Oman LNG signs contracts for gas-fired power plant

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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
publication. However, no warranty is given to the accuracy of its content. Page 1
NewBase Energy News 12 June 2018 - Issue No. 1180 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Oman: Pacts inked for Oman’s first LNG-fueled power plant
Oman Observer
Oman LNG has signed two key contracts to establish a new gas engine driven power plant at its
facilities in Qalhat, Sur. The contracts are essential for the delivery of Oman LNG’s gas engine
driven power plant, the first of its kind for liquefied natural gas (LNG) application in Oman.
The move will help conserve natural gas and reduce CO2 emissions. Gas savings accumulated
through this project are aimed at producing power for Oman LNG’s facility with less natural gas by
optimising gas resources and yielding less environmental emissions.
The signing ceremony was held under the auspices of Dr Mohammed bin Hamed al Rumhy, Minister
of Oil and Gas and Chairman of Oman LNG. Harib al Kitani, Chief Executive Officer of Oman LNG,
inked the contracts with Wayne Jones, Chief Sales Officer of MAN Diesel & Turbo, and Jay Ibrahim,
President EMEA & APAC for KBR.
The first contract inked with MAN Diesel & Turbo will deliver the highest quality of gas engine scope,
design, manufacturing and supply of equipment.
MAN Diesel & Turbo is one of the world’s leading suppliers of large diesel and gas engines and
engine technology covering a wide range of decentralised power plant applications up to 300
megawatts (MW), using liquid fuel, gaseous fuel or dual-fuel solutions. For the new power plant,
MAN Diesel & Turbo provides a tailored solution to suit the specific requirements of Oman LNG

while building on a well proven engine platform. The second contract is a Project Management
Consultancy (PMC) Services contract awarded to KBR.
KBR will act as an extension to Oman LNG’s project team and help manage the overall execution
of the project including the management of the supply of the Gas Engines Generators Packages
and ensure all areas of compliance and safety are adhered to.
The contract, additionally, underpins Oman LNG’s robust commitment towards knowledge sharing
and boosting staff competency in dealing with such complex projects. KBR is a global provider of
differentiated professional services and technologies across the asset and programme life cycle
within the government services and hydrocarbons sectors.

Oman; Pact signed for $1.5bn chemical chlor-alkali PVC plant
Oman Observer + NewBase
Leading Canadian-based international engineering giant SNC-Lavalin has announced that it has
signed an exclusive agreement with Project Development & Management International LLC (PDMI)
in Oman, to design and deliver a greenfield chlor-alkali PVC plant 150km southeast of the Omani
capital, Muscat.
SNC-Lavalin will support the project long term, from concept development to commissioning,
carrying out the initial engineering, master planning, process technology evaluation and selection
to support project financial investment decision approvals.
The subsequent Engineering, Procurement and Construction Management (EPCM) contract is
expected in Q1 2019, where SNC-Lavalin will execute the complete design and delivery, working
alongside Omani contractors to maximise in-country value.
SNC-Lavalin will also support the operations and maintenance of the plant. The project capital cost
is expected to be in the range of $1.5 billion (CAD1.9 billion), and will produce around a quarter of
a million tonnes per annum of PVC destined for Asia, and around 140,000 tonnes per annum of
sodium hydroxide (caustic soda) that will support local industries.
SNC-Lavalin has extensive experience in delivering downstream oil and gas infrastructure around
the world, with expertise in greenfield and brownfield petrochemical and refining facilities, and has
worked with some clients for over 50 years.
“This contract is a major strategic win for us, helping to grow our business in the region and
demonstrate our world-leading credentials in providing end to end solutions for large EPC projects,”
said Christian Brown, President, Oil & Gas, SNC-Lavalin.
“Oman is an important market for SNC-Lavalin where we have a long history of safely delivering
complex major projects. We are pleased to be able to apply our international experience to such a
significant project in the region while working hard to increase in-country value and help develop
Oman’s resources.”
In 2017, SNC-Lavalin was awarded a long term framework contract from Petroleum Development
Oman for the commissioning and start-up support services management for its upstream assets in
Oman. As part of this contract, SNC-Lavalin has set-up a dedicated training academy in Muscat to
train and develop multidisciplinary graduate engineers in the specialist field of commissioning.

