New base 02 november 2017 energy news issue 1095 by khaled al awadi

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 Energy News 02 November 2017 - Issue No. 1095 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: Fujairah Oil product stocks down to 15.895 mil barrels
(WAM/Platts) -- Total refined product stocks at Fujairah stood at 15.895 million barrels in the week
to October 30th, down 1.1 percent from the previous week, according to data from the Fujairah
Energy Data Committee, FEDCom, Platts have reported.
While in absolute terms the week on week change was relatively small, stocks of light and middle
distillates fell to their lowest levels since the start of Fujairah stocks reporting, S&P Global Platts
Analytics said in a report.
Consequently, total combined stocks were at a record low, due in part to strong backwardation in
most product markets. Stocks of light distillates fell by 2.5 percent week on week to 4.266 million
barrels, the data showed.
The gasoline market is resisting the usual seasonal demand slump in the fourth quarter due to
healthy regional demand, according to Platts Analytics.
European barrels, which usually flow to the Middle East, have instead been going to West Africa
due to very healthy demand there. In Asia, recent tenders from Indonesia, Vietnam and Sri Lanka
have added to regional demand.

Stocks of middle distillates fell by 9.5 percent week-on-week to 2.245 million barrels, the data
showed.
Stock levels remained below 3 million barrels for the seventh week in a row, although supply
fundamentals could lean towards more supply and higher stocks levels over the next few months,
Platts Analytics said.
Additional spot supplies of gasoil have emerged as the bulk of current refinery maintenance in
both the Middle East and Asia will soon be completed, it added.
Stocks of heavy distillates and residues rose by 1.8 percent to 9.384 million barrels, but remained
below 10 million barrels for a fifth consecutive week.
The first/second month time spread for 180 CST Arab Gulf HSFO swaps rose to a five-week high
of $2.80/mt Tuesday, indicating a stronger backwardation, which discourages traders from
keeping volumes of oil in storage.
The fourth quarter typically sees a pickup in regional bunker demand, but demand in Fujairah is
likely down year-on-year partly because of reduced regional crude exports due to OPEC
production cuts, Platts Analytics said.
FEDCom was established by the Fujairah Oil Industry Zone, FOIZ, to collect, verify and distribute
inventory data to replicate the data sets provided at other global trading centres such as
Singapore and Rotterdam. Fujairah has about 41.5 million barrels of commercial oil product land
storage available for leasing, Platts Analytics estimates.

Saudi Aramco maps Red Sea seabed, hydrographic survey
Arabia Trade + NewBase
Saudi Aramco has undertaken an unprecedented geological task on the Kingdom’s West Coast as
it looks to first understand, and then uncover, the treasures buried beneath the waters of the Red
Sea. Almost a decade ago, Saudi Aramco made the decision to conduct the world’s largest single
hydrographic survey in the Saudi Red Sea waters — an area of almost 200,000 sq km.
Prior 2-D seismic data acquisition had revealed positive
signs for the presence of hydrocarbons in geological
traps. Just like the Eastern Province in the early 1940s,
the Red Sea was frontier territory — unexplored. Its
development would be a catalyst to spur growth and
industry in the Western Region.
A large-scale hydrographic survey was required to fully
understand the seafloor conditions. The hydrographic
survey with its close grid analysis would help support all
oil field operations, including rig movements, laying of pipelines, oil field facilities, and the routes
for supply vessels.
“We got a good understanding, but lacked the topography of the seabed,” noted Saleh A Al-
Maghlouth, manager of the Exploration Operations Department. “So we undertook this
groundbreaking hydrographic survey to help us better understand the structures and where to
drill.”
“The major concerns were the time constraints and vessel safety,” observed Richard G. Moffitt,
Exploration Survey Unit consultant. “These were hazardous, shallow areas previously uncharted.
In fact, there were old navigation charts in existence, but from several decades ago and at low
resolution — insufficient for present-day vessel navigation for exploration projects. Historically,
there were many more shipwrecks in the Red Sea than there were navigation charts.”
Conventional technology at the time utilized echo sounding as a means to map underwater
topography, but this would have taken many years to complete. So instead, Saudi Aramco put at
its disposal the latest technology available to get the job done.
What followed were 848 days of survey operations. Five specially equipped ships would spend a
combined total of 2,823 vessel days using a multi-beam echo sounder to collect data for water
depths between 5 meters and 2,400 metres. This technology was supported by three aircraft
using Airborne LiDAR Bathymetry systems for water depths between 0 m and 40 metres, with a
combined total of 1,260 survey flights completed.
The results were a new high resolution merged bathymetry grid allowing the mapping of complex
geological features, including volcanoes on the seabed. The data was encouraging for Saudi
Aramco. The company was now able to move offshore rigs around and initial exploration could
begin, a statement said.
Previous 2-D seismic data had been compromised in certain sections due to the unpredictable
seabed topography of the Red Sea. If plausible, a 3-D seismic survey would deliver more
definitive and detailed data, and combined with the hydrographic survey, it would yield immensely
useful information with a high degree of certainty. –

