Anjli Raval, Senior Energy Correspondent AUGUST 27, 2018

Saudi Arabia has cut the length of time that its state energy company has exclusive rights to the kingdom’s vast oil and gasfields, raising questions about Saudi Aramco’s long-term production and revealing a power struggle between the company and the government. Saudi Aramco’s concession agreement with the state has limited the amount of time in which the group can explore and develop resources to 40 years — from a previous contract that gave it access in perpetuity.

There will be an option to renew the contract. The move, three people briefed on the matter said, came as part of the kingdom’s preparations for a stock market flotation of Saudi Aramco, which has been indefinitely delayed.

Energy minister Khalid al Falih, chairman of Saudi Aramco and former chief executive of the company, has insisted the kingdom is committed to a listing, despite mounting signs that the country is unable or unwilling to execute the flotation. Mr Falih said last week that a new concession contract had been agreed as part of the initial public offering process, which also included overhauling Saudi Aramco’s financial reporting and undertaking an independent audit of its energy reserves, without disclosing terms. The Saudi energy ministry told the FT that the new contract was “one of several important steps undertaken to prepare Saudi Aramco for being listed”, adding that the government was committed to “proceeding with the IPO, when conditions are optimum, at a time of its choosing”.

The legal change sought to formalise the relationship between Saudi Aramco and the state, ahead of opening up the company to potential foreign investors, the three people said. It also suggested that the ambitions for a listing were for a sale of more than 5 per cent of the company. With the listing halted, those close to the company said it had been a pointless exercise that had only served to exert ministerial control over Saudi Aramco, which had fought to keep its rare evergreen contract. The government initially pushed for an even shorter contract — more in line with international oil companies that have 20-year agreements. But this would have had ramifications for what the company could declare as its reserves, long-term development plans and its valuation. Some energy sector experts have asked if the concession agreement could prompt Saudi Aramco to produce oil at a faster rate. Others have suggested it could signal a move by the government to alter its output policy, with the industry expecting demand for crude to peak in the coming decades. Recommended Lex Saudi Aramco IPO: the Empty Quarter “Often for oil companies, the shorter the concession, the sooner you must produce the resources,” said John Lee, professor at Texas A&M University. “It has always been a huge advantage to have a concession without any expiry.” However, a 40-year concession is still longer than most energy sector contracts and, with Saudi Aramco the country’s main revenue generator, there is no sign yet it would not be renewed. People close to Saudi Arabia’s energy minister said that output policy should remain unaffected. They added that the kingdom, as the ultimate shareholder, already had the power to dictate big changes in energy strategy without the legal change, which they said was a procedural matter.

(MENAFN – AzerNews) ByPatricia Espinosa and Anne Hidalgo

Next month, the Global Climate Action Summit one of the largest international gatherings on climate change the world has seen will be held in San Francisco. The event, whose theme is ‘Take Ambition to the Next Level, aims to serve as a launchpad for accelerated action that will enable the world to meet the goals set by the 2015 Paris climate agreement. It is a golden opportunity to make progress in the effort to combat global warming, but it can be seized only with the involvement of all stakeholders.

With the Paris climate agreement, the international community agreed to limit the rise in average global temperature to 2° Celsius and ideally 1.5°C above pre-industrial levels. To that end, national governments were tasked with developing their own climate-action plans, called Nationally Determined Contributions (NDCs).

But national governments cannot do it alone. Everyone including those at all levels of government, as well as business leaders, investors, and civil society must contribute. This calls for a new form of inclusive multilateralism one that can also be applied to achieving the Sustainable Development Goals, which complement the Paris agreement’s commitments.

It is a tall order, but there is plenty of reason for optimism. There is unprecedented global momentum to build a low-carbon, climate-secure future, characterized by a dynamic green economy, a thriving society, and a healthy environment.

Globally, renewable power accounted for 70% of net additions to power-generating capacity in 2017, according to the Renewables 2018 Global Status Report . Moreover, as part of the Under2 Coalition, over 200 states, regions, and local authorities have committed to cut their greenhouse-gas emissions by at least 80% below 1990 levels by 2050.

Urban centers are also proving their capacity for climate innovation and leadership. New York City has mandated the retrofitting of 14,500 of the city’s most polluting buildings. Shenzhen has become the first city in the world with a fully electric bus fleet. Curitiba, Brazil, has introduced a new model of urban food production. And Oslo has created a climate budget to guide financial decision-making.

