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Iran’s automotive industry: a potential draw for investors

Iranian non-oil exports had been growing even before sanctions were lifted by the USA and European Union earlier this month. According to the UNESCO Science Report: towards 2030, released in November last year, ‘companies deprived of oil and gas revenue have shown a propensity to export technical and engineering services to neighbouring countries.’ Since the nuclear deal was signed last July, the World Bank has observed a surge in interest among multinational companies in investing in Iran. One sector attracting attention is Iran’s automotive industry.
After oil and gas, the automotive industry is Iran’s biggest, accounting for about 10% of GDP and employing about 4% of the labour force. There was a boom in local car manufacturing between 2000 and 2013, driven by high import duties and a growing middle class. The imposition of fresh sanctions in July 2013 prevented Iranian companies from importing the vehicle parts upon which domestic cars rely, causing Iran to cede its place to Turkey as the region’s top vehicle manufacturer.

Traditional export markets for Iranian automobiles include Algeria, Azerbaijan, Cameroon, Ghana, Egypt, Iraq, Pakistan, Senegal, Syria, Sudan and Venezuela. The sanctions imposed in 2013 hit automobile exports particularly hard, which had doubled to about 50 000 cars between 2011 and 2012.

The Iranian car market is dominated by Iran Khodro (IKCO) and SAIPA, which are subsidiaries of the state-owned Industrial Development and Renovation Organization. IKCO was founded in 1962 and SAIPA in 1966. Both companies assemble European and Asian cars under license, as well as their own brands. IKCO is the biggest car manufacturer in the Middle East. In 2012, it announced plans to reinvest at least 3% of company sales revenue in R&D.

In 2008 and 2009, the government spent over US$ 3 billion developing infrastructure to enable vehicles to run on compressed natural gas. The aim was to reduce costly petroleum imports, owing to an insufficient refining capacity in Iran. With the world’s biggest natural gas reserves after the Russian Federation, Iran rapidly became the world leader for the number of vehicles running on natural gas: by 2014, there were over 3.7 million on the road.

About 3% of nanotech companies in Iran focus on the automotive industry. Iranian carmakers use nanotechnology to increase customer satisfaction and safety by providing such comforts as anti-stain dashboards, hydrophobic glass planes and anti-scratch paint. In 2009, researchers at Isfahan University of Technology developed a strong but light nanosteel as resistant to corrosion as stainless steel for use in road vehicles but also potentially in aircraft, solar panels and other products. Nanotechnology research has taken off in Iran since the Nanotechnology Initiative Council was founded in 2002. In 2014, Iran ranked seventh worldwide for the volume of papers related to nanotechnology. The number of papers per million inhabitants has consequently risen from 19 in 2009 to 59 in 2013, overtaking Japan (56 per million) and approaching the USA (69 per million) in the process.

The author of the chapter on Iran in the UNESCO Science Report argues that, indirectly, sanctions have accelerated the shift from a resource-based economy to one based on knowledge in Iran. The sanctions have hit the private sector hard, increasing the costs of finance companies and the credit risk of banks, eroding foreign exchange reserves and restricting companies’ access to foreign assets and export markets. Knowledge-based enterprises have been further penalized by limited access to high-quality equipment, research tools, raw materials and technology transfer. Despite this, the number of firms declaring activities involving research and development (R&D) more than doubled between 2006 and 2011, from 30 935 to 64 642. The author argues that, by isolating Iranian companies from the outside world, the sanctions have encouraged them to innovate. By erecting barriers to foreign imports and encouraging knowledge-based enterprises to localize production, they have helped small and medium-sized enterprises develop their business. Moreover, with unemployment high and Iranians well-educated, firms have had no difficulty in recruiting trained staff. The sanctions have also helped to reconcile research and development (R&D) with problem-solving and public interest research in Iran, he argues, after high oil receipts had divorced science from socio-economic preoccupations for many years.

The government first articulated its policy of developing a knowledge economy in 2005 in the document Vision 2025, its recipe for turning Iran into the region’s leading economy by 2025. Even the economic plan adopted by decree in 2014 for an ‘economy of resistance’ in response to the increasingly tough sanctions regime essentially reasserts the goals of Vision 2025.

