New base 21 january 2018 energy news issue 1130 by khaled al awadi

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 21 January 2018 - Issue No. 1130 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 Masdar, Current partnerships and Renewable Energy Projects
Cepsa + NewBase
Cepsa, a global energy company, and Masdar, Abu Dhabi’s renewable energy company, have
signed a memorandum of understanding (MOU) to explore renewable energy project
collaboration, especially wind and solar.
Cepsa and Masdar aim to expand their international presence in the renewable energy market
through the signing of this agreement, a statement said.
The collaboration between Cepsa and Masdar is a reflection of the constant search for synergies
among businesses of the Mubadala Investment Company. The combination of Cepsa's technical
excellence in operations and execution of industrial projects in places like Algeria and Latin
America, coupled with Masdar's experience in renewable energies in the Middle East, the United
Kingdom and other markets, will help drive the development of projects in strategic countries for
both companies.
Cepsa and Masdar plan to explore opportunities in the locations where they already operate or
can easily access, such as Spain, Mena, Latin America, Europe, and other regions.
The agreement was announced today at Abu Dhabi Sustainability Week, one of the world's largest
gatherings on sustainability which is currently being held in the UAE capital. Last year the event
received over 38,000 visitors.
Masdar in deal to develop major wind power project in Egypt
Abu Dhabi Future Energy Company (Masdar) has signed a collaboration agreement to deliver a
wind power portfolio of more than 800 megawatts (MW) in Egypt alongside Elsewedy Electric and
Marubeni Corporation.

The signing took place in the presence of Wael Gad, Ambassador of Egypt to the UAE, during the
Abu Dhabi Sustainability Week
Mohamed Jameel Al Ramahi, chief executive officer at Masdar, said: “As Egypt’s economy
expands, so do the opportunities to provide energy from renewable sources. We are ready to tap
into our existing experience with renewable energy projects, while collaborating with industry
experts like Elsewedy Electric and Marubeni in Egypt, to deliver on the country’s visionary plans
for the future.”
The three entities are partnering for the first time to build on their existing renewable energy
capacity in Egypt. Masdar has already developed a number of solar power plants in partnership
with Egypt’s New and Renewable Energy Authority. These include the 10MW Siwa Solar PV
plant; four PV plants in the Red Sea governorate with a combined capacity of 14MW; and three
PV installations in Al Wadi Al Jadeed with a combined capacity of 6MW. That is in addition to
providing 7,000 standalone solar home systems to homes and community buildings.
Egypt’s Ministry of Electricity and Renewable Energy recently announced that the country plans to
generate 42 per cent of its electricity from renewables by 2025. According to the International
Renewable Energy Agency (Irena), headquartered in Masdar City in Abu Dhabi, the country aims
to install 7.2GW of wind power by 2020 and 3.5 gigawatts (GW) of solar by 2027.
“This new addition to Egypt’s energy portfolio is amongst several projects implemented in recent
years, and shows once again the country’s attractiveness as a location for renewable energy
investors,” said Ahmed Elsewedy, president and chief executive officer of Elsewedy Electric. “We
are confident that Egypt will realise the ambitious targets set for renewable energy, and Elsewedy
is glad to be part of the continuous success of Egypt’s IPP programme alongside two great
international organisations.”

Masdar, Economic Cities Authority sign MoU
ABU DHABI, 17th January, 2018 (WAM) -- Abu Dhabi Future Energy Company, Masdar, has
signed a memorandum of understanding with Saudi Arabia's Economic Cities Authority, ECA, to
cooperate on projects and services to progress the Saudi Economic Cities initiative and in turn
advance the strategic objectives of both parties.
In the presence of Dr. Sultan bin Ahmad Sultan Al Jaber, Minister of State, Chief Executive Officer
of Abu Dhabi National Oil Company, ADNOC, and Chairman of Masdar, the MoU was signed by
Mohamed Jameel Al Ramahi, Masdar’s Chief Executive Officer and Mohanud A. Helal, Secretary-
General of ECA.
The agreement aims to establish cooperation and knowledge exchange between both parties in
planning future sustainable cities and will enable the Economic Cities to play their role in the
KSA’s development.
"We are delighted to sign this MoU with the Saudi ECA, through which we aim to exchange
knowledge and expertise in the sustainable cities field", Al Ramahi commented. "We also aim to
share our successful experience in developing Masdar City – one of the most sustainable cities in
the world – with our brothers in ECA, and we look forward to promoting and maintaining this
cooperation so we can advance sustainable urban development and expand its reach using
commercially viable methods".
"This MoU will definitely support ECA and Masdar in achieving their goals by cooperating in a
number of vital fields that are essential to the future of the national economy," Helal said. "ECA
will continue to build fruitful and constructive relationships with parties that can help us fulfil our
role in realising Saudi Vision 2030, which aims to create a vibrant society, a thriving economy, and
an ambitious nation. ECA is determined to make an effective contribution to achieving the goals of
our wise leadership and the ambitions of Saudi citizens."