At the business level, more than 700 companies with a total market capitalization of over $16 trillion have made far-reaching climate commitments, according to the We Mean Business Coalition. And 289 investors , holding nearly $30 trillion in assets, have signed on to Climate 100+, a five-year initiative to engage with the world’s largest corporate greenhouse-gas emitters to improve governance on climate change, curb emissions, and strengthen climate-related financial disclosures. As a result, global green bond issuance could reach $300 billion this year.

Yet we are far from being in the clear. Scientists agree that global carbon dioxide emissions must reach a turning point in 2020 if we are to achieve carbon neutrality (with emissions low enough to be safely absorbed by forests, soils, and other natural systems) by mid-century. So far, nearly 50 countries have or may have reached their emissions peaks, and more may soon join their ranks. This is progress, but it is not enough.

In fact, greenhouse gases in the atmosphere are still accumulating at a rate that will soon take us well above the 1.5°C threshold, beyond which some of the worst effects of climate change cannot be staved off. Extreme weather already is becoming more common, as exemplified by record-high temperatures worldwide this year. On current trends, average global temperatures could well rise by 3°C, imperiling vital natural systems like coral reefs, rainforests, and the polar regions.

All relevant stakeholders need to strengthen their climate commitments. To kick-start that process, the Global Climate Action Summit and its partners have issued a wide array of new challenges, including zero-waste goals in cities, a target of 500 companies adopting science-based targets, and initiatives to accelerate uptake of zero-emission vehicles.

Such efforts would not just protect our environment; they would also boost our economies. A recent report by the New Climate Economy suggests that, in transportation alone, a low-carbon transition would create 23 million jobs worldwide annually.

Perhaps more important, a show of climate-action ambition from leaders across sectors would likely inspire national governments to increase their own NDCs ahead of this December’s United Nations Climate Change Conference in Poland, where governments will finalize the implementation guidelines of the Paris agreement.

Acting alone can be difficult. Acting in concert can inspire and enable all participants to do more. And if we are to leave a healthy planet to future generations, more is what we need.

Copyright: Project Syndicate: The climate fight’s next turning point

Russia’s Novatek has launched a second liquefi ed natural gas (LNG) production train at its plant on the Yamal peninsula ahead of schedule, as Moscow tries to become a signifi cant global player on the super- cooled-gas market. Novatek, which controls Yamal LNG in which France’s Total along with Chi- na’s CNPC and the Silk Road Fund are minority shareholders, said the launch was made six months ahead of its ini- tial schedule. Yamal ships LNG to Asia and Eu- rope. Along with LNG, the Yamal plant is producing gas condensate, a type of light oil, which can replace some Iranian supplies to Middle East- ern companies as the US reimposes sanctions on Tehran, trading sources said. The second LNG train’s annual ca- pacity is 5.5mn tonnes, which will dou- ble Yamal’s output. Novatek is also building a third production train which is expect- ed to be launched next year, rais- ing annual LNG output to 16.5mn tonnes. Novatek’s chairman and co-owner Leonid Mikhelson said yesterday that the two Yamal LNG trains represent around 3.5% of the global LNG market, a growing area for the world’s energy producers.

“Our strategic goal is to produce between 55mn and 60mn tonnes an- nually by 2030,” Mikhelson said in a statement. Novatek is also planning to launch its second LNG plant, Arctic LNG-2, after 2020. The launch of the second LNG train comes just days after China proposed tariff s on US liquefi ed natural gas, wid- ening the trade war between the two countries. In July, Novatek delivered the fi rst LNG cargo to China via the Northern Sea Route alongside the Arctic coast, which drastically cuts delivery time to Asia. CNPC plans to start lifting at least 3mn tonnes of LNG from Yamal from 2019. At its peak, Yamal will produce over 1mn tonnes of gas condensate a year and Novatek has ordered special ves- sels for these shipments. In the fi rst six months of the year, Novatek, which is Russia’s largest pri- vate gas producer, shipped 234,000 tonnes of Yamal condensate, selling the fi rst cargo to commodities trader Vitol via a tender earlier this year. According to Reuters data and two trading sources, Emirates National Oil Company (ENOC) has bought around 37,000 tonnes of condensate via a ten- der from Yamal — that cargo was load- ed on a tanker at Yamal’s Sabetta port at the end of July.