Vision 2025 foresees an investment of US$ 3.7 trillion by 2025 to finance the transition to a knowledge economy. Much of this amount is to go towards supporting investment in R&D by knowledge-based firms and the commercialization of research results. A law passed in 2010 provides an appropriate mechanism, the Innovation and Prosperity Fund. According to the fund’s president, Behzad Soltani, 4600 billion Iranian rials (circa US$ 171.4 million) had been allocated to 100 knowledge-based companies by late 2014. Public and private universities wishing to set up private firms may also apply to the fund.

The Fifth Five-Year Economic Development Plan (2010–2015) set out to secure second place for Iran behind Turkey in the region in science, technology and innovation (STI). Within the plan, a National Development Fund was established to finance efforts to diversify the economy; by 2013, the fund was receiving 26% of oil and gas revenue.

According to Vision 2025, nearly one-third (US$ 1.3 trillion) of the overall investment in the transition to a knowledge economy is to come from foreign sources, which are to represent 3% of GDP by 2015. This target appeared somewhat optimistic in 2013, when foreign direct investment contributed just 0.8% of GDP. However, given the surge in interest among multinational companies in investing in Iran since the signing of the nuclear agreement last July, this target may now be within reach.

Source:http://www.unesco.org/new/en/media-services/single-view/news/irans_automotive_industry_a_potential_draw_for_investors/

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Setting off a trade war over national security

While the US President has power over trade deals and imposing tariffs on international trade, US trade policy on a day-to-day basis is usually in the hands of the US Trade Representative, a government function comparable to a minister of trade in other countries.
It was, however, President Donald Trump himself who slapped import tariffs of 25 and 10 per cent on steel and aluminium, respectively. And he did so on the grounds of national security than for reasons of safeguarding against particular products suddenly entering the US market in increased quantities or via price dumping.

The import tariff plan has not yet been put in effect but nonetheless indicates a willingness to endorse a hardline US foreign trade policy. The issue already has the potential to erupt into a full-blown trade war, with a global backlash brewing.

It set off alarms immediately. Canada and the European Union (EU) already made clear that the US tariff plan is unacceptable, and would consider retaliation through imposing tariffs on a range of branded US goods entering their markets if an acceptable way out is not to be found.

China might also decide to defend its vested export interests to the US by either imposing, or threatening to impose, counter-measures against US manufacturing interests on its soil. Or restrict market access on select US goods entering the market.

Although Canada and China obviously have steel and aluminium supplies to the US, it will be particularly interesting to see whether the EU will try to engage the US in consultative talks before the plan goes ahead or decide to send a target list, signalling retaliation on highly lucrative US exports to the EU.

Indeed, when competitive steelmakers from India made their inroads in high-grade EU steel markets about a decade ago by taking over reputed steel mills in Belgium, France and the Netherlands, some of the EU member-states found the powerful forces of globalisation led by non-European actors hard to accept. In the EU, steel is still seen as more than just a heavy industrial activity but involves national pride and prestige.

But this is only a part of the story.
Gulf states like Bahrain and the UAE will equally closely monitor the looming issue in the US, for their aluminium smelters are reputed players in the sector.

But all-out trade wars are nothing new. The US and the EU have had their fights over tariff and subsidisation issues, starting with chickens in the 1960s and over twin-decked, long-haul commercial aircraft in more recent times.

Recent history demonstrates that industrial sectors tend to call upon their governments for protectionist measures against perceived unfair trade practices such as price dumping when sales stagnate or go into decline. Usually, these issues have been brought to the attention of the watchdog of multilateral free trade.

Indeed, invoking notions like national security, temporary safeguards, or anti-dumping duties is not self-evident, for it involves rules and procedures of the World Trade Organisation (WTO), to which the US has subscribed.

For its new tariff plan, the US invokes national security. But to do so, it will thus have to demonstrate its legitimacy to the WTO. Counter-measures are only justified based on facts and not merely a remote possibility.
Johann Weick is an analyst on trade policies.

