UAE Danfoss wins recognition for IP projects

Copyright © 2018 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 03 June 2018 - Issue No. 1176 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: Danfoss wins top UAE recognition for its novel projects
Trade Araia + NewBase
Danfoss, a global leader in engineering solutions, said it has won top recognition for its intellectual
property and innovative projects from Abu Dhabi and Dubai Customs Authority. The awards were
given in recognition of Danfoss' best practices on intellectual property at the World Intellectual
Property held recently.
Through its effective major crack down on the sale of counterfeit goods and products across the
UAE and the wider region, Abu Dhabi Customs Authority identified Danfoss as the best company
that shows solid effort in providing support and raising awareness about intellectual property.
The Dubai Customs Authority has also identified Danfoss’ initiative in supporting innovative projects
in schools in the UAE, said the statement.
Danfoss Foundation for Education was awarded last month with its ongoing commitment to support
students from different local universities in terms of technical knowledge and equipment, it added.
A major player in the region, Danfoss' products and services were used in areas such as
refrigeration, air conditioning, heating, motor control and mobile machinery. It is also active in the
field of renewable energy as well as district heating infrastructure for cities and urban communities.-

Iraq: Kuwait Energy appoints adviser for sale of Block 9,Iraq
Source: Reuters+ NewBase
Kuwait Energy, an independent oil and gas company, has hired investment bank Perella Weinberg
Partners (PWP) to advise it on options that could include selling all or part of its Block 9 asset in
southern Iraq and a spin-off of Egyptian assets, according to sources.
Kuwait Energy earlier this year sold an 8.57 percent stake in Block 9 to Dragon Oil, a subsidiary of
Dubai’s Emirates National Oil Company (ENOC), for $100 million and has settled an ownership
dispute with the Dubai entity by giving it an additional 6.43 percent stake in the block.
The company’s operations in Iraq are focused on three assets, including Block 9, while in Egypt it
has interests in four oil and gas fields.

Kuwait Energy’s Egypt
Egypt has 3.5 billion barrels of total proven oil reserves and 65 Tcf of proven natural gas reserves
as at 31 December 2016*. Its total oil production averaged approximately 0.7 mmbopd and its total
gas production averaged 41.8 billion cubic metres during 2016*.
Kuwait Energy holds a working interest in four licences in Egypt, one of which is governed by a
service contract and three of which are governed by PSCs.
The East Ras Qattara (ERQ) asset (acquired in 2008) with a 49.5% revenue interest, the Abu
Sennan asset (acquired in 2007) with a 25% revenue interest, and the Burg El Arab asset (acquired
in 2006) with a current revenue interest of 100%, are located in the Western Desert.
The Area A asset (acquired in 2008) where Kuwait Energy has a 70% working interest is located in
the Eastern Desert. Kuwait Energy is the operator of three of the four producing assets.
Kuwait Energy produces oil from all four of its assets which make up a significant portion of the
Company’s production.
The ERQ licence area is a significant production asset, representing approximately 30% of the
Kuwait Energy’s total working interest oil production in 2017. Kuwait Energy’s assets in Egypt were
producing approximately 15 kboepd in 2017 representing around 55% of the Company’s total
production during that year.
Over the period from 2008 to 2017, Kuwait Energy achieved above 50% exploration drilling success
rate with respect to its Egyptian assets.
Kuwait Energy enjoys a strong and strategic partnership with the Egyptian General Petroleum
Corporation (EGPC), as it does with all host governments where it operates.
In 2015, Kuwait Energy was the catalyst in Egypt entering their first external venture as they
partnered with the EGPC in Block 9. Later, EGPC became a partner in Siba as well. This alliance
further improves the outlook for the Company’s operations in Egypt.

