OMV Signs $1.5B Oil Deal in UAE Expanding Global Operations

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NewBase Energy News 30 April 2018 - Issue No. 1166 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: Adnoc awards OMV 20% in SARB & UmmLulu concession
Gulf News -By Fareed Rahman,
Abu Dhabi National Oil Company (Adnoc) signed an agreement awarding Austrian firm OMV a 20
per cent stake in Abu Dhabi’s SARB and Umm Lulu offshore concession. OMV contributesa
participation fee of $1.5 billion to enter the concession
The signing of the agreement, which has a term of 40 years from March 9, 2018 was witnessed by
His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy
Supreme Commander of the UAE Armed Forces, and Sebastian Kurz, Chancellor of Austria, Adnoc
said in a statement on Sunday.
“With this deal, concession rights in offshore fields in Abu Dhabi have been awarded to a prestigious
group of international companies with vast experience, strengthening the UAE’s partnerships that
ensure a significant stake of its hydrocarbon resources in international markets for years to come,”
said Shaikh Mohammad. “The agreement reaffirms the UAE’s firmly established stature in this vital
sector.”
OMV contributed a participation fee of $1.5 billion (Dh5.5 billion) to enter the concession. Adnoc
retains a majority 60 per cent stake in the offshore concession that will be operated by Adnoc
offshore.
“The expansion of the global economy and increasing demand for oil, refined products and
petrochemicals, provide us with new opportunities to create value across our upstream and
downstream business,” Dr Sultan Ahmad Al Jaber, Adnoc Group Chief Executive Officer said in a

statement. “To seize these opportunities, we will work closely with OMV, and our other partners to
further optimise operational efficiencies, enhance performance, and capture future growth
opportunities.”
“OMV’s strong track record in deploying advanced technologies to cost-effectively increase recovery
rates from mature fields will help enable Adnoc to continue to be a reliable supplier of oil for decades
to come.”
Shareholder
OMV is Austria’s largest listed company and is part-owned by a subsidiary of Mubadala Investment
Company. The Austrian firm joins Spanish oil company Cespa as a shareholder in the concession
which has a production capacity of 215,000 barrels of oil per day.
With the signing of the agreement on Sunday, Adnoc completed the round of offshore concession
awards, which has seen the company bring on board a number of partners including India’s ONGC
and France’s Total, among others.
Collectively the offshore agreements have contributed $7.92 billion (Dh29.1 billion) in participation
fees and secured markets for 40 per cent of the UAE’s oil for the next 40 years.
“This deal represents a deepening of OMV’s existing involvement in Abu Dhabi. For OMV the deal
allows them to use their investment budget to expand their Middle East upstream portfolio and see
OMV’s expansion throughout the petroleum value chain,” Jaafar Al Taie, managing director of
Manaar Energy group told Gulf News.
OMV is already involved in midstream and specifically petrochemical ventures with Adnoc, such as
Borealis. “From Adnoc’s perspective, this is a continuation of the company’s priority to diversify the
global portfolio of participants in its upstream sector,” he added.
The two companies are also working together to explore potential opportunities in downstream
businesses.

UAE: OMV Set to Sign Oil Deal in Move on Global Expansion
Bloomberg + NewBase
OMV AG and its state-owned partner in Abu Dhabi are set to sign a $1.5 billion oil exploration
agreement today in what could be the first major step for a joint global expansion in oil production
and refining.
Austria’s Chancellor Sebastian Kurz and Abu Dhabi’s Crown Prince Sheik Mohammed bin Zayed
will take part in ceremonies on Sunday to ink an agreement that may be followed by joint
investments in refineries or Asian markets. Abu Dhabi has been the second-biggest shareholder in
OMV after the Austrian government since 1994 and is now looking for partners to explore for oil and
upgrade its refineries.
“The United Arab Emirates are already our most important trade partner in the Gulf region and they
still offer a lot of potential for Austrian businesses,” Kurz said in a statement before his departure to
Abu Dhabi. The central European country of 9 million is trying to strengthen ties with the Middle
East and boost trade with regions outside of Europe.
OMV’s 10 billion-euro ($12.1 billion) budget for buying new assets until 2025 could include upstream
and downstream investments in Abu Dhabi, Chief Executive Officer Rainer Seele told investors last
month. OMV said it’s looking to expand in the Gulf region and in Asian markets where demand for
higher-graded fuels is rising together with population growth.
Seele has pivoted OMV away from expensive oil production in the North Sea and toward lower-cost
oil and gas fields in Russia and the Middle East. Abu Dhabi holds about 6 percent of global crude
reserves and produces most of the oil in the United Arab Emirates.

