New base 484 special 23 november 2014

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NewBase 23 November 2014 - Issue No. 484 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oman inks concession pact with Medco Arabia, Intaj
Times of Oman + NewBase
Oman's Ministry of Oil and Gas has signed a concession agreement with Medco Arabia and Intaj
for exploring and developing block 56, which has crude oil and natural gas deposits.
As per the production sharing pact, these companies
will explore for oil and natural gas in block 56, which is
spread in an area of 5,808 square kilometres in Al
Wusta Governorate, said a press statement issued by
the ministry.
The agreement was signed in Muscat on Thursday on
behalf of the Government of the Sultanate by Dr
Mohammed bin Hamad Al Rumhy,
minister of oil and gas and Lukman
Mahfoed, director of Medco Arabia
and Said Al Adawi, chief executive
officer of Intaj
The commitments of the companies
under this agreement are to perform
geological and geophysical studies
and drill several wells during the
exploration period Oman government
will not bear any financial
commitments during exploration
period.

DNV GL, Qatar's N-KOM to Promote LNG as Fuel
(Source: DNV GL)
DNV GL and Qatar's shipyard Nakilat-Keppel Offshore & Marine (N-KOM) on Thursday signed a
memorandum of understanding (MOU) to promote LNG as fuel within the maritime and offshore
industry.
N-KOM will capitalize on DNV GL’s deep competence and long-standing experience in LNG,
working with
shipyards, ship
owners and other
key stakeholders
on a global basis
to develop
synergies related
to the promotion
of LNG as fuel
within the
maritime and
offshore industry,
DNV said.
“Qatar is the
single largest producer and exporter of liquefied natural gas in the world and has become a
leading cluster for gas related activities. Therefore, we look forward to establishing a valuable
partnership with N-KOM which further cements our strong market position on LNG as fuel in this
region and benefits the environment by making the shipping industry greener,” said Henrik
Madsen, DNV GL’s Group President and Chief Executive Officer.
As part of the agreement DNV GL and N-KOM will cooperate, amongst others, on the
development and new building of bunker barges, of coolant barges for temporary gas storage as
well as to promote
the use of LNG as
fuel in the offshore
sector. Moreover, a
training program is
to be conducted in
the N-KOM facility
on LNG carrier or
LNG-fuelled vessel
repairs. Finally,
both partners will
offer project
management
support for
conversion projects
to third party yards.
N-KOM’s CEO Chandru Rajwani and Dr Henrik O. Madsen, DNV GL’s Group President
and Chief Executive Officer (Source: DNV GL)

Oman: Tethys suspends LE-1 exploration well in Oman onshore
Block 4 for further study
Source: Tethys Oil
Tethys Oil has reported that the exploration well LE-1 in the eastern part of Block 4 onshore the
Sultanate of Oman has been suspended to allow for further studies in the future. An oil sample
has been recovered from the well,
indicating the presence of medium light oil,
which suggests that a petroleum system
may be active also in the eastern region of
Block 4.
With no previous well data in this area,
LE-1 has given important new data of the
area’s lithology which will necessitate a
reinterpretation of the seismic data
previously collected. The well has been
suspended to allow for further study in the
future. Once the seismic reinterpretation
is completed the work programme for the
area will be assessed also for other well
locations.
Tethys Oil, through its wholly owned
subsidiary Tethys Oil Block 3 and 4 Ltd,
has a 30 per cent interest in Blocks 3 and
4. Partners are Mitsui E&P Middle East
B.V. with 20 per cent and the operator CC
Energy Development S.A.L. (Oman
branch) holding the remaining 50 per
cent.