Oman: GlassPoint Solar says Oman project on track, Miraah
Glass Point Solar
Petroleum Development Oman (PDO) and GlassPoint Solar, the global leader in solar energy for
the oil and gas industry, have completed construction on the first block of the Miraah solar plant
safely on schedule and on budget, and has successfully delivered steam to the Amal West oilfield.
Upon completion, Miraah will be among the world’s largest solar plants delivering 1,021 MW of
peak thermal energy to generate 6,000 tonnes of steam per day used for heavy oil production,
said a top official.
"The safe and successful delivery of solar steam into our network at Amal is a significant
milestone for the Miraah project and a major
step towards transforming the energy landscape
in Oman," remarked Raoul Restucci, the
managing director of PDO. “Solar-powered oil
production is a sustainable, long-term solution to
meet the Sultanate’s future energy demand and
utilise its natural resources most efficiently,” he
stated.
Restucci said: "GlassPoint, our staff and sub-
contractors have worked tirelessly for more than
1.5 million man-hours without a Lost Time Injury,
while continuing to drive efficiency across all
facets of project construction and commissioning."
"Miraah is a real statement of intent from PDO as we begin the transition away from an exclusive
focus on oil and gas to becoming a fully-fledged energy company with a greater focus on
renewables," he added.
GlassPoint’s solar technology was specifically designed to harness the sun’s energy to generate
the steam required for thermal enhanced oil recovery (EOR), seamlessly integrating into existing
oilfield operations.
The natural gas saved by using GlassPoint’s technology can be exported or directed toward
higher-value applications such as power generation or industrial development, diversifying the
economy.
“We are proud to partner with PDO to build a world-class solar industry out of Oman’s oil and gas
industry roots,” remarked Ben Bierman, the chief operating officer and acting CEO of GlassPoint.
“This project is helping put Oman on the global solar energy map, creating new jobs and
developing expertise in solar technology innovation, project deployment and manufacturing,” he
noted.
Unlike solar panels that generate electricity, GlassPoint’s solution uses large mirrors to
concentrate sunlight and boil oilfield water directly into steam. The steam is used for the extraction
of viscous or heavy oil as an alternative to steam generated from natural gas, he added. The 7
MWt pilot project proved the effectiveness and cost efficiency of GlassPoint’s technology and lead
to significant learnings and design improvements as the technology scales.-