Source:http://gulfnews.com/business/analysis/setting-off-a-trade-war-over-national-security-1.2182778

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Developing nations cannot fall behind in digital economy

Developing nations cannot fall behind in digital economy
More so as some of the low-cost advantages they used to have will no longer be valid

From cloud computing to artificial intelligence, technology is beginning to revolutionise how the world economy functions. But while these shifts are enriching many in the advanced economies, the developing world is at risk of being left behind.
To improve the global South’s economic prospects and avoid a deepening of inequality, developing-country policymakers must take seriously the implications of these shifts for their economies and their countries’ position in the global economy.

For years, the “digital divide” was narrowly defined in terms of internet connectivity. But today, it manifests itself in the way businesses in rich countries use technology to strengthen their control of global value chains and extract a larger share of the added value created in the developing world.

Consider, for example, how recent innovations threaten the export-oriented industrialisation strategy that has fuelled many countries’ development in recent decades. By using abundant and low-cost labour, developing countries were able to increase their share of global manufacturing activities, creating jobs, attracting investment and, in some cases, kick-starting a broader industrialisation process.
But, for the firms that took advantage of the opportunity to reduce costs by shifting manufacturing to the developing world, there was always a trade-off: offshore production meant limited ability to respond quickly to shifts in consumer demand.

Now, technology may offer another option. By investing in “additive manufacturing”, robots, and other non-human tools, companies could move their production sites closer to their final markets. Adidas, for example, is employing some of these technologies to bring footwear “speed factories” to Germany and the US.

Similarly, as digital technology facilitates the cross-border sale of services, and protections for domestic service providers become increasingly difficult to enforce, domestically oriented services in developing countries will face growing global competition. While such shifts remain nascent, they represent a long-term threat to the development strategies on which many countries in the global South rely.

With advanced and emerging economies moving fast to capture new opportunities created by technology, the digital divide is widening at an accelerating pace. For example, China, which used a protectionist industrial policy to nurture domestic digital giants like Baidu and Tencent, is now supporting these firms as they move deeper into development of new technologies and try to expand globally.

Similarly, the European Union is supporting technology investments through its “digital single market”, and through new policies in areas like venture capital, high-capacity computing, and cloud computing. Indeed, plans for a “European cloud” have been put forth.
There are very few, if any, comparable frameworks currently in place in the global South. This must change, but how?
Development strategists often suggest that poor countries cannot afford to dedicate resources to the digital economy. While that is true to some extent, failing to account for technology-driven economic trends will merely exacerbate the problem.

In fact, such trends should be at the centre of national development strategies. Moreover, at a regional level, there is a need to analyse technology-driven economic shifts and design policies that take advantage of the opportunities they represent, while coping with the associated challenges.

In Africa, for example, ongoing efforts to develop regional trade links and boost industrial cooperation — including frameworks like the Continental Free Trade Area (CFTA) initiative and Agenda 2063 — should include a focus on digital transformation strategies. Discussions on this front should be informed by lessons from other regions, such as the EU.

This should occur in the context of broader efforts to help local firms expand and become more competitive internationally. Too often, excitement for Africa’s innovative start-up ecosystem masks the challenges, such as small and fragmented domestic markets, that could impede long-term success.

Digital technology has already been put to good use in many parts of the developing world. Data-driven farming techniques are helping growers achieve higher yields, while mobile finance is broadening financial inclusion in poor communities. But these innovations will not be enough to prevent developing countries from falling behind in the global economy.

To catch up with the global North, policymakers will need new tools.
To invest in those tools, developing countries will also need support from international organisations. For example, ongoing World Trade Organisation discussions about the rules that will govern the digital economy should be expanded to include strategies for levelling the global playing field.

Overcoming the resource constraints that limit developing countries’ investment in the digital economy will not be easy. But failing to do so will carry a steeper price. As leaders in the developing world seek to position their countries for sustainable growth, they must think globally and locally, without losing sight of the role that technology will play in shaping the economy of tomorrow.
The writer is a professor of international development and international political economy at the University of Bath and a visiting fellow at the London School of Economics and Political Science.

Source:http://gulfnews.com/business/analysis/developing-nations-cannot-fall-behind-in-digital-economy-1.2180219

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UAE aims to attract $75b in manufacturing sector by 2025, economy minister says

Abu Dhabi: The UAE is aiming to attract $75 billion by 2025 into the country’s new industrial manufacturing sector, the UAE economy minister said in Abu Dhabi on Monday.
In his inaugural address at the world’s first Global Manufacturing and Industrialisation Summit, Sultan Bin Saeed Al Mansouri also said the manufacturing sector will contribute 25 per cent towards the country’s GDP by 2025.