Iraq : US PV welcomes oil deal between Iraqi Kurdistan and Baghdad
Reuters + NewBase
US Vice President Joe Biden ( while in Energy Summit ) welcomed an agreement between Iraq’s
central government and its northern Kurdistan region over the management of oil exports, a step
forward in a feud that has threatened the unity of Iraq.
In a speech in
Istanbul yesterday
that touched on
energy issues from
Russia to Cyprus,
Biden said he was
encouraged to see a
recent interim
agreement between
Baghdad and Arbil
on managing
exports and revenue
sharing.
After years of friction, the two sides last week struck a deal in which Kurds will give half of their
overall oil shipments to the federal government and Baghdad will pay overdue civil servants’
salaries in the region. Oil has been at the heart of a feud between the government in Baghdad and
the Kurdish-run northern enclave, with disputes over oilfields, territory and crude revenues shared
between the two regions.
The Kurdish autonomous region and the Baghdad government are both important actors in the
fight against Islamic State militants who have captured broad regions of Iraq and Syria. Biden,
who was speaking at an Atlantic Council summit, also said that Washington supported the
development of an oil pipeline from southern Iraq’s Basra oilfields to Turkey’s Mediterranean port
of Ceyhan, a project which Turkey has long advocated despite reluctance in Baghdad.
Addressing tensions in Ukraine, Biden warned that Moscow should not use its energy resources
as a political weapon, and said that Europe should look for alternative energy solutions. “I have no
doubt Russia will and should remain a major source of energy supply for Europe and the world.
This is about energy security. To achieve it, Europe needs to make sure it diversifies its
resources, its routes and its suppliers.”
Russia and Ukraine reached a temporary pricing deal last month after Moscow switched off the
gas supply to its ex-Soviet neighbour, amidst worsening relations over Russian support for rebels
in eastern Ukraine. Biden also touched on the exploitation of Cypriot gas reserves, a source of
tension between Cyprus and Turkey, which does not recognise the EU member country. Biden
said the reserves could be a force for stability and prosperity in the region if Cyprus developed
them in co-operation with all its neighbours.
Talks between Cyprus and its politically and ethnically separate Turkish Cypriot north have broken
down in recent weeks. Speaking shortly after Biden, Turkish Prime Minister Ahmet Davutoglu
warned that any unilateral exploitation of gas near Cyprus would be met with a similar response
by northern Cyprus. “That’s why parties should return to the negotiating table as soon as
possible,” Davutoglu said.

India: Cheap electricity for poor squeezing out solar
Bloomberg + NewBas
The villagers of Dharnai in northern India had been living without electricity for more than 30 years
when Greenpeace installed a microgrid to supply reliable, low-cost solar power.
Then, within weeks of the lights flickering
on in Dharnai’s mud huts, the government
utility hooked up the grid – flooding the
community with cheap power that undercut
the fledgling solar network. While
Greenpeace had come to Dharnai at
Bihar’s invitation, the unannounced arrival
of the state’s utility threatened to put it out
of business.
“We wanted to set this up as a business
model,” said Abhishek Pratap, a
Greenpeace campaigner overseeing the
project. “Now we’re in course correction.” It’s a scenario playing out at dozens of ventures across
India’s hinterlands. Competition from state utilities, with their erratic yet unbeatably cheap
subsidised power, is scuppering efforts to supply clean, modern energy in a country where more
people die from inhaling soot produced by indoor fires than from smoking.
About as many people in India are without electricity as there are residents of the US, and the
number is growing by a Mumbai every year. Prime Minister Narendra Modi wants to bring
electricity to every home by 2019 by leapfrogging the nation’s ailing power-distribution
infrastructure with solar-powered local networks – the same way mobile-phones have enabled
people in poor, remote places to bypass landlines.
“We are facing the searing impact of climate change and we spend more than 6% of our gross
domestic product in adapting to its consequences,” Modi told Fiji’s parliament, saying technologies
such as wind and solar mean “we don’t have to seek old pathways to prosperity.” Modi’s vision is
also championed by the World Bank, General Electric, and BlackRock Inc-backed SunEdison Inc,
which say switching from old-style centralised networks to microgrids is a cheaper, faster solution
to bringing 1.3bn people, mostly in India and Africa, out of the dark.
India’s state utilities risk crushing that model before it gets off the ground as they continue a policy
of supplying farmers and the poor with cheap power. While the utilities incur huge losses
stemming from subsidies, changing the system is a political minefield. Bihar, for instance, has the
second-largest number of people below the poverty line among India’s 29 states: almost 44mn
living on 75 cents a day or less.
“The issue isn’t whether people can pay for power,” said Vivek Gupta, co-founder and director of
Saran Renewable Energy Pvt., which suffered unannounced grid arrivals when building microgrids
in Bihar. “They don’t want to pay because they know the government gives it for free if the grid
comes.”
Bina Devi, 55, who squats on her heels in a dirty beige sari, says she’s grateful to Greenpeace for
bringing the kind of modern energy needed to light schools, run health clinics and refrigerate food.

