QatarEnergy to sign long term LNG supply deal with Bangladesh

QatarEnergy will sign a long-term liquefied natural gas (LNG) supply deal with Bangladesh's state-owned gas company Petrobangla on Thursday, the second Asian sales deal to be sealed for Qatar's North Field expansion project.

The 15-year agreement is for the supply of 2 million tons annually, Petrobangla's Chairman Zanendra Nath Sarker told Reuters.

Supplies are set to start in January 2026, he said.

The agreement will be one of many to come this year as state-owned QatarEnergy secures sales for its mega expansion of North Field, a source with direct knowledge of the new contract agreement, who did not wish to be identified, said.

Qatar is the world's top LNG exporter and competition for LNG has ramped up since the start of the Ukraine war, with Europe in particular needing vast amounts to help replace Russian pipeline gas that used to make up almost 40% of the continent's imports.

But Asia, with an appetite for long-term sales and purchase agreements, has been ahead so far in securing gas from Qatar's massive production expansion project.

This will be Bangladesh's second long-term deal with Qatar as it desperately looks for long-term LNG deals at a cheaper rate after prices spiked following the Ukraine war last year.

The contract will be QatarEnergy's second to Asia since it started selling the gas expected to come on stream from the North Field expansion project.

The two-phase expansion plan will raise Qatar's liquefaction capacity to 126 million tons per year by 2027 from 77 million.

Qatar's first Asian deal, with Sinopec, the longest to be signed at 27 years for the supply of 4 million tons a year, was followed by the state-owned Chinese company taking a 5% stake in the equivalent of one North Field East LNG train.

QatarEnergy's sales and purchase agreements to supply Germany with around 2 million tons of LNG annually through a partnership with ConocoPhillips cover at least a 15-year period.

Bangladesh has a 10-year LNG import deal with Oman Trading International. That LNG is priced at 11.9% of the three-month average price of Brent crude oil plus a constant price of 40 cents per million British thermal units (mmBtu).

Under its first 15-year deal with Qatar, Bangladesh pays 12.65% of the three-month average price of Brent oil plus a constant of 50 cents per mmBtu.

The North Field expansion project will help guarantee long-term supplies of gas globally. North Field is part of the world's biggest gas field that Qatar shares with Iran, which calls its share South Pars.

QatarEnergy chief Saad al-Kaabi said last week there was big demand for LNG and that he expects by the end of the year to have signed supply deals for all the gas expected to come on stream from the North Field expansion.

 

China to invest in Suez Canal Economic Zone

Chinese companies have pledged to invest over US$3 billion in new Suez-based projects.

Egypt's Suez Canal Economic Zone (SCZone) secured the investments from Chinese companies active in chemical, textile and apparel, power, pipes, and iron and steel industries. The investment agreements and commitments were secured during the visit by SCZone Chairman, Walid Gamal El-Din.

Focus of the deals appears to be the Suez Economic and Trade Cooperation Zone (SETC), an industrial estate near the city of Suez, jointly established by the governments of China and Egypt, for the purposes of inviting Chinese companies to set up industries, as part of the Belt and Road project.

The SETC was built by the Tianjin Economic-Technological Development Area (TEDA). The TEDA Suez zone was created in 2008 and extended in 2016 during a visit by Chinese President Xi Jinping to Egypt.

Last week, the SCZone delegation held discussions with Xinxing Ductile Iron Pipes Co, regarding a proposed US$2 billion ductile cast iron pipe manufacturing plant in the Sokhna Industrial Zone, Zawya said.

“The first phase of the project will have an annual production capacity of 250,000 tons of ductile iron pipes, which is expected to increase to 500,000 tons per year in the second phase,” it said.

Shandong Tianyi Company planned to establish bromine and caustic soda production plants in TEDA Suez, with a total investment of $310 million.

“The bromine production plant, valued at US$110 million, will cover an area of 270,000 square meters and have an annual production capacity of 140,000 tons,” it said.

Several other projects in textiles, power generation, apparel and fashion and other industries, worth tens of millions of dollars, to be located in Suez, Sokhna and Abu Khalifa were also announced.

While in China, Gamal El-Dien also met with officials from the China-Africa Development Fund, to discuss investments in the pharmaceutical, automotive, and green fuel industries. His counterparts expressed readiness to finance Chinese investment projects in SCZone, including those related to green hydrogen.

 

Fuel prices likely to fall globally

Global prices of diesel and motor gasoline have corrected significantly by 46% and 50% since the start of the calendar year 2023, due to rising concerns of global recession majorly emanating from Western/European front, to presently stand at US$86/US$90 per barrel, for gasoil and gasoline respectively.

Refiner’s main input, crude oil selloffs (Arab Light/ WTI/ Brent down 9.5%/9.8%/10.7% since start January 2023) have also remained rampant throughout CYTD as an overall direct repercussion of US-Fed’s hawkish stance (debt ceiling conundrum, banking crisis) resulting in significant stockpile build up over the previous week, softer demand in China amid COVID concerns, availability of low cost Russian crude towards China and India and finally easing prices of RLNG globally (US$9.3/mmbtu, down 60%YoY), resulting in power generation demand for diesel to fall drastically.

