Business

AMMAN — Payments made through e-FAWATEERcom recorded an increase by 36.5 per cent at the end of May 2016, amounting to JD56.8 million, compared to JD41.6 million at the end of the same period last year.

Data of the bill payment service also showed that the number of bills and financial transactions settled rose by 14 per cent to 547,000, compared to 478,000 during the same period last year, according to the Jordan News Agency, Petra.

Government institutions accounted for most of the payments made through the service, supported by the Central Bank of Jordan, the news agency added. 

AMMAN — The Central Bank of Jordan (CBJ) figures revealed that the interest rate on deposits, extended by licensed banks operating in the Kingdom, are at the lowest level in more than five years.

Customers who have a savings account or a call deposit receive less than 1 per cent in interest, while those who have a time deposit account, held for a specific duration, may get an interest rate of 3.2 per cent, according to the CBJ figures.

The CBJ data also showed that the credit interest rate offered to the best clients was 8.39 per cent at the end of May 2016. 

LONDON — "How much oil lies beneath the desert sands of Saudi Arabia and how long will it last before running out?" is a question that has intrigued and confounded oil experts for five decades.

The kingdom has proven reserves of 266 billion barrels according to government estimates submitted to the Organisation of the Petroleum Exporting Countries.

If these numbers are correct, Saudi Arabia's reserves will last for another 70 years at the average production rate of 10.2 million barrels per day reported for 2015.

But there is widespread scepticism about the official estimates, which were abruptly raised without explanation from 170 billion barrels in 1987 to 260 billion in 1989.

Official reserves have remained constant every year since then at 260-265 billion barrels, even as the country has consumed or exported another 94 billion barrels ("Statistical Review of World Energy", BP, 2016).

If the government data is accurate, the kingdom has managed the remarkable feat of exactly replacing each produced barrel with new discoveries or increased estimates of the amount recoverable from existing fields.

But most of the country's giant oil fields were discovered between 1936 and 1970 and no comparable discoveries have been made since then.

The implied increase in reserves must therefore come from enhanced estimates of the amount of oil recoverable from existing reservoirs.

The problem is that field-by-field production profiles and reserve estimates are state secrets known by only a small group of insiders, making it impossible to test or verify them.

Analysing Saudi reserves and trying to predict when the kingdom's production will begin to decline has been a graveyard for the reputation of professional oil analysts.

The kingdom is currently producing more oil than ever before, defying predictions that its output would peak and then fall.

Reserve estimates

The oil industry employs a number of different ways of classifying the amount of oil available for future production.

The broadest category is the total amount of original oil in place (OOIP) in the reservoir formation before production began.

In the 1970s, there was broad agreement that the OOIP of Saudi Arabia's discovered oil fields was around 530 billion barrels.

The estimate for original oil in place was reported to the US Senate's Subcommittee on International Economic Policy by executives for Arabian-American Oil Company (Aramco).

Aramco was then jointly owned by four US oil companies (Exxon, Texaco, Socal and Mobil) as well as the government of Saudi Arabia so its owners and executives could be required to testify.

The subcommittee report, now nearly 40 years old, contains some of the last detailed information about Saudi reserves in the public domain.

But not all of the original oil in place can be produced technically or profitably so most analysts focus on a series of narrower measures which look at the amount of technically and economically recoverable reserves.

Proved reserves, the most conservative and prudent measure, are those which are estimated to exist, and are technically and economically recoverable, with a probability of at least 90 per cent.

Probable reserves are those estimated to exist and be commercially recoverable with a probability of at least 50 per cent.

Possible reserves, the most speculative and optimistic measure, are estimated to exist and be commercially recoverable with a probability of at least 10 per cent.

In the late 1970s, Aramco put proven reserves at around 110 billion barrels, while the more speculative categories of probable and possible reserves were put at 178 billion barrels and 248 billion barrels respectively.

The question of which measure to use for production and planning purposes is a matter of judgment and caused controversy between the Aramco partners and the Saudi government in the 1970s.

