Newbase 647 special 14 july 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 14 July 2015 - Issue No. 647 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
More investment into strategic areas urged for Saudi petchem
sector to be globally competitive
Saudi Gazette + NewBase
In an increasingly competitive marketplace, Saudi Arabia’s chemical industry needs to channel
more investment to strategic areas to enhance its global competitiveness, Dr. Abdulwahab Al-
Sadoun, Secretary General, Gulf Petrochemicals and Chemicals Association (GPCA) told Saudi
Gazette in an interview.
He stressed that investment should put more emphasis on “developing local innovation
capabilities.” Several steps in this direction are already in place including the launch of several
Products Application Innovation Centers by leading Saudi companies such as Sabic, Tasnee and
Sipchem, he noted.
The Saudi government has invested
in launching KAUST, the first
research university in the region
which was complemented by
launching two Techno Valleys in
Riyadh and Dhahran.
However, more coordination is
needed to ensure optimizing the
resources utilization in this strategic
area, he pointed out.
Moreover, Al-Sadoun said “product
diversification drive” into higher
value products (specialty and
performance chemicals) should
continue. A key challenge
associated with this drive could be getting access to leading-edge technologies and one option
which lend itself to overcome this challenge is the acquisition of technology companies, he added.
He also called for the development of the downstream industry not only to capture more of the
value of the exported products and substitute the imported chemicals to the GCC, which,
according to GPCA research is valued $23.1 billion as of 2013, but in line with the GCC
government’s direction to create jobs opportunities for locals.
He likewise urged the coordination of efforts between local companies involved in developing new
breakthrough technologies such as crude oil-to-chemicals to offset the industry’s challenge in
securing supply of feedstock amid constraint in supply of the favorable ethane.

In addition, to sustain its growth trajectory, the industry needs to improve its performance and
global competitiveness through “functional excellence” to sustain its market share in
Manufacturing, Supply Chain, Marketing, Sourcing and Service Functions .
The enablers to all areas of Excellence, i.e., talent including bringing more GCC women in the
workforce. “It is our opinion that today’s challenges are tomorrow’s opportunities. We have
reasons to believe that the industry’s future is bright.
This confidence is based on the projection for the global chemicals demand to be doubled by
2030 and the fact that the Kingdom has privileged access to fast growing markets such as Asia
and Africa, with 40% of the world’s population within 3,000 kilometers of Saudi Arabia,” he said.
Excerpts from the interview follow:
What specific steps are being taken by PetroRabigh and Sadara with respect to research and
development of state-of-the-art research centers and in Jubail Industrial City? Are these joint
venture companies, products of Saudi Aramco, Dow and Sumitomo, thriving because of
investment or does something different need to be done?
Both of the outlined projects are key milestones in the diversification drive that the industry in the
Kingdom had embarked on in the early 2000s to move from a predominantly cyclical commodity-
based industry to an industry of a more diversified products portfolio, with a steadily increasing
share of less cyclical and higher-value products (specialties and performance chemicals).
Additionally, the two Saudi Aramco petrochemical joint ventures are key milestones in the
emergence of Saudi Aramco as a fully integrated energy company and are in line with the
company’s strategy to be among the top ten chemical producers in the globe by 2020.
Saudi Aramco has demonstrated full commitment to the national agenda and the development of
mega projects like PetroRabigh and Sadara enable the production of new products that will
stimulate a new set of downstream industries in the Kingdom.
It is well-known that the specialty products require significant technical support to customers and
as such their producers have to invest in setting research centers focused on the application
aspects of the new and existing products.

