New base 24 december 2017 energy news issue 1118 by khaled al awadi-compressed

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,
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NewBase Energy News 24 December 2017 - Issue No. 1118 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: Dubai to host Global Smart Energy Summit in March-2018
(WAM) -- The Dubai World Trade Centre will host the opening session of the Global Smart Energy
Summit on March 6th-8th 2018, in the presence of leading energy and technology
trendsetters from around the world.
The three-day summit, which will bring together minds in the industry, will host pioneers of science
and innovation in the areas of international relations, space and industry, to enrich discussions on
technology and operations and change the way that people live and work. The summit is intended
to be a centre for global intellectual studies, in an age that is reliant on energy in every aspect of
life.
Ryan O'Donnell, Programme Director of the Global Smart Energy Summit, explained that the
summit’s programme will explore all types of smart energy, which has become the current focus of
international attention, ranging from technology that drives innovation to the future of storage and
the need for smart cities. The summit will include a demonstration on a series of case studies on
revolutionary projects from around the world.
O’Donnell pointed out that Dubai is the clearest choice to host the summit on account of its full-
fledged commitment to clean energy.

Oman:Cost Reflective Tariffs making consumers energy efficient
Oman Observer + NewBase
Cost Reflective Tariffs (CRT), which effectively do away with government subsidy on electricity
consumed by large customers, are making a significant impact in driving efficiency in energy
consumption in the Sultanate, according to the Authority for Electricity Regulation Oman (AER).
An estimated 10,000 government, commercial and industrial customers across the Sultanate,
identified by electricity authorities as “large” power consumers, are currently subject to Cost
Reflective Tariffs (CRT) that came into force on January 1, 2017.
It follows a decision by the Council of Ministers to lift longstanding subsidy on power supplied to
major customers consuming more than 150 megawatt-hours (MWh) per annum.
“The revised tariffs have promoted awareness and action in terms
of energy efficiency for these consumers,” said Bushra al Maskari
(pictured), Senior Policy & Strategy Specialist at AER.
“We are really happy to see consumers coming to us and
explaining with enthusiasm how they have been able to reduce
their energy consumption. Some of them said they were surprised
to realize that they could have done much more in reducing
consumption even before the introduction of the new tariffs. So the
increase in tariffs was necessary to raise awareness.”
Speaking at a seminar on the theme, ‘Energy Transition in Oman’,
organised by the Embassy of the Kingdom of the Netherlands
recently, Bushra listed Cost Reflective Tariffs as one of several
steps taken by the regulator in support of the nation’s energy
efficiency drive. The accent, however, is on building awareness through campaigns targeting all
categories of consumers, including residential and commercial, she noted.
But achieving energy efficiency goals will require a comprehensive, all -encompassing strategy
based on hard information on consumption behaviour and trends, Bushra stressed.

“The Authority wants to have in place a coherent and holistic policy for driving energy efficiency,
rather than ad hoc initiatives. And to support this objective, we really support evidence-based
policies for which we have started collecting a lot of data and information before formulating these
policies. Data will help us prioritise areas that need to be focused on and ensure the best results.”
Data collection efforts aimed at creating a full-fledged energy efficiency framework began in 2016
and is ongoing, said Bushra. “We are collecting data that will help the Authority formulate policies
across all sectors, including commercial, residential and government, evaluate consumption
behaviour and awareness trends, and study what’s going on in Omani society, and so on.”
According to the Authority, while the Cost Reflective Tariffs scheme scraps government subsidy
for large consumers, it does not automatically translate into higher electricity costs for these
customers. Rather, it incentivises a shift in consumption from periods of overall peak system
demand to non-peak demand — a move that also has the potential to significantly reduce the
need for substantial investments in new generation capacity.
The new tariff varies for every hour of the day, thereby providing the targeted government,
commercial and industrial customers with strong incentives to reduce overall consumption.

