new base 588 special 22 april 2015

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Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 1 NewBase 22 April 2015 - Issue No. 588 Khaled Al Awadi NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE UAE: ADNOC To Invest Over $25bn In Offshore Oilfields Reuters + NewBase Abu Dhabi ( ADNOC) plans to invest over $25 billion in the next five years on boosting its oil production capacity from offshore fields, a senior official of Abu Dhabi National Oil Co said on Tuesday. The plan is part of the United Arab Emirates’ strategy of increasing its crude oil output potential to 3.5 million barrels per day by 2017-18. The UAE’s actual current production is around 2.8 million bpd. “We want to build capacity from production and from number of wells and infrastructure. Our current plan as ADNOC (is to reach) 3.5 million bpd and to sustain it,” Qasem al-Kayoumi, manager of ADNOC’s offshore division of the exploration and production directorate, told reporters. Speaking at the Middle East Petroleum and Gas conference in Abu Dhabi, he also said the investment plan for offshore drilling activities was $2.5 billion per year. ADNOC plans to drill around 160 wells per year in the next couple of years, Kayoumi said. “It is a considerable increase – the number of rigs has built up considerably in offshore, it could be more than a 50 percent increase.” He also said current production for the ADMA-OPCO and ZADCO oil fields was 1.2 million bpd and “in 2017-18 that figure will go close to, I would say around 1.6 million bpd.” One of the main UAE fields being developed by Exxon is the giant Upper Zakum, for which the plan is to boost production capacity to 750,000 bpd by 2017-18; this may be raised further to 1 million bpd by 2024. Kayoumi said ADMA-OPCO was in an early phase of preparing for the renewal of its offshore concession, due to expire in 2018. “We hope that this concession will be renewed with our (existing) partners and future partners.”

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Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

publication. However, no warranty is given to the accuracy of its content. Page 1

NewBase 22 April 2015 - Issue No. 588 Khaled Al Awadi

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE

UAE: ADNOC To Invest Over $25bn In Offshore Oilfields Reuters + NewBase

Abu Dhabi ( ADNOC) plans to invest over $25 billion in the next five years on boosting its oil production capacity from offshore fields, a senior official of Abu Dhabi National Oil Co said on

Tuesday. The plan is part of the United Arab Emirates’ strategy of increasing its crude oil output potential to 3.5 million barrels per day by 2017-18. The UAE’s actual current production is around 2.8 million bpd.

“We want to build capacity from production and from number of wells and infrastructure. Our current plan as ADNOC (is to reach) 3.5 million bpd and to sustain it,” Qasem al-Kayoumi, manager of ADNOC’s offshore division of the exploration and production directorate, told reporters.

Speaking at the Middle East Petroleum and Gas conference in Abu Dhabi, he also said the investment plan for offshore drilling activities was $2.5 billion per year.

ADNOC plans to drill around 160 wells per year in the next couple of years, Kayoumi said. “It is a considerable increase – the number of rigs has built up considerably in offshore, it could be more than a 50 percent increase.” � He also said current production for the ADMA-OPCO and ZADCO oil fields was 1.2 million bpd and “in 2017-18 that figure will go close to, I would say around 1.6 million bpd.”

One of the main UAE fields being developed by Exxon is the giant Upper Zakum, for which the plan is to boost production capacity to 750,000 bpd by 2017-18; this may be raised further to 1 million bpd by 2024.

Kayoumi said ADMA-OPCO was in an early phase of preparing for the renewal of its offshore concession, due to expire in 2018. “We hope that this concession will be renewed with our (existing) partners and future partners.”

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

publication. However, no warranty is given to the accuracy of its content. Page 2

UAE: GASCO enters into a LSTK Agreement with Spanish

Tecnicas Reunidas valued AED 2.51 Billion ( WAM + NewBase) On behalf of Abu Dhabi National Oil Company, ADNOC, Abu Dhabi Gas Industries, GASCO, have signed a lump sum turnkey, LSTK, agreement for the Engineering, Procurement, Construction and Commissioning of the Integrated Gas Development Expansion Project – Phase One, for the Onshore Pipeline and Habshan Modifications, Package 3.

The agreement was signed by GASCO CEO, Abdul Aziz Abdulla Al Ameri, and Arthur Crossley, CEO Upstream of Tecnicas Reunidas, in the presence of Dr. Saif Sultan Al Nasseri, ADNOC Gas Processing Director and a number of senior official from both sides, on Monday April 20th, at the GASCO HQ Offices in the Sheikh Khalifa Energy Complex.