Founded in 1911, SNC-Lavalin is a global fully integrated professional services and project
management company and a major player in the ownership of infrastructure.
From offices around the world, SNC-Lavalin’s employees are proud to build what matters. Our
teams provide comprehensive end-to-end project solutions — including capital investment,
consulting, design, engineering, construction, sustaining capital and operations and maintenance
— to clients across oil and gas, mining and metallurgy, infrastructure, clean power, nuclear and
EDPM (engineering design and project management). Last July, SNC-Lavalin acquired Atkins, one
of the world’s most respected design, engineering and project management consultancies, which
has been integrated into its business.
How is PVC made ?
The chemical process for making PVC involves taking the simplest unit, called the monomer, and
linking these monomer molecules together in the polymerisation process. Long molecular chains
are formed called polymers (which are also called macromolecules).
This is the case for PVC, which is made from vinyl chloride monomer known usually by its initials
VCM through polymerisation. Some monomers exist in the form of reactive gaseous chemical
substances, and some of these may cause health hazards when in direct contact with humans.
In these cases they are manufactured and processed under strict control for health, safety and
environmental protection. On the other hand, polymers such as PVC, which are manufactured from
monomers through polymerisation, are solid and chemically stable substances, therefore do not
affect human health. VCM, which is the raw material for PVC, is a gas at ambient temperature but
is usually stored in liquid form under pressure.
Ethylene and chlorine are raw materials for PVC. Upstream industries are those that provide these
materials and include producers of basic petrochemicals (sometimes known as feedstocks’), which
supply ethylene, and the chlor-alkali (caustic soda) industry, which supplies chlorine.
By thermal cracking of naphtha or natural gas, the basic petrochemical industry manufactures
ethylene and propylene, etc. Naphtha is mainly supplied from the petroleum refinery industry, which
uses crude oil as raw material. The chlor-alkali industry produces caustic soda, chlorine and
hydrogen via electrolysis using industrial grade salt as main raw material.
At a first stage in the PVC production process ethylene and chlorine are combined to produce an
intermediate product called ethylene dichloride; this is then transformed into vinyl chloride, the basic
building block of polyvinyl chloride or PVC. The process of `polymerisation' links together the vinyl

chloride molecules to form chains of PVC. The PVC produced in this way is in the form of a white
powder. This is not used alone, but blended with other ingredients to give formulations for a wide
range of products.
Most commodity plastics have carbon and hydrogen
as their main component elements. PVC differs by
containing chlorine (around 57 per cent by weight) as
well as carbon and hydrogen. The presence of chlorine
in the molecule makes PVC particularly versatile
because it makes it compatible with a wide range of
other materials.
The chlorine content also helps to make PVC flame
retardant. It can also be used as a `marker' to
distinguish PVC in automatic sorting systems for
plastics recycling. PVC formulations can be shaped by
a variety of techniques and, using very little energy,
made into the final product form. PVC polymer is
chemically stable, neutral and non-toxic. PVC
formulations have a wide range of applications
including the most sensitive, such as medical
equipment, plus construction, automotive and electrical
cabling.

Algeria: Total and Repsol sign new concession contract to extend
the TFT gas field license … Source: Total
Sonatrach, Total, Repsol and Alnaft (the National Agency for the Valorisation of Hydrocarbon
Resources), have signed a new concession contract for a period of 25 years to extend the
exploitation of the Tin Fouyé Tabankort (TFT) gas and condensate field.
This new contract, which will become effective upon the approval by the relevant Algerian
authorities, will give Total a 26.4% interest alongside Sonatrach (51%) and Repsol (22.6%). The
companies have also signed a gas marketing agreement.
The partners will carry out the drilling and development investments required to develop additional
reserves estimated at more than 250 million barrels of oil equivalent. These investments will allow
to maintain the production of the field, which is currently over 80,000 barrels of oil equivalent per
day for 6 years.
"Today’s agreements mark a new milestone in the implementation of the comprehensive partnership
agreement signed between Sonatrach and Total in April 2017, and strengthen the strategic
cooperation between the two companies.
As a historical partner of the TFT field, Total will continue to provide the best of its technological
expertise to keep developing the reserves of this gas field. This project is in line with the Group's
strategy to grow its gas production in competitive conditions,' commented Patrick Pouyanné,
Chairman and CEO of Total.