Proved or probable?

Since 1980, the Saudi government has been the sole owner of Aramco. From 1982, detailed field-by-field information about the company's reserves and production has been restricted.

Saudi Arabia began reporting to OPEC that its "proved" reserves stood at around 168-170 billion barrels of crude oil.

The Saudi figure was much higher than the 110 billion barrels of proved reserves reported by the Aramco partners a few years before.

But it was very close to the figure for possible reserves that the Aramco partners had reported to the US Senate.

That raised the question if the Saudis had chosen to increase their reported reserve base by reporting probable reserves as proved reserves.

In 1988/89, the proved reserve figure jumped again to 260 billion barrels despite no major new discoveries. 

This was much higher than the proved figure reported by the Aramco partners, but not far off the figure of 248 billion for possible reserves they had reported in the 1970s.

Again that posed the question whether the Saudis were reporting possible reserves as proved to increase the size of their reserve base.

The Society of Petroleum Engineers and the US Securities and Exchange Commission have strict definitions for estimating and reporting reserves.

But it is far from clear that the "proven" reserves which Saudi Aramco has reported to OPEC employ the same definitions; because the calculations are secret outsiders have no way of verifying them.

Reserve growth

It is not uncommon for countries to produce far more oil than initial reserve estimates suggested would be possible.

Reserve increases can come from the discovery of new oil and gas deposits or from an increase in the estimated amount of oil that is commercially recoverable from an existing field.

Reserve growth from existing fields, also known as field appreciation, is one of the most important sources of increases in oil reserves in most countries.

As understanding of the reservoir increases, more information is known about its extent, and new technology and techniques become available, the amount of technically recoverable oil may rise ("Reserve growth of oil and gas fields", United States Geological Survey, 2013).

Because the calculation of reserves is deliberately conservative, it is fairly common for reserves initially reported as "possible" to become "probable" and eventually "proved".

But Saudi Arabia seems to have been unusually reliant on reserve growth within existing fields to revise its reserves up to 265 billion barrels and keep them there since the late 1980s.

Selling Aramco

Saudi leaders have announced plans to seek a stock market listing for Saudi Aramco and make up to 5 per cent of the company's shares available to investors.

The prospect of a partial floatation has triggered renewed interest in Aramco's reserves since they could be an important part of any valuation.

If Saudi Aramco was required to comply with the normal listing rules, it would have to make much more information available about its reserves and how they are calculated.

But there are reasons to be cautious about expecting much more transparency: it is far from clear that any share sale would include ownership of the reserves in the ground.

In the meantime, no one really knows how much more oil can be recovered from beneath the Saudi desert and adjoining areas in the Gulf.

Rystad Energy, a respected consultancy, puts Saudi Arabia's proved reserves at 70 billion barrels and its proved and probable reserves at 120 billion barrels.

If new field discoveries are included, the reserve figure could grow to somewhere between 168 billion and 212 billion barrels.

All these figures are substantially below the official numbers for proved reserves, though at the upper end the gap is relatively narrow.

The implication is that Saudi Arabia is relying on reserve growth from the reclassification of possible reserves and fresh discoveries to maintain its proved reserves at the same level since the 1980s. 

AMMAN — The Department of Statistics (DoS) said the country’s gross domestic product recorded a growth of 2.3 per cent in fixed market prices in the first quarter of 2016, compared to its 2015 Q1 results. 

A DoS report said the results of most “productive” sectors were positive, posting modest growth during the first quarter of this year.  

The electricity and water sector achieved the highest growth rate of 16.4 per cent, according to a DoS statement issued on Monday.

The agricultural sector registered a 6.4 per cent growth rate, followed by that of the “non-profit” special services sector at 4 per cent, according to the DoS statement.

Clawing closely behind, finance, insurance, real estate and business services achieved a 3.6 per cent growth.

