November, fuelled by a sharp rise in sales and strengthening sentiment.

Non-oil private sector activity in the kingdom rose to the highest level since January, according to IHS Markit’s Purchasing Managers’ Index. The gauge was well above the 50 mark that separates growth from contraction.

While it is welcome news, there is still catching up to do in order to overcome the coronavirus slowdown, the report said.

Concerns that the virus may flare up again still cloud the outlook. Meanwhile, employment figures returned to growth last month, though “only fractionally overall,” according to the report.

The Saudi PMI “pointed to an economy getting back on its feet in November,” wrote David Owen, economist at IHS Markit. “However, most of the key series remain off their trend level, hinting at a continued gap between the economy’s current conditions and its pre-Covid momentum.”

The Saudi PMI rose to 54.7 from 51 in October, the strongest improvement since January.

An increase in new work and better market conditions were highlighted in the report, while both domestic and foreign sales rose, marking only the second upturn in new export orders since February. Business confidence also rose to its highest mark in 10 months, as companies were encouraged by an easing in lockdown measures and news about effective vaccines. There were more private sector investments along with efforts to raise inventories, the report said, while cautioning that some firms delayed payments to suppliers as cash flow was still weak and there were reports of low raw material supply leading to increased cost pressures.

The rate of input price inflation increased from October and was one of the steepest in the last five years, the report also noted.


Saudis raise crude price to Asia as coronavirus vaccines buoy oil market

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Saudi Arabia raised oil pricing for customers in its main market of Asia after optimism over coronavirus vaccines caused crude prices to rise to an eight-month high last week.

The increase, the biggest in five months, indicates the world’s largest oil exporter is confident global energy demand is strong enough to absorb a small boost in output from OPEC+ members next month and that markets will remain tight even with parts of Europe and the US in lockdown.

The Saudis kept prices low for most of the fourth quarter as virus cases surged, crimping demand for crude.

This time, state producer Saudi Aramco raised pricing for Arab Light crude for Asia by 80 cents a barrel to 30 cents above the benchmark. Aramco had been expected to increase pricing for the grade by 65 cents, according to the median estimate in a Bloomberg survey of seven traders and refiners.

Aramco also increased pricing for light crude grades to the Mediterranean region and kept them unchanged for northwest Europe. It lowered pricing for all grades to the US to the lowest since May. Saudi exports to the US have plummeted this year.

Brent crude edged lower on Monday after rising 2.2 percent last week to $49.25 a barrel, its highest level since early March. It’s still down about 26 percent this year. While Asia is leading the overall global demand recovery, the virus resurgence in Europe and the US continue to threaten the pace of recovery.

The Organisation of Petroleum Exporting Countries and allies including Russia agreed last week to add 500,000 barrels a day to crude markets from January. That was less than the increase of two million barrels a day the group had agreed to in April, when it struck its deal to cut output.


France’s Idemia buys Saudi bank card services firm amid cashless payments boom

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France-based Idemia, a global firm developing augmented identity, has expanded its footprint in the Middle East through the acquisition of Saudi Arabia’s most prominent card personalisation bureau.

Strengthened by PCard’s capabilities, Idemia said it will offer an expanded range of card payment services and solutions to the kingdom’s banking and payment ecosystem.

International Smart Card Factory Company, locally known as PCard, was founded in 2008 and offers services from smart card personalisation, mobile banking, digital wallets, instant card issuance and card inventory tracking and management to nine domestic banks.

In 2016, the Saudi government announced a move towards a cashless economy as part of its Saudi Vision 2030 development goals.

As a result of these efforts, the number of cashless PoS (point-of-sale) transactions in 2019 reached 1.6 billion, a rise of 57 percent on the previous year, while contactless PoS transactions hit 918.5 billion in 2019, an increase of 442 percent in 2018, with bank cards and smart phones representing 57 percent of all PoS transactions.

Recent studies suggest that Saudi Arabia is expected to have over 6.4 million credit cards and 28 million debit cards in circulation by 2023.

