Microsoft word new base 668 special 19 august 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,
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NewBase 19 August 2015 - Issue No. 668 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: Amec Foster Wheeler wins Upper Zakum field contract extension
Source: Amec Foster Wheeler + NewBase
Amec Foster Wheeler has been awarded an extension to its existing Project Management Consultancy
(PMC) contract for the UZ750 project in the Upper Zakum (UZ) field, located 84 kms north-west of Abu
Dhabi. The value of the contract has not been announced.
The contract was award by the Zakum Development Company (ZADCO), which operates the field through
a venture involving the Abu Dhabi National Oil Company, ExxonMobil and the Japan Oil Development
Company.
The UZ750 project commenced in 2008 to redevelop the Upper Zakum (UZ) field, which is recognised as
the second largest oil field in the Gulf and comprises four artificial islands with associated drilling and
production facilities.
Amec Foster Wheeler’s scope of work includes PMC Services to be delivered as part of an Integrated
Project Management team. ZADCO will oversee the contractors’ delivery of reimbursable Engineering,
Procurement and Construction (EPC) scopes of work, as well as commissioning and start-up support of the
facilities. This work is scheduled to complete in December 2017.
Roberto Penno, Group President, Asia, Middle East, Africa & Southern Europe, Amec Foster Wheeler, said:
'This UZ750 contract win cements Amec Foster Wheeler’s ongoing engagement in this strategically
important project. The Middle East is a key growth area for Amec Foster Wheeler and we look forward to
continuing our relationship with ZADCO on this next important phase of work.'
Amec Foster Wheeler has been engaged on the UZ750 project since June 2008 when it was awarded the
initial PMC contract. The UZ750 project is an important investment for both ZADCO shareholders and Abu
Dhabi, given it will achieve and sustain oil production at one million barrels of oil per day until 2050 and
beyond.

Rising energy consumption calls for a more sustainable
and integrated strategy in the UAE
http://www.cpifinancial.net - Matthew Amlôt
The UAE’s gross domestic electricity consumption has more than doubled over the past 10 years,
and is expected to grow even more rapidly over the next five years as the country undergoes
substantial population and economic growth, according to a study by management consultancy
Strategy&, formerly Booz & Company.
The study reveals that energy usage in the
UAE has grown at an annual average of four
per cent over the past six years, and is
projected to increase to five per cent through
2020. A recent forum organised by the
Energy Working Group of the UAE-UK
Business Council and facilitated by Strategy,
highlighted three key aspects of energy
efficiency which comprise of smart cities,
building efficiency and water usage.
Although numerous initiatives have already
been launched in the UAE, implementing
additional comprehensive measures and
policies can help reap the full benefits of an
improved energy efficiency strategy, as
challenges cannot be overcome in isolation.
While UAE’s increased urbanization is a sign of the country’s growth and progress, it also
presents some challenges alongside. According to the UN, 85 per cent of the UAE’s population
resided in urban areas as of 2014, and this is forecasted to reach 91 per cent by 2050. The UAE,
therefore, needs to have integrated infrastructure planning as a prerequisite to any urban master
plan.
Per-Ola Karlsson, a senior partner with Strategy&, formerly Booz & Company in Dubai, said, “One
of the best way of doing this, which takes advantage of digitization and the Big Data that urban
populations produce, is through the so-called ‘smart city approach’. This term typically entails
integrated infrastructure planning that applies digital technologies to deliver better services and,
critically for the UAE, reduce energy consumption. Smart cities allow city planners and managers
to improve efficiency at the intersection of different infrastructure sectors, such as electricity,
water, transport, telecommunications, cooling and waste.”
The study reveals that there have been commendable efforts on behalf of UAE governments to
manage energy consumption. For example - Abu Dhabi has deployed an advanced electric
metering system that monitors usage over time, and encourages customers to reduce
consumption. Similarly, Dubai now has several interrelated programs in place to substantially
reduce electricity consumption.
Another important feature of smart cities is transportation, an area in which technology has
advanced dramatically. The UAE is encouraging the use of electric cars and building the
necessary infrastructure to support them.

