new base 652 special 22 july 2015 (1)

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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NewBase 22 July 2015 - Issue No. 652 Senior Editor Eng. Khaled Al Awadi

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

UAE energy price support costing $29 billion each year, says IMF The National

Energy price support is costing the UAE as much as US$29 billion a year despite substantial progress in their reduction over the past two years, says the IMF. The country has reduced spending on pre-tax energy subsidies by a third over the past two years, IMF data shows.

That followed a collapse in global energy prices, with the government spending less on subsidising fuel consumption and beginning a reform of the UAE’s energy markets.

Total direct spending on subsidising energy products fell to $12.6bn this year from US$18.2bn in 2013, a 31 per cent decline. This was driven by cutting subsidies on petroleum products to $7bn from $10.2bn. Electricity subsidies have fallen 44 per cent to $3.2bn.

The price of Brent crude has fallen from $108 per barrel in July last year to $56.90 yesterday. And the lower cost of energy use has helped to ease spending on subsidies.

Initial steps to reduce subsidies, including ending discounts for expatriate consumers of electricity in Abu Dhabi this year, have also made a dent. In January, the Supreme Council of Energy issued a report recommending that the Ministry of Energy begin gradually phasing out fuel subsidies.

Nevertheless, the indirect cost to the UAE’s economy of subsidising energy products remains high at 6.6 per cent of GDP, according to the IMF. When the impact of lost revenues from taxes, the damage to the environment and people’s health, and the impact on congestion and traffic are taken into consideration, the cost of energy subsidies to the UAE is $29bn, which is 229 per cent more than the direct spending on subsidies.

The IMF released data on energy subsidies for individual countries last week. The new data set provides the most up-to-date picture of what governments are spending on to reduce the cost of energy and its impact on the wider economy.

The UAE is the region’s third- biggest spender on energy subsidies, behind Saudi Arabia and Egypt, the data show. Egypt spends $62.3bn on direct pre-tax subsidies, followed by Saudi Arabia with $37.2bn. But both these countries have populations much larger than the UAE. Saudi Arabia’s population is about four times as big as the UAE’s, while Egypt’s is about nine times larger.




The IMF estimates the UAE’s per capita spending on energy subsidies this year at $1,319.70, ahead of all Middle East countries with the exception of Qatar, which has an estimated spending of $1,544.10.

The two Arabian Gulf states’ spending on subsidies have declined since 2013, with Qatar’s annual per capita spending falling from $3,340.90. The IMF has repeatedly urged the UAE to cut energy subsidies.

Earlier this year, Masood Ahmed, the IMF’s director for the Middle East, said there had been “a shift in the sense of urgency” with which the IMF felt that Arabian Gulf states needed to reduce them.

Bassam Fattouh, a director at the Oxford Institute for Energy Studies, said governments in the Middle East had felt for some time that energy subsidies “cannot go on forever”. “That’s why they have been thinking of reforming energy subsidies. The drive is not new, but lower oil prices may provide a favourable backdrop,” he said.

“In the Gulf, we have seen some very small steps until now. The focus has instead been on trying to diversify the energy base and trying to increase energy efficiency. “Further energy subsidy reform is a political issue, and reform will be much easier politically if the Gulf acts collectively. Gulf governments don’t want to be in a situation where some countries are feeling the pinch, and others aren’t.”

Last month, the IMF said that total global energy subsidies amounted to about $5.3 trillion – far larger than previous estimates, and greater than global spending on health care.




Kuwait infrastructure sector to rise by 20% despite reduced oil revenues SG/Agencies + NewBase With the state planning to develop new rail links and upgrade its roads, seaports and airports, construction is set to surge in Kuwait over the coming years. Plans to deliver hundreds of thousands of government-funded residential units by 2020 will also keep the sector on a growth path, despite challenges presented by reduced oil revenues and the rising cost of raw materials, Oxford Business Group reported.