Iraqi Oil Minstry Take control Majnoon oilfield, partners out
Reuters + NewBase + The National
Malaysia's Petronas has confirmed its exit from Iraq's Majnoon concession along with joint
stakeholder Shell, after the Iraqi oil ministry announced it would assume control of the field.
"Petronas confirms its exit from the Majnoon oilfield, Iraq, together with Shell. We will be working
with Shell on the handover of the field to the Basra Oil Company," a spokeswoman for Petronas
said .
"An announcement will be made once details of the handover is finalised,"
The Malaysian state firm will relinquish its minority stake of 30 per cent along with Shell, which
held a 45 per cent interest by June 2018.
The Iraqi oil ministry awarded the concession in Majnoon, one of the world’s largest oil fields with
estimated reserves of 38 billion barrels, to the Anglo-Dutch oil major in 2010 under a technical
services contract.
Shell was tasked with raising production from the field, littered then with mines and weapons from
the Iran-Iraq war in the 1980s to 1.8 million barrels per day (bpd) by 2017, a target the oil
company found daunting. Following the fall in oil prices, Shell saw a steep decline in profitability
per barrel of oil and subsequently announced its decision to quit in September.
On Thursday, the oil ministry announced it had put together a new management team to
oversee the transition of interest back to the state. It also outlined a target to ramp up production
to 400,000 bpd from the current level of 235,000 bpd "over the coming years", without specifying a
timeline.

“The priority of the new management team is to cut the cost of producing a barrel [of crude] from
Majnoon by 30 per cent,” Iraqi oil minister Jabbar Al Luaibi said in a statement on the ministry's
website last week.
Iraq, the second the largest producer of oil within Opec after Saudi Arabia, is balancing the need
to raise output to finance its post-ISIL reconstruction efforts while maintaining production cut
quotas as part of an agreement with other fellow oil exporting states to stabilise prices.
Baghdad, which had earlier targeted raising its production to five million bpd by the end of 2017,
requires significant funding and expertise from international oil companies (IOCs) to develop its
massive fields. However, IOCs like Shell found the terms of their contract with the government too
restrictive.
"Iraq's technical service contracts constrain upstream investment in two ways. Firstly, Iraq
effectively pays the capex through cost recovery so any major investment has to be budgeted and
approved by the government," said Ian Thom, principal analyst, Middle East upstream at energy
consultancy Wood Mackenzie in Edinburgh.
"Secondly, the low profit fee for the international investor means Iraqi projects often struggle to
compete for capital against more profitable projects. Iraq's budget primarily comes from oil
revenues, so when oil receipts are low, only a small share of that can be reinvested back into oil
and gas."
There are hopes that IOCs may return to Majnoon, following Mr Al Luaibi’s comments on the
sidelines of Opec’s gathering in Vienna in November, where he suggested a consortium of the
US’s Chevron, France’s Total and PetroChina may be invited to operate on terms different to that
agreed with Shell.
Following its exit, the Malaysian firm's key interest in Iraq is through its majority stake in the Garraf
oil field (45 per cent) in the southern Dhi Qar province, from where production currently stands at
100,000 bpd. Its other interests include minority stakes in the Halfaya and Badra concessions,
also in the south.

China's LNG imports hit record amid gas supply crunch
Reuters + NewBase
China’s imports of liquefied natural gas (LNG) jumped to a monthly record in November as
residential and industrial demand surged in line with Beijing’s drive to promote use of gas rather
than coal to cut winter pollution.
Shipments in November rose 53 percent to 4.06 million tonnes compared with the same month a
year earlier, according to data released on Saturday by the China’s customs bureau. That beat the
previous record of 3.733 million tonnes set in December 2016.
Year-to-date, LNG imports were 33.13 million tonnes, compared with 26.15 million in the same
period of 2016, pointing to 2017’s imports setting a full-year record.
Gas shortages deepened in December, with some cities putting quotas on residential purchases
and chemical plants in southern provinces shutting in order to cope with the supply crunch.
Constraints on infrastructure such as LNG receiving terminals and storage facilities have meant
China has limited space to further increase its LNG shipments, analysts have said.
Meanwhile, China’s diesel exports exports rose 37.6 percent in November to 2.03 million tonnes
from the same month a year earlier. Gasoline exports were 1.04 million tonnes in November, up
11.2 percent from the same month a year ago.

TAP pipeline on course for first gas to Italy in early 2020
Reuters + NewBase
The Trans Adriatic Pipeline (TAP) taking gas from Azerbaijan to Europe will pump the first gas into
Italy at the start of 2020 despite local protests against the 4.5 billion euro ($5.3 billion) project, the
TAP president told Reuters.
“We are on track to deliver the gas in the first quarter of 2020,” Walter Peeraer said in an
interview.
TAP, the end piece of the $40 billion Southern Gas Corridor, is slated to bring up to 10 billion
cubic metres of gas from the giant Azeri Shah Deniz II field into the small Italian seaside town of
San Foca in the southern Apulia region by 2020.
But opposition from the local town council and the regional authority, as well as ongoing clashes
between no-TAP protesters and police, has caused delays and raised concerns the project could
miss deadlines and even be re-routed.
Michele Emiliano, governor of the Apulia region, has called for the pipeline to be moved further
north and has filed a series of legal claims that have drawn the ire of Rome.
The Italian government, keen to transform Italy into a gas hub for southern Europe, considers TAP
a strategic priority.
Puglia has around 14,000 kilometres (8,700 miles) of high/mid/low-pressure gas pipes on its
territory. EDF unit Edison and Greece’s Depa have plans to bring in Mediterranean gas through
the EastMed pipeline to the Puglia resort of Otranto.
Peeraer said the landfall site, which had been chosen from 20 other locations for its minimal
environmental impact, would not be changed. Such a move could put the project back 4-5 years,
he said.