“It changed everything,” she said. Yet given the option for virtually free state power, she’s not
inclined to pay for an alternative. “We hardly have enough money for food. It’s difficult to pay an
electricity bill.” Husk Power Systems Pvt., which has built microgrids to supply about 200,000
people with power from rice husks, has had “huge problems” with disconnections when the grid
appears, said Chief Executive Officer Manoj Sinha. In Tanzania, by contrast, the state utility
promised to stay away for a decade from the area where First Solar Inc-backed Husk planned a
microgrid. “India is preventing innovation,” Sinha said.
The number of Indians without access to modern energy is increasing as population growth
outpaces electrification - rising 13mn last year to 306mn, according to the International Energy
Agency. That’s more than triple the next- biggest unelectrified populace: Nigeria with 85mn.
Delivering electricity the traditional way means building more transformers, substations and
transmission lines, as well as more fossil-fuel plants. India can’t serve existing customers, with
shortages of as much as 11% at peak hours, and its distributors are saddled with more than
$32bn in debt incurred from subsidies as well as losses from theft, a leaky network, and slack
billing.
Efforts to expand the grid have fallen short since at least 2010, when the government set a goal to
have every village electrified. As of September, 13% of villages were still pending, according to
the government. On the ground, many villages technically may be connected to the grid but get
little or no power for years because of broken infrastructure. Others may have one government
building tethered to a transformer and little else.
The unreliability of grid power, which in some places only works when people are sleeping, makes
alternatives attractive. Renewable-based options also offer clean, bright light in a nation where
indoor air pollution is the second-biggest killer after high blood pressure, according to the Centre
for Science and Environment.
Solar power can also work out cheaper in the countryside than using kerosene, diesel and
candles - yet subsidies distort the market. Mera Gao Power, which has built minigrids for 20,000
households in Uttar Pradesh state, is planning projects in Haiti and Nepal, where its model will
compete against market-priced kerosene, unlike India, where the fuel is subsidised.

China Prepares for Third Shale Auction Round
WantChina Times + NewBase
China's Ministry of Land and Resources has begun preparations for a third round of bidding for
shale gas exploration, according to local media reports.
Second round of bidding was completed last year. The ministry has so far issued 54 licenses
covering an area of 170,000 square kilometers, chiefly around Sichuan and neighboring areas,
according to WantChina Times.
Some 80% of China's shale gas resources are controlled by four petrochemical giants led by
CNPC and Sinopec, who have so far mostly conducted only test exploration on a small scale.
The government in its 2011-2015 shale gas development plan aimed to turn out more than 60
billion cubic meters of shale gas by 2020, but the goal was later cut by half to 30 billion cubic
meters. The ministry said in September that it may increase the production target from the revised
30 billion cubic meters if smoother progress is achieved, reported WantChina Times

China: Primeline signs project finance for LS36-1 gas field development
Source: Primeline Energy Holdings
Primeline Energy Holdings has announced that the binding documentation for the project finance
facility for the financing of its share of the costs to complete theLS36-1 gas field
development has now been finalized and was signed by Primeline and the financing banks on
17th November 2014.
As announced on 7th November, Primeline, and its affiliate company Primeline Petroleum Corp.
('PPC') secured a project finance facility from a syndicate jointly led by China Development Bank
('CDB') and China Export and Import Bank ('EXIM') with Shanghai Pudong Development Bank
('SPDB') as participant and agent bank.
The facility is made available to Primeline and PPC on a joint borrower basis and secured on
their respective interests in the Development. The principal amount of the facility is US$ 274
million (of which the Company's share is US$ 205.5 million) which will be repayable over 9 years
at an all-in interest rate of 6 month LIBOR+4.7%. Following the signing of the documentation, the
security arrangements and accounts set up will be implemented with first drawdown expected
around the end of November.
China National Offshore Oil Corp (CNOOC) is the 51% owner and operator of the
Development. Under agreements signed by CNOOC, Primeline and PPC in 2010, CNOOC has
advanced all development costs to date. The loan facility has been put in place in order to
finance the obligation of Primeline and PPC to repay their share of the development costs
(collectively 49%) to CNOOC.
Development trial production, which started in July 2014, has progressed extremely well and has
averaged 23.3mmcfpd since early September. Once the loan has been drawdown and CNOOC
repaid, Primeline and PPC expect to receive a significant amount of income for their shares of
the sales revenue which has been generated during the trial production period and which has
been held by CNOOC for the account of Primeline and PPC pending repayment. A further
announcement will be made when the initial drawdown has been completed.