Russia Rosneft Testing Oil Production Increase Ahead of OPEC Talks
Russia’s largest oil company is testing its capacity to bring back production it cut under a deal
between Moscow and OPEC, telling investors it boosted output this week by about 70,000 barrels
a day, Renaissance Capital said.
The output test was disclosed by Rosneft PJSC executives to investors and analysts visiting the
company’s facilities in Siberia.
Russia and Saudi Arabia last week signaled they’re likely to start increasing oil supplies in the
second half of this year in response to a surge in prices to a three-year high. The move though is
yet to be approved by other members of the Organization of Petroleum Exporting Countries,
triggering consternation ahead of a meeting of the group on June 22.
Rosneft “said it had started to ramp up production in the past three days to test the actual production
limits ahead of the likely relaxation of OPEC+ constraints,” Renaissance Capital said in a note.
“According to Rosneft, it has been able to recover 70,000 barrels a day of oil production in just two
days, with more near-term production upside likely to support its 2Q18 results, in our view.”
The production test comments were also confirmed by three other people attending the Rosneft
briefing. They asked not to be named discussing a closed-door presentation.
Ready for Changes
Rosneft is producing in line with quotas under the deal with OPEC, its press service said. “Yet, the
company should be ready for possible changes” in the market situation, it said.

It’s not unusual for oil companies’ day-to-day production levels to fluctuate, and it’s not clear whether
Rosneft’s output increase will be sustained, the people said.
Rosneft’s management said the company’s spare production capacity was 120,000 to 150,000
barrels a day, the Renaissance Capital analysts wrote. It produced 4.57 million barrels a day of
crude and other liquids in the first quarter, making up over 40 percent of Russia’s total output.
Saudi Arabia is also lifting supply, with tanker-tracker Petro-Logistics saying on Thursday that the
kingdom’s production had risen to the highest in seven months.

U.S. gas to China: Positive energy for bilateral relations
Jiaqi Lu and Ye QiThursday,
With the Shale Gas Revolution, the United States has increased its natural gas production by 35
percent over the last decade. The technology has had huge impact. In 2015, the United States
finally lifted its four-decade-old ban on oil and gas export. In 2016, the first cargo of LNG from the
U.S. arrived at China.
President Trump deems the U.S. “a big gas producer”, and plans to expand both domestic and
overseas markets. In 2017, U.S. LNG export capacity reached 20 billion cubic meter (bcm), 2.9 bcm
exported to China, accounting for 6 percent of China’s total LNG imports.
By the end of 2019, the annual U.S. LNG export capacity is expected to reach 99 bcm, with
additional projects totaling 53 bcm capacity being in the process of FERC approval. During the
Unleashing American Energy Summit 2017, Trump announced that the Department of Energy
would accelerate the process for approving more LNG export facilities in Louisiana. Many of these
exporters are targeting the Asian market for its great growth-potential.
China is the fastest growing natural gas consumer in the world. The Chinese government has
initiated projects and campaigns to promote natural gas in replacing coal for factories and residential
heating for addressing the main sources of air pollution. In 2017, China’s natural gas consumption
increased by 15 percent, and its import grew by 28 percent; import dependency raised from zero in
2005 to 39 percent in 2017.
In spite of its high cost and seasonal shortages, natural gas creates tremendous social benefits.
Air quality in metropolitan areas improved between 21 percent to 42 percent during the first phase
of the National Air Quality Action Plan (2014-2017), having yielded significant social and health
gains.