Saudi Arabi: Al Babtain to set up wind power plant in KAEC
TradeArabia News Service
King Abdullah Economic City (KAEC) has signed a contract with the International Wind Power
Company, a subsidiary of Al Babtain Power & Telecom, a leader in renewable energy and
telecomm sectors to build Saudi Arabia’s first commercial wind farm. Under the terms of the
contract the International Wind Power Company will lease 102,000-sq m of land in the Industrial
Valley on which to build wind turbines to generate electricity.
“We are delighted that the International Wind Power Company has chosen the Industrial Valley to
produce renewable energy,” said Fahd Al-Rasheed, managing director and Group CEO of KAEC.
“This strategic partnership further
enhances the Industrial Valley’s state
of the art infrastructure and facilities
and cements its reputation as the
regional destination of choice for
leading international and local
companies in the logistics and light
industry sectors.
“We continue to work toward the aims
of Saudi Vision 2030 by opening the
door to local and international
companies who invest in ventures that
diversify the Kingdom’s economy. Renewable energy is a promising sector that holds many
development opportunities in the medium and long term,” he added.
The Al Babtain plant in the Industrial Valley is the company’s first investment in the field of
generating renewable energy inputs in Saudi Arabia. Production is scheduled to begin in 2019.
“Saudi Arabia is witnessing a rapid increase in demand for electricity, especially due to the high
population growth rate,” said Ibrahim Al Babtain, chairman of Al Babtain Power &
Telecommunication Company.
“The project, which will be launched from King Abdullah Economic City, targets the Saudi market
in the first place, then the GCC and the Middle East, and ultimately the international market.” He
went on to state that the newly established International Wind Power Company is in talks with the
concerned authorities to be the supplier of the first renewable wind energy in the Kingdom as part
of Saudi Arabia’s Renewable Energy Plan referred to in Saudi Vision 2030.
According to government estimates, Saudi peak energy demand is expected to exceed 120 GW
by 2032, prompting the Kingdom to launch the National Renewable Energy Program (NREP),
which aims to substantially increase the share of renewable energy in the total energy mix,
targeting the generation of 3.45 GW of renewable energy by 2020 and 9.5GW by 2023.
“Al Babtain’s decision reflects King Abdullah Economic City’s strong competitive offer, which is evidenced
by the rapid growth being enjoyed by all sectors in the city,” said Ayman Mansi, CEO of the Industrial
Valley. “The ongoing development of the Industrial Valley continues to keep pace with the growing demand
for industrial land by local and international investors excited by the opportunities of Saudi Vision 2030.”
King Abdullah Economic City is one of the biggest privately owned and run projects in the world. Its centerpiece is a
comprehensive, 181-sq-km city on the eastern coast of the Red Sea, just north of Jeddah. –

Iraq: Genel Energy announces Bina Bawi and Miran West gas
resource update .. Source: Genel Energy
Genel Energy has announced that RPS Energy Consultants, as part of its work on the updated
competent person's reports ('CPRs') for the Bina Bawi and Miran West fields (Genel 100% and
operator), has finalised its evaluation of
the contingent gas resources at both assets:
• The RPS evaluation confirms a significant upgrade to the combined 2C gross (100%
working interest ('WI')) raw gas resource estimate for the Bina Bawi and Miran West fields:
o The RPS assessment of the combined gross 2C raw gas resource for both fields
now stands at 14,792 Bscf, a figure which excludes associated condensate volumes
attributable to the upstream partners.