Moving forward, analysts expect gasoline cracks to gain strength and remain elevated with the onset of summer driving season beginning 1st June in the western front, where-in last time both gasoline/gasoil spreads peaked during July last year.

Overall, heightened geopolitical tensions will continue to provide major support to prices and in case OPEC Plus stands firm on it supply cut decisions, the prices may possibly increase further.

Naturally, domestic refinery margins have fallen sharply from their multi year highs from US$26/ US$45/bbl for MS/ HSD back in June2022, to presently stand at US$-0.2/2.6/bbl (down 100%/94%).

This has subsequently pushed domestic ex-refinery prices down by 10%/ 27% from peaks of PKR224/ PKR276 per liter in last summer, for MS/ HSD, even with the currency depreciating by 42% during this time.

Using the aforementioned space, IFEM margin was pushed into the positive territory as well which had been mostly negative for several months now.

Local refiners are also expected to reap benefits of the aforementioned fuel inflation expected during the summer season, which pushed the domestic cracking spreads as high as US$25/ US$45 barrel last year, for MS/ HSD respectively. Assuming Arabian Gulf gasoline/ gasoil prices increase by +10% from current levels, this is expected to raise domestic MS/ HSD prices by PKR18/ PKR21 per liter, respectively.

Outlook: Moving forward, sector profitability may remain firm in the near term as refined product margins are expected to remain strong during 2Q/3QFY23 alongside healthy inventory gains amidst increasing ex-refinery prices, but may eventually cool off post summers and the commencement of Middle Eastern capacities (one million bpd capacity inclusion beginning October 2323).

Although, worsening furnace oil yields in the wake of falling FO demand may be a risk to look out for as FO crack spreads presently stand at negative US$28/bbl.

 

OPEC to welcome Iran’s return to oil market

OPEC will welcome Iran’s full return to the oil market when sanctions are lifted, the secretary general of the Organization of the Petroleum Exporting Countries (OPEC) told the Iranian oil ministry's website SHANA on Monday.

Iran is an OPEC member, although its oil exports are subject to US sanctions aimed at curbing Tehran's nuclear program.

Secretary General Haitham Al Ghais, who is visiting Tehran for the first time, added that Iran has the capacity to bring on significant production volumes within a short period of time.

"We believe that Iran is a responsible player amongst its family members, the countries in the OPEC group. I’m sure there will be good work together, in synchronization, to ensure that the market will remain balanced as OPEC has continued to do over the past many years," SHANA's English-language website cited him as saying.

Asked about OPEC’s voluntary production cut and its effect on oil prices, Ghais said, "In OPEC...we don’t target a certain price level. All our actions, all our decisions are made in order to have a good balance between global oil demand and global oil supply."

In a surprise move in early April, Saudi Arabia and other members of OPEC Plus, which comprises OPEC and allies including Russia, announced further oil output cuts of around 1.2 million barrels per day, bringing the total volume of cuts by OPEC Plus to 3.66 million barrels per day, according to Reuters calculations.

Saudi Arabia, the kingpin of OPEC, and Iran announced in March that they would restore diplomatic relations after years of hostility, in a deal brokered by China, the world's second largest oil consumer.

Turkey: Erdogan wins another term as President

Chairman of Turkey's Supreme Election Council (YSK) announced that the incumbent President Recep Tayyip Erdogan has been re-elected as the country's leader.

Yener said that Erdogan won Turkey's presidency over opposition challenger Kemal Kilicdaroglu in the second-round runoff vote.

He pointed out that Erdogan won the race with 52.14%, while Kilicdaroglu got 47.86% of the votes after counting 99.43% of the votes.

In a speech in Istanbul late Sunday, President Erdogan said Turkey’s 85 million-strong citizens are the winners in the national elections that concluded today.

More than 64.1 million people were registered to vote, including over 1.92 million who earlier cast their ballots at overseas polling stations.

Nearly 192,000 ballot boxes were set up for voters across Turkey.

On May 14, no candidate won the required 50% in the first round, triggering Sunday’s runoff, although Erdogan took the lead with 49.52%.​​​​​​

On that day, Erdogan’s People’s Alliance also won a majority in parliament.

 

 

Israeli President’s visit to Azerbaijan

President Isaac Herzog will travel to Azerbaijan on Tuesday to strengthen the strategic ties between Israel and the Shia Muslim country bordering on Iran.

During the two-day visit, Herzog plans to meet with his Azeri counterpart Ilham Aliyev and to take part in a special event marking the 75th anniversary of Israeli independence.

Aliyev will welcome Herzog and his wife, Michal, at his palace, with an honor guard, and the two presidents plan to hold a diplomatic meeting, followed by a lunch.

Health and Interior Minister Moshe Arbel will accompany Herzog to Azerbaijan, where he plans to meet with his counterparts in Baku to discuss greater cooperation in training doctors, emergency preparedness and digital health.