The Chinese government is expected to wage the second phase of the anti-air pollution campaign
in 2018, expanding the effort of cleaner fuel replacement. In addition, the government has also
acknowledged the crucial role of natural gas in the climate and air quality battle as a “bridge fuel” to
deepen renewable energy penetration.
Disclosed in its National Energy Strategy, China plans to increase the share of natural gas to 15
percent of the energy mix by 2030. If China’s primary energy consumption reaches 5.5 billion tons
coal-equivalent by 2030, natural gas consumption would reach about 650 bcm accordingly,
increasing by 2.7 times from the 2017 level.
However, the domestic supply has been less promising, especially due to unfortunate geology and
poor institutional setting. While the Energy Information Administration (EIA) of the US Department
of Energy estimates China to have the world’s largest shale gas deposit at up-to 361 trillion cubic
meters (tcm), only 218 tcm is technologically extractable according to the Chinese National Energy
Administration (NEA).
The economical availability is even lower due to geological complexities, especially concerning
depths of more than 3,500 meters below ground. As of 2017, shale gas production represents only
6 percent of the total domestic production.
Although China has been implementing reforms in the sector, serious political and economic
challenges lies ahead. The National Development and Reform Committee (NDRC) concludes that
significant boost in domestic supply is unlikely in the near future because of low investment in
exploration, technology barriers, regulatory constraints and inadequate infrastructure.
The International Energy Agency (IEA) predicts that China’s natural gas production would only
reach 255 bcm by 2030, which means at least 395 bcm, or 61 percent of the total projected demand,
will have to be met by imports. To continue expanding natural gas import is the only way to meet
the demand under the policy goal.
China’s natural gas consumption, production and import. (Data: NBE)

China Pipeline Imports
China has been actively ramping up natural gas imports via pipelines through bilateral and
multilateral arrangements over the last decade. Today, the Central Asian Gas Pipeline (CAGP) and
China-Myanmar Oil and Gas Pipeline are the only two entrances for international pipeline gas,
representing 46 percent of overall imports in 2017, with more than three quarters of those coming
from Turkmenistan.
Two more projects are scheduled to come online within the next two years: Power of Siberia in 2019
and Line D of CAGP in 2020. Line D will connect another gas field in Turkmenistan with China’s
cross-country West-East Gas Pipelines, adding another 30 bcm capacity to the CAGP. Power of
Siberia, a.k.a Eastern Line of China-Russia natural gas pipeline, with a designed capacity of 38 bcm
per year, is set to be fully operational in 2020, after a significant delay. Although the China-Russia
Western Line is still within prospects, no meaningful steps have been made.
China’s natural gas import pipelines
Source: China National Petroleum Corporation (CNPC).
LNG
As of 2017, China imports 21 percent of its natural gas in the form of LNG. Australia has the greatest
market share (47 percent), followed by Qatar (21 percent), Malaysia (11 percent), Indonesia (8
percent), New Guinea (6 percent) and the United States (6 percent).
Melanie Hart of Center for American Progress, who is a leading expert in the field of China’s energy
issues, argues that LNG from the U.S. is more expensive than many other sources, lacking
competitiveness against other suppliers, especially when compared to pipeline imports from Central
Asia. Although the authors make very good points, a couple of other factors should also be taken
into account.

LNG supply by sources, 2017 (Data: EIA, Reuters, and Author’s calculation)
First, existing cheap LNG suppliers do not have enough potential to fill the growing market. Hart
points out that U.S. LNG are more
expensive than those from
Australia, Malaysia and Indonesia.
However, these three countries
cannot provide enough supply in
the future.
According to the Department of
Industry of Australia, the projected
LNG exports will reach 120 bcm in
2030, representing only roughly 40
percent of the projected LNG
demand in China.
Malaysia will likely to experience
progressive decline in LNG export
in the 2020s due to the limits of its
gas reserve. Similarly,
for Indonesia, in the absence of meaningful new gas reserve discovery, the IEA expects Indonesia
will become a net-importer of LNG in 2023 because of strong increases in consumption, especially
in the industrial sector. In addition, Malaysian and Indonesian sources will likely to grow in the next
decade due to tightened demand and supply, making American LNG more competitive in the
market.
Second, international pipeline supply is also not enough to fill the gap. Even if all the listed projects
become operational in full-capacity by 2030, pipeline gas can only support 165 bcm at max,
representing 42 percent of the projected import. In reality, pipelines are usually under-utilized due
to various seasonal, economic, technological, and political constraints.
In 2017, China imported 43 bcm of natural gas via four lines that had a combined designed-capacity
of 78 bcm. In other words, only 55 percent of the existing pipelines were utilized; the utilization rate
for China-Myanmar pipeline was only 33 percent.
Although China’s Belt and Road Initiative places energy cooperation at the top of the list, considering
these issues, we believe the feasible import through pipeline would be around 95 bcm/year by 2030,
leaving a gap of 300 bcm, or 46 percent of the overall projected demand for LNG.
Third, international pipeline gas supply depends as much on bilateral relations and geo-politics as
on the market. As China’s largest supplier, Turkmenistan has been worrying about the export
dependency with China and is seeking to reach out to the European market to hedge the political
and economic risks.
In the wave of shortages in last December, the CNPC sent its former head manager in
Turkmenistan to arrange for an increase of supply by around 30 percent. However, by the end of
January 2018, supply from Central Asia was cut by more than 40 percent, causing an immediate
shortage in Northern China. Instability and risk such as these urge China to seek supply
diversification.
Unlike pipelines based on bi-lateral contracts, there is a more mature global LNG market with a set
of market mechanisms in place to secure the stability of supply. With the proliferation of flexible-