“One of the most effective ways to drive a smart city initiative is to influence citizens’ behavior
through awareness programs. One of the best examples of this is the launch of Emirates Energy
Award by the Dubai Supreme Council of Energy, which offers monetary prizes for innovative work
in projects of all sizes across both the public and private sectors. The Dubai Electricity and Water
Authority (DEWA) also launched customer awareness campaigns which have contributed towards
DEWA’s initiative of saving more than 600 million AED ($163 million) since 2009,” Karlsson
added.
A second essential aspect to consider is improving building efficiency, also referred to as “green”
or “sustainable” construction. In Dubai, the government has issued a set of green building
regulations and specifications that cover planning, the use of resources, materials, and waste.
Notably, the regulations are intended to improve the sustainability performance of buildings
throughout their entire life cycles, from design through construction, operation, and ultimate tear-
down.
Christopher Decker, a Principal with Strategy& in Dubai, said, “Although the UAE already has a
range of building efficiency measures in place, government authorities will still need to develop
more detailed regulations and frameworks that dictate energy efficiency in buildings, particularly
during construction. This has to be supported by enhanced communication and information
campaigns that persuade real estate companies to improve the energy efficiency of their projects
without regulation. The government should also encourage the use of innovative building
technologies, materials, and systems adapted to the region’s requirements that would
substantially improve the efficiency of buildings.”
The third aspect of energy efficiency involves water consumption and desalination processes.
Water consumption in the UAE is about 740 cubic meters per capita per annum (m3 pcpa), or
roughly 50 per cent higher than the 500 m3 pcpa world average. Also, the energy required to
desalinate seawater represents approximately 30 per cent of the country’s total yearly power
consumption.
Jad Moussalli, a manager with Strategy& based in Dubai, said, “The majority of the country’s
water is generated as a by-product of thermal energy plants, through combined water-and-power
infrastructure. Electricity and Water have different demand cycles: electricity has large peaks in
demand, whereas water demand is relatively flat, limiting the optimization of the infrastructure for
either resource. The planned introduction of nuclear energy as a prominent source of power in the
UAE might mitigate this issue. Nuclear power can help break the connection between water and
electrical infrastructure, creating opportunities to select more efficient desalination technologies
such as reverse osmosis.”
Additionally, the study also suggests the adoption of both hard and soft regulatory levers to reduce
water consumption. A hard approach would, for example, be increasing water tariffs which will
reduce water demand. A softer measure would include for instance awareness campaigns
targeting all segments of the population, especially educational and corporate institutions.

In this context, the study suggests four strategic priorities that will aid towards implementing a
more sustained energy efficient program in the UAE. These consist of :-
(i) The need for an overarching strategy that joins individual sectors and their
respective value chains around a single set of goals and objectives;
(ii) Ensuring a regulatory framework that addresses demand/market challenges, in
order to change behaviors and maximize benefits;
(iii) Introducing communication and information campaigns to demonstrate the benefits
of energy efficiency and obtaining support from all stakeholders including
consumers:
(iv) Identifying and promoting region-specific R&D and technology that will create an
innovative ecosystem to help meet energy efficiency goals while also boosting the
overall economy.
“For decades, the abundance of hydrocarbon resources meant that energy efficiency was not a
pressing topic in the UAE. However the steady population and economic growth have changed
attitudes. Today, sustainability is a critical issue, and the UAE government needs to reinforce its
efforts to create a more sustainable future for the country and for generations to come,” concluded
Karlsson.

