Pakistan: OGDC profit down 22%QoQ

Pakistan’s largest exploration and production company, Oil & Gas Development Company (OGDC) has reported its 2QFY23 financial results, posting profit after tax of PKR 41.7 billion (EPS: PKR9.70), lower by 22%QoQ, higher by 18%YoY.

Net sales were PKR97.2 billion for the period, down 8.3%QoQ but up 22%YoY basis, mainly on the back of declining oil prices (down 15%QoQ) during the period. Overall, total hydrocarbon production declined by 1.7% during the quarter.

Exploration expenses were reported at PKR5.1 billion on account of two dry wells: Shahpurabad-1 (OGDCL stake: 50%) and Sundha Thal-1 (OGDCL stake: 50%).

Furthermore, operating expenses increased to PKR21.4 billion (up 15%QoQ) from PKR18.63 billion in the previous quarter.

Finance & other income for the quarter were reported at PKR9.2 billion, likely due to higher income on lease holdings and bank deposits.

Along with the result, company also announced an interim cash dividend of PKR2.25/share, taking total 1HFY23 dividend payout to PKR4.0/share.

 

Pakistan: Government likely to approve new oil refining policy shortly

The upcoming Cabinet Committee on Energy (CCoE) meeting is likely to approve the Pakistan Oil Refining Policy 2023 as Prime Minister Shehbaz Sharif being In-charge of the Petroleum Division has authorized submission of a summary in this regard to the CCoE.

The petroleum division has prepared the summary for the new oil refining policy 2023 involving upgradation of the existing refineries. 

The summary was circulated to the Finance Fivision, Ministry of Planning, Development and Special Initiative, Federal Board of Revenue (FBR) and Oil and Gas Regulatory Authority (OGRA) for seeking their input. 

This is a positive development for establishing a proposed refinery in the country worth around US$10 billion dollars with the cooperation of Saudi Arabia.

Petroleum products contribute 31% to the energy mix of Pakistan with an overall contribution of  around 11 million tons Per Annum (inclusive of 30% local crude processing) while the remaining 69% of the country’s demand has to be met with imports.

Indigenous and imported crude is refined by five local refineries which have been periodically upgraded to meet local fuel specifications.

The upgradation of refineries included setting up of Diesel HydroDesulfurization (DHDs) to reduce Sulphur from diesel and isomerization plants for enhancing the production of Motor Spirit (Petrol) at a combined cost of around PKR75 billion.

The government has been emphasizing local refineries to further up-grade their plants by producing Euro-V specification fuels and minimizing production of furnace oil, however it requires capital investment of around US$4.5 billion. 

This would require refineries to arrange funding from either their own resources and or borrowing from lenders at commercial terms. To obtain the required funding, refineries will have to improve their balance sheet, according to sources.

The five year profit/loss position of refineries indicates that the sector needs fiscal support from the government to improve the financial position for upgradation purposes.

In case of no intervention by the government, the local refining industry might be at risk of collapsing according to some speculators. 

In such a case the domestic crude oil production of approximately 70,000 barrels per day by the country’s Exploration and Production (E&P) companies would have to be exported and more expensive refined petroleum products would have to be imported. 

Such a scenario might discourage investment in exploration of the oil and gas sector, apart from creating vulnerability in the supply chain of strategic fuels and placing additional burden on the country’s balance of payments.

In October 1997, the government introduced the Petroleum Policy 1997 (amended in 2002), which replaced the minimum 10% guaranteed rate of return for refineries with tariff protection formula/deemed duty (10% on high speed diesel, 6% on Kerosene oil, light diesel oil & JP-4). In 2008 tariff protection was reduced to 7.5% on HSD only. 

Given the tariff protection could not attract investment in the sector, it is therefore required to be improved. Accordingly, an Energy Sub-Group of the Advisory Committee of the Planning Commission was constituted which made recommendations in April of 2021, with regard to investment in the refinery sector through government support including product pricing policies, tax structure etc.

In view of the above, the Petroleum Division prepared a draft Pakistan Oil Refining Policy for new and existing refineries which was discussed in CCoE meetings. The committee through its decision dated 13th September, 2021, provided guidelines to improve the policy document, therefore, the policy has been revised, said the sources.

The establishment of a new refinery requires considerable lead time and huge investment for which a policy along with attractive incentives needs to be in place.

In case of existing refineries, necessary changes have been incorporated in the policy after deliberation with the refineries and government bodies.

The draft Pakistan Oil Refining Policy 2023 for upgradation of existing refineries is submitted for the consideration and approval of the ECC whereby certain tax exemption and tariff protection incentives have been proposed as provided at section-6 of the proposed policy.

 

Shipping industry grapples with ways to cut cargo fires at sea

Global shipping companies are exploring ways to boost safety in transporting cargoes as risks grow from fires erupting inside containers or in cars at sea, officials said on Wednesday.

