new base 685 special 13 september 2015

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.

NewBase 13 September 2015 - Issue No. 685 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: DP World and partners officially open Rotterdam World Gateway terminal

WAM/Ahlam/AAMIR

DP World, together with joint-venture partners APL, HMM, MOL and CMA-CGM, has officially opened the Rotterdam World Gateway, RWG, terminal, providing the global supply chain with the most innovative and automated container terminal in the world.

DP World Chairman, Sultan Ahmed Bin Sulayem attended the grand opening ceremony as guest speaker along with the Mayor of Rotterdam, Ahmed Aboutaleb, RWG Managing Director Ronald

Lugthart, RWG Board of Directors Chairman Rob van Dijk and Port of Rotterdam Authority CEO Allard Castelein.

Sultan Ahmed Bin Sulayem, said: "Rotterdam World Gateway promises to provide an unrivalled level of automation and customer service and brings a new era of technology and modern efficiency in container terminal operations. The ease of connectivity between container vessels, barges, road and rail is a vision of how the future can look in our

industry. With RWG, the future of container port operations promises to be cleaner, greener, safer, quicker, more inclusive and brighter. I am extremely proud that DP World and our partners are part of that future."

Mayor Aboutaleb of Rotterdam said, "If we, as a global port, have the ambition to remain a world player, we need outstanding companies that are ready for the future. RWG is such an organisation."

RWG's terminal is able to handle the largest container vessels afloat in the most efficient and reliable way due to its innovative character. With dedicated handling facilities for road, rail and barge and extensive automation on site, RWG looks very different to a traditional marine container terminal. RWG currently employs about 180 people, a large number of whom are IT specialists




due to the level of innovation and automation at the terminal. This is a completely new approach to container operations.

The high level of automation at the terminal brings benefits for RWG when it comes to safety and sustainability. These are two areas in which RWG is leading the way. Innovative concepts result in shorter distances for internal terminal transport and less equipment on the terminal. With fully electric cranes which are powered by 100% green energy and generate their own power, RWG is setting new standards in the industry.

Developed to cater for the largest container vessels in the world at the highest levels of

productivity, safety and sustainability, both MV II and RWG will deploy ground-breaking

container handling automation technology




DEWA makes significant progress in AED 250 million substation at Mohammed bin Rashid Al Maktoum Solar Park

WAM -- Saeed Mohammed Al Tayer, MD and CEO of Dubai Electricity and Water Authority, DEWA, has confirmed that DEWA is progressing according to plan with the construction of the 400/132kV substation at the Mohammed bin Rashid Al Maktoum Solar Park.

"This supports the vision of Vice President and Prime Minister and Ruler of Dubai His Highness Sheikh Mohammed bin Rashid Al Maktoum, and the Dubai Plan 2021, to enhance Dubai’s position as a global role model for achieving the highest standards in energy efficiency, renewable

energy, creativity, innovation, and creating a sustainable future for generations to come," he said in a statement.

Al Tayer noted that DEWA is building a world-class energy infrastructure to meet all the development needs in the Emirate. Constructing the 400/132kV substation is part of DEWA’s efforts to implement its strategy and ambitious plans according to the highest availability, reliability, and efficiency standards. This project includes supplying, installing,

testing, and commissioning a 400/132kV substation with four 400kV cables. About 30% of the project’s engineering work has been completed. The station is due to be completed by November 2016.

MD DEWA pointed out that the 400/132kV substation will connect the solar power generated from the 200MW second phase of the Mohammed bin Rashid Al Maktoum Solar Park, to DEWA’s grid to supply Dubai with electricity. In the future, other phases of the Solar Park will be connected to the station to power new development projects in Dubai. There will be future expansions at the station. Another substation with the same capacity will be built to transmit the solar energy of the Solar Park, which is expected to reach 3,000MW by 2030.

The 400/132KV substation is being built at a cost of AED250 million and has a 505 MVA transmission capacity. It is one of the projects of the Mohammed bin Rashid Al Maktoum Solar Park, which is one of the largest strategic Independent Power Producer, IPP, projects worldwide in renewable energy with a planned 1,000MW production capacity by 2020 and 3,000MW by 2030. The project supports the Dubai Integrated Energy Strategy 2030 developed by the Dubai Supreme Council of Energy to diversify the energy mix in the Emirate.