o The RPS assessment of the combined gross 2C condensate volumes potentially
recovered from raw gas production at both fields totals 137 MMstb
o As at end-2016 Genel's reported 2C resources included net raw gas resources from
Miran and Bina Bawi totalling 1,421 MMboe(1), which related to Genel's respective
80% and 75% interests in the Bina Bawi and Miran PSCs at that time
o In February 2017 the Company increased its interest in both PSCs to 100%,
resulting in a combined pro-forma end-2016 Genel 2C resource of 1,815 MMboe
(10,530 Bscf(2))
o The 2018 RPS estimates of combined 2C resources from both fields have increased
c.40% compared to the pro-forma end-2016 2C resource
• The revised Bina Bawi 1C gross raw gas resource estimate is more than 50% higher than
the gas volume agreed to for the field under the Gas Lifting Agreement ('GLA'). The revised
Miran West 1C gross raw gas resource estimate is in line with the volume agreed to for the
field in the GLA
A comparison of the revised 2C gross contingent resource numbers for both fields and the
Company's end-2016 number, which was based on the 2013 RPS reports plus the addition of the
Company's assessment of non-hydrocarbon gases, is summarised in the following table. Further
detail is provided in an appendix to this announcement.
RPS's updated analysis of the raw gas resources on both fields has benefitted from updated
reservoir simulation modelling combined with analogue analysis jointly created and developed by
the Company and Baker Hughes since the original reports were produced.
As a consequence, the recovery factors for the gas reservoirs in both fields have, in most
resource categories, been increased to reflect a better understanding of potential reservoir
performance. Further appraisal activity, which is currently under consideration, could help refine
reservoir performance and these recovery factor estimates.
Volumes agreed under the GLAs total 2,800 Bscf from Bina Bawi, and 2,000 Bscf from Miran
West over a 12 year period, consisting of a two year build-up period and 10 year plateau period.
The revised 2C and 3C raw gas resources for both fields significantly exceed these volumes.

Following the completion of the upstream field development plans ('FDPs'), sufficient progress on
the midstream facilities and sales gas export route, and subsequent final investment decision, the
Company expects that a percentage of the contingent raw gas resources will be converted to
reserves, dependent on the volumes set to be produced under the FDPs.
The upstream FDPs for the gas and oil fields in the Bina Bawi and Miran PSCs, which are being
carried out by Baker Hughes, are expected to be completed shortly.
RPS is continuing its evaluation of the oil bearing reservoirs at both fields, the results of which will
be announced once finalised.
Appendix
Summary of Contingent Resources - Development unclarified (Gross 100% working interest
basis) attributable to the Bina Bawi and Miran West fields as of 31 December 2017

Iraq and BP sign deal to boost Kirkuk crude output
Source: Reuters
Iraq signed a memorandum of understanding with BP on Thursday to boost production capacity at
its northern Kirkuk oilfields, the country’s oil ministry said in a statement. The oilfields were taken
back under Baghdad’s control last October after Iraqi government forces dislodged Kurdish
fighters from the area.
Oil Minister Jabar al-Luaibi
and BP’s president for the
Middle East region, Michael
Townshend, attended the
signing ceremony at the
Kirkuk office of the Iraqi
state-run North Oil
Company, which operates
the fields, the ministry said.
The agreement provides for
BP to boost Kirkuk’s output
capacity to 750,000 barrels
per day (bpd), more than
twice existing capacity, the
statement added, citing
Townshend.
'The company will carry out
seismic survey operations and studies to develop the fields,' the ministry statement quoted the BP
executive as saying. Luaibi initiated the talks with BP in October, only days after the Kurdish
fighters were driven from the area.
Oil exports from the field, transported by pipeline to Turkey, halted after the Iraqi military
operation, which was conducted in retaliation against an independence referendum held on Sept.
25 by the semi-autonomous Kurdistan Regional Government (KRG).
Iraq plans to start trucking crude from Kirkuk to Iran at the end of the month.
BP had agreed in 2013 to help Baghdad to halt a huge decline in output from Kirkuk. The KRG
took control of the Kirkuk region in 2014, when the Iraqi army collapsed in the face of Islamic
State’s sweeping advance in northern and western Iraq.
The Kurdish move prevented the fields from falling into the hands of the militants.
Kirkuk is one of the biggest and oldest oilfields in the Middle East, estimated to contain about 9
billion barrels of recoverable oil, according to BP.
BP has provided technical assistance in the past to the North Oil to aid the redevelopment of the
Kirkuk field.
Iraq is the Organisation of Petroleum Exporting Countries’ second-largest producer behind Saudi
Arabia.
Luaibi said on Saturday that Iraq oil output capacity is nearing 5 million bpd. However, it is
currently producing 4.4 million bpd in compliance with an agreement between oil exporters to
support crude prices.

