UAE-India hold talks to finalize rupee dirham trade deal

The United Arab Emirates (UAE) and India are in technical discussions to finalize rupee-dirham exchange rate for trade arrangement. This was told by UAE ambassador to India, Abdulnasser Jamal Alshaali to Hindustan Times newspaper. 

“The technical conversation is ongoing. There has been an agreement to settle a certain [amount] of trade between the two countries, just not having to go through a third currency,” he said, adding the two sides are working on a remittance facility to make it "more direct and easier".

Alshaali noted that energy security is important for both countries with the UAE seeking to be part of India’s energy security.

“The fact that the strategic oil reserve has been agreed on and it’s been established and has been ongoing for quite some time, it is quite helpful and constructive, especially given the current state of affairs,” he added.

The ambassador said that India is a reliable partner for the UAE’s food security.

“Food security is important for us. We don’t produce that much food and we import a lot of it. And it’s quite vital for us that we have a partner that we can rely on, and India is a reliable partner when it comes to that,” Alshaali noted.

 

India leads world in cutting internet access for 5th year in a row

India imposed by far the highest number of internet shutdowns in the world in 2022, internet advocacy watchdog Access Now said on Tuesday, as the country topped the list for the fifth successive year.

Out of 187 internet shutdowns globally recorded by Access Now, 84 took place in India, including 49 in Indian- administered Kashmir, the New York-based digital rights advocacy group said in a report published on Tuesday.

"Authorities disrupted internet access at least 49 times in Kashmir due to political instability and violence, including a string of 16 back-to-back orders for three-day-long curfew-style shutdowns in January and February 2022," the watchdog report added.

Kashmir has long been a flashpoint between India and archrival Pakistan, which claim the region in full but rule only parts.

In August 2019, the Hindu nationalist Bharatiya Janata Party government led by Prime Minister Narendra Modi scrapped the autonomy of the Muslim-majority state of Jammu and Kashmir, splitting it into two federally administered territories.

The government has since regularly imposed communications restrictions on the region on security grounds, which rights groups have condemned and described as measures to quash dissent.

Militants have battled India's rule in Kashmir for more than three decades. The South Asian country blames Pakistan for stoking the revolt. Islamabad denies the claims.

Although India once again led the world in internet shutdowns, 2022 marked the first time since 2017 that there were fewer than 100 shutdowns in the country, the watchdog said.

Ukraine was second on the list, with the Russian military cutting access to the internet at least 22 times after Russia invaded Ukraine on February 24 last year.

"During Russia's full-scale invasion of Ukraine, the Russian military cut internet access at least 22 times, engaging in cyberattacks and deliberately destroying telecommunications infrastructure," the watchdog said in its report.

Ukraine was followed on the list by Iran where authorities imposed 18 internet shutdowns in 2022 in response to demonstrations against the government.

Nationwide anti-government protests erupted in Iran last fall after the death of 22-year-old Kurdish Iranian woman Mahsa Amini in police custody on September 16, last year. Amini was arrested in Tehran by the morality police for flouting the hijab rules, which require women to entirely cover their hair and bodies. She died while in custody.

 

Pakistan: Monetary Policy or Mockery

State Bank of Pakistan (SBP) was scheduled to announce Monetary Policy on March 16, 2023. However, on February 28, the central bank announced to hold meeting of Monetary Policy Committee on March 02. The central bank is likely to hike the interest rate by 200 to 300 bps.

While this may have surprised some people, many say it was much anticipated. They say since SBP and Finance Ministry plan to hold a big auction on March 08, 2023. The Banks faced a few challenges, worst being lack of clarity on the interest rate.

It was feared that if the Monetary Policy is not announced before the auction, the banks will participate at much higher than the previous cutoff levels.

If the Banks participate at or around the previous cutoff levels and the SBP raises interest rates higher than the market expectations of 200bps, the carry on the T-bills will be negative as SBP will have to hold OMO at higher levels.

