OGDC: Takeaways from FY22 Analyst Briefing

Pakistan’s largest exploration and production company; Oil & Gas Development Company Limited (OGDCL), held its analyst briefing earlier, wherein the following was discussed:

The Company has posted the highest quarterly profit after tax of PKR53.3 billion (EPS: PKR12.4) for 1QFY23, higher by 145%QoQ and 58.5%YoY basis.

Major projects during the year were: Discovery in Wali block with cumulative potential of 219bcf gas and 13 million bbl oil and exploration and appraisal activities at Abu-Dhabi offshore block 5.

Other developments during the year included: company entering into a framework agreement with the Government of Pakistan, provincial government of Baluchistan, GHPL, PPL and Barrick Gold Corporation for extraction of gold and copper reserves from Reko Diq.

As per company presentation, OGDCL holds 87,300 square km of exploration coverage with total of 57/111 exploration/development licenses, respectively.

Province wise concession shares are: KPK 19%, Sindh 21%, Punjab 21% and 39% Baluchistan.

Seismic survey acquisition during the last six fiscal years was 15,380 Line km of 2D and 3,766 sq. km of 3D portraying.

OGDCL’s share in total industry stood at 80% 2D and 31%3D surveys. Finally, OGDCL’s share in gross production works out at 23%, with industry’s total production at 73,400 bpd as on June 2022.

According to management, average natural decline rate of major oil fields stands at 16% (5-year average). Although, the said decline rate has been arrested to 6-8% more recently with the help of workovers and development wells etc.

Industry’s net gas production stood at 3,390mmcfd (OGDCL share 29%) during FY22. Natural depletion rate stands at 8% for major fields (Mela, Nashpa, Kunnar Pasakhi Deep etc.), but has been arrested at 5% by the company through workovers and development wells etc.

Management stated that Reko Diq project is a stepping stone for the diversification strategy company is trying to achieve. Company is also trying to move into power and other energy projects as well.

LNG trade faces unprecedented times

According to Seatrade Maritime News, LNG shipping is seeing exceptional strength, already fueled by geopolitical vagaries, and with the impact of winter weather patterns yet to be determined.

The sector received considerable emphasis at Marine Money’s mid-November Ship Finance Forum, held in midtown New York.

Mike Tusiani, Poten & Partner’s Chairman Emeritus, in introducing the day’s kick-off panel, described the present situation as an unprecedented time in the LNG trades.

His colleague at Poten, Jefferson Clarke, talked about “ton time” having supplanted ton miles as the operative metric in explaining LNG shipping’s rise.

He said that commodity prices are driving the flows of LNG; in short, it gives the incentive for charterers to hold on to tonnage…and not get access to tonnage.

He explained that vessel charterers have been moving vigorously into the term market, and explicitly linked high LNG prices with demand for term charters.

Though media headlines within the mainstream and trade press have pointed to charter hires for high end LNG carriers at US$400,000 per day or more, spot fixtures are actually few and far between.

Oystein Kalleklev, CEO of Flex LNG said, after reviewing fixture lists, that he could only find two spot fixtures done in November.

On a shipowner panel later in the day, Kalleklev opined that LNG shipping is like a liner trade in contrast to more spot-oriented commodity sectors, including VLGC/ LPG transporter Avance Gas, where he is Executive Chairman.

On that same panel, he described the FLNG strategy, if he were taking delivery of a hypothetical new vessel, as “fix it out, finance it, and pay a hell of a lot of dividends.”

He described one year time charters as being in the US$200,000 per day range with three-year deals drawing around US$170,000 per day but added that there will be volatility.

In the earlier panel, he indicated a preference for a strategy of fixing FLNG’s vessels on term business when they come off existing charters, rather than expanding the fleet with expensive newbuilds.

Kalleklev attributed strength in the markets to waiting and delays, which effectively reduce available supply, in explaining the market’s dynamics. In LNG trades, he explained that “ton time has mitigated the downturn in ton miles.

People are waiting more, people are deploying floating storage. One component of the potential volatility awaiting market participants this time around might be unwinding of such storage if the present contango structure LNG pricing was to flatten out.

He noted that a precipitous market fall in late 2018 had been brought about by a previous instance of floating storage being unwound.

 

 

 

US may save itself, but destroy others

The United States hopes to save itself by destroying others, rather than solving its own problems by managing and controlling crises. The US has created many crises in its relations with China. If they're not properly dealt with, not only China, but also the US itself will suffer, and the latter will suffer more.

