New base 30 december 2019 energy news issue 1306 by khaled al awadi -comprssed_compressed

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NewBase Energy News 30 December 2019 - Issue No. 1306 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
U.A.E; IMO 2020 set to boost Fujairah’s bunker industry,opinion
By Jack Jordan - Jack Jordan is Editorial lead, Bunker News for S&P Global Platts.
A century after the shipping industry moved from coal to oil as its primary energy source, another
change on the same scale is now under way – one prompted this time by a change in environmental
regulations. The shift could provide a significant boost to the status of the UAE’s East Coast Port of
Fujairah as a global oil hub.
The London-based UN body, the International Maritime Organisation, has toughened its rules on
marine fuel emissions, setting a global sulphur content limit of 0.5 percent to come into effect from
1st January 2020. At present most of the shipping industry burns high-sulphur fuel oil, a dense, dirty
refinery by-product, as its main fuel, but these new regulations will force most to shift to new 0.5
percent sulphur blends that more closely resemble diesel.
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The current situation puts Fujairah at a price disadvantage compared with other bunker ports. The
bulk of the world’s high-sulphur fuel oil is made in the older, less complex refineries of Russia and
Europe, and prices are more competitive at ports closer to those production locations.
But the more complex refining industries of the Middle East and Asia-Pacific, with a high yield of
middle distillates, will be better placed to produce blending components for 0.5 percent sulphur
fuels. Fujairah’s proximity to these producers will improve its position on price among the world’s
bunker hubs.
At a local level, production of the new 0.5 percent sulphur fuels is being developed quickly. Since
2017, Uniper Energy Fujairah has run a topping refinery at the port with a marine fuels production
capacity now reaching 3.6 million mt/year, including low-sulphur fuels.
The oil storage company Brooge Petroleum and Gas Investment is set to build a 24,000 b/d unit to
produce 0.5 percent sulphur bunker fuel as the first phase of its plans for a 250,000 b/d refining
complex in Fujairah in conjunction with Sahara Energy Resources.
The impact of IMO 2020 is already being felt in Fujairah’s oil storage terminals. Heavy fuel oil stocks
at the Middle Eastern hub have almost doubled from their level at the end of 2018 to 12,265 million
barrels by 12th December, according to data from the Fujairah Oil Industry Zone, FOIZ. Middle
distillate inventories are also on the rise, gaining more than 150 percent over the same period.
All commercial terminal operators in Fujairah participate in the weekly stock reporting at the request
of FOIZ, the Middle East's largest commercial storage facility for refined products. A total of 11
terminals participate, including storage volumes involved in activities such as blending and refining.
The next step for terminal operators will be to determine how much fuel oil storage is still needed
as shipping moves on to cleaner fuels. A small number of shipowners have chosen to install
emissions-cleaning scrubber systems on board their vessels to allow them to continue burning high-
sulphur fuels – estimated by S&P Global Platts Analytics at about 2,400 ships out of the global
commercial fleet of 80,000.
These buyers will still want fuel oil to be available at all of the major bunkering hubs, but represent
a small niche in the market. Some power generation providers, notably in Saudi Arabia, will also be

seeking to take advantage of low fuel oil prices to make greater use of their oil-fired generation
capacity. In general, however, the market will be looking for more storage of cleaner products from
the middle distillates range.
Looking beyond 2020, Fujairah will need to look at developing a supply chain for alternative fuels if
it is to maintain its status among the world’s top bunkering ports. The IMO has set a target of 50
percent cuts to shipping’s greenhouse gas emissions from the 2008 levels by 2050. This is unlikely
to be compatible with oil remaining the predominant bunker fuel.
In the next few years the industry is likely to see a series of arguments between the proponents of
LNG, methanol, hydrogen, ammonia and other alternatives about which is best suited to driving
shipping’s energy transition. Those ports that move first in preparing to deliver these newer fuels
will have the most to gain from the changes to come over the coming decades.

