The guide, to be developed by MAS, is targeted for completion by the end of 2018.

The Monetary Authority of Singapore (MAS) is developing a guide to promote the responsible and ethical use of artificial intelligence (AI) and data analytics by financial institutions (FI).

According to an announcement, the guide will set out key principles and best practices for the use of AI and data analytics and help FIs to strengthen internal governance and reduce risks of data misuse. “The guide is targeted for completion by the end of the year. It will cover all segments of the financial sector including fintech firms,” MAS said.

MAS formed the Fairness, Ethics, Accountability and Transparency (FEAT) Committee that will co-write the guide. Members comprise of leaders from FIs such as PrimePartners, SingTel, Allianz, the Singapore Exchange (SGX), and Singapore banks.

MAS said it will be engaging the industry to obtain views and feedback on the proposed guide in Q2 2018. “MAS is also working closely with the Infocomm Media Development Authority to coordinate a broader understanding of AI governance across sectors,” it added.

MAS chief data officer and FEAT committee co-chair David Hardoon said, “AI and data analytics have huge potential to transform the financial industry for the better. But these technologies can also potentially be misused. MAS looks forward to working with the industry to encourage innovative uses of these technologies while putting in place the right conditions for their ethical use based on the principles of fairness, accountability, and good governance.”

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The world’s biggest energy companies are ready for big projects again. They just need to be cheaper this time around.

Energy companies will approve spending for about 30 major projects this year, consultancy Wood Mackenzie Ltd. said in an April 5 report. That’s in line with the 32 that were sanctioned last year and more than were approved in 2015 and 2016 combined, when oil prices bottomed out amid a global price crash.

Projects launched this year are expected to cost about $2.2 billion each, down from $2.7 billion last year and as high as $9.3 billion in 2009, according to Wood Mackenzie. The average break-even price for this year’s slate of projects, which target reserves of more than 50 MMboe, will be about $44/boe, down from $52 last year.

“A couple of years ago, company break-evens were incredibly high, and they’ve worked really hard to reduce spending, reduce workforce and bring down costs,” Angus Rodger, director of Asia-Pacific upstream research at Wood Mackenzie, said by phone from Singapore. “They don’t want to go on massive spending splurge now.”

That means companies are targeting brownfield projects, expansions and subsea tie-backs, Rodger said. Such projects cost less and are quicker to complete and pay back their investments, similar to the short-cycle investment for shale wells in the U.S., Rodger said. Even the biggest projects launched last year, such as the Leviathan gas field in Israel, were started in small stages.

The shift to small projects could reverse in 2019 with several massive liquefied natural gas projects in places like Qatar, Papua New Guinea and Mozambique nearing investment decisions. If several mega-projects launch simultaneously, companies will have to plan carefully to avoid cost overruns that plagued similar ventures earlier this decade, Rodger said.

BP and Statoil ASA have been among the most active in sanctioning new projects during the price downturn, when activity was low and costs could be managed, Rodger said. Exxon Mobil Corp. recently joined their ranks, outlining a plan for aggressive growth in the Permian Basin, Guyana and Papua New Guinea, among other areas.

“Some companies have been more aggressive, trying to take advantage of lower costs, while others are rebuilding their balance sheets,” Rodger said. “All of them are trying to err on the conservative side and keep their shareholders on board.”

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The global deal to rein in oil output has removed “85% of the problem” of oversupply, and OPEC and allied producers are seeking ways to cooperate after the agreement ends, according to United Arab Emirates Energy Minister Suhail Al Mazrouei.

The world economy is benefiting from the cuts, he said at a Bloomberg Businessweek Middle East conference in Dubai. Mazrouei, who also serves this year as president of the Organization of Petroleum Exporting Countries, isn’t concerned that a potential international trade war might upset the crude market, he said Tuesday in a Bloomberg TV interview in Dubai.

“I’m not that concerned about a trade war getting to the oil market,” Al Mazrouei said in the interview. “It may affect the cost of drilling, the cost of completion, but I think overall the effect is going to be minor to the oil prices.”

Participants in the oil-cuts accord plan to meet later this month in Jeddah, Saudi Arabia, to assess their progress toward clearing a glut and re-balancing the market. Saudi Arabia, Russia, the UAE and other producers agreed in November to extend the deal through this year. Brent crude has gained 1.5% in 2018 and was 25 cents higher at $67.89/bbl at 11:55 a.m. in London.

‘Great partner’

The benchmark fell 2.5% on Monday after China imposed retaliatory tariffs on U.S. goods, the latest move in an escalating trade dispute between the world’s largest economies.

