“Oman’s Port of Duqm Playing Vital Role in Future Proofing Logistics!”

Reggy Vermeulen , Chief Executive Officer, Port of Duqm Company SAOC

The Covid crisis caused major supply chain disruptions and woke up every part of the global procurement value chain. Many companies rearranged themselves and became much more agile. Today, we have a new crisis with attacks on shipping passing through the Bab Al Mandeb area, which has again forced the reorganization of logistics. At the port of Duqm, we see it as an evolution in the sense that it shows again that we cannot rely on old value chains that used to be in place and taken for granted. Routes are being disturbed daily, but most of the main shipping lines are finding alternative routes, not just for the short term, but to have a network that will be future proof. Duqm is one of the closest ports in this crisis area and we have been there to support all the efforts in stabilizing the region – whether it is to reroute cargo via land, whether in ship-to-ship transport, or from air to sea and vice versa. We are working actively with the major players in global logistics to see how to unplug routes that will be constantly available despite any disruptions. The port of Duqm has access inland towards Saudi Arabia, towards the UAE, and Oman, as well as being positioned to serve the entire Indian Ocean.

How does this contingency role impact Duqm’s infrastructure expansion plans?

We look at our infrastructure in two parts. There’s what is already developed and in use for liquid bulk, break bulk, dry bulk, and our container terminal. With our partners, we are increasing utilization and optimizing that port infrastructure. In addition, we are also preparing for new and more captive infrastructure development, so that going forward, we will have the capacity to serve a larger base of needs for new projects.

Is rising interest in alternative and cleaner fuels impacting port development?

It’s very promising for Duqm. Firstly, Oman has a very good combination of, wind, solar and proximity of port infrastructure, which makes it one of the most promising destinations to generate pure green hydrogen. We are working with the Ministry of Energy, which has set up the first six projects in this regard. In parallel and in addition to addressing green hydrogen generation, we also see downstream generation potential and more particularly the attraction of a green steel industry, and companies are already in advanced stages of setting up in Duqm. We are also working with Shell on blue hydrogen and carbon capture. So basically, Duqm can attract different industries and offer them carbon reduction options from CCS to blue hydrogen and green hydrogen, which is quite unique within port and industrial zone frameworks.

Outlook for Duqm to serve new markets in Africa and Asia?

These are the geographies that will witness an increasing demand for trade in the coming decades. Indian Ocean markets are growing at a very fast pace but the infrastructure, especially the marine infrastructure linked to it, is not adapting at the same pace. That's where ports like Duqm can play a vital role and offer larger hub capacities for logistics, manufacturing, and distribution to new and very promising markets. It is also often forgotten that Oman has a free trade agreement with the US, so Duqm can play a bridging role between the Middle East, Africa, the Indian Ocean, and the US.

Watch full Interview here!

Over the last week, Gulf Intelligence has held high-level interviews with energy experts in the Middle East, Asia, Europe, and the US. This intel is harvested from the exclusive briefings.

ENERGY MARKETS VIEWS YOU CAN USE

Amena Bakr 		        		           		      Senior Research Analyst, Energy Intelligence        

Is it time for OPEC+ to bring back volumes at these prices?

I think it is, but they won’t do it now. When they meet in June in Vienna, they will discuss any gradual unwinding, starting with the latest tranche of 2.2 million b/d voluntary cuts. They don’t want to shock the market by announcing that they’re bringing back all these volumes. We’re also seeing very high compliance because members are reaping rewards from better prices. OPEC+ has been waiting for two things to happen – for prices to be at a good level, and to have a better picture of where demand is going. For now, they still see demand growth of 2.2mn b/d by year end, with most of it happening in H2. They also don’t want the market to overheat. Much higher prices could be counterproductive and could destroy demand. When prices are above the $85 range, it’s more tempting for members to start easing on their compliance.

Which members can add oil to the market today?

Countries that have been lax on compliance, like Iraq and Kazakhstan, might start to leak some of that supply. Others, like Saudi Arabia, are sitting on a large amount of spare capacity, and they might say it’s time to bring back some supply to regain market share and benefit their economy. So, there needs to be a balance, and we are still to see what mechanism they would use to return any volumes. We will know that closer to the official meeting in June.

Should OPEC+ be concerned about market share?

They are watching supply from outside the group, especially because the growth in US supply tends to surprise on the upside. And we’re also talking about additional supply coming from Brazil, Guyana and other areas. But there isn’t much concern about their share of the Asian market. There is a deep belief that we’re going to see a lot of growth there and so these higher prices will be accepted. Also, crude supply from the Gulf is based on long-term agreements. Having that security is very important when you have a growing economy, whether it’s China or India.

Kate Dourian, FEI           		      
MEES Contributing Editor & Non-Resident Fellow, 
The Arab Gulf States Institute in Washington        

What’s the main driver moving us to $90 Brent?

It’s a combination of factors - rising geopolitical risk in the Middle East, which is now more firmly engrained, continued attacks on shipping in the Red Sea, attacks by Ukraine on Russian refineries, and expectations of interest rates staying as they are for the moment. It’s a bullish market in general - Bitcoin and gold are setting records and we have strong manufacturing data.

How should OPEC+ handle these moving parts?

The market structure right now is in their favor. They will need to decide when they taper their cuts and how gradually, whether over three or six months for example, depending on how the market’s going. And they don’t just look at price; they look at stock levels and the backwardation in the market, which at the moment is quite narrow in the first few months after June, but it gets a bit steeper in the fourth quarter. One issue OPEC+ has to consider, is that there will be 1.6 million b/d of increases from non-OPEC+ countries, led by the US, which more or less covers the demand increase. So, how much longer will Saudi Arabia and Russia sacrifice market share for price? It’s going to be quite a difficult balancing act. The other thing you’re going to see is more effort to force compliance by those countries that aren’t doing so fully with their quotas. OPEC has a new system that’s coming up where they’re going to have an independent assessment of capacity that might cause some problems because some people will get lower quotas.

Dr. Carole Nakhle     		        		      
Chief Executive Officer, Crystol Energy        

Anything one would identify as bearish for the current market?

Given the geopolitical tensions, whether they are resulting in actual supply disruptions or just creating a fear in the market, and despite OPEC+ cuts, for prices to be trading only at this level, should keep us more cautious about this optimism on where prices are heading. Several factors indicate a more bearish outlook. Spare capacity is above five-year and ten-year averages as a result primarily of OPEC+ cuts, so that should dampen the geopolitical risk premium. There have been some positive indicators coming from China, but it still has major structural problems with its economy that are not going to dissipate overnight. And the more positive the data is coming out of China, the more reluctant the government will be in stimulating the economy. Another factor is all that oil that is still floating in the sea because of tanker diversions. It’s a question of time before those reach their destination. Add to that more non-OPEC supply and the outlook for oil prices looks different, not only for this year, but for years to come.

Outlook for Europe’s economic position in the world?

There are two things that stand out to me as very different today since Russia invaded Ukraine in 2022. One is the lack of public enthusiasm for supporting Ukraine and a fatigue from the ongoing war. The second is the attitude towards the Energy Transition and climate change policies within Europe. Before 2022, there was much excitement about saving the planet from further warming and pushing for green energy. Today, people are more concerned about what they’re spending and the cost of living.

Omar Najia     	          		        		      Global Head, Derivatives, BB Energy        

What’s your call for oil in Q2?

A lot of people mistake a market that is very overlapping to the upside, with a weak one, but we see it moving higher, and substantially so, with the first target for WTI at $90, then $95, then $120 and above. We’re looking for new all-time highs without a move below the low that we saw earlier this year of about $67 WTI. And the reason is not because of supply and demand fundamentals, but rather because the trend is higher, as it is for gold, for the S&P, for Bitcoin and for inflation.

Will the Fed still cut interest rates?

Whether inflation increases or not, they will cut rates because of the US debt and affordability of interest rate payments. The US either inflates its debt way or it goes belly up. Our forecast is they will inflate, inflate, inflate. If interest rates stay where they are, they’re going to be paying massive amounts in interest payments and borrowing to pay for their borrowing. That situation is unsustainable, so they’re going to lower rates and let inflation increase and let their currency weaken. US interest on its debt is expected to hit $1.6 trillion by year end, making it the largest US government outlay - more than they spend on defense and more than they spend on social security.

Marc Howson    	         		      
Head of Asia, Welligence Analytics        

Chinese LNG demand really surprised everyone on the upside last year.

It grew 13% year on year and surpassed Japan to be the world’s largest LNG importer again. Along with other Asian LNG markets, it led to 3% growth in total Asian LNG demand. European demand in contrast was flat year on year. And this year again, its Asian demand that has driven relatively high prices; in the short space of under a month, we have had more than a dollar increase in spot LNG prices, which now stand above $9.50 per MMBtu again. Also, domestic gas production in Southeast Asian in countries like Pakistan, Thailand, and Indonesia, has either plateaued or is declining. So, there’s a long-term structural deficit in supply and that leaves LNG as the only way to meet demand in the short to medium term. Last year alone, we saw the Philippines, Thailand, and Hong Kong begin LNG imports for the first time. The challenge this year is that there’s also very little new LNG supply globally hitting the market. The big North American and Qatar supply should get going in 2025 and beyond, so prices will be creeping up to over $10 per MMBtu in the summer months in Asia.

Expectations for Asia to invest in permanent LNG infrastructure?

Buyers and sellers in the region are increasingly happy with floating liquefaction infrastructure and floating FSRUs. If countries like Pakistan and Bangladesh develop enough domestic resources one day, FSRUs can simply sail away. They have a lower Capex and lower carbon footprint than onshore LNG facilities. Importers are increasingly preferring the flexibility of FSRUs, especially given the volatility we’ve seen in markets the past few years.

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