It appears that the Government of Pakistan is adamant at rising interest to curb inflation as per IMF mantra. However, it is necessary to say that after the proposed hike the paying interest rate for the GoP on its borrowing would become unsustainable, inflation would spike to new highs and businesses would witness further erosion in their competitiveness – leading to further fall in exports.

It is also necessary to reiterate that the steps being taken on the behest of IMF would take Pakistan closer to default. One wonders, why the present economic managers have not been able to come up with their homegrown plan to pull Pakistan out of the current malice.

Failure on the part of economic managers to tax the rich, as advised by the chief of IMF, suggests that the rulers wish to prolong their ‘honeymoon’ and let the Pakistanis face all the adversaries.

 

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Pakistan: What should be the facets of New Refining Policy?

There can’t be two opinions about need for boosting crude oil refining capacity in Pakistan. However, analysts are of the consensus that the issue is complicated, policy makers and players are not on the same page, presence of pressure groups and above all there is an acute shortage of foreign exchange. As a result announcement of new Refining Policy has been lingering on, eroding paltry foreign exchange reserves of the country.

Lately, the government has asked local refineries to overcome the likely shortfall of 8,000 tons of petrol in the country. This clearly indicates that the concerned departments were unaware of the factors responsible for the shortfall: 1) delay in opening of L/Cs due to the limited availability of the foreign exchange and 2) overflowing furnace oil storage tanks of the refineries.

The government has been emphasizing local refineries to further up-grade their plants for producing Euro-V specification fuels and minimizing production of furnace oil, however it requires capital investment of around US$5 billion.

Analysts also say that for up-gradation of refineries that included setting up of Diesel HydroDesulfurization (DHDs) to reduce Sulphur from diesel and isomerization plants for enhancing the production of Motor Spirit (Petrol).

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. 

At present 8 refineries are operating in the country which have not been able to perform well. These refineries have not been able to utilize full capacity mainly due to low margins, liquidity issues, low fuel grade, low domestic crude oil production and high cost of production.

The aggregate installed capacity of the refining sector is around 22 million tons per year. In 2021 these refineries refined around 12 million tons, which puts capacity utilization around t 55%.          

Mainly these refineries produce Motor Sprit, Kerosene, HSD and Furnace oil. They also produce HOBC, LDO, Aviation Fuels, Naphtha, Refinery Gas, LPG, Lube-Oil, Asphaly, Wax, Sulphur and various other non-energy products. 

Furnace oil is being produced in large quantities. However, due to it being a high cost source for power generation its consumption has gone down drastically which has piled up its inventories as exporting furnace oil has been a challenge for the refineries. 

Sector experts suggest that the upcoming refining policy must incentivize existing players to upgrade their facilities to allow them to produce international quality standard products in turn opening up avenues for exports. This will also reduce furnace oil production which will increase profitability of the whole sector due to high margins of MS and HSD. 

It seems that policy planers are keen in the creation of new refinery that will require approximately US$15 billion. However, sponsors demand more incentives that would put the existing refineries at a disadvantage.

Refineries are regulated by Oil & Gas Regulatory Authority (OGRA) under Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules, 2016. Setting up an oil refinery is a highly capital-intensive Project. Going for a secondhand refinery is a not advisable as a refinery comprises of extensive net of pipelines and once refinery shuts down than for long (other than a planned yearly shut down) most of the pipelines are required to be replaced.

The Country can learn from the experience of Cynergico (BYCO) in this regard. The unit even after 8 years of its implementation is the least efficient among all refineries in Pakistan.

The way forward is that the GoP should come up a short term policy that will cover debottlenecking of processes and Balancing, Modernization & Reconstruction (BMR) of existing refineries to make them more efficient in terms of capacity utilization.

The product composition of Refineries should be such that the Country will be importing cheaper products (like crude oil and furnace oil) and producing more of expensive products (like Motor spirit and high speed diesel.

Long term plan comprises of construction of at least one Refinery in next five years with a minimum refining capacity of 50,000 barrel/day extendable to 100,000 barrel/per day in 10 years.