“Saudi Arabia has evolved rapidly in the last few years, attracting international players to collaborate with local experts to localise global technology in the Kingdom for their needs. Our acquisition of PCard is highlighting Idemia’s longstanding belief in the economy of Saudi Arabia and the huge potential for growth in electronic payments,” said Julia Schoonenberg, senior vice president, MEA, Financial Institutions, Idemia.

“This acquisition stems from our commitment to improve the lives of hundreds of millions of people by enabling trusted and secure access to financial services for everyone… With a professional management team that has intimate knowledge of the Saudi Arabian market, PCard is the perfect fit for us,” she added.

Idemia employs close to 15,000 employees around the world and serves clients in 180 countries.


Explosion rocks Singapore-flagged tanker off Saudi port

An explosion rocked a Singapore-flagged oil tanker off the Saudi port city of Jeddah Monday, the vessel’s owner said, in the latest in a series of attacks on energy infrastructure in the kingdom.

No group has so far claimed responsibility for the blast on the tanker BW Rhine, but it comes as Iran-backed Huthi rebels in neighbouring Yemen step up cross-border attacks against Saudi targets in retaliation for a five-year military campaign led by Riyadh.

“BW Rhine has been hit from an external source whilst discharging at Jeddah… causing an explosion and subsequent fire onboard,” its owner, Singapore-based shipping company Hafnia, said in a statement.

“The crew have extinguished the fire with assistance from the shore fire brigade and tug boats, and all 22 seafarers have been accounted for with no injuries,” it added.

Saudi authorities did not immediately confirm the blast off Jeddah, a key Red Sea port and distribution centre for oil giant Saudi Aramco.

Hafnia reported “hull damage” in the blast, which struck just after midnight on Monday, and did not rule out the possibility of an oil spill.

“It is possible that some oil has escaped from the vessel, but this has not been confirmed and instrumentation currently indicates that oil levels on board are at the same level as before the incident,” Hafnia said.

Dryad Global, a London-based maritime intelligence firm, also reported the latest explosion, saying it struck a vessel while “carrying out operations within the main tanker anchorage at the Saudi Aramco Jeddah port”.

But it identified the Dominican-flagged tanker Desert Rose or the Saudi-flagged Al Amal Al Saudi as the possible targets.

Series of attacks

The incident comes after an explosion last month rocked a Greek-operated oil tanker docked at Saudi Arabia’s southern port of Shuqaiq, an attack that a Riyadh-led military coalition blamed on Yemen’s Huthi rebels.

No injuries were reported in that blast on the Maltese-flagged Agrari tanker, according to its Greece-based operator TMS Tankers.

Last month, the Huthi rebels said they struck a plant operated by Saudi Aramco Jeddah with a Quds-2 missile. Aramco said that strike tore a hole in an oil tank, triggering an explosion and fire.


Fears allayed over expat exodus from Gulf countries

Expats might not flee the Gulf in the numbers predicted earlier as economies fare better than expected during the pandemic, according to Oxford Economics.

“The impact on jobs of the declines in non-oil gross domestic product has been smaller than anticipated,” Scott Livermore, chief economist for the region, wrote in a report Wednesday. “Travel restrictions and the use of furlough or unpaid leave have weakened the link between expats losing their jobs and returning to their home country.”

According to the report, expats are still expected to leave in significant numbers across the six nations comprising the Gulf Cooperation Council – Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman – which are all heavily dependent on foreign workers in sectors as diverse as construction and finance.

As economies slowed and then contracted during the global health emergency, many expats whose residency visas were linked to jobs that had disappeared were forced to head home.

Fuelling the exodus, Kuwait passed legislation trimming its foreign workforce as it sought to assuage local anger over job losses. As a result, the report said both Kuwait and Oman “may have decisively turned their backs on expats”.

On the flip side of that, the drop in Saudi expat jobs has been lower than estimated, at 3.8 percent, excluding domestic workers. And the report revealed foreigners are likely to return to Bahrain and Saudi, although it will probably take a couple of years for numbers to reach pre-pandemic levels.

The report added that, in the UAE, where there have been significant cuts to the workforce announced across key sectors, the expat population will likely decline in line with previous estimates (around ten percent).