destination contracts and a growing number of players, shorter contracts and spot markets have
become more popular in the natural gas business over the past decade.
These mechanisms allow China to hedge against potential economic and political risks associated
with long-term deals. A combination of short-term and long-term contracts can expand China’s
accessibility to various sources of supply, contributing to its overall energy security.
In that sense, importing natural gas from the U.S. suits China’s economic interests and energy
security. While most LNG and all pipeline gas contracting partners of China index to oil to determine
the price for natural gas, the U.S. uses the Henry Hub price, which is consistently lower and less
volatile.
Adding Henry Hub supply to an oil-linked LNG portfolio brings about higher stability due to the
inclusion of a large fixed component and the low correlation between Brent and Henry Hub. U.S.
gas would be more competitive if oil price rebounds. The abundant and stable natural gas supply
from the U.S. can help to balance China’s import portfolio by avoiding potential disturbances from
risky and conflict areas.
Moreover, LNG import terminals
are closer to the demand centers
along the east coast, therefore
making more economic sense.
China’s natural gas distribution
system is constructed by the trunk
pipelines and the provincial and
local distribution networks.
While the “Three Barrels” operate
the cross-country pipelines, local
transmission networks are
operated by various local
distribution companies. The
fragmented structure charges
transportation tolls at every level,
reducing the economic
competitiveness of pipeline
imports.
Transportation fee for pipeline
imports from Xinjiang to
Guangdong could be about seven times more expensive than fuel costs. Taking into account of the
transportation cost, Turkmenistan supplies are much more expensive than U.S. LNGs, especially
on the east coast. Therefore, pipeline supplies can only fill the demand in western parts of China.
In addition, LNG is transportable using trucks. This is especially important for replacing coal
combustion in rural areas, where the local storage and distribution networks are weak.
The LNG trade between the two countries is meaningful for rebalancing trade. Increasing the U.S.
share to 20 percent of the future LNG demand at the price of $10/mmbtu, for instance, is equivalent
to 21 billion U.S. dollars.
At the Sino-U.S. Presidential Summit 2017, President Xi and President Trump found common
ground in expanding bilateral natural gas trade. In fact, cooperation in natural gas between the two
countries should not be limited merely to LNG trading. In the near future, China will have to improve
domestic infrastructure, especially storage systems, to facilitate natural gas consumptions.