The social and personal services sector recorded a 3.1 per cent in growth, followed by transport, storage and telecommunications at 3 per cent, the construction sector at 2.6 per cent and wholesale, and retail trade as well as hotels and restaurants at 1.6 per cent. 

Last month, the World Bank (WB) downgraded its 2016 global growth forecast to 2.4 per cent from the 2.9 per cent pace projected in January, saying the move was due to sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows.

As for the region, the WB said growth is forecast to pick up slightly to 2.9 per cent in 2016, 1.1 percentage points less than expected in the January outlook. 

The WB downward revision came as oil prices were expected to track lower during this year, at an average of $41 per barrel. 

An envisaged upturn in average oil prices in 2017 is projected to support a recovery in regional growth to 3.5 per cent in 2017, the WB said. 

AMMAN — The Amman Stock Exchange (ASE) on Monday said Jordan Phosphate Mines Company (JPMC) has completed all required procedures to increase its listed capital from JD/Share 75 million to JD/Share 82.5 million through stock dividends. Accordingly, the ASE will list the new shares on Sunday July 10th, 2016 with a reference price of JD2.87.

ABU DHABI — Two Abu Dhabi-based banks have agreed to merge to create the single largest lender in the Middle East and North Africa (MENA), a statement said on Sunday.

The boards of the National Bank of Abu Dhabi (NBAD) and the First Gulf Bank (FGB) voted unanimously in favour of the merger, which would create a lender with assets worth $175 billion, the banks said in a statement posted on the Abu Dhabi bourse.

The merger — which is expected to take place in the first quarter of 2017 — still requires approval from the general assemblies of both banks, the statement said.

The new bank would become the leading financial institution in the United Arab Emirates, with 26 per cent share of outstanding loans, it said.

It would have a combined market capitalisation of $29.1 billion and offices in 19 countries, it said.

“The proposed merger will create a bank with the financial strength, expertise, and global network to support the UAE’s economic ambitions,” the statement said.

The government of oil-rich Abu Dhabi — one of the seven emirates that make up the UAE — would own a 37 per cent stake in the new bank.

The merger would be executed through a share swap, with FGB shareholders receiving 1.254 NBAD shares for each FGB share.

NEW YORK — Global stocks rose again Friday as worries about the British exit from the European Union continued to recede amid expectations of more stimulus from central banks. 

Equity markets in Paris, London and Frankfurt all gained about one per cent in their fourth straight day of moving up. 

US stocks also pushed higher for the fourth day running, but the S&P 500 mustered a gain of just 0.2 per cent. US markets will be closed Monday for a public holiday.

The European increases came as eurozone unemployment fell to a near five-year low in May, a welcome piece of good news for the struggling single-currency bloc. However, unemployment still stood at 10.1 per cent, well above the level prior to the 2008 financial crisis.

In the US, the Institute for Supply Management reported its purchasing managers’ index for manufacturing activity rose to an unexpectedly strong 53.2 in June from 51.3 in May.

Analysts said that Britain’s June 23 vote to quit the EU, which has unleashed global worries about its impact on the global economy, would probably push central banks to further ease monetary policy.

Bank of England chief Mark Carney hinted on Thursday of more monetary stimulus in the coming months. The Brexit vote is also expected to push back any plans by the US Federal Reserve to hike interest rates.

The Brexit “is not a bullish event”, said Mace Blicksilver, the director of Marblehead Asset Management. 

“But you’ve triggered this massive dose of liquidity.”

Blicksilver said investors are cautious about selling stocks since the market could rally even higher next week now that it is clear that Brexit has not emerged as a Lehman-type event, at least in the near term.

But S&P Global trimmed its 2016 and 2017 US growth forecasts on Friday, warning that “the vulnerabilities surrounding Brexit are far from resolved”.

“All told, we expect the repercussions from Brexit to weigh somewhat on US GDP,” S&P said.

Briefing.com analyst Patrick O’Hare said the growing unknowns emanating from questions about the political complexion of Britain and the EU will drag on the US earnings outlook.