Venezuela’s oil production has collapsed; but how badly.
By Liam Denning
I think we can all agree that, absent a war or some deliberate strategy, a 14 percent drop in a
country's oil production in the space of one year is not a good thing. Even worse, though, is a 29
percent drop.
These two realities, both undesirable, were presented for Venezuela in OPEC's latest monthly
report, out Thursday. The oil-exporters' club publishes two sets of production figures for each
member: namely, what the countries report themselves and a consensus figure from secondary
sources.
In Venezuela's case, something very interesting happened in December. While secondary
sources estimated a drop of 82,000 barrels a day in the country's output, Caracas said it was
216,000 barrels a day. This chart showing the month-to-month changes in Venezuela's output
over the past year from the two sets of figures shows you just how weird that is:
Self Harm
Venezuela's own numbers on its oil output have turned sharply negative in the past few months
Source: OPEC
Note: Change in oil production, month to month.
The independent figures show output dropped by 276,000 barrels a day between December 2016
and December 2017 (that's the 14 percent drop). The official figures show an astounding collapse
of 649,000, roughly equivalent to losing Argentina's entire output. Speaking at Bloomberg's offices
in New York on Wednesday, Fatih Birol, executive director of the International Energy Agency,
characterized the drop in Venezuela's oil production as the biggest unplanned one in history.
That Venezuela's oil output is collapsing isn't in doubt. It's worth noting that while December's
discrepancy stands out, the 2017 decline in the official numbers overtook the drop in the
secondary numbers on a cumulative basis back in April:

The Long Slide
Venezuela's official oil figures have been showing steeper declines in output since April 2017
Source: OPEC
Note: Cumulative change in Venezuelan oil production versus December 2016.
Notably, though, December's savage drop took the official level of production below the secondary
estimate -- to 1.62 million barrels a day versus 1.75 million, respectively -- for the first time.
The timing makes this interesting. In late November, Major General Manuel Quevedo
was suddenly appointed both oil minister and head of state-oil company Petróleos de Venezuela
SA. This tightening of government control over the country's vital industry, coming alongside a
purge, raises bad memories of similar moves by former president Hugo Chávez that ultimately
resulted in strikes and a loss of much of PdVSA's technical expertise; output dropped by about
300,000 barrels a day between 2001 and 2003.
Equally, though, new leaders inheriting bad situations have an incentive to kitchen-sink the figures
in the hopes of gaining credit for subsequent stabilization. Francisco Monaldi, a fellow in Latin
American energy policy at Rice University's Baker Institute, says Quevedo appeared on television
on Sunday claiming production had collapsed to 1.5 million barrels a day but was already
recovering to almost 1.9 million. Monaldi adds that he still hears the collapse is "massive" but also
suspects figures for January might show slight improvement, especially as Baker Hughes reported
an increase in the number of rigs operating there that month, up from 40 to 50.
As so often, the truth likely lies somewhere in between those two figures that OPEC published.
What is clear is that, as I wrote here, Venezuela's suffering aids its fellow members in their efforts
to take supply off the market.
Taking the midpoint of the two figures and comparing it to the supply cuts agreed in late 2016,
Venezuela's compliance level is now above 400 percent. Factoring in the wildcards of Libya and
Nigeria, OPEC's net cut versus the baseline agreement stood at around 910,000 barrels a day in
December. Venezuela accounted for four out of every 10 of them. The rally in oil prices owes
something to economic growth, OPEC's maneuvering, and speculative zeal. Increasingly, it also
rests on sheer misery in this one corner of the world.

U.S. fossil fuel production to reach record levels in 2018 and 2019
Source: U.S. Energy Information Administration, Monthly Energy Review and Short-Term Energy Outlook
In its January 2018 Short-Term Energy Outlook (STEO), EIA forecasts that total fossil fuels
production in the United States will average almost 73 quadrillion British thermal units (Btu) in
2018, the highest level of production on record. EIA expects total fossil fuel production to then set
another record in 2019, with production forecast to rise to 75 quadrillion Btu.
Fossil fuels include dry natural gas, crude oil, coal, and hydrocarbon gas liquids (HGL). Although
EIA tends to express fossil fuel production in physical units, such as cubic feet for natural gas,
barrels for oil, and tons for coal, expressing production in heat content allows for comparisons
across fuel types.
Record production levels are largely attributable to increased production of natural gas and crude
oil enabled by the use of hydraulic fracturing techniques in tight rock formations. EIA expects
increases in natural gas production to be the leading contributor to overall fossil fuels production
growth in 2018 and increases in crude oil production growth to the be leading contributor in 2019.
In both years, expected growth in natural gas, crude oil, and HGL production more than offset
expected declines in coal production.
On a heat-content basis, dry natural gas accounted for the largest share of fossil fuel production in
2017 at 41%. Crude oil accounted for 29%, coal for 23%, and HGL for the remaining 7% of the
total. As recently as 2010, coal was the leading source of U.S. fossil fuel production, but it was
surpassed by dry natural gas in 2011 and by crude oil in 2015.
In 2018, EIA forecasts dry natural gas production will average 80.4 billion cubic feet per day
(Bcf/d), an increase of 9% from 2017 levels. If achieved, this level of production would be the
highest annual average on record, surpassing the previous record of 74.2 Bcf/d set in 2015. EIA