Oman: BP eyes launch of $1billion acetic acid project in 2023-24
Oman Observer - Conrad Prabhu
Energy major BP says it is in discussion with the Omani government, its energy investment arm
Oman Oil Company (OOC) as well as a potential partner, to press ahead with the implementation
of its world-scale acetic acid plant in Duqm — a project involving an investment of around $1
billion.
The revelation was made by Yousuf al Ojaili (pictured), President — BP Oman, at a panel
discussion of chief executive officers of major Oman-based
producers held as part of the OPAL Oil & Gas Conference 2017 on
Tuesday. Salim bin Nasser al Aufi, Under-Secretary of the Ministry
of Oil & Gas, was the Chief Guest at the event.
The proposed Duqm Acetic Acid project, first unveiled in 2013,
envisions a large-scale greenfield, petrochemical scheme based on
BP’s proprietary SaaBre technology.
A Memorandum of Understanding (MoU) was signed with the
Ministry of Oil & Gas, to this effect at the time. Oman Oil Company,
which is a 50 per cent equity partner in the $7 billion Duqm Refinery
project, is also expected to play a key role in the venture.
“We hope to put (the project) on stream by 2023-24 in line with the petrochemical developments of
Duqm Refinery. It is still in the feasibility stage,” Al Ojaili said, adding that BP recently “had a
discussion with a partner — and the government — that has shown interest in developing this
project further”.
Billed as a fundamental building block of the petrochemical industry, acetic acid is used as a raw
material in the production of a wide array of petrochemicals that serve as intermediaries in the
manufacture of adhesives, paints and solvents, as well as the production of purified terephthalic
acid (PTA), one of the most common polymers at the source of the multiple forms of polyesters.
The plant is also expected to spawn investments in a wide range of downstream petrochemical
ventures while also creating synergies with petrochemical investments planned by Oman Oil
Company downstream of the Duqm Refinery mega
project.
“The good thing about this project is that it can
contribute to a local downstream derivatives
industry that can be established in the Duqm
area,” Al Ojaili said, noting that natural gas
required as feedstock for the main project will “not
be big” and will be equivalent, at best, to that of a
fertiliser or methanol plant.
Significantly, the proposed acetic acid project is
one of two major downstream petrochemical
ventures supported by BP in the Sultanate, said
BP Oman’s President. “We have an agreement
with Oman Oil Company for the Ompet PTA

project to provide the licensing technology for the project. Hopefully we will see a (Final
Investment Decision) from Oman Oil. This is their own project, while we will be providing the
technology.”
In 2015, BP and Oman International Petrochemical Industries Company (Ompet) — part of Oman
Oil Company — had signed a licence agreement for supply of BP proprietary technology for a
proposed 1.1 million tonnes per annum (tpa) capacity PTA project in Suhar. PTA is a key
ingredient in the manufacture of polyesters for textiles and packaging materials.
As part of its commitment to the project, BP has agreed to provide a wide range of technical and
knowledge transfer services as well as assist Omani staff within the Ompet joint venture. The
front-end engineering design (FEED) package for the licence had been completed and delivered
to Ompet on schedule, company officials said at the time.
BP’s PTA technology is cited as have the potential to significantly lower capital and operating
costs when compared with conventional PTA plants. The technology is also more energy efficient,
uses less water, and produces less solid waste.
Commenting on its flagship
investment – the Block 61 tight gas
development – Al Ojaili said Phase 2
of the giant scheme – dubbed
‘Ghazeer’ – is in the appraisal phase.
“We are getting ready to take a Final
Investment Decision (FID) together
with our partner (Oman Oil Company
Exploration & Production – OOCEP)
and the government, in early 2018
and aim to put first gas into the
network by 2020-21, along with
associate condensate volumes.”

World Quarter of oil refineries risk closure under climate goals
Ron Bousso + Reuters + NewBase
A quarter of the world’s oil refineries risk closure by 2035 if governments meet targets to limit
fossil fuel burning in the fight against global warming, a report released on Thursday said.
A surge in electric vehicle sales and higher efficiency in internal combustion and jet engines are
expected to slow demand growth for fuels such as gasoline, diesel and aviation fuel in the coming
decades, potentially putting pressure on refining profits.
At the same time, governments around the world are set to introduce legislation in the coming
years to limit emissions of heat-capturing carbon dioxide into the atmosphere in order to meet
targets set at a U.N-backed Paris conference in 2015.
As a result, companies such as Chevron, Royal Dutch Shell, France’ Total and China’s largest
refiner Sinopec could see profits from refining drop by 70 percent or more over the period,
according to the report co-authored by environment think tank Carbon Tracker, Swedish
investment fund AP7 and Danish pension fund PKA.
The study is based on the International Energy Agency’s 450 Scenario to limit global warming to 2
degrees Celsius under which oil demand declines by 23 percent between 2020 and 2035.
Under this scenario, despite new refinery additions in Asia and the Middle East, only 62 percent of
global capacity will be required to meet demand compared with around 80 percent today. Profits
from converting crude oil into refined products will also shrink.
That in turn means that approximately one quarter of the 2016 refining capacity, the equivalent of
some 24.7 million barrels per day of oil demand, will need to be closed, the report said.
The closures would likely be more pronounced in developed economies where oil demand is
expected to peak earlier than in developing economies. Also, modern, complex refineries that can
produce more high quality and cleaner fuels are likely to fare better than older plants.
“The consequences of achieving a 2 degree Celsius world are far more detrimental to the refining
sector than the upstream sector, as it results in structural over-capacity and associated poor

