NEW YORK: Morgan Stanley has quietly filed plans to build and run one of the first US compressed natural gas export facilities, the first sign the bank is plunging back into physical commodity markets even as it sells its physical oil business.
In a 23-page application to the US Department of Energy’s Office of Fossil Energy submitted in May, the Wall Street bank outlined a proposal to build, own and operate a compression and container loading facility near Freeport, Texas, which will have capacity to ship 60 billion cubic feet a year of compressed natural gas (CNG).
While the size of the project is small compared with bigger liquified natural gas (LNG) projects, the plan highlights the bank’s ability to exploit its status as one of two Wall Street banks which are allowed to own and operate infrastructure for the manufacture, storage and operation of raw materials. The other one is Goldman Sachs.
Their physical commodities activities were both “grandfathered” in when they became bank holding companies during the financial crisis more than five years ago.
It also showcases a nimble and novel approach to exporting cheap domestic gas that could replace oil for power plants in Caribbean nations, as the US pumps out record amounts of gas from its fracking revolution.
The strategy skirts the multibillion-dollar upfront investments, long lead times and stringent application processes associated with building liquified natural gas (LNG) terminals in favor of using readily-available containers and inexpensive container ships, in one of the first projects of its kind.
The bank plans to ship CNG to countries with which the US has free trade agreements, including the Dominican Republic, Panama, Guatemala, El Salvador, Honduras and Costa Rica, according to the filing, which has not been previously reported.
Those countries now mainly use oil for their power plants. Natural gas, which in the US is often used to power trucks and buses, could provide a cheaper alternative.
“You can collect US gas at $4, it costs you $1 to ship it and gasify it, you bring it in at $5 and the equivalent that they are paying for fuel is $20 plus,” said a person familiar with the project.
“There is a lot of money to be made.”
A spokeswoman for Morgan Stanley declined to comment on the plan beyond the contents of the filing.
The boom in natural gas production in the US has pushed prices down to $4.02 per million British thermal units. Natural gas contracts sold outside of the US are often linked to higher-priced oil, which can inflate the cost of the gas.
The US Energy Information Administration projects total domestic natural gas production to hit 73.9 billion cubic feet per day, portending sustained low prices going forward.
About 1,000 cubic feet of natural gas yields 1 million BTU. One barrel of oil is roughly equivalent to 5,800 cubic feet of natural gas.
Billions of dollars are being poured into sophisticated export terminals for LNG, which require specialized equipment to cool the fuel to turn it into a liquid, as well as infrastructure to warm it at the receiving end, and take years to build.
Cheniere Energy, for example, is investing $5.6 billion to expand its Sabine Pass terminal in Louisiana to export LNG, which is expected to be operational by 2015.
The permitting process is also lengthy, with almost two dozen applications awaiting approval.
By contrast, the source familiar with Morgan Stanley’s plans estimated the cost of building the plant at $30 million to $50 million, with minimal investment needed on the receiving end. The bulk of the expenditure would be in buying thousands of containers to ship the gas.
“They’ll lease some land, buy some cranes,” he said.
“But you need literally thousands of these containers.”
It will take 12 months to complete the plant from the time Morgan Stanley receives final regulatory approvals, according to the filing.
In November 2013, Florida-based energy company Emera CNG LLC applied to export 9.125 billion square feet a year; the status of its application is not clear and its lawyers and executives did not return calls for comment in time for publication.
Andy Weissman, an energy lawyer at Haynes Boone in Washington, said the Morgan Stanley proposal was one of the first such CNG export projects he was aware of.
“This could be something very significant, and if it was done successfully, there would undoubtedly be more of these,” he said.
The 50-acre proposed site in Texas is currently being inspected for suitability, according to a second source familiar with the plans.
Freeport is a deepwater port on the Gulf of Mexico with a 45-foot draft, and already receives large container ships carrying tropical fruits imported by Dole and Chiquita.
Morgan Stanley will lease pre-existing loading docks there, but plans to supply the containers itself, said the second source.
According to the filing, gas would be piped into the proposed facility on an 11-mile third-party pipeline connected to the Brazoria Interconnector Gas Pipeline (BIG), which moves natural gas within Texas. Gas that travels in a pipeline is already compressed.
After further compressing and containerizing the gas, Morgan Stanley can load the pressurized natural gas containers on standard container ships.