NewBase June 03 - 2018 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Crude retreats on trade concerns as dollar strengthens
Reuters + Bloomberg + NewBase
Oil prices retreated on Friday after strengthening early in the session as U.S. President Donald
Trump’s remarks on trade led the dollar to strengthen against other currencies, weakening
greenback-denominated commodities including crude.
Trump told Canada and the European Union to do more to bring down their trade surpluses, a day
after hitting the two U.S. allies and Mexico with import tariffs on their steel and aluminum.
The president’s comments led the dollar .DXY to strengthen and dollar-denominated commodities
to sell off, said John Kilduff, a partner at Again Capital Management.
U.S. West Texas Intermediate crude CLc1 fell 48 cents to $66.56 a barrel by 12:03 p.m. EDT [1603
GMT]. For the week, WTI was on track for a 1.9 percent fall, adding to last week’s near 5 percent
decline.
Global benchmark Brent fell 91 cents to $76.65 per barrel. It was set to rise 0.3 percent for the
week. WTI’s discount to Brent widened to $11.57 a barrel, the largest since 2015, before narrowing
to $10.19 a barrel as both grades retreated.
Concerns about growing U.S. crude production and a glut trapped inland due to a lack of pipeline
capacity have pushed prices of WTI lower, doubling its discount to Brent over the course of a month,
U.S. crude production has hit record levels since late last year. In March, it jumped 215,000 barrels
per day (bpd) to 10.47 million bpd, a new monthly record, the Energy Information Administration
said on Thursday.
Oil price special
coverage

On a weekly basis, it rose to 10.8 million bpd last week, coming close to matching that of top
producer Russia, the EIA also said on Thursday. [EIA/S]
“There’s still the hangover from the report yesterday, the weekly number suggesting U.S. production
is really strong and continuing to rip higher,” said Matt Smith, director of commodity research at
ClipperData.
“Until transportation is incentivized to get crude to the coasts or production is shut in, “we’re going
to continue to see some weakness in WTI,” Smith said.
Russia would be able to raise its oil output within months to levels last seen before a global
production-cutting deal took effect if there is a decision to unwind the pact, a Russian Energy
Ministry official said.
Sources told Reuters last week that Saudi Arabia, the effective leader of the Organization of the
Petroleum Exporting Countries, and Russia were discussing boosting output by about 1 million bpd
to compensate for losses in supply from Venezuela and to address concerns about the impact of
U.S. sanctions on Iranian output.
This pushed Brent to a three-week low below $75 a barrel on Monday. Brent recovered some
ground, however, when a Gulf source flagged that any rise in production would be gradual.
To view a graphic on Russia vs Saudi vs U.S. oil production, click: reut.rs/2J1fC51
WTI drop
Oil dropped as rising U.S. output overshadowed a surprise decline in crude stockpiles, with traders
also focused on whether Saudi Arabia and Russia will boost production.

Futures in New York dropped 1.7 percent after briefly easing losses following an Energy Information
Administration report showing a 3.62 million-barrel decline in U.S. crude inventories. That compared
with a 450,000-barrel increase forecast in a Bloomberg survey.
U.S. drillers add oil rigs for second week in a row: Baker Hughes
U.S. energy companies added oil rigs for a second week in a row even though crude prices have
declined about 7 percent over the past two weeks and analysts do not expect any big changes in
the rig count for the rest of the year.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 733 rigs
were active as energy companies have been ramping up production in tandem with OPEC’s efforts
to cut global output in a bid to take advantage of rising prices.

U.S. crude futures fell below $66 a barrel this week, their lowest level since April 17, as U.S. output
comes close to matching that of top dog Russia. Just last week, U.S. futures traded over $72 a
barrel, their highest since November 2014.
U.S. crude oil production hit a record 10.8 million barrels per day (bpd) last week, while on a monthly
basis, it peaked at 10.47 million bpd in March, the Energy Information Administration (EIA) said in
separate reports on Thursday.
Production in Texas rose by 4 percent to almost 4.2 million bpd, a record high based on the data
going back to 2005. The Permian basin, which stretches across West Texas and eastern New
Mexico, is the largest U.S. oilfield.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week
forecast average total oil and natural gas rig count would rise to 1,025 in 2018 and 1,125 in 2019.
Last week, Simmons forecast the count would rise to 1,020 in 2018 and 1,125 in 2019.
With the boost in rigs so far this year, analysts were not as bullish on further increases.
Since 1,060 oil and gas rigs were currently in service, drillers would not have to add any more rigs
for the rest of the year to hit Simmons’ forecast for 2018.
So far this year, the total number of oil and gas rigs active in the United States has averaged 993,
up sharply from 2017’s average of 876. That keeps the total count for 2018 on track to be the highest
since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.
Looking ahead, crude futures were trading below $66 for the balance of 2018 and nearly $63 for
calendar 2019.