The project aims to process additional onshore and offshore gases to produce 650 MMSCFD of natural gas to the existing GASCO Network by the middle of 2018.

IGD-E (Package-3) consists of the following new facilities that will be required to handle the additional offshore Gas; New 42" pipeline with a length of 114 km from Ras Al Qila to Habshan 5

Plant, and New Units required at Habshan 5 to receive the Gas from the new 42" IGD-E pipeline.

The new Habshan 5 units will also be the destination of additional onshore sour gas from ADCO’s North East Bab Development, NEB-III. The EPC Contract was awarded in February 2015 to Tecnicas Reunidas, Spain with a completion period of 40 months from the date of the award.

The initial phase of the project

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

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execution, consisting of detailed engineering and procurement, will commence from the contractors home office in Madrid, Spain, and will later on move to the sites of the onshore pipelines and Habshan for construction activities.

GASCO will direct its EPC Contractor to maximise the local contents in terms of materials, equipment and services in these projects.

During the already completed Front End Engineering Design (FEED), GASCO included the highest quality standards and placed particular emphasis on all aspects of health, safety and environment (HSE) to minimise environmental and community impacts and ensure compliance with ADNOC’s HSE Code of Practices.

These projects will also provide excellent opportunities to UAE nationals for training and learning through exposure and interaction with these experienced engineering companies to enable them to manage future projects, and operate and maintain the plants after project completion and handover.

GASCO is executing the construction of the Integrated Gas Development Expansion Project – Phase One (Package-3) on behalf of ADNOC.

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

publication. However, no warranty is given to the accuracy of its content. Page 4

UAE: Dewa to open tender to build coal-fired power plant GulfNews + NewBase

Dubai Electricity and Water Authority (Dewa) will open a tender in two weeks to build a coal-fired plant with a capacity of 1200 Megawatts (MW), Saeed Al Tayer, MD and CEO of Dewa said.

The Hassyan coal-fired power plant is expected to operate on two phases, which are due in 2020 and 2021, he said during Water, Electricity, Energy, Technology and Environment Exhibition (Wetex),

By 2030 the share of power generation from coal-fired will reach 7 per cent of energy production, Al Tayer said.

Dewa also signed a contract with Siemens for the construction of the Jebel Ali M-Station expansion. The contract was originally awarded in February.

The project is worth Dh1.47 billion ($400 million) and will be completed by end of April 2018. DEWA previously appointed Mott McDonald as

the project consultant. The new combined-cycle power plant will add a further 700 megawatts (MW) to the installed generating capacity of M-Station at Jebel Ali, boosting its capacity to 2,760MW when the project is completed in 2018.

The expansion project includes adding two gas turbine generators, two heat recovery steam turbine generators, and one back-pressure steam turbine. This will increase the plant’s thermal efficiency from 82.4 per cent to 85.8 per cent, which is considered to be one of the highest thermal-efficiency rates in the world, he said

M-Station, built at a cost of Dh10 billion, is the newest and largest power production and desalination plant in the UAE, with a total capacity of 2,060MW of electricity and 140 million imperial gallons of water per day. The station adopts the highest levels of availability, reliability, and efficiency, using the most advanced technologies in the world.

Jebel Ali Power Station includes M-Station, which is one of the main pillars that enable DEWA to provide Dubai with a very reliable, efficient and high quality electricity and water supply.

DEWA works tirelessly to enhance its installed capacity, which is currently 9,656MW of electricity and 470 million imperial gallons of desalinated water per day. After completing this station, DEWA’s installed capacity will reach 10,356MW of electricity.

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UAE: SolarImpulse2 reached its 6 destination- NANJING (CHINA) http://www.solarimpulse.com/leg-6-from-Chongqing-to-Nanjing

Solar Impulse took off for its sixth flight from Chongqing to Nanjing, China, on Monday April 20th at 22:06 UTC (local time: 06:06 on next day) and landed on Tuesday April 21st at 15:28 UTC. Bertrand Piccard flew the zero-fuel airplane on 1344km (725.7 NM) for 17 hours and 22 minutes.

Leading global provider of elevators, escalators and related services, Schindler established China’s first industrial joint venture in 1980 and began operating as a Wholly Owned Foreign Enterprise (WOFE) in 2006. Schindler is pleased to accompany Solar Impulse in China, presenting the latest clean and green technology to the public, as well as Chinese developers, architects, urban designers and planners.

