Oman to introduce 5pc VAT by April 2021
Cash-strapped Oman has announced plans to introduce a 5pc value-added tax (VAT) "within 180 days" as it looks to boost state coffers that have been hit hard by the Covid-19 pandemic and resulting fall in global oil prices.
The country is the largest non-Opec oil producer in the Mideast Gulf and is heavily reliant on hydrocarbons. Oil and gas exports make up over 70pc of state revenues and around 60pc of total exports.
The tax will be levied on most goods and services, with exemptions on essential food items, medical care, education and financial services. The implementation of the VAT will provide an "additional resource for the state's public finances to ensure the continued quality of public services", the authorities said. "It will also support the achievement of the sultanate's objectives to reduce dependence on oil and other hydrocarbon products as the main source of revenue."
Oman's oil revenues have been squeezed by the collapse in oil prices since the onset of the pandemic in the first quarter, and also by the country's participation in the Opec+ crude production cut agreement which has required it to produce well below its capacity since May. Oman pledged to cap its crude output at 682,000 b/d in May-July and 722,000 b/d from August through to the end of the year. Its production is set to remain constrained until at least April 2022, when the current agreement expires.
The move to introduce VAT is latest in a raft of measures that have been implemented to try to bolster the sultanate's finances, including a slimming down of the government, a drive to rationalise state spending and most recently a plan for a new bond and sukuk offering. But years of heavy reliance on debt to offset a widening budget deficit have contributed to a downgrading of the country's credit rating to junk by all three major credit rating agencies, which means tapping the bond markets will not come cheap. In August Fitch forecast that Oman's fiscal deficit would end up at 20pc of GDP this year ̶ around 4.8bn rials ($12.4bn) ̶ which is almost double what the country had projected in its 2020 budget in January.
Oman will become the fourth Gulf Co-operation Council (GCC) country to implement VAT under the GCC VAT framework that was signed in 2016, after the UAE, Saudi Arabia and Bahrain. Qatar and Kuwait have suggested that they will follow suit before the end of 2022.
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Polish gas reforms still needed: Energy Traders Europe
Polish gas reforms still needed: Energy Traders Europe
London, 15 July (Argus) — Recent government plans to amend Poland's onerous gas storage legislation are positive, but more serious reforms are necessary to foster increased competition, industry association Energy Traders Europe told Argus . The Polish government last month said it plans to amend the Act on Stocks in November , removing importers' obligation to maintain mandatory gas storage reserves and placing it on state-owned strategic reserves agency Rars instead. Energy Traders Europe welcomed the move but recommended several further steps to bolster competition and liquidity. The Act on Stocks "needs to be revised first and fast" before addressing other issues in the market, the association's gas market manager, Pawel Lont, told Argus . While shifting the obligation to Rars is a positive first step, Poland would still have "state-enforced storage filling with hardly any capacity left for commercial use", which removes an important flexibility source for the market, he said. Ultimately, storage needs to be reformed to a point at which commercial filling becomes not only possible but desired, Lont said. The government needs to ensure that the system provides an incentive for the storage operator to offer products that are attractive to users, Lont said, noting that currently "this incentive simply does not exist, and this set-up can only inflate the costs of gas consumption in Poland". Energy Traders Europe previously suggested that the strategic reserve should be calculated against the demand of vulnerable customers only, as opposed to all consumers, which would significantly reduce the overall burden and free up space for commercial use. It would also be desirable to move the start date of the draft storage legislation to 1 April 2025 and ensure that licence applications declaring the intention to start commercial activity after this date are tested for compliance with these new rules. It can take a year or more for licence applications to be approved, so "the sooner we start, the better", Lont said, adding that the licensing procedure in Poland is "undoubtedly the most problematic in all of Europe". Applications involve a long list of documents that are difficult to complete in a timely manner. There are also issues on the reporting side, with "an impressive list of 20+ positions reported to different bodies at different points in time" on top of standard EU reporting, Lont said. These obligations create exposure and considerable costs