What are some of the key projects within KSA that will come on stream in 2015 as well as
upgrades in existing facilities that will continue to see production growth?
• Sadara, will produce nearly 26 products which include: ethoxylates, amines, elastomers.
Several production units are scheduled to start-up in the 2nd half of 2015.
• Sipchem commissioned its plant to produce Ethylene Vinyl Acetate (EVA) and
Polyethylene Vinyl Acetate (PEVA) in Jubail.
The company had also commissioned its Polybutylene Terephthalate (PBT) plant early
2015. The plant will a capacity of 63,000 tons per annum of PBT.
• Safco, an affiliate of Sabic, will begin production of its new Safco 5 Plant in Jubail. The
plant is designed to produce 1.1-million m.t./year urea.
This is a significant development as the plant will be the world largest carbon capturing plants,
consuming 850,000 m.t./year of carbon dioxide, the world-largest CO2 capturing plant.
• Saudi Hydrogen Peroxide, a JV between Sadara and Belgium’s Solvay Group. The 300,000
tons/year plant is scheduled to begin production in 2015 and will be one of the world’s largest
hydrogen peroxide propylene oxide (HPPO) plants.
Looking at the second half of fiscal year 2015, how will the Sadara impact the petrochemical
sector in KSA (jobs, growth, projection)?
The Sadara project is Saudi Arabia’s first venture into petrochemicals based on naphtha
feedstock, offering a broader portfolio of products, particularly in the Aromatics (BTX) value chain
which will stimulate a new set of downstream industries in the Kingdom.
Furthermore, Sadara will include an integrated “Value Park” (Chem VP), which will accommodate
large process businesses. The Chem VP Park will be located next to the Sadara Complex and will
have access to raw materials via rail.
This will enable these businesses to produce number of high-value added products for the first
time in the Kingdom such as: RO Membrane used by the desalination plants, Elastomers, among
others.
Further, the “Chemical Value Park” will be integrated with “PlasChem Park” to be developed by
the Royal Commission of Jubail & Yanbu for further downstream conversion of the Sadara
products.
The PlasChem Park will host smaller, more downstream, fabrication type activities. Both of the
outlined parks will create numerous rewarding job opportunities for Saudi nationals. The planned
products will help making available key building blocks for the National Industrial Cluster Program
(NPCD) in sectors of energy, transportation, infrastructure and consumer products.
Some issues that have already arisen in 2015 include Sabic’s disappointing 4Q2014 earnings
report and rising domestic consumption coupled with a deficit in gas production. How best to
approach these specific issues if the petrochemicals is to have a good fiscal year 2015? The
slumping oil prices have had a serious impact on the petrochemical prices which have dropped on
average by 25-35%.

The health of the global economy had also contributed to this weak prices and created a difficult
near-term outlook for the global chemical industry and it is hard to predict the outlook for the rest
of the year.
The low oil prices have made the naphtha based producers in Europe and Asia more competitive
and resulted in further pressure on the petrochemical prices. This, in turn, has resulted in a drop in
sales revenue for all the petrochemicals producers in Saudi Arabia, as well as elsewhere around
the world.
We have noticed that the producers of commodity petrochemicals such as those in the Kingdom
have been the most impacted compared with their global counterparts, who produce specialty
chemicals which have been the least impacted by the current weak market prices.
Given that the industry in the Kingdom is not a price setter, in such environment it has to embark
on cost-cutting campaign to optimize its operational model to improve its bottom line. In late
January 2015 at the Global competitiveness Forum, Sabic’s then CEO, Mohamed Al-Mady, said
the petrochemicals sector has played a significant role in creating value for the country over the
last 40 years.
Will this continue to be the case in the short and medium term? From your vantage point at the
GPCA, how is sustaining a high-value business chain, diversifying the economy and adapting to a
competitively priced feedstock vital for the sector?
There are good reasons to believe that the industry will continue its expansion drive both in the
local and international markets. According to GPCA analysis, the Saudi petrochemical industry will
add over 30 Million ton to reach production capacity of 126 Million ton by the Year 2020, up from
94.6 Million ton in 2014.
This expansion will bring alone more socio-economic benefits to the Kingdom. To do so, the
industry should invest heavily in developing “Innovation Capability Building”. This entails is the
implementation of a new or significantly improved product (good or services), or process, a new
marketing method, or a new organizational method in business practices”. Collectively, this will
enhance the global competitiveness of the industry in Saudi Arabia.
What are concrete steps to ensure KSA’s path forward and being ‘out in front’ in the
petrochemical sector?
• The Kingdom had successfully developed a globally competitive petrochemical industry,
particularly in the commodity products segment.
•
The government has been a key enabler behind this success, by providing massive
investments to develop a world-class infrastructure in Jubail and Yanbu.
•
The industry is now entering a new phase characterized by consistent capacity expansion
and a diversification down the value chain into high-value products.
Given that the petrochemical industry is a global industry, the path forward should involve creating
a competitive differentiation through ‘functional excellence’ and continue our focus on innovation
and sustainability. This in turn requires having producers with “critical mass” either through
organic or inorganic growth.