Oman suspend clean-coal power to focus on Renewables
Oman Obsever - Conrad Prabhu
Plans for the inclusion of ‘clean coal’ in Oman’s diversified energy mix have put on the back-burner for
now, as the country makes an aggressive transition to renewables-based electricity generation,
according to an official of the Ministry of Oil and Gas.
Hilal bin Said al Hadi, Head of Studies and Research at the Ministry, said moves to embrace clean-coal
based power generation as part of the Sultanate’s fuel diversification strategy have been “suspended”
in light of the current focus on solar PV and wind power resources. The official made the disclosure
during a presentation held at an energy summit held in Muscat recently.
Clean-coal power generation, which was originally slated to contribute around 3 gigawatts (GW) of
capacity by 2030 under the government’s fuel diversification strategy, is now on ice. Oman Power and
Water Procurement Company (OPWP), the sole procurer of new generation capacity in the Sultanate,
had earlier indicated that it is actively weighing the procurement of a Concentrated Solar Power (CSP)
plant if a Clean Coal Independent Power Project (IPP) proposed at Duqm SEZ does not get the
government’s greenlight for implementation before the end of this year. Envisaged in lieu of the clean
coal power plant is a 600 MW CSP project (also known as a thermal power plant).
Explaining its vision for supporting the Duqm SEZ’s electricity requirements, the procurer had stated in
its 7-Year Outlook Statement issued in July: “Upon direction from the Government, OPWP initiated
procurement of a Clean Coal IPP in 2018, following a feasibility study.
The project has not yet been approved, pending policy evaluation of alternatives. Considering the need
to develop a baseload generator to serve the Duqm load centre, OPWP plans to develop a Thermal
Solar project with thermal storage if the procurement of the clean coal project is not approved to proceed
in 2019.
The Thermal Solar project is planned to provide around 600 MW by 2025, about the same capacity of
the first block of the Clean Coal IPP.” Oman is targeting a minimum 10 per cent share of electricity output
from renewable sources by 2025 – a target that is projected to be surpassed as investments are lined
up in a string of solar PV, wind and waste-to-energy projects.

DME Oman to price Kuwaiti crude oil from Feb 2020
DME + Oman Observer + NewBase
Dubai Mercantile Exchange (DME), the premier international energy futures exchange in the Middle
East, has announced that Kuwait Petroleum Corporation (KPC) will use the DME Oman Futures contract
as a price reference for Kuwaiti crude oil exports to Asia from February 1, 2020 onwards.
The decision by KPC
reinforces DME Oman’s
benchmark status in the
Middle East. DME Oman is
widely regarded as the most
efficient and transparent
price discovery and risk
management tool for the
regional sour crude oil
market.
Oman Blend crude oil is
highly representative of the
quality of the majority of
Middle Eastern crudes and
as such is an ideal price
marker for the region’s oil
exports.
Raid al Salami, DME
Managing Director, said:
“The combination of Oman’s
historical role as a trusted benchmark with best-in-class technology, market regulation and physical
delivery makes DME Oman a very compelling benchmark for national oil companies that want
transparent price discovery for their crude oil exports.”
“We welcome KPC and are delighted by their decision to switch part of their formula to DME Oman. We
highly value the trust and the confidence granted to us by KPC and we are committed to providing the
region with reliable risk management and price benchmarks,” Al Salami added.
DME Oman crude oil futures contract is an official benchmark for five producers in the Middle East, all
of whom use the exchange’s marker price in their crude oil export contracts with Asian customers. The
five producers are Oman, Dubai, Saudi Arabia, Bahrain and now Kuwait.

Saudi Arabia plan to doubling natural gas production by 2030
REUTERS/Maxim Shemetov + SG + NewBase
“Between 2008 and 2018, LNG trade flows increased from 172 MTPA to 314 MTPA, averaging 6%
annual growth... Aramco expects global demand for LNG to continue to grow at 4% annually,
breaching 500 MTPA by 2035,” KAPSARC’s recent paper titled “Aramco’s LNG strategy:
Opportunities and Options” said.
Having LNG in Aramco’s energy offerings ensures that Saudi Arabia retains its market share in
these countries . KAPSARC’s latest commentary highlights Aramco’s efforts to double the
Kingdom’s natural gas production and boost its infrastructure network by 2030 to achieve Saudi
Vision 2030 objectives.
Since China and India are also forecast to be the fastest-growing oil and gas markets, having LNG
in Aramco’s energy offerings ensures that Saudi Arabia retains its market share in these countries.
The report noted that the cost for reducing the burning of liquid fuels in the power mix and meeting
the bulk of future power demand with gas is around $150 billion and may include the possibility of
exports.
The paper mentioned that the company has already invested in and operated refining and
petrochemical complexes internationally. As Aramco’s business strategy shifts toward more gas-
related activities in the Kingdom, it also looks to add overseas gas assets to its international energy
portfolio.
Additionally, LNG can provide an immediate and temporary solution to eliminate the use of liquid
fuels from the power sector, as Saudi Aramco gradually ramps up gas production over the next