for companies, so it would be beneficial to run a critical review on their necessity, he said. And Polish transmission tariffs are high, although this is understandable given Gaz-System's construction of interconnectors with several neighbouring countries over the past few years. Polish tariffs are decided yearly, while entry/exit splits can also be adjusted, which is problematic for trading companies that would like to book longer-term products. The multipliers and seasonal factors "definitely deserve some rethinking as they severely inflate the costs of short-term capacity products, while booking yearly products in Poland can be quite a bet", he said. But even if these other issues are addressed, "We will [still] be looking at a largely monopolised country, with the dominant player having exclusive access to LNG terminals", Lont said. While the gas release programme is positive for the market, it would be beneficial to see whether Orlen's dominance could be challenged at import terminals. Orlen has booked all capacity at the Swinoujscie terminal, as well as at the planned Gdansk terminal, meaning it continues to be the sole beneficiary of the 100pc discount on entry to the grid from LNG terminals. Several measures could be taken to open other companies' access to the terminals, such as secondary capacity trading, use-it-or-lose-it rules or set-aside rules and limits when allocating capacity to a single entity, Lont said. But these measures would be ineffectual without a guarantee that other firms are ready and willing to book this capacity, so the reforms discussed above need to come first so as to ensure that these participants can actively trade in Poland beforehand, Lont said. In general, it is not unusual to have a dominant company in a given country, but "one just needs an environment in which the group cannot abuse its position and its offer can be challenged", he said. Orlen had a 91pc share of the Polish retail market last year, according to regulator URE. Poland has "all the cards" to develop a liquid gas market, but this takes time, so reforms must get going as soon as possible. Since the change of government, it has at least become "much easier to approach the ministries in Poland", which "helps a great deal on the transparency side", Lont said. By Brendan A'Hearn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Iraq's Opec+ compliance challenges are not going away
Iraq's Opec+ compliance challenges are not going away
Dubai, 15 July (Argus) — Iraq's crude production fell in June but not by enough to stave off heat from the Opec+ alliance. State-owned marketing firm Somo said output dropped by 26,000 b/d on the month to 3.83mn b/d, excluding that from the semi-autonomous Kurdistan region. Production levels in the northern region are unclear, but are probably enough to take the overall country output to above the 4mn b/d limit imposed by the Opec+ agreement. Iraq has failed to meet this target in any month this year, and as the Opec+ alliance's least compliant member it agreed in May to make additional cuts to compensate for prior overproduction. The Opec+ secondary sources, which include Argus , put Iraq's output at 4.19mn b/d in June. Iraq's oil ministry on 14 July reiterated its commitment to meeting the 4mn b/d limit and reaffirmed its willingness to compensate for the excess production since the beginning of the year. Baghdad's mission is made more difficult by a lack of visibility in Kurdistan, where 400,000 of crude exports were taken off international markets in March 2023. Argus estimates output from the region at between 250,000 b/d and 300,000 b/d, much of which ends up in Turkey or Iran, but the Kurdistan Regional Government (KRG) has stopped providing any oil-sector data. Baghdad says a drop in its crude exports is evidence of attempts to improve compliance — shipments from the southern Basrah oil terminal averaged 3.29mn b/d in June, down from 3.36mn b/d in May and 3.41mn b/d in April, according to Somo. Kpler data put Iraq's crude exports at 3.24mn b/d in June, the lowest since the beginning of the year. Somo said the amount of crude supplied to domestic refineries increased to 475,000 b/d in June from 441,000 b/d in May and 421,000 b/d in April. It said 10,000 b/d were exported to Jordan. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Singapore LNG bunker sales post fresh highs in June
Singapore LNG bunker sales post fresh highs in June