The field of energy and petroleum is highly specialized, and its policy makers should also be properly educated, knowledgeable and experienced to judge the implications of any Policy Review.

The problem is that Ministry of Energy & Petroleum comprises of decision makers who cannot grasp the whole implications because they are more trained in management than the business.

This weakness pushes them to call for advice from consultants on every implication which may spread into various sub implications. The Opinion of each consultant may vary from each other so much that the decision makers try to just pass the time instead of taking a decision.

The same phenomena are with the cabinets and their heads who understand least of the sector and often failed to defend a decision as they can’t comprehend the implication of a policy review at decision time, nor any body give them confidence over a decision.

The multinationals, international suppliers/ traders and local operators engaged in the country in selling of energy / petroleum do also take the advantage of ignorance of decision makers at Ministry and Cabinet level and try to influence the decisions to their own respective advantage. During the process the country suffers and the custodian of country benefits has least of required knowledge.

 

 

 

 

 

 

 

 

US oil drilling on decline in response to lower prices

In United States, oil drilling activity has begun to decline in response to the downturn in prices since the middle of 2022. This will lead to lower production growth throughout the rest of 2023 and into 2024.

The number of rigs drilling for oil fell to 600 in the week ending on February 24, down from a recent peak of 627 in the week ending on December 02, 2022 oilfield services company Baker Hughes found.

The rig count has declined in five of the eight most recent weeks and is at the lowest level since the start of July 2022.

The acceleration of drilling activity that started in August 2020 after the first wave of the pandemic appears to have paused or possibly ended.

Over the last three decades, changes in the rig count have generally followed changes in front-month WTI futures prices with an average lag of about 4-5 months (roughly 19 weeks).

When prices rise, delays reflect the time needed to confirm a change in price level is persistent rather than temporary, contract extra rigs, move them to the drill site, erect the equipment, and begin boring.

When prices fall, the lag reflects time needed to confirm the trend, finish part-drilled wells, drill wells already under contract, and idle unneeded rigs.

The number of rigs drilling for oil peaked in late November 2022, roughly 25 weeks after prices peaked, slightly longer than average.

Since June 2022, prices have generally retreated, which has been reflected in a gradual turnover in drilling activity rates.

Prices are roughly 15% below year-ago levels and still trending lower, implying drilling is likely to continue falling through end of June 2023.

Once drilling is finished, there is a further delay of six months on average for casing, pressure pumping, installation of surface equipment, flow testing, linking up to the pipeline network and entering commercial production.

The current slowdown in drilling is therefore likely to reduce production growth through the end of 2023 and probably into 2024.

The Energy Information Administration (EIA) forecasts US production will be only 340,000 barrels per day (2.7%) higher in December 2023 than it was in December 2022.

If this forecast is realized, growth will have halved from 660,000 barrels per day (5.8%) in December 2022 compared with December 2021.

Growth would be just one-sixth of what it was at the height of the second shale drilling boom in 2018, marking the end of the shale revolution.

Slower growth in US production will reduce any accumulation of crude inventories, even if the global economy slows this year, and restrict the potential for non-inflationary growth in the remainder of 2023 and 2024.

 

Zelensky thanks Saudi Arabia for support

Saudi Arabia and Ukraine signed an agreement and a memorandum of understanding (MoU) for the provision of humanitarian aid, amounting to US$400 million, to the war-stricken European country.

This is in implementation of the pledge made by Crown Prince and Prime Minister Mohammed Bin Salman during his phone call with Ukrainian President Volodymyr Zelensky in October 2022 with regard to the provision of an additional humanitarian aid package to Ukraine.

The ceremony of signing the pacts was held on the occasion of the visit of Saudi Foreign Minister Prince Faisal Bin Farhan to Ukraine and his meeting with Zelenskyy.

Prince Faisal Bin Farhan and Director of the Office of the Ukrainian President Andriy Yermak attended the signing ceremony of the agreement and MoU between the Kingdom and Ukraine, with a value of up to US$400 million.