The project is aiming to circumnavigate the globe, and it must now prepare for the challenge of crossing the Pacific. The next 10 days will be spent giving Solar Impulse a thorough servicing. Meteorologists on the Swiss team, which has its mission control in Monaco, will then look for a suitable weather window for the ocean flight.

It will be done in two stages, with the first reaching over to Hawaii - a distance from Nanjing of 8,000km. For the slow-moving aircraft, this will entail being airborne continuously for several days and nights.

In simulations done last year, the weather opening was found quite quickly, but the team recognises also that its stay in Nanjing could be a long one. "I think 10 days is the time we need to get ready. Then we need to wait for a good weather window," explained mission director Raymond Clerc.

"That could be three days; we could have to wait three weeks - because this leg is really the most important and is very complex. To go

towards Hawaii could last five days and five nights."

Bertrand Piccard has been sharing the flying duties in the single-seater with his business partner, Andre Borschberg. And it is Borschberg, the trained engineer, who will take the controls for the leg to Hawaii.

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Morocco: Chariot Oil & Gas provides update on Moroccan Source: Chariot Oil & Gas

AIM-listed Chariot Oil & Gas, the Atlantic margins focused oil and gas exploration company, has provided an update on itsRabat Deep, Loukos and Mohammedia permits, offshore Morocco. Rabat Deep (Chariot (50% Operator), Woodside (25%), the Office National des Hydrocarbures et des Mines ("ONHYM") (25% carried)):

• Woodside has not exercised its option to take operatorship and fund well costs for a further 25% equity stake; it will remain a partner on the licence with a 25% working interest

• Drilling is now anticipated to be in 2016/2017, subject to securing an additional partner

Loukos and Mohammedia (Chariot (75% Operator), ONHYM (25% carried)): • Material potential oil prospects identified in both the proven Jurassic and Neogene plays

• Dataroom to open following completion of 3D interpretation

Chariot's Rabat Deep, Loukos and Mohammedia permits, offshore Morocco

Rabat Deep

Chariot announces that its partner in the Rabat Deep Offshore permit, Woodside, has not elected to take operatorship and fund the drilling of an exploration well in return for an additional 25% equity stake. As a result, Chariot will remain operator with a 50% equity interest, with Woodside retaining a 25% equity interest and ONHYM a 25% carried interest.

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As part of its two-tier partnering process, Chariot is currently at near zero cost in its Moroccan acreage and will seek an additional partner to participate in drilling on the Rabat Deep permits. As previously announced JP-1 is the focus prospect and contains 618mmbbls of gross mean prospective resources as estimated by Netherland Sewell and Associates on the 2D seismic data. This prospect remains technically robust on the 3D seismic and a Competent Person Report will be undertaken following the interpretation of the recently received pre-stack depth migrated data.

Whilst market conditions are challenging, the large scale of the prospects in Chariot's portfolio means that drilling success would create transformational value even at current oil prices. A dataroom for Rabat Deep will open in due course and, subject to securing a partner, drilling of this prospect is now anticipated to occur in late 2016/2017.

Loukos and Mohammedia

The interpretation of the pre-stack time migrated 3D data acquired in the 2014 seismic campaign has also generated several material prospects within the Loukos and Mohammedia licences, including the JP-2 prospect in the Jurassic play. Recent work has also identified further oil-prone prospectivity within the Neogene. In line with Chariot's focus on risk management, partners will be sought for these licences to either participate in the drilling of the prospects already located, or to further the 3D seismic campaign across the permits. A dataroom will be opened once the Chariot team is satisfied that it has a full description of the prospectivity within the licences to maximise the understanding of the value proposition for potential farminees.

An independent audit of the prospective resources associated with the 1,700km2 3D seismic campaign on these permits will also be carried out once Chariot has completed its internal evaluation of the pre-stack depth migrated data.

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

publication. However, no warranty is given to the accuracy of its content. Page 8

Oman: Take gas flaring issue seriously, Ministry tells companies Oman Times + NewBase

The Ministry of Oil and Gas says the country has made progress in reducing the amount of the natural gas that is flared as a by-product of operations but acknowledges that there are certain challenges which have been hampering these efforts. "Gas flaring has reduced because we are mandating the companies to take gas flaring very seriously and reduce it as much as possible by proposing different solutions," Salim bin Nasser Al Aufi, Undersecretary at the Ministry of Oil and Gas, told Times of Oman. He was speaking on the sidelines of the first Middle East Oilfield Produced Water Management Conference, which opened at Golden Tulip Seeb Hotel on Monday and concludes on Wednesday. Al Aufi said that conversion into LNG or compressing the gas and using it again for power generation are some of the options to utilise the wastefully burned gas for beneficial use. "However, it has a higher cost. The cost is always a challenge with reducing gas flaring," the official added.