Saudi Arabia opens oil taps, ups June output
Reuters + NewBase
Saudi Arabia ramped up its crude production to a record high in June, reaffirming its strategy of
defending market share and feeding a rise in global as well as domestic demand. The world's top
oil exporter said it pumped 10.56 million barrels per day (bpd) of oil last month, up 231,000 bpd
from May, according to official figures released by Opec on Monday.
Saudi Arabia has been increasing its production steadily in the past few months. The June data
eclipsed recent peaks, according to records going back to the early 1980s. The output boost
highlighted Saudi Arabia's determination to defend market share against higher-cost producers,
such as US shale drillers, and other competing supply sources.
Poorer members of
the Organisation of
the Petroleum
Exporting
Countries have
called for
production cuts to
shore up oil prices,
which are down
about 50 per cent
since June 2014.
The rise in
production also
underlines strong
growth in global demand and an increase in crude supplies to local refineries and power plants
during summer, when air-conditioning usage soars and as the kingdom ships more oil products.
For example, the amount of crude burnt to generate power last year rose from around 350,000
bpd in March to nearly 830,000 bpd in June, according to the Joint Oil Data Initiative (JODI). Local
refineries processed 1.852 million bpd in April 2014 but by the same month this year that had
risen to 2.224 million bpd, figures from JODI, an international body set up to promote oil-market
transparency, show.
Moreover, Yanbu Aramco Sinopec Refining Co (Yasref), a local joint venture between Saudi
Aramco and China Petrochemical Corp (Sinopec), reached its full processing capacity of 400,000
bpd in late June.
Opec heavyweight Saudi Arabia exported 7.737 million bpd in April, the latest month for which
such data is available. That was down slightly from 7.898 million bpd in March, the highest level in
almost a decade.
Oil minister Ali Al-Naimi has said Saudi Arabia's output is likely to remain around 10 million bpd,
and that he was "very positive" about the outlook for Asian oil demand. Al-Naimi also said he
expects oil demand to pick up in the second half of 2015 while supply decreases. Opec said on
Monday it expected demand for its own crude to rise by 860,000 bpd in 2016 to 30.07 million bpd.
But it cut its estimate of demand for its crude this year by 100,000 bpd to 29.21 million bpd

Iraq: Genel Energy announces trading and operations update
Source: Genel Energy
Genel Energy has issued a trading and operations update in advance of the Company’s half-year
2015 results, which are scheduled for release on 6 August 2015. The information contained herein
has not been audited and may be subject to further review.
Tony Hayward, Chairman of Genel, said:
'Production has grown rapidly in the first half of the year, increasing 41% year on year, with
operational delivery driving record volumes above 100,000 bopd net to Genel on peak days. This
increase has been integral in helping the Kurdistan Regional Government achieve its export goals,
and the KRG is firmly committed to ensuring companies are paid in full for their production. Over
600,000 bopd of exports are now flowing to Ceyhan and, as distribution of the resulting revenues
stabilises, the KRG is moving towards a financial position from which to make export payments to
contractors.
Progress has also been made on our world-class Miran and Bina Bawi assets, the development of
which provides a huge opportunity for both Genel and the Kurdistan Region of Iraq as a whole.
We are now working on putting in place all of the components to progress this transformational
project to its development and ultimate monetisation.'
KURDISTAN REGION OF IRAQ ('KRI') OIL PRODUCTION
• Net working interest production for H1 2015 averaged 88,800 bopd, an increase of 41% on
H1 2014. The Company’s net working interest production in May and June was 95,600 bopd
• The Company’s 2015 production guidance is maintained at 90-100,000 bopd
• Gross production by field and sales route for H1 2015 is shown in table above
• In H2 2015, Genel will seek to optimise the mix between domestic and export sales from
Taq Taq and Tawke, balancing the benefit of near-term cash flows with the requirement for
both fields to contribute to exports via the KRI-Turkey pipeline
• At Taq Taq, surface processing capacity stands at 150,000 bopd following the successful
commissioning of a temporary production facility in Q1 2015. Completion and
commissioning of the second central processing facility, which has planned capacity of
90,000 bopd, is on track for year-end 2015
• At Tawke, wellhead, processing and pipeline capacity was successfully doubled to 200,000
bopd during H1 2015. Record daily production of c.180,000 bopd was delivered in late May