The deal to be signed today is Seele’s first effort to capitalize on Abu Dhabi’s co-ownership. OMV
is also seeking a minority stake in the Emirate’s Ruwais refinery, people familiar with the talks have
said.
Austria owns 31.5 percent of OMV, while Abu Dhabi’s state-run investment company
Mubadala holds 24.9 percent.

Oman PDO to invest over $20bn up to 2021 in O&G production
Oman observer - Conrad Prabhu
Petroleum Development Oman (PDO), the biggest oil and gas producer of the Sultanate, envisions
an investment of over $20 billion up to 2021 to help sustain long-term hydrocarbon production, the
majority government-owned company said in its newly released Sustainability Report for 2017.
The figure is largely in trend with capital expenditure (capex) and operating expenditure (opex)
levels of the company over the past several years. PDO’s capex totalled around $5.8 billion in 2017,
while opex was pegged at $1.8 billion, representing a reduction of around $700 million from the
2017 expenditure projected a year earlier.
A rigorous cost management regime coupled with the implementation of Lean business principles
designed to eradicate waste and streamline operations contributed to significant savings in 2017,
the report said.
Around $199 million were generated in the form of oil capex savings last year, stemming from a
combination of drilling efficiencies, well optimisation initiatives and various project savings. Gas
capex savings pitched in another $188 million, the report said.
PDO’s budget for 2018 is $4.114 billion, which includes around $85 million of presently identified
savings in oil capex and $60 million in gas capex, it stated. To help finance its expenditures, PDO
says they are exploring alternative financing options for the consideration of the company’s
shareholders.
“A financing option was presented to shareholders during 2017 in respect to the releasing of value
from PDO’s working capital. During 2017, PDO continued to work on a significant proposal that
would leverage some of PDO’s assets, with the final proposal being presented to shareholders
during the first half of 2018.
Additionally, we are working closely with certain PDO contractors to further release value from our
working capital for a further proposal for shareholders,” the company said in its Sustainability Report.
A $4 billion Pre-export Finance facility secured by PDO on behalf of the government in 2016 has
repayments which are scheduled to start from Q3 2018.
The loan is scheduled to be repaid by the end of Q2 2021, it stated.
Commenting on PDO’s all-round performance in 2017, Dr Mohammed bin Hamad al Rumhy,
Minister of Oil & Gas and Chairman of the Board of Directors of PDO, said: “Against a backdrop of
continuing uncertainty over oil prices, PDO performed admirably to comply with revised production
targets as a result
At the same time, the Company kept up its cost control and Lean business efficiency drive,
supported (the efforts of His Majesty’s government) to diversify the economy, and made further
substantive progress on In-Country Value, including the creation of many thousands of job, training
and redeployment opportunities for Omanis in both the oil and non-oil sectors.”