“Manufacturing is central to growth and it creates jobs and it also has a great impact on the society. We have a vision and strategy to achieve this,” he said.
“The UAE is a de facto capital of new Silk Road with sea lanes, airports and logistical hub. We have an excellent geographic location between emerging markets like India and China and developed markets in Europe and North America.”
He said the new UAE investment law, which allows one hundred per cent ownership to foreigners, will boost the manufacturing sector.

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai attended the opening ceremony along with Shaikh Hamdan Bin Mohammad Bin Rashid Al Maktoum, Crown Prince of Dubai and Shaikh Saif Bin Zayed Al Nahyan, Deputy Prime Minister and Interior Minister of the UAE.
Some ministers of the UAE cabinet including energy minister Suhail Al Mazroui were also present.
More than 1,200 businessmen and global leaders are attending the three-day Global Manufacturing and Industrialisation Summit being held under the patronage of His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces.
The summit is being jointly organised by the UAE Ministry of Economy and the United Nations Industrial Development Organisation (Unido).
It is the first global gathering for the manufacturing community, bringing together leaders in business, government and civil society to shape a vision for the sector’s future.
A number of high profile ministers and industry leaders from the region as well from across the globe are attending the four day summit.

Source:http://gulfnews.com/business/sectors/manufacturing/uae-aims-to-attract-75b-in-manufacturing-sector-by-2025-economy-minister-says-1.2001443

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The Future of Manufacturing in the U.A.E.

The U.S.-U.A.E. Business Council released a new report on the latest developments in the U.A.E.’s manufacturing sector at a high-profile event in Abu Dhabi on Sunday, 28 January. Eng. Jamal Salem Al Dhaheri, CEO of SENAAT, and Badr Al-Olama, the Head of the Aerospace Business Unit at Mubadala Investment Company, provided keynote remarks at this exclusive business roundtable luncheon.

U.S.-U.A.E. Business Council President Danny Sebright, highlighted the U.S.-U.A.E. Business Council’s new report, titled “Making the Future: The U.A.E.’s Growing Manufacturing Sector“.

Eng. Jamal Al Dhaheri subsequently spoke about the state of the country’s manufacturing sector. He also provided insights into SENAAT’s plans and projects, including the recently inaugurated Ducab Aluminium Company (DAC).

Mr. Al Dhaheri said: “SENAAT is a key contributor to Abu Dhabi Economic Vision 2030, strategically developing the Emirate into a global industrial player. As a fast-growing industrial champion with a track record in forging successful partnerships, we are currently managing AED 27.5 billion of industrial assets in metals, F&B, O&G services, and the construction and building materials sector. In line with Abu Dhabi Economic Vision 2030 & the Abu Dhabi Industrial Development Strategy, we continue to explore multiple investment plans and strategic projects and we look forward to strengthening ties with the international investment community in this journey.”

Badr Al-Olama, who also leads the organizing committee for the Global Industrialization and Manufacturing Summit (GMIS), then shared his thoughts on the future of U.A.E. manufacturing. “The U.A.E. is a story of transformation,” Mr. Al-Olama said. “With strong leadership, and a continued focus on long-term goals, our advanced manufacturing sector is set to share a quarter of the national GDP in the very near future. Growth in manufacturing is encouraging greater investment in developing specialist skills and promoting wider societal sustainability initiatives across the country.”

Mr. Al-Olama also discussed the role that Mubadala plays in this industrial transformation and on wider U.A.E. society. “At Mubadala, we believe that manufacturing, ultimately, has a transformative impact on society— by creating an agile economy that offers high-value employment opportunities that are more resilient to market dynamics.”

Following these keynote remarks, Mr. Al Dhaheri and Mr. Al-Olama engaged in a thoughtful discussion with senior-level attendees about the Fourth Industrial Revolution and the impact of 3D printing, automation, and artificial intelligence on industry. Finally, they discussed opportunities and challenges to manufacturing in the U.A.E. and provided detailed advice to companies considering establishing operations there.