decade. Plus, the flexibility offered by LNG contract terms and infrastructure can allow LNG to be
used for a transitionary period without committing to fixed volumes of cargoes or having stranded
importation facilities.
The paper also suggested that the LNG importing could additionally provide insurance against
delays in the expansion of domestic natural gas production and infrastructure projects. KAPSARC
has tested a scenario importing LNG into the western region from 2022, using a 5 MTPA
regasification terminal, and found that most cargoes can be cost-effectively sourced from Egypt and
Eastern Africa (Mozambique and Tanzania).
This strategy is aligned with the announcement that Japan and Russia are set to launch a $9bn
LNG project in the Far East in a move that may shift the power dynamics of the growing global LNG
market.
The new project will send gas via a 200-km pipeline to Russia and produce 6.2 million tons of LNG
a year, nearly a tenth of Japan’s total LNG procurement.
KAPSARC is a non-profit global institution dedicated to independent research into energy
economics, policy, technology, and the environment, across all types of energy. The Center is
focused on finding solutions for the most effective and productive use of energy to enable economic
and social progress nationally, regionally, and globally.

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Egypt awards oil and gas exploration concessions to Chevron,
Shell and Mubadala ….. The National - Jennifer Gnana
Egypt awarded US oil major Chevron, Anglo-Dutch Shell and Abu Dhabi's Mubadala rights to
explore for oil and gas in the Red Sea, as it expands its search for new hydrocarbon reserves.
The North African state, which launched its first licensing round in the Red Sea earlier this year,
awarded one block each to Chevron and Shell and the third jointly to the Anglo-Dutch firm and
Mubadala.
The concessions cover a total acreage of 10,000 square kilometres, with a minimum investment of
$326 million (Dh1.12 billion), according to the country's petroleum ministry.
Egypt, the Arab world’s most populous state, has been offering exploration rights following the
discovery of the massive Zohr field by Italian energy major Eni in 2016. The find sparked a search
for more hydrocarbon resources along the Nile Delta and western desert as the country looks to to
become a net exporter of gas, particularly to markets in Europe.
Following the award of exploration licences to concessions in the western and eastern desert
regions, the Nile Delta and the Gulf of Suez, Egypt announced its intention to launch another round
that included blocks in the Red Sea.
The country in February tendered 10 blocks offshore the Red Sea, aiming to replicate the gas
bonanza, which helped Egypt drastically reduce its fuel imports.
Earlier this year, Egypt also successfully closed one of its largest bid rounds, awarding 12 licences
to companies including US energy major Exxon Mobil.

The North African country will see production from its Zohr resource increase to more than 3 billion
cubic feet per day by the end of this year. The country is also ramping up output from the North
Alexandria West Nile Delta concessions operated by BP.
Production is expected to reach 700 million cubic feet per day as 400 million cubic feet per day of
gas comes on stream.
Saudi Arabia also announced the discovery of large quantities of gas in the Red Sea. The kingdom
will conduct an investment feasibility study on the scheme and intensify exploration over the next
two years.
The accomplishments of the petroleum sector included achieving self-sufficiency in natural gas in
Egypt, where natural gas represented the highest growth rate during 2018/2019, Molla said, thanks
to the quick implementation of projects of gas fields’ development and exploration.
The ministry has developed the petrochemical industry of added-value in the country to cope with
the changes in the global market, with the aim of meeting the needs of the domestic market,
supporting many industrial sectors and exporting surplus.
The Egyptian Petroleum Authority and Egyptian General Petroleum Corporation (EGPC) signed on
Sept. 5 two agreements to explore oil and gas in Egypt’s western desert, according to the Petroleum
Ministry.
The ministry clarified that the agreements stipulate drilling four exploratory wells in Southeast Abu
Sennan and Ras Kattara in Western Sahara with a minimum investment of $4 million.