US: Solar photovoltaic output depends on orientation, tilt, and tracking
Source: EIA, based on National Renewable Energy Laboratory's PVWatts,
Financial incentives, renewable portfolio standards, cost declines, and system performance
improvements have led to more customer-sited solar photovoltaic (PV) installations, especially in
states such as California. Because PV panels are able to capture more solar energy when they
are pointed directly at the sun, installers may configure systems to optimize output by adjusting
the orientation and tilt of a system, or by using mechanisms that track the sun as it traverses the sky.
Installers will generally determine the tilt of a system—or the angle between the module and the
horizontal—to optimize overall or seasonal performance. Assuming that a system has tilted
modules, installers will generally set the orientation—or direction—of that tilt to optimize overall or
time-of-day performance. In the Northern Hemisphere, the simplest way to maximize total annual
system output of a fixed-tilt system is to tilt the panels south. The tilt angle may increase with
latitude: the farther away from the equator, the higher the tilt.
However, while solar radiation peaks around noon, electricity demand often peaks in the afternoon
or early evening. In these last few hours of daylight, west-facing PV panels have an advantage
over south-facing panels, as they're tilted towards the setting sun.
Higher PV output at this time of day is often beneficial to grid operators working to increase
electric supply to balance high levels of demand, but customers generally will not see this benefit
unless they are on time-of-use electric rates. For example, under net-metering arrangements, the
financial benefit of these PV systems is based on the quantity of kilowatthours generated,
regardless of the time of day.
As part of California's Solar Initiative (CSI), the characteristics of each distributed (nonutility) solar
PV system are cataloged in their California Solar Statistics database. Based on this California
data, about two-thirds of the fixed-tilt systems that were installed so far in 2014 are tilted between
11 and 30 degrees. Residential and small commercial systems generally have higher tilt angles,
likely matching the pitch of the roofs these systems are often installed on.
Tilt angles may reflect factors other than generator performance. Some installation sites may not
be conducive to tilted arrays or specific orientations. In the case of pitched (sloped) roofs, an
installation with an orientation or tilt that differs from that of the roof can be more costly, and can
affect the visual impact of the system.

Tilted arrangements can require more surface area to deal with shading issues, may be subject to
increased wind damage, and require more costly mounting structures. Some installers have
tried different installation approaches to alleviate the shading issue while also capturing more
sunlight early and late in the day compared to south-facing arrangements.
Customers with higher electricity consumption (such as commercial, industrial, and institutional
customers) are more likely to be on time-of-use rates, providing them with the financial incentive
to consider both the amount and the timing of generating electricity. For this reason, these larger
installations are more likely to use yet another option: tracking systems. Single-axis tracking
systems are installed on tilted arrays, but they rotate the panels to follow the sun as it moves east
to west, improving output in the early and late hours of daylight. Dual-axis tracking systems do
this, too, while also modifying the tilt angle as the sun is lower or higher in the sky.
In addition to increasing total annual output, tracking systems also
help reduce seasonality in solar output. However, tracking
systems are still relatively rare. For systems greater than 10
kilowatts (kW) installed in California so far this year eligible for
support from the CSI, 30% of the capacity was installed using
single-axis tracking systems and 4% either used dual-axis tracking
or a mix of tracking and fixed mounts, but the majority of the
capacity (66%) was on fixed mounts. Virtually all (more than
99.9%) of the capacity under 10 kW installed in California this year
have fixed mounting without any tracking.