Top 20 flaring states

According to the satellite data on global flaring, Oman is among the top 20 countries with the highest volume of flared gas for the period 2007 to 2011. The report prepared by the National Oceanic and Atmospheric Administration (NOOA) in cooperation with the World Bank-led Global Gas Flaring Reduction Partnership, places the Sultanate in the 19th position, with an estimated flared volume of 1.6 billion cubic metres (bcm) in

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2011, down from 2 bcm in 2007. Russia, Nigeria, Iran, Iraq and the United States topped the list. Saudi Arabia and Qatar are also among the 20 countries with the highest volume of flared gas based on the satellite data. Initiatives

Oman's Ministry of Oil and Gas has taken several initiatives to reduce gas flaring in the face of ever-increasing energy demand, and its efforts are supported by several companies, including the state-owned Oman Oil Refineries and Petroleum Industries Company (Orpic), which recently announced investment plans for a flare gas recovery system at its refinery in Sohar. Global commitment

As Oman is seeking to contribute to global flaring reduction efforts, chief executives from major oil companies and senior government officials from several oil-producing countries met at the headquarters of the World Bank in Washington on April 17 to launch the 'Zero Routine Flaring by 2030' initiative. The initiative, which has already been endorsed by nine countries, 10 oil companies and six development institutions, was launched by United Nations Secretary General Ban Ki-moon and World Bank Group President Jim Yong Kim. The governments which have endorsed the initiative to end the practice of routine gas flaring at oil production sites by 2030 include Norway, Cameroon, Russia, Kazakhstan, Gabon, Uzbekistan, Republic of Congo, Angola and France. According to the World Bank, endorsers collectively represent more than 40 percent of global gas flaring. 140 bcm every year

It says that every year, around 140 bcm of natural gas produced together with oil is flared at thousands of oil fields around the world. "This results in more than 300 million tons of CO2 being emitted to the atmosphere - equivalent to emissions from approximately 77 million cars. If this amount of associated gas were used for power generation, it could provide more electricity (750bn kWh) than the entire African continent is consuming today. But currently, the gas is flared for a variety of technical, regulatory, and economic reasons, or because its use is not given high priority," says the World Bank.

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Oman Tethys Oil's new oil field enters production © Oman Daily Observer 2015 + NewBase

The commerciali-sation of a new oil field in Blocks 3 & 4 onshore Oman has buoyed hopes that the massive acreage in the eastern part of the Sultanate will yield up more of its hydrocarbon potential, according to international oil and gas firm Tethys Oil.

The Swedish upstream energy company owns a 30 per cent interest in the two adjoining blocks, with Mitsui (20 per cent) and CC Energy Development SAL Oman Branch (50 per cent) as partners. CC Energy Development is also the operator of the two blocks. Previously called the 'Lower Buah Exploration Area', the field was formally named 'Shahd' after exploration and appraisal work revealed that it had the hallmarks of a new oil field. Discovered in March 2013, Shahd has since turned into a major producing area, alongside the producing Farha South and Saiwan East oilfields of the two blocks. According to Tethys Oil Managing Director Magnus Nordin, the new oil field has since delivered the majority of the increase in the company's total reserves of the past two years. "The Shahd oil field is Tethys' third field on Blocks 3 and 4 in Oman, but most likely not the last," said Nordin. "New leads in the Shahd

oil field continue to be identified as seismic interpretation goes on and the geological understanding of the area increases. One rig is expected to be employed full- time during all of 2015 in this area," the executive stated in the company's 2014 Annual Report issued yesterday. Tethys Oil, he said, will continue to invest in Blocks 3 & 4, output from which rose to a new company record averaging more than 9,000 barrels per day during March this year. Average daily production has been up by 14 per cent so far this year, compared to average daily production in 2014, he added. Blocks 3 & 4 "showed their true potential" during 2014, said Nordin. The Farha South oil field in Block 3 continued its strong performance driven by continued development and implementation of the water injection programme. Tethys Oil also pledged to continue exploration efforts in several parts of the 36,410 square kilometre blocks, both adjacent to current production and in other areas. In 2014 some 1,200 square kilometres of new 3D seismic was shot, which will be continually evaluated. Blocks 3&4 represent Tethys Oil's most significant asset in Oman. Oil production from the two blocks amounted to over 2.8 million barrels in 2014, representing a 64 per cent jump over 2013. Tethys Oil has also interest in Block 15 in the northwestern part of central Oman. The licence terms for Block 15 expired in 2014. Discussions regarding the future of the block are ongoing, the company added.