“It’s a logistics nightmare, putting [the gas] in containers and shipping them around — it’s hard to do. Most people can’t figure out how to make money doing it,” said the second source. “For once, the price of gas is low enough that it makes sense.”
GRANDFATHER STATUS
The project marks a new foray into the physical commodity market for Morgan Stanley after it sold the bulk of its physical oil operations, ending its long run as the biggest physical oil trader on Wall Street amid intense regulatory pressure.
The assets included oil storage and transport company TransMontaigne Inc. as well as its global physical oil trading operation, which it has agreed to sell to Russia’s Rosneft.
Thanks to a provision in the 15-year-old Gramm-Leach-Bliley Act, Morgan Stanley and Goldman Sachs alone among Wall Street banks enjoy “grandfather” status for any commodities activities they engaged in before 1997, although the provision has never been publicly interpreted by the banks’ regulators at the Federal Reserve.
It was unclear whether the bank was using its grandfathered status to undertake the natural gas plant. However, the appointment of two of its commodities executives as officers of the natural gas subsidiaries indicates they could have more day-to-day control than in an arm’s-length investment done under merchant banking authority.
The application is filed under the name Wentworth Gas Marketing LLC, a Delaware company with a business address in Purchase, New York, home to Morgan Stanley Capital Group, its commodities group.
Wentworth Gas Marketing and another company, Wentworth Compression LLC, are both wholly owned by Wentworth Holdings LLC, which is indirectly owned by Morgan Stanley.
The filing contains an agreement that Wentworth Compression will sell CNG to Wentworth Gas Marketing, which is signed by two Morgan Stanley commodities executives, Deborah Hart and Peter Sherk.
Hart, whose LinkedIn profile lists her as Morgan Stanley’s chief operating officer North American Power & Gas, is a vice president of Wentworth Compression. Sherk, a managing director and co-head of commodities trading, is a vice president of Wentworth Gas Marketing.
The Federal Reserve declined to comment on the natural gas project, and Morgan Stanley did not answer questions about what authority it was using to pursue it.
The filing for the project landed just months before the bank bought Deutsche Bank’s North American natural gas trading book.
Morgan Stanley to build and run natural gas export facility
Morgan Stanley to build and run natural gas export facility
Saudi energy minister, EU official discuss cooperation on clean energy
RIYADH: Saudi Energy Minister Prince Abdulaziz bin Salman on Sunday held talks with EU Energy Commissioner Kadri Simson to discuss prospects for cooperation in the field of clean energy.
The top officials met on the sidelines of the World Economic Forum in the Saudi capital, the Saudi Press Agency reported. They discussed ways to strengthen bilateral ties, boost cooperation for the promotion of green energy and advance the goals of the Paris Agreement and ensure the implementation of the outcomes of the COP28 held in Dubai last year.
The Paris Agreement is an international treaty on climate change that was adopted back in 2015. It was negotiated by 196 parties at COP21 in France and covers climate change mitigation, adaptation, and finance.
They reaffirmed the common goals of Saudi Arabia and the EU and the determination of both parties to accelerate private investment in the renewable energy sector, cooperate on electricity interconnection and the integration of renewables into the electricity grid.
The officials stressed the need to strength the electricity supply infrastructure through demand side management smart grid. They also discussed carbon capture, utilization and storage technology and opportunities for industrial partnerships in those sectors.
They also shared their view on building on the UNFCCC, the Paris Agreement and COP28 outcomes. The officials also discussed a Saudi-EU memorandum of understanding to boost cooperation in the energy sector.
According to SPA report, they were of the view that such an MoU should provide a solid and mutually beneficial basis for orienting and anchoring investment decisions in the energy and clean tech sectors, involve and mobilize stakeholders from the public, private and financial sectors, and lay the foundation for a more sustainable and secure energy future.
The European Commission and Saudi Arabia aim to conclude the MoU in the next few months.
Saudi Arabia to host 28th World Investment Conference in Riyadh
RIYADH: Saudi Arabia is on track to host the 28th World Association of Investment Promotion Agencies’ World Investment Conference from Nov. 25 to 27 in Riyadh.
The forum themed “Future-ready IPAs: Navigating digital disruption and sustainable growth,” will bring together leaders from investment promotion agencies, corporates, multilateral institutions, and other stakeholders to discuss global financial trends and opportunities, according to a statement.
The Kingdom’s selection as a host underscores its position as an international funding hub, according to Saudi Investment Minister Khalid Al-Falih.