NewBase December 30 – 2019 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil price rise muted in 2019 despite sanctions, supply cuts, attack
in Saudi Arabia ;;;; (Reuters + NewBase )
Oil prices rose more than 20% this year but there were no sharp spikes and crude futures barely
sniffed $70 a barrel despite attacks on the world’s biggest oil producer, sanctions that crippled crude
exports of two OPEC members and gigantic supply cuts from big oil producing countries.
The price gains in crude oil benchmarks were all in the first quarter of 2019, even as the next several
months featured supply shocks that in the past would probably have propelled crude past the $100
mark.
Prices are likely to remain rangebound in 2020 as swelling supplies, particularly from the United
States, offset cuts from the Organization of the Petroleum Exporting Countries and weakening
worldwide demand, brokers and analysts said.
U.S. crude oil CLc1 is on track to end 2019 roughly 35% higher. Since the end of March, it is up just
3%, after rallying early in the year after the United States introduced sanctions on Venezuela. Brent
has gained 26%, but is off by 1% since the first quarter.
Oil price special
coverage

Investors and analysts say U.S. production and weak demand kept prices under control. The United
States is on track to be a net petroleum exporter on an annual basis for the first time in 2020. Output
is expected to average 13.2 million bpd, an increase of nearly a million bpd from 2019.
“Demand growth cratered while U.S. production continued to barrel along at high rates and
geopolitical risk eased,” Bob McNally, president of Rapidan Energy Group. “And now, at the end of
the year, weary investors are looking to next year and seeing a tsunami of oil.”
Investor concern over peak oil demand is expected to weigh on prices next year, particularly as the
urgency around action against climate change has increased. Also, a long-term resolution of the
U.S.-China trade war seems elusive, keeping market watchers wary of predicting energy demand
growth in the world’s two largest economies.
“There is growing concern around the long-term sustainability of U.S. oil and gas companies for
investors in an ESG (environmental, social and governance) driven world,” said Greg Sharenow,
portfolio manager at PIMCO, who co-manages more than $15 billion in commodity assets.
The U.S. Energy Information Administration expects average crude oil prices will be lower in 2020
than in 2019 because of rising inventories. Outside the United States, production is expected to
continue to grow in Brazil, Norway, and Guyana.
Prices did spike, but only briefly after drone attacks on Saudi Arabia’s biggest oil facility and U.S.
sanctions on Venezuela and Iran. September attacks on Aramco facilities briefly pushed Brent
above $72 a barrel, but within 10 days, oil prices sank back as Aramco brought production back
online.
Notably, the market barely wavered in its view of where prices would end up. Implied volatility, a
sign of how the market prices future gyrations in WTI and Brent CLATMIV LCOATMIV futures, was
largely muted in 2019 after a see-saw 2018, a sign that investors focused on broader supply trends.
Both Brent and U.S. West Texas Intermediate (WTI) futures were locked in a $22-$23 a barrel range
during the year, well below last year’s levels.
While the rate of annual U.S. production growth is expected to slow, the country should still account
for about 85% of the increase in global oil production to 2030, according to the International Energy
Agency. PIMCO’s Sharenow said U.S. crude supply would need to slow for the price outlook to
brighten.

“If we can move down to supply growth in a much more sustainable way of about 500,000-600,000
bpd, then all of a sudden the world is much better in 12 months,” Sharenow said.

NewBase Special Coverage
The Energy world – Special coverage Dec. 30-2019
Shale's Amazing, World-Changing, Lousy Decade
A historic boom in production was a bust for stock prices.
Bloomberg - Liam Denning
In between dealing with margin calls, Aubrey McClendon spent some of 2009 liquidating his
famously well-stocked wine cellar in the non-fun way. In vino veritas, as it turns out: McClendon’s
vintage version of the financial crisis, after his meteoric rise at the helm of fracking pioneer
Chesapeake Energy Corp., embodied the wild successes, excesses and lasting hangover of the
shale boom.
That same year, an analyst at Sanford C. Bernstein published a report titled “Will Chesapeake's
Board Please Stand Up?”, calling for reform of the company’s almost laughable
governance. McClendon eventually stepped down (he died in 2016), and Chesapeake embarked
on an effort to clean itself up. While its fortunes have waxed and waned since, they’ve mostly waned.
Earlier this month, its sub-$1 stock was threatened with de-listing from the New York Stock
Exchange.
It is remarkable that, in one big respect, U.S. energy just had its most successful decade ever — and
yet turned in the worst performance in the S&P 500 by a wide margin.
Boom
In terms of raw output, the U.S. oil and gas industry just had its most successful decade ever
Source: Energy Information Administration
Note: Rolling 10-year change in U.S. production. Natural gas data begin in 1900. Data for 2019 are
projections.