UAE: Nuclear-related contracts worth Dh9.15bn have been
awarded to UAE firms, says Enec
The National
More than Dh9.15 billion in contracts have been awarded to UAE companies for the construction
of the country’s first nuclear power plant, according to the Emirates Nuclear Energy Corporation
(Enec).
“An important factor in the UAE’s decision to pursue a peaceful nuclear energy programme was
the opportunity to develop a new industrial sector to support the nation’s economic growth and
diversification strategy,” said Mohamed Al Hammadi, the chief executive of Enec.
Along with its prime contractor Korea Electric Power Corporation (Kepco), Enec over the past five
years awarded contracts to more than 1,100 local companies to work on the Barakah nuclear
plant project in Abu Dhabi’s Western Region.
Enec created an industrial development team that helped local firms to update their products over
two years to meet the tender requirements for the nuclear energy programme. These companies
include Emirates Steel and the cable manufacturer Ducab. As a result, the companies were also
able to expand their business portfolio.
“We are aiming to maximise our supplies of nuclear-quality reinforcing steel bars to the Barakah
plant to reach almost 180,000 to 200,000 tonnes until the year 2017,” said Saeed Al Romaithi, the
chief executive of Emirates Steel. Ducab took the opportunity to customise the world’s first range
of nuclear cables with certified 60-year lifespans.
“We intend to leverage our position to secure similar contracts in other advanced countries, who
are looking to nuclear energy to meet growing demand,” said Ahmad Al Shaikh, Ducab’s
chairman.

Oman floats tender for Duqm refinery service corridor
© Times of Oman + NewBase
Muscat: A major tender for building a service corridor between Duqm Refinery and a liquid jetty has been
floated by the Special Economic Zone Authority (Sezad) here on Monday.
The scope of work for the service corridor includes earthworks, security-related work and bridge work to
allow Duqm Refinery to lay its pipes, connecting it to the Port of Duqm in the industrial zone. "This is an
engineering, procurement and construction (EPC) projectthat requires experienced contractors with previous
experience in the design and construction of pipeline support," said a tender announcement by Sezad.
Tender documents for the project will be available for contracting firms from August 24, and the last date of
submission is September 16. Duqm Refinery is developing a grassroots refinery in Duqm that will produce
an output of 230,000
barrels per day,with
diesel, jet fuel,
naphtha and LPG as
its primary products.
Galfar Engineering
and Contracting won
a tender for site
preparation work for
the proposed
refinery at the
Special Economic
Zone in May.Site
preparation work
will be completed
during the second
quarter of 2016.
Duqm Refinery and
Petrochemical Industries Company is a joint venture between Oman Oil Company (OOC) and International
Petroleum Investment Company (IPIC). This mutually beneficial partnership between OOC and IPIC was
established during the incorporation of Duqm Refinery, which is based in Al Duqm in the southeasternAl
Wusta Governorate of the Sultanate.
This strategic maritime location gives the project the competitive advantage of being in the path of
international shipping lines in the Indian Ocean and the Arabian Sea, thus easing the process of transporting
goods into and out of the region.

Malaysia feels heat as its solar industry soars
Oman Observer
Malaysia’s rapid ascent as a solar energy equipment manufacturer has triggered allegations of underhanded
strategies. The country, which did not have a solar industry before 2007, was the world’s fourth-largest
producer of solar cells last year behind China, Taiwan and Japan.
Its fast growth is mainly
attributed to the influx of
multinational corporations,
including the US First
Solar, Taiwan’s AUO
Sunpower, Germany’s
Hanwa Q Cells and Japan’s
Panasonic Energy. In the
past two years, the
government has granted
five other foreign
companies permission to set
up their own production
plants, the Malaysian Investment Development Agency (MIDA) said.
The Ministry of International Trade and Industry said it is working with the European Union on allegations
that Chinese manufacturers have re-labelled their products “Made in Malaysia” to circumvent EU
requirements imposed on Chinese solar products.
The Office of the US Trade Representative has also expressed concern about generous tax breaks granted to
foreign investors, including solar energy manufacturers. It asked Malaysia to provide details of how it works
so that other countries can assess whether the tax breaks violate a World Trade Organization ban on export
subsidies.
The government says solar companies are attracted to Malaysia because of the country’s vibrant semi-
conductor manufacturing sector, a process similar to that of making solar cells. “This makes Malaysia a
perfect fit for the solar industry to build upon,” MIDA said.
Other factors contributing to Malaysia’s rise are a combination of low-cost labour with the availability of
skilled engineers, according to Song Eng Eng, an analyst at EXIM Bank Malaysia. A 100 per cent income
tax break for 10 years, along with a 100 per cent investment tax allowance for capital expenditures, has
persuaded solar manufacturers to relocate to Malaysia, Song said.
The subsidies provided to attract foreign investments are within international trade rules, the government
said. “Just like in other promoted sectors, Malaysia provides incentives in the form of corporate tax
exemptions to all eligible enterprises engaging in solar industry on a non-discriminatory basis,” MIDA said.
Malaysia’s solar industry has also benefited from a trade war between the US and China in the solar
manufacturing sector, it said.
When the US government imposed higher tariffs on solar manufacturers from China and Taiwan a year ago,
there should have been “no surprise” that these manufacturers would seek new sites for their export markets,
MIDA said. Chinese energy giant Jinko Solar has set up a factory in Penang,