Mr. Sebright concluded the event by stressing the wide range of opportunities the U.A.E.’s manufacturing sector provides for U.S. companies and investors. “This new report and today’s event demonstrate that the prospects for U.A.E. manufacturing are bright,” Mr. Sebright said. “There are substantial opportunities for U.S. companies who are considering establishing manufacturing operations in the U.A.E. or exploring commercial relationships with U.A.E. manufacturers.”

Source:http://www.manufacturingtrade.com/news-detail:30d40984-15e4-d5c0-6fe1-5a7c225ca449.html

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Iran Oil Investment likely to Jump: Expert

An expert in oil market says a huge investment tide is under way in Iran’s oil industry provided that financial interactions of the country and the world normalize.
Speaking to Shana, Mahdi Asali, a veteran expert in oil market and political energy economy, said if Iran’s international relations become normalized and stable, and the country’s financial interactions with international banks and centers recover, it shall expect a huge investment tide in its oil industry by foreign financiers.

The senior expert on energy economics emphasizes the need for global investment in Iran’s oil industry in line with the world’s state-of-the-art technologies, and said: “In the face of low oil prices, OPEC countries, especially Iran and other Persian Gulf littoral states, can better compete with non-OPEC producers in attracting the world’s capital and technologies.

The following is his responses to the three questions Shana asked on the current oil market status.

Shana: Bloomberg’s news service recently quoted sources as saying that Aramco, through one of its affiliates in the United States, has been examining the possibility of sending US crude to the Asian market in February. What is your assessment of Riyadh’s efforts to export shale oil to Asian countries?

Asali: “It can be said that the Saudis are preparing for the supply of Aramco shares in the world’s financial markets, and Saudi Aramco is gradually operating like other oil and gas companies, whose shares are traded on the market and its value depends on the professional management and profitability of these companies in the global oil markets. The difference here is that Aramco’s financial resources are likely to be higher than most of the world’s oil and gas companies, as its production and export of crude oil and its byproducts are higher. These measures could be inferred as part of a Saudi strategy to prepare Aramco for performing a stronger international role. On the other hand, it is a measure to safeguard the long-term interests of itself, and in general, Saudi Arabia.

In my opinion, Saudi Arabia cannot or, for unannounced reasons, does not want to increase its crude oil output, as it has continually reduced its crude oil storage in the last two years in onshore inventories. For this reason, it has taken this clever strategy to keep its customers in the developing markets of Asia, on the one hand, and ensure its presence in the American energy market, on the other.

Saudi Arabia’s presence in the US shale boom will provide Riyadh the necessary intelligence of the industry to ensure a better position in the Organization of Petroleum Exporting Countries (OPEC), in order to affect the crude oil market. For example, a heated topic regarding US shale oil is the discussion that at which price range the item’s production can highly increase to slash the prices. The presence of Aramco in the shale oil market will provide the Saudis with accurate, in-depth information about production, process, and dynamics of manufacturing technology and investment in the financial markets in the industry, which will provide Saudi Arabia with the benefits and risks of these investments, which can lead to more effective positions in the oil markets and OPEC. And as a result, it will help Riyadh to better manipulate OPEC decisions.

Shana: The lack of investment in oil producing countries is one of the major concerns of consumers in the future. Under the current circumstances, how necessary do you think OPEC capacity building would be?

Asali: According to the International Energy Agency, investment in the energy sector, including investment in the global oil and gas industry, has declined by an average of around 20% per year over the past three years due to low oil prices (as compared to the 2011-2014 period). Of course, the performance of OPEC countries has proved relatively better than that of non-OPEC countries, due to lower OPEC production costs than non-OPECs, which allows OPEC members, especially its Middle East members, to profit even at low prices. From this point of view, consumers’ concerns can be realized because they believe that with the growth of demand by Asian countries and the lack of capacity building, oil prices in the coming years will undergo another leap that will put pressure on some of these countries.

It should also be noted that, as a matter of fact, at low oil prices, OPEC countries, especially Iran and other Persian Gulf OPEC members, can better capture global investments in their oil and gas industries in competition with non-OPEC countries, and if this does not happen, at least for countries like Iraq and the countries in north Africa, it is because of high risks of investment in these countries springing from their political and social instability.