forecasts dry natural gas production will set another record with 83.0 Bcf/d in 2019. Growth is
likely to be concentrated in Appalachia’s Marcellus and Utica shales along with the Permian Basin
in Texas and New Mexico.
EIA expects total U.S. crude oil production to average 10.3 million barrels per day (b/d) in 2018,
up 10% from 2017. If achieved, this would be the highest annual average U.S. oil production on
record, surpassing the previous record of 9.6 million b/d set in 1970. In 2019, EIA expects crude
oil production to continue to increase, reaching an average of 10.8 million b/d.
Increased production from the Permian region in Texas and New Mexico accounts for most of the
projected increase in the U.S. total. EIA also expects a significant contribution to crude oil
production growth from the Federal Gulf of Mexico, as seven new oil-producing projects are slated
to come online by the end of 2019.

EIA forecasts coal production will total 759 million short tons (MMst) in 2018, down 2% from 2017.
Coal production is expected to fall to 741 MMst in 2019, a further 2% decline from 2018. In both
years, EIA expects production declines in the Appalachia and Western producing regions to be
partially offset by production increases in the Interior producing region.
U.S. coal consumption also is projected to fall the next two years. About 90% of domestic coal
consumption occurs in the electric power sector, and EIA expects relatively low natural gas prices
to reduce demand for coal used to produce electricity. EIA expects demand for U.S. coal exports
to fall in 2018 and 2019 after a slight increase in 2017.
Growth in crude oil production, especially in the Permian Basin, is projected to result in increased
associated natural gas production and to contribute to growing HGL production at natural gas
processing plants. EIA forecasts HGL production will average 4.2 million b/d in 2018 and 4.6
million b/d in 2019.

NewBase January 21 - 2018 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices fall as rally falters on growing U.S. output concerns
Reuters + NewBase + Bloomberg
Oil prices ended down on Friday and broke a four-week winning streak after a rally that had taken
benchmarks to three-year highs, as investors sold positions on re-emerging U.S. production
concerns.
Brent crude futures LCOc1 fell 70 cents, or 1 percent, to settle at $68.61 a barrel after hitting a
session low of $68.28. On Monday, they hit their highest since December 2014 at $70.37. U.S.
West Texas Intermediate (WTI) crude futures CLc1 settled at $63.37 a barrel, down 58 cents, or
0.9 percent. WTI marked a December-2014 peak of $64.89 a barrel on Tuesday.
On a weekly basis, Brent settled 1.8 percent lower while WTI was down 1.5 percent.
Oil price special
coverage

“We had such a meteoric rise in the oil market recently and we were overbought quite a bit. This is
the first time we’ve taken a breath,” said Phil Flynn, analyst at Price Futures Group in Chicago.
“The pullback in relationship to the recent run-up is still very modest,” he added.
The International Energy Agency (IEA) said in its monthly report that global oil stocks have
tightened substantially, aided by OPEC cuts, demand growth and Venezuelan production hitting
near 30-year lows.
But it warned that rapidly increasing production in the United States could threaten market
balancing. “Explosive growth in the U.S. and substantial gains in Canada and Brazil will far
outweigh potentially steep declines in Venezuela and Mexico,” the IEA said of 2018 production.
The energy watchdog forecast U.S. supply growth will push its output past 10 million barrels per
day (bpd), overtaking Saudi Arabia and rivaling Russia. U.S. crude oil production C-OUT-T-EIA
rose nearly 300,000 bpd to 9.75 million bpd last week, according to government data.
The U.S. oil rig count, an indicator of future production, fell by five this week but at 747, was still
much higher than the 551 rigs a year ago, according to General Electric Co’s (GE.N) Baker
Hughes energy services firm.
“The drop in the rig count should place a little bit of doubt about the IEA’s forecast of explosive
growth. People are starting to really question the validity of demand,” Flynn said. Overall,
however, oil prices remain well supported, and most analysts do not expect steep declines.
Hedge funds have been increasing long positions steadily on expectations that tightening supply
will keep prices buoyant. Money managers raised their net long U.S. crude futures and options
positions in New York and London by 40,855 contracts to 541,990 in the week to Jan. 16, a record
high, the U.S. Commodity Futures Trading Commission said.
In a separate report, Intercontinental Exchange Inc said speculators trimmed positions in Brent in
the week to Jan. 16 from a record the week before, dropping 3,357 contracts to 570,795. The
main price driver has been a production cut by major producers led by the Organization of the
Petroleum Exporting Countries (OPEC) and Russia since January last year.
The supply cuts, scheduled to last throughout 2018, were aimed at tightening the market to prop up prices.
Even in the United States, not part of the pact to curb output, crude inventories fell 6.9 million barrels last
week to 412.65 million barrels, the lowest seasonal level in three years and below the five-year average
marker around 420 million barrels.