In anticipation of higher prices, U.S. financial services firm Cowen & Co this week said the
exploration and production (E&P) companies they track have provided guidance indicating a 13
percent increase this year in planned capital spending.
Cowen said those E&Ps expect to spend a total of $81.2 billion in 2018, up from an estimated $72.1
billion in 2017.
Brent & WTI Oil Prices Go Separate Ways
Long-established relationships between the world’s most important oil prices are being strained by
conflicting forces across the globe.
Buyers grappling with crude’s rebound to levels last seen in 2014 are assessing how to take
advantage of the differences between benchmarks, which determine the flow of crude around the
world. Cheaper American varieties such as WTI Midland and Eagle Ford shale shipments are
headed from the U.S. Gulf Coast all the way to Asia, the top consuming market, while some buyers
are limiting Middle East cargoes that are seen as too expensive.
The discordance in prices signals how uncertainty over supply is playing out with varying impact on
different corners of the oil market. A U.S. decision to renew sanctionson Iran risks curbing the
OPEC member’s exports and is contributing to Middle East marker Dubai crude’s gain,
while infrastructure hurdles in shale country are thwarting American benchmark West Texas
Intermediate. In the meantime, a proposal by Russia and Saudi Arabia to revive output is weighing
on Europe’s Brent.
Brent, the benchmark for more than half the world’s crude, widened to more than $10 a barrel
against U.S. WTI, the most in three years, data compiled by Bloomberg show. However, its premium
to Dubai, indicated by exchange of futures for swaps, had shrunk to the least since January near
the end of May. And American oil is at its cheapest in at least two years to Middle East supply.

Prices within the U.S. are also diverging, with the cost of crude at the American Gulf Coast surging
against WTI at Cushing, Oklahoma, in May.
“The three benchmarks -- Brent, WTI and Dubai -- have been fluctuating based on a combination
of domestic factors, as well as wider geopolitical risks,” said Den Syahril, an analyst at industry
consultant FGE in Singapore. “WTI is currently reflecting inland economics, as the U.S. struggles
to bring oil to its coast. Brent and Dubai, on the other hand, are pricing in geopolitical tensions
around U.S.-Iran sanctions, as well as uncertainties around the upcoming decision between OPEC
and its allies.”
Price differences spur shifts in crude-trade flows globally
The effects are reverberating in the physical oil market. South Korean refiners such as SK
Innovation Co. and GS Caltex Corp. have recently bought millions of barrels of everything from U.S.
WTI to Eagle Ford and Bakken crudes. Indian Oil Corp., the nation’s top processor, is set to get WTI
Midland as well as Light Louisiana Sweet cargoes in coming months. Japan’s JXTG Holdings Inc. is
also receiving North American supply, as is Taiwan’s CPC Corp. and Thailand’s PTT Pcl and Thai
Oil Pcl.
The trading unit of the biggest refiner in China, the top oil importer, is said to be shipping millions of
barrels of U.S. crude to the Asian nation, with the flows tied to WTI’s favorable discount to Brent-
linked grades. That was after the trader, known as Unipec, was said to cut contractual volumes from
Saudi Arabia for a second month because it believes prices set by the Middle East nation are too
costly.

