Even before the pandemic, the oil and gas industry was faced with slumping prices. However, with a record collapse in oil demand amid the lockdowns, the COVID-19 crisis has further shaken the market, causing massive revenue and market cap drops for even the largest oil companies.
According to data presented by Finaria.it, the net income of the world’s biggest oil producer and one of the largest publicly listed companies, Saudi Aramco, dropped to $49bn in 2020, a 55% plunge in two years.
The COVID-19 Crisis and Oil Price War Cut Profits by Almost $40B in a Year
In preparation for its IPO, which took place in December 2019, Saudi Aramco had published 2018 profits. With a net income of $111.1bn, Saudi Arabia’s state-run oil giant ranked as the most profitable publicly listed company in the world.
Global macroeconomic concerns like the US-China trade war and the oil overproduction set significant price drops even before the coronavirus outbreak. In 2019, the company reported a profit of $88.2bn, a 20% drop year-over-year.
However, a standoff between Russia and Saudi Arabia in the first months of 2020 sent prices even lower and caused a massive hit for Saudi Aramco’s profits.
After global oil demand plunged in March, Saudi Arabia proposed a cut in oil production, but Russia refused to cooperate. Saudi Arabia responded by increasing production and cutting prices. Shortly Russia followed by doing the same, causing an over 60% drop in crude oil prices at the beginning of 2020. Although OPEC and Russia agreed to cut oil production levels to stabilize prices a few weeks later, the COVID-19 crisis already hit.
In March, Saudi Aramco announced full-year figures for the second time since going public, and the results revealed huge financial losses. In 2020, Saudi Arabia’s state-run oil company reported a net income of $49bn, almost a $40bn drop in a year.
While Saudi Aramco was the most profitable publicly listed company globally in 2019, the current result puts the company behind Apple, which reported a net income of $57.4bn in 2020.
Saudi Aramco’s Market Cap $210B Below Apple’s
In December 2019, Saudi Arabia’s state-run oil giant completed its long-awaited IPO and hit a staggering $2 trillion valuation on the second day of trading, nearly one trillion higher than the world’s next-largest publicly listed companies Microsoft and Apple. The initial public offering was an essential part of Crown Prince Mohammed bin Salman’s Vision 2030 program to transform the Saudi economy.
However, Saudi Aramco’s stocks were outperformed by Apple in 2020. After plunging to $1.61trn in March last year, the market cap of the Dhahran-based company jumped to $2.15trn in September. By the end of the year, this figure slipped to $2.05trn. Statistics show that Saudi Aramco’s market cap floated around this value for the last three months and then dropped to $1.87trn in April after the company revealed the full-year results.
Although valued one trillion less than Saudi Aramco at the time of its IPO, the world’s largest tech company, Apple’s, has seen its market cap surge last year. In January 2020, the combined value of shares of the US tech giant stood close to $1.4trn. After plunging to $1.1trn in March, Apple’s market cap soared to over $2.3trn in December. Although this figure slipped to $2.08trn last week, it still represents almost a 90% increase in a year.
UAE Commits $4.5 Billion for African Clean Energy Initiatives at UN Climate Summit
The United Arab Emirates, as the host of this year’s United Nations climate summit, has made a significant pledge of $4.5 billion to support clean-energy projects in African nations.
This substantial commitment is a collaborative effort involving key entities such as Abu Dhabi’s clean-energy producer Masdar, Abu Dhabi Fund for Development, Etihad Credit Insurance, the nation’s export credit agency, and AMEA Power, a Dubai-based renewable-energy company.
The announcement was made by the COP28 Presidency in an official statement.
Africa faces a critical need for nearly a tenfold increase in climate adaptation funding, amounting to $100 billion annually, as emphasized by the Global Center on Adaptation. This financial boost is essential for enhancing infrastructure and protecting agriculture from the adverse impacts of climate change.
Although the continent contributes only about 4% of global greenhouse gas emissions, its nations are disproportionately affected by climate change.
“The initiative will prioritize investments in countries across Africa with clear transition strategies, enhanced regulatory frameworks, and a master plan for developing grid infrastructure,” stated COP28 President-Designate Sultan Al Jaber at the inaugural Africa Climate Summit on Tuesday.
Al Jaber’s commitment to invest in the African continent precedes the UN climate summit that he is overseeing. As the chief executive officer of Abu Dhabi National Oil Co., one of the world’s largest oil and gas producers, his involvement has sparked criticism from climate activists.
Over 400 environmental groups have voiced concerns in a letter to the UN secretary-general, expressing reservations about how Al Jaber’s work may affect the legitimacy and effectiveness of the summit.
The African Development Bank’s Africa50 investment platform will serve as a strategic partner in identifying initial projects, according to the statement.
Here are the funding details:
- The Abu Dhabi Fund for Development will provide $1 billion in financial assistance.
- Etihad Credit Insurance will offer $500 million in credit insurance to mitigate risk and attract private capital.
- Masdar commits $2 billion in equity and will facilitate an additional $8 billion in project finance, aimed at delivering 10 gigawatts of clean energy capacity in Africa by 2030.
- AMEA Power will contribute to funding 5 gigawatts of renewable energy capacity in the continent by 2030, mobilizing $5 billion, with $1 billion in equity investments and $4 billion from project finance.
This generous funding initiative reflects the United Arab Emirates’ dedication to addressing climate change and supporting sustainable development in Africa, marking a significant step toward a greener and more resilient future for the continent.
MAN Raises Alarm Over Potential Displacement of Local Meter Manufacturers in Power Sector
The association explained that the stiff financial requirements and technical specifications listed in the advertised material of the Transmission Company of Nigeria (TCN) are heavily biased against domestic manufacturers
Following the implementation of the NMMP Phase IIT, a World Bank-funded initiative launched to supply 1.2 million smart meters, the Manufacturers Association of Nigeria (MAN) has cautioned the government on excluding local meter manufacturers and assemblers within the downstream power sector from the initiative.
This was disclosed in a statement made available to the media by MAN on Sunday.
The association explained that the stiff financial requirements and technical specifications listed in the advertised material of the Transmission Company of Nigeria (TCN) are heavily biased against domestic manufacturers as local manufacturers would struggle to meet those stated requirements.
This, MAN said is against contradicted the Central Bank of Nigeria’s guidelines for the National Mass Metering Programme.
MAN emphasizes that local manufacturers have made substantial investments in expanding their manufacturing capacities, as per the Federal Government’s backward integration policy and the introduction of the NMMP intervention.
They have also made efforts to train and nurture a highly skilled workforce capable of meeting the power sector’s demands, as envisioned in the Nigeria Electricity Supply Industry.
In the statement MAN warns that this situation could potentially lead to a replication of the distressing scenario witnessed in 2012 when local manufacturers were sidelined during the meter supply, resulting in the delivery of substandard meters by foreign companies awarded the contract, which were subsequently removed from the network.
Speaking on employment opportunity, MAN said “The position of the TCN that installation will provide employment opportunities to Nigerians will completely pale into insignificance when compared with a ratio of 1 to 10 jobs that will be created if local manufacturers are included in the scheme.”
Similarly, MAN argues that the intentional denial of opportunities for local manufacturers fails to acknowledge their impressive performance in the sector, including the successful deployment and installation of a total of 611,231 energy meters across the country between January 2019 and January 31, 2021.
The potential displacement of local meter manufacturers and assemblers in Nigeria’s power sector raises serious concerns about the future of the industry.
MAN calls on the government to reconsider the advertised financial requirements and technical specifications, ensuring that they align with the Central Bank of Nigeria’s guidelines.
By including local manufacturers in the supply of smart energy meters, the power sector can benefit from high-quality products while stimulating economic growth and generating a substantial number of job opportunities for the Nigerian workforce.
Power Consumers Protest Export of Electricity Worth N23.13bn Amidst Widespread Darkness in Nigeria
Power Consumers Demand Prioritization of Domestic Needs as Nigeria Exports Electricity Worth N23.13bn to Neighboring Countries Despite Widespread Darkness.
Power consumers in Nigeria have voiced their strong opposition to the export of approximately N23.13 billion worth of electricity to neighboring countries in 2022.
This development comes at a time when many Nigerian communities are grappling with persistent power outages and widespread darkness.
According to data obtained from the Nigerian Electricity Regulatory Commission (NERC) in Abuja, Nigeria continued its export of electricity to the Republics of Benin and Niger as well as certain special categories of consumers.
The total value of electricity exported from Nigeria in 2022 amounted to $50.98 million (equivalent to N23.5 billion at the official exchange rate of N461/$). However, international customers only remitted $32.69 million, approximately N15.1 billion, indicating a shortfall of $18.29 million or N8.4 billion during the period.
Also, special customers failed to remit N792.6 million in the same period, as revealed by figures from the power sector regulator.
The export of electricity despite the dire situation of power supply within the country has drawn significant criticism from electricity consumers.
The Nigeria Electricity Consumer Advocacy Network’s National Secretary, Uket Obonga, expressed dismay at the decision, stating that Nigeria has one of the highest numbers of citizens without access to electricity in the world.
He compared Nigeria’s situation to that of China, highlighting that while China has approximately 68 million citizens without electricity out of a population of 1.4 to 1.5 billion, Nigeria has a staggering 90 million people without access to electricity.
Obonga questioned the economic rationale behind exporting such a scarce commodity that the Nigerian people desperately need. He criticized the decision-makers behind this move and their apparent disregard for the plight of their own citizens.
The export of electricity, in the face of widespread darkness and a lack of access to electricity, has left many perplexed and wondering about the reasoning behind such a decision.
The NERC provided updates on the remittances made by special/cross-border customers in the fourth quarter of 2022.
Obonga argued that the export of electricity was unjustified, particularly considering the ability of Nigerians to pay for the commodity.
He pointed out that the joint monthly revenues from two or three power distribution companies exceeded the N23 billion earned from international customers throughout the entire year. Obonga suggested that corruption might be at play and urged the incoming government of President Bola Tinubu to thoroughly investigate this issue.
While officials at the NERC defended the export of electricity, citing obligations and agreements, the discontent among Nigerian power consumers remains palpable.
Critics argue that the export of electricity should not take precedence over meeting the domestic energy needs of the Nigerian people, especially when millions still lack access to reliable power supply.
It is imperative for the government and relevant stakeholders to address the concerns raised by power consumers and find a balance between fulfilling international commitments and ensuring adequate and reliable power supply within Nigeria.
The future of the country’s energy sector hinges on striking the right equilibrium that prioritizes the needs and well-being of the Nigerian people while fulfilling international obligations in a responsible and sustainable manner.
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