Iran has been one of the key gas condensate suppliers to ENOC but further exports could be complicated with sanctions due to be reimposed on Iran’s energy sector on November 4. One of the trading sources said he believed that ENOC was making a test purchase of the Yamal conden- sate ahead of the sanctions coming into force.

An LNG carrier sits docked at the Cheniere Energy terminal in this aerial photograph taken over Sabine Pass, Texas (file). European nations are far behind Mexico and China when it comes to receiving liquefied natural gas from the US, but the region is making its biggest eff ort to date to change that, according to Bloomberg. European Commission trade off icials will travel to Washington on August 20 to follow up on an energy agreement last month between the Commission’s President Jean-Claude Juncker and US President Donald Trump. Europe pledged to import more LNG in a bid to diversify imports, while America is seeking new markets for its expanding LNG production. Russia is currently Europe’s biggest supplier. “The European Union is ready to facilitate more imports of liquefied natural gas from the US and this is already the case as we speak,” Juncker said in a statement yesterday. “The growing exports of US liquefied natural gas, if priced competitively, could play an increasing and strategic role in EU gas supply.” Europe received about 10% of total US exports last year, up from 5% in 2016 after the American shale gas revolution went global with the opening of the Sabine Pass export facility on the country’s Gulf of Mexico coast. Since then, Europe has imported more than 40 LNG cargoes from the US, or 2.8bn cubic metres, the Commission said.

ANKARA (Reuters) – Qatar pledged $15 billion (£11.8 billion) of investment in Turkey on Wednesday

that a government source in Ankara said would be channelled into its banks and financial markets.

The investment package was announced after Qatar’s Emir Tamim bin Hamad Al-Thani met President Tayyip Erdogan in the capital, as Turkey grapples with a collapsing lira and a worsening commercial and political standoff with NATO ally the United States.

Its precipitous decline has raised concerns about the resilience of Turkey’s banking sector and caused ructions on global markets.

MOSCOW (Reuters) – QHG Oil Ventures, a joint venture between Qatar Investment Authority and Glencore, has valued a 14.2 percent stake in Rosneft, which it is selling, at 7.4 billion euros ($8.4 billion), a QHG financial statement showed on Wednesday.

QHG was set up by QIA and Glencore in 2016 to invest in Rosneft and it bought a 19.5 percent stake in the Russian company for 10.2 billion euros. In its statement on Wednesday, QHG said that stake was now valued at 10.4 billion euros, meaning it has changed little in value in two years.

QHG also said in the financial statement, which covered the period between Dec. 8 2016 and May 31 2018, that it made a profit of more than 672 million euros during that period, mostly from Rosneft dividends.

The 2016 sale of the stake in Rosneft was trumpeted by the Kremlin at the time as a landmark deal and vote of confidence in the Russian economy, despite Western sanctions.

But the deal, from the outset, was mired in unanswered questions about how it was structured.

After the transaction was announced in 2016, it transpired that it was only an interim deal, and that a long-term buyer for the stake had yet to be found.

Rosneft came close to concluding a deal with China’s CEFC last year, but that deal ran into trouble after CEFC founder and chairman Ye Jianming was put under investigation by Chinese authorities over suspected economic crimes, Reuters reported in March.

Eventually Qatar’s investment fund agreed to become the permanent owner, resulting in the sale agreement in May.

In its financial results, QHG said it expected that deal to complete by the end of this year.

QIA would eventually control an equity stake of 18.93 percent in Rosneft and Glencore would hold 0.57 percent.

On Dec. 7 2016, when the deal to sell 19.5 percent in Rosneft to Glencore and QIA was announced, Rosneft’s shares were trading at around 356.3 roubles (4.7 euros) per share compared to 427.1 roubles on Wednesday.

This winter could be a bleak one for Amer- ica’s natural gas exporters as the fastest- growing buyer of the fuel threatens to halt purchases amid an escalating trade war. PetroChina, a unit of the state-owned China National Petroleum Corp, may suspend its buy- ing of US liquefi ed natural gas cargoes during the colder months, just as new American LNG ter- minals start up. The move could force gas sup- pliers like Cheniere Energy Inc to cut prices as they seek to lure other buyers during the heating season, when demand peaks. While US LNG companies make the bulk of their money from long-term contracts, Cheniere last winter reaped big earnings from the spot market, which saw Asian prices climb to three-year highs amid booming consumption in China. But with China eyeing a 25% tariff on US LNG, Cheniere and other US LNG traders may have no choice but to sell spot volumes at a discount, Jason Gabelman, vice president at Cowen and Company LLC, said by telephone on Monday. Cheniere didn’t immediately respond to a re- quest for comment. The “US is probably going to have more spot LNG available than it would have had otherwise if it had been selling into the Chi- nese market,” Gabelman said. Other buyers in Asia may look to take advan- tage of low-cost US gas. Cheniere announced August 10 a binding 25-year contract with Taiwan’s state-owned CPC Corp beginning in 2021. “If you’re selling gas in the spot market, you need to fi nd a new place” for cargoes that would have gone to China, said Nikos Tsafos, a senior fellow at the energy and national security pro- gramme at the Center for Strategic and Interna- tional Studies in Washington.