Morocco and Nigeria on steps for offshore/onshore gas pipeline
Source: Reuters
Morocco and Nigeria on Sunday signed a joint declaration in Rabat laying out the next steps for the
completion of a gas pipeline deal that will be built onshore and offshore, Moroccan state news
agency MAP said. The two countries agreed to the pipeline in December 2016 and launched
feasibility studies ending with a plan to build the pipeline onshore and offshore, it said.
'For economic, political, legal and security reasons, the choice was made on a combined onshore and
offshore route,' Morocco’s National Office of Hydrocarbons and Mines (ONHYM) and the Nigerian National
Petroleum Corporation (NNPC), the two authorities supervising the project said in the joint declaration. 'The
pipeline will be 5,660 kms (3,516.96 miles) long and its CAPEX has been defined,' the declaration said,
adding that construction will be in phases covering 25 years.
As a next step, Morocco and Nigeria will launch a front-end engineering design (Feed) to involve countries
that will be crossed by the pipeline in the Economic Community of West African States (ECOWAS) and to
determine the amount of gas available for export to European off-takers.

Russia a growing force in region but careful approach needed
Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis
Russia’s return to the G7 (or G8) group of leading developed nations was suggested by Donald
Trump, via tweet, on Friday.
Excluded over its annexation of Crimea, Moscow’s return to this grouping looks unlikely. But with
last week’s signature of a strategic cooperation agreement with the UAE, Russia has upped its
game in the Arabian Gulf.
As Dorel Iosif and I contend in a new report, Russia’s relations in the Middle East are more
opportunistic and tactical as it navigates a contradictory archipelago of contending states and
interests. Its position in Asia is more consistent and strategic but, ultimately, more perilous for it.
Alongside its military and diplomatic heft, energy is one of the northern giant’s strongest tools as it
is the world’s largest gas exporter and one of the top three oil producers. It uses its oil, gas and
nuclear power to advance both in the Middle East and in East Asia, even as these two regions
increasingly interlock in a complicated triangle.

Russia has proved adept at playing all sides. It backs Bashar Al Assad’s genocidal regime in Syria,
supports Iran against US sanctions, expands gas sales to Turkey, engages with strongmen in Egypt
and Libya, advances money to the Kurdistan region of Iraq in support of an independence bid, and
invites investment from Saudi Arabia and the UAE on the one side, and Qatar on the other.
The Russian accord with the UAE, signed on June 1, aims at stability in the global oil and gas
market, alongside defence cooperation and joint projects. It came shortly after Mubadala’s May 24
joint venture to develop Siberian fields with Gazprom Neft. Western sanctions have left Russia keen
to find capital for domestic energy developments from China, India and the Middle East.
Russian influence in the region and worldwide has been enhanced by its cooperation with Opec,
essential to allow the expanded group to cut production and boost oil prices without fear of losing
too much market share.
Rosatom has also laid down a regional marker by finishing Iran’s first civil nuclear power plant, at
Bushehr, signing initial deals for reactor construction with Saudi Arabia, Egypt and Jordan, and
constructing a nuclear power plant at Akkuyu in Turkey, due for completion in 2023. Russia thus
gives regional countries an alternative to the US, whose aid comes with many strings attached.
In these ventures, Russian companies have often been driven by commercial considerations. Its
political moves have been opportunistic, advancing forward into a vacuum left by US reluctance and
confusion and the unreadiness, so far, of China to take a leading role. The Kremlin does not intend
to confront the US head-on.
The contradictions of dealing with every Middle East power simultaneously make Moscow influential
and impossible to ignore, but leave it without natural regional allies. There is always the suspicion
that a chip in the Middle East might be traded for some more important Russian interest in Europe
or the Far East.
In East Asia, by contrast, elements of a
Russian grand strategy are more apparent.
Its East Siberia Pacific Ocean pipeline has
made it a direct competitor with Middle East
exporters for the Chinese and other oil
markets. Its planned Power of Siberia
pipeline, although very expensive, enables
it to tap into the suddenly flowering Chinese
gas market and present an implicit, though
not very plausible, threat to shift supplies
away from Europe.
Liquefied natural gas plants in Yamal, using
the newly-melting Arctic sea route to Asia, and the Far Eastern island of Sakhalin give other export
options. Détente on the Korean peninsula might even allow a gas pipeline through the North to
South Korea. The authoritarian, state capitalist models of Beijing and Moscow also align.