KRI PIPELINE CAPACITY AND EXPORTS
• The KRI oil pipeline from Khurmala to Fishkhabur now has capacity of 700,000 bopd, with
plans to increase to 1 mmbopd in 2016 through installation of additional compression
• According to Kurdistan Regional Government ('KRG') data, in May and June 2015 574,400
bopd was exported from northern Iraq to Ceyhan, not taking into account pipeline
downtime, representing 20% of total Iraqi crude exports in that period, and underscoring
the strategic importance of the KRI pipeline
• Production from Taq Taq and Tawke is not constrained by pipeline capacity
KRI GAS OPERATIONS
• Progress has been made on all necessary components for the development of the Miran
and Bina Bawi fields, which will deliver the gas supply to underpin the KRI-Turkey Gas
Sales Agreement, signed in November 2013:
o In June 2015, Genel executed a detailed term sheet with the KRG for the upstream
production sharing contract, which retains Genel’s upstream project economics in
line with the original framework announced in November 2014
o A company will be contracted by the KRG on a build, own, operate and transfer
('BOOT') basis for the gas treatment facilities. Genel is working with the KRG on the
midstream development, currently leading discussions in relation to FEED, EPC
tender, and financing options
o Genel will sign a gas supply agreement with the KRG for the sale of raw gas from
Miran and Bina Bawi
• The sale and purchase agreement for OMV’s 36% operated stake in the Bina Bawi field is
proceeding in parallel with the progress on the wider gas project, and is expected to
complete on the signing of final contracts
FINANCIALS
• Revenue for H1 2015 is estimated at $200 million
• In H1 2015, crude oil realisations averaged c.$42/bbl, a 42% decrease on H1 2014 due to
the impact of lower global oil prices
o Pipeline export realisations for Taq Taq and Tawke are estimated at $45/bbl and
$40/bbl respectively
o Taq Taq domestic market sales (including Bazian refinery) realised c.$44/bbl
o Tawke domestic market sales realised $36-38/bbl ? 2015 revenue guidance is
unchanged at $350-400 million on a Brent oil price of $50/bbl
• In its H1 2015 accounts, Genel expects to record an exploration expense of c.$10 million in
respect of its Africa and KRI operations .
CAPEX AND BALANCE SHEET
• Capital expenditure in H1 2015 is estimated at $90 million, the majority of which was spent
on the Taq Taq and Tawke development programmes

