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 Arabia unveils Green Finance Framework in sustainability push
RIYADH: Public and private participation in climate financing in Saudi Arabia is poised to receive a boost with the introduction of the Green Finance Framework.
This initiative, launched by the Ministry of Finance, is aimed at propelling the nation toward its sustainability goals and achieving net-zero emissions by 2060, Saudi Press Agency reported.
The framework is expected to contribute to the efforts aimed at reducing emissions through a circular carbon economy approach, along with positioning Saudi Arabia as a regional leader in sustainable finance.
It was in October 2021 that Saudi Arabia announced its ambitious goal to achieve net-zero emissions by 2060.
With this framework, the Kingdom aims to significantly reduce greenhouse gas emissions by 278 million tonnes annually by 2030, aligning with the commitments under the Paris Agreement.
The Paris Agreement is an international treaty on climate change that was produced in 2015 and compels signatories to work toward limiting the global temperature increase to 1.5 °C above pre-industrial levels.
The Kingdom has been spearheading several initiatives including the Saudi Green Initiative to combat the adverse effects of climate change over the past few years.
On March 27, the Kingdom celebrated its first Saudi Green Initiative Day highlighting the importance of fostering a sustainable legacy for future generations.
The celebration was organized under the theme “For Our Today and Their Tomorrow: KSA Together for a Greener Future” and it highlighted the collaboration of more than 80 public and private sector projects that are part of the SGI.
To date, Saudi Arabia has deployed 2.8 gigawatts of renewable energy to the national grid, powering more than 520,000 homes, with additional projects underway to increase capacity.
Moreover, more than 49 million trees and shrubs have been planted throughout the Kingdom since 2021, and extensive land rehabilitation efforts have been undertaken.
Additionally, energy giant Saudi Aramco, in collaboration with the Kingdom’s Ministry of Energy is building a carbon capture and storage hub in Jubail, which will have 9 million tonnes annual storage capacity upon its completion in 2027.
Closing Bell: Saudi main index slips to close at 12,565
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Thursday, losing 42.09 points, or 0.33 percent, to close at 12,565.89.
The total trading turnover of the benchmark index was SR10.53 billion ($2.8 billion) as 54 stocks advanced, while 170 retreated.
Similarly, the Kingdom’s parallel market, Nomu, dropped 385.72 points, or 1.43 percent, to close at 26,622.88. This comes as 20 stocks advanced while as many as 42 retreated.
Meanwhile, the MSCI Tadawul Index rose 7.54 points, or 0.47 percent, to close at 1,599.02.
The best-performing stock of the day was Modern Mills for Food Products Co. The company’s share price surged 9.46 percent to SR68.30.
Other top performers include the Mediterranean and Gulf Insurance and Reinsurance Co. as well as Al Yamamah Steel Industries Co.
On the announcements front, Red Sea International Co. announced its annual consolidated financial result for the period ending Dec. 31.
According to a Tadawul statement, the entity’s revenues reached SR1.37 billion in 2023, reflecting an increase of 241 percent when compared to 2022 figures.
The rise in sales is mainly attributed to the strategic acquisition of a 51 percent stake in Fundamental Installation for Electric Work Co., or First Fix, with the recognition in RSI’s consolidated financial statements starting in the final quarter of the year.
Additionally, the company has tactically increased its focus on enhancing its supply chain and adopting competitive pricing strategies while advancing procurement techniques.
On a similar note, the firm’s net profits during the same period hit SR2.17 million, up from a net loss of SR198 million, which was recorded in the same period in 2022.
This rise is mainly linked to positive impact of the First Fix acquisition, in addition to the improvement in revenues and operating performance.
Moreover, Riyadh Steel Co. has also announced its annual financial results for 2023.
A bourse filing revealed that the firm’s net profit reached SR11.14 million in the period ending on Dec. 31, reflecting an increase of 118.8 percent compared to the corresponding period a year earlier.
The increase in net profit is primarily attributable to a reduction in the cost of revenue and secondarily to a rise in other income in comparison to the previous year.
Furthermore, Al-Baha Investment and Development Co. also announced its annual financial results for the period ending on Dec.31.
According to a Tadawul statement, the company’s net profit hit SR4.94 million in 2023, up from the net loss of SR8.09 million that was recorded in 2022.
The increase was owed to a 39 percent surge in the group’s revenues and reduced financing costs by 73 percent, among other reasons.
Saudi Arabia leads the charge toward energy transition: report
RIYADH: Saudi Arabia is emerging as a proactive leader, pioneering green initiatives to mitigate economic challenges posed by the transformation toward sustainability, according to the International Monetary Fund.
A recent report by the IMF highlighted the intricate dynamics at play and underscored the Gulf Cooperation Council and Saudi Arabia’s strategic positioning in this evolving scenario.
Titled “Key Challenges Faced by Fossil Fuel Exporters during the Energy Transition,” the study discussed climate change mitigation efforts in many fossil fuel exporting countries.
As Saudi Arabia and its GCC counterparts continue to lead the charge toward sustainability, they set a precedent for the global community.
By embracing green initiatives, investing in renewable energy, and fostering economic diversification, these nations are paving the way for a sustainable future, balancing economic prosperity with environmental responsibility.
The report emphasized that the Saudi Green Initiative launched in 2021 aimed at combating climate change and reducing carbon emissions.
It explained: “The Green Initiative is centered around three objectives, including targets for increasing the share of renewable energy in electricity generation up to 50 percent by 2030 and the deployment of circular carbon economy technologies, including carbon capture utilization and storage.”
Key challenges
The IMF stressed the need for economic diversification to effectively mitigate the impact of declining fossil fuel revenues.
Highlighting Saudi Arabia’s progress in economic diversification, the report explained: “The non-oil sector growth has accelerated since 2021, reaching 4.8 percent in 2022 spurred by strong domestic demand, especially in the wholesale, retail trade, construction, and transport sectors.”
Similarly, Bahrain, Qatar, and the UAE are diversifying their economies away from hydrocarbons, the study added.
In the UAE, non-hydrocarbon GDP was expected to grow by 5.3 percent in 2022, driven by tourism and FIFA World Cup impacts.
Progress on the Comprehensive Economic Partnership Agreements will further boost trade, attract foreign direct investment, and enhance integration with global value chains, according to the report.
The IMF highlighted that in Saudi Arabia, “the share of high-skilled jobs has increased to more than 40 percent in 2022, and female labor force participation doubled in four years to reach 37 percent in 2022.”
In its report, the Washington-based lender said the governments heavily reliant on revenues from fossil fuel exports face challenges in maintaining fiscal sustainability as these revenues decline.
“Countries with significant exposure to the fossil fuel industry may experience higher financial sector risks, including balance sheet effects, asset devaluation, and increased vulnerability to international market fluctuations,” it said.
The report added that transitioning away from fossil fuels may result in job losses in the fossil fuel industry, necessitating retraining programs and support for affected workers.
It called for structural reforms to address all the issues. “Accelerating structural reforms to diversify export bases and develop alternative industries is critical for mitigating the adverse macroeconomic effects of the energy transition,”the report said.
The IMF stressed the need for coordinated global efforts to overcome all these challenges. “Collaborative efforts can help ensure a smooth transition, mitigate transition costs, and support affected countries in diversifying their economies,” the report said.
New service at Jeddah port to boost Saudi-India trade
RIYADH: Saudi and Indian traders are set to benefit from Jeddah Islamic Port’s new service, bolstering trade connectivity between the nations.
The Saudi Ports Authority, also known as Mawani, on Thursday said that Unifeeder, a Danish logistics company, has introduced the “RGI” shipping service at the Saudi port. This initiative connects the Kingdom to Indian checkpoints, facilitating trade between the two nations and offering expedited and secure solutions for exporters and suppliers.
In a statement, Mawani affirmed that this undertaking showcases investors’ confidence in the Kingdom’s terminals, bolsters maritime transport and logistics services, and solidifies Jeddah Islamic Port’s status.
It added that the seaport is the Kingdom’s first dock for exports and imports, and the first re-export point in the Red Sea, with 62 multipurpose berths and a capacity of 130 million tonnes.
The new shipping service connects the Jeddah terminal to the ports of Mundra and Nhava Sheva in India, Jebel Ali in the UAE, and Sokhna in Egypt through regular weekly trips, with a capacity of up to 2,824 twenty-foot equivalent units, Mawani noted.
Mideast sets record in renewable energy capacity, Saudi Arabia reaches 2.6 GW: IRENA
RIYADH: Renewable energy capacity in the Middle East soared to a record high in 2023, with the addition of 5.1 gigawatts, marking a 16.6 percent increase from the previous year.
According to the latest data released by the International Renewable Energy Agency, this new addition brought the region’s total renewable energy capacity to 35.54 GW, with Saudi Arabia accounting for 2.68 GW.
The data showed that global green power capacity reached 3,870 GW in 2023, marking a 13.9 percent increase over the previous year. This represents the largest surge in sustainable energy capacity to date, with the addition of 473 GW.
Green sources constituted a record-breaking 86 percent of global power additions, primarily driven by substantial expansions in solar and wind energy.
Solar power alone contributed nearly three-quarters of renewable additions, totaling a record 346 GW, while an additional 116 GW of wind energy was incorporated, the report added.
Francesco La Camera, director general of IRENA, said: “Despite these unprecedented renewable additions in 2023, the world is still falling short of what is required to achieve the goal adopted at COP28 to triple installed renewable power capacity by 2030 to reach 11 TW.”
With one less year to meet the goal, he emphasized that the world now requires additions of approximately 1,050 GW each year for the remainder of this decade to align with the World Energy Transitions Outlook scenario and maintain a trajectory toward limiting global warming to 1.5 degrees Celsius.
The growth of sustainable energy is unevenly distributed globally, with Asia leading the expansion with a 473 GW increase, primarily propelled by China’s 63 percent surge to 297.6 GW. This highlights a notable discrepancy with other regions, particularly developing countries. While Africa saw some growth, it was modest at 4.6 percent, reaching 62 GW.
By the end of 2023, Camera said, renewable energy sources comprised 43 percent of the global installed power capacity.
“Yet, as we draw closer to a world in which renewable energy accounts for half of total capacity, many energy planning questions still need to be addressed to establish renewables as the most significant source of electricity generation - including in the context of grid flexibility and adaptation to variable renewable power,” he added.