Oman Duqm Refinery eyes global markets for fuel exports
Oman Observer
Countries in Europe, Far East and even Africa are seen as potential markets for the prodigious
quantities of clean petroleum fuels that will be produced once the new Duqm Refinery comes on
stream in 2021, according to a top official of the landmark project.
Jacobus Nieuwenhuijze, Acting CEO and Project Director, said Duqm’s geographical location
overlooking the Indian Ocean offers strategic advantages in accessing key markets for the refined
petroleum products that will begin flowing from the refinery in just over three years from now.
“The location of Duqm is absolutely fantastic in serving the East, West and Africa,” said
Nieuwenhuijze. “We are looking at Africa in the future because, if you look at World Bank predictions
for population growth in the continent, it is projected to rise from 2.5 billion to around 5 billion within
20 years. They will require fuel,” the official added in comments to journalists soon after joining
dignitaries at ceremonies marking the groundbreaking at the site on Thursday of Oman’s single
biggest energy investment.
Oman Oil Company (OOC), the energy investment arm of the Omani government, and Kuwait
Petroleum International (KPI) are 50:50 partners in Duqm Refinery, which is being established with
an investment of around $7 billion.
“We have been waiting for this moment for several years, and we are finally here!” said the Acting
CEO, voicing his delight at the imminent start of construction work on the giant project. “The project
will be implemented in accordance with not only Omani environmental regulations, but also in line
with the Equator Principles prescribed by the World Bank,” he noted, referring to the risk
management framework adopted by financial institution, for determining, assessing and managing
environmental and social risk in project finance.
Commenting on the financing of the project, Nieuwenhuijze said around 50-60 per cent of the project
finance would come from lenders. “We envisage having, by mid-June, all of the financing documents

ready for signing,” he stated, citing the complexity of working with more than 20 international banks
for the financial arrangements.
Ahead of the start of the physical construction of the mammoth scheme, which is coming up on a
900-hectare site at the Special Economic Zone in Duqm, contractors will drill as many as 2,000 bore
holes to ensure that the plant is built on solid ground. In the meanwhile, engineering teams from the
company as well as its consultants will pore over detailed engineering designs currently being
finalized in three locations — Spain, Sharjah (UAE) and India.
Significantly, crude oil as feedstock for the 230,000 barrels per day (bpd) capacity Duqm Refinery
will come from two principal sources: Kuwait (65 per cent) and Oman Export Blend (35 per cent).
The feedstock will be supplied by ships that will discharge their cargoes at a new Crude Oil Storage
Terminal under development at Ras Markaz just 80 km north of Duqm. Duqm Refinery is investing
in storage capacity as well as a 28-inch pipeline that will link Ras Markaz with the refinery, the Acting
CEO said.
Refined fuels for export will be pumped to a Liquid Terminal under construction 7 km away at Duqm
Port. “The SEZ Authority at Duqm (SEZAD) is providing us with quay walls and jetties for the export
of our refined products,” said Nieuwenhuijze.
“We will be building the loading arms, tanks for storage and other export facilities as part of our
investments. A 7 km long pipeline will carry the clean fuels to the terminal for export into the
international market via Duqm Port.”
Output from the refinery will be marketed internationally by the respective marketing arms of Oman
Oil Company and Kuwait Petroleum International, he said.
Construction of the refinery project has been apportioned into three main Engineering-Procurement-
Construction (EPC) packages as follows: (1) EPC 1 comprising process units — Joint venture of
Tecnicas Reunidas SA & Daewoo Engineering & Construction Co Ltd (2).
EPC 2 comprising utilities and offsites — Joint venture of Petrofac International Limited & Samsung
Engineering Co Ltd and (3) EPC 3 comprising offsite facilities — Saipem SpA.

Iraq signs contract with PowerChina, Norinco to build Fao oil
refinery to produce 300,000 barrels per day
REUTERS/Essam Al-Sudani
Iraq has signed a contract with two Chinese companies, PowerChina and Norinco International, to
build an oil refinery at the port of Fao on the Gulf, an Iraqi oil official said on Sunday. The refinery in
Fao will have the capacity to produce 300,000 barrels per day and will include a petrochemical plant,
he told Reuters, saying the agreement was signed on Saturday in Iraq.
The Fao refinery south of Basra is one of several Iraq plans as it seeks by Iraq to become self-
sufficient in oil products. Iraq is OPEC's second-largest oil producer, after Saudi Arabia. Its refining
capacity was curbed when Islamic State overran its largest oil processing plant in Baiji, north of
Baghdad, in 2014.
Iraqi forces recaptured Baiji in 2015 but it sustained heavy damage in the fighting. The country now
relies on the Doura refinery in Baghdad and the Shuaiba plant in the Basra region.