Shipping transports around 90% of world trade onboard different vessels including container and Ro-Ro ships with trade routes getting busier.

In a new initiative, leading carriers Evergreen Line of Taiwan, South Korea's HMM, Denmark's Maersk, Germany's Offen Group, Singapore's ONE (Ocean Network Express), Hong Kong's Seaspan as well as British ship certifier Lloyd's Register said they are looking into feasibility studies to understand how cargo is loaded and also monitored at sea, as well as finding solutions to detect fire onboard ships and speed up ways to stop it spreading.

"The priority for the first challenge area is to provide earliest indication of a fire incident, thus allowing the appropriate onboard responses to prevent the occurrence of large fires and loss," Rich McLoughlin, Program Director for the cargo fire and loss innovation initiative, told Reuters.

"The initiative seeks to provide proof-points that emerging tech may be used to improve response times over the existing regulatory requirements, leading to enhanced vessel safety."

In its 2022 safety and shipping review, analysis by major insurer Allianz Global Corporate & Specialty showed there had been over 70 reported fires on board container ships alone in the past five years, with growing risks faced by car carriers transporting electric vehicles using batteries.

"The main root cause for cargo fires on container ships is the integrity of dangerous goods throughout the supply chain. Therefore, it is a problem that can only be improved through industry wide solutions," Maersk's Aslak Ross said separately in a statement.

 

Russia suspends only remaining major nuclear treaty with United States

Russian President Vladimir Putin declared Tuesday that Moscow was suspending its participation in the New START treaty — the last remaining nuclear arms control pact with the United States — sharply upping the ante amid tensions with Washington over the fighting in Ukraine.

Speaking in his state-of-the-nation address, Putin also said that Russia should stand ready to resume nuclear weapons tests if the US does so, a move that would end a global ban on nuclear weapons tests in place since Cold War times.

Explaining his decision to suspend Russia’s obligations under New START, Putin accused the US and its NATO allies of openly declaring the goal of Russia’s defeat in Ukraine.

“They want to inflict a strategic defeat on us and try to get to our nuclear facilities at the same time,” he said, declaring his decision to suspend Russia’s participation in the treaty. “In this context, I have to declare today that Russia is suspending its participation in the Treaty on Strategic Offensive Arms.”

New START’s official name is The Treaty between the United States of America and the Russian Federation on Measures for the Further Reduction and Limitation of Strategic Offensive Arms.

US Secretary of State Antony Blinken deplored Putin’s move as deeply unfortunate and irresponsible, noting that we’ll be watching carefully to see what Russia actually does.

He said, “We’ll, of course, make sure that in any event we are postured appropriately for the security of our own country and that of our allies,” but emphasized “We remain ready to talk about strategic arms limitations at any time with Russia irrespective of anything else going on in the world or in our relationship.”

“I think it matters that we continue to act responsibly in this area,” Blinken told reporters on a visit to Greece. “It’s also something the rest of the world expects of us.”

NATO Secretary-General Jens Stoltenberg also voiced regret about Putin’s move, saying that “with today’s decision on New START, full arms control architecture has been dismantled.”

“I strongly encourage Russia to reconsider its decision and respect existing agreements,” he told reporters.

Putin argued that while the US has pushed for the resumption of inspections of Russian nuclear facilities under the treaty, NATO allies had helped Ukraine mount drone attacks on Russian air bases hosting nuclear-capable strategic bombers.

The Russian military said that it shot down the Soviet-built drones that struck two bomber bases deep inside Russia in December last year, but acknowledged that several servicemen were killed by debris that also damaged some aircraft.

Putin on Tuesday mocked NATO’s statement urging Russia to allow the resumption of the US inspections of Russian nuclear weapons sites as some kind of theater of the absurd.

“The drones used for it were equipped and modernized with NATO’s expert assistance,” Putin said. “And now they want to inspect our defense facilities? In the conditions of today’s confrontation, it sounds like sheer nonsense.”

He said that a week ago he signed an order to deploy new land-based strategic missiles and asked: “Are they also going to poke their noses there?”

The Russian leader also noted that NATO’s statement on New START raises the issue of the nuclear weapons of Britain and France that are part of the alliance’s nuclear capability but aren’t included in the US-Russian pact.

“They are also aimed against us. They are aimed against Russia,” he said. “Before we return to discussing the treaty, we need to understand what are the aspirations of NATO members, Britain and France and how we take it into account their strategic arsenals that are part of the alliance’s combined strike potential.”

Putin emphasized that Russia is suspending its involvement in New START and not entirely withdrawing from the pact yet.

The New START treaty, signed in 2010 by US President Barack Obama and Russian President Dmitry Medvedev, limits each country to no more than 1,550 deployed nuclear warheads and 700 deployed missiles and bombers. The agreement envisages sweeping on-site inspections to verify compliance.