Some elites in Washington make no attempt to improve themselves when facing competition with China and dealing with domestic woes, instead, they dedicate themselves to taking China down through committing sabotage.

Former US Treasury Secretary Lawrence Summers warned US policymakers to focus on building the country's own economic strengths in its contest with China, rather than attacking its adversary.

"If we change our focus from building ourselves up to tearing China down, I think we will be making a very risky and very unfortunate choice," he was quoted as saying, according to Bloomberg's report.

The primary reason why Washington focuses on "tearing China down," rather than concentrate on its own innovation, infrastructure, education and challenges lies in the US political system's structural contradictions.

The US is now trapped in conundrums such as the loss of manufacturing capability, the hollowing out of local industries, and the asymmetric distribution of benefits from global trade among different groups in the country. For the US, the top capitalist country, the excessive expansion of financial capital will inevitably lead to the emergence of the above mentioned problems.

If the US wants to improve itself as Summers suggested, it must overcome the constraints of its system and carry out domestic reforms to curb the excessive expansion of financial capital, implement a fairer tax policy, and manage the wide income distribution gap between different groups. It also needs to plan and guide national innovation through policies so as to enhance the creativity and competitiveness of the country. However, unless the US becomes a socialist country, these are difficult to accomplish under its existing capitalist framework, Shen Yi, a professor at the School of International Relations and Public Affairs of Fudan University, told the Global Times.

In addition, reforms require short-term costs, but under the current US system with political parties facing pressure of winning more votes in the elections, any reforms demanding short-term costs cannot be implemented in the US unless the two parties reach a consensus," said Shen.

The simpler solution, for both parties, is to "hoax" the American public that the US has been running smoothly and that the main obstacle for US' development is because of a "bad" country. Both Republicans and their Democratic counterparts claim that they can help deal with the "bad" country if elected, so as to solve their current predicament. To win the election, the two parties have been intensifying their steps to contain China.

As a matter of fact, there is nothing complicated about what is the proper solution for the US, and many elites, including Summers, are fully aware of it. Shen noted that the US seems to stay in a paralysis state, under which the brain is actually sober, but the body cannot operate according to people's thoughts.

This is how Washington's strategic anxiety in terms of China policy has been formulated. In this context, decision-makers have been given some absurd advice, with strong gambling and speculative mentality.

Furthermore, US term of office and election determine that the government has very limited time to carry out practical policies, as much time is spent on election and buck-passing. Such a nature of US political games also determines that Washington has little time to make remarkable changes.

Only when the entire US reaches a new consensus, realizing that US problems do not lie in China, but the US itself, can the US make fundamental changes on its China policy. Until that day comes, what Summers proposed will not take place.

Gaza beekeepers and struggle for survival

According to a report by Reuters, more than 15 years of Israeli blockade has not quite killed off beekeeping in Gaza, but beekeepers say climate change just might.

This time, it wasn't the bulldozers or the bullets, but the rain and the wind. Weather kept the bees confined to their hives in the spring, when they should have been out foraging for nectar.

"This year was the worst for beekeepers in Gaza," said Waleed Abu Daqqa, who tends hives in the eastern section of the Palestinian coastal enclave. "Lots of bees have died."

Temperatures have been rising for half a century in the territory, where 2 million Palestinians live under an economically devastating blockade imposed by Israel and Egypt since Hamas Islamists took control in 2007.

Over recent years, the number of hives has almost been halved and the production of honey went down to 180 tons from 400 tons a few years ago, said Adham Al-Basyouni, an official from the agriculture ministry.

Beekeepers and their bees have lost access to prime agricultural land, bulldozed near the borders of the strip. The blockade and six wars between militants and Israel have made it difficult and expensive to import supplies.

And now, the "prime factor" causing a bee crisis is climate change caused by global warming, Baysouni said. This year, in Gaza, that unpredictable climate brought an unseasonable cold spell. Few Gazans had the right sort of hives to withstand it.

"We witnessed repeated rain storms that forced the bees to stay inside the hives and they fed on what was inside and that led to poor production," he said.

Bees and other pollinators are vital to agriculture and wildlife around the world, and the impact of climate change is a global problem.

"Radical shifts in temperature, droughts, and floods are disrupting native ranges for pollinators, making ecosystems unsuitable for the processes needed to sustain populations, such as overwinter hibernation, spring nest establishment, and reproduction," wrote bee researchers Diana Cox-Foster and Gloria DeGrandi-Hoffman of the US Department of Agriculture.