Russian Oil Giant Hoards $44 Billion Cash in Sanctions' Shadow
Bloomberg - Elena Mazneva
Surgutneftegas OJSC, Russia’s fourth-largest oil producer, is consolidating its position as the
country’s richest company by amassing $44 billion in cash and bank deposits even as risks of further
U.S. sanctions mount.
The Siberian driller increased its cash pile 6 percent in dollar terms last year, according to a
statement Saturday. Surgutneftegas didn’t include a breakdown by currency in its 2017 report to
international standards. For at least the past six years, it has held most of the cash the U.S.
greenback.
Investors are watching Surgut’s accounts closely after the U.S. Treasury earlier this month included
Chief Executive Officer Vladimir Bogdanov in a sanctions list. That has raised concern in Russia
that Surgut could also come under sanctions. The penalties could mean the company is left stranded
with dollars it can’t easily use as banks, contractors and customers likely to steer clear.
Greenback Fans
Surgutneftegas prefers to maintain the majority of its huge cash hoard in U.S. dollars
SOURCES: Surgutneftegas, Bloomberg
NOTE: Figures show cash and cash equivalents, banking deposits. Surgutneftegas didn't provide breakdown
for FY2017
Similar penalties against Russian billionaire Oleg Deripaska and his United Co. Rusalhave already
caused market convulsions as the company’s contractors and banks have frozen dealings with the
aluminum giant.
Should Surgut faces sanctions similar to Rusal, the company could have problems using the dollars
as all such transactions are monitored by the U.S., said Alexei Panich, a partner at an international
law firm Herbert Smith Freehills. Russian banks may continue to hold dollar deposits under existing
contracts but Surgut may face difficulties in extending tenures and putting more cash in.
The lion’s share of the company’s cash is in long-term deposits in state-run Sberbank PJSC,
according to a person close to the oil company. The bank held 44 percent of Surgut’s deposits in
2012, the last time it disclosed the information. Most of the remainder was with VTB

PJSC, Gazprombank JSC and the local unit of Italy’s UniCredit SpA. Surgutneftegas, Sberbank
and UniCredit declined to comment. Others didn’t respond.
Surgut was included in U.S. sanctions imposed in 2014 over Russia’s role in the deadly Ukraine
conflict. Those curbs targeted some technology supply and access to foreign capital markets, which
aren’t vital for the company and haven’t affected its operations.
Surgut doesn’t borrow as it spends just enough money to keep output flat and avoids acquisitions.
The company’s owners are a mystery. Run by Bogdanov, one of the last so-called red directors, or
former Soviet managers, still in charge, it is owned mostly by its employees, according to public
statements from government officials.
Who Owns The Money
Bogdanov, 66, cemented his hold over Surgutneftegas in the mid-1990s, when the cash-strapped
government emerging after the collapse of the Soviet Union auctioned off Russia’s industrial jewels.
Surgut’s pension fund acquired 40 percent of the company, which a few years later was divided
among two dozen legal entities with interlocking ownerships, all registered in the city of Surgut,
according to bankers working with the producer and its managers.
These entities and their successors had about 1 trillion rubles in long-term investments in the
company at the end of 2016, according to Russia’s Spark-Interfax legal database, giving them more
than 75 percent. None has more than 5 percent at any given time, meaning the company isn’t
obliged to disclose their names.
Bogdanov, who officially owns less than 1 percent, has said the cash pile would help the company
in a crisis. “He knows he can’t use this money personally,” Alexander Ryazanov, a former deputy
head of gas exporter Gazprom PJSC, who has known Bogdanov for more than 20 years, said in an
interview three years ago.