WTI Falls to Lowest in a Week as Shale Revival Fears Haunt
Oil’s recent three-year highs are looking increasingly elusive as the week ends, with mounting
fears that current prices will spark too much production, all over again.
Futures in New York slid 0.9 percent on Friday to the lowest level in more than a week and posted
the first weekly loss since mid-December. The International Energy Agency on Friday said it sees
“explosive” growth in U.S. oil output in 2018. A day earlier, the Energy Information Administration
showed the biggest gain in U.S. crude production since October.
“The higher the price is, the more production we are going to get out of the U.S., which threatens
the price,” James Williams, president of London, Arkansas-based energy researcher WTRG
Economics, said by telephone. “We are in that threatening cycle right now.”
The enthusiasm that put the crude market in the groove for another year of rising prices is giving
way to some caution. With technical indicators signaling oil is overbought, hedge funds cut their
bullish bets on Brent crude from a record-high, according to ICE Futures Europe data released on
Friday.
The Organization of Petroleum Exporting Countries, which will meet in Oman this weekend to
review its strategy, is sticking to its production curbs. But some analysts expect the output-cut
agreement will end earlier than planned. Plus, the compliance rate for the 10 non-OPEC nations
participating in the deal plummeted to 78 percent in December, the lowest level since July,
according to Bloomberg calculations from preliminary IEA data.
The "probability is growing" that the accord may conclude before the end of the year, said Harry
Tchilinguirian, BNP Paribas SA’s head of commodity strategy. Discussions around an early exit
are likely to emerge at the OPEC’s meeting in June, he said.

West Texas Intermediate for February delivery dropped 58 cents to settle at $63.37 a barrel on
the New York Mercantile Exchange. Total volume traded was about 11 percent below the 100-day
average. Prices are down 1.5 percent this week.
Brent for March settlement slipped 70 cents to end the session at $68.61 a barrel on the London-
based ICE Futures Europe exchange. Prices fell 1.8 percent this week. The global benchmark
The IEA expects non-OPEC supply to expand by 1.7 million this year, the biggest jump since the
peak of the shale boom.
“The big 2018 supply story is unfolding fast in the Americas,” the IEA said in its monthly report.
“Explosive growth in the U.S. and substantial gains in Canada and Brazil will far outweigh
potentially steep declines in Venezuela and Mexico.”
Earlier in the week, an EIA report showed that while U.S. crude inventories tumbled for a ninth
straight week, production rose by 258,000 barrels a day.
The decline in crude inventories “was a definite positive, but at the same time, there was a little bit
of concern in the market that has really been brought out too by the IEA, with just continual
production as we get closer to the $65 range,” Mark Watkins, a Park City, Utah-based regional
investment manager at U.S. Bank Wealth Management, which oversees $142 billion in assets,
said by telephone.
Drillers Remove Five Rigs From Service in American Oil Fields
U.S. oil explorers shut down rigs this week as concerns mounted that American drilling has
expanded too much too quickly.
Working rigs drilling for crude in the U.S. dropped by five this week, bringing the total down to 747,
according to Baker Hughes data released Friday. The decline wiped out half of last week’s
increase in the rig fleet.

The American rig count jumped 12 percent in 2017 for the biggest annual increase since 2014.
That injection of new activity has set the stage for “explosive” growth in U.S. crude production, the
International Energy Agency said just hours before Baker Hughes disclosed its weekly rig tally.
The IEA alarm followed OPEC’s warning on Thursday that output by non-OPEC producers will
expand by 16 percent this year.
“The big concern is prices -- are they worried about prices going too high too quickly?” said Mike
Wittner, head of oil-market research at Societe Generale SA in New York. “There are many
reasons they’d be concerned, but top of the list is: how will U.S. production respond?”
Oil output in the U.S. rose by 258,000 barrels a day last week to 9.75 million, according to the
Energy Information Administration. Analysts at Simmons & Co, energy specialists at U.S.
investment bank Piper Jaffray, this week slightly increased their forecast for the total oil and
natural gas rig count to an average of 1,004 in 2018 and 1,128 in 2019. Last week, it forecast 996
in 2018 and 1,126 in 2019.
There were 936 oil and natural gas rigs active on Jan. 19. On average, there were 876 rigs
available for service in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.
U.S. oil output is expected to continue to rise in February with production from shale formations
rising by 111,000 barrels per day (bpd) to 6.55 million bpd, the U.S. Energy Information
Administration said on Tuesday.
According to this week’s Baker Hughes report, more than half of the oil rigs were located in the
Permian basin in west Texas and eastern New Mexico where the number of active rigs increased
by six to 409, the most since February 2015.
Those rigs were expected to help boost oil output in the Permian to a record high near 2.9 million
bpd in February, according to federal projections, representing about 30 percent of total U.S. oil
production.
The global oil market has been closely watching U.S. output, which may continue to contribute to
global oversupply even as OPEC members, Russia and other producers curb production. The
agency previously said U.S. output could reach 10 million bpd in February and surge to 11 million
bpd in 2019.