Speaking of Iran, it seems, if the international relations of the country are normalized and stabilized, and the financial interactions of the country with world financial centers recover, we can witness a leap in foreign investment in the oil and gas industry of the country, which is highly needed for the reconstruction and modernization of production and refining technologies in the country.

Shana: What will be the fate of the OPEC and non-OPEC production cut agreement, and how much will an economized shale oil production threaten this deal?

Asali: OPEC and non-OPEC producers have renewed their agreement to maintain the current production ceiling and extend it until the end of 2018 and all parties of the agreement are apparently complying with it. Reports suggest restoration of the balance in the oil market and the lowering level of oil inventories to the average level of five years ago.

As long as Saudi Arabia is not able to increase its production or, for some reason, does not wish to ramp up its [crude oil] production, it tries to extend the OPEC and non-OPEC agreement so not to lose its market share to its OPEC and non-OPEC rivals and keep the prices at its desired levels. Recent market reviews suggest that the prices will reach the range of $70 per barrel.

But it should not be forgotten that in the current market, the unconventional shale oil has effectively eliminated the effectiveness of OPEC at high prices, and there is a consensus that if oil prices remain high for the time needed for investments in new shale oil production capacity building, the prices will decrease, so it is common sense that OPEC and its non-OPEC allies should prevent such an undesirable situation by ramping up production to prevent price increases which lead to hikes in shale oil glut in the market. It is for this very reason that, in recent days, Russian authorities, including Russian energy minister, have spoken about the need for the flexibility of OPEC and non-OPEC member states to reduce the level of OECD’s oil and gas inventories to the level of the last five years. It should not be forgotten that OPEC’s management of oil supply and the emphasis on compliance with production quotas would find meaning only when oil prices are declining, and in the context of a stable market and gradual price rise, an increase in the production of member states in relation to the quotas of concerted production, if not encouraged, will not be seriously prohibited. Therefore, in the coming months, we will probably see an increase in production from Russia, Kazakhstan and even those OPEC countries that are able to increase their output, such as Iraq. These conditions will be a good opportunity for our country to increase its oil production capacity, because it could add to its market share without negatively affecting prices.

Source:http://www.iran-bn.com/2018/03/02/iran-oil-investment-likely-to-jump-expert/

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Saudi Arabia seeks new economy with $500 billion business zone with Jordan, Egypt

RIYADH – Saudi Arabia, seeking to free itself from dependence on oil exports, announced on Tuesday a $500 billion plan to build a business and industrial zone extending into Jordan and Egypt.

The 26,500 square km (10,230 square mile) zone, known as NEOM, to be powered entirely by renewable energy, will focus on industries including energy and water, biotechnology, food, advanced manufacturing and entertainment, Saudi Crown Prince Mohammed bin Salman said.

The announcement was the highlight at the opening of a three-day international business conference drawing over 3,500 people from 88 countries.

Prince Mohammed, in a rare public address, hailed it as an example of the innovative high tech future he has promised his highly conservative country.

Speaking on a panel, he said young Saudis and the promotion of moderate Islam were the key to his modernizing“dream” for his country, the world’s largest oil exporter. In a brief political comment, he said the country would eradicate extremism soon.

The stakes in the country’s rapid modernization were high.

“This is a double-edged sword. If they (young Saudis) work and go the right way, with all their force they will create another country, something completely different … and if they go the wrong direction it will be the destruction of this country,” he said.

Holding two phones – one a decade old and one a smart phone – Prince Mohammed said they represented the difference between what NEOM would be and any other such area.

“This project is not a place for any conventional investor … This is a place for dreamers who want to do something in the world,” he said.

Arranged by Saudi Arabia’s main sovereign wealth fund, the Public Investment Fund (PIF), the conference is labeled the Future Investment Initiative – an effort to present the kingdom as a leading global investment destination.

Saudi Arabia’s economy, though rich, has struggled to overcome low oil prices. Prince Mohammed has launched a series of economic and social reforms — such as allowing women to drive — to modernize the kingdom.

Officials hope a privatization program, including selling 5 percent of oil giant Saudi Aramco, will raise $300 billion.

Saudi Electricity Co (5110.SE), the state-owned utility, said on Tuesday the government would consider selling a large stake in it to the SoftBank Vision Fund, the world’s biggest private equity fund.