Solar energy will account for 7 percent of the total energy production by 2020 and 15 percent by 2030. The project, which occupies 4.5 square kilometres, will help achieve a reduction of approximately 400,000 tonnes of carbon emissions by 2020, and support the green initiatives and programmes implemented by the Government of Dubai to reduce carbon emissions.




Qatar: Al Sada stresses on GCC water project The Peninsula

Minister of Energy and Industry H E Dr Mohammed bin Saleh Al Sada yesterday reasserted the importance of GCC countries going forward with their proposed “GCC Water Inter-connectivity Project”.

Addressing the 28th Ministerial meeting of GCC Water and Electricity Cooperation Committee here yesterday, Dr Al Sada said the region is increasingly facing the depletion of its traditional water resources.

On the one hand the region’s ground water table is fast depleting, while it’s water consumption has become one of the highest in the world. The region is facing a serious challenge. The situation will aggravate in future. Dr Al Sada said the GCC electricity network has benefited the region in a big way. Water inter-connectivity will bring in similar benefits to the region. Water inter-connectivity was on top of the agenda in yesterday’s meeting, besides a series of other key topics, Ahmad Al Jassar, Minister of Public Works and Minister of Electricity and Water, Kuwait said. Talking to the media, he called for boosting pan GCC cooperation in electricity and preservation of natural resources, especially water. The GCC has cut a long path, and achieved breath-taking success, in electricity inter-connectivity among its six countries. They are working hard to realize the same in water, he told Kuna. At the meeting, the Kuwaiti minister presented a study on the surplus realised by electricity inter-connectivity, which amounted to $415m in 2014. Yesterday’s GCC ministerial meeting also gave the go-ahead to host the new website on GCC’s electricity and water data. On the use of the renewable energy in the GCC, the meeting discussed forming a committee for alternative and clean energy. The committee will be tasked with drawing up plans and programmes. The head of the electricity and water department in the GCC Secretariat Mohammad Falah Al Sharika said that joint GCC rationalisation campaign launched yesterday was the first of its kind in the region. It aims at enhancing awareness among the GCC people on the great importance of rationalising water and electricity, amid rising rate of consumption. Esssa bin Hilal Al Kuwari, President, Qatar General Electricity and Water Corporation (Kahramaa) said the GCC water inter-connectivity project will ensure a sustainable water resource for the region.

Minister of Energy and Industry H E Dr Mohammed bin Saleh Al Sada (third right) with other GCC

ministers and leaders at the GCC Water and Electricity Co-operation Committee meeting in Doha

yesterday.




Indonesia: Cooper Energy completes Bunian-4 appraisal well in South Sumatra. Source: Cooper Energy

Cooper Energy has completed operations at Bunian-4 in the Tangai-Sukananti KSO, South Sumatra, Indonesia. The drilling rig has been released having cased and completed the well for production. Temporary surface facilities are now being connected to enable a series of production tests to be conducted to evaluate the two primary hydrocarbon bearing zones encountered in the TRM3 and GRM Sandstones. Additionally, testing will be carried out to determine the potential of the upper TRM Sands and to define the extent of the oil accumulation in the K1 Sandstone reservoir.

Cooper Energy Managing Director David Maxwell said 'preliminary results from Bunian-4 are very encouraging for both reserves and production potential and we look forward to the results of the production tests to assist us in progressing the development plan for the field'. It is expected that testing will take approx. two weeks. An announcement of test results will be made after testing is completed.




The Bunian oil field is located in the Tangai-Sukananti KSO, South Sumatra, Indonesia (refer Figure 1). The Bunian structure is a four-way, fault bounded anticline defined by the 2011 Sukananti 3D seismic survey (refer Figure 2). The field was discovered in 1998 and has produced over 1 million barrels of oil, predominantly from the 2.8 metres of net pay intersected in the TRM3 Sand in Bunian-1.

As announced on 31 August, preliminary results from Bunian-4 indicated the well intersected 5.2 metres of net pay in the TRM3 Sandstone, 17 metres high to prognosis (refer Figure 3). The top of the primary target TRM3 was intersected 470 metres east-southeast and 6 metres below the producing TRM3 Sand at Bunian-3. In addition to the successful appraisal of the TRM3, a new zone designated the GRM Sandstone is identified as potentially hydrocarbon bearing. The net sand thickness intersected at the GRM

Sandstone is 3.5 metres. Joint Venture participants in the Tangai-Sukananti KSO are Cooper Energy Sukananti (Operator

55%) and Mega Adhyaksa Pratama Sukananti (45%).