The country’s infrastructure sector is forecast to grow by 15-20% this year, according to investment bank Alpen Capital, with projects aimed at greater GCC integration and economic diversification also serving as key growth drivers. The region’s broader economic strategy is expected to bolster this trend. The GCC plans to boost investment in the construction sector by showcasing the region as a tourist and investment destination, helping to increase the industry’s value from $91.5 billion to $126.2 billion in the three years to 2016, according to Alpen Capital’s June “GCC Construction Industry” report. Kuwait’s construction industry is forging ahead with several large infrastructure projects, with planned developments worth an estimated $123.6 billion, according to MEED, outpacing Qatar ($113.8 billion), Oman ($29.6 billion) and Bahrain ($25 billion). In an analysis of the 100 largest construction contracts in the GCC in 2014, Kuwait came in third after the UAE and Saudi Arabia, based on the combined value of projects in the pipeline. Progress has been promising to date. In June, Cairo-based Arab Contractors said the $855.7m Al Jahra road project - a 142-km highway connecting the industrial area of Shuwaikh to Kuwait City - was on track to be completed in 2016. The project is one of a number of planned infrastructure upgrades, along with the $2.6 billion Sheikh Jaber Causeway, which will link Kuwait to Silk City, and the $7 billion Kuwait City Metro, scheduled for completion in 2018 and 2019, respectively. At the same time, rising demand for public housing is expected to drive long-term residential construction growth, with the Public Authority for Housing and Welfare announcing plans to build 174,000 housing units by 2020. Private contractors will be able to bid on a raft of developments, including the Mutlah Residential Project, Al Subiyah Residential City and Sabah Al Ahmad township, that together should help to reduce the waiting list for public housing, which currently ranges from 15 to 20 years. The Kuwaiti government also plans to employ a public-private partnership model to deliver public housing, including 11,000 units under the Sabah Al Ahmad project, which will house up to 100,000 people




Although the industry is poised for significant growth in the long run, contractors will nonetheless be faced with the rising cost of materials, while falling oil prices could curtail state spending. Consolidated revenues at state-owned Kuwait Petroleum Corporation are expected to fall by 36% year-on-year in FY 2015/16, according to statements made in June by Adnan Abdulsamad, chairman of the National Assembly’s Budget and Final Account Committee.

The rising cost of construction materials within the GCC also poses a significant problem. The region is facing an acute shortage of primary building materials, such as limestone, gabbro, cement and steel, as a result of huge anticipated demand through to 2022. Alpen Capital reported that the GCC’s construction cost index rose 57.5% to 156.4 in the decade to 2013, while raw materials prices are projected to increase by 4-5% over the short to medium term, exacerbated by supply bottlenecks. Kuwait saw the second-largest increase in the region, with its cost index up 70% over the same period, to 170. The impact is already being felt, with reports that an additional KD800m ($2.6 billion) was needed for the Al Zour refinery upgrade, already budgeted at $4 billion, due to rising construction costs. With some big-ticket projects facing delays − including a national railway which will connect to the 2177-km GCC rail network and a planned second terminal at Kuwait International Airport − falling energy revenues and rising input costs could dampen prospects for timely delivery. While these are perhaps the most significant medium-term challenges for the industry, the pace of development is likely to preserve the sector’s long-term growth trajectory.




Angola: Total starts up production from Dalia Phase 1A on deep offshore Block 17 Total + NewBase

Total has started production from Dalia Phase 1A, a new development on its deep offshore

operated Block 17, located 135 km off the coast of Angola. Dalia Phase 1A will develop additional

reserves of 51 million barrels (Mb) and will contribute 30,000 barrels per day (b/d) to the block’s

production.

'The Dalia FPSO came on stream nearly nine years ago and with the addition of Phase 1A will still produce around 200,000 b/d. It is the latest milestone in the success story of Block 17, Total’s most prolific license with cumulative production reaching two billion barrels in May 2015,” explained Arnaud Breuillac, President Exploration & Production. “Dalia Phase 1A demonstrates Total’s commitment to maximizing value through the optimal use of existing facilities. These types of profitable satellite

tie-back developments play an important role in maintaining production levels and generating additional free cash flow for the Group.' The Dalia Phase 1A project involves the drilling of seven infill wells tied back to the Dalia Floating Production Storage and Offloading (FPSO) unit.