“The commitment is to transport about 8 to 10 bcm to Italian shores. Re-routing through Albania is
not an option. There is no Plan B,” he said. taly’s anti-establishment 5-Star Movement, the
biggest single party in opinion polls, is against the pipeline which it sees as an environmental
danger and unnecessary given Italy’s excess capacity.
General elections are expected in Italy in March.
TAP was cleared by European regulators in March last year as part of Europe’s drive to secure
energy supplies and reduce the bloc’s dependence on Russian gas. The 870-km pipeline will link
the Shah Deniz II field with Italy, crossing Georgia, Turkey, Greece, Albania and the Adriatic Sea.
It is the largest attempt so far to bring new supply sources to European consumers.
TAP shareholders include Azerbaijan energy group Socar, oil major BP and Italian gas group
Snam. Peeraer said capacity on the TAP pipeline would be expanded when enough customers
expressed interest but added there had been no discussions yet.
“It is therefore premature to discuss if Gazprom might take capacity,” he said. Earlier this year
Gazprom’s deputy head Alexander Medvedev said the company was considering pumping gas
through the link.
Peeraer said talks with the European Investment Bank on funding for TAP were ongoing, adding
he expected a decision in February. Reports have said the EIB could sign off on a loan of 1.5
billion euros for TAP developers at its board’s meeting in February next year.

Norway's Labor Market Strengthening to Leave Oil Crash Behind
Bloomberg - Sveinung Sleire
Registered unemployment, one of the key indicators for the central bank, has fallen a percentage
point from a Jan. 2016 high to end the year at 2.4 percent, levels that haven’t been seen for five
years.
Stoked by higher economic optimism, the labor force will now expand as a cyclical trough is
marked in the declining participation rate, according to analysts at Svenska Handelsbanken.
“Going forward, both we and Norges Bank expect participation to pick up in line with firming
employment,” said Marius Gonsholt Hov, an economist at Handelsbanken. “The end result should
be a slowing of the decline in unemployment,” he said.
Central bank Governor Oystein Olsen said earlier this month that the output gap is closing as he
raised the probability for a rate hike toward the end of 2018. The unemployment rate is
now falling in line with the latest central bank forecast in December as a tighter labor market is
expected to put pressure on wages and revive inflation.
But that will take time. The
central bank doesn’t expect
inflation to pick up to 2 percent
until 2020 and underlying
consumer price growth is now 1.5
percentage point below target.
Norges Bank will hold its next
rate decision on Jan. 25, when it
sits for an intermediary meeting
without a monetary policy report.

NewBase December 24 - 2017 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil inches higher ahead of Christmas holiday weekend
Reuters + NewBase + Bloomberg
Oil prices rose in light volumes on Friday, steadying near their highest levels since 2015 on
pledges from OPEC leader Saudi Arabia and non-OPEC Russia that any exit from crude output
cuts would be gradual.
Brent crude futures, the international benchmark for oil prices, ended the session up 35 cents at
$65.25 a barrel, its highest close since June 2015. U.S. West Texas Intermediate (WTI) crude
futures settled 11 cents higher at $58.47 a barrel. WTI has also been touching values not seen
since mid-2015 over the past two months.
Both contracts settled one hour early due to the upcoming Christmas holiday. Market liquidity was
also drying up on Friday as traders closed positions ahead of the Christmas and New Year
breaks.
Oil price special
coverage