Russia has been a “great partner” in the cuts agreement, and the majority of participants in the deal are supportive of a longer-term cooperation between OPEC and non-OPEC producers, Mazrouei said in the interview.

Producers should first achieve their goal of reducing crude inventories in developed economies to the five-year average before they consider adopting a different measurement for when the oil market is re-balanced, he said. OPEC and its allies have held talks about changing the way they gauge the impact of their production cuts, including possibly using use a seven-year inventory average, according to delegates from the group.

“I would prefer to focus on achieving the mission first,” Al Mazrouei told Bloomberg TV.

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• Companies weren’t required to report attack to regulator TSA
• Congressman Latta sees ‘bad actors’ looking to weaken U.S.

A cyberattack that U.S. natural gas pipeline owners weren’t required to report has lawmakers taking a closer look at how the industry is handling such threats, raising the prospect of tighter regulation.

In website notices to customers this week, at least seven pipeline operators from Energy Transfer Partners LP to TransCanada Corp. said their third-party electronic communications systems were shut down, with five confirming the service disruptions were caused by hacking. But the companies didn’t have to alert the U.S. Transportation Security Administration, the agency that oversees the nation’s more than 2.6 million miles of oil and gas conduits in addition to providing security at airports.

Though the cyberattack didn’t disrupt the supply of gas to U.S. homes and businesses, it underscores that energy companies from power providers to pipeline operators and oil drillers are increasingly vulnerable to electronic sabotage. It also showed how even a minor attack can have ripple effects, forcing utilities to warn of billing delays and making it more difficult for analysts and traders to predict a key government report on gas stockpiles.

“These attacks are a wake-up call that addressing our aging energy infrastructure needs to be a priority,” Congressman Robert Latta, a Republican from Ohio who serves on the House Committee on Energy and Commerce, said in an emailed statement on April 5. “Bad actors are looking at any way to weaken the American energy sector.”

This isn’t the first time hackers have had oil and gas pipes in their sights: The Congressional Research Service reported intrusions targeting pipeline communication systems back in 2012. A web attack could “disrupt pipeline service and cause spills, explosions, or fires — all from remote locations,” the service said in a report.

The electronic systems that were targeted in the recent cyberattack help pipeline customers communicate their needs with operators via a computer-to-computer exchange of documents, such as contracts and invoices. The attacks didn’t affect operational control of the pipelines.

Even before the most recent pipeline web attack, there were signs that the government was intensifying its focus on web-based energy threats. Last month, the TSA issued a 27-page report on pipeline security that included a section on cybersecurity. In the report, the agency urged pipelines to take measures including establishing a cybersecurity plan, limiting network access and changing default passwords.

But TSA doesn’t require operators to report web intrusions, and it’s not clear whether the agency would have jurisdiction over an attack on a third-party communications provider. TSA requests voluntary notifications of “security incidents that are indicative of a deliberate attempt to disrupt pipeline operations or activities that could be considered precursors to such an attempt,” according to the report last month.

“TSA will continue to work with the pipeline industry to assess any vulnerabilities associated with this incident,” Lisa Farbstein, a spokeswoman for the agency, said in an email Friday. “TSA, in consultation with cyber experts, will make recommendations, as appropriate, to the pipeline industry to mitigate concerns.”

The American Gas Association, an industry group that represents more than 200 gas supply companies, supports voluntary reporting of cyberattacks, said Dave McCurdy, the association’s president. Mandatory reporting could be counterproductive because it may set the bar too low and create a false sense of security, especially in an environment where cyber threats evolve quickly, McCurdy said by phone Friday.

“Just asking for reporting and requirements is not the answer,” he said. “We need to understand the nature of attacks. Every industry in a critical area receives attacks mostly daily.”

$96 Million

In February, Energy Department Secretary Rick Perry announced the department would use $96 million in funding to create an office to address cyber threats to energy. Though Homeland Security, which oversees TSA, has the legal authority to oversee energy cybersecurity, “DOE works closely with the sector on cyber security and threat information sharing,” Shaylyn Hynes, a spokeswoman for the department, said in a statement.

But some lawmakers say it’s not enough.

At a congressional hearing in March, Maria Cantwell, a Democratic senator from Washington, told Perry that budget cuts could make it more difficult to shield the energy sector from cyber intrusions.

“Our energy infrastructure is under attack,”’ Cantwell said. “A year ago, I called for a comprehensive assessment of cyber attacks to our grid by Russians. We don’t need rhetoric at this point – we need action.”

The threat appears to be widespread. Two years ago, the Department of Energy’s Pacific Northwest National Laboratory in Richland, Washington, said its firewall system blocks 25,000 cyberattacks a day.