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US:Increasing domestic production of crude oil reduces net oil imports Source: U.S. Energy Information Administration, Annual Energy Outlook 2015

In its recently released Annual Energy Outlook 2015 (AEO2015) Reference case, EIA expects U.S. crude oil production to rise through 2020 as oil prices recover from their steep decline, reducing net petroleum (crude oil and petroleum products) imports. AEO 2015 explores the effects of domestic crude oil production under various assumptions about world oil prices and domestic resource availability.

In all AEO2015 scenarios, the United States remains a net importer of crude oil (despite increased domestic production) and a net exporter of petroleum products. As always with EIA base-case outlooks, AEO2015 assumes no changes in current laws and regulations. Thus, all cases in the AEO2015 assume that current restrictions on U.S. crude oil exports remain in place. Increasing levels of domestic crude oil production through 2020 have two effects: lower crude oil imports and higher throughput at U.S. refineries. Higher refinery throughput increases production and net exports of refined petroleum products like motor gasoline and diesel fuel. Together, lower crude oil imports and higher product exports reduce net imports of petroleum and other liquids, which in 2013 provided 33% of total U.S. consumption (product supplied). In the AEO2015 Reference case, this percentage falls to 14% in 2020, when domestic crude oil production reaches 10.6 million barrels per day. Domestic crude oil production then begins to decline, and the net import share of product supplied increases to 17% by 2040. The United States also remains a net petroleum importer through 2040 in the Low Oil Price case. Low world oil and petroleum product prices result in an increase in domestic petroleum product

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consumption, which leads to significantly lower net petroleum product exports than in the Reference case.

In two other cases, the United States becomes a net petroleum exporter after 2020, as net petroleum product exports surpass net crude oil imports. In the High Oil and Gas Resource case, increased domestic crude oil production growth is driven by production from tight oil formations. This higher production is a result of more optimistic production assumptions compared with the Reference case, such as higher estimated ultimate recovery (EUR), more significant technology improvements, closer well spacing, and development of new tight oil formations or additional layers within known tight oil formations.

With more domestic crude oil supply, the High Oil and Gas Resource case has both the greatest decrease in net crude oil imports and the greatest increase in net petroleum product exports through 2040 of all cases in the AEO2015 analysis. In the High Oil Price case, higher world oil prices spur domestic crude oil production and reduce domestic petroleum product consumption, leading to a significant increase in net petroleum product exports through 2040. However, because the High Oil Price case contains the same resource assumptions as the Reference case, drilling moves into less-productive areas, resulting in a decrease in domestic crude oil production in the later years of the projection. However, high oil prices continue to hold domestic use of petroleum products below the Reference case level, keeping the United States a net petroleum exporter through 2040.

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Oil Price Drop Special Coverage

Oil prices drop as Middle East tension eases

Oil prices extended declines on Wednesday as Middle East tension eased after Saudi Arabia ended a military campaign in Yemen, while industry data showed that a larger-than-expected build in US oil inventories. Saudi Arabia announced on Tuesday it was ending a month-long campaign of air strikes against the Houthi rebels who seized large areas of Yemen, easing geopolitical tension in the key oil producing region. Oil prices have risen nearly $10 a barrel so far this month, on tension in the Middle East and concerns over slowing output growth in the United States. Prices could weaken again but they are unlikely to plumb new depths this year, leading commodity traders said on Tuesday, citing strengthening demand. "We will probably see one more dip in the second quarter but prices probably won't go below this year's lows," Ian Taylor, head of the world's largest oil trader, Vitol, said. Brent crude for June delivery was down 28 cents at $61.82 a barrel by 0142 GMT, after settling $1.27 lower. US crude for June delivery was 38 cents lower at $56.22 a barrel. The May contract, which expired on Tuesday, ended down $1.12. "Short-term momentum is starting to swing against