Yet Russia’s Far Eastern federal district, two-thirds the area of China, has a population of only 6.3
million. Siberia in general is rich in oil, gas, hydropower, timber and minerals, but there is always a
sense of vulnerability to its heavily-populated neighbour. From Moscow’s vantage point,
development and repopulation of this remote area is vital but unaffordable.
China’s Belt and Road Initiative, with strong energy-focused elements including pipelines, maritime
transit and electricity connections, also competes in traditional Russian areas of influence in the oil-
rich states of Central Asia. China, not Russia, is the key trade partner for Iran and will be even more
so as the renewed US sanctions bite.
For Middle East states, Russia’s importance has grown greatly over the past decade. Its geographic,
diplomatic and military reach make it useful, its lack of firm alliances and principles make it flexible,
and its energy resources lead naturally to both cooperation and competition.
But its partners need, too, to be acutely aware of Moscow’s weaknesses and contradictions.

India ONGC is Bleeding Cash, financial reserves shrunk 90%
The national + Newbase + Bloomberg
India’s Oil and Natural Gas Corp (ONGC), which once had $4.3 billion of funds, is now bleeding
cash.
The state-run company’s cash reserves have shrunk by more than 90 per cent in the past year,
after it was ordered to purchase the administration’s stake in a refiner and it paid a record dividend.
ONGC’s reserves dropped to about 10 billion rupees (Dh543.5 million) as on March 31 from nearly
130bn rupees a year earlier, according to data complied by Bloomberg.
ONGC’s largest shareholder, Prime Minister Narendra Modi’s government, has been tapping state-
run companies including India’s biggest energy explorer to bridge its fiscal deficit. That’s left the
company with depleting cash at a time when it has been ordered to boost investment to help cut the
nation’s crude imports. ONGC paid 426bn rupees last fiscal year as dividend to the government and
to buy its stake in the refiner.
“ONGC is heavily leveraged now,” Aloke Kumar Banerjee, the company’s former finance head, said
in an interview. “It’s important for exploration companies to have sizable cash balance as buffer. It’s
a high-risk business.”
The energy explorer’s shares have fallen 17 per cent from a January high. They dropped as much
as 0.6 per cent in Mumbai at 9:51am in Mumbai, while the benchmark S&P BSE Sensex gained 0.4
per cent. The company’s spokesman declined to comment on its falling cash levels.
ONGC aims to spend 860bn rupees on 31 big projects to boost oil and gas production, according
to its website. The company has started work on its largest-ever exploration project that will require
investments of more than $5bn over about four years.