Just days before the treaty was due to expire in February 2021, Russia and the United States agreed to extend it for another five years.

Russia and the US have suspended mutual inspections under New START since the start of the COVID-19 pandemic, but Moscow last fall refused to allow their resumption, raising uncertainty about the pact’s future. Russia also indefinitely postponed a planned round of consultations under the treaty.

The US State Department has said that Russia’s refusal to allow the inspections “prevents the United States from exercising important rights under the treaty and threatens the viability of US-Russian nuclear arms control.” It noted that nothing prevents Russian inspectors from conducting inspections of US facilities.

Putin on Tuesday challenged the US assertion, alleging that Washington has rejected some Russian requests for visits to specific US facilities.

“We aren’t allowed to conduct full-fledged inspections under the treaty,” he said. “We can’t really check anything on their side.”

He alleged that the US was working on nuclear weapons and some in the US were pondering plans to resume nuclear tests banned under the global test ban that took effect after the end of the Cold War.

“In this situation, Rosatom (Russia’s state nuclear corporation) and the Defense Ministry must ensure readiness for Russian nuclear weapons tests,” Putin said. “We naturally won’t be the first to do it, but if the U.S. conducts tests we will also do it. No one should have dangerous illusions that the global strategic parity could be destroyed.”

 

Rising number of Americans say media misinform

A new survey reveals half of Americans say their national news organizations “mislead and misinform them”. The joint study published by the Knight Foundation and Gallup has revealed that half of Americans believe that major US news organizations are trying to persuade the public to adopt a particular point of view with the bias coverage of their reporting.

As little as 26% of Americans have a favorable opinion of their news media.

The survey goes beyond other research that showed a low level of trust in the US media, but this poll stretches to a new level where half of the American population believes there is a deliberate intention to deceive public opinion.

This is the lowest confidence level ever. Five years ago, surveys also showed a low level of trust in the media.

But these are strikingly worrying statistics in which Americans believe US news outlets are acting to purposely misguide them.

In other words, US citizens are essentially saying that American national media outlets are attempting to deceive them into trusting fake news.

If Americans believe mainstream US news organizations are spreading a campaign of disinformation (and not misinformation), this raises question marks over how the US media is having an impact on misguiding global views with its disinformation campaign.

Officials from different governments have previously slammed US news coverage as a factor that instigates unrest in different regions of the world and the American people’s growing suspicions of US news narratives add further weight to the argument.

Critics have also criticized US mainstream media for using pundits with links to arms manufacturers in a bid to persuade and encourage the American public into supporting Washington’s foreign military adventurism at the expense of their tax money.

This is while pundits who oppose US foreign policy or express a different narrative are being taken off the air or prevented from writing columns for newspapers.

In this modern age of information, reliable news sources are difficult to find in the US and its allies.  

This is while sources of news outlets from countries in West Asia, East Asia, Eastern Europe, and beyond which offer an audience with different narratives have been taken off the airwaves or heavily censored on social media platforms. 

If an audience has only one narrative, is that not a form of brainwashing? 

The Knight Foundation says it joined hands with Gallup as part of an academic initiative launched in 2017 to address the decline in trust for journalism and other democratic institutions.

In its latest joint publication, the survey has documented that only 26% of Americans have a favorable opinion of the news media, the lowest level Gallup and Knight have recorded in the past five years.

This is while 53% of the American population (more than half of the nation) do not hold a favorable view of their news outlets.

With the new survey highlighting how the nation's cynicism of US media is growing, the Knight Foundation pointed out that “democracy in America relies on an independent press to inform citizens with accurate information.

Yet today, two forces pose significant challenges to this function: the growing struggle of news organizations to maintain financial independence and the growing distrust of news among the public.”

For example, the research reports that “81 percent of Americans in 2020 said the news media was ‘critical’ or ‘very important’ to democracy. 

In August 2022, a Quinnipiac University poll reported that 67% of Americans believe the nation’s democracy is in danger of collapse, up from 58% in January.”

Across all political affiliations, more Americans say they hold an unfavorable opinion of the news media compared to a survey conducted in late 2019-early 2020. 

This rise is especially significant among independent voters who have no political affiliation to either the Republican Party or the Democrats.

Perceptions of political bias in news coverage have also increased, with independents again driving the trend, followed by Republicans, then Democrats.

Furthermore, the younger generation continues to hold more negative perceptions of the news media than older generations, which is in line with previous studies.

Gallup’s long-term trend on this measure hit a record low in 2020 when the share of Americans with no confidence in the news media surpassed that of people with at least some confidence for the first time in 40 years. 

Research from the American Views 2020 report by Gallup and Knight showed that Americans were “very concerned” about increasing political bias in news coverage and the perception that news organizations “push an agenda.”