Russia Sends Oil to China at Europe's Expense as Trades Upended
Bloomberg
Europe’s oil refineries are increasingly missing out on Russian crude as the world’s biggest energy
producer directs more and more barrels by pipeline to China.
Russia will ship an average of 19 percent less crude through its main ports on the Baltic and Black
Seas in the first five months of 2018 compared with a year earlier, according to loading plans
obtained by Bloomberg. Meanwhile piped flows to China soared 43 percent in the first three months,
the most recent data from state operator Transneft PJSC show.
Russia Realigns
Crude exports via Baltic and Black Sea ports have borne the brunt of rising flow to China
Source: Bloomberg
The shift is likely to leave Europe’s refineries looking replacement for crudes, according to Alan
Gelder, vice president for refining, chemicals and oil markets at Wood Mackenzie Ltd. in London.
The continent imports more crude from Russia than any other nation, figures from ITC Trade Map
show. The replacement crude is likely to come from Middle East cargoes that would previously have
gone to Asia as well as U.S. supply.
“It’s almost like a crude shuffling,” Gelder said. “The Middle East will have less medium-sour crudes
going to Asia because of the growth in Russian volumes, so then they would push those barrels into
Europe.”
Europe Shielded
For the time being, the cuts to Russian crude flows aren’t showing up in prices -- quite the opposite
-- thanks to maintenance work at refineries in Europe that turn the oil into fuels. Russia’s Urals crude
has been trading near 4-year lows in Europe thanks to that maintenance, as well as an increase in
crude flows from the U.S.
However, the lost Russian cargoes are being felt in tanker markets, which had already been
beleaguered by an oversupply of ships and OPEC supply cuts that reduced the amount of oil
transported. Freight costs to move Russian supplies from its key Black Sea port of Novorossiysk
into the Mediterranean Sea averaged less than $1 a barrel so far in 2018, putting them on course
for the weakest annual average since at least 2009, data compiled by Bloomberg show.

Every Region
It’s the same picture for cargoes loaded in the Baltic Sea, home to the Primorsk terminal that’s still
the nation’s biggest crude-export facility. The move doesn’t bode well for the longer-term outlook
for ships in the region, said Jon Chappell, a shipping analyst at Evercore ISI.
“The tanker sector is getting hit in every region,” he said. “If Russia were to have more and more
cargoes going to pipelines instead of ports, then as the industry starts to recover it may be a segment
that’s weighed down by the fundamental shift in demand.”
China imports the bulk of Russian oil via pipes and seaborne shipments from the eastern ports of
Kozmino, De-Kastri and Prigorodnoye. A second conduit between the two countries began
operations on New Year’s Day, doubling China’s ESPO crude import capacity to 30 million tons
annually, or about 600,000 barrels a day.
Total pipeline flows to China jumped 43 percent to about 750,000 barrels a day in the first quarter,
the Transneft data show. Those via Russia’s European ports -- most of which end up in Europe --
will fall 19 percent to 1.86 million barrels a day through May, the loading programs show.
As it increasingly flows east, Russian oil will be replaced by a mixture of Middle Eastern and U.S.
crude, according to Gelder. Exports from America to all destinations rose to a record of 2.3 million
barrels a day last week and a flood of cargoes to Europe are expected in the coming months. That
could be needed to support supplies of gasoline -- a product usually produced by European
refineries -- when demand reaches its peak in the summer.
“U.S. tight oil could fit the need for summer driving season,” Gelder said. “In the late spring and into
summer as we’re starting to see gasoline strength, Europe would then be the logical home.”

NewBase April 30 - 2018 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil slips on rising U.S. rig count; Iran concerns limit downside
Reuters
Oil prices dipped on Monday after a rising rig count in the United States pointed to higher production
there, but markets held near their highest in over three years and remained set for a second straight
month of gains.
Oil prices were supported by supply concerns amid prospects that the United States could reimpose
sanctions on Iran, while OPEC-led producers continue to withhold output.
Brent crude futures LCOc1, the international benchmark, had dipped 50 cents, or 0.7 percent, to
$74.14 a barrel by 0633 GMT. Prices climbed as high as $75.47 last week, levels not seen since
November, 2014.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $67.82 a barrel, down 28 cents, or
about 0.4 percent, from their last settlement.
Oil price special
coverage