Earlier this year, ONGC sold debt for the first time to pay for the 369.2bn rupee acquisition of the
government’s holding in refiner Hindustan Petroleum. Its capital expenditure swelled to a record
729bn rupees in the year ended March as it also invested 283.5bn rupees on exploration and
production, and 74.8bn rupees to buy a stake in a block operated by Gujarat State Petroleum,
according to the company’s website.
ONGC has about 250bn rupees of one-year loans maturing in January, according to company
officials, who asked not to be identified as they are not allowed to speak to the media. It used up
cash it had for capital expenditure and the acquisitions and needs about 21bn rupees more for the
final dividend payout for the year ended March, the officials said.
The company officials said that ONGC has no plans to raise more debt to fund its capital expenditure
of 320bn rupees in the current fiscal that started April 1. Cash flows through the year will suffice,
they said.
In the past, ONGC has been asked to share fuel subsidies by selling oil to refiners at a discount, a
burden that was taken entirely off its back only in the year ended March 2017.
Despite these pressures ONGC ’s credit rating remains good, primarily because it is majority owned
by the government, which means a sovereign assurance and easier access to the domestic banking
system.
Moody’s Investors Service has a very high investment grade rating on ONGC, Vikas Halan, senior
vice president at the ratings company said in an interview. “In terms of financial ability, they have
access to the banking sector in India unlike anybody else.”

Malaysia: Sapura Energy makes 9th gas discovery offshore Sarawak
Source: Sapura Energy
Sapura Energy through its wholly-owned subsidiary, Sapura Exploration and Production (Sarawak)
('Sapura E&P') and its partners Sarawak Shell and PETRONAS Carigali, has announced its ninth
gas discovery offshore Sarawak, following the completion of its 2017 drilling campaign within
the SK408 Production Sharing Contract ('PSC').
The Pepulut-1 exploration well was drilled and encountered high quality reservoir. The well is
located offshore Bintulu, Sarawak in Block SK408.
'This successful gas discovery is attributed to the strength and capabilities of our exploration, sub-
surface and drilling teams whose combined expertise has resulted in a number of significant
discoveries.
This series of successful results is founded on our work in understanding the geologic fundamentals
of the region' said Tan Sri Dato’ Seri Shahril Shamsuddin, President & Group Chief Executive
Officer, Sapura Energy Berhad.
The Pepulut-1 gas discovery is a continuation of Sapura E&P’s exploration successes in the highly
prolific area of SK408.
'In line with our strategy to unlock the value of our gas fields and enhance long-term earnings
visibility of our E&P business, we will focus on realising the full potential of our highly prospective
gas fields in SK408 and strengthening our E&P portfolio' Tan Sri said.
The Pepulut-1 discovery is another significant milestone for Sapura Energy following the recent
announcement of its development plans for Gorek, Larak and Bakong fields as phase 1 in the
SK408 PSC
Sapura E&P is the exploration operator with its partners PETRONAS Carigali and Sarawak Shell.

Global LNG trade continues to grow, from Australia and U.S
U.S. Energy Information Administration, based on International Group of Liquefied Natural Gas Importers, Annual Reports, 2014-18
Global trade in liquefied natural gas (LNG) reached 38.2 billion cubic feet per day (Bcf/d) in 2017, a
10% (3.5 Bcf/d) increase from 2016 and the largest annual volume increase on record, according
to the Annual Report on LNG trade by the International Association of Liquefied Natural Gas
Importers (GIIGNL).
In 2017, there were 19 LNG exporting countries and 40 LNG importing countries. Australia and the
United States were among the countries with the largest increases (2.7 Bcf/d combined) in 2017
LNG exports.
Besides Australia and the United States, several other countries also increased LNG exports in
2017.
The return to service of Angola LNG and increases from several countries including Nigeria,
Malaysia, Algeria, Russia, and Brunei added another 1.4 Bcf/d of LNG exports, more than offsetting
a combined decline of 0.6 Bcf/d in exports from Qatar, Indonesia, Norway, Peru, the United Arab
Emirates, and Trinidad.
Asian countries led the growth in global LNG imports, accounting for 74% (2.6 Bcf/d) of the increase
in 2017.
Japan remains the largest LNG importer, importing 11.0 Bcf/d in 2017. China had the largest growth
in LNG imports globally (1.5 Bcf/d) and became the world’s second-largest LNG importer in 2017,
surpassing South Korea.