Britain offers new shale gas sites for first time in seven years
REUTERS + NEWBASE
Britain offered shale gas exploration licences for the first time in seven years on Tuesday,
awarding new sites to companies including IGas (IGAS.L) and France's GDF Suez (ENGIE.PA).
Prime Minister David Cameron has promised to go "all out for shale", hoping it will help reduce
dependence on energy imports and generate additional tax revenue, despite opposition from
environmental campaigners.
Many other European countries, including
France and Germany, have banned the use of
shale gas hydraulic fracturing, or fracking, due
to environmental concerns. Britain is estimated
to have decades worth of gas needs
underground but so far has no shale gas
producing wells.
All of the new licensing blocks are in England
as parliaments in Wales and Scotland have
imposed moratoriums on fracking due to the
public's environmental concerns. The new
licensing round, delayed since the start of the
year, offered 27 new shale gas and
conventional exploration blocks and attracted
95 applications from 47 companies, the
government said, showing developers are still
interested in exploring for the unconventional
fuel in Britain.
The government also offered new blocks on
Tuesday to explorers Egdon Resources
(EGRE.L) and Cuadrilla Resources, as well as
Swiss chemicals company INEOS. "We are
keen to move quickly to evaluate the potential
of this resource, and determine if we can
economically produce gas from our licenses," said Gary Haywood, chief executive of INEOS
Shale, in a statement. The licences, around half of which relate to conventional oil and gas drilling,
will be formally awarded once further assessments are carried out on a second tranche of 132
blocks that could be awarded at a later date.
INEOS has applied for shale gas licences in Scotland as part of a $1 billion investment plan but
has so far been unable to proceed due to the moratorium. However, progress has been slow
because of opposition by local residents and environmental campaigners. Some are concerned
about groundwater contamination from chemicals used in the hydraulic fracturing -- or fracking --
process, while others fear the potential impact on property prices or tourism.
Despite these concerns, the government fully supports shale gas development and Tuesday's licence
awards show it intends to continue pushing it forward. Last week, it changed planning guidelines to fast-
track applications for fracking after local politicians in northwest England rejected two Cuadrilla planning
permits in June. Cuadrilla said on Tuesday it would work with the local communities in its new licence
areas from the start.

UK: OGA announces 27 onshore blocks to be offered as part of 14th
Onshore Oil and Gas Licensing Round
Source: OGA
The Oil & Gas Authority (OGA) - the UK’s oil and gas regulator - has announced that 27 onshore blocks
from the 14th Onshore Oil and Gas Licensing Round will be formally offered to
companies.
A second group of 132 further blocks has been subjected to detailed assessment
under the Conservation of Habitats and Species Regulations 2010, the findings of
which are now out for consultation. Subject to the outcome of that consultation,
the OGA will announce offers for the second group of licence blocks later in the
year. The licences for all offered blocks will then be granted after the terms and
conditions have been finalised.
OGA Chief Executive Andy Samuel said:
'With almost 100 applications received, the 14th Onshore Round has
attracted significant interest and high-quality proposed work
programmes from a range oil and gas companies. Today’s
announcement regarding the offer of 27 blocks gives those successful
companies assurance about the blocks that they will be formally
offered later in the year.'
UK Energy Minister Lord Bourne said:
'As part of our long-term plan to build a more resilient
economy, create jobs and deliver secure energy
supplies, we continue to back our onshore oil and gas
industry and the safe development of shale gas in the
UK. This is why the OGA has moved quickly to confirm
the winners of licence blocks which do not need further
environmental assessment.
'Keeping the lights on and powering the economy is not
negotiable, and these industries will play a key part in
providing secure and reliable energy to UK homes and
businesses for decades to come.
'It’s important we press on and get shale moving, while maintaining strong environmental controls.
Investment in shale could reach £33 billion and support 64,000 jobs creating financial security for
hardworking people and their families, whilst providing a cost-efficient bridge to lower-carbon energy use.'
The Habitats consultation, which covers those blocks which do require further environmental assessment,
enables the public and other interested parties to submit responses by the end of September. The OGA will
then consider the results of the consultation before offering any further blocks.
The 14th Onshore Oil and Gas Licensing Round was launched on 28 July 2014 and closed on 28 October
2014. A total of 95 applications were received from 47 companies covering 295 Ordnance Survey Blocks.