US: IEA sees US oil output collapsing by next year Reuters + NewBase

Lower oil prices will force non-Opec producers including the US to cut output by the steepest rate in more than two decades next year, rebalancing an oversupplied oil market, the International Energy Agency said yesterday.

The IEA, which advises the world’s biggest economies on energy policy, said global oil demand was poised to climb to a five-year high this year thanks to lower prices. It steeply revised its outlook for demand for oil from the Organisation of the Petroleum Exporting Countries.

The report is one of the most bullish for Opec since the group shocked

markets last year by deciding against cutting production, choosing to fight for market share and depress the output of higher-cost producers such as the US.

“The big story this month is one of tightening supply, with the spotlight firmly fixed on non-Opec,” the IEA said in its monthly report.

“Oil’s price collapse is closing down high-cost production from Eagle Ford in Texas to Russia and the North Sea, which may result in the loss next year of half a million barrels a day — the biggest decline in 24 years.”

The projected drop in output would be the largest since 1992, when non-Opec supply contracted by 1mn barrels per day (bpd) from the previous year, with the collapse of the former Soviet Union. The IEA said it now expected US light, tight oil production to shrink by 0.4mn bpd next year after expanding by a record 1.7mn bpd in 2014.

Meanwhile, global oil demand growth is expected to climb to a five-year high of 1.7mn bpd or 1.8% in 2015, before moderating to a still-above-trend 1.4mn in 2016 — 0.2mn more than in the previous IEA report.

In 2014, growth stood at a five-year low of 0.8mn bpd.

As a result, the world would need much more crude from Opec, the IEA said. It estimated that the group would need to pump around 31.3mn bpd in 2016 — 0.5mn bpd more than the forecast in the previous IEA report — to balance the market.




In the second half of 2016, Opec would need to pump some 32mn bpd — the first time the world would require more oil the group currently produces. Opec, led by Saudi Arabia, has been pumping much more oil than the market needed over the past year, resulting in global oversupply and a price crash.

The developments predicted by the IEA should help rebalance oil markets next year and potentially lift prices, which in August sank to six-year lows due to a growing glut and as concern deepened over the Chinese economy.

The IEA said China’s economic health represented one of the biggest bearish risks to its forecast but added that Chinese demand for oil products remained remarkably resilient, with growth in the first half of 2015 at more than 5%.

“We expect China, the world’s second-largest oil consumer, to keep up its crude purchases despite the recent stock market collapse, currency devaluation and steady stream of negative macroeconomic news. Beijing could also buy extra crude to fill up its strategic reserves,” the IEA said.

It predicted Chinese oil product demand growth at over 3% in 2016.

Before the market rebalances in the second half of 2016, global inventories — already at record levels — will continue to grow and put further pressure on oil prices.

And by the time markets begin to rebalance, Iranian oil could return in big volumes if sanctions are lifted. Iran’s crude exports have fallen from roughly 2.2mn bpd at the start of 2012 to around 1.0mn bpd in August.

“While there is unlikely to be a substantial boost in Iranian production before next year, oil held in floating storage could start to hit world markets before then,” the IEA said estimating Iran’s floating storage at 44mn barrels of which it said condensate amounted to some 60%.




US: Oil Drillers Idel Rigs Amid Risk of Prices Fallig to $20 Bloomberg + NewBAse + Gulf News

US oil explorers idled rigs for a second straight week as Goldman Sachs Group Inc. said the oil glut could push prices as low as $20 a barrel.

Rigs targeting oil in the US fell by 10 to 652, Baker Hughes Inc. said on its website Friday.

Explorers cut 13 last week. Natural gas rigs were trimmed by 6 to 196, bringing the US total down by 16 to 848.

The oil market remains more oversupplied than previously expected, with a surplus forecast to persist into 2016, Goldman analysts including Damien Courvalin wrote in a report today. The glut could force crude prices to plunge further before the market can rebalance.

“A lot of companies are in a wait-and-see mode, saying let’s see if this $20 talk happens,” Carl Larry, head of oil and gas for Frost & Sullivan LP, said by phone from Houston. “Instead of investing and bringing on new rigs, they’re saying, let’s see where it goes from here.”

West Texas Intermediate for October delivery fell $1.11, or 2.4 per cent, to $44.81 a barrel on the New York Mercantile Exchange at 2:08pm, and is down 2.5 per cent this week. Drillers reduced the number of rigs seeking crude by one in each of the three biggest shale oil regions in the US — the Permian Basin, the Eagle Ford and the Bakken.