Total Exploration & Production in Angola

In terms of exploration and production, we operate several licenses that are in production or development, each comprising several fields:

• Located in nearly 1,300 meters of water, the deep offshore Block 17 (40%, operator) is our primary asset in Angola. It comprises four major hubs, Girassol, Dalia, Pazflor and CLOV, the latter of which began producing in June 2014.

• Ultra-deep offshore Block 32 (30%, operator), where water depths range from 1,400 to 1,900 meters. The Kaombo development, the block's first hub, was launched in April 2014. It contains six of the 12 fields discovered.

• We also operate exploration Blocks 33 (58.67%), 17/06 (30%), 25 (35%) and 40 (40%).

• Lastly, we hold working interests in Blocks 14, 14K, 0 and 39.

In the liquefied natural gas sector, we hold a 13.6% stake in the Angola LNG project. Located near Soyo in the northwestern Zaire Province, the gas liquefaction plant is supplied with associated gas from the country's offshore oil fields.




Technip Wins TAP Pipeline Project Management Work by Rigzone Staff

French oilfield services firm Technip announced Tuesday that it has been awarded a project management consultancy (PMC) contract by the Trans Adriatic Pipeline consortium for a projectdesigned to transport gas from the Shah Deniz field in Azerbaijan to the European market.

The TAP project scope includes an approximately 530-mile long pipeline that will start from the tie-in with the TANAP portion of the Southern Gas Corridor project at the Greece/Turkey border. The pipeline will then go through Greece and Albania to eventually cross the Adriatic Sea to end in Puglia, Italy, where it will connect to the Italian natural gas network.

The project aims to enhance security of supply as well as diversifying gas resources in the European market. It will open a new route for natural gas from the Caspian Sea region. It is designed to transport 350 billion cubic feet per year with a potential future expansion to 700 billion cubic feet per year, as more gas becomes available.

The PMC contract awarded to Technip will cover the onshore portion of the pipeline from Greece to Albania and in Italy. The services will include the overall project and site management, procurement and subcontracting for all the EPC (engineering, procurement and construction) packages throughout the EPC phases, as well as warranty management and the project close-out. The project completion is scheduled for the first quarter of 2020.

The services will be mainly performed at TAP's headquarters in Baar, Switzerland, and Technip's office in Rome, Italy. Other project centres will be operating in Greece, Albania and Italy. Marco Villa, president of Technip Region B, commented in a company statement:

"We are excited to have been awarded this important project by TAP. This contract reflects TAP's trust in our capabilities in delivering a key project for them." TAP is a joint venture between BP (20 percent), SOCAR (20 percent), Statoil (20 percent), Fluxys (19 percent), Enagas (16 percent) and Axpo (five percent).




Croatia seeks investors to build an Adriatic LNG terminal Source: Reuters

Croatia's power utility HEP and gas transmission system operator Plinacro on Tuesday invited investors to express interest in building a liquefied natural gas (LNG) terminal in the northern Adriatic, part of the country's drive for energy independence.

The terminal on the island of Krk is also part of Europe's wider efforts to reduce its reliance on Russian energy supplies and has gained new importance following the cancellation of the South Stream project. It is aimed at receiving, storing and re-gasifying LNG, with a nominal capacity of 6 billion cubic metres.

HEP and Plinacro, in a joint venture named LNG Croatia, said potential investors should submit their letters of interest for joining the

project as soon as possible. Applicants meeting the criteria will be admitted to a virtual data room that will open on Sept. 1, they said. The deadline for submitting investment proposals is Dec. 15. The terminal is expected to entail an investment of around 600 million euros ($653 million).

The Croatian government last week declared the project to be of strategic interest, which should simplify the procedures for obtaining location and construction permits.