“There is a heightened degree of uncertainty stemming from the Brexit vote and a weaker global economic outlook as a result of it,” said Briefing.com analyst Patrick O’Hare.

Moves by central banks have “helped put a band-aid on the bleeding, yet there still haven’t been any sutures beyond that to close the cut, which will likely remain an open wound for some time,” he said.

On Wall Street, Hewlett Packard Enterprise rose 1.4 per cent after a California jury awarded it $3.1 billion from software giant Oracle in damages after HPE sued Oracle for not providing support services. Oracle lost 0.2 per cent.

Tesla Motors rose 2 per cent despite news that US auto-safety regulators were probing a fatal crash involving a Tesla sedan operating in a self-driving mode. Global Equities Research said the incident was “sad” but a “non-event” from a stock perspective.

SINGAPORE/HONG KONG — United Overseas Bank (UOB) became Singapore’s first lender to temporarily halt mortgage loans for London properties, as other Asian banks flagged potential investment risks in the wake of Britain’s vote to leave the European Union.

Brexit has spooked global markets and pushed the pound to multi-year lows, sparking worries about the health of a London property market that has previously attracted huge interest from Asian investors seeking stable returns.

“We will temporarily stop receiving foreign property loan applications for London properties,” a spokeswoman for Singapore’s No. 3 lender said in an e-mail. “Given the uncertainties, we need to ensure our customers are cautious with their London property investments”.

While UOB’s move is a first, volatility and uncertainty since the June 23 vote about Britain’s economic prospects has encouraged many Asian banks to flag potential risks of London property dealings to customers. The Singaporean dollar has gained 10 per cent against the pound since the referendum, eroding the value of assets held in Britain.

A raft of Asia’s lenders said on Thursday they were issuing reminders to clients of the risks, though they were still offering loans for London properties.

Singapore’s top two lenders — DBS Group Holdings Ltd. and Oversea-Chinese Banking Corp — said London mortgage loans were still available, as did Malaysian lender CIMB and Hong Kong’s Bank of East Asia .

“For customers interested in buying properties in London, we would advise them to assess the situation carefully before committing to their purchases as there could be potential foreign exchange and sovereign risks,” Tok Geok Peng, the executive director of secured lending, consumer banking group at DBS Bank said in an email.

OCBC, meanwhile, said it was monitoring the situation carefully.

At Bank of East Asia, deputy chief executive officer Brian Li told Reuters, “We will continue to provide mortgage loans to our clients, though we are warning our customers of the increased risks arising due to volatility in financial markets.”

“We have a reasonable exposure to London property market, but we believe the risks are manageable at this stage,” Li said.

Negative outlook

JLL, a global real estate consultancy, said there were 1.3 million residential transactions in 2015 in London. In a typical year, overseas investors in London make up about 15 per cent of new transactions, a percentage that rises to up to 40 per cent in central zones of the British capital.

“Singapore is one of the most important markets for London residential property,” said Adam Challis, the head of Residential Research, JLL UK. It did not provide a breakdown of transactions by Singaporean buyers.

Other risks for Singaporean banks have been exacerbated in recent months by an economic slowdown in Asia and rising bad debts in energy-related industries.

Moody’s Investors Service on Thursday revised the outlook on Singapore’s banks to negative from stable. This reflected the “weaker operating conditions” against the backdrop of softer regional economic and trade growth, Moody’s Vice President and Senior Credit Officer Eugene Tarzimanov said.

Property consultants say data on the number of properties purchased by Singaporeans in Britain is not tracked that closely. Banks do not disclose lending data for British property purchases.

Analysts said Brexit could slow the sale of British properties in Asia as buyers turned cautious.

“There have been London properties available for the last few months before the Brexit. The question is whether these properties can still continue to receive buyers in the short-term,” said Alice Tan, the head of consultancy and research at Knight Frank Singapore.