Israel and Azerbaijan are expected to sign an agreement on health cooperation during the visit.

The Herzogs will also meet with members of the Jewish community in Azerbaijan. They are expected to be met at the airport by 30 children who attend the Chabad School in Baku, waving the flags of Israel and Azerbaijan.

Azerbaijan opened an embassy in Israel for the first time in March of this year, though Israel has had an embassy in Baku since 1993.

Baku had been hesitant to open an embassy in Israel in the past for fear of alienating other Muslim-majority states or provoking Iran but saw the Abraham Accords and Israel's rapprochement with Turkey, in which Aliyev played a part, as turning points.

Israel and Azerbaijan have a close defense relationship. Jerusalem supplied drones to Baku that were used in its 2020 war with Armenia, according to foreign reports.

The Stockholm International Peace Research Institute found that 69% of Azerbaijan’s arms imports in 2016-2020 came from Israel, which represents 17% of Israel’s arms exports in that period.

About 40% of the petroleum imported to Israel comes from Azerbaijan.

Azeri politicians tied the move to open an embassy in Israel to Iran opening an additional consulate and declaring close ties with Armenia, with which Azerbaijan fought a war in 2020.

Iran and Azerbaijan share a 670-kilometer border, and there has long been speculation that Israel has launched covert operations in Iran from its northern neighbor.

Last year, Iranian Foreign Minister Hossein Amir Abdollahian accused Israel of having established its presence in several regions of Azerbaijan, which Baku denied.

Soon after, Iran staged a military drill along the border. Aliyev responded by having himself photographed with Israeli Harop kamikaze drones, which are produced in his country.

Also this week, Foreign Minister Eli Cohen will be making a diplomatic trip to Central Europe to meet with senior government figures in Croatia, Slovakia, Hungary, and Austria. He plans to visit four countries and meet with five foreign ministers in four days.

He will be the first Israeli foreign minister to visit Slovakia and the first in 10 years to go to Zagreb.

“The diplomatic visit to Central Europe strengthens our strategic coordination with our allies and creates opportunities for Israel to promote its diplomatic and economic interests on the continent,” Cohen said. “Israel’s allies in the EU play an important role…from economic, cultural and technological cooperation, to our joint fight against terror and a nuclear Iran.”

 

Iranian team visits location of deadly attack

A parliamentary delegation from the National Security and Foreign Policy Committee of Iran visited the location of the deadly armed attack that took place earlier this month on the border with Pakistan. Shahriar Heidari, a member of the Committee, led the delegation.

Last week, five Iranian border guards were killed during an attack by gunmen in the border region of Mak Soukhteh in Sistan-Baluchistan province. Two of the victims are officers and the remaining three are conscripts.

The troops serving in the border regiment of Saravan clashed with a group of gunmen who were trying to cross the border near the Mazesar border post, the Iranian police said, adding that the terrorists fled the scene after sustaining heavy losses, according to Tasnim.

The attack took place in Saravan, which is only 40 kilometers away from the border with Pakistan. Earlier, the deputy commander of the Iranian police and the commander of the Iranian border guards traveled to the location of the clash.

Heidari said the Iranian troops resisted from their location at the border post’s turret for an hour. “Five people of the border guards were stationed in the turret that was destroyed by the group for about an hour. The terrorists first asked the Iranian border guards to surrender, but the brave border guards of our country preferred martyrdom to surrender. And this shows the sacrifice, interest and courage of the border guards towards the soil of the country,” he said, according to the parliamentary news agency ICANA. 

He also said that the assailants were backed by foreign powers. “Based on the geographical conditions of this region, it is quite clear that the foreign services on the other side of the border had a close relationship with the terrorist group and definitely helped them in providing equipment,” he added. 

He continued, “The authorities should pay special attention to equipping the country's border guards, and I expect my colleagues in the parliament to soon put the plan to strengthen the border guards on the agenda so that the border guards of the Islamic Republic of Iran can be strengthened in terms of quality and quantity.”

Heidari said, “In the course of the clash, with the planning of the border guard commander and the border regiment and readiness, the turrets around the border guard helped as soon as possible. The border guards targeted the enemy's location in different places; some of the bad guys were injured in this conflict.”

He also called on Pakistan to ensure border security. “The expectation of the Islamic Republic of Iran from Pakistan is that this country also pays attention to the security of the border and this issue is very important for Iran. The foreign ministers of Iran and Pakistan should monitor these issues and Pakistan should take measures to ensure the security of the common borders so that we do not witness the repetition of such unfortunate events.”

Heidari noted, “The two countries of Iran and Pakistan have concerns about their common borders, but today only the Islamic Republic of Iran has been active and has taken measures to ensure the security of these borders.”

The lawmaker said Iran is also ready to conduct operations inside Pakistan to ensure security if Islamabad is unable to do so. He said such an operation can be done with Pakistan’s approval. 

“Pakistan must respect the right of neighbor, because the border tensions that occur under the influence of some currents and with the help of the equipment of foreigners harm the relations between Iran and Pakistan,” he continued.