Price Risk

Rig counts risk falling further if oil prices remain at current levels, according to Bloomberg Intelligence.

“Well economics fail to justify the deployment of fresh drilling capital, even after factoring in 30 per cent declines in well costs and efficiency gains,” Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, wrote in a Sept. 8 report.




Natural gas rigs fell to the lowest level in Baker Hughes records dating back to 1987, led by a two-rig drop in the Eagle Ford in south Texas. The Energy Information Administration this week raised its forecast of gas production for this year to 78.95 billion cubic feet a day, which would be a record level.

Rigs Sidelined

America’s oil drillers have sidelined more than half the country’s rigs since October as the world’s largest suppliers battle for market share. The crude being pumped out of US shale formations helped create a global glut that’s pushed prices down almost 60 per cent since June 2014.

The Energy Information Administration reduced its forecasts for US crude output in 2015 and 2016, predicting a slide to 8.82 million barrels a day next year from 9.22 million a day in 2015 in its monthly Short-Term Energy Outlook on Wednesday.

Production this year is still projected to be the highest since 1972, the report showed. And a separate government report showed crude supplies rose 2.57 million barrels to 458 million, leaving stockpiles more than 100 million barrels above the five- year seasonal average.




NewBase 13 September - 2015 Khaled Al Awadi

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

Oil ends down about 2 percent as Goldman Sachs cuts price forecast Reuters/Eric Gaillard + NewBase

Crude futures fell 2 percent or more on Friday after influential Wall Street trader Goldman Sachs cut its outlook on oil, but positive sentiment from rebounding U.S. stock prices and less drilling for oil helped the market pare losses. Goldman lowered its 2016 forecast for U.S. crude to $45 a barrel from $57 previously, and Brent to $49.50 from $62, citing oversupply and concerns over China's economy. Germany's Commerzbank also cut its oil outlook, joining a long list of banks that have downgraded crude price projections on supply glut concerns. "The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016," Goldman said in a note entitled "Lower for even longer." Citing "operational stress" as a growing downside risk, the Wall Street firm said crude could even fall to near $20 a barrel. "While not our base case, the potential for oil prices to fall to such levels ... is becoming greater as storage continues to fill." Global benchmarks for crude oil fell more than 3 percent initially on the Goldman announcement, then pared losses as stocks on Wall Street rebounded .SPX and news of a lower U.S. oil rig count emerged. But toward the close, they headed lower again before finishing off their lows. U.S. crude CLc1 settled down $1.29, or 2.8 percent, at $44.63 a barrel. Brent LCOc1, the global benchmark for oil, closed down 75 cents, or 1.5 percent, at $48.59.

U.S. stocks were off their lows in afternoon trade ahead of a Federal Reserve meeting next week that could decide on an interest rate hike. Equity markets have provided direction to oil since the end of August as investors grappled with mixed fundamentals for crude. Oil services firm Baker Hughes said U.S. drillers idled

10 rigs this week, cutting activity for a second week in a row in sign that price declines were discouraging producers.

Oil price special

coverage




Saudis Are Winning Their War on Shale Oil Bloomberg + NewBase

If you believe all the recent stories about how Saudi Arabia is losing the price war it started against US tight oil producers last year, the new Oil Market Report from the International Energy Agency offers a reality check. The Saudis are winning, though they’re paying a heavy price for it.

The narrative about US shale’s resilience in the face of the Saudi decision to drive up production, prices be damned, centers on the American industry’s ability to cut costs and use innovative technology to repel the brute force onslaught.

There is a kind of David versus Goliath charm to this story, but the data don’t bear it out. The IEA, the world’s most respected independent source of information about the oil market, has changed its methodology for measuring US output: It now polls producers, instead of relying on data from states. And the switch has caused the agency to revise production data for the first half of 2015, showing a noticeable slowdown.

The US is still pumping more than it did last year, but the output is declining.

IEA data show monthly contractions of 90,000 barrels a day in July and almost 200,000 barrels a day in August. Output is dropping for all seven of the biggest US shale plays. The IEA predicts that the US production of light tight oil — the type pumped by frackers — will go down by 400,000 barrels a day next year, about as much as Libya currently produces. That drop will account for most of the 500,000 barrels a day drop in production outside the Organisation of Petroleum Exporting Countries that the agency predicts for 2016. Production is also dropping in Canada: It’s below 4 million barrels a day for the first time in 20 months.