About 280,000 front-month U.S. crude futures changed hands while front-month Brent crude
futures saw the lowest trade volumes in about seven months, excluding expiration days.
“I think the market is looking balanced overall but think the risk remains to the upside in Brent
spreads due to continued price appreciation,” said Scott Shelton, a broker at ICAP in Durham,
North Carolina.
“Traders who are flat and waiting for a dip will come in on the first trading day of the month in
January in 2018 with a fresh P&L wondering if $60 WTI and $66 Brent are buys or not.”
Oil prices have recovered in the past year on the back of oil production cuts by OPEC, Russia and
other producers, helping reduce the global inventory overhang.
Russian Energy Minister Alexander Novak told Reuters OPEC and Russia would exit cuts
smoothly, possibly extending curbs in some form to avoid creating any new surplus.
“There is a consensus among the (oil) ministers that we should avoid oversupply on the market
when exiting the deal,” Novak said, comments that will calm investor worries that Moscow wants a
speedy exit.
Saudi Energy Minister Khalid al-Falih said it was premature to discuss changes to the pact on
supply cuts as market rebalancing was unlikely to happen until the second half of 2018.
The OPEC-led pact to withhold supplies started in January this year. The producer group and its
allies last month extended the agreement until the end of next year.
The supply restraint has reduced oil inventories and helped push up Brent by more than 45
percent since June this year.
“OPEC’s extension of its production cuts through the end of 2018 is a necessary condition for
continued inventory drawdown,” U.S. investment bank Jefferies said, raising its 2018 Brent
forecast to $63 from $57, and its WTI forecast to $59 from $54.
Novak said some pressure on prices was possible in the first quarter of 2018 when demand
traditionally declines and added he saw prices hovering at around $50 to $60 in 2018.
Analysts said crude output in the United States, fast approaching 10 million bpd, would be a drag
on prices in the longer term.
“Supply is expected to grow further, paving the way to an oversupplied market, which can again
exercise downward pressure on oil prices,” consultancy Rystad Energy said.
Novak said he expected U.S. oil output to grow by 0.6 million bpd in 2018 but added that rising
U.S. demand should help offset an increase.
OPEC starts working on oil supply cut exit strategy: sources
OPEC has started working on plans for an exit strategy from its deal to cut supplies with non-
member producers, two OPEC sources said, a sign that an eventual winding down of the deal is
coming onto producers’ radar, at least in theory.
The Organization of the Petroleum Exporting Countries, Russia and other non-OPEC producers
on Nov. 30 extended an oil output-cutting deal until the end of 2018 to finish clearing a glut. But
the market is increasingly interested in how producers will exit the deal once the excess is
cleared.

Two OPEC sources said the group’s secretariat in Vienna has been tasked to work on a plan with
different options and it was too early now to say what the plan would look like.
“It’s a continuity strategy, rather than exit,” one of the OPEC sources said.
Oil prices have rallied this year and are trading near $64 a barrel, close to the highest since 2015,
supported by the OPEC-led effort. This is above the $60 floor that sources say OPEC would like
to see in 2018.
Publicly, OPEC ministers say it is too early to talk of an exit strategy. But OPEC has said
producers want to continue working together beyond the end of 2018, including on supply
management.
While oil prices have risen to levels seen as favorable by OPEC, the stated goal of the supply cut
is to reduce inventories in developed economies, which built up after a supply glut emerged in
2014, to the level of the five-year average.
OPEC is making progress and said in October OECD inventories stood 137 million barrels above
the five-year average. Since the start of deal in January, the overhang relative to that average is
down by 200 million barrels, Kuwait’s oil minister said on Wednesday.
A discussion on exiting the deal may be needed before December 2018 if, as OPEC expects, the
world oil market returns to balance by late 2018. OPEC and its allies hold their next full ministerial
meeting in June, which will be a opportunity to review progress.
Non-OPEC Russia, which has been the biggest contributor to cuts from outside the group, has
been suggesting a review of the deal as early as June. However, its biggest producer Rosneft said
this week the cuts could last into 2019.

World Oil discoveries at lowest point since the 1940s
Oilprice.com
The oil industry discovered the least amount of oil in 2017 in almost eight decades, breaking the
previous record low set in 2016.
The global oil industry has discovered less than seven billion barrels of oil equivalent so far this
year—a drop-off from the eight billion boe discovered last year. Last year’s total was the lowest
since the 1940s. The 2017 figure is down by more than half from the 15 billion boe discovered in
2014-2015, and down sharply from the 30 billion boe discovered in 2012.
The plunge is the result of a third consecutive year of relatively low upstream exploration budgets.
So many oil companies slashed their spending on exploration when the market downturn began in
2014, and they have yet to restore that spending to anything close to pre-2014 levels.
“We haven’t seen anything like this since the 1940s,” Sonia Mladá Passos, Senior Analyst at
Rystad Energy, said in a statement. “The discovered volumes averaged at ~550 million barrels of
oil equivalent per month. The most worrisome is the fact that the reserve replacement ratio in the
current year reached only 11 percent (for oil and gas combined)—compared to over 50 percent in
2012.”
The reserve-replacement ratio measures the volume of oil that is discovered relative to what is
produced in a given year. The idea being, the industry needs to discover 100 percent of what it
produces in order to avoid a decline in reserves.