“Oil prices are hanging tight as the market remains fundamentally optimistic with declining stockpile
levels and on prospective sanctions on Iran,” Benjamin Lu, commodities analyst at Singapore-based
broker Phillip Futures, said in a note.
U.S. drillers added five oil rigs in the week to April 27, bringing the total count to 825, the highest
level since March 2015, General Electric’s Baker Hughes energy services firm said. Crude
production in the United States has soared more than 25 percent since mid-2016 to a record 10.59
million barrels per day (bpd). Only Russia currently produces more, at around 11 million bpd.
Meanwhile, Brent prices have gained nearly 6 percent this month, buoyed by expectations the
United States will renew sanctions against Iran.
U.S. President Donald Trump has until May 12 to decide whether to restore the sanctions on Iran
that were lifted after an agreement over its disputed nuclear program.
“Things are not quite the same as in the previous decade, when Iran was regarded as a menace
and a threat. Over the last three-four years Iran has behaved itself - according to everybody,” said
Sukrit Vijayakar, director of energy consultancy Trifecta.
“It’s only Trump who wants to back out of the deal, but he wants to back out of so many deals ... If
you keep saying about backing out, you lose credibility as a state. Everyone is feeling the pinch of
OPEC cuts anyway,” Vijayakar added.
Re-imposed sanctions on Iran, OPEC’s third-largest producer, would probably result in a reduction
of Iranian oil exports, tightening global supplies even more. Further backing oil prices are declining
output in Venezuela, OPEC’s biggest producer in Latin America, and Angola, Africa’s second-
largest exporter.
Oil Heads for Monthly Gain on Iran Risks and as OPEC Clears Glut
Oil’s poised for a second monthly advance, propelled by the prospect of a disruption in Iranian
supplies and as OPEC closes in on its target of wiping out a global glut.
Futures were little changed in New York Monday. Crude’s heading for a 4.6 percent monthly gain
as investors weigh whether U.S. President Donald Trump will pull out of a 2015 nuclear deal
between world powers and Iran . A withdrawal would reimpose American sanctions on the producer,

curbing its exports. Meanwhile, OPEC continues to trim output even after concluding it’s cleared 97
percent of the surplus that’s weighed on prices for three years.
Oil has surged to levels last seen in 2014 as everything from the conflict in Syria to tensions between
Saudi Arabia and Iran-backed rebels in Yemen stoked concerns over supply disruptions. French
President Emmanuel Macron’s prediction that the U.S. will pull out of the nuclear deal has boosted
speculation over reduced shipments from the Islamic Republic. Still, expanding American drilling
activity continues to weigh on prices.
“We’ll see oil fluctuating as uncertainties will persist over whether Trump will withdraw from the Iran
nuclear agreement,” Vincent Hwang, a commodities analyst at NH Investment & Securities Co., said
by phone in Seoul. “Prices have rallied as OPEC and its allies including Russia have eroded global
inventories and as geopolitical risks surrounding the U.S. and the Middle East have increased this
month.”
West Texas Intermediate crude for June delivery traded at $67.93 a barrel on the New York
Mercantile Exchange, down 17 cents, at 11:32 a.m. in Seoul. The contract fell 0.4 percent last week.
Total volume traded was about 47 percent below the 100-day average.
Brent crude for June settlement, which expires Monday, dropped 33 cents to $74.31 a barrel on the
London-based ICE Futures Europe exchange. Prices are up 5.8 percent for the month. The global
benchmark crude traded at a $6.37 premium to June WTI. The more-active July contract traded at
$73.64.
Futures for September delivery rose 0.6 percent to 444.2 yuan per barrel on the Shanghai
International Energy Exchange, after rising 1.7 last week. The contract is on course for a 5.7 percent
gain this month.
While U.S. Defense Secretary Jim Mattis said last week that there’s been no decisionon the nuclear deal,
the nervousness around a potential breakdown in the accord is also spilling over into the physical oil market.
Traders are unwilling to sign contracts for Iranian crude and refined products that would be valid after May
12, the deadline for Trump to decide whether to reimpose sanctions, according to recent interviews with six
companies that buy and sell oil in the Middle East.