Buying Boom
Apart from the risk to Iranian supply, other factors are also boosting Dubai crude. The total number
of July-loading Middle East cargoes sold as part of an assessment process operated by S&P Global
Platts to set price benchmarks has more than doubled to 14, or 7 million barrels, this month. That’s
based on data compiled by Bloomberg from traders who monitor the market-on-close assessment
process, usually referred to as the Platts window.
The surge in volume is helping keep Middle East crude in backwardation, a market structure where
near-term cargoes are costlier than later shipments, signaling strong demand or tighter supply,
according to three traders who participate in the market and analyst Nevyn Nah of industry
consultant Energy Aspects Ltd.
Still, forward prices for Dubai crude show it getting relatively weaker versus Brent, according to Nah.
That’s because international shipping-fuel regulations that take effect in 2020 are spurring
speculation that consumption will boom for cleaner fuels, which are yielded more when Brent-linked
oil is refined than from typical Middle East varieties.
Shale Bottlenecks
In the U.S., the shale surge is crashing into a barrage of bottlenecks. From West Texas pipelines to
Oklahoma storage centers and Gulf Coast export terminals, the delivery system for American crude
is straining to keep up with soaring production. While the nation is exporting supplies, the
infrastructure problems are limiting the industry’s ability to take full advantage of growing worldwide
demand.
That means prices of oil from the prolific Permian Basin shale play in Texas may fetch a discount
of at least $20 a barrel to Brent over most of 2019, according to Raymond James Equity Research.
Production growth from the region is likely to “massively” outpace local demand and there isn’t
enough pipeline capacity to transport the crude elsewhere, it said in a note last week.

Russian Oil Output Again Tops OPEC Target Ahead of Vienna Talks
Bloomberg - Elena Mazneva
Russia breached its oil-output quota agreed with OPEC for a third straight month as the producing
alliance prepares for crucial talks this month on increasing supplies.
Oil output averaged 10.97 million barrels a day in May, almost unchanged from a month earlier,
according to data emailed Saturday by the Energy Ministry’s CDU-TEK statistics unit. That means
its compliance with the production quota of 10.95 million was close to 95 percent, same as in April.
In March, the rate was 93 percent.
Russia and Saudi Arabia last month signaled they may start increasing supplies in the second half
of this year in response to a surge in prices. The move is yet to be approved by other members of
the Organization of Petroleum Exporting Countries and its allies, and some such as Ecuador have
said they aren’t in favor. The 24-member group is scheduled to meet in Vienna later this month to
discuss the future of their landmark 2016 accord.
Several Russian companies want the production cap eased as the grand alliance has
already achieved a key goal of draining a surplus in global stockpiles. The deal with OPEC has been
a success and “we believe that the global energy market is currently balanced,” President Vladimir
Putin said May 25. “Our arrangements were never intended to remain in force forever,” he said.
Russia currently has about 500,000 barrels a day of spare production capacity, according
to Gazprom Neft PJSC, the country’s third-largest producer. The company and Rosneft PJSC will
lead the ramp up once output restrictions are eased, according to Citigroup Inc. and ESAI Energy
LLC. Rosneft this week started testing its capacity to increase output.
OPEC’s de-facto leader Saudi Arabia is also lifting supply. Production rose to the highest in seven
months in May, according to tanker-tracker Petro-Logistics. Kazakhstan, the second-biggest oil
producer in the former Soviet Union and a signatory in the supply deal with OPEC, is set to boost
output to a record in May, data compiled by Bloombergshowed.

NewBase Special Coverage
News Agencies News Release June 03-2018
This Is What an Oil Shock Looks Like, world wide
David Fickling
If it looks like a duck, swims like a duck, and quacks like a duck, it’s probably a duck. And right now,
this duck is looking a lot like an oil shock:
 In Brazil, a strike by truckers protesting the price of fuel brought the economy to a halt over
the past week, interrupting exports of soybeans, coffee and chicken and prompting some
to call for a return to military dictatorship;
 In India, prices for diesel and gasoline have hit multi-year records, leading to demands for
the government to cut taxes and for a price cap to be imposed on state-controlled Oil &
Natural Gas Corp. – a self-defeating expedient, as my colleague Andy Mukherjee
explained this week;
 Governments in Thailand, Vietnam and Indonesia and implementing or planning increases
in retail fuel subsidies to protect consumers from the effects of rising oil prices and weakening
national currencies;
 Airline profits have probably peaked because of headwinds from fuel costs, according to
Alexandre de Juniac, chief executive officer of the International Air Transport Association.
Philippine budget carrier Cebu Air Inc. this week promised to impose fresh fuel surcharges;
 Moody’s Investors Service just blamed high oil prices in part for a 0.2 percentage-point cut
in its outlook for India’s 2018 GDP growth, and warned of the potential of falling consumption
spending and rising inflation across the globe if current high prices are sustained.