LNG imports also increased in South Korea, Pakistan, Taiwan, and Thailand, which collectively
added 1.0 Bcf/d.
Europe increased its LNG imports by 1.4 Bcf/d, primarily in Spain, Italy, Portugal, France, and
Turkey.
LNG imports in the United Kingdom declined by 0.34 Bcf/d (35%), one of only two countries in
Europe to experience declines in LNG imports, as lower winter heating demand from the residential
sector and increased electricity generation from wind reduced the demand for natural gas.
LNG imports in South America (Brazil, Argentina, Chile, and Colombia) remained essentially
unchanged from 2016. In North America, Mexico’s LNG imports increased by 17% as the country
continued to rely on LNG supplies amid declining domestic production and construction delays in
infrastructure connecting the Mexican domestic grid to natural gas pipeline exports from the United
States.
LNG imports into the Middle East declined by 9%, primarily to Egypt and the United Arab Emirates
(Dubai).
Growth in LNG trade was driven in part by new liquefaction capacity commissioned in Australia,
the United States, and Russia, collectively adding 3.4 Bcf/d of liquefaction capacity. The world’s first
floating liquefaction plant, Malaysia’s PFLNG Satu (0.2 Bcf/d capacity), was also commissioned in
2017.

Since 2013, the United States and Australia have added a combined 9.67 Bcf/d of new liquefaction
capacity, with another 8.3 Bcf/d expected to be completed by 2020.
Including additions in the United States and Australia, liquefaction projects currently under
construction are projected to increase global liquefaction capacity by 13.5 Bcf/d by 2022.
Source: U.S. Energy Information Administration, based on IHS and trade press
The United States is expected to add 6.05 Bcf/d of new liquefaction capacity by 2021, in addition to
3.5 Bcf/d already in operation at Sabine Pass and Cove Point. This year the Elba Island liquefaction
project in Georgia is expected to commission the first 6 of 10 small modular liquefaction units, or
trains, with a combined capacity of 0.2 Bcf/d. New trains at Cameron, Freeport, and Corpus Christi—
all along the U.S. Gulf Coast—are expected to be commissioned in the next three years.

NewBase June 12 - 2018 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 cautious optimism over Trump, Kim summit in Singapore
Reuters + Bloomberg + NewBase
Oil prices edged up along with global markets on Tuesday on cautious optimism over the outcome
of a summit between U.S. President Donald Trump and North Korean leader Kim Jong Un in
Singapore.
But movements in crude markets were limited as traders said they were reluctant to take on large
new positions ahead of a meeting between producer cartel OPEC and some of its allies on June
22.
Brent crude futures LCOc1 were trading at $76.56 per barrel at 0201, up 10 cents from their last
close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $66.24 a barrel, up 14 cents from
their last settlement.
Oil price special
coverage

Crude has been supported by healthy demand and voluntary production cuts led by the
Organization of the Petroleum Exporting Countries (OPEC), but analysts said oil markets were also
currently heavily driven by public policy events and statements.
Trump and Kim on Tuesday started a one-day summit in Singapore with the goal to narrow
differences over how to end a nuclear standoff on the Korean peninsula.
“This week is all about global developments ... And today marks the potentially momentous meeting
between Donald Trump and North Korean leader Kim Jong-Un in Singapore,” said Shannon Rivkin,
investment director at Australia’s Rivkin Securities.
Global markets edged up as the highly anticipated U.S.-Korea summit got underway in Singapore
amid expressions of goodwill.
“Any positive outcome could be good news for markets,” Rivkin added. In oil market fundamentals,
however, not all things point to higher prices, with output from the three biggest producers, Russia,
the United States and Saudi Arabia on the rise.
Russian production has reportedly climbed from below 11 million barrels per day (bpd) to 11.1
million bpd in early June. In the United States, output has risen by almost a third in the last two
years, to a U.S. record of 10.8 million bpd.
“The deluge of U.S. crude production continues to hold the top-side in check,” said Stephen Innes,
head of trading at futures brokerage OANDA. Now, top exporter Saudi Arabia - which has so far
led OPEC’s efforts to withhold supplies - is also showing signs of upping production.
To view a graphic on Russia vs Saudi vs U.S. oil production, click: reut.rs/2JAw1dG
Saudi Arabia has told OPEC that it raised oil output to a little more than 10 million bpd in May, up
from 9.9 million bpd in April.