Rystad Energy says that 2006 was the last year in which the industry posted a reserve-
replacement ratio above 100 percent. The implication is that the world is burning through oil at a
faster rate than the industry is discovering new reserves.
Moreover, Rystad says that the volume of resources per discovered field also declined in 2017.
For instance, the average offshore discovery in 2012 held roughly 150 million boe in 2012, a figure
that fell significantly to just 100 million boe this year. That matters because smaller fields tend to
be less economic, and may not be enticing enough to be developed at all. “Low resources per
discovered field can influence its commerciality. Under our current base case price scenario, we
estimate that over one billion boe discovered during 2017 might never be developed,” Rystad’s
Passos said.
In terms of location, the top three countries for discoveries in 2017 were Senegal, Mexico and
Guyana. Kosmos Energy discovered the Yakaar gas field in Senegal, which could transform West
Africa into a notable LNG exporting region. Talos Energy discovered the Zama field, adding
roughly one billion boe in recoverable resources in Mexico. Meanwhile, ExxonMobil added
another one billion boe to its resource base in Guyana this year, the latest in a string of
discoveries in the South American nation.
Still, there wasn’t too much else to write home about. The massive cuts to upstream spending
could leave a gaping hole in supply in the future.
Because large conventional discoveries typically take years to develop, it is not as if the shortfall
will be felt immediately. Even the past several years of paltry discoveries probably won’t lead to
supply problems for quite a while.
There are still large stocks of crude oil in storage, and US shale will continue to grow at a
blistering pace into 2018. Beyond that, OPEC has quite a bit of surplus capacity sitting on the
sidelines. It might not be until the 2020s until the lack of discoveries starts translating into supply
issues.
“While there have been some notable successes this year, we have to face the fact that the low
discovered volumes on global level represent a serious threat to the supply levels some ten years
down the road,” Rystad’s Passos said.
“Global exploration expenditures have decreased year-over-year for three consecutive years now,
falling by over 60 percent from 2014 to 2017. We need to see a turnaround in this trend if a
significant supply deficit is to be avoided in the future.”
That echoes the repeated warnings from the IEA, which recently predicted that despite the
expected massive growth from US shale over the next decade or so, shale won’t be able to carry
the load all on its own.
Shale “cannot increase indefinitely,” the IEA said in its 2017 World Energy Outlook. The IEA also
noted that about 2.5 mb/d of supply is lost each year due to depletion, a gap that must be made
up with new projects. And the impact of “near-record lows of new conventional oil projects
receiving approval in recent years has yet to be fully seen.”

Why the Prospect of ‘Peak Oil' Is Hotly Debated
Bloomberg - Jess Shankleman
The world is turning its back on oil. But how quickly? Technological advances driven by the threat
of climate change could mean the world’s thirst for petroleum tops out sooner than companies
such as Exxon Mobil Corp. or giant producers like Saudi Arabia are banking on. “Peak oil” has
been debated for decades, but today it means something very different.
1. Why is oil’s future in doubt?
About 60 percent of oil is used in transportation, which is also where the biggest technological
changes are emerging. The impact of electric carmakers such as Tesla Inc. could
be turbocharged by advances in related fields such as self-driving vehicles and ride-hailing apps,
which make it possible for people to switch from owning cars to relying on rides from more
efficient fleets. The culmination of these trends could transform how people travel and prompt
more revisions to forecasts for when oil consumption will peak.
2. Is the world running out of oil?
No. The peak oil that’s talked about today is quite different from the concept that emerged in the
1950s, when M. King Hubbert, a Royal Dutch Shell Plc geologist, predicted that U.S. oil
production would crest in the 1970s and the world would physically run out of oil. That never
happened, and new discoveries and efficiency gains at existing fields mean oil supplies will
abound for a long time to come. So the discussion has shifted to peak demand — whether people
will simply use less petroleum and reserves that are considered valuable assets today will wind up
being left in the ground.