Riyadh, meanwhile, is cutting red tape and removing barriers to investment. It said on Sunday it would let strategic foreign investors own more than 10 percent of listed Saudi companies.

NEOM could be a major focus.

Adjacent to the Red Sea and the Gulf of Aqaba and near maritime trade routes that use the Suez Canal, the zone will serve as a gateway to the proposed King Salman Bridge, which will link Egypt and Saudi Arabia, the PIF said.

Saudi Arabia’s border with Jordan touches the northern end of the Gulf of Aqaba, near the Israeli city of Eilat. It also sits opposite Egypt, across the Straits of Tiran.

“NEOM is situated on one of the world’s most prominent economic arteries … Its strategic location will also facilitate the zone’s rapid emergence as a global hub that connects Asia, Europe and Africa,” PIF said.

There was no immediate comment on the plan from Jordan and Egypt, which are close allies of Saudi Arabia. Riyadh said it was already in contact with potential investors and would complete the project’s first phase by 2025.

Prince Mohammed appointed Klaus Kleinfeld, a former chief executive of Siemens AG and Alcoa Inc, to run the NEOM project.

HUGE RESOURCES
Saudi Arabia will need huge financial and technical resources to build NEOM on the scale it envisages. Past experience suggests this may be difficult.

Bureaucracy has slowed many Saudi development plans, and private investors are cautious about getting involved in state projects, partly because of an uncertain legal environment.

But the project underlines Prince Mohammed’s ambition to rescue the economy from severe damage caused by low oil prices. NEOM will reduce the volume of money leaking out of Saudi Arabia by expanding limited local investment options, the PIF said.

A key source of future investment funds for the PIF, which now has about $230 billion of assets under management, is the planned sale of a roughly 5 percent stake in Saudi Aramco, which could raise tens of billions of dollars.

PIF Managing Director Yasir al-Rumayyan told the conference that Saudi Arabia was still on track to conduct an initial public offering (IPO) of Aramco shares in 2018, but did not say on which stock markets the company would be listed.

Aramco CEO Amin Nasser told reporters that in addition to Riyadh, possible foreign listings in markets such as New York, London, Tokyo and Hong Kong had been looked at, and a decision still had to be made.

Source:https://www.reuters.com/article/us-saudi-economy/saudi-arabia-seeks-new-economy-with-500-billion-business-zone-with-jordan-egypt-idUSKBN1CS2PL

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Lebanon Defends Right To Drill For Gas In Offshore Blocks

Drill For Gas In Offshore Blocks

The Lebanese oil ministry will move forward in its much-anticipated oil and gas tender, despite the inclusion of disputed territories in some of the allotted blocks, a new report says.

Current explorations taking place in an offshore gas field are “by all accounts” part of Israel, according to the Israeli defense minister. Lebanese minister Cesar Abi Khalil, on the other hand, considers the statement to be an aggression against Beirut, since Lebanon has demarcated its maritime borders and reported them to the United Nations previously.

In December, the results of Lebanon’s first tender authorized Eni, Total, and Novatek to explore natural gas prospects in two offshore blocks.

Heated letters sent to the UN by Beirut and Jerusalem from 2010-2011 showed the two nations squabbling over the right to claim an 860 kilometer triangular area as part of their respective exclusive economic zones. The dispute is still active, but energy companies are accustomed to working around border disagreements, usually by agreeing to develop a contentious block without touching areas considered to be the most contentious.

Lebanon and neighboring Cyprus signed an agreement delineating their maritime boundaries in 2007, but it remains unratified.

U.K.-based Spectrum performed surveys on the area between 2006 and 2013. The 2D and 3D seismic tests, which covered over 70 percent of Lebanese coastal waters, said the seabed could hold anywhere between 12 to 25 trillion cubic feet of it being recoverable. Before drilling began last month, Lebanon had not achieved a single well in its seabed, so all analysis of potential reserves need to be taken with a grain of salt.

In 2013, former energy minister Gebran Basil said reserves within Lebanese waters totaled 95.9 trillion cubic feet, emphasizing that reserves may be larger than previously expected. These figures were speculative, put out at a press conference to drum up excitement for the licensing round.