Oil Price Drop Special Coverage
Oil prices fall again as lower demand U.S. season looms
Reuters + NewBase
Oil prices fell on Wednesday after eking out gains in the previous session, with the United States
set to enter the lower demand autumn season and Asia's leading economies continuing to show
signs of slowing down.
Oil prices edged up on Tuesday after the release of bullish U.S. economic data and as traders
placed bets on the prospect of falling crude stockpiles.
But a rout that has dominated the past six weeks remains in force, analysts say, and U.S. West
Texas Intermediate (WTI) crude and internationally traded Brent have dropped back again.
"Any recovery in WTI prices from a six-year low may be short-lived with the U.S. entering the slow
demand period in September," ANZ bank said on Wednesday.
U.S. crude futures CLc1 were trading at $42.46 per barrel at 0339 GMT, down 16 cents from their
last settlement. Brent LCOc1 was down 22 cents at $48.59 a barrel.
"The recent drop in the price of oil confirms ... the global commitment producers have to their
current levels of (high) output," said Scott Cockerham, managing director Houston-based Conway
MacKenzie's Energy Advisory Services.
"Could we see $30 oil in the next 15 months? Absolutely, and headlines like China's recent yuan
devaluation and the prospect of sanctions on Iran being lifted will only contribute to such volatility,"
he said.

Cockerham added that a slowdown in U.S. drilling would not pull down global supplies until 2017
and prices would likely remain low and volatile before then.
China's Commerce Ministry said on Wednesday it cannot rule out falling exports in the coming
months, after data showed exports tumbled in July, and the ministry said the country's foreign
trade was facing a severe situation and uncertainties.
Exports in July tumbled 8.3 percent from a year earlier, their biggest drop in four months and
imports fell 8.1 percent from a year earlier. Despite the overall bearish market sentiment, some
analysts expect a price rebound, driven by strong demand for refined products, particularly in
Asia.
"Crude prices are setting the stage for a significant bounce from the recent downturn. Product
demand growth for the remainder of the year remains constructive (in Asia), and products will get
a lift from fall maintenance," U.S.-based PIRA Energy said in a note to clients.
However, PIRA also said that Asian refinery margins would be slow to recover as the region
remains oversupplied with oil products due to rising supplies from new refineries in the Middle
East.

OPEC's ‘Fragile Five’ Face Rising Cost in the Fight for Oil Market Share
Bloomberg
The costs of OPEC’s plan to protect members' share of the oil market by out-producing rivals are
mounting. As oil prices slump to six-year lows, the risks of worsening political turmoil are rising in
the organization’s most vulnerable nations. This includes Algeria, Iraq, Libya, Nigeria and
Venezuela, a group dubbed the ‘Fragile Five' by RBC Capital Markets Ltd.
The pain doesn’t end there. With even Saudi Arabia facing its biggest budget deficit in almost
three decades, consultant Petromatrix GmbH says the plan to produce at full throttle was a
“strategic mistake.”
Oil prices slumped to near $40 a barrel in New York on Aug. 14 as a global surplus
endures almost nine months after the Organization of Petroleum Exporting Countries unveiled its
plan to squeeze rivals led by U.S. shale drillers. American production has stubbornly refused to
buckle.
This chart shows how the budget position of Saudi Arabia and other key OPEC members has
quickly worsened:
Some OPEC members may start asking whether the pain's been worth it, said Christopher
Louney, an analyst at RBC Capital Markets LLC.
"If we haven't got a recovery by the mid-point of next year, that's when the questions will arise...
has the strategy paid off or not, and will there need to be a change in strategy."