Asked whether they agreed with the statement that national news organizations do not intend to mislead, 50% said they disagreed while only 25% agreed, the latest study found.

Similarly, 52% disagreed with a statement that those spreading national news “care about the best interests of their readers, viewers, and listeners,” the study found. It said 23% of respondents believed the journalists were acting in the public's best interests.

“That was pretty striking for us,” said Sarah Fioroni, a consultant for Gallup. The findings showed a depth of distrust and bad feelings that go beyond the foundations and processes of journalism, she said.

Journalists need to go beyond emphasizing transparency and accuracy to show the impact of their reporting on the public, the study said.

“Americans don’t seem to think that the national news organizations care about the overall impact of their reporting on the society,” said John Sands, Knight’s senior director for media and democracy.

Whereas Americans are increasingly losing faith and distancing themselves from national news coverage, the study found they have more trust in local news.

65 percent said that local news organizations report the news accurately and fairly to the public, and more than half of Americans say most local news organizations can be relied on to deliver the information they need.

53% believe most local news organizations care about how their reporting affects their community broadly, and 47% believe most local news organizations care about the best interests of their readers, viewers, and listeners.

44% of Americans say local news organizations do not intend to mislead, misinform or persuade the public.

But the study indicates more Americans are on top of the news than ever before with (1) the ability of many people to instantly get their news from a device they hold in their hand, (2) the rapid pace of the news cycle and (3) an increased number of news sources.

According to the survey, these factors also appear to bring problems as they overload Americans with news information. The study said 61% of Americans believe these factors make it harder to stay informed, while 37% said it's easier.

In an indication of how people are distancing themselves from national media for their news, 58% said they relied on the internet while, 31% said television, 7% said radio and only 3% mentioned printed newspapers or magazines.

As for the younger generation aged 18 to 25 years old, a massive 88% said they got their news online, the survey found.

While 72% say national news organizations have the resources and opportunity to report the news accurately and fairly to the public, only 35% say they can rely on most national news organizations to deliver the accurate information they need.

The study also found that half or more Americans report difficulty in sorting out facts and being well-informed,  61% say the increase in information today makes it harder to be well-informed.

50% say there is so much bias in the US news media that it is often difficult to sort out the facts.

The other results from this study as well as others indicate that most Americans think news organizations prioritize business needs above their public duty. 

Overall, it's a disturbing example of how the US establishment uses the media to exploit the American public, especially considering when only 23% of respondents believe the media is covering news with an attempt to deceive them.

Pakistan: Key Economic Indicators getting from bad to worse

Current account deficit (CAD) during January 2023 was reported at US$242 million as compared to US$290 million in December 2022.

Trade deficit during the month under review was down 11%MoM to US$1.7 billion.

Imports dropped by 7% to US$3.9 billion and exports were down 4% to US$2.2 billion.

A 17%MoM decrease of in CAD is mainly attributed to lower trade deficit of goods.

Remittances declined by 10%MoM to US$1.9 billion. This is likely due to global economic slowdown and difference between Interbank and Open Market/Kerb rates.

Foreign exchange reserves of the country in January 2023 were down 23%MoM to US$8.7 billion.

The reserves held by State Bank of Pakistan (SBP) were down 45%MoM to US$3.1 billion.

CPI inflation in January 2023 surged to 27.6% as against 24.5% in December 2022.

Pakistan total debt & liabilities in 2QFY23 clocked in at 85.18% as % of GDP vs. 84.28% same period last year.

On other hand, external debt & liabilities increased to 38.15% in 2QFY23 vs 37.62% in 2QFY22.

 

Israeli-linked ship attacked in Arabian Sea

An Israeli-linked tanker was slightly damaged in an attack last week by an airborne object while sailing through the Arabian Sea, the ship's manager confirmed on Saturday.

Regional defence and security sources suspect the assault was carried out by Iran, which did not comment on the incident. Tehran has rejected accusations it was behind similar attacks in the past few years.

The Liberian-flagged Campo Square had no cargo when it was hit late at night on February 10, about 300 nautical miles off the coasts of India and Oman, the manager said in a statement.

Shipping databases linked the tanker to Zodiac Maritime, which is controlled by Israeli shipping magnate Eyal Ofer.

"We can confirm that both the vessel and crew are safe and proceeding as per planned passage. There is minor damage to the vessel. We have made the necessary notifications to the relevant authorities," the manager said.

The attack came during antagonism between Iran and the West over Tehran's nuclear activity and its supply of arms - including long-range suicide drones - for Russia's war in Ukraine, as well as months of anti-government demonstrations at home.

British maritime security company Ambrey Intelligence said unmanned aerial systems had attacked two tankers and one bulk carrier in the Arabian Sea and assessed that Tehran had mounted the attack.

Two of the merchant vessels were Israeli-owned, it said, and one was Emirati.