Oil Price Drop Special Coverage
Oil up first time in 8 weeks on China rate cut
NEW YORK, 22 hours, 2 minutes ago
Oil prices rose on Friday for their first weekly gain in two months with benchmark Brent crude
returning to above $80 a barrel after a rally triggered by China's interest rate cut and speculation
of an Opec output cut.
Brent rose $1.03 to settle at
$80.36 a barrel. It had risen as
much as $2.28 earlier to a
session high of $81.61. US
crude finished up 66 cents at
$76.51, after an intraday peak at
$77.83.
Oil's rise for a second straight
day gave Brent a 95-cent, or 1.2
percent, gain on the week. It was
also the market's first positive week after a record drop of eight weeks in a row. US crude rose 69
cents, or 1 percent, on the week, after consecutive losses for seven weeks.
Since June, oil has lost about 30 percent of its value, with Brent plunging from a high above $115
and US crude falling from above $107. "This market has been sold out so much that any kind of
fresh bullish news is going to cause a price pop," said Thomas Saal, analyst at INTL FC Stone in
Miami, Florida.
China's central bank cut benchmark interest rates for the first time in more than two years to
reduce borrowing costs and ward off the slowest growth in 24 years. China is the largest net
importer of petroleum and metals, and the rate cut sent most commodity prices surging.
Expectations of a production cut from the Organization of the Petroleum Exporting Countries at its
November 27 meeting also fed the rally, although profit-taking emerged later, along with selling by
those expecting another tumble next week.
"We continue to see a bear market for crude, and we've used any opportunity at all in the market's
strength to sell into it, in any small way we could," said Tariq Zahir, managing member of Tyche
Capital Advisors in Laurel Hollow, New York.
Market bets on the outcome of the Opec meeting vary, although optimism of an output cut has
grown lately. Opec heavyweight Saudi Arabia has not committed to lower production. But Russia
said on Friday that Riyadh had expressed "a willingness to cooperate on issues related to energy
and oil markets."
Venezuela has also said it will curb its own output if Opec agreed to do so.

Much at stake for OPEC envoys as oil prices dip
A new era could be on the horizon! The energy world is entering into a momentous week.
While it eagerly awaits the outcome of the ongoing deliberations between the P5+1 and Iran on
Tehran’s purported nuclear program, eyes are also focused on the upcoming OPEC ministerial
this week. The OPEC moot in Vienna this Thursday, is being dubbed by many as one of the most
important and crucial in its recent history.
All this is taking place in the midst of what is being described by some as the ‘Great Oil Crash.’
And the trend is not expected to go off - any time soon. “It is increasingly clear that we have begun
a new chapter in the history of the oil markets,” the IEA stated in its November oil market report,
observing that the world’s oil supply is outstripping projected oil demand.
We are very much in the midst of a glut, with little possibility of any rally in near term. Oil
producers are scurrying to hold on to their market share in China and elsewhere in the emerging
markets. In the meantime, the Alaskan North Slope crude oil is now being exported to South
Korea on a regular basis.
Adding to the glut has been the return of Libya’s oil production, despite a raging civil war with two
competing governments asserting governance over the country. And despite the ongoing war
against IS, exports from Baghdad continue to rise to a record post- Iraq war levels.
The Kurds are in the meantime, also flexing their crude muscles with a deal with Baghdad
allowing them to increase their oil exports from Northern Iraq in the coming months. And to top it
all, North Sea production is also set to rise over 11 percent in December. Overflow is imminent.
Prices are to go down - unless - taps are tightened! As the OPEC ministers are preparing to sit
down in Vienna next Thursday, fireworks seem imminent. Oil market watchers appear divided. All
sort of projections - from a large OPEC production cut to a small cut to none at all - are being
made.
Eyes but, remain focused on Riyadh. What would be the stance of Saudi Arabia on a possible cut
in output? Is Riyadh in a battle for market share or is it a part of a well-thought-of policy to let the
prices melt, not only to hamper the growing shale business in the United States but also to make
life for Moscow and Tehran more miserable? “Is it just my imagination or is there a global oil war
underway pitting the United States and Saudi Arabia on one side against Russia and Iran on the
other?” New York Times columnist Thomas Friedman, wrote last month.
Already in Russia, the idea of a Saudi-US plot against Moscow is a common currency as its
economy struggles under the effects of low oil prices and Western sanctions imposed over its
annexation of Crimea and support for rebels in eastern Ukraine. Riyadh has been composed to all
this speculation. However, with the OPEC ministerial just round the corner, it is making it clear -
Saudi Arabia is for stable markets.
“Saudi oil policy... have been subject of a great deal of wild and inaccurate conjectures in recent
weeks. We do not seek to politicize oil ... For us it’s a question of supply and demand, it’s purely
business,” Minister Ali Al-Naimi was quoted as saying a couple of weeks back.