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commodities," analysts at ANZ said in a note, noting that Brent has failed to hold and retreated from key levels around $62-$63 a barrel in recent days. US crude oil storage has reached the highest levels since 2011, with tanks in the Cushing, Oklahoma hub running nearly 80 per cent full, according to energy markets intelligence firm Genscape. A Reuters survey showed US crude inventories likely rose for the 15th straight week, adding nearly 3 million barrels last week, less than a reading by industry group American Petroleum Institute showing a stock build of 5.5 million barrels. Official stockpile data will be issued by the government's Energy Information Administration at 1430 GMT on Wednesday. While futures prices have been mostly driven by supply issues in recent months, Vitol's Taylor said demand is strong and should provide support to oil prices. "Gasoline is coming back with a vengeance. Refining margins are not as bad as we had feared," he said. Growth in demand outside the United States was impressive in India, South Africa and even Europe, he added. –

Exxon’s Chief Tillerson Says OPEC Not Waging War on U.S. Shale Rivals

Rex Tillerson, chief executive officer of Exxon Mobil Corp., said he doesn’t think OPEC

is at war with U.S. shale.

OPEC’s refusal to curb output in response to the collapse in crude prices is an attempt to find the most economic price for oil, not an attack on U.S. shale drillers, said Exxon Mobil Corp. Chief Executive Officer Rex Tillerson.

The Organization of Petroleum Exporting Countries is engaged in “a classic price-discovery exercise” after the revolution in shale-oil production turned global crude markets topsy turvy, Tillerson said during the IHS CERAWeek conference in Houston on Tuesday.

The 10-month, 48-percent cascade in U.S. oil prices has crushed stock prices, eroded drilling budgets and cost tens of thousands of workers their jobs.

“I don’t take the view that they are in any way trying to threaten other suppliers,” Tillerson said. “I think they’re really kind of on a classic price-discovery exercise, which is important for all of us as investors to know.”

Its “price discovery” is OPEC’s effort to find the highest price at which it will no longer have to compete with supplies from higher cost producers.

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Although painful to endure, the market correction will be good for the industry in the long run as the lower oil price strips out excessive costs and forces producers to operate more efficiently, said Tillerson, a 40-year veteran of the oil patch. Shale drillers in particular will have little choice but to take more disciplined investment decisions and find opportunities to collaborate with rivals to lower their risks, he said.

“I think it’s going to be very useful to the industry to have a clearer understanding of the resilience of these resources, how robust these resources are, and how they are able to withstand different price environments,” he said.

Boom And Bust

West Texas Intermediate crude, the U.S. benchmark, has averaged about $49 a barrel this year, down 47 percent from last year and an annual average not seen since Tillerson took the helm at Exxon in 2006. Excluding the 2009 oil slump that was “over before we realized it,” Tillerson said he’s lived through three major boom-and-bust cycles since joining Exxon in 1975.

“My expectation is this is going to be with us for a while,” he said. “We’ll have some false signals, we’ll have some false responses, where we get a little bump this way or that but I do think people need to settle down for us to be in a different price environment for at least the next couple of years and then we’ll see how things respond.”

His pessimistic outlook for crude prices was echoed by Patrick Pouyanne, CEO of Total SA, Europe’s third-largest oil company by market value. Pouyanne, who succeeded the late Christophe de Margerie after a fatal plane crash on a Moscow runway in October, also sees opportunities to correct sloppy spending habits the industry developed when prices were sky high.

Lost Control

“This is an opportunity to clean up the oil industry,” Pouyanne said in remarks to the IHS CERAWeek conference on Tuesday. “We lost some control over the way we spend the money.”

Tillerson, who oversees the largest U.S. shale operator, also said crude output from shale fields may not abate, even as explorers slash spending, dismantle drilling rigs and scale back expansion plans. A similar slump in natural gas prices five years ago that failed to slow supply growth may hold a lesson for the energy industry, he said.

“Understanding how the resource really behaves in a reduced level of investment is something I think we will all learn in this downturn,” Tillerson said. “Clearly a significant decline in rig activity did not diminish the continued growth of natural gas capacity even in a very difficult price environment. Is that analagous to the tight oil? I think that’s what we’re all going to learn.”

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Khaled Al Awadi is a UAE National with a total of 25 years of experience in the Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operations Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years, he has developed great

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Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

publication. However, no warranty is given to the accuracy of its content. Page 17

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

publication. However, no warranty is given to the accuracy of its content. Page 18