Feb 2020 review: Ambitious energy outlook in line with Saudi Vision 2030

 

Saudi Arabia continues to gain momentum towards achieving its Vision 2030 objectives with a particular focus on the energy market for the month of February 2020.

 

The Kingdom is also pursuing the implementation of several reforms to create a promising regulatory environment and propose new business models for investors across all sectors, including the untapped ones.

 

Perhaps the major event to start with is the announcement of oil giant Saudi Aramco receiving regulatory approval for the development of Jafurah unconventional gas field in the Eastern Province, paving the way for boosting the Kingdom’s position to become the world’s third gas producer by 2030.

 

Before moving to Argaam’s review of key events that took place in February, the growing fears of the spread of coronavirus (COVID-19) reached Saudi Arabia, which proactively took a list of precautionary measures to safeguard its citizens and visitors.

 

Energy

 

1) Jafurah field

 

The field’s production is set to commence early 2024, and reach nearly 2.2 billion standard cubic feet per day of sales gas by 2036, with an associated 425 million SCFD of ethane, representing nearly 40% of current production. It is also forecast to produce almost 550,000 barrels per day of gas liquids and condensates, the oil giant said.

 

The field would provide the Saudi government with an annual net income of SAR 32 billion ($8.6 billion) over 22 years, said Crown Prince Mohammed Bin Salman.

 

2) Aramco’s international deals

 

Saudi Aramco signed 66 memorandums of understanding (MoUs), as well as strategic and commercial collaborations worth more than SAR 78.75 billion with international entities from 11 countries.

 

3) Aramco and Saipem

 

Saudi Aramco also awarded an engineering, procurement, construction and installation contract to Italian oil and gas contractor Saipem as part of the long-term agreement in force until 2021.

 

4)  Desalination plants

 

The Ministry of Environment, Water and Agriculture and Saline Water Conversion Corp (SWCC) signed a SAR 1.6 billion bridge finance deal with local banks, to finance 2 projects that aim to improve asset utilization and increase the efficiency of the 2 desalination plants in Jubail and Al Khobar.

 

Coronavirus

 

5) Visa suspension

 

The Saudi government temporarily suspended entry to the Kingdom for Umrah pilgrims and those planning to visit the Prophet’s Mosque in Madinah. It also suspended visas for tourists coming from countries in which the coronavirus (COVID-19) poses a "danger".

 

6) Impact on crude oil 

 

Energy Minister Prince Abdulaziz bin Salman downplayed the possible impact of the spread of the coronavirus on crude oil prices, while urging caution against gloomy expectations.

 

7) Impact on oil demand

 

Saudi Aramco CEO Amin Nasser expected the coronavirus impact on oil demand to be short-lived.

 

Finance and Markets

 

8) Positive earnings

 

A number of listed companies on the Saudi Stock Exchange (Tadawul) continued to announce their financial results for the fiscal year 2019, with the majority recording robust performance.

 

The companies that posted higher profits include Samba Financial Group (Samba), Qassim Cement Co., Hail Cement Co., Bank Aljazira, Bank Albilad, Mobile Telecommunication Company Saudi Arabia (Zain Saudi), Abdullah Al Othaim Markets Co., Al Kathiri Holding Co., United International Transportation Co. (Budget Saudi), Banque Saudi Fransi (BSF), Al Rajhi Bank, Yamama Cement Co., Etihad Etisalat Co. (Mobily), Saudi Airlines Catering Company, National Medical Care Co. (Care), Saudi Ceramic Co., Bupa Arabia for Cooperative Insurance, Taiba Investments Co., Zahrat Al Waha for Trading Co., Dallah Healthcare Co., and Thob Al Aseel Co.

 

9) Lower profits

 

However, only a few firms reported a drop in net earnings such as Alinma Bank, Abdulla Saad Abo Moati For Bookstore Co. (Abo Moati), Arabian Centres Co., Fawaz Abdulaziz Alhokair Co. (Alhokair), Arab National Bank, Rabigh Refining and Petrochemical Company (Petro Rabigh), Saudi Investment Bank, Saudi Electricity Co., Saudi Paper Manufacturing Co., and Dur Hospitality Co.

 

10) Dr. Sulaiman Al Habib Medical Group goes public

 

Dr. Sulaiman Al Habib Medical Group (HMG) floated 52.50 million shares, or 15% of its capital in an initial public offering (IPO) on Tadawul.