LONDON (Reuters) – Clouds are gathering over the outlook for the oil market, as trade tensions and rising crude supply threaten to swamp demand growth, but some of the world’s most prominent energy investors are convinced the price will return to record highs.

The escalating trade war between the United States and China threatens global growth. The physical markets are already showing signs of strain as unwanted crude builds on ships and crushes prices for cargoes of oil. [CRU/E] [CRU/WAF] [CRU/MED]

Aside from that, interest rates around the world are rising and the dollar is strengthening, which means emerging market oil buyers are seeing their import bill growing almost daily.

Both OPEC and the International Energy Agency have warned about the risk of trade disputes to global demand growth in their most recent monthly market outlooks. [IEA/M] [OPEC/M]

Funds have cut their bullish bets on Brent and U.S. crude futures and options to their lowest in almost a year. [CFTC/] [O/ICE]

Despite all this, prominent hedge funds such as Andurand Capital and Westbeck Capital are betting oil could skyrocket to $150 a barrel from around $75 now LCOc1.

The main driver is expected to be upcoming U.S. sanctions on Iran’s energy sector, which kick in November.

“Our view is that by November 4, we will have lost between 1.3 and 1.4 million barrels (of output) a day. It is a very big number. That’s based on the view that the U.S. will allow a few temporary exception waivers …. Ultimately, we could see losses from Iran exceed 2 million barrels a day,” Jean-Louis Le Mee, chief executive officer of London-based Westbeck, said.

(GRAPHIC: Major forecasters’ estimates of oil demand growth in 2018 – reut.rs/2vIs2Xp)

U.S. President Donald Trump in May walked away from a 2015 nuclear deal between world powers and Tehran that he said was one-sided in Iran’s favour.

Trump has also blamed OPEC for the 45-percent rise in oil prices over the last 12 months and, in June, exchanged sharp words with Iran on the subject.

Pierre Andurand, who runs the $1.2-billion Andurand Commodities Fund and predicted the rise and subsequent crash in the oil price in 2008, responded on Twitter by pointing out OPEC’s spare capacity was at its lowest ever. “There is going to be a real issue,” he wrote, predicting prices above $150 per barrel within two years.

“We don’t sense a great deal of engagement yet from generalist investors. A few of them are starting to look at it now,” Will Smith, Westbeck chief investment officer said.

“This is going to catch everybody by surprise. Some of the specialists are bullish – including Pierre (Andurand), ourselves and Energy Aspects,” he said.

Aside from the risk to Iranian supply, Venezuela’s crude production, which has already collapsed as a result of economic crisis, could fall below 1 million barrels per day (bpd) by the end of the year, compared with 2 million bpd in mid-2017, Smith said.

Andurand Capital declined to comment.

Taking a contrarian view can be costly. Even Andurand took a hit in 2017 when he expected the oil price to rally sharply and, instead, it wallowed around the $50 mark.

And he wasn’t alone. A number of long-time oil investors such as U.S. commodity fund manager Andy Hall were reportedly so badly burned they shut up shop and bowed out.

Westbeck’s Energy Opportunity Fund is up 4.1 percent in the year to July 13, showed an investor presentation shared with Reuters. Andurand’s commodities fund is up 12 percent in the first six months of 2018, according to data compiled by HSBC.

The oil options market shows that, for contracts from October 2018 to December 2020, traders and investors are holding more contracts to buy crude futures – or calls – at $100 a barrel than any other.

However, in line with Westbeck’s view that $150 oil is not one that is widely shared in the investment community, that position has barely changed in the last month, having dropped by a mere 1,500 lots to just over 107,000 lots, equivalent to 100 million barrels of oil.

