The region’s national oil companies (NOCs) are reviving plans to beef up their trading operations, although it is an area they have long shied away from.
Among the new efforts, Abu Dhabi National Oil Company is currently studying proposals to make its trading and risk management contribute to the bottom line, part of the company's broader effort to be more commercial and in line with its private sector peers.
In the spring, Saudi Aramco unveiled its new Aramco Trading Company website (ATC) to announce stepped-up trading in refined oil products - although still not in crude oil, its main export. After a slow first five years, ATC last summer put Ibrahim Al Buainain, a graduate of MIT's Sloan School of Management, in charge. He is bringing in the more sophisticated, data-driven trading approach necessary to maximise margins as Aramco invests heavily in downstream assets worldwide, which means it has many more products to sell and trade.
Also, Kuwait Petroleum Corporation has been consulting with major oil companies in recent months, including BP and Royal Dutch Shell, about new efforts to bolster trading operations, according to several people involved.
Still, the perennial question remains: why, in a region famed for its centuries of trading prowess, and home to the world’s largest and most powerful oil producers, have oil trading efforts so far been cursory?
The risk-averse cultures in NOCs hitherto run more as government bureaucracies than commercial organisations is one explanation.
"A key reason is that losses aren't tolerated," said Owain Johnson, the managing director of CME Group and until last year the head of Dubai Mercantile Exchange (DME). "If you have a hedging programme, one element of it is going to lose money. Hedging is like an insurance policy, except at the NOCs you would get fired if you took out an insurance policy and there wasn't actually a fire - that doesn't really motivate people."
Certainly, a plethora of case studies of hedging-turned-financial-nightmare (typified by Metallgesellschaft’s 1990s oil trading debacle) have given NOC leaders cause for caution. On the other hand, there is a new realisation that the absence of a modern trading operation means they are leaving money on the table.
As an executive at one regional NOC said: “The boss knows that a well-run trading operation can add US$1 to every barrel. There’s been a lot of talk but nothing much has happened yet, so he thinks it’s time to do something.”
An innovative approach borne out of necessity was adopted this year by Iraq's State Organization for Marketing of Oil (Somo). The country has been stretched financially by internal conflict and Somo itself has had its resources squeezed, so that its sales and marketing staff have had to improvise.
In the spring, Somo's director-general, Falah Alamri, began holding auctions through DME, and so far sold 6 million barrels of mostly Basrah Light crude oil. This month, Somo is expected to sell another 2 million barrels of its Basrah Heavy crude, and the list of approved bidders - which includes trading houses, refiners, oil majors - has risen to more than 50 from 30, according to participants.
The programme, run by Somo’s head of Asian marketing, Ali Al Shatari, while not exactly state-of-the-art trading, has helped to push up the price premium for Iraq’s crude by about 30 per cent and caught the eye of other NOCs, according to well-placed market sources.
Also in May, Somo set up a Dubai-based joint venture with the Swiss trading unit of Russia's Lukoil, with a mandate to sell an additional 2 million barrels a month.
Other developments helping to revive the NOCs' interest in trading include concern over moves by China's big oil companies to exert greater influence over pricing of Middle East oil.
But the most important factor is the new sense of urgency to be more entrepreneurial, the milestone for which was Aramco's plan for an IPO of shares. Fostering that cultural shift is the big challenge.
"It's a difficult transition to go from merely being a producer of oil, to selling through third parties, to selling on the spot markets, and then to buying and selling, which is an entirely different thing," said Jorge Montepeque, who is the senior vice president at Italian major Eni's shipping and trading division, and is credited with inventing the modern oil pricing method while the head of oil at Standard & Poor's Platts unit.
Saudi Arabia's transformation, led by Aramco, is having a knock-on effect, he said. "After ATC, the other NOCs are thinking: 'well if they can do it why don't we?'" he says.
Meanwhile, Mr Johnson reckons the best approach for the NOCs would be a radical one. “The modern approach would be to separate a trading entity out from the parent NOC to try to build a new culture and a new risk-taking spirit; also, it would help with pay,” he said, because introducing a bonus culture into the existing organisations might be too disruptive.
“Ideally, they would do it in London, New York or Singapore so that they are part of an established trading culture.”
Blonde
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Race card
5pm: Maiden (PA) Dh80,000 (Turf) 1,600m
5.30pm: Handicap (PA) Dh80,000 (T) 1,600m
6pm: Arabian Triple Crown Round-1 Listed (PA) Dh230,000 (T) 1,600m
6.30pm: Wathba Stallions Cup Handicap (PA) Dh70,000 (T) 1,400m
7pm: Maiden (PA) Dh80,000 (T) 1,200m
7.30pm: Handicap (TB) Dh100,000 (T) 2,400m
The Details
Kabir Singh
Produced by: Cinestaan Studios, T-Series
Directed by: Sandeep Reddy Vanga
Starring: Shahid Kapoor, Kiara Advani, Suresh Oberoi, Soham Majumdar, Arjun Pahwa
Rating: 2.5/5
Killing of Qassem Suleimani
Killing of Qassem Suleimani
MATCH INFO
Watford 2 (Sarr 50', Deeney 54' pen)
Manchester United 0
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Where to donate in the UAE
The Emirates Charity Portal
You can donate to several registered charities through a “donation catalogue”. The use of the donation is quite specific, such as buying a fan for a poor family in Niger for Dh130.
The General Authority of Islamic Affairs & Endowments
The site has an e-donation service accepting debit card, credit card or e-Dirham, an electronic payment tool developed by the Ministry of Finance and First Abu Dhabi Bank.
Al Noor Special Needs Centre
You can donate online or order Smiles n’ Stuff products handcrafted by Al Noor students. The centre publishes a wish list of extras needed, starting at Dh500.
Beit Al Khair Society
Beit Al Khair Society has the motto “From – and to – the UAE,” with donations going towards the neediest in the country. Its website has a list of physical donation sites, but people can also contribute money by SMS, bank transfer and through the hotline 800-22554.
Dar Al Ber Society
Dar Al Ber Society, which has charity projects in 39 countries, accept cash payments, money transfers or SMS donations. Its donation hotline is 800-79.
Dubai Cares
Dubai Cares provides several options for individuals and companies to donate, including online, through banks, at retail outlets, via phone and by purchasing Dubai Cares branded merchandise. It is currently running a campaign called Bookings 2030, which allows people to help change the future of six underprivileged children and young people.
Emirates Airline Foundation
Those who travel on Emirates have undoubtedly seen the little donation envelopes in the seat pockets. But the foundation also accepts donations online and in the form of Skywards Miles. Donated miles are used to sponsor travel for doctors, surgeons, engineers and other professionals volunteering on humanitarian missions around the world.
Emirates Red Crescent
On the Emirates Red Crescent website you can choose between 35 different purposes for your donation, such as providing food for fasters, supporting debtors and contributing to a refugee women fund. It also has a list of bank accounts for each donation type.
Gulf for Good
Gulf for Good raises funds for partner charity projects through challenges, like climbing Kilimanjaro and cycling through Thailand. This year’s projects are in partnership with Street Child Nepal, Larchfield Kids, the Foundation for African Empowerment and SOS Children's Villages. Since 2001, the organisation has raised more than $3.5 million (Dh12.8m) in support of over 50 children’s charities.
Noor Dubai Foundation
Sheikh Mohammed bin Rashid Al Maktoum launched the Noor Dubai Foundation a decade ago with the aim of eliminating all forms of preventable blindness globally. You can donate Dh50 to support mobile eye camps by texting the word “Noor” to 4565 (Etisalat) or 4849 (du).
More from Aya Iskandarani
The biog
Favourite book: You Are the Placebo – Making your mind matter, by Dr Joe Dispenza
Hobby: Running and watching Welsh rugby
Travel destination: Cyprus in the summer
Life goals: To be an aspirational and passionate University educator, enjoy life, be healthy and be the best dad possible.
Asia Cup 2018 final
Who: India v Bangladesh
When: Friday, 3.30pm, Dubai International Stadium
Watch: Live on OSN Cricket HD
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