Source: https://oilprice.com/Latest-Energy-News/World-News/Lebanon-Defends-Right-To-Drill-For-Gas-In-Offshore-Blocks.html

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The Oil Bubble Has Burst. What Now?

Those analysts who warned that oil prices can’t go on rising forever now have the chance to tell everyone else “I told you so.” Brent and WTI have fallen by 9 percent since the highs they hit in late January, with the international benchmark slumping to US$64.42 today in midday Asian trade, and West Texas Intermediate falling to US$60.61 a barrel.

The problem with bubbles is that they are so irresistibly shiny while they expand, but sooner or later every bubble pops. Sometimes the bang can be deafening, which is what happened four years ago. This time it was quite loud, too.

Energy analyst Tom Kloza from the Oil Price Information Service warned at the end of January that there is a “tremendous speculative bubble.” He warned that the price is due for a serious correction. Reuters’ John Kemp noted that bullish bets on Brent, WTI, and the four most popular oil product futures are at all-time highs, which also suggests a correction is pending.

Now, the correction is taking place. It may have started with the stock market slip on Monday, prompted by higher bond yields, but it continued with the Energy Information Administration reporting that the United States have breached the 10-million-bpd oil production threshold for the second time since last November—and apparently much earlier than most observers expected.

U.S. drillers produced 10.25 million barrels of oil daily last week, the EIA said in its weekly petroleum report, and prices slumped further as doubts about the global oversupply—which is still lingering—were reignited. But the weekly report was just additional kindling to EIA’s latest Short-Term Energy Outlook, which forecast that U.S. oil production will top 11 million bpd in 2019.

Source:https://oilprice.com/Energy/Oil-Prices/The-Oil-Bubble-Has-Burst-What-Now.html

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Nearly Half Of All Public Buses Will Be Electric By 2025

Electric By 2025

Within the next seven years, nearly half of the buses used by municipal transit districts will be electric, with China playing a leading role.

That comes from a new study by Bloomberg New Energy Finance. The study predicts that last year’s sale of 386,000 electric buses will go up to 1.2 million by 2025. China will account for 99% of the world’s electric buses by that time.

“China will lead this market, due to strong domestic support and aggressive city-level targets,” wrote Aleksandra O’Donovan, an analyst for BNEF and author of the study.

Diesel-powered buses were the norm for several decades in municipal bus fleets and with private coach operators. Owners appreciated the performance of diesel engines, broad accessibility to fuel pumps, and the competitive cost of diesel fuel.

In recent years, municipal transit agency buses powered by compressed natural gas took away some of the market share that diesel buses had dominated for years. Fleet operators were impressed by the reductions in air pollution for compliance with federal, state, and local regulations offered by bringing compressed natural gas (CNG) buses into their fleets. Cost of operation became more reliable, with natural gas providing a stable fuel price. That helped CNG-powered buses see sales growth when the pump prices of diesel and gasoline shot up in 2008 through 2010.
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Electric buses may take away some of the market share from both diesel and CNG buses. While electrified buses are more expensive in upfront costs than diesel and CNG buses, the BNEF study found that all-electric buses can offer lower total cost of ownership through their vehicle lifecycles. The cost of fuel and maintenance expenses can be much lower. Electric buses are much easier to maintain and require less parts replacement than diesel- or natural gas-powered buses.

The BNEF study forecasts that expected declines in lithium battery prices will make electric buses more competitive with diesel buses by 2026.

Battery-powered buses also make a visible, massive presence on a city’s streets. Observers will read about the buses being electrified, which can stir up their interest and research even more. Electric buses convey a local government committed to making air quality improvements, finding savings in operating costs, and taking action to make the municipal transit agency look more innovative and committed to integrating new technology.

China’s new energy vehicle policies have been behind electric bus sales strength, and expectations that it will grow over the next decade. BYD Co., China’s largest seller of electric vehicles and backed by Warren Buffett’s Berkshire Hathaway, is well-positioned to take advantage of government incentives. Last year in China, BYD sold 128,000 new energy vehicles, which include all-electric and plug-in hybrid passenger and commercial vehicles. That went up from 100,183 in 2016.

Source:https://oilprice.com/Alternative-Energy/Renewable-Energy/Nearly-Half-Of-All-Public-Buses-Will-Be-Electric-By-2025.html