• 2015 capex guidance is reduced to $150-200 million from $200-250 million, due to the
exiting of exploration commitments and capital discipline on our KRI operations. Overall
activity levels and associated expenditure during 2015 will continue to depend on oil prices
and the evolution of payments for KRI exports
• Successful issue of $230 million senior unsecured bonds in March 2015
• Cash balances at 30 June 2015 stood at c.$470 million, with net debt of c.$220 million.
Cash balances reflect a net trade receivable with the Kurdistan Regional Government of
c.$378 million at the end of the period (from c.$230 million at end 2014), in addition to a
working capital draw of c.$60 million in respect of 2014 Africa exploration activity .
Genel Energy co-founder Tony Hayward open to sale
Tony Hayward, former chief executive of BP, is prepared to sell Genel Energy, the
lossmaking Kurdistan oil producer he co-founded, should a buyer hunting 'high-quality
assets' make an approach at the right price.
Mr Hayward, who has stepped back
from his role as chief executive to
become Genel’s chairman, signalled
his readiness to negotiate a deal,
telling the Financial Times that he
would 'always contemplate
interesting offers' for the group,
which he set up with financier Nat
Rothschild and former Goldman
Sachs banker Julian Metherell.
'We see ourselves both as a potential
consolidator and, given the nature of
the oil industry and natural state of
affairs, we also see ourselves as
potentially being consolidated,' Mr
Hayward said.

China Oil Imports Rebound as New Emergency Reserves Open
Bloomberg + NewBase
China’s crude imports rebounded last month to near a record as the world’s second-largest oil
consumer began filling tanks at a new strategic petroleum reserve site.
Overseas shipments rose to 29.49 million metric tons in June, a 27 percent increase from May
when shipments were the least since February 2014, according to preliminary data released by
the Beijing-based General Administration of Customs on Monday. Oil imports last month were
equivalent to about 7.2 million barrels a day compared with a record 7.4 million in April,
Bloomberg calculations show.
China’s crude
imports rose
as it began
filling the
second phase
of emergency
reserves in the
eastern city of
Qingdao that
have a
capacity of 3
million cubic
meters (about
19 million
barrels). Oil
imports may climb in the third quarter from the previous three months as another storage site in
the southern Chinese city of Huizhou is scheduled to open, ICIS China, a Shanghai-based
commodity researcher, said July 1.
“Filling of the strategic reserves in Qingdao definitely played a part in the increase,” Amy Sun, an
analyst with ICIS China, said by phone from Guangzhou. “Also, refineries were gradually
resuming operations in June as it was toward the end of seasonal maintenance, pushing up crude
demand.”
China’s crude imports in the first six months of the year grew by 7.5 percent, slower than the 10
percent pace in the same period of 2014, according to customs data. The country’s gross
domestic product expanded by 6.8 percent in the second quarter, according to the median
estimate of economists surveyed by Bloomberg before official data released Wednesday. That
compares with 7 percent in the first quarter.
Increasing Reserves
China may add 100,000 barrels a day of oil to strategic stockpiles this year and increase it to
200,000 barrels a day in 2016, PIRA Energy Group, a New York-based energy consultant, said in
May. The government has filled four sites in the first phase with 91 million barrels of crude, the
National Bureau of Statistics said on Nov. 20. The second phase, which includes the Qingdao and
Huizhou sites, is designed to take in 168 million barrels, according to Gao Shixian, a deputy
director at the National Development Reform and Commission’s energy research institute.
The nation’s crude processing is poised to climb 2.5 percent in the next three months from the
previous quarter amid reduced refinery maintenance, ICIS China said on July 6.