The IEA doesn’t believe shale oilers’ incantations about drastically lower marginal cost of producing oil from already drilled wells. It points out that tight oil wells dry up much faster than traditional ones: Recent data show that output drops 72 per cent within 12 months of start-up and 82 per cent in the first two years of operation.

“To grow or even to sustain production levels requires continuous investment,” the IEA report says. Low oil prices reduce frackers’ access to the capital they need, and rig counts are falling again — in early September the drop was the steepest since May.

The number of active rigs has fallen by 40 per cent from a year ago. They are far more productive, because they are only being used in the most profitable locations, but that tactic has largely exhausted itself. A steeper production decline cannot be staved off for much longer.

None of this should come as a surprise. If there is one thing the Saudis know about, it’s oil. They know all about the new technology used by US shale, too: They work with the same international service companies and attend the same conferences.

They did not make a dumb mistake gambling with their only economic advantage. The IEA reported: “On the face of it, the Saudi-led Opec strategy to defend market share regardless of price appears to be having the intended effect of driving out costly, ‘inefficient’ production.”

The perception that Saudi Arabia is losing the oil war is based on the absence of a spectacular rout in the US — the shale industry hasn’t collapsed, right? — as well as the Saudis’ own fiscal difficulties. The kingdom is certainly running through its foreign currency reserves faster than shale oil output is falling:

So what, price wars are costly. And victory in them doesn’t usually mean the complete destruction of the losing side. Rather, the Saudis seek submission.

The IEA notes an increase in demand for oil at the current low prices. Much of that increase is in developed countries, including the US, where people are more willing to take long drives now gasoline is cheaper. It will be the Saudis, pumping at near record levels, who meet this extra demand — not US frackers. Opec has 2.27 million barrels a day of spare capacity, with 86 per cent of that in Saudi Arabia’s hands.

The Saudis are teaching the market that they are the go-to suppliers at any price level and that they’re always going to be there, unlike those fly-by-night American operators. They’re also teaching investors in US shale that as soon as they plough more money into the sector, they, the Saudis, will boost output and drive prices lower, ruining the economic models on which the investment decision was based.

That’s a lesson they want to sink in, because there’s still a lot of talk about shale’s nimbleness in responding to changing price conditions.

Leaving purely financial speculation aside, oil prices cannot go up for any extended period while the Saudis are teaching their oil class to the frackers. So long as the US shale industry reacts to price rises with production increases, prices will keep falling back. They will stabilise at a level acceptable to petrostates only once that response becomes muted. No victory announcement will be needed: Things will just look peaceful again.




Oil bear market seen to last well into 2016 Saudi Gazette Oil prices are expected to remain subdued this year and for the most of next year, as the global supply glut is likely to persist, while demand is anticipated to increase only at a modest rate, Alkhabeer Capital, a leading asset management and investment firm based in Saudi Arabia, said in its analysis addressing the future outlook of oil in light of economic and geopolitical events. The analysis showed that subdued growth in China, one of the largest oil consuming nations, will likely lead to lower demand. Moreover, most of the additional recent demand was led by strategic stockpiling, which might start abating by next year.

The current record high levels of oil inventories across the OECD countries might delay the timing of any upward movement in oil price. Although major oil companies have scaled back their expansion plans, we do not expect an immediate impact as most investment projects have a lead time of a few years. Meanwhile, increase in usage of fuel efficient technologies and a stronger US dollar would add to the woes. Moreover, An unexpected escalation of geopolitical conflicts in the Middle East and elsewhere could reverse the course of oil prices. “Bear market for oil is expected to last well into 2016,” Alkhabeer Capital said in the report. The analysis noted that oil prices are currently hovering close to their 6-1/2-year lows, a drop of nearly 60% from the highs seen last year.