IEA Sees ‘Explosive’ Growth in U.S. Oil Output As Prices Rally
U.S. oil output is set for “explosive” growth this year as prices rally, potentially offsetting a further
collapse in Venezuela’s production, the International Energy Agency said.
The agency is joining a chorus of voices from Goldman Sachs group Inc. and OPEC’s own
analysts in warning of a surge in U.S. production as oil hits three-year highs. Output cuts led by
the Organization of Petroleum Exporting Countries have been successful in eroding bloated
stockpiles, and yet they risk becoming a victim of their own success.
Heady Days
Non-OPEC oil output growth in 2018 is comparable with the best years of U.S. shale boom
Source: International Energy Agency
The IEA boosted its forecasts for non-OPEC supply growth this year by 100,000 barrels to 1.7
million barrels a day compared to last month’s report. It also warned 2018 could be a “volatile”
year amid geopolitical uncertainties, not least the risks to Venezuela’s oil industry.
“The big 2018 supply story is unfolding fast in the Americas,” the IEA said in its monthly report.
“Explosive growth in the U.S. and substantial gains in Canada and Brazil will far outweigh
potentially steep declines in Venezuela and Mexico.”
The agency raised its forecast for U.S. oil production growth this year by 240,000 barrels a day to
1.35 million barrels. The country’s crude output is on track to surpass Saudi Arabia and rival
Russia. While the U.S. gains, there are others that are still suffering. The IEA expects Venezuela’s
troubles to continue after it had the biggest unplanned production decline last year.
“Given Venezuela’s astonishing debt and deteriorating oil network, it is possible that declines this
year will be even steeper than the 270,000 barrels a day in 2017,” the report said. The country’s
output last year was 1.97 million barrels a day, the lowest in nearly 30 years.
Yet, the IEA doesn’t see a “clear sign yet of OPEC turning up the taps to cool down oil’s rally” to
“compensate for a precipitous drop in supply from Venezuela.” OPEC and its partners will meet in
Oman over the next two days to review their strategy for clearing the global oil glut. Ministers from
the United Arab Emirates, Iraq and Kuwait have said the deal needs to continue. Russia’s Energy
Minister Alexander Novak has said talks this weekend could include mechanisms for gradually
exiting the supply cuts after the agreement concludes at the end of 2018.

Speculation Grows That OPEC Will End Cuts Early as Prices Rise
As oil trades near a three-year high and crude stockpiles fall rapidly, analysts are questioning
whether the OPEC-led production cuts will last until the end of the year. As the producer group
gears up for a meeting with its partners to review strategy in Muscat, Oman, this weekend, there
are growing expectations that the deal will be phased out early.
The "probability is growing" that the accord may conclude before the end of the year, said Harry
Tchilinguirian, BNP Paribas SA’s head of commodity strategy. Discussions around an early exit
are likely to emerge at the next OPEC meeting in June, he said.
"If Brent is still trading around $60 a barrel and oil inventories are close enough to OPEC’s five-
year average," the deal may be phased out informally by nations gradually weakening their
compliance with production cuts, Tchilinguirian said. It would be "prudent" to expect OPEC
members will start cheating given higher oil prices, said Energy Aspects Ltd.’s chief oil analyst
Amrita Sen.
Other analysts predict a more formalized unwinding of the cuts.
"I don’t think the deal per se will end" as inventories near the five-year average, said Bjarne
Schieldrop, chief commodity analyst at SEB AB. The Declaration of Cooperation -- the 2016
accord that first established the group of 24 oil producers-- will still stand, but be modified to allow
for production cuts to gradually unwind from mid-2018, he said.
OPEC's Mission Already Accomplished
Citigroup says global oil stocks are back to average levels
Source: Citigroup
Giovanni Staunovo, commodity analyst at UBS Group AG, expects a similar outcome. Citigroup
Inc., whose data show that global oil stockpiles are already back in line with the five-year average,
predicts a summer agreement to ramp up production.
The oil producers themselves say they’re sticking to the plan. While Russia’s Energy Minister
Alexander Novak told reporters on Jan. 12 that the meeting in Oman could include discussion of
mechanisms for gradually exiting the cuts, four days later he affirmed that the pact should
continue. Ministers from the United Arab Emirates, Iraq and Kuwait also insisted there’s no need
to change tack.