Singapore, 15 July (Argus) — Demand for alternative marine fuels rose further in June at the port of Singapore, with LNG demand for bunkering touching fresh highs. Total bunker sales in June rose by 8.7pc from a year earlier to 4.27mn t, according to preliminary data from the Maritime and Port Authority of Singapore (MPA), lifted by a 2.7pc increase in vessel throughput in Singapore to around 10.11mn in June. But sales slipped by 11pc from a strong May. "It is [lower] LNG prices versus fuel oil prices, along with higher fuel demand, due to the longer passage through the Cape, [and] that is playing an important role," said a key Singapore-based LNG bunker supplier, referring to the increased demand from the rerouting of vessels because of attacks on shipping in the Red Sea region. Demand for bunkering LNG has increased this year, with Singapore recording 175,030t of LNG used to fuel ships in the first half of this year. This is more than a threefold increase from the same period last year when 36,900t of LNG was bunkered in Singapore. Demand for biofuel blends in the first half increased by 46.7pc versus the same period last year. January-June sales were 280,160t compared with 191,000t a year earlier. The blend of 76pc very-low sulphur fuel oil (VLSFO) and 24pc used cooking oil methyl ester, also known as B24, has been the first choice of alternative fuel among shipowners in Singapore, partly because of its drop-in character. Increased enquiries emerged for B24 in Singapore since April-May this year, with short-term tenders going to key shipowners planning voyages to Europe. "There are customers taking more volumes in H2 2024. Volumes wise [for the year, this] might not see a huge increase [but we] will just see more customers," said an international trader. Consumption of conventional bunker fuels has remained largely steady in Singapore, with the exception of high-sulphur fuel oil (HSFO) where sales for June rose by 26pc compared with a year earlier to 1.56mn t. There was a 29pc increase for January-June this year against the 2023 equivalent. Firmer demand has continued for lower priced HSFO, particularly for vessel owners hoping to maximise the use of installed exhaust scrubber systems in handling alternative marine fuels. VLSFO consumption was down by 2pc in the first six months of 2024 versus the same period in 2023, with overall demand largely unchanged. Supplies have been higher in Singapore from this year's second quarter, which is expected to remain in the short term, said industry participants. Red Sea diversions Singapore has absorbed 40pc of the increased demand created by the Red Sea disruptions, data from the International Bunker Industry Association show. Demand in Singapore rose to 4.62mn t/month in this year's first quarter from 4.23mn t/month in 2023. Container terminals in Singapore were congested in the first half of the year because of Red Sea voyage rerouting. Container throughput at the city-state grew by 6.4pc from a year earlier in the first half of 2024 to 20.25mn 20ft equivalent units (TEUs) by June, according to the MPA. Singapore in May recorded a 7.7pc year-on-year increase to 16.9mn TEUs, said Singapore's transport minister Chee Hong Tat. Tonne-mile demand for tanker vessels is expected to grow this year. Greek crude tanker owner Okeanis Eco Tankers forecasts tonne-mile demand to grow by 5.6pc in 2024 and by a further 5.5pc in 2025. By Cassia Teo, Sean Zhuang and Mahua Chakravarty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Snowy, Lochard ink Iona gas storage deal
Australia’s Snowy, Lochard ink Iona gas storage deal
Sydney, 15 July (Argus) — Australian state-owned utility Snowy Hydro has signed a 25-year deal to store gas at the country's largest domestic gas storage in Victoria state to support its gas-fired power stations. The agreement with the 26PJ (694mn m³) Iona site, owned by domestic gas storage firm Lochard Energy, will commence in January 2028. This will be ahead of the permanent closure of the 1,480MW Yallourn brown coal plant, operated by Hong Kong-owned utility EnergyAustralia, in mid-2028. "The gas storage agreement with Lochard Energy will support the operation of our gas-fired power stations in Victoria," Snowy Hydro chief executive Dennis Barnes said on 15 July. Snowy Hydro, which owns and operates three gas-fired power stations totalling 1,290MW at present, is building the 750MW Kurri Kurri gas-fired plant , of which the initial 660MW stage is scheduled to come on line in late 2024. Snowy's 320MW Laverton North and 300MW Valley Power generators are located in Victoria. The deal is expected to underwrite the Heytesbury underground gas storage project , Lochard's chief executive Tim Jessen said, which will expand the capacity of Iona by approximately 3PJ. Australia's southeastern states are expected to face significant shortfalls of gas later this decade as fields supplying Victoria's 1,150 TJ/d (30.7mn m³/d) Longford gas plant deplete. A mixture of pipeline expansions to bring more gas south from Queensland state, LNG import terminals, and reducing demand have been floated to bridge this gap. Two LNG import terminals are proposed for Victoria but both require environmental approvals from the state government. Snowy Hydro is facing significant pressure from the federal government over its delayed Snowy 2.0 pumped hydroelectric project, which has suffered significant cost overruns and delays. Snowy last year said the scheme's costs had doubled to A$12bn ($8.1bn) from a previous A$5.9bn estimate , which was itself higher than the original guidance. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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