refining margin environment, which can only be addressed by sustained capacity rationalization,”
said Alan Gelder, vice president for research at Edinburgh-based consultancy Wood Mackenzie
which took part in the report.
Meeting the emission reduction targets however seems distant today. A report published on
Tuesday said global emissions are set to be 30 percent higher than the target needed by 2030.
While oil companies including Shell have acknowledged that demand for some fuels such as
gasoline could peak by the end of the 2020s, they expect demand for oil to remain strong for
decades from heavy transport, aviation and chemical production.
The authors of the report estimate that overall earnings before interest, taxes, depreciation and
amortization (EBITDA) for refiners could fall by over 50 percent by 2035 from around $147 billion
in 2015.
“We consider that prospective investors should be wary of all new refinery investments,” the report
said. “When demand growth stalls and turns negative, new investments will carry the risk of
failing to earn an adequate return.”
Carbon Tracker and a group of investors warned in a report earlier this year that oil giants risk
spending trillions by 2025 on oil and gas projects that won’t be feasible under the international
climate targets.

Egypt's Orascom to build and operate wind 250MW wind farm
© ZAWYA 2017
Firm's consortium will take two years to build plant that will run for 20 years. A consortium led by
Orascom Construction has signed a deal to develop, build and operate a 250 megawatt (MW)
wind farm project in its home market of Egypt.
The contractor's consortium with French energy firm Engie and Toyota Tsusho-owned Eurus
Energy has signed a power purchase agreement with the Egyptian Electricity Company to supply
power to the state for 20 years, the company said in a press release on Tuesday.
The wind farm will cost approximately $400 million to build and is being financed by the Japan
Bank for International Corporation (JBIC), alongside Sumitomo Mitsui Banking Corporation and
Société Générale. Export credit guarantees have been provided by the Japanese government-
owned body Nippon Export and Investment Insurance.
Orascom Construction will be responsible for building the farm under a 24-month contract and will
have a 20 percent stake in the consortium. Financial close for the project is expected to be
achieved by the end of the year, the press releases said.
Osama Bishai, CEO of Nasdaq Dubai-lised Orascom Construction, was quoted as saying: “This
project underscores our strategy to pursue investments in the infrastructure sector that create new
construction opportunities and long-term value for shareholders, and expands our growing
presence in the power market to the
renewable energy sector."
In September, the company announced that
its 50:50 joint venture with Spain's FCC Aquila
had won a public-private partnership deal to
develop and operate a $320 million
wastewater treatment plant.
The Abu Rawash plant will have a capacity of
1.6 million cubic metres and will serve six
million customers. The same partners also
developed the New Cairo Wastewater plant,
which was Egypt's first PPP project when
completed in 2013.

NewBase November 02 - 2017 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil edges up on OPEC-led supply cuts, tighter U.S. market
Reuters + NewBase + Bloomberg
Oil prices edged up on Thursday as U.S. crude inventories fell despite a rise in production, while
outside the United States an OPEC-led supply cut continued to tighten the market. Brent futures,
the international benchmark for oil prices, were at $60.59 per barrel at 0647 GMT, up 10 cents
from their last close. Brent has risen by more than a third since its 2017-lows last June.
U.S. West Texas Intermediate (WTI) crude CLc1 was at $54.32 a barrel, up 2 cents from its last
settlement, and some 30 percent above its 2017-low in June.
Confidence has been fueled by an effort this year lead by the Organization of the Petroleum
Exporting Countries (OPEC) and Russia to hold back about 1.8 million barrels per day (bpd) in oil
production to tighten markets.
Oil price special
coverage