3. What do experts say about that?
Forecasts for long-term oil demand have been coming down. The International Energy Agency,
which advises rich countries on policies, has been steadily revising its predictions lower over the
past 20 years as renewable energy has taken off and more power utilities have switched to
cleaner-burning natural gas. Solar power, for example, has picked up steam as its cost tumbled
much faster than expected, with prices falling 50 percent since 2009. That’s already upending the
business model of utilities, which were designed to deliver fossil-fuel energy from large power
plants to homes and businesses.
4. Is oil usage still a threat to global warming?
Yes. To limit global warming to “well below” 2 degrees Celsius (3.6 degrees Fahrenheit) — the
target set by the United Nations-sponsored climate change treaty — the IEA predicted in 2016
that demand for oil would need to peak in the next few years. That’s unlikely to happen: The
agency’s main demand scenario still sees oil use expanding for the next two decades.
5. So when will demand for oil peak?
There’s a range of about 25 years between the earliest and latest predictions. The most
aggressive ones are based on the rapid expansion of electric vehicles, energy efficiency
improvements and policy changes to curb greenhouse gas pollution. That scenario leads Statoil
ASA and some forecasters to predict that oil demand could peak as soon as the late 2020s. Ben
van Beurden, Shell’s chief executive, has said that if electric cars become really popular, the
zenith could arrive in the next 15 years.

6. Do all oil companies have the same view?
No. Most oil companies see a peak around 2040. Others say their industry will enjoy decades of
growth as it feeds the energy needs of the world’s expanding middle class. Saudi Arabia and
Russia, the world’s two largest exporters, don’t foresee a top until 2050 at the earliest. Even when
production does peak, it’s likely to lead to a plateau rather than a steep fall.
7. Why such differences in forecasting?
There’s a lively debate about how rapidly electric vehicles will catch on. Falling costs for batteries could
make them as affordable as internal combustion engine cars over the next 10 years, according to
Bloomberg New Energy Finance. Meanwhile, some of the world’s largest auto markets plan to phase out
vehicles powered by fossil fuels to clean up dirty air. By 2030, India wants all new vehicles sold to be
electric; the U.K. and France will ban the sale of diesel- and gasoline-fueled cars by 2040. The impact of
the U.S. is a wild card because President Donald Trump is disrupting efforts to tackle global warming.
8. What will become of oil companies?
Many are speeding up efforts to diversify, investing more in natural gas and cleaner technologies such
as hydrogen fuel cells. Even now these companies are doing huge business turning crude into chemicals
used for everything from plastics to fertilizer. Still, peak oil has to be a concern, since it can take a decade
or more for multibillion-dollar oil exploration projects to come to fruition.
9. What will happen to car companies?
They are furiously preparing for the shift. Volvo said all its new models will include electric drive by 2019,
while Volkswagen wants 25 percent of its sales to be electric by 2025. Daimler and BMW are aiming for 15
percent to 25 percent by 2025.
10. What happens to countries that depend on oil revenue?
That’s a big unknown. Peak oil could cause political turmoil in so-called petro-states, which rely on oil
revenue to keep government finances afloat. Saudi Arabia plans a partial privatization of its state oil
company, Aramco, to raise funds to diversify its economy for the post-hydrocarbon age. Other petro-states,
such as Russia, Venezuela and Nigeria, have yet to lay out plans for the future.

NewBase Special Coverage
News Agencies News Release December 24-2017
Big Oil Looks on as Italian Giant Completes ‘Mission Impossible’
Bloomberg - Chiara Albanese
The fact even senior managers privately described the plan as “Mission Impossible” showed the
scale of the task: Italian energy giant Eni SpAwanted to produce gas from the Zohr field little more
than two years after finding it in August 2015.
But this week, the Mediterranean’s largest gas field -- lying about 200 kilometers (168 miles) off
the Egyptian coast -- began pumping, defying skeptics both inside and outside the company.
“We presented our development plan to Egypt’s minister after two weeks,” Chief Executive Officer
Claudio Descalzi said in an interview in Port Said, the dusty town three hours from Cairo where
the gas arrives on the Egyptian mainland. “Nobody believed what we were going to do, analysts
said we were crazy; now we can say they were wrong and we were right.”
The quick turnaround from discovery to production hasn’t gone unnoticed in the industry, and
while it’s not as fast as shale companies have been known to move in Texas, North Dakota and
other U.S. states -- where new production is often brought in within just a few weeks -- for Big Oil
it represents a seismic shift.