Bust
Energy stocks trailed every sector by a wide margin this decade
Source: Bloomberg
Note: As of December 26, 2019.
It isn’t an accident this happened in the same, zero-rate decade that gave us the likes of WeWork.
Like many a unicorn, the frackers upended a mature industry using cheap capital in a brash grab
for market share. Similarly, profits and payouts to shareholders ranked as distant runners-up to that
dash for growth.
Chesapeake, for example, didn’t generate a single year of positive free cash flow out of the past 10.
During that time, it generated $31 billion in cash from operations and topped that up with $44
billion of disposal proceeds. How much of that $75 billion went on capital expenditure? You guessed

it: $75 billion. 1 After a decade of no growth and decent returns on capital, the E&P sector took the
opposite approach.
Growth At All Costs
The resurgence in U.S. oil and gas production over the past decade coincides with a collapse in the
industry's financial performance
Source: Kimmeridge Energy Management, Energy Information Administration
Note: Production data include crude oil, natural gas liquids and natural gas. ROACE data are
averages for 73 E&P companies, adjusted for impairments.
Early in the decade, triple-digit oil prices and wide-open equity and junk-bond markets provided a
windfall. The E&P sector’s lax governance and perverse incentives ensured much of that ended up
either in drilling budgets or sweet compensation packages for insiders. The resulting surplus of oil
and gas teed up the crash in late 2014 that is now forcing a reckoning.
Ben Dell, the Bernstein analyst who wrote that report on Chesapeake, went on to found Kimmeridge
Energy Management Co., a private equity firm that has engaged in shareholder
activism with several E&P companies. These campaigns have echoed the central demands in that
report from 2009: better governance and financial discipline.
In particular, Kimmeridge urges smaller E&P companies to merge in order to cut overheads, direct
the savings into shareholder payouts and completely overhaul management compensation, with a
heavy emphasis on stock awards linked to absolute total shareholder return.

Shifting the priority to returns could not only coax at least some investors back but also cool
production growth, thereby taking some of the weight off oil and gas prices.
Regarding the latter, Kimmeridge estimates that while the industry’s oil output grew at roughly 10%
a year, compounded, in the decade through 2018, the vast majority of that was funded by third-
party capital. Purely self-funded growth would have averaged less than 3% a year.
It’s an uphill battle, though. Recent campaigns at PDC Energy Inc. and Carrizo Oil & Gas Inc. were
knocked back — although, given what’s happened since, investors may well regret that. Carrizo,
especially, went from shrugging off calls to merge to agreeing to sell itself for a relative
pittance within roughly 18 months.
Winning The Battle And Losing The War
Both Carrizo and PDC have slumped since rejecting an activist's call to merge or sell assets
Source: Bloomberg
Note: Performance indexed to 100. Callon Petroleum's acquisition of Carrizo closed December 23,
2019.
Such experiences may be sinking in, though. Generalist investors have largely deserted the sector,
with valuation multiples notably unresponsive to oil prices for much of the past year. Equity and debt
issuance has dropped off significantly, and stocks of more-indebted frackers have been hit hardest.
While the recent rally in oil prices has eased conditions somewhat in the high-yield bond market,
option-adjusted spreads for energy issuers remain elevated versus the more-forgiving levels that
fueled the pre-2014 boom and offered relief in 2017-18.

Premium Fuel
High-yield bonds remain relatively expensive for energy issuers
Source: Bloomberg
It is fitting that, as the 2010s draw to a close, the biggest E&P company, ConocoPhillips, hosted a
recent analyst day that summed up the fallout from the shale boom and what it will take to navigate
from here. Growth must be an output, not an input to the model. Cut capital intensity, not just to fund
big payouts but also to smooth volatility and resist the cost inflation that comes from following the
herd.
Above all, with investors AWOL and concerns about climate change sharpening rapidly, don’t
assume energy exposure is a must-have. So benchmark against the market rather than just peers;
no one gets rich owning the best performer in a bad sector.
Cheap capital, technological breakthroughs and economic recovery should have added up to a
vintage decade for frackers. That it didn’t for many is the result of bad decisions fostered by
skewed incentives and enabled by weak oversight. In a business with few certainties, it’s a pretty
sure thing this just won’t cut it in the 2020s.

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
www.linkedin.com/in/khaled-al-awadi-38b995b
Mobile: +971504822502
khdmohd@hawkenergy.net or 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 2019 K. Al Awadi

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