Oil prices surge after Gulf of Oman tanker attacks

The Saudi oil tanker Al-Marzoqah was one of the four ships damaged in alleged ‘sabotage attacks’ a month earlier off the coast of Fujairah. (AFP)
Updated 13 June 2019

Oil prices surge after Gulf of Oman tanker attacks

  • The attacks took place to the east of the Strait of Hormuz, a major strategic waterway for world oil supplies, raising fears of disruption to the global energy trade
  • They come at a time of heightened tensions over Iran’s activities in the region and after Tehran has repeatedly threatened to disrupt shipping in and out of the Arabian Gulf

LONDON: Twin attacks on tankers in the Gulf of Oman, close to the world’s biggest energy chokepoint, sent oil prices surging by as much as 4.5 percent on Thursday.

The attacks took place to the east of the Strait of Hormuz, a major strategic waterway for world oil supplies, raising fears of disruption to the global energy trade. 

They come at a time of heightened tensions over Iran’s activities in the region and after Tehran has repeatedly threatened to disrupt shipping in and out of the Arabian Gulf.

Benchmark brent crude prices were up by 1.8 percent to $61.06 at around 4 p.m. GMT, having risen as much as 4.5 percent earlier in the day.

Thursday’s attacks involved the Front Altair, which caught fire in between the coast of Iran and the UAE after an explosion, and the Japanese-owned Kokuka Courageous, which was abandoned after being hit by a suspected torpedo.

The incidents follow the “sabotage” of four commercial vessels off the coast of the UAE’s Fujairah port last month.

Robin Mills, CEO of consultancy Qamar Energy, told Arab News that Thursday’s attacks were “considerably” more serious than the Fujairah incident. 

“Security will no doubt be beefed up, but it will have to be extended further if there is any repetition of such an attack,” he said. 

The impact on oil prices came despite global exporters having the capacity to boost production if needed, Mills added. 

“On the overall market, demand growth is weakening and there is plenty of spare capacity, but most of this is in the Gulf, of course. So (it is) not surprising we saw the price response,” he said. 

Andy Lipow, an analyst at Lipow Oil Associates in Houston, said the attacks could have a further knock-on impact on the market, notably on insurance risk premiums. 

“These types of attacks have always been a concern,” he told Reuters.

“But the impact of tanker owners not chartering their vessels and insurance companies potentially refusing to provide coverage could further exacerbate the supply problem.”


Saudi energy giant to invest $3bn in Bangladesh’s power sector

Updated 22 October 2019

Saudi energy giant to invest $3bn in Bangladesh’s power sector

  • Experts say deal will usher in more economic and development opportunities for the country

DHAKA: Saudi Arabia’s energy giant, ACWA power, will set up an LNG-based 3,600 MW plant in Bangladesh after an agreement was signed in Dhaka on Thursday.

The MoU was signed by ACWA Chairman Mohammed Abunayyan and officials from the Bangladesh Power Development Board (BPDB), officials told Arab News on Monday.

According to the agreement, ACWA will invest $3 billion in Bangladesh’s energy development sector, of which $2.5 billion will be used to build the power plant while the rest will be spent on an LNG terminal to facilitate fuel supply to the plant. Under the deal, ACWA will also set up a 2 MW solar power plant.

In recent months, both countries have engaged in a series of discussions for investment opportunities in Bangladesh’s industry and energy sectors. 

During the Saudi-Bangladesh investment cooperation meeting in March this year, Dhaka proposed a $35 billion investment plan to a high-powered Saudi delegation led by Majed bin Abdullah Al-Qasabi, the Saudi commerce and investment minister, and Mohammed bin Mezyed Al-Tuwaijri, the Saudi economy and planning minister.

However, officials in Dhaka said that this was the first investment deal to be signed between the two countries.

“We have just inked the MoU for building the LNG-based power plant. Now, ACWA will conduct a feasibility study regarding the location of the plant, which is expected to be completed in the next six months,” Khaled Mahmood, chairman of BPDB, told Arab News.

He added that there are several locations in Moheshkhali, Chottogram and the Mongla port area for the proposed power plant.

“We need to find a suitable location where the drift of the river will be suitable for establishing the LNG plant and we need to also consider the suitability of establishing the transmission lines,” Mahmood said.

“It will be either a JV (Joint Venture) or an IPP (Independent Power Producer) mode of investment, which is yet to be determined. But, we are expecting that in next year the investment will start coming here,” Mahmood said.

BPDB expects to complete the set-up process of the power plant within 36 to 42 months.

“We are in close contact with ACWA and focusing on the successful completion of the project within the shortest possible time,” he said.

Abunayyan said that he was optimistic about the new investment deal.

“Bangladesh has been a model for the Muslim world in economic progress. This is our beginning, and our journey and our relationship will last for a long time,” Abunayyan told a gathering after the MoU signing ceremony.

Economists and experts in Bangladesh also welcomed the ACWA investment in the energy development sector.

“This sort of huge and long-term capital investment will create a lot of employment opportunities. On the other hand, it will facilitate other trade negotiations with the Middle Eastern countries, too,” Dr. Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies (BIDS), told Arab News.

She added that Bangladesh needs to weigh the pros and cons before finalizing such contracts so that the country can earn the “maximum benefits” from the investment.

“It will also expedite other big investments in Bangladesh from different countries,” she said.

Another energy economist, Dr. Asadujjaman, said that Bangladesh needs to exercise caution while conducting the feasibility study for such a huge investment.

“We need to address the environmental aspects, opportunity costs and other economic perspectives while working with this type of big investment. Considering the present situation, the country also needs to focus on producing more solar energy,” Dr. Asadujjaman told Arab News.