The agreement includes a joint cooperation program to provide humanitarian aid from the Kingdom to Ukraine, amounting to US$100 million.

The agreement was signed by Advisor at the Royal Court and General Supervisor of the King Salman Humanitarian Aid and Relief Center (KSRelief) Dr. Abdullah Al-Rabeeah and Deputy Prime Minister for Restoration of Ukraine – Minister for Communities, Territories and Infrastructure Development of Ukraine Oleksandr Kubrakov.

The MoU also includes financing oil derivatives worth US$300 million as a grant from the government of Saudi Arabia through the Saudi Fund for Development in favor of Ukraine.

Earlier, Zelensky received Prince Faisal and his accompanying delegation at the presidential residence in the capital city. At the outset of the meeting, Prince Faisal conveyed the greetings of Custodian of the

Two Holy Mosques King Salman and the Crown Prince to the president, the government, and the people of Ukraine.

Zelensky conveyed his greetings and appreciation to King Salman, Crown Prince Mohammed bin Salman, and the government and people of Saudi Arabia.

During the reception, they reviewed the bilateral relations between the two countries and ways to further promote them. They also discussed a number of regional and international issues of common concern.

The foreign minister reiterated the Kingdom’s keenness and support for all international efforts aimed at resolving the Ukrainian-Russian crisis politically, and the continuation of its efforts to contribute to mitigating the humanitarian effects resulting from it.

The reception was attended by Dr. Abdullah Al-Rabeeah, CEO of the Saudi Fund for Development Sultan Al-Murshed, Saudi Ambassador to Ukraine Muhammad Al-Jabreen, and Director General of the Office of the Foreign Minister Abdul Rahman Al-Daoud.

Prince Faisal also met with the Minister of Foreign Affairs of Ukraine Dmytro Kuleba. During the meeting, they discussed the latest developments in the Ukraine crisis.

The Saudi foreign minister emphasized the Kingdom’s support for everything that contributes to de-escalation, protection of civilians, serious pursuit of negotiated political solutions, and support for all international efforts aimed at resolving the political crisis.

The signing of the agreement and the MoU reflects the keenness of the Saudi government to support Ukraine and its friendly people in facing the social and economic challenges that the country is going through and to contribute to mitigating the resulting humanitarian impacts.

Iranian annual export to India rises 60%

The value of Iranian export to India increased 60% in 2022 as compared to the preceding year, according to the data released by the Indian Ministry of Commerce and Industry.

The Indian ministry put the worth of Iran’s exports to India at US$653 million in 2022, while the figure was US$409 million in 2021, IRNA reported.

As reported, petroleum products have been the major goods imported by India from Iran.

According to the mentioned data, the value of trade between Iran and India reached US$2.5 billion in 2022, up 48% from US$1.693 billion in 2021.

During January-December 2022, Indian export to Iran also increased 44% to stand at US$1.847 billion, while the figure was US$1.284 billion in 2021.

Rice was India’s major product exported to Iran during this period, the country shipped US$1.098 billion worth of rice to the Islamic Republic.

In late May 2022, the Iranian ambassador to India said that Iran and India were trying to diversify the channels of payments to expand bilateral trade.

In an exclusive interview with Financial Express Online, Ali Chegeni said, “We are trying to diversify the channels of payments and accordingly wish to extend and expand an already existing mechanism in order to cover all of the goods and services including all of the non-oil goods and to achieve this”.

During the past two years, because of Covid restrictions, we pursue the issue via virtual dialogues and currently, our officials are following the matter through the exchange of delegations, the envoy stated at the time.

“We want to develop our economic and trade relations beyond energy and petrochemical products. because, due to the complementarity of Iran and India's economies, an extensive range of non-oil trade exists between the two sides including trade on goods and services, investment, tourism, education, and … which may pave the way for multiplying our economic relations ten times more than current relations in mid and long terms”, Chegeni said.