US: Shale Oil Output Heads for Record Drop After Drilling Swoon
Bloomberg
Shale fields that powered the U.S. energy renaissance will suffer the biggest drop in output since
the boom began after companies pulled more than half their drilling rigs.
Production from the prolific tight-rock formations such as the Eagle Ford in southern Texas will
decline 91,000 barrels a day in August to 5.36 million, the Energy Information Administration said
Monday. It’s the fourth month in a row production is expected to slide, after more than tripling from
2007.
Output is slipping after producers from ConocoPhillips to EOG Resources Inc. reduced the
number of drilling rigs in order to
cut costs following a 50 percent
drop in the price of oil. About 645
rigs were drilling for oil last week,
down from 1,609 in October,
according to oil-field service
company Baker Hughes Inc.
“The market is largely anticipating
oil production to keep declining
this year and snap back to a
certain extent in 2016,” Andrew
Cosgrove, a Princeton-based
energy analyst for Bloomberg
Intelligence, said by phone
Monday. Second-half declines this
year will be muted, due to high-
grading and efficiency gains, he
said.West Texas Intermediate crude for August delivery fell 54 cents to settle at $52.20 a barrel
Monday on the New York Mercantile Exchange. It’s down 51 percent from the 2014 peak of
$107.26. “We need to see oil prices above $60 and more toward $65 to spur a recovery in the rig
count,” Cosgrove said. “The longer it stays below $60, the harder it’s going to be for U.S.
production to ramp back up.”
Technology Gains
The EIA’s production forecasts cover the yield from major plays that together accounted for 90
percent of domestic output growth from 2011 to 2012. Output from the Eagle Ford in Texas, the
second-largest oil field in the U.S., is expected to fall 55,000 barrels a day in August to 1.54
million, about 10 percent below peak levels in March. Production in the Bakken region of North
Dakota will decline 22,000 to 1.18 million, the EIA said.
Yield from the Permian Basin in West Texas and New Mexico, the largest U.S. oil field, will continue to rise,
by 5,000 barrels a day to 2.05 million. The EIA’s oil-production estimates are based on the number of rigs
drilling in each play and estimates on how productive they are. As the rig count has dropped, companies
have targeted richer sections of shale and made adjustments like using more sand in each hydraulic
fracturing job to make each rig more productive. That’s why production has not fallen off nearly as much as
the cratering rig count, said Carl Larry, head of oil and gas for Frost & Sullivan LP.
“Technology is beating rig counts to the punch,” Larry said by phone Monday from Houston. “People are
looking for cheaper, more efficient ways to enhance their oil recovery, and they’re finding solutions faster
than the production can decline.”

Oil Price Drop Special Coverage
Oil prices fall as Iran nuclear deal looks imminent, Asia growth outlook dims
Reuters + NewBase
Oil prices dipped on Tuesday as the market awaited a nuclear deal between Iran and six global
powers that could see an easing of sanctions against Tehran and a gradual increase in its oil
exports, while Asian economies showed new signs of slowing.
Front-month Brent crude futures LCOc1 dropped 61 cents to $57.24 a barrel at 0409 GMT.
U.S. crude CLc1 was trading at $51.48 per barrel, down 72 cents.
"With a nuclear deal imminent, it is clear that Iran is preparing to make up lost ground and re-
establish itself as a major supplier," said Sarosh Zaiwalla, a London-based sanctions lawyer.
"Sanctions have crippled Iran's oil production, halving oil exports and severely limiting new
development projects. The prospect of them being lifted is creating great excitement ... as foreign
trade and investment will allow Iran to make huge efficiencies and drive down the cost of
production."
Analysts say it would take Iran many months to fully ramp up its export capacity following any
easing of sanctions. But even a modest initial increase would be enough to pull international oil
prices down further as the market is already producing around 2.5 million barrels per day above
demand.
SLOWING ASIA
Meanwhile, the outlook for some Asian economies dimmed further, potentially eroding oil demand.
China's economic growth is forecast to be the weakest since the 2008/2009 global financial crisis
in the second quarter, which together with a stock market rout raises pressure on authorities to do
more despite little pay-off so far from a run of stimulus steps.
In Singapore, Asia's main oil trading hub and one of the region's biggest ports, the economy
unexpectedly contracted in the second quarter as sluggish global demand knocked the city-state's
manufacturing sector.