Ratib Sammour, a Gazan agricultural engineer and beekeeper, has built a successful business selling health products from bees and treating patients with bee stings, known as apitherapy. Now it is at risk.

Not only has honey production fallen, but with it the quantity of other products such as royal jelly, bee pollen, bee venom and bee glue known as propolis.

"When the quantity of bees started to decline it reflected on us," he said.

 

Iran’ 1st fishery park goes operational

Iranian Agriculture Minister Javad Sadati-Nejad has announced the launch of the country’s first fishery industries park, IRIB reported on Tuesday.

Making the announcement on the sidelines of the 6th International Fisheries Industry Exhibition (IFEX 2022), Sadati-Nejad said the country's first fishery park was put into operation in which every year 1,000 tons of shrimp will be produced.

According to the official, the volume of shrimp production in this park will increase to 2,000 tons by the end of the current Iranian calendar year (March 20, 2023).

Sadati-Nejad stressed his ministry’s support for the companies active in the fishery sector. He said, “The Ministry of Agriculture and Iran Fisheries Organization (IFO) support investors active in the field of fisheries and seafood production, which in addition to improving the economy, increasing exports and foreign revenues, it also brings job creation.”

The minister also announced the growth of the export of aquatic and fishery products, including caviar, in the current year.

Iran’s 6th International Fisheries Industry Exhibition was opened at the Tehran Permanent International Fairgrounds on Sunday.

The exhibition aims at providing a platform for exchanging ideas and developing technical and economic cooperation, marketing and promoting trade and production facilities in the domestic and international arena, promoting the exports of fishery products, introducing domestic and foreign developments in the fisheries industry, strengthening and improving the distribution system and facilitating trade relations, upgrading technical knowledge in production, processing, and marketing, introducing new potentials for creating more employment opportunities in the country's fisheries industry and also promoting seafood consumption.

The event covers a variety of areas including fishing equipment, processing of fishery products, ornamental fish farming, and aquarium equipment, machinery for transporting aquatic and fishery products, aquaculture, and storage equipment, export-oriented fishery products, refrigeration facilities, aquaculture, and fish farming in cages, downstream marine industries, aquatic feed and supplements, sturgeon breeding, equipment and tools for water treatment, packaging industry, veterinary and pharmaceutical services, algae and leech breeders, electronic marketing for aquatic goods, weighing systems, as well as banks, credit institutions, and insurance companies.

 

Israeli government and fate of Palestinians

It was not a big surprise to wake up on the morning of November 02, 2022 to find out that the Israeli government and Knesset would now be run by a dominant majority of nationalistic religious Jews, Zionists and hard-line politicians who have previously advocated official ethnic-cleansing and shoot-to-kill policies against Palestinians.

One of them is likely to become public security minister, and others will hold key positions in government. Israel has been lurching further rightwards for the past two decades, and this coalition has nearly won previous elections, so it is not that shocking that they are now in power. And yet, one should ask, how different will Israel be after these elections?

With a clear majority in the Knesset and a firm hold on the executive branch, these old-new political elites will continue to do everything that previous governments have done over the past 74 years - but with more zeal, determination and disregard for international condemnation.

It will likely begin by expanding the Judaisation of the occupied West Bank and Greater Jerusalem, and by expanding military activity in what is already on track to be an exceptionally deadly year for Palestinians. Since the start of 2022, Israeli forces and settlers have killed more than 130 Palestinians, including more than 30 children, across the occupied West Bank. 

The new government will surely intensify the provocative visits of Jewish politicians to al-Aqsa Mosque complex. One can also expect further escalation in house demolitions, arrests without trial and a free hand being given to settler vigilantes to wreak destruction at will. 

It is not clear how far these new elites will go in its policy towards the Gaza Strip. Since 2008, Israel’s policy in Gaza has been so callous and inhumane that one finds it difficult to imagine what could be worse than a siege, blockade and occasional brutal air bombardments on a civil society. 

Similarly, it is difficult to predict the new government’s policies towards Palestinians inside Israel. Under the 2018 nation-state law, Israel formalized its status as an apartheid state. One suspects that, as in the occupied West Bank, much of the same and worse can be expected. One will probably see a continued disregard for the rise of criminal activity, along with stricter policies on house expansions in Palestinian rural areas.

One can also expect a continued suppression of any Palestinian collective attempts to express the minority’s national identity - whether through waving Palestinian flags on campuses, commemorating the Nakba, or in other ways expressing the rich cultural heritage of this community. 

In short, any remaining charade of democracy will disappear under this new regime.