”Its sheer size ensures a very competitive positioning along the cost curve compared to new
supply coming onstream elsewhere, in particular from US shale,” said Alessandro Pozzi, an
analyst at Mediobanca SpA in London.
Light Speed
For an industry once accustomed to spending a decade or longer building mega-projects, the
maze of steel pipes, offshore platforms and processing facilities that make up Zohr came online at
breathtaking speed. Analysts polled by Eni a month after the discovery gave only a 10 percent
probability to the project producing gas “some time in 2019,” according to an Eni memo seen by
Bloomberg News. Twenty-four percent said “after 2021” was more likely.
Beyond the potential profit for Eni and a bonanza for the Egyptian government, which hopes to
save billions of dollars in natural gas imports, the project could shake up the industry if others are
able to replicate it, possibly transforming offshore oil and gas exploration by bringing in new
supplies faster.
“Our philosophy is time to market,” Descalzi said. “We changed all the industry strategy by
breaking the contractual schemes and starting to move from investment authorization to
production with parallel steps."
To keep things moving, Eni didn’t hire a general contractor for Zohr, instead launching a direct
tender process for technical components, including the longest umbilical cable ever used in such a
project. At the onshore facility on the coast near Port Said 200 kilometers of pipe needed to be
shipped from Europe.
This strategy has allowed Eni to generate more than $9 billion from its exploration activities
between 2014 and 2017, according to the company.
To be sure, there is debate about how far the Zohr experience can be replicated elsewhere.
Drilling in the Mediterranean is far easier than in the frigid Arctic or Brazil’s ultra-deep
offshore waters. Also, the Italian company benefited from a downturn in the global oil industry as
prices crashed from $100 a barrel to $30 a barrel, reducing building costs.
Not All Luck
While Descalzi acknowledges that conditions were favorable for Zohr, he’s convinced the
company was smart as well as lucky and sees lessons for the rest of the industry. Already, Eni
itself has begun applying some of the methods from Zohr elsewhere. The company started
production at the Sankofa field off the coast off Ghana in May, just 29 months after discovery and
three months ahead of schedule.
The industry should shift its focus “from outsourcing to in-sourcing,” Descalzi said. "Things should
move in parallel, of course this implies more risk, but it’s mitigated by in-house expertise, and this
leads to a lower overall cost.”
Others in the industry are already showing they can move faster with projects and bring in new
supplies cheaply, reducing the price of oil or gas needed to make a profit.
Exxon Mobil Corp. discovered oil in offshore Guyana in 2015 and green-lighted the project earlier
this year, saying it expects the first oil by 2020. The five-year plan is unusually short for a brand-
new field nearly 200 kilometers offshore with depths of up to 1,900 meters.
Other majors are focusing on cost reduction. Norway’s state-controlled Statoil is pushing ahead
with the second phase of its Johan Sverdrup field, saying it can build it for between $4.8 billion
and $6.5 billion, about half what it spent on the first phase.

BP Plc is also becoming nimbler, recently sending some plans back to its engineers with
instructions to simplify them. A year ago, BP approved the Mad Dog 2 oil field in the U.S. Gulf of
Mexico, saying it would be built for $9 billion, compared with an initial estimate of $20 billion.
While Descalzi said he was confident about the Zohr timeline throughout the project, his engineers
initially weren’t so sure. Some of the team working at the site only became confident the deadline
could be met in July, when pipe-connection activities picked up after the traditional Ramadan
holiday.
"It takes competence, grit, friendship and a crazy trust in your people,” Descalzi said. “Making this
possible was an agonistic challenge, we are in a sort of a trance now. We are celebrating, but
momentum is now, the process has just started."
Why One Giant Gas Field Is a Big Deal for Egypt
The gas imports which once helped Egypt avert power blackouts may soon be a thing of the
past. Eni SpA’s massive "Zohr" natural gas field, the Mediterranean Sea’s largest offshore
field, started production earlier this month. Its huge reserves could prove a permanent remedy to
the most populous Arab nation’s power needs and bring Egypt closer to its goal of energy self-
sufficiency.
1. How giant is ‘Supergiant Zohr?’
Discovered in August 2015, Zohr is often described as a "supergiant" field because it has
estimated reserves of about 30 trillion cubic feet, equal to the reserves of Israel and Oman
combined, making it the largest gas discovery in the Mediterranean Sea. The field covers an area
of about 100 square kilometers. On Dec. 16, gas from Zohr began to flow to a facility in Port Said
city, with initial production of 350 million cubic feet per day. Daily output is expected to rise to
about 1 billion cubic feet in June, and then to 2.7 billion by the end of 2019. President Abdel-
Fattah El-Sisi has vowed to tackle the energy shortage as a priority. The project could also
eventually enable Egypt to return to exporting gas.
2. Why did Egypt end up short of gas?
Previously, Egypt had sufficient supplies to export gas by pipeline to Jordan and Israel. Gas
shortages began after the 2011 uprising against then president Hosni Mubarak. The ensuing
political struggles scared off tourists and investors, provoking a drop in foreign currency
reserves. The North African nation had to give up gas exports in 2014 to meet local demand.
Sporadic sabotage of its pipeline in the Sinai Desert by Islamist militants also throttled exports.
Repeated power cuts, especially during the summer months, fueled anger against Muslim
Brotherhood President Mohamed Mursi, who was toppled by the army in July 2013.
3. How will Zohr help?
Zohr’s output is enough to cover the gap between Egypt’s total gas consumption, which stood at
4.9 billion cubic feet per day in 2016, and its total daily production of 4 billion cubic feet, according
to data from the BP statistical review. Consumption outstripped production in 2015 reversing a
trend of more than a decade. Egypt now imports liquefied natural gas, or LNG, at high costs to
meet its energy needs. It first purchased the fuel in 2013. It bought a total of 89 LNG cargoes from
international suppliers in fiscal year 2015/2016 at the cost of $2.2 billion, according to the oil
ministry.
4. What will happen to LNG shipments?