Saudi Arabian Energy Minister Khalid al-Falih said on Thursday in Thailand that supply and
demand balances continued to tighten and global oil inventories were falling, while compliance
with the OPEC-led pact to curb supplies has been “excellent”.
Russian oil output edged up to 10.93 million barrels per day (bpd) in October from 10.91 million
bpd in September, official data showed on Thursday, but the country remains in compliance with
the deal to curb output.
Overall, global oil markets have been slightly undersupplied during the past quarters, resulting in
fuel inventory drawdowns. The pact to withhold supplies runs to March 2018, but there is growing
consensus to extend the deal to cover all of next year.
U.S. commercial crude oil inventories fell by 2.4 million barrels in the week to Oct. 27 to 454.9
million barrels, according to data from the Energy Information Administration on Wednesday (EIA).
U.S. crude inventories are back on a downward trend after disruptions from hurricane Harvey
caused a small build,” said William O‘Loughlin, analyst at Rivkin Securities.
This came despite a 46,000 bpd increase in production to 9.55 million bpd. U.S. crude output is
now up over 13 percent since mid-2016. Goldman Sachs said in a note that it expects year-on-
year U.S. oil production growth of 0.8 million to 0.9 million bpd at year-end 2017.
That would put end-of-year output at 9.6-9.7 million bpd, only slightly above current levels. The
EIA said that a record 2.1 million bpd of U.S. crude was exported in the latest week.
“The overbought nature of the daily RSI’s (relative strength index).. has made both contracts
(Brent and WTI) vulnerable to short-term profit taking on the headline-driven news,” said Jeffrey
Halley, senior market analyst at futures brokerage OANDA in Singapore
Oil Little Changed as Storage Drawdown Fails to Impress Traders
Oil settled near an eight-month high after a closely watched U.S. government report showed
smaller-than-expected declines in domestic crude and gasoline stockpiles.
Futures closed down 0.2 percent in New York after earlier topping $55 a barrel for the first time
since early January. The government’s tally of oil and gasoline held in U.S. storage tanks failed to
register withdrawals as large as those reported by the industry-funded American Petroleum
Institute on Tuesday.
The federal figures released on Wednesday “came in not quite as strong as API, which was
extremely bullish,” Brian Kessens, who helps manage $16 billion in energy assets at Tortoise
Capital Advisors LLC, said by telephone.

A 5.2 percent October rally in the benchmark U.S. crude grade was largely fueled by the
determination of Saudi Arabia, Russia and other major oil producers to extend output curbs well
into 2018.
While a formal decision to extend the caps may not be made at a Nov. 30 meeting, it’ll come
sooner or later, according to PIRA Energy Group, a unit of S&P Global Platts. Meanwhile, overall
OPEC production dropped 180,000 barrels a day in October from September to 32.59 million a
day, data shows.
West Texas Intermediate crude for December delivery fell 8 cents to settle at $54.30 a barrel on
the New York Mercantile Exchange, just pennies off the Tuesday close at a level not seen since
February.
See also: Fracking Hits Midlife Crisis as Investors, Geologists See Limits
Brent for January settlement slipped 45 cents to end the session $60.49 on the London-based ICE
Futures Europe exchange. The international benchmark traded at a premium of $5.98 to January
WTI.
The Standard & Poor’s 500 Energy Index rose as much as 1.5 percent with Devon Energy Corp.,
Concho Resources Inc. and Cimarex Energy Co. leading the pack.
U.S. Inventories
Nationwide crude stockpiles slid by 2.44 million barrels last week, while gasoline supplies edged
lower by 4.02 million, according to the Energy Information Administration report released
Wednesday. The figures were below a 5.09 million barrel drop in crude and a 7.7 million decline in
gasoline that the American Petroleum Institute was said to report Tuesday.
Oil inventories at the key Cushing, Oklahoma, pipeline hub ticked higher by 90,000 barrels last
week and domestic crude production increased. Distillate supplies slid to levels not seen since
2015 and U.S. crude exports rose for a third week, the EIA data showed.
The crude and gasoline draws weren’t “as big as anticipated. It wasn’t consistent with the API,”
James Williams, president of London, Arkansas-based energy researcher WTRG Economics, said
by telephone. “We’ve had a strong run in oil prices. It’s time to get a little bit of a pull-back.
Diesel Makes a Comeback
It was only two years ago that the world’s biggest oil market was awash with diesel and profits
from making the fuel cratered. Now the refined product is getting a new lease of life, and more
demand is poised to emerge from the sea.
With crude’s bull market being underpinned by diesel consumption, Asian refiners could soon be
scrambling to meet further appetite as a maritime rule in 2020 seeks to replace dirtier fuel that
runs tankers. While shippers could add technology that’ll clean up their traditional power source,
it’ll mean investing millions of dollars in each vessel -- an expense they may not be prepared to
bear. Their other option is to use diesel.
“By 2020 is too short a time to find an alternative other than to shift to marine gasoil,” said Rakesh
Mehra, Dubai-based strategic advisor at Gulf Petrochem Group, a company that runs a refinery in
the Middle East as well as trades fuels and operates storage terminals. “This will drive diesel
demand and that’s going to stay.”