However, one thing is being made apparent: Riyadh was not willing to solely shoulder the burden
of stabilizing the markets. In his meeting with Venezuelan Foreign Minister Rafael Ramirez earlier
this month, Minister Naimi reportedly said: Saudi Arabia won’t cut output on its own. Mr. Naimi is
expected to repeat the message to delegates at the Vienna ministerial, the WSJ said.
It has made known to its fellow OPEC member that all the members need to bear joint
responsibility for the global oil market and that they should not expect Saudi Arabia to be the only
country within OPEC to cut its supplies, former oil ministry official Mohamed Al-Sabban was
recently quoted as saying. Unless agreement is reached on this fundamental issue, Saudi Arabia
will continue defending its market share, he insisted.
Concern is but spreading. Energy diplomatic flurry could be witnessed all around - preceding the
crucial Vienna meeting. Kuwait’s cabinet and the country’s Supreme Petroleum Council held an
“extraordinary” joint meeting last week to consider measures to stop the slide in prices. According
to KUNA, the meeting “discussed steps that have to be taken on all levels…including having
consultations with fellow OPEC member states for maintaining interests of all parties”.
This was despite the earlier Kuwait statement expressing confidence on market situation. Only
last week Kuwait’s oil minister had stressed that he did not believe there would be a reduction in
output by OPEC when its 12 members gather in Vienna. Iran too has been badly hit by the falling
oil prices.
In a statement last week, Iran’s oil minister criticized (some) countries of “trying to justify keeping
oil production at the current level – which were set before countries such as Iran were allowed to
return to selling oil in the global marketplace,” he emphasized. Iran is already tapping its
sovereign wealth fund to mitigate the impact of the oil price slump.
In the backdrop, Iranian Petroleum Minister Bijan Namdar Zanganeh has been undertaking visits
to Gulf Arab states Qatar, Kuwait and the United Arab Emirates. Zanganeh also held talks in
Tehran with Rafael Ramirez of Venezuela. In a press talk, Zanganeh also indicated that he would
talk with Saudi Arabia about market share when OPEC meets next week in Vienna.
Venezuela, Ecuador and Libya have all been contributing to the debate by saying that a cut was
appropriate. Rafael Ramirez, who was Venezuela’s energy minister until two months ago, has
also been visiting Algeria, Iran, Qatar and Russia in recent weeks.
As market players sit down to evaluate their priorities, Russia has said it’s willing to cooperate with
Saudi Arabia on the oil market, while avoiding a commitment to limit output to reverse plunging
prices.
In a joint statement issued after a meeting between the Russian Foreign Minister Sergei Lavrov
and his Saudi couterpart Prince Saud Al-Faisal in Moscow on Friday, the two agreed to coordinate
on “issues” affecting the energy and oil markets.
Saudi Arabia and Russia, which together produce 25 percent of global oil, agreed the market
“must be free of attempts to influence it for political and geopolitical reasons,” Lavrov added.
Where supply and demand are “artificially distorted,” oil exporters “have a right to take measures
to correct these non-objective factors.”
And to follow up, Rosneft Chief Executive Igor Sechin was reportedly flying in to Vienna on Nov.
25 for an energy market conference, just two days before the OPEC meeting. The surprise

announcement raised speculation that Sechin, a close ally of Russian President Vladimir Putin
and a former deputy prime minister, would