Though the energy industry and regulators are looking more closely at cybersecurity risks, the shift may not be happening fast enough, said Edgard Capdevielle, chief executive officer of Nozomi Networks Inc. in San Francisco, a company that provides cybersecurity applications for customers including power producers and oil and gas pipeline operators.

The industry’s perception is that addressing energy cyber threats “is important, but mañana is OK,” said Capdevielle. “Mañana is not OK.”

— With assistance by Jordan Robertson 

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(Bloomberg) — China’s tariffs in one corner of the energy market signal U.S. shale fields may follow the nation’s farms as a target if a trade war escalates.

Beijing on Wednesday took aim at America’s rural heartland by proposing levies on politically sensitive farm commodities such as soybeans, which were among 106 U.S. products targeted. The list also included petrochemicals and liquefied propane, indicating that the world’s biggest oil buyer is willing to use energy as a weapon to retaliate against planned American duties on its high-tech goods.

While officials from the world’s two largest economies had sought to calm markets by showing a willingness to negotiate, U.S. President Donald Trump on Thursday ordered his administration to consider tariffs on an additional $100 billion in Chinese imports. The Asian nation is the biggest regional buyer of American oil as well as liquefied natural gas, and the critical commodities may be swept up in the trade war if tensions flare further.

“China can ditch American energy at any time because there’s plenty of supplies elsewhere, whereas for the U.S., energy is a sensitive subject,” said Will Yun, a commodities analyst at Hyundai Futures Corp. in Seoul. “The two countries may eventually come to an agreement and China may not use energy so soon into the dispute. It will use the card wisely.”

China’s Commerce Ministry said on Friday that the country would counter U.S. protectionism and “will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people.”

The soybean tariffs showed China is willing to strike the U.S. where it hurts, with Wednesday’s announcement ending weeks of speculation over whether Xi’s government would target the commodity that it buys in huge volumes from America and is essential to feed its citizens’ growing appetite for pork. The market reaction was immediate: the oilseed led a tumble in agricultural prices, with corn and cotton also declining.

Energy Costs

“Moving to different sources of energy supply is unlikely to have a significant impact on industry input costs as they are commodity items,” said Stuart Orr, a professor in the faculty of business and law at Australia’s Deakin University. “It will inevitably increase the cost of energy for the growing Chinese middle-class which is rapidly adopting high-energy consuming lifestyles.”

While the proposed tariff on American propane probably won’t hurt U.S. companies as much as intended, Yuanta Securities Co. predicts duties on oil will rattle investors. “If China shows its willingness to impose tariffs on crude, it will send a shock wave through markets,” said Min Byungkyu, a global strategist at the brokerage.

A surge in U.S. crude exports has helped drain inventories and prop up oil prices, which are still recovering from the biggest crash in a generation after a global glut wreaked havoc on the market. OPEC producers and allies including Russia are curbing output to shrink the oversupply, while surging output in shale fields from Texas to North Dakota threaten to undermine those cuts.

Export Surge

U.S. oil net exports to China averaged about 435,000 barrels a day in 2017, more than double a year earlier, when they averaged about 180,000 barrels a day, according to a Citigroup Inc. report dated April 3. The notional dollar value rose even faster — at a rate of 200 percent — to about $8.24 billion last year, the bank said.

China bought about 750 million cubic feet a day worth of American LNG in the fourth quarter, the most of any country, according to U.S. government data.

The Asian nation’s imports and U.S. exports of crude and natural gas liquids “should both grow materially over the next five years, implying that the Trump administration should push back forcefully on any Chinese move to impose tariffs on energy trade if they want to reduce the trade deficit,” analysts including Christopher Main and Ed Morse wrote in the report.

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SINGAPORE – The Singapore FinTech Association (SFA) and the Fintech Association of Japan (FAJ) have inked a memorandum of understanding (MOU) to foster greater fintech cooperation, both bodies said in a joint statement on Monday (March 26).

This partnership will be used to raise the profile of the Japanese fintech industry, and promote Singapore as a destination for Japanese businesses within Asia.

It will also see the two associations collaborating on joint projects to support fintech innovation and development, with members benefiting from the exchange of expertise in a bid to nurture global business opportunities.

The signing of the agreement was celebrated with a “friendship evening and sake tasting” in Singapore on March 13, 2018 at the Money 20/20 conference.

SFA’s president, Chia Hock Lai, said that the aim of this partnership is to bridge the gap between the two fintech communities in Singapore and Japan.

Separately, FAJ’s vice-chairman, Natalie Shiori Fleming, said that she looked forward to “growing synergies” through a deeper relationship with the Singapore fintech community.