No Worries
Internet searches for oil shock-related terms show the world isn't concerned about prices
Judging by internet searches for the term, an oil shock is the last thing anyone should be worried
about. It seems insane to be stressing over oil when Brent is struggling to break through $80 a barrel
and West Texas Intermediate is bobbing around $70, about one-third lower than their levels four
years ago. But crude has a short memory.
Over a Barrel
Crude oil prices during the 1990-1991 Gulf War price spike were merely a return to the pre-1986
average. They still helped spark a global recession
Source: Bloomberg

Take the first Gulf War. In the five months between Saddam Hussein’s 1990 invasion of Kuwait and
the start of Operation Desert Storm, a spike drove West Texas Intermediate to an average $30.84
a barrel. Despite representing little more than a return to the status quo before Saudi Arabia flooded
the market late in 1985, those prices were high enough to help spark the early 1990s recession.
A 2011 analysis of previous oil shocks by James Hamilton of the University of California, San Diego,
suggests they’re a strong predictor of downturns. Rapid oil price increases have preceded 10 of the
11 U.S. business cycle peaks since World War II; only in 1970, 1973 and 2003 – during or in the
immediate aftermath of recessions 1 – did a run-up in prices fail to herald the peak.
Future Shock
Rapid oil price increases have an uncanny knack for predicting peaks in the U.S. business cycle
Source: Hamilton, D. (2011) "Historical Oil Shocks", Bloomberg data
Note: There was also a business cycle peak in April 1960, which we've not shown for design reasons
since there was no nearby run-up in oil prices. "Invalid date" indicates there's yet to be a peak.

Over the past 11 months, Brent crude is up 62 percent and West Texas Intermediate has risen 46
percent – but does that constitute an oil shock? By one measure, it could. One way of analyzing
such events, pioneered by Hamilton, is to compare current oil prices to their highest level over the
previous three years.
Where prices are below their previous peak, any increase can be considered a return to the norm;
where they’re above that level, there’s the possibility of a genuine shock. On a Hamilton-style
measure, we’re seeing the strongest flashing red light since 2008. 2
Crude Measure
By one way of analyzing it, we're seeing the largest oil shock since 2008
Source: Bloomberg, Bloomberg Opinion calculations
Are such fears premature? Real global growth will reach 4 percent this yearfor the first time since
2011, the Organisation for Economic Co-operation and Development forecast this week.
Consumer prices, which have been slumbering for a decade in developed countries, could arguably
do with an extra kick from higher energy prices to fuel core inflation and speed the return of central
bank rates to pre-crisis levels.
The Conference Board’s U.S. Leading Index, one widely watched measure of turns in the business
cycle, is at some of its highest levels on record.

No Surprises Please
Citigroup's index of global economic surprises is showing the weakest result in five years, but so far
emerging markets are only mildly negative
Source: Bloomberg
At the same time, we shouldn’t expect to see many other signs of weakness yet because oil shocks
are prophets, not partners, of slowing growth. And while higher prices don’t yet appear to be
seriously crimping consumer spending in rich countries, trucker strikes and government subsidies
elsewhere are a strong signal that the cost of crude and slumping currencies are eating into incomes
elsewhere.
That should provide an extra impetus to governments in Saudi Arabia and Russia in deciding how
much to increase exports. With U.S. crude locked up onshore by infrastructure bottlenecks, a surge
in supply and easing in prices may be the only thing standing between us and the next downturn.

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 28 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
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NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase June 2018 K. Al Awadi

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