The renaissance in diesel, also known as gasoil, has contributed to the surge in global benchmark
Brent crude to the highest level in more than two years. It’s a far cry from 2015 when a flood of
exports from China swamped the Asian market, dragging profits from making the fuel in the region
to below $8 a barrel and the lowest level in at least five years.
After the average annual diesel margin in Asia declined for the past three years, it has rebounded
in 2017 to more than $12 a barrel as industrial activity picks up in the region. Unexpected refinery
outages at plants from Europe to the U.S. due to fires and hurricanes have also contributed to a
slump in stockpiles of the fuel. China’s exports, meanwhile, dropped in September to the lowest
since January as domestic demand increased.
More good news is coming in the form of the fight against pollution. The International Maritime
Organization, a global shipping regulator, will cap the limit on sulfur content in fuel oil -- a residue
from the refining process that’s used to power ships -- to 0.5 percent in 2020 from 3.5 percent
now. One way of meeting the new emissions standards is to use an exhaust gas cleaning system,
or scrubbers, that removes pollutants before they’re released into the atmosphere.
Shipping Uncertainty
Vessel owners may be skeptical about whether this technology, still in its infancy, will be
economical in the long term. The uncertainty over how the rules will be implemented, as well as
concerns the IMO could one day impose stricter regulations that render newly installed scrubbers
obsolete, is keeping shippers on the sidelines, said Rahul Kapoor, an analyst at Bloomberg
Intelligence.
“The easiest option, therefore, is to switch over to gasoil,” Gulf Petrochem’s Mehra said. “Gasoil
with 0.1 percent sulfur is easily available.”
Most shippers will use less sulfurous diesel than spend $4 million to $10 million per ship to add
scrubbers, Kapoor estimates. Just one out of every five ships that have come to the market in the

last five years will install the cleaning system by 2020, said Suresh Sivanandam, a senior
research manager for Asia refining at Wood Mackenzie Ltd.
Diesel consumption in Asia, home to nine of the 10 largest container ports in the world, will rise by
an annual average rate of 5 percent from 2020 through 2026, according to BMI Research. That
compares with growth of 1.6 percent a year from 2017 to 2019.
Profits in Asia from turning benchmark Dubai crude into diesel, known as the crack spread, more
than doubled to $15.37 a barrel in September versus a record low in April 2016, according to data
compiled by Bloomberg going back to 2010.
Inventories in Asia are also tightening, with onshore middle distillate stockpiles in Singapore
shrinking to 11.5 million barrels, down 22 percent from their peak in 2015, the year China began
significantly increasing its overseas diesel shipments.
“These regulations are definitely good for refiners, especially in Asia,” said Arun Kumar Sharma,
finance director of Indian Oil Corp., the nation’s biggest refiner. “Opening up of a new market for
gasoil will further improve diesel cracks.”
Demand is likely to gain by as much as 300,000 barrels a day for gasoil in 2020, while fuel oil
consumption may drop by 350,000 barrels daily, according to Ehsan Ul-Haq, a London-based
director of crude oil and refined products at Resource Economist.
“By around 2020, the diesel market even looks tight unless refiners do something about it,” said
Ul-Haq. “And there’s not much time left.”