OPEC sees higher oil demand in 2016
Reuters + SG + NewBase
THE global oil market should be more balanced next year as China and the developing world
increase oil consumption while supply of shale oil from North America and other regions grows
more slowly, the Organization of Petroleum Exporting Countries (OPEC) said on Monday.
In its monthly report, OPEC said it expected world oil demand to increase by 1.34 million barrels
per day (bpd) in 2016, up from growth of 1.28 million bpd this year. World oil demand growth
should outpace any increase in oil supply from non-OPEC sources and ultra-light oils such as
condensate, increasing consumption of OPEC crude oil, it said.
US crude for July was down 99 cents at $59.46. Oil falls to $63, ample supplies and Greece weigh
Saudi Arabia’s oil output had been 10.31 million barrels a day in April. Last month it reached
10.33 million barrels a day, according to numbers submitted by Riyadh to OPEC. Saudi Arabia
increases oil production to new levelin May.
“This would imply an improvement towards a more balanced market,” OPEC’s in-house
economists said in the report. OPEC said it expected demand for its own crude oil to rise by
860,000 bpd in 2016 to 30.07 million bpd. But it cut its estimate of demand for its crude this year
by 100,000 bpd to 29.21 million bpd.
Oil prices are now around half their levels of a year ago with global crude oil benchmark Brent
trading at around $58.50 a barrel on Monday, down from a peak above $115 in June 2014. Lower
prices have squeezed high-cost oil producers and brought a sharp fall in the number of oil
exploration rigs in operation, particularly across North Amrica.
OPEC said supply of oil from non-OPEC producers was expected to grow by only 300,000 bpd in
2016, down sharply from growth of 860,000 bpd this year. US oil output, which has seen rapid
increases over the last five years thanks to the development of huge shale resources by
“fracking”, is expected to log much more modest supply growth in 2016.
OPEC estimated, based on figures from secondary sources, that its own group crude oil output
rose 283,000 bpd to 31.38 million bpd in June, led by Iraq, Saudi Arabia and Nigeria. It said Saudi
Arabia had told it that it pumped 10.56 million bpd last month, up 231,000 bpd from May.

Shale Gas Supply Held Hostage by Oil to Drop by Most in a Year
by Christine BuurmaNaureen Malik - Bloomberg
After four years of record supply, America’s natural gas output is showing signs of weakness as producers
retreat amid tumbling oil prices. Gas production from the seven largest U.S. shale basins will fall 0.6
percent to 45.1 billion cubic feet a day in August from a month earlier, the biggest drop since March 2014,
the U.S. Energy Information Administration said Monday in its monthly Drilling Productivity report. EIA
estimates have shown supply declines since June. The government’s forecasts signal the collapse in crude
oil prices, which have plunged by about half over the past year, is reverberating in the natural gas market.
As drillers shut wells in liquids-rich deposits from North Dakota to Texas, they’re also curtailing gas output
from those reservoirs. That may prevent further price declines for gas, which has slid almost a third over the
same period.
“Gas is being held captive by oil,” Aaron Calder, senior market analyst at Gelber & Associates in Houston,
said by phone Monday. Natural gas for August delivery rose 1.1 cents, or 0.4 percent, to $2.875 per million
British thermal units on the New York Mercantile Exchange at 12:05 p.m. Singapore time Tuesday. U.S.
benchmark West Texas Intermediate crude fell 1.4 percent to $51.48 a barrel.
The forecast drop in August gas output was led by the Eagle Ford shale, the biggest oil reservoir in the U.S.,
EIA data show. Gas supply there will slide 1.7 percent, while output from the Utica deposit in the U.S.
Northeast, where propane and ethane help to subsidize gas drilling, is poised to climb 0.8 percent.
Gas Bulls
Marketed gas production will expand at a slower pace in 2015, rising 5.7 percent to a record 78.97 billion
cubic feet a day, compared with 6.2 percent last year, government data show. That’s good news for gas
bulls, whose ranks have thinned this year as prices have slid. Money managers have been net-short in four
benchmark gas contracts since January.
Meantime, gas deliveries to electricity generators are up 15 percent from a year ago, according to LCI
Energy Insight in El Paso, Texas. Demand from the power industry, the fuel’s biggest customer, may jump
13 percent this year in response to low prices, according to the EIA. A hotter-than-normal summer would
increase fuel consumption to run air conditioners. “Production is not showing up and that is partially
because the prices are so low,” Derek Salvino, vice president of market research at Tradition Energy in
Stamford, Connecticut, said by phone Monday. “We see some heat in the forecast.”

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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 14 July 2015 K. Al Awadi

Newbase 647 special 14 july 2015

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Newbase 647 special 14 july 2015