Venezuela “appears poised for a near-term crisis” amid protests and shortages of basic goods as
the country heads for parliamentary elections in December, according to RBC analysts Louney
and Helima Croft. The cost of insuring the government’s five-year bonds has rebounded to near a
12-year high.
While promises of reform from newly elected President Muhammadu Buhari have bought Nigeria
time, the grace period won’t last indefinitely, RBC says. The naira has weakened 7.8 percent
against the dollar this year, pushing inflation outside the central bank’s upper target of 9 percent,
and the recovery of Nigeria’s depleted cash reserves has hit a plateau.

Libya’s risks of further political chaos are among the highest in the organization, matched only by
Iraq, according to RBC. Threats have also intensified in Algeria as it faces “a looming leadership
transition,” spurring the country last week to suggest an emergency OPEC meeting. The
economies of both North African nations tipped into a current account deficits last year after more
than a decade of surpluses.
As chief architect of OPEC’s new policy, Saudi Arabia has the financial resources to absorb the
short-term pain involved. These include a budget deficit for 2015 that the International Monetary
Fund estimates at 20 percent of gross domestic product, and the whittling away of $80 billion in
foreign currency reserves. Here's Louney again on the Middle East's most important producer:
"They do still have FX reserves, they do still have sovereign wealth funds, they do have that
cushion to sit on for a while. But the question is: When we get to that point where the recovery to
$70 is supposed to happen, and we're not there? That's when it's going to get re-evaluated."

Low oil price: Opportunities, challenges for downstream sector
Mirko Rubeis*
Falling oil prices have deeply affected the oil and gas upstream (exploration and production), with many
projects shelved or put on hold globally. For much of the downstream sector though, the current
environment also provided cheaper feedstock (crude oil) and a sudden stimulus to demand.
In line with this, over the past few months, the plunge in oil prices has
helped temporarily improve refining margins across Europe and Asia. In
fact, it assisted in the erosion of some of the supply advantages enjoyed
so far by US refiners. Different factors have supported this: firstly, the
slower production growth of US shale oil and the removal of some
infrastructure bottlenecks narrowed the price differential between WTI
and Brent, a key advantage of US refiners. A stronger dollar further
contributed to the reduction of the competitive position of US players.
This doesn’t mean that US refiners will be lagging behind anytime soon;
these companies will continue to hold a competitive edge, particularly
given their gas and energy costs, which are lower than their competitions’
in Europe and Asia.
Overall, sinking oil prices have indisputably served as a shot in the arm for the downstream sector in the
short term. The fundamental challenges for the refining industry, however, remain. The global refining
market is set to remain oversupplied in the coming years and this overflow could only be alleviated if low
prices persist – as this would, in turn, substantially boost economic activity – and a large portion of planned
refining projects are cancelled.
Even in the case of persisting low crude oil prices, several questions exist on the degree to which demand
could significantly increase in the medium or long term. Efficiency and substitution (biofuels, natural gas,
and electric vehicles) may limit the demand growth upside. Furthermore, in many Asian countries fuel
prices remain regulated (subsidized) and the impact of lower oil prices on demand could not be immediate –
or if these countries decide to take the opportunity to remove the subsidies when oil prices are low (to limit
price increases when subsidies are lifted, and therefore mitigate public malcontent - i.e. what India and
Indonesia have just done) prices could even increase, adversely impacting the demand (particularly when oil
prices rise again).
Based on this, we expect that refining margins will remain under pressure for the medium and long- term,
largely due to overcapacity and relatively slow demand growth.
In the Middle East, refiners have reaped significant benefits from the temporary overall improvement in
margins. For GCC countries that have invested heavily in the downstream sector (such as Saudi Arabia),
higher downstream margins have provided partial relief from the drop in crude oil revenue.
Despite the fact that most national oil companies (NOCs) in the region are integrated along the value chain –
and more rigorous capital discipline is being exercised not only upstream but also downstream – no major
refining projects have been shelved to date. This is also because, prior to the sharp slump in oil prices,
numerous mega-projects were already in advanced stages of development or close to completion.
With two world-class refineries (SATORP and YASREF) starting operations in Saudi Arabia and the
expansion of the UAE’s Ruwais Refinery being completed (among other projects), the Middle East has
emerged as a formidable global player in the refining sector and a key exporter of refined products,
particularly diesel.