Major oil exporting countries, especially the larger OPEC members have embarked on price cuts since the last quarter of 2014 in a bid to defend their market share and to force higher cost production facilities to shut down. Efforts by the cartel to flood the oil market with excess supply and drive out oil producers with higher operating costs, particularly those in the US, have proven largely ineffective till date. With the US topping the list of producers last year and large producers in the GCC refusing to agree with other OPEC members for lowering oil production, the outlook for oil prices appears muted. Major oil companies have also forecasted a ‘prolonged’ period of low oil prices and scaled back their capital expenditure plans. With global supply showing no signs of abating and oil demand expected to grow at a modest pace, we expect oil prices to remain subdued in 2015 and for the most of 2016. Growth in oil supply has been the predominant factor that has contributed to the slump in oil markets since June last year. World oil supply continues to outstrip demand, with EIA figures showing that the supply-demand imbalance reached about 2.6 million barrels per day (mbpd) in the second quarter of the year, compared to 0.8 mbpd in the same period last year. “OPEC refuses to slash production with Saudi and Iraq increasing production near record levels “Ever since the slide in crude oil prices began, it was widely expected that the OPEC would slash its oil output in a bid to increase prices. But the organization, which produces about 40% of the world's crude oil, refrained calls by some members to lower output at its meeting last year and has increased production by more than 1.7 mbpd since November 2014. “Prospect of fresh supply from Iran looms large,” Alkhabeer Capital said. Iran, which reached a historic nuclear deal with major world powers last month, has indicated that it is ready to boost oil production by 500,000 bpd within a week of sanctions against the nation being lifted. Moreover there are speculations suggesting that Iran already has around 30 to 40 million barrels of oil in tankers anchored in the Gulf which could came to the market as soon as the lifting of sanctions comes into effect. Increased oil supply from Iran is likely to keep global oil supply at elevated levels and impact oil markets in the near future. However, many experts opine that it would be at least six months or probably more than a year before Iran is able to impact supply effectively. The analysis also showed that “US shale output has been resilient to lower oil prices and drop in oil rigs.” The sharp increase in shale oil production has resulted in a major shift in global oil market dynamics. The US has been increasing oil output at a robust pace and was the world’s biggest oil producer in 2014. Many experts earlier believed that the oil crash witnessed last year would substantially affect the US oil industry, but shale production has remained remarkably resilient. Though the viability of shale firms has depleted amid low oil prices, it appears that shale oil would continue to have a profound influence on the global oil market in the foreseeable future.




Bright spot for Natural Gas in Middle East, says U.S. energy envoy Reuters - Timothy Gardner

Signs of hope are scarce in the Middle East, a region awash in violence, civilians fleeing crumbling states, and economies built largely on oil squeezed by a dive in global prices. But Amos Hochstein, the U.S. energy envoy, sees some long-term potential for natural gas development to help provide economic security from Iraq to the eastern Mediterranean.

Low crude prices have hit particularly hard in Iraq, where the central government in Baghdad and the semi-autonomous Kurdistan Regional Government (KRG) are locked in a spat over oil revenues. The row threatens to reduce Iraq's ability to organize the fight against Islamic State militants. But Hochstein, in an interview at the State Department, was optimistic on the long-term energy prospects of natural gas. "There's a lot of potential for gas in the KRG. Why shouldn't we see Kurdistan as delivering significant amounts of gas via Turkey into Europe?" Hochstein, the State Department's special envoy for international energy affairs, said late last week. The European Union is looking to diversify its natural gas sources. The EU now depends on Russia for one third of its gas, about half of it shipped through Ukraine where Russia is seen to be stoking a civil conflict. Iraq also needs reliable and affordable sources of power, though it first needs to build more power plants. Meanwhile the United States is trying to work with both Baghdad and KRG on sharing oil revenues, he said. "It's limping along," he said about the relationship between the two. Hochstein said last month's mammoth find in Egyptian waters of the Zohr offshore natural gas field by Italy's Eni, the largest in the Mediterranean, was good news for the region. Some analysts contend the Egyptian find poses a challenge to plans by Israel and Cyprus to export their own natural gas from recently discovered fields..




Hochstein disagreed, saying the find shows that under the right conditions, countries such as Lebanon, Israel andCyprus can uncover greater energy reserves. "What this confirms is that recent discoveries ... are not accidental, but that this is an under explored basin that could yield many more fields," he said. "All that needs to happen is to put in place the right regulatory environment and investment climate." Hochstein wants the Israeli government to approve a framework that would encourage companies to drill there, though he had no prescriptions for how to do that. U.S. WILL NEVER BE ENERGY INDEPENDENT Despite the domestic drilling boom that has made the United States one of the world's top oil producers, the country will remain engaged in the Middle East, Hochstein said. Even if the United States was able to produce enough oil to reduce its imports to zero, domestic oil prices will always fluctuate with the global crude price. "The fact that we are living through revolutionary times in U.S. energy does not mean we can ever be energy independent," Hochstein said. Oil is still an international commodity, and global supplies influence domestic prices, he said. In previous years, Hochstein worked with countries to accept sanctions on Iran's oil exports, measures that many say helped push Tehran to agree to this year's nuclear deal. U.S. companies are banned from investing in Iran by sanctions that date back to 1995. Hochstein said he does not expect U.S. companies to return any time soon, until a decision is made to lift those sanctions. "Will contracts be signed at some point? Yes. I fully expect there will be activity in the energy sector."