UOB, which runs an international property loans programme that also covers properties in Australia, Japan, Thailand, Malaysia and Singapore, said it would review the market regularly to determine when it could resume its property loan offering.

AMMAN — Jordan plans to introduce a programme of far-reaching structural reforms to counter economic challenges, Finance Minister Omar Malhas said in a recent interview with Oxford Business Group (OBG).

Exogenous shocks had taken their toll on Jordan’s economy, with public debt now at a “critical” level, he told the OBG.  

“We cannot continue with the same economic model,” he acknowledged. “We need to adapt it to fit with modern times.”

The full interview will appear in The Report: Jordan 2016, OBG’s forthcoming report on the Kingdom’s economy. The publication will also contain a detailed, sector-by-sector guide for investors, alongside contributions from leading personalities, according to an OBG statement.

Malhas said the new fiscal measures would target boosting the gross domestic product (GDP) and improving the country’s competitiveness in a bid to attract higher levels of foreign investment.

The Kingdom is also looking to decrease its reliance on foreign aid, targeting self-sufficiency by 2018.

 “This is an important issue for Jordan, since last year, our revenue reached only 94 per cent of the total expenditure,” the minister noted. 

“Unfortunately, we remain exposed to exogenous shocks. However, we are hoping that the economy will grow at a higher percentage than it did last year.” Changes to Jordan’s income tax law were among the reforms expected to help raise revenue, he added.

Structural reforms will include over 20 actions that are being mandated by the International Monetary Fund in order for Jordan to meet the criteria to receive support via the international organisation’s Extended Fund Facility (EFF).

Malhas expressed confidence that the EFF would help Jordan to achieve stronger economic growth. “We are targeting an EFF programme of at least three years which combines fiscal measures with structural reforms,” he said. “The main goal is to reduce Jordan’s debt to 77 per cent of GDP by 2021, so we’re discussing how we can achieve that.” 

The Report: Jordan 2016 will deal with the country’s developments in the areas of infrastructure, banking and macroeconomics. 

WASHINGTON/TOKYO — Toyota Motor Corp. has recalled 3.37 million cars worldwide over possible defects involving airbags and emissions control units.

The automaker on Wednesday said it was recalling 2.87 million cars over a possible fault in emissions control units. That followed an announcement late on Tuesday that 1.43 million cars needed repairs over a separate issue involving airbag inflators.

Some of the automaker’s gasoline-electric hybrid Prius models contain both of the potential defects, taking the total number of vehicles affected by the recalls to 3.37 million.

No injuries have been linked to either issue.

Toyota on Wednesday said evaporative fuel emissions control units in models produced from 2006 to 2015 including the Prius, Auris compact hatchback and its popular Corolla models were prone to cracks, which could expand over time and lead to fuel leaks.

Late on Tuesday it recalled Prius models and Lexus CT200h cars made from 2010 to 2012 over airbag inflators that could have a small crack in a weld, which could lead to the separation of the inflator chambers.

The inflator could partially inflate and enter the vehicle interior, increasing the risk of injury, Toyota said.

Sweden-based auto safety gear maker Autoliv Inc. confirmed on Wednesday that it supplied the airbag inflators involved in the recall.

The company said it was aware of seven incidents where a side curtain airbag has partially inflated in parked Toyota Prius cars, but no injuries were reported.

Autoliv has benefited from an early recall involving faulty airbag inflators made by Japan’s Takata.

The company said in a regulatory filing in April that it was investigating six incidents related to its airbags and a possible recall could cost it between $10million-$40 million, net of expected insurance recoveries. 

Autoliv said on Wednesday it expected the cost of recall to be at the lower end of the range.

The company’s US-listed shares were down 4.7 per cent at $105.00 in premarket trading. The stock fell as much as 16 per cent to 765 Swedish kronas on the Stockholm Stock Exchange, their lowest since December 2014.

Toyota Motor’s US listed shares were down 1.2 per cent at $98.69 in premarket trading.