This increased exposure to an oversupplied refining sector (to which Middle East contributed significantly)
requires Middle Eastern players to step up the game and improve their ability to compete more aggressively
in the market in order to extract value from their new, large, and complex but costly assets. Scale, supply
advantage and location may not be the only attributes sufficient to ensure satisfactory returns anymore.
We identified four key opportunities for Middle Eastern downstream players:
• Focus on operational excellence
• Build strong trading capabilities
• Expand internationally
• Advocate for subsidies reduction/removal on refined products
In the first place, Middle Eastern players need to focus on operational excellence. Despite being a topic of
conversation amongst Middle Eastern refining managers for years, operational efficiency in the region still
lags behind international best practices. Limited pressure on reducing personnel (due to the role of NOC
employers), subsidized gas/energy, and security of supply considerations often prevailing over bottom line
focus, are among the reasons for the efficiency gaps that still persist in the region.
In our experience supporting over 30 worldwide IOC, NOC and independent refineries, a systematic profit
improvement program can result in 1-2 $/bbl margin improvement, acting on technical levers such gross
margin optimization, energy management, maintenance, auxiliary operations; as well as on 'soft' levers such
as organization and culture to 'hardwire' in the employees certain desired behaviors, required to make the
change and the gains sustainable over time.
Once the manufacturing efficiency is improved, Middle Eastern players should also improve the way in
which they market their products. Particularly in today’s volatile market environment, Middle East’s O&G
companies should consider strengthening their trading capabilities and making additional investments in
logistics assets in markets spanning Asia, Africa, and Europe. This could help them efficiently dispose of
the growing export product volumes coming from their domestic assets, as well as securing the products
needed for their domestic markets.
A strong trading arm could make the argument for complete domestic self-sufficiency across all products
less compelling, and provide an alternative to further large grassroots domestic refining investments, often
designed primarily to satisfy local demand. The configuration and scale needed to make these assets
economically viable often results in mega-complexes that rely on large export volumes to sustain their
economics. This trend is precisely what contributed to the current refining glut. Future refinery investments
in the Middle East should be uniquely driven by economics and profitability, rather than security of supply
considerations (which is obsolete in an increasingly liquid refined products market anyway).
In the current environment, a further opportunity for Middle Eastern producers is to increase their presence
in international refineries.
In fact, in addition to causing a steep fall in oil prices, the oversupply of crude has triggered a fierce battle for market
share among crude oil producers. As a result of this ‘war’, owning interests in international refineries – a strategy
pursued in the past by countries such as Saudi Arabia, Kuwait, and the UAE, for different reasons – has now become
a strategic advantage. Investments in refining assets in key markets help secure the placement of volumes and curb
the need to slash crude official selling prices (OSP) to defend market share. This is a clear example of value from
integration, questioned in the past years of high oil price and low refining margins. Last but not least, today’s low-oil-
price environment presents an opportune moment to eliminate or reduce subsidies on refined products – a major
burden on the region’s government budgets and oil downstream companies’ P&Ls. The UAE has set the example and
the hope is that other countries will follow.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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Khaled Malallah Al Awadi,
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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.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase 19 August 2015 K. Al Awadi

Microsoft word new base 668 special 19 august 2015

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Microsoft word new base 668 special 19 august 2015