Consensus process provides alternate approach to energy efficiency standard

development . U.S. Department of Energy (DOE)

Last month a group of industry stakeholders, and energy efficiency and environmental advocates, along with the U.S. Department of Energy (DOE), proposed consensus energy conservation standards for multiple commercial heating and cooling equipment types. DOE estimates these standards could save about 15 quadrillion Btu over 30 years. The working group represents an alternate approach to energy efficiency standards development within DOE.

Formed in 2013 by DOE's Appliance and Equipment Standards Program, the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC)

exists to provide advice and recommendations regarding energy efficiency standards and test procedures. As a result, ASRAC has convened a number of working groups to address various efficiency standard topics.

Several laws provide DOE authority to establish

minimum energy efficiency standards. These laws include the Energy Policy and Conservation Act of 1975 (EPCA), the National Appliance Energy Conservation Acts of 1987 and 1988 (NAECA), the Energy Policy Acts (EPACT 1992 and EPACT 2005), and, more recently, the Energy Independence and Security Act of 2007 (EISA).

Since the first standard went into effect in 1990, DOE rulemakings, consensus standards, and directly legislated standards have driven efficiency improvements for more than 50 residential and commercial equipment types. The recent consensus standards build upon existing, DOE-issued standards for commercial gas- and oil-fired warm-air furnaces and package air-conditioning and heat pumps that went into effect in 2003 and 2010, respectively.

Similar consensus agreement approaches were used to develop standards for several residential appliances such as furnaces, heat pumps, air conditioners, clothes washers, clothes dryers, dishwashers, refrigerators, and freezers. In some cases, these agreements meant earlier adoption of standards compared with the traditional DOE rulemaking process.

For rapidly developing equipment types like consumer electronics, voluntary market transformation programs such as ENERGY STAR® may offer an expedited way to update specifications. Energy efficiency advocates, manufacturers, service providers, and the federal government recently developed a non-regulatory agreement based on ENERGY STAR specifications for television set-top boxes as an alternative to developing a federal standard.




Oil Price Drop Special Coverage

Oil prices fall as industry data shows U.S. crude stocks rising Reuters + NewBase

Oil prices fell on Wednesday after industry data showed U.S. crude inventories rose last week when they had been expected to drop, even as a weaker dollar helped to limit deeper losses.

Crude futures have steadied this week after tumbling to three-months lows earlier in July on concerns that higher Iranian exports would add to an oversupplied market.

U.S. crude held above $50 a barrel on Wednesday after dipping below that mark this week for the first time since early April. By 0528 GMT (1.28 a.m. EDT), West Texas Intermediate (WTI) for September delivery CLc1 was trading 68 cents lower at $50.18 a barrel, after closing 42 cent higher in the previous session.

The WTI August contract CLQ5, which expired on Tuesday, settled at $50.36 a barrel on its last day of trade, after slipping as low as $49.77 during the session. September Brent futures LCOc1 were trading 48 cents lower at $56.56 a barrel, after rising 39 cents on Tuesday.

Reuters technical analyst Wang Tao expected both benchmarks to rebound to $51.90 and $57.97, respectively.

Prices came under pressure after data from industry group American Petroleum Institute (API) showed U.S. crude stocks rose 2.3 million barrels in the week ended July 17. In a poll by Reuters, eight analysts had forecast U.S. commercial crude oil stocks fell 2.3 million barrels on average last week. [EIA/S]

"Any indication of rising oil inventories in this week's EIA weekly report is likely to weaken oil prices further," analysts at ANZ said in a note to clients. The U.S. Energy Information Administration (EIA) report - more closely watched that the API figures - is due out at 1430 GMT (10.30 a.m. EDT) on Wednesday.

Besides pressure from the nuclear accord between Iran and world powers, oil prices had also been weighed down over the past week as the dollar .DXY rose to three-month highs on prospects for a U.S. interest rate hike later this year.




Oil firms may retain clear-up costs for hard-to-sell N. Sea assets Reuters/Andy Buchanan/pool

Oil firms trying to sell aging North Sea oilfields are considering shouldering hundreds of millions of dollars in future dismantling costs to help find buyers, industry sources say. One of the world's oldest and most important offshore oil and gas production basins, the UK North Sea faces dwindling output and a growing number of redundant platforms that require decommissioning in a scale and complexity never seen before.

The near halving of oil prices over the past year to below $60 a barrel has forced the industry to slash spending, increase efficiencies and sell or shut down assets that are least profitable or which do not fit their portfolios.

But despite a large rise in the number of assets up for sale in the North Sea in recent months, only a few deals have been completed. "There remains a very big gap between buyers and sellers and that hasn't been narrowing the way some expected," said Christopher Young, director of the Strategy Group at KPMG.

Decommissioning, which involves plugging wells with cement on the seabed and removing obsolete platforms and pipelines, has proved to be a major stumbling block for deals. As companies come to grips with an extended period of low oil prices, the urgency to sell assets is growing. As a result, boards are weighing up new strategies.




"A lot of companies under stress are now starting to consider if retaining some or all of the decommissioning liability might be an option for selling," Young told Reuters. "Our conversations with a number of North Sea operators suggest that others are now considering selling assets while retaining decommissioning liabilities."

BP and Total are among several field operators considering such a strategy, according to the sources. "On the big old fields, which is what the majors are selling, decommissioning is a major issue. They have been trying to sell some of those fields for quite some time. It's unattractive to take on those decommissioning liabilities," Tony Durrant, Chief executive of Premier Oil told Reuters.

"The others, including BP, are coming around to the view that the only way they can reduce their assets in the UK is by retaining those liabilities." Decommissioning costs can reach hundreds of millions of dollars for the larger North Sea assets.

Total decommissioning costs in the UK continental shelf over the next 30 years are expected to reach around 50 billion pounds ($78 billion), according to a strategic industry review by sir Ian Wood for the British government.

BP, which has been selling assets in the North Sea since 1996, said it is considering all options. "Our preference is to sell assets with the decommissioning liability, however the agreements reached with buyers are deal specific," a spokesman said.

DE-RISKING

The concept of shouldering the decommissioning costs was used at least once when BP sold to DNO in 2003 the Thistle field, today operated by Enquest. The oil price drop also offers opportunity for buyers, particularly private equity funds such as Caryle Group, and Riverstone to invest in the North Sea.

Removing the decommissioning costs would make late-life assets more attractive and remove a lot of risk buyers might associate with them. "The number of potential buyers for such assets will be far higher than is the case in a traditional sale," a KPMG report said. At the same time, seller will receive a higher price for the asset which would boost balance sheets in the short-term.




Global growth to boost oil prices - Kuwait minister

Reuters + NewBase Oil producing countries expect global economic growth in the coming period to boost oil prices, Kuwaiti Oil Minister Ali Saleh al-Omair was quoted by the al-Qabas newspaper on Tuesday as saying. "There is satisfaction among member states with indications of better growth of the world economy," Omair was quoted as saying in a statement to the newspaper.

"We do not look at the amount of production, but what concerns us primarily is the rate of growth of the world economy, which will bring the required balance to keep prices at the desired level." Omair also said Kuwait had a special relationship with importers in Asian, European and other markets, so it would be able to maintain its share of world oil markets.

He said Kuwait was confident of being able to carry out its oil strategy for the period to 2020, and was continuing plans to raise its crude oil production to 4 million barrels per day. Output in June this year was 2.74 million bpd.




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Khaled Malallah Al Awadi, Energy Consultant MS & BS Mechanical Engineering (HON), USA Emarat member since 1990 ASME member since 1995 Hawk Energy member 2010

Mobile: +97150-4822502 [email protected] [email protected]

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 experiences in the designing & constructing of gas pipelines, gas metering &

regulating stations and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation, operation & maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcasted internationally, via GCC leading satellite Channels.

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

NewBase 22 July 2015 K. Al Awadi

new base 652 special 22 july 2015 (1)

Business

cost of energy subsidies

pretax energy subsidies

ministry of energy

uaes energy markets

electricity subsidies

fuel subsidies

global energy prices

supreme council of energy