This alliance comes as the governments in both nations seek to enhance fintech capabilities in their respective countries.

According to the joint statement, the Financial Services Agency of Japan has updated its legislation to enable established banks and non-bank fintech companies to collaborate.

In the same vein, the Monetary Authority of Singapore (MAS) established the Industry Transformation Map (ITM) in 2017, outlining fintech innovation as a growth strategy.

In October last year, MAS board member and education minister, Ong Ye Kung, announced that the ITM “aims to create 3,000 net jobs in financial services, and an additional 1,000 net jobs in the fintech sector annually”.

Additionally, data from KPMG’s Pulse of Fintech report shows that fintech funding in Singapore reached a record US$229 million in 2017.

Thus, this latest agreement between Singapore and Japan was signed to capitalise on opportunities in these markets.

The SFA is a cross-industry, non-profit organisation designed to facilitate collaboration among all stakeholders in the fintech ecosystem, and has over 125 members.

The FAJ promotes open innovation in the Japanese fintech industry by creating networking opportunities for members, and cooperating with different organisations. It has over 300 members, and represents over 100 fintech companies in Japan.

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Managing the risk of cryptocurrencies like bitcoin while not stifling innovation continues to test central banks, said Monetary Authority of Singapore (MAS) managing director Ravi Menon yesterday.

Mr Menon told a conference that MAS has been watching the crypto space with great interest.

A second generation of what he termed “crypto tokens” rather than “crypto currencies” is emerging to address some of the challenges related to network congestion, energy costs, money laundering risks and, importantly, price stability.

“Some of the best minds in the field are applying their creative energies to make crypto tokens mainstream,” Mr Menon added.

Not all developers and programmers in the crypto world are anti-establishment anarchists, he said. “Many may have been 10 years ago, but a growing number are married and have kids now! They know the value of stability.”

Bitcoin – the most well-known cryptocurrency – hit a high of nearly US$20,000 in December last year and then lost two-thirds of its value in just over a month.

The challenge for central banks and regulators is how to harness the potentially transformative benefits of blockchain technology and crypto tokens while containing some of their risks, Mr Menon said.

Blockchain is basically a way to maintain a database without a central authority and is the process which creates bitcoins.

MAS has chosen not to regulate crypto tokens directly, said Mr Menon. Instead it is focusing on related activities, evaluating the different kinds of risks these pose and considering the appropriate regulatory responses while seeking to ensure innovation is not stifled.

“The key risks MAS is monitoring in the crypto world are in the areas of financial stability, money laundering, investor protection and market functioning,” he said.

There is market risk from the direct exposure of financial institutions to crypto tokens; credit risk through unsecured lending to crypto token businesses; and leverage when borrowers pledge crypto tokens as collateral to borrow and buy more crypto tokens.

“MAS assesses that the nature and scale of crypto token activities in Singapore do not currently pose a significant risk to financial stability. But this situation could change, and so we are closely watching this space,” he added.

“MAS is also watching with interest developments in the US, where futures contracts based on crypto tokens have been introduced on regulated exchanges.”

These exchanges have clear rules governing trade and post-trade activities and such products could also potentially have a stabilising influence on crypto token prices as they provide two-way hedging opportunities for investors, said Mr Menon.

He noted as well that regulation cannot address all the concerns around crypto tokens: “The industry too has a part to play in strengthening the ecosystem, for instance, by adopting best practices around transparency, cyber security, and record-keeping.”

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• Kingdom currently has two fields, one shared with Saudi Arabia
• New offshore field is located off the west coast of Bahrain

Bahrain, the smallest energy producer in the Persian Gulf, discovered its biggest oil field since it started producing crude in 1932, according to the country’s official news agency.

The shale oil and natural gas discovered in a deposit off the island state’s west coast “is understood to dwarf Bahrain’s current reserves,” Bahrain News Agency reported, without giving figures. The country currently pumps about 45,000 barrels of oil a day from its Bahrain Field, and it shares income from a deposit with Saudi Arabia that produces about 300,000 barrels a day, according to figures from the U.S. Energy Information Administration.

Bahrain discovered the offshore Khaleej Al Bahrain Basin as it seeks to expand output capacity at its wholly owned Bahrain Field to 100,000 barrels a day by the end of the decade. The island kingdom is now bound by the global agreement among major oil producers to limit production to reduce global inventories.

“Initial analysis demonstrates the find is at substantial levels, capable of supporting the long-term extraction of tight oil and deep gas,” Bahrain Oil Minister Shaikh Mohammed bin Khalifa Al Khalifa said in the BNA report.