 

11) Sumo’s IPO prospectus

 

Meanwhile, Sumou Real Estate Company issued the IPO prospectus on the Nomu Parallel Market.

 

12) Falcom’s IPO approval

 

In addition, the Capital Market Authority (CMA) approved the public offering of FALCOM Gold Fund and Albilad Gold ETF.

 

13) Dividends

 

Several listed-companies announced dividends for 2019, including Al Rajhi Bank, Saudi Cement Co., Al Rajhi Capital, Budget Saudi, Bank Albilad and Yamama Cement Co., Dur Hospitality Co., Thob Al Aseel Co. Dallah Healthcare Co., Taiba Investments Co., Saudi Industrial Services Co., Zahrat Al Waha Trading Co., and Saudi Airlines Catering Co.

 

14) Riyad Bank’s Sukuk

 

Riyad Bank completed the first offering of its international Tier 2 dollar-denominated sukuk worth $1.5 billion.

 

15) Dar Al-Arkan’s Sukuk

 

Dar Al-Arkan Real Estate Development Co. closed the seventh tranche sukuk issuance worth SAR 1.5 billion under its dollar-denominated sukuk program.

 

16) Appointments & resignations

 

Some companies announced new appointments and resignations to their boards and executive management teams, including Alhokair, National Agricultural Development Co. (NADEC), Jabal Omar Development Co., Saudi Paper Manufacturing Co. (SPM), Maharah Human Resources Co., Al-Etihad Cooperative Insurance Co. and Al Gassim Investment Holding Co. (GACO).

 

Giga Projects

 

17) Qiddiya

 

The Qiddiya Investment Company awarded Abdul Ali Al Ajmi Co. a construction contract to build the Resort Core & the City Centre.

 

It also awarded a contract to Saudi Pan Kingdom Co. to build perimeter fencing for the project’s phase one.

 

18) Amaala

 

Amaala, the ultra-luxury development, announced a new advisory board.

 

Infrastructure

 

19) Riyadh transportation system

 

Crown Prince Mohammed bin Salman issued new directives on the development of main routes and ring roads in Riyadh to upgrade the city’s transportation system.

 

Economy & Investment

 

20) Non-oil exports

 

Saudi Arabia is expected to record around SAR 310 billion worth of non-oil exports by the end of 2020, said Saleh Al-Sulami, Secretary General of the Saudi Export Development Authority.

 

21) Economic growth

 

In addition, SAMA governor Ahmed Al-Kholifey said the Kingdom’s economy is expected to grow in 2020, backed by the non-oil sector.

 

22) Foreign direct investment

 

Foreign direct investments (FDIs) in Saudi Arabia reached SAR 17.6 billion in 2019, according to Minister of Commerce and Investment Majid Al-Qasabi.

Banking

 

23) Sharia governance rules 

Saudi Arabian Monetary Authority (SAMA) laid out a supervisory framework for the banks providing Islamic banking services.

 

Loans

 

24) Home loans surge

 

The mortgage loans provided to retail clients by banks surged 173% year-on-year (YoY) to SAR 73.86 billion by the end of 2019, data issued by the Saudi Arabian Monetary Authority (SAMA) showed.

 

Mergers & Acquisitions

 

25) AlAhli and Chubb Arabia

 

The board of directors of AlAhli Takaful Co. and Chubb Arabia Cooperative Insurance Co. approved entering into preliminary discussions to study the possibility of a merger.

 

26) PIF and ACWA Power

 

ACWA Power is in talks with the Public Investment Fund (PIF) to increase the latter’s stake in the company to 45% from the current 25%.

 

Telecom

 

27) STC Pay

 

STC Pay, the mobile wallet launched by Saudi Telecom Co. (STC), became one of the first companies to be granted the non-bank financial institutions license by SAMA.

 

Media

 

28) Riyadh’s Media City

 

Minister of Culture and Media City project CEO, Prince Badr bin Abdullah bin Fahran, signed 4 agreements with leading institutions across cultural, media and technological fields to establish offices and headquarters at Riyadh’s Media City.

 

Entertainment

 

29) SEVEN’s expansion

 

The Saudi Entertainment Ventures Company (SEVEN), a wholly-owned subsidiary of PIF, announced the expansion of new entertainment complexes to major locations across the Kingdom. 

 

Write to Christine El Cheikh at christine.elcheikh@argaam.com and Parag Deulgaonkar at parag.d@argaam.com