(GRAPHIC: Brent crude oil investors bulk up on bearish sell options – reut.rs/2P9dAQA)

By contrast, in the last month, the largest change in holdings, or open interest, has materialised in contracts to sell oil – or puts – at $60 to $65 a barrel between October 2018 and December 2020. This position has grown by nearly 45,000 lots to 140,000 lots, or 140 million barrels of oil.

A month ago, the amount of open interest in calls maturing in this time period outnumbered that of puts by nearly three to one. This ratio is now down to two to one.

“If we are right about oil going from $75 to $150 over the next 12 to 18 months, out-of-the-money oil options, further down the curve … look very exciting. The pay back there is just fantastic if we are right,” Westbeck’s Smith said.

ROME (Reuters) – The economic spokesman of Italy’s ruling League party warned on Monday that unless the European Central Bank offers a guarantee to cap yield spreads in the euro zone, the euro will collapse.

“The situation can’t be resolved, and it is going to explode,” Claudio Borghi told Reuters after Italian, Spanish and Portuguese government bond yields rose in the wake of the financial turmoil in Turkish markets.

Borghi said the ECB should guarantee that yield spreads between euro zone government bonds not exceed a certain level, suggesting 150 basis points between the yields of any two sovereign bonds as a reasonable maximum.

The extra yield that investors demand for holding Italian bonds over top-rated German ones rose to its highest since late May earlier on Monday, briefly rising above 280 basis points before easing back to around 275.

A former trader and managing director at Deutsche Bank, Borghi said he expected those now selling peripheral euro zone debt would “end up losing out” because sooner or later the ECB would be forced to issue the guarantee he is calling for.

He said the fact that contagion from Turkey was pushing up yields in several euro zone countries showed that Italy’s domestic political and economic situation was not the main reason for market pressure on its stocks and bonds in recent days.

Safe-haven German Bund yields fell to a one-month low, but Spanish and Portuguese bond yields were dragged higher by their Italian peers and the broader sentiment going against market assets seen as carrying greater risk.

Italy’s 10-year yield at one point reached a two-month high at 3.109 percent, heading towards levels seen in late May when a political crisis triggered a huge sell-off in Italian debt.

The right-wing League has governed since June with the anti-establishment 5-Star Movement, eventually forming a coalition among former rivals following an inconclusive March election.

Ahead of the election, the League had called for Italy to exit the euro, but since forging its alliance with 5-Star it has repeatedly denied any suggestion that it is planning to orchestrate Italy’s exit from the single currency.

Bloomberg New York General Electric Co is working with bankers on a possible sale of its power-conversion business, people familiar with the matter said, as the fallen manufacturer attempts to regain its footing by slimming down. The unit formerly known as Converteam could fetch about $1.5bn, below the $3.2bn GE paid for the assets in 2011, said the people, who asked not to be identified as the matter isn’t public. Credit Suisse Group AG is working with GE on the sale process, which could begin as soon as next month and isn’t guaranteed to lead to a transaction, the people said. The advisers are likely to approach private equity firms and companies such as Caterpillar Inc, Schneider Electric SE and ABB Ltd, the people said. GE will consider all options and could opt to keep the business, which is known for making oil-rig motors. Representatives of GE, Credit Suisse, Schneider and ABB declined to comment. Representatives for Caterpillar didn’t respond to requests for comment. A deal would deepen GE chief executive off icer John Flannery’s eff orts to streamline the conglomerate, which is reeling from cash-flow challenges and a power-market slump. He has already agreed to unload the century-old locomotive business, while also promising to spin off the health unit and sell GE’s majority stake in oilfield-equipment maker Baker Hughes. GE fell 26% this year through Thursday, following a 45% plunge in 2017. The slump, which has wiped out $167bn in investor wealth since the beginning of last year, prompted GE’s recent expulsion from the Dow Jones Industrial Average. The power-conversion unit builds motors, generators and automation controls for industries such as marine transportation and oil and gas. A sale would further unwind the sprawling version of GE pushed by former CEO Jeff rey Immelt, who stepped down last year. During his 16-year tenure, Immelt built a sizeable oil equipment business, started a digital division, expanded the health unit and bought power assets such as Converteam — all of which are being divested or shrunk under Flannery. While GE is keeping its power, renewable energy and aviation divisions under Flannery’s recovery plan, the CEO is still looking to prune unwanted pieces. The company agreed in June to sell its industrial gas- engine business to Advent International for $3.25bn.