Consultants DeGolyer & MacNaughton Corp. evaluated the field, and Bahrain plans to provide additional details on Wednesday about the reservoir’s “size and extraction viability,” according to BNA.

Bahrain last week reined in plans to sell bonds as investors sought higher yields. After indicating it could sell a mix of conventional and Islamic debt with as many as three different maturities, it only offered 7.5-year sukuk, raising $1 billion on March 28.

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They lead the rest of the world when shares of global banks plunged 17%.

Asian banks are steadily picking up pace in their bid for larger market share and zooming past their foreign counterparts as the region’s wholesale revenues surged 21% from 2010 to 2017, according to a report from Morgan Stanley.

The region’s largest economy China continues to lead the pack as CAGR grew 6% in 2017 as it sets its sights for global markets. Southeast Asia as a whole also posted a slight expansion with CAGR hitting 0.1%.

“Local banks are investing heavily and could gain advantages through the better use of data, the emergence of innovative open API platforms, and participation in trade and supply chain ecosystems,” the report added.

Liberalisation of local markets and a commitment to the disruption of payment systems ought to keep the steady growth trajectory of Asian banks, according to Morgan Stanley.

On the other hand, foreign players have been unable to keep up pace with the changing dynamics of the international arena as wholesale revenues plunged 17% over the same period with CAGR of investment banks falling 4% and offshore universals dipping 7%. Only onshore universals rose by a marginal 2% in 2017.

The slump comes as global banks grapple with lower returns on equity due to increased competition, FD loss and lower NII which are hampering the expansion efforts of global firms into Asia, Morgan Stanley pointed out.

To stay relevant, larger global banks must continue to invest heavily on global platforms to keep up pace with their Asian counterparts who have already captured the regional market.

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Following a record year for production, deepwater drilling may be bound for another round of investment. All the oil and gas exploration financed in the decade of high prices that culminated in 2009’s $100 per barrel prices, has come into production or is soon to come online. From here, without further investment, the major oil companies will be looking at declining output. These big companies, the household names such as Exxon and BP, play the long game when it comes to oil production. They are, for all intents and purposes, the only players in deepwater drilling and must commit to investment soon if they want to avoid production declines.

Oil prices have now been above sixty dollars a barrel for over a full quarter. Not only are prices higher but deepwater drillers have slimmed down production, looking at lean and efficient plays rather than focusing on volume. Whereas the former price point for profitable deepwater drilling may have been in the seventy dollar a barrel range, the oil price crash forced companies to lower profitable production to fifty dollars per barrel, going as low as thirty-five dollars per barrel in some cases. Based on the recent price stability and with the possibility of prices going even higher with geopolitical flashpoints such as Venezuela and Iran, it might be time to go back to the “bad old days” of big fields and volume plays.

Shell, the deepwater leader, seems to have a coherent plan, bidding for deepwater leases in an area contiguous with its Perdido Basin leases all the way to and beyond the undersea border with Mexico, where it has snapped up newly opened leases potentially worth billions. Much of the reason for Mexico opening leasing to foreign companies was national oil company Pemex’s lack of deepwater expertise. But is Mexico ready for deepwater drilling? Political roadblocks could come up as soon as July, as the leading candidate in this year’s presidential race is Andres-Manuel Obrador, the perennial also ran who may finally have such an overwhelming lead that he will end up in Los Pinos, and complicate deepwater drilling by restrictions on foreign companies.

In contrast to Mexico, Brazil has long been a leader in deepwater development. However, it only opened up to independent foreign oilfield development in 2016. The past year has seen bidding from twenty companies on leases in the Copacabana waters, with Exxon the big winner, and over a billion dollars put into Brazilian government coffers. Each of the sixteen big blocks are estimated to contain over a billion barrels of recoverable oil.

Norway’s national petroleum company, Statoil, partnered with Exxon in many of its Brazilian bids, but deepwater drilling could not be more complicated than in Norway’s Statoil’s last Great Hope at home, Johan Castberg, the largest untapped field in Norway. The field is north of the Arctic Circle, in depths of up to 400 meters, and situated adjacent to the cod breeding grounds, Norway’s leading fishery, and a powerful lobby who will be sure to make sure the drilling is done with heavy safety oversight or not at all.

The majors may be looking in another direction, seeking to diversify, but ignoring the deepwater sector could be a grave error. The two top players, Shell and Exxonmobil, have both been making moves into alternative energy and electric cars. The question is whether they will continue hedging their bets with further investments into alternative energy or whether high oil prices will give them confidence to put money on what is the most challenging play in the petroleum field, deepwater exploration and development.

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