Egypt’s government will issue another tender for LNG purchases in early 2018 to cover needs for
the second quarter. It plans to stop importing the fuel by the end of next year because of gas from
Zohr, Tarek El-Molla, Egypt’s oil minister, said in a November interview. Initial production from the
field has raised Egypt’s gas production to 5.5 billion cubic feet a day, according to oil ministry
data.
5. What’s the effect on the imports bill?
Initial production from Zohr is equivalent to three LNG import cargoes a month at the cost of $60
million, according to a Dec. 13 oil ministry statement. It will save the country double that amount,
or $180 million a month later on when output will exceed 1 billion cubic feet a day, it said. "Zohr is
a game changer for Egypt’s energy outlook," said Hany Farahat, a senior economist at Cairo-
based CI Capital Holding. Zohr, along with BP Plc’s West Nile Delta field, which started earlier in
2017, will allow the cheaper locally produced gas to substitute for the much more expensive LNG,
he said. "Those two fields can improve Egypt’s balance of payments by narrowing the current
account by approximately $4 billion and encourage" more foreign investment in Egypt’s energy
sector.
6. Could this spur other energy investments?
Development of Zohr shows big projects can be “brought on stream in a relatively very short
period of time,” El-Molla said in the interview. Eni was joined in the field by BP and then Rosneft
PJSC. Egypt is planning to seek bids for more oil and gas exploration rounds, El-Molla told an oil
conference in Cairo Dec. 18. The government has taken other steps to encourage energy
investment. Under a law signed in August, private businesses will be allowed to transport and
trade gas using the country’s pipeline network and infrastructure, moving away from a state
monopoly. The country has also adopted a flexible gas-pricing formula to encourage investment
and boost supply.
7. Is Zohr enough to turn the tide for Egypt’s economy?
No. The government cannot rely on gas production alone and has to take more measures,
including renewable energy projects and the removal of fuel subsidies, according to Mohamed
Abu Basha, Cairo-based economist at investment bank EFG-Hermes. Over the past year, Egypt
has enacted sweeping reforms, backed by the International Monetary Fund, that have included
floating the Egyptian pound, cutting subsidies and approving legislation to attract foreign currency.
Foreign-currency reserves rebounded to a record high of $36.723 billion in November 2017 from
as low as $13.42 billion in March 2013.
8. What else is Egypt doing to provide more energy?
Earlier this month, the electricity ministry held its first competitive solar energy auction, part of
Egypt’s plan to generate a fifth of its electricity from clean sources by 2022. It currently has a feed-
in tariff system and is in the process of building more than 1 gigawatts of solar power, largely in
the southeastern Benban region.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
The Editor :”Khaled Al Awadi” Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile: +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 27 years of experience in
the Oil & Gas sector. Currently working as Technical Affairs Specialist for
Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy
consultation for the GCC area via Hawk Energy Service as a UAE
operations base , Most of the experience were spent as the Gas Operations
Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility &
gas compressor stations . Through the years, he has developed great
experiences in the designing & constructing of gas pipelines, gas metering &
regulating stations and in the engineering of supply routes. Many years were spent drafting, &
compiling gas transportation, operation & maintenance agreements along with many MOUs for the
local authorities. He has become a reference for many of the Oil & Gas Conferences held in the
UAE and Energy program broadcasted internationally, via GCC leading satellite Channels.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase December 2017 K. Al Awadi

New base 24 december 2017 energy news issue 1118 by khaled al awadi-compressed

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