NewBase Special Coverage

News Agencies News Release 13 Sep. 2015

Which country will devalue next? Libya, Oman at risk Bloomberg Business

They’re small, devoted to oil and at risk of dropping their currency pegs. Meet Equatorial Guinea, Libya, the Republic of Congo and Oman. When Kazakhstan abandoned its dollar peg in the wake of China’s shock yuan devaluation it warned other oil-producing countries would have to do the same as the world enters a “new era” of low oil prices. Here’s a quick look at the economies in those four nations. Oman

The second-smallest economy in the Gulf happens to be the biggest Middle East oil producer outside Opec. Its currency is pegged to the dollar. That’s not unusual. So is Saudi Arabia’s. Interestingly, Kuwait was the first country in the region to drop the peg in 2007 in response to spiralling inflation. Again, it’s the combination of a smallish economy and dependence on oil that could send the rial into a freefall. After years of comfortable surpluses, the country last year reported a budget deficit of 600mn rials ($1.56bn). That will widen to 8% of GDP if oil prices average $75 a barrel, the government predicts. Analysts surveyed by Bloomberg are far more pessimistic, anticipating the deficit will widen to 13% of GDP. Between May and July, expenditure soared by 40%. Equatorial Guinea

The economic fortunes of Equatorial Guinea changed overnight with the discovery of oil in the mid-1990s. The former Spanish colony the size of Massachusetts was transformed into one of the world’s fastest-growing economies, yet also left dangerously reliant on a single source of revenue at a time crude price are tanking. Energy accounts for nearly 90% of its gross domestic product and virtually all of its exports. What could tip Equatorial Guinea over the edge is that the Central African CFA franc it shares with five other countries is pegged to the euro, preventing them from weakening enough to offset the oil decline. “Options for relief include a departure from the monetary union, an adjustment of the rate at which the single currency is hitched to the euro, or a break of the peg altogether,” writes David Powell, an economist at Bloomberg Intelligence in London. Congo

The resource curse strikes again with the Republic of Congo, which is also latched on to the CFA franc. Oil rents — the profits from that industry — totalled 56.8% of GDP at the end of 2013 — the second-highest in the world, after Kuwait, according to Powell. What gives Congo a veil of protection is hefty international reserves, among the highest in Africa. Libya Since the 2011 overthrow of dictator Muammar Gaddafi, oil-rich Libya has descended into a state of lawlessness that has drawn comparisons to Somalia. It’s part of a club dubbed the “fragile five” reserved for Opec members mired in political turmoil that are slashing social spending in response to lower crude prices. The collapse in oil revenue is forcing Libya to deplete foreign currency reserves — a quarter of it just last year — to keep the country running. After a 2002 devaluation aimed to boost its competitiveness, Libya pegged the dinar to the International Monetary Fund’s Special Drawing Rights to give it stability. Will that be enough?