NewBase Special Coverage
News Agencies News Release November 02-2017
S&P Global Platts Analytics: on Energy Market Drivers
Content provided by The Gulf Intelligence
Three years of low oil prices have stimulated strong demand growth of over 1.5mbd each year
with S&P Global Platts Analytics forecasting 2018 to grow
at 1.8mbd. This along with the OPEC and Non-OPEC
production cuts has finally started to result in global
balances tightening with S&P Global Platts Analytics
forecasting that stocks have drawn at 900kbd during 2017
resulting in surplus crude stocks falling to around 50mb
once you take into account the rebasing of natural stocks
length given the demand growth over the period.
Fears of U.S. Shale Oil production growth and demand
destruction from Electric Vehicles (EVs) has dampened the
price response with S&P Global Platts Analytics forecasting Data Bent to inch closer towards
$60/bbl during the last 2 months of 2017.
However, projects sanctioned pre-2014, when oil prices were above $100/bbl will add to non-
OPEC, non-US Shale supply growth in 2018 (Canada, Brazil, Kazakhstan, North Sea). Despite
strong forecasted demand growth, this supply growth along with US Shale supply growth will
erode the stock draws of 2017, resulting in softening of markets in the first half of 2018 to around
$55/bbl and thus meriting the need for OPEC production constraint for the rest of 2018.
However, the deficit of projects sanctioned over the last 3 years could start to bite as we head
towards 2020. Non-OPEC/Non-Shale production accounts for 40mbd of supply and with 3-4%
decline rates could result supply tightness as longer-term investments have been cut due to fear
of US Shale Production and EVs Growth.
In the next 3-4 years, EVs will not be meaningful, even with spectacular demand growth every 1m
additional sales of EVs only replaces 30kbd of demand which should be input in context with the
1.8mbd growth seen this year and likely in 2018. Regional tensions (such as North Korea) are
likely to result in supply disruptions (over the last 40 years there has been a significant disruption
every 2-3 years) which with low surplus stocks and OPEC spare capacity could
While today’s market is anchored down the back of the curve by producers hedging around $55-
57/bbl (Brent) limiting upside in the front month to around $60/bbl taking into account Dated Brent
shifting into Backwardation.
S&P Global Platts Analytics to see US Shale Production coming under some price pressure if
required to respond to supply tightness. Productivity improvements are starting to plateau and
cost are creeping upwards as resources (people and fracking equipment) have become
increasingly tight.

At the same time, “conventional” production costs are coming down, the cost of steel has halved,
drilling rigs are being leased at below operating costs and fabrication yards in South Korea are
almost empty having let go of the majority of their workforce.
As such we may see an inversion between US Shale being the price setter (as many
commentators suggest) and new conventional marginal capital projects setting longer-term price
forecasts closer to $60/bbl.
LNG
LNG remains the key to unlocking the global gas market which has seen a short-term price
recovery. The price in the East (Platts JKM) has crested after heavier buying this summer due to
support from coal, Chinese short-term pollution control measure, and stock building for new
Korean storage.
S&P Global Platts see LNG oversupply building and with the majority of demand covered for the
end of the year is likely to see weaker support. New production in 2018 may start to bear more
heavily on prices in 2018. Major policy decisions in China and India will have a significant outlook
on future prices as renewables may continue encroaching on gas demand for power generation
needs.
US Henry Hub (HH) price support remains in place ahead of winter due to lower than normal
inventories and in spite of warmer than normal weather. new demand from industry (investment)
and LNG producers still outpacing supply growth. Increased production of associated gas from US
Shale Oil growth is helping to keep marginal production costs low, capping upside to the market,
although a colder winter would result in short term price spikes. Overall remains range bound
around $3-3.50/mmBTU.
In Europe, gas storage has recovered from 2Q deficits due to heavy builds on the Continent, although U.K.
is extremely nervous going into winter with its only long-range storage facility shuttered. Having to rely on
imports and continental storage for peak demand in winter is inherently risky due to potential demand for
gas from other markets.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
The Editor :”Khaled Al Awadi” Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile: +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 27 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 November 2017 K. Al Awadi

New base 02 november 2017 energy news issue 1095 by khaled al awadi

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