NewBase Special Coverage
News Agencies News Release January 21-2017
OPEC's Casual Relationship With Hedge Funds
Oil speculators are helping the cartel, but at a price.
By Liam Denning
OPEC has a complicated relationship with hedge funds.
Historically, the oil exporters' club routinely blamed
"speculators" for moving oil prices too far this way or
that relative to fundamental supply and demand. Let's
breeze past the irony of an organization artificially
restricting supply bemoaning others for interfering with
the purity of the price-setting mechanism. Instead, let's
recognize OPEC is getting a helping hand from hedge
funds -- albeit one that comes at a price.
Speculative positions in crude oil have soared in
recent months, with net length in two of the biggest
contracts topping a notional 1 billion barrels last week:
One Billion Barrels!
Hedge funds' net length in two big crude oil contracts has doubled since July to more than one
billion notional barrels
Source: Bloomberg

The surge in speculative flows has fueled a rally taking West Texas Intermediate crude oil from
about $45 a barrel in July to almost $64 today. This relationship make sense, and the chart below,
adapted from one published in a recent report by Bank of America Merrill Lynch, shows it has held
over time:
The scatter chart above shows the year-over-year change in both managed money net positions
in WTI futures and options and the price of the front-month contract, each week for the past five
years. The correlation coefficient is about 0.8 (where 1.0 indicates perfect correlation), with a
coefficient of determination (the "r-squared" value) of about 0.63. These both point to a close
relationship, even including the figures for 2015 -- highlighted in the chart -- where the steep price
decline in the first year of the oil crash results in a distinct set of data points.
In adding almost $20 to the front-month price, the recent rally has also flipped the shape of the
futures curve, taking near-term prices to a premium versus longer-dated oil for the first time since
late 2014, when the crash began:
Premium Grade
The rally has flipped the crude-oil futures curve, making near-dated barrels more expensive than
those dated further out

Source: Bloomberg
OPEC, even if it may not say so, is grateful.
Any oil producer loves a higher price, of course. Just as important for OPEC is that futures-curve
flip. Its members sell the majority of their exports in the spot market. So higher-near dated prices
mean more cash both in absolute terms and relative to rival producers that hedge their risk by
selling futures. No prizes for guessing that those happen to be the North American shale
producers who make extensive use of hedging to grow production and represent the biggest
threat to higher prices, especially this year.
The shape of the curve has an added bonus when it comes to speculative money: It's somewhat
self-perpetuating. When the curve slopes downward, like today, investors buying futures and then
rolling those positions forward as they mature earn a little extra: the "roll yield". For example, a
strategy of buying the 2nd-month Brent futures contract and rolling it forward just before expiration
from May 1994 to the end of 2017 would have earned an annualized return of 7 percent,
according to a recent report from Morgan Stanley (the same principle holds for WTI).
For now, there is little to dent speculators' faith that the curve will hold and, maybe, spot prices will
rise further. Economic growth is strong, winter weather has spurred diesel demand -- and, of
course, OPEC is doing its part.
As speculators buy, however, producers are selling. Exuberance, in this way, enables the hedging
that is spurring higher production in the shale patch. If estimates of U.S. production this year start
getting revised up, and the usual seasonal lull in demand hits in the second quarter, then it could
shake faith in OPEC's ability to keep draining inventories. Already on Thursday, OPEC raised its
estimate for U.S. output this year. The International Energy Agency may well do the same when it
publishes its own report on Friday.
And with the market this long, faith is the most precious commodity of all. Look back at that chart
of net length and see how volatile it's been, even in just the past 12 months. Then look at the
scatter-plot and see what an unwinding usually means for prices.
OPEC's dilemma hasn't gone away. Spurring higher prices brings in more revenue -- but also
brings more money into the market and spurs more activity by rival shale producers. The oil-
futures market, which got going in the early 1980s, generally works against those seeking to set
oil prices by fiat. For OPEC, symbiosis with speculators is an unnatural state of affairs.

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 January 2018 K. Al Awadi

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