NewBase Special Coverage
News Agencies News Release April 01-2018
OPEC Ditches Its Rear-View Mirror for Something Worse
By Julian Lee
Setting policy by referring to investment plans makes no sense.
OPEC's multi-year attempt to steer the oil market by focusing on inventory levels was always like
trying to drive a car while looking only in the rear view mirror. The inventory data is historical and
reflects what the market was like a month or more ago. By the time OPEC gets the data, the world
has already moved on.
If you thought that was a bad idea, wait until you hear this.
The most important metric for OPEC and its friends, according to Saudi oil minister Khalid Al-Falih,
is the level of investment in future oil production capacity.
Speaking after the group’s gathering in Jeddah on April 20, he
said they all need to promote confidence in the long-term market
in order to attract capital, not to target price.
The world needs to add 4 million to 5 million barrels a day of
new production capacity each year to meet rising demand and
offset declines, he said. The industry is far from reaching that
goal.
OPEC may be starting to shift its goalposts away from returning inventories to a 5-year average
level, however it chooses to measure that target. Now the group seems to want to keep cutting
output until investment in new upstream projects picks up.
Nearly There?
As OECD stockpiles near their 5-year average level, OPEC considers new targets to measure
balance
Source: Bloomberg, IEA

But this is a much worse guide to the state of the market even than inventory levels. Stocks are at
least 2 months out of date, but investment plans reflect price levels of 12 to 24 months ago and a
whole host of other considerations, too.
The group is abandoning the rear-view mirror in favor of a telescope. Light travels so fast that what
you see in the former is mere nanoseconds out of date compared to what the latter reveals – using
a telescope to look at distant galaxies shows you how things were millions of years ago, and not at
all how they are now.
Comments from Royal Dutch Shell Plc Chief Financial Officer Jessica Uhl show how ridiculous it is
for OPEC and friends to base current output decisions on oil company investment plans. "We will
not increase capital investment above existing plans in response to the current oil price
environment," Uhl said during the company's results presentation for the first quarter of 2018. "Any
excess free cash flow will be allocated to net debt reduction and shareholder distributions."
Other companies take a similar view. France's Total SA and Italy's ENI SpA both said that 2018
investment targets would not rise, despite the increase in oil prices.
And even Saudi Arabia doesn’t look wholly committed to the new regime. According to Al-Falih,
though his country won't stop investing in new oil production capacity if needed, it has no plans to
raise it beyond the 12.5 million barrels a day it currently claims.
Drilling Down
Oil drilling in Saudi Arabia has fallen by more than 20 percent since OPEC+ introduced output cuts
Source: Baker Hughes

That insistence looks perverse, given that the country sits atop some of the cheapest oil on the
planet. Bloomberg's recent analysis of the accounts of state oil company Saudi Aramco show that
it spends less than $4 per barrel to pump hydrocarbons, compared to similarly rough calculations
of around $20 for Exxon and Shell. Yet, Aramco is behaving just like its peers. Oil drilling in Saudi
Arabia has been falling even as oil prices have moved in the opposite direction.
You Call This Stability?
Oil prices have been anything but stable despite the best efforts of OPEC
Source: Bloomberg
Of course, the kingdom could perhaps stimulate oil company investment by allowing them access
to some of those cheap Saudi reserves. There are plenty of ways of doing that without ceding
ownership of the oil in the ground - just ask the governments of Iraq, Mexico or a host of other
partners in the OPEC+ group.
The long-term price stability that ministers from Al-Falih to Russia's Alexander Novak profess to
seek is illusory, as I argued here. In the meantime, the suggestion that they switch from using a
metric that is a little bit out of date to one that bears little relation to market balance risks inflating
short-term volatility too.
Of course, while they seek stable oil prices that will last for decades, the OPEC+ group won't mind
a bit of short-term instability, as long as it drives prices upwards, not downwards.
This column does not necessarily reflect the opinion of NewBase LP and its owners.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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Khaled Al Awadi is a UAE National with a total of 28 years of experience in
the Oil & Gas sector. Currently working as Technical Affairs Specialist for
Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy
consultation for the GCC area via Hawk Energy Service as a UAE operations
base , Most of the experience were spent as the Gas Operations Manager in
Emarat , responsible for Emarat Gas Pipeline Network Facility & gas
compressor stations . Through the years, he has developed great experiences
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 April 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 –
https://www.slideshare.net/khdmohd/ne-base-27-april-2018-energy-news-issue-1165-by-khaled-al-awadi
Call us for details khdmohd@hawkenergy.net
Your Energy Consultant for the GCC area
Khaled Al Awadi

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