“This fits with the theory that the Saudis and Russians are subtly moving toward a change to the
agreement at this month’s meeting,” McKenna said. OPEC, together with some non-OPEC
producers including Russia, started withholding output in 2017 to end a global supply overhang and
prop up prices.
OPEC and its partners are due to meet on June 22 at the cartel’s headquarters in Vienna, Austria,
to discuss policy. “Expect more of the same whippy markets driven by rumours and innuendo ahead
of June 22 Vienna OPEC meeting,” Innes said.
Russia & US Boosted Crude Output Before OPEC Meets
Oil extended declines as Russia was said to increase output before it meets with OPEC, adding to
signs that a global coalition of producers is unwinding a pact to restrain supply.
Futures dropped 0.9 percent in New York after a third weekly loss. Russia, which along with Saudi
Arabia is trying to garner support for lifting output limits, was said to have boosted production earlier
this month to above the level envisioned by OPEC.
Meanwhile, the number of rigs drilling for crude in the U.S. inched higher, signaling output may
extend a record.
Oil is trading near a two-month low after Saudi Arabia and Russia indicated they’re ready to restore
production in the second half of this year to offset potential supply disruptions in Iran and Venezuela.
Russia’s apparent willingness to ease caps is in contrast with those two nations, which have little to
gain from such a move since they have limited ability to raise output themselves. Iraq has also
expressed opposition.

“OPEC-led cuts have acted as an important pillar of price support in recent months and any
relaxation in supply curbs will inevitably weigh on prices,” said Stephen Brennock, an analyst at
PVM Oil Associates Ltd. in London.
WTI for July delivery fell 60 cents to $65.14 a barrel on the New York Mercantile Exchange at 8:49
a.m. local time. Total volume traded was about 25 percent below the 100-day average. Brent futures
for August settlement slid 58 cents to $75.88 a barrel on the London-based ICE Futures Europe
exchange, and traded at a $10.79 premium to WTI for the same month.
U.S. Request
The Organization of Petroleum Exporting Countries and its allies will meet in Vienna on June 22-
23. Ahead of the summit, the U.S. government has quietly asked Saudi Arabia and some other
producers to increase oil production by about 1 million barrels a day, according to people familiar
with the matter.

Saudi Arabia and Russia, among the countries with spare capacity to raise production, signaled last
month they may restore output even though they hadn’t yet consulted most other producers. Oil
prices have fallen more than 7 percent since the two nations made their proposal public.
Russia increased oil output to 11.1 million barrels a day during the first week of June, Interfax
reported, citing a person it didn’t name. That’s above the 10.95 million-barrel level anticipated in the
country’s agreement with OPEC and allies.

NewBase Special Coverage
News Agencies News Release June 12-2018
Aviation Transport Faces Turbulence as Slowest Changes Its Fuel
©2018 Bloomberg L.P. -- Alex Longley
From the window of a jet plane, it can be hard to see ships crawling across the seas. Yet what’s
burning in those engines thousands of feet below may determine the fate of airline profits in the next
few years.
In about 18 months’ time, the world’s oil refineries are going to have to supply shipping companies
with better-quality fuel to comply with international regulations agreed back in 2016 in a nondescript
building on the banks of the River Thames in London.
While the regulators’ target was to lower sulfur emissions from ship fuel, it’s becoming increasingly
clear there will be an accompanying -- and significant -- impact on the supply of jet fuel, the aviation
industry’s single biggest expense. The trouble is, there’s profound disagreement about whether the
result will be a glut or a shortage of the fuel.
“These rules are going to impact airlines,” said Mark Maclean, managing director at Commodities
Trading Corporation Ltd., which advises on hedging strategies. “The impacts will not be isolated

