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DESPITE anticipated energy project start-ups, the Central Bank’s latest Monetary Policy Report has stated that upstream activity will remain hindered by limited natural gas supplies. “Domestically, constraints in natural gas availability will continue to affect energy sector output. Despite the anticipated start-up of several projects, upstream activity will remain challenged by constrained natural gas supplies,” the Monetary Policy Report November 2024 has stated.
The Central Bank stated that while economic activity improved in the first quarter of 2024, production challenges in the energy sector persisted. “Energy sector output incurred major declines, on account of shortfalls in upstream production,” it stated. It stated that indicators suggest a contraction in energy production in the second quarter of 2024.
“Waning energy sector output was premised on shortfalls in upstream production. Data from the Ministry of Energy and Energy Industries (MEEI) pointed to reduced output of crude oil (-11.4%) and natural gas (-9.
8%) in the second quarter of 2024. This largely reflected the planned maintenance programmes conducted by bpTT at several production facilities. This prompted a falloff in Mining and Quarrying sector activity (-8.
2%). These upstream declines filtered through to the Refining and Petrochemicals sectors. In the case of the former, reduced production of liquefied natural gas (LNG) (-16.
7%) outweighed a sizable uptick in natural gas liquids (NGL) production (41.6%). The large increase in NGL production was due to a base effect, as Phoenix Park Gas Processors Ltd took its processing units offline in April 2023 for routine maintenance works.
Meanwhile, production of petrochemicals was marred by declines in ammonia (-9.8%) and methanol (-6.8%) output.
Over the period, urea production improved marginally (1.0 %),” it stated. While the energy sector faced challenges, the Central Bank noted that the outlook for the non-energy sector remained strong at 1.
7%, though this was insufficient to offset the 7.9% decline in the energy sector. “Strong business activity, coupled with an uptick in consumer demand, will bolster activity in the short to medium-term.
While inflation is expected to remain contained, several domestic and international factors can place upward pressure on prices. In particular, the ongoing conflict in the Middle East, supply bottlenecks from earlier strikes at United States ports, industrial action at the local port, and weather-related events. In this dynamic context, the Central Bank will continue to closely examine developments and adjust monetary policy actions as appropriate in addressing its objectives of internal and external balance,” it stated.
The Central Bank stated that preliminary data from the energy sector from July to August 2024 suggest a “partial improvement” compared to the second quarter. “According to data from MEEI, crude oil production declined by 3.1%, while natural gas output increased by 2.
8% over the period. The production of liquefied natural gas (LNG) fell by 2.5%, while natural gas liquids (NGL) grew by 12.
8%. In the downstream sector, improved output was observed for ammonia (18.7%) and methanol (3%), while the production of urea declined by 72.
9%,” it stated. The Central Bank stated that indicators suggest the non-energy sector remained resilient in the second quarter of 2024. “This sentiment was supported by an increase of 10.
1% (year-on-year) in the Cashless Payments Index in June 2024, a supplementary indicator of activity in the non-energy sector. On a sectoral basis, increased activity was estimated in the Wholesale and Retail Trade (excluding Energy) sector (2.7%), reflecting an improvement in the Index of Retail Sales.
This reflected improvements in most sub-indices, specifically Dry Good Stores (3.6%) and Supermarkets and Groceries (1.3%).
Improvements in the Index were offset by decreased sales in the Household Appliances, Furniture and other Furnishings (-1.1%) and Textiles and Weaving Apparel (-0.3%) sub-indices.
The buoyancy of this sector was further supported by upticks in supplementary indicators, depicted by an increase in the volume of point of sale (18%) and internet merchant (14.8%) transactions,” it stated..