“We are honored to be welcoming the global investment community to Saudi Arabia. Our strategic location at the crossroads of three continents, coupled with our world-class investment ecosystem and long-term political and economic stability, has seen the Kingdom develop into a global investment hub,” Al-Falih said.
“The World Investment Conference will serve as a platform to showcase our nation’s potential and forge partnerships that will shape the global investment landscape for years to come,” the minister added.
On WAIPA’s behalf, Executive Director and CEO Ismail Ersahin said: “WAIPA is honored that the 28th WAIPA World Investment Conference will be held in Riyadh, a city with a rich history and culture.”
Ersahin added: “With each edition, the WIC reaffirms its status as a guiding force for sustainable and inclusive development.”
He went on to stress how the conference is poised to be an impactful gathering aimed at the future readiness of IPAs.
Since 1995, the annual gathering has provided a forum for stakeholders to exchange insights and best practices and forge partnerships that drive economic development globally.
Human capital a ‘key challenge’ for Kingdom’s tourism sector, says Saudi minister
- Saudi Arabia's tourism sector is 'heading to achieve $80 billion this year' in private investment, Al-Khateeb told a WEF panel
LONDON: Developing human capital is a key challenge for Saudi Arabia’s travel sector, the country’s tourism minister has said on Sunday.
Ahmed Al-Khateeb, speaking during a two-day meeting of the World Economic Forum in Riyadh, discussed the Kingdom’s burgeoning tourism industry, which has boomed over the past half-decade.
To address the human capital challenge, the Saudi leadership has encouraged young people across the Kingdom “to join the sector,” he said.
“We are spending a lot to train (young Saudi talents) and scale them, and involve them in the sector,” he told the “Vacationomics” panel discussion, adding that hiring local experts is essential for delivering better tourism experiences.
“You get the best experience and you know more about other people’s culture and other nations’ cultures when you deal and interact with locals,” he said. “We want to make sure that our guests are served by local people.”
Saudi Arabia has delivered “strong growth in Q1 this year, and we are moving to deliver our 2030 numbers,” the minister said.
The Kingdom’s tourism sector “has come a long way” since the launch of the National Tourism Strategy as part of efforts to diversify the economy, Al-Khateeb said, adding that the industry is “heading to achieve $80 billion this year” in private investment.
Last year, Saudi Arabia attracted about $66 billion in private investment into tourism.
“We doubled the number of visitors coming from outside — 100 million in total … 77 million domestic (and) 27 million international,” he said. “This is double the number that we achieved before we launched our National Tourism Strategy.
“We have the funding. We have a great country. We have everything that the international tourists would like to see and experience.”
Jerry Inzerillo, chief of the Diriyah Gate Development Authority, told the panel: “What the Gulf and its leadership will do in the next 10 years is going to be breathtaking to allow people to come from all over the world.”
With “so much to do in the region,” Inzerillo said he believed the “warmth and hospitality” of the Saudi people is serving as a strong selling point for tourism in the Kingdom.
Though the traditional Gulf tourism market in Saudi Arabia is well developed, European tourism is “now activating” through new business with the Kingdom, he added.
“And as we sign more and more airline deals and… (the) Ministry of Tourism has done a brilliant job in getting bilaterals, you’ll see those numbers grow very exponentially.”
Other panelists included Abdulla Bin Touq Al-Marri, UAE minister of economy; Thiago Alonso de Oliveira, CEO of JHSF Participacoes; and Aireen Omar, president and CEO of RedBeat Capital.
Saudi Green Building Forum set to obtain UNCCD’s permanent observer status
RIYADH: The Saudi Green Building Forum is set to obtain permanent observer status following the submission of a formal request to the UN Convention to Combat Desertification.
Pending a final decision during the 16th session of the Conference of the Parties to be held from Dec. 2-13 in Riyadh, this move underscores the forum’s efforts to enhance its role in sustainable development and combat desertification.
The forum, which has already been temporarily accredited, is involved in the proceedings based on the provisions of paragraph seven of article 22 of the convention and articles six and seven of the internal regulations of the COP, according to a press release.
This initiative is part of a broader strategy to integrate scientific and community-based approaches to environmental management.
Commenting on the development, Faisal Al-Fadl, secretary-general of the Saudi Green Building Forum, said: “We are pleased with the official notification from the UN Secretariat of the receipt of the required documents after a thorough review of the documents submitted for the accreditation of the forum as the first Saudi institution specialized in preparation for obtaining observer status for the Conference of the Parties to the UN Convention to Combat Desertification,” he stated.
“The efforts of local communities play a significant role in enhancing the sustainable development goals for people, plants, and prosperity through advocating for human experiences based on scientific rules and community health and well-being for healthy, fair, and resilient communities and cities, sufficient consumption and production, climate action in removing harmful carbon, and reducing the temperature to 1.5 degrees Celsius, addressing desertification, and managing natural resources and water,” he added.
The UN Secretariat confirmed the receipt of all necessary documents for the forum’s accreditation as an observer, encouraging further participation in the convention’s activities.
“After a thorough review of the documents submitted by your institution, we encourage you to continue participating in the implementation of the UN Convention to Combat Desertification and keep the secretariat informed of the activities,” the letter stated.
The Saudi Green Building Forum’s potential new status as a permanent observer at the UN Convention will enable it to contribute more effectively to global efforts against desertification, leveraging cooperation between developed and developing nations, particularly in sustainable land management and environmental restoration.
‘Two-state solution,’ investing in crisis resilience hold key to Mideast future, says Saudi minister
‘Two-state solution,’ investing in crisis resilience hold key to Mideast future, says Saudi minister
- Vision of regional development, prosperity ‘complicated by tensions,’ Adel Al-Jubeir tells WEF special meeting
RIYADH: The key to getting the Middle East region back on track toward development and prosperity is ending the Gaza conflict, the Saudi minister of state for foreign affairs said on Sunday.
Adel Al-Jubeir, who was speaking at the World Economic Forum Special Meeting being held in Riyadh, said the Israel-Hamas conflict raging in the enclave only served to “undercut” any attempts to integrate the region and “unleash its potential.”
He added that, considering its young population, abundant natural resources and strategic geographical location, the Middle East had all the ingredients to be a successful region.
The goal of policymakers in Saudi Arabia and beyond was to ensure these elements benefitted everyone and better linked the Middle East region with the rest of the world, Al-Jubeir said.
However, he said that this vision was “complicated by tensions” affecting the Middle East, and it was important to put an end to these in order to “focus on the things that matter” to developing its prosperity.
“(With the situation in Gaza), our number one priority is to stop the fighting,” he said. “Our second priority is to ensure enough humanitarian assistance goes into the Gaza Strip so that we avoid starvation, disease, and we take care of the people there,” he added.
“In the long term, we need to find a way to end this conflict (for good), and the only way we end it is by having a two-state solution, so we need to chart a clear, time-bound irreversible path to a Palestinian state.
“Saudi Arabia has said in terms of normalization (with Israel), this would be a part of that. The Arab world has had a position with regard to the Arab Peace Initiative, the US and the rest of the world supports this, so we need to make sure we stop the fighting, increase assistance and come up with a pathway to that Palestinian state,” he added.
When pressed by the panel moderator, CNN’s Becky Anderson, on whether a two-state solution would be possible with Benjamin Netanyahu and his right-wing government in charge in Israel, Al-Jubeir said it was in “everyone’s interest” to end the conflict.
“I’m not a mind reader or a psychiatrist; it’s not what I was educated in or my profession,” he said. “But what I can tell you is the interests of everybody in the region requires putting an end to this conflict, the potential that can be unleashed is tremendous, with good will, seriousness and foresight we should be able to get the ball over the goal line,” he added.
Mohamad Al-Ississ, Jordanian finance minister, also said the region had lurched from crisis to crisis over several decades, and told the WEF panel: “The one certain thing anybody can be certain of is that uncertainty is here to stay.”
He said the role of policymakers in the Middle East should be investing and developing sectors that allowed the region’s economies to absorb and ride out the shock and impact that crises can have.
“The top priority is (determining) how to invest in enhancing your buffers, so that you can increase your resilience for when ‘black swan’ events, which have become the norm, unfold,” he said.
Ahmed Galal Ismail, CEO of UAE’s Majid Al-Futtaim Holding, agreed. He said that while peace and stability were “obviously indispensable to economic growth,” if the region just waited for it to happen, it could be “waiting for a long time.”
He cited an example of intra-Arab trading being at its highest-ever level, but added it was “anaemic” compared with other global blocs.
“We need to act. From a private sector perspective, we see opportunities independent from geopolitics and from the cruelty we see in parts of the region, so it is very important the actors in the sector are pragmatic, take the lead, and start what is needed to drive that economic integration.”