only within the shipping industry, these changes will affect the entire oil and middle-distillate
complex,” the part of refining that includes jet fuel and diesel.
From Jan. 1, 2020, the world’s ships will need to consume fuels containing less sulfur under the
2016 rules set out by the International Maritime Organization, part of the United Nations.
Oil refineries are likely to face an initial demand surge from shippers for diesel-type products when
the rules kick in. Diesel is critical in determining the cost of normally more-expensive jet fuel, so if
that historic price relationship holds, then the aviation industry’s fuel bill could surge as well.
Refining Puzzle
How it plays out in practice hinges on the way refineries make jet fuel and -- critically -- how much
flexibility they’ll have to adjust their output once the new rules enter into force.
Jet fuel is made in one simple refining process, meaning that if more crude gets distilled to make
diesel, then there will be an unavoidable surge in jet fuel supplies too. Several traders say that could
result in a surplus.
But not everybody agrees. For one thing, increased amounts of jet fuel will be blended into fuel oil
to meet the more stringent sulfur specifications, according to Jan-Jacob Verschoor, a director at Oil
Analytics and a chemical engineer by training who previously worked at Royal Dutch Shell Plc.
Refineries will also have some flexibility to maximize diesel production to the detriment of jet fuel
output, more than negating any ramp-up in overall crude processing, he said.
Airlines Un-Hedged
So far, most airlines seem relaxed about the situation. Of 26 carriers monitored by Bloomberg in
Europe, the U.S. and Asia, only Southwest Airlines Co. has reported hedged fuel prices into the
next decade. The company has 38 percent of 2020 buying covered, up from 36 percent a year ago
for 2019. It’s already hedging all the way into 2022.
“New developments like IMO 2020 regulations are certainly one of the many items we monitor on
an ongoing basis to determine their impact on the energy markets, and ultimately the price of jet
fuel, and we incorporate such information into our robust planning processes,” Southwest said by
email in response to questions about its hedges.

Big Question
Prices for jet fuel for mid-2020 have risen by more than 40 percent since the middle of last year,
tracing gains in both crude and diesel. Rising profit margins for diesel, one of the fuels that airlines
reference when hedging their costs, are a sign of the impact the new shipping rules already are
having on the market, London-based Maclean said. The ICE gasoil crack, or premium to Brent, for
June 2020 has gained about 60 percent since last July.
The fallout from the shipping rule change is an important quandary for airlines already suffering from
a more than 50 percent increase in crude prices over the past year.
The crude-price surge may force some weaker operators out of business, Ryanair Holdings Plc
Chief Executive Officer Michael O’Leary said last month. Willie Walsh, CEO of British Airways parent
IAG SA, said last week that the price of fuel “is having an impact because it’s much higher than we
expected.” Rising fuel costs were a factor that prompted the International Air Transport Association
to cut its profit target for global aviation.
Hedging Strategy
While those higher crude prices may be preoccupying airline executives for now, the looming
changes for shipping are starting to register.
Robert Isom, president of American Airlines Group Inc., said in a call last month that his company
too is looking at the issue without having a clear strategy yet. At a recent industry conference, the
CEOs of Kenya Airways Plc and LOT Polish Airlines SA said they were aware of the issue and that,
if anything, it may lower costs as more jet fuel gets produced. Virgin Australia’s CEO also said it
would likely influence pricing.
“Our fuel guys are going through everything to understand what the impact could be on us,” Isom
said. “So, we are in the process of working through that. I don’t have an answer on that yet at all.”

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 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
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 June 2018 K. Al Awadi

Thank you for sharing with us your comments and thoughts on the above issue, similarly we would like to
share with our daily publications on Energy news via own NewBase Energy News –
Call us for details khdmohd@hawkenergy.net
Your Energy Consultant for the GCC area
Khaled Al Awadi

For Your Recruitments needs and Top Talents, please seek our approved agents below

Oman LNG signs contracts for gas-fired power plant

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Oman LNG signs contracts for gas-fired power plant

Similar to Oman LNG signs contracts for gas-fired power plant (20)

More from Khaled Al Awadi

More from Khaled Al Awadi (20)

Recently uploaded

Recently uploaded (20)

Oman LNG signs contracts for gas-fired power plant