Changing global oil landscape spares no one Energy outlook - Syed Rashid Husain

CRUDE markets are in the midst of thunderstorms. Output remains robust. Expanding crude supplies from the Atlantic basin, North Sea and Nigeria - as per data compiled by Bloomberg - are casting spell on the overall energy scene. The International Energy Agency is now forecasting non-OPEC supply to average 58.1 million bpd this year, as against 57.5 million bpd, forecasted only in July. And with China's crude imports falling 13.4 percent in August from the previous month to 6.29 million bpd, prospects of a return to normal appeared still dimmer in near term. A glimmer of hope though arose when international press reported of ongoing discussions between Russia and OPEC, to 'stabilize' the markets. Arkady Dvorkovich, the Russian deputy prime minister and the head of the country's economic and energy strategy, told the press last week that his country was in constant talks with OPEC in order to bring about a "more rational policy." However, he was not forthright on the issue of coordination. "Our consultations do not imply directly that we are going to see any coordinated action. Perhaps 'yes', perhaps 'no', most likely 'no'," he said while speaking at the Ambrosetti forum of world policy-makers. "We are sending signals to each other," Ambrose Evans-Pritchard of The Telegraph quoted him as saying. However, Moscow insists, it cannot switch off or reduce output from its fields easily, given the harsh weather in the Siberian fields. Nor, it emphasizes, it could order drillers to slash production as the companies involved in drilling were answerable to their shareholders and not Kremlin. However, many within OPEC dismiss this as just a negotiating ploy. However, in his presentation Dvorkovich did not close the door altogether of some sort of arrangement. He hinted that Russian output cuts could be on the way. "We are not going to cut supply artificially. Oil companies will act on their own. They will look at market forces and decide whether to invest more or less.' And then he added: "If prices stay low, it is in the nature of oil companies to stabilize production, or even to cut production," he told the well-informed audience. And eventually, this may happen by default, writes Evans-Pritchard. The main Russian wells in Western Siberia are Soviet vintage and depleting at a rate of 8-11 percent a year. Sanctions have paralyzed new investments in the Arctic and the Bazhenov shale basin. Contours of the an emerging realpolitik entente between Saudi Arabia and Russia, with indeed major implications for the global oil markets, are thus visible, Evans-Pritchard points out. However, the euphoria turned out only to be short lived, as a senior Russian official ruled out cooperation on production cuts with OPEC.




While addressing the FT Commodities Retreat in Singapore, former Russian deputy prime minister and the current OAO Rosneft Chief Executive Officer Igor Sechin, a close ally of Russian President Vladimir Putin, revealed that OPEC had proposed Russia to become its member, but Russia was not going to join the OPEC. He also made it abundantly clear, Russia will also not work with OPEC to curb the global oil glut even after prices hit the lowest level since the financial crisis. Markets have taken the cue. And as output continues to be strong, with no real sign of diminishing, markets are emitting distress signals. The single product economies of 'most - if not all' oil producing countries are faced with real challenges. With consequences evident, most are now taking steps to be able to endure the downturn. In a meeting with his Russian counterpart Vladimir Putin recently, the Venezuelan President Nicolas Maduro proposed a summit of oil producers, including Russia, to address the price slump. The two also agreed on “initiatives” to bring stability to the market. OPEC kingpin Saudi Arabia is also taking the challenge seriously. The IMF is of the view that the Kingdom was likely to run a deficit of 19.5 percent of GDP in 2015. Last month Fitch Ratings too lowered the outlook on Saudi Arabia's sovereign ratings to 'negative' from 'stable' citing fiscal deterioration. Lower oil prices and increased spending are forecast to widen the general government deficit this year, the agency noted, cautioning deficits would stay in double digits if there was no consolidation. And though given its financial muscle and reserves, Riyadh can definitely endure the downturn for years, yet the Kingdom is fully alive to the daunting challenge. The country was well-prepared to cope with the plunge of crude prices and policymakers were taking it seriously, Saudi Finance Minister Ibrahim Alassaf told CNBC Arabia during a visit to Washington with King Salman, earlier the month. Saudi Arabia's government is cutting unnecessary expenses and delaying some projects to compensate for low oil prices, though projects that are important for the economy will go ahead, Alassaf assured. "We have built reserves, cut public debt to near-zero levels and we are now working on cutting unnecessary expenses while focusing on main development projects and on building human resources in the kingdom," he added. "There are some projects like the ones that have been approved a few years ago and haven't been carried out until now - that means such projects are not currently necessary and can be delayed," he added. As per reports, some infrastructure projects may feel the brunt. For example, a plan to build soccer stadiums around the country has been scaled back, a $201 million contract to buy high-




speed trains was cancelled, and expansion of an oilfield has been slowed, Reuters reported in recent weeks, quoting sources. In order to plug the budgetary deficit, Saudi Arabia has also resorted to issuing sovereign bonds for the first time since 2007. Minister Alassaf also added that the government would continue issuing bonds and might also sell Islamic bonds, or sukuk, to finance specific projects. "There may be an issue (of sukuk) before the end of 2015 but I cannot say this will continue - it all depends on the need to finance the budget deficit," he stressed. And in the meantime, the Kingdom is reportedly considering to reduce subsidy on gasoline to domestic consumers. The debate is old. Many have been pushing it as a tool to control the galloping domestic gasoline consumption. The matter had taken on additional importance after United Arab Emirates reduced subsidies and allowed gasoline prices to rise last month. The global landscape has changed. The domestic horizon is changing too.




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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

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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

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.

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NewBase 13 September 2015 K. Al Awadi




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