Yet, despite the massive shift in global perceptions towards Israel in recent years - manifested in its depiction as an apartheid state by major international human rights groups, such as Amnesty International and Human Rights Watch, and the willingness of the International Court of Justice to discuss the decolonization of the occupied West Bank - there seems to be a general reluctance to acknowledge the possibility that there is Jewish racism, as much as there is Christian, Muslim or Buddhist racism.

Suddenly, UN General Assembly Resolution 3379 (passed in 1975 and later revoked), which equates Zionism with racism, no longer seems to be a declaration detached from the realities and complexities in Israel and Palestine. The African and Arab member states that pushed the resolution showed foresight in pinpointing racism as the main danger that Zionism as a state ideology carries with it - not only for Palestinians, but for the region as a whole. 

The disappearance in this election of the Zionist left can also be easily understood if one appreciates the depth and breadth of racism within Israeli society, particularly among youth. As a son of German Jews who escaped German racism in the early 1930s, and now studying it as an adult, I am deeply disturbed at this picture of a society mesmerized by racism and bequeathing it to the next generation.

Will Jewish communities recognize this reality or continue to ignore it? Will governments in the West, and particularly the American administration, acknowledge or disregard this trend? Will the Arab world, which has embarked on a process of normalization with Israel, treat this as irrelevant, as it does not undermine their regimes’ fundamental interests?

One has no answers to these questions. It is actually not necessary to answer these questions, but rather to do everything possible so that one day, they will be answered in a way that saves both Palestinians and Jews from a disastrous fate - and stops Israel from leading all towards a precipice whose edge is now more visible than ever. 

 

 

Pakistan's worsening current account deficit

Pakistan’s current account deficit (CAD) increased to US$567 million in October 2022, up 56%MoM primarily due to decline in remittances and imports.

CAD has reduced significantly on YoY basis from US$1.78 billion in October 2021. This is due to administrative measures to curb non-essential imports and reduced energy imports, lowering the trade deficit to US$2.3 billion (down 35%YoY and down 3%MoM).

Remittances witnessed a downward trend during the month to US$2.2 billion (down 9%MoM). The Balance of Payment position turned positive (US$1.2 billion) as Pakistan received US$1.5 billion loan from Asian Development Bank (ADB) in the last week of October.

Going forward, possible loans and international aid for floods rehabilitation, coupled with manageable CAD will likely provide external support to BoP position apart from US$1.0 billion international Sukuk payment which is scheduled in the first week of December 2022.

During October 2022, the trade deficit declined a mere 3%MoM to US$2.3 billion, largely owing to administrative measures taken to restrict import of non-essential items alongside 24%MoM decline in petroleum imports to US$1.2 billion. However, exports have also reduced by 7%MoM to US$2.3 billion. This is due to lower textile exports and PKR volatility, which likely refrain exporters from remitting proceeds to Pakistan.

Remittances declined in October 2022 to US$2.2 billion (down 9%MoM). Lower inflows from KSA, UAE and UK have reduced the overall base. The spread between actual and offered exchange rate coupled with active participation from informal channels dented remittance flows during the month. Looking ahead, less PKR volatility and increase in Pakistani worker registration in GCC countries may increase remittance flows in the remainder of FY23.

As per Board of Emigration and Overseas Employment (BEOE), around 693,000 Pakistanis have expatriated during 10MCY22TD compared to 288,000 and 225,000 during CY21 and CY20, respectively.

Most of these expatriations have occurred from Middle East countries which continue to enjoy better macros in high oil price environment.

The overall Balance of Payment (BoP) turned positive in October 2022 and recorded at US$1.2 billion against negative US$662 million last month. During October 2022, Pakistan received US$1.5 billion loan from ADB. Post these inflows Pakistan paid US$1.0 billion external debt repayment in the start of November 2022 while another international Sukuk payment of PKR1.0 billion is due in December 2022. Therefore, to support overall BoP and Foreign exchange reserves, Pakistan is in dire need of support from international organizations and friendly countries.

Apart from this, recent floods damaged extensive parts of Sindh and Baluchistan and displaced 15% of Pakistan population and 2.3 million homes have been affected. As per initial estimates of several agencies, total damages have so far reached US$40 billion and this will likely slowdown GDP growth to 2% as per recent estimates provided by World Bank. Pakistan is expected to receive additional assistance from international organizations and countries. We expect the pre-flood estimate of SBPs foreign exchange reserves of US$15 billion by end FY23 to remain broadly intact.