Tag Archives: Khalid Al-Falih

Mining the Ocean

We might look at how Dow dropped 1175 points; we might in equal measure react to the act that Yemeni Houthi’s have decided to perform another attempt to send missiles into the Saudi civilian populations, all factual events of the last day alone. Yet that is not the initial issue that I am looking at. These are short term events and the media loves them because they get to report on the event, the proclaimed solution and the actual solutions. All follow up stories and the media loves them for the coin they tend to bring to their personal pockets. So it was nice to get a look at Saturday’s article by Jonathan Watts who gave us a look at an upcoming disaster (at https://www.theguardian.com/cities/2018/feb/03/day-zero-cape-town-turns-off-taps), not in Saudi Arabia, but in Cape Town no less. Yet it must be said that what is good for the one, could potentially hit the other as well.

So when you initially read the caption, you might think that the quote “In 10 weeks engineers will turn off water for a million homes as this South African city reacts to a one-in-384-year drought” is no big deal. Let’s face it, an event that hits once every 7 to 8 generations is not really a big deal is it. Yet that is not really the part that matters. You see, when you see the pictures, not on merely the empty swimming pool, but the image on the Theewaterskloof dam and how we see on what was and what now is. When we realise that ‘Day Zero, the apocalyptically named point when water in the six-dam reservoir system falls to 13.5% of capacity‘, is upon them just as autumn is ending, is in my view a much larger issue. When we see the people in queues with as many jerry cans as they can carry, that same point of befuddlement is reached when you consider why alarms have not been ringing a lot earlier, or were they ignored? They were not! The official Cape Town page (at http://www.capetown.gov.za/Family%20and%20home/residential-utility-services/residential-water-and-sanitation-services/Residential-water-restrictions-explained) gives us a lot. So as we see “A daily limit of 50 litres or less per person whether at home, work, school or elsewhere” we need to realise that 433 thousand people will still potentially drill down on 21.6 million litres of water every day. I am not putting any doubt on the 10 weeks until day zero, I merely wonder what else could be done to bring that number down and not to forget, that the WWF reported merely 4 days ago that only 39% of the Cape Town residents are adhering to these restrictions. The question becomes, when these restrictions began. For how long was there some plan of no-water, because the article gives us: “Greg Pillay: “We had to go back to the drawing board. We were prepared for disruption of supply, but not a no-water scenario. In my 40 years in emergency services, this is the biggest crisis.”“, it is fair that there was no plan and the fact that this happens once every 384 years makes the non-plan acceptable part, but the fact is that the empty dam pics should have been an alert stage when it had gone down to 50%, the restrictions to the degree as now might have been less severe pushing the reserves forward to a longer time. Now we see that the oddest thing will happen in 10 weeks, the taps will be turned off, no water from the taps. As seen the current 10%, who own up to 95% of all assets can likely afford, that each person buys a 20 ft. container filled with mineral water and ship it to their home, yet the other 90% will not have such an option setting a very dangerous situation, a very flammable and oddly fluid one to say the least.

the one good part is that Cape Town will start getting more rain by the time Day Zero approaches, so with April getting on average 300% more rain than the quarter before, and the steady incline in the months thereafter implies that the worst might be over, the dangers are that mother nature is a bitch on the best of days, so if they end up with a soft and warm winter the Cape Town goose ends up being most literally dry-cooked. There is just one other element. It is the one that they got to live with in Australia, these water catchments have no real purpose if the rain falls in the wrong place, so there is still that risk to look forward to.

So, why mention Saudi Arabia?

Well, Saudi Arabia has a similar drought pressures, yet they have additional issues as well. In Saudi Arabia, according to some sources groundwater extraction far exceed the level of natural recharge. The Al-Asha aquifer in the Eastern Province experienced a drop of 150 meters over the past 25 years. the National Geographic reported in 2015 that by 2012 80% of the aquifers had been depleted. That is one large setting whilst on taps the vein to find out in the first just how reliable those numbers are, but in the second degree as to how the impact on larger cities will become when the news brings them the story that ‘the fore mentioned source of water has been drained‘, because at that point the breakdown will be a lot larger when you consider 433 thousand in Cape Town versus 5.1 million in Riyadh. When that happens in one place, who long until Jeddah, Mecca and Medina follow? The problem is that there is no way to tell because there is no transparent oversight (an issue in many countries), there is no way to reliably forecast the issue and in all this the long terms impact of places that want to upgrade and maximise their economic potential sounds nice, but when the water level hits zero, everything stops, and right quick.

This might be the one long term danger that some are not looking hard enough at. so with: “Under the slogan “Bounties of our land,” Saudi Energy Minister Khalid Al-Falih inaugurated the 12th International Geological Conference on Sunday and an accompanying exhibition at a local hotel in Jeddah“, is nice to propagate the Vision 2030, but it is still 12 years away and at present, the water mining issues as well as the water disruptions that are currently still happening (as stated by more than one source) would impact it all. The growth of infrastructures, the middle eastern heat that is about to hit Saudi Arabia for the next 6 months, whilst the rain will again decide to remain absent until December (speculated forecast), that alone would require a much higher priority to resolve water issues in Saudi Arabia, or at least give it additional priority. The fact that there are 27 plants in Saudi Arabia, creating millions of litres of water every day implies that perhaps it is time to see if this process can be improved upon and more important 9 more plants will be added to the need of Saudi Arabia. Now we can agree that Saudi Arabia has made massive strides here and the fact that they have upped it to 5 million cubic metres a day should not be underestimated. I am merely speculating that if someone finds a way to improve this process by 1%-5%, the impact for the water quality of life for Saudi’s would go straight through the roof, the impact is that large at present. In addition, the fact that for now the 36 plants would suffice in the short term, the long term is still not a given, that is because the need cannot be predicted. Here too it is about the data captured and to learn where the losses to the water cycles are found and how they can be prevented. More important, if mining is an initial issue now, how much of an issue will it be in 10 years, because depleted places could have other implications too, implication mind you! There is a lot that is not known, but it seems to me that both Saudi Arabia and South Africa will have issue to deal with over the coming year. Not just the water as needed for consumption, whatever else relies on water will also impact structural changes and even more drastic show an optional impact on infrastructure. Part of this was also seen last month (at http://meconstructionnews.com/27099/emerson-opens-new-tech-lab-in-saudi-arabia), where Emerson is set to a “new $25 million new technology and innovation centre at Dhahran Techno Valley, in Dhahran, Saudi Arabia enables the company to host Saudi students, entrepreneurs, researchers and industry stakeholders to collaborate with its technical experts to develop process automation technologies and design products and solutions that, “meet the country’s goals.”“. Yet how much priority is given to design new ways to give rise to measuring and monitoring production, distribution and delivery of water solutions towards data collection, designed to contribute to longer term forecasting of water needs. You see, most of these systems tend to be short term, or when they are longer term they lose reliability because of a number of factors, so what happens when we can map and monitor the factors themselves? It is one of the powers that 5G could bring to an automation system, automated drone technologies that monitor and feed. This reminds me of a 2006 paper called ‘Modular learning models in forecasting natural phenomena‘ by Solomontine and Siek. Now in the paper we see in the abstract: “Comparison of the algorithms based on modular local modelling to the more traditional ‘global’ learning models on a number of benchmark tests and river flow forecasting problems shows their higher accuracy and transparency of the resulting models“, now what if the plant is the source of the river and the pipes are the river themselves. What if losses and therefor risks of these pipe systems could be mapped and correctly categorised? Only last year the Saudi Gazette reported (at http://saudigazette.com.sa/article/500157/SAUDI-ARABIA/Water-supply-disrupted-in-five-Jeddah-districts), “Residents of five districts in southeast Jeddah have complained about disruption of water supply to their homes after the National Water Company (NWC) changed its supply schedule. The residents of Al-Musaed, Quwaiza, Al-Nakheel, Al-Raghama and Al-Obaid districts in southeast Jeddah were mainly affected by the supply disruption“, now there can be all kinds of valid reasons why this happens, yet the official response was: “it was beyond their control as the quantity of water they receive from Shuaiba plants was less than what they received before“, the question is not whether, why or the issues of delivery, it is whether quantity of water changes can be measured and set into data models that give better forecasting, this is seen as that nations will soon face provision from 36 plants and any plan to rely on full production and let things run will have longer term problems. Knowing where water is going and what losses are measured will also give rise to initial better information and longer term better water measurement. In my view it is the same with almost every port in the world. It is not how much you ship and how many vessels you service, it is the one place where idle time is not monitored, that is the place where the cost of it all spins out of control really fast.

As I see it, both South Africa and optionally Saudi Arabia have a flaw in the long term view of water, from the articles South Africa is already past the initial point of worry from what I have read and I am speculating that Saudi Arabia has an optional issue growing as it is working towards Vision 2030, because when those tech firms start rolling in in 2031, Riyadh with all its growth could potentially grow by at least 10% in the short term, the question becomes whether Riyadh would be ready to service a jump that is twice the size of Cape Town? I have no way of knowing and it is not yet the point where it is out there, but Vision 2030 is only 12 years away and desalinisation plants do not grow overnight, which would be awesome if someone could design one that did so.

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Prospecting black gold

There has been news all over the world, some news is good, some less so and at times we cannot see whether news is good, bad or irrelevant. To see the dangers, or perhaps the opportunity of what is what we need to look back to 2014, and start that issue with a quote from the Marvel Movie: Age of Ultron. The quote originally from Tony Stark was: “As I always say, keep your friends rich, and your enemies rich, and then find out which is which“, it is a reference to the arms industry and the benefit of mutual escalation. Keep this in mind when you consider the article in the Independent (at http://www.independent.co.uk/news/business/news/royal-mail-float-scandal-how-hedge-funds-cleaned-up-9303674.html), the title gives us the immediate threat with ‘Royal Mail float scandal: how hedge funds cleaned up‘, and “Speculators were allowed to buy £150m of shares despite Vince Cable’s pledge to favour long-term investors“, I omitted the claim that it was all due to the postman. That person usually rings twice, especially when Jessica Lange is around. Yet the heart of the matter, like in the movie, is not in the ‘boner’ or the ‘bonee’, it is the aftermath that matters. You see, the gem is seen in the local prosecutor and his ploy to get to the truth by going after one side, yet it is Cora’s Lawyer Katz who stops the evidence to get to the prosecutor, which nullifies whatever was attempted. So consider the part we see in the Independent: “around 20 per cent of the shares it had allocated to 16 preferred investors had gone to hedge funds and other short-term investors. This would equate to around £150m of Royal Mail shares – 13 per cent of the entire stock sold by the Government. The companies bought in at the float price of 330p a share. The shares shot up within seconds of trading, eventually peaking within weeks at more than 600p, allowing the hedge funds to bank vast profits at the taxpayers’ expense“, now consider also that this is a reflection of ‘£150m of Royal Mail shares‘. A system that has issues and allows for ‘deal sweeteners‘, now when you see this, and knowing that the bulk of hedge funds managers seem to get away with murder, consider the arrival of Aramco, better stated, the Financial Times headline ‘The $2tn Saudi Aramco question‘, which is now squarely an issue of titanic proportions (intentional pun towards the sinking dinghy). First things first, you see, this is not a fuel vendor like Shell, or a social media company like Facebook, this is the Privatised Saudi oil company that is larger than the sum of Shell, Facebook, Apple and Google. It is a 2 trillion dollar company, now consider the danger of the floating dangers of something like that, hedge funds managers can clean up and those who do will be set for a decadent life, for the rest of their lives. The dangers of something this big is pretty astounding and the fact that it could happen is not that small. You see, the dangers increases as we consider certain facts. NASDAQ gives us: “OPEC agreed in November last year to curb its output by about 1.2 million barrels per day between January and June“, that is because the stocks are a little higher than expected. This happens, oil will always fluctuate, now consider in the US alone there are 32 oil fired power plants. Production is down (for now) and the moment the first heatwave gets to the US, we see a massive spike in power requirements and 32 of those power makers require fossil fuel. In this I am only mentioning the USA, there has been power issues on a global scale, which is always going to be the case, but one of the largest providers towards the demand is going public and that is what speculators really like, because if the supply & demand need is not properly managed, we see an increase option towards fluctuation. Those speculators only need to get lucky once and the mess would be unrepairable.

The Financial Times gives us some of the goods with: “Privatising Aramco is the first step in rebalancing the economy. By disentangling the company, which accounts for more than two-thirds of government revenues, from the state, Prince Mohammed hopes to make Riyadh less oil-reliant, while providing capital for investment in new industries, ranging from technology, where it is pumping $45bn into the SoftBank Vision Fund, to mining. The privatisation of its national champion is crucial to this process” (at https://www.ft.com/content/7ed59bee-163b-11e7-b0c1-37e417ee6c76), but the heart is seen in: “That is even without looking at the question of how much oil actually lies beneath the desert kingdom’s sands“, when we consider that the oil gains in the North sea is slowing down and this is a signal seen in several places, the fact that at some point (in past, present or future) that something similar will happen to the Aramco goods is a certain fact, it is the when that cannot be anticipated. In addition, going public means that you need to be commercial, when it is government no one really cares, but in the public sector the trend must forever be upwards, so when will we see a similar float in Aramco when the numbers are not as great? It has been an utter certainty that nearly all companies go through, some did it calculated knowing they would kill the numbers within a quarter, some hoping they would kill the numbers and some did it whilst they were desperate for a miracle. Yet floating they went. How much of a $2 trillion dollar company in stock value will tumble when that happens?

And these are the circumstances where the acts were valid and not criminal at all (see UK Mail), I am not making any Tesco assumptions here, because the damage in that case will be devastating to the London Stock Exchange. One firm representing close to 70% of its entire market, there would be no London Stock Exchange after such a disaster. Bloomberg gives us the second tier of risks and dangers with ‘Saudi Aramco Cuts Oil Pricing for Europe Where Russia Dominates‘ (at https://www.bloomberg.com/news/articles/2017-04-05/saudi-aramco-lowers-some-crude-pricing-for-asia-raises-for-u-s), a market that Russia already dominates. What would happen if let’s say 3 days after going public, Russia decides to slash their prices for a short time? How would the market react? Not just to Aramco having to follow, but the forecasted annual numbers then take a dive, at who’s expense? Consider that the European market is ‘ruled’ by Russia and Norway, together they make up for 50% of that market and the Saudi part is smaller than Norway and 80% of that 50% market is just Russia. So they can influence the market a fair bit. You see, Bloomberg gives us “There is a risk price wars may resume in Europe, raising the possibility the output cut agreement won’t be extended to the second half of this year“, meaning that in the second half Russia could flood the markets and the streets with black gold. That impact would be felt all over the stock market. There is one part that I am uncertain on. You see, it reads like a small and insignificant part. The quote: “Aramco will tweak the benchmark it uses in the region to make it easier for crude buyers to hedge their purchases” seems small, but consider that hedging is done by a few hundred buyers for up to 25,000 barrels. It seems like nothing, but with 179 buyers it is almost a week worth of crude oil, now the ‘stock is full‘ issue becomes a larger one, because this is a level of fluctuation on stock levels that would impact on the stock prices, the mere stock is full a few weeks ago had a $3 impact (or 4.6%), that becomes a little more than insignificant. Now, I could be wrong here as I am not in the oil, yet you see that this is a concern when it impacts a $2T invested interest by more than just hedge funds managers.

The last part comes from the Guardian. In Jan 2016 they stated “Saudi Aramco is likely to be worth well over $1tn (£685bn)“, this is important as we do not see 1.2 or 1.5 trillion, so this given number implies that in a year Saudi Aramco grow by more than 40%, the exact number cannot be determined. Other media stated that Aramco had grown to 2 trillion last year, but none have given enough evidence to state which number is the reliable one. That too impacts this new market, especially the initial dangers of floating a stock. Yesterday (at https://www.theguardian.com/business/2017/apr/05/theresa-may-lse-saudi-aramco-uk-london-stock-exchange-oil) we see: ‘May and LSE chief woo Saudi ministers for $2tn Aramco listing‘, here we see: “Xavier Rolet, has launched a charm offensive in Riyadh to woo Saudi ministers with the prospect of London hosting the upcoming flotation of Saudi state oil company Aramco, which is likely to be the largest of all time“, the word ‘flotation‘ is given and the danger is now out and about, in clear view of all. So as the UK government is trying to appease Khalid Al-Falih, energy minister of Saudi Arabia (and CEO of Aramco), as well as Yasir al-Rumayyan, the director of the Saudi public investment fund – a sovereign wealth fund, I have to wonder where the Rothschild’s are, because there is no way in heaven or hell that the Rothschild family would be absent of a 5% of a $2T company option and not be a player in something with the ROI of billions, especially after the losses they had with Kurdistan and Africa. They have skin in the game now, and they need a victory in this field, their ego demands it from themselves!

In all this the final part given in the Guardian must not be overlooked, because the quote “Downing Street announced on Monday it had drawn up plans with Riyadh to boost support for Saudi’s much-vaunted Vision 2030 strategic plan for diversifying the Saudi economy to decrease its over-reliance on oil, spearheaded by the deputy crown prince, Mohammed bin Salman, who met May on Tuesday“, as this now offers the level of revenue to fund the ability to become the largest 5G player in the middle east, with options to diversify into Europe, the far East and America. It is perhaps the first time in history that a public company would shoot to a top position in mobile communication, ready to set the market and their values in a few ways on a global scale. For the simple reason that moving into technology and not go for the new tech that will determine the fate of the large mobile and telecom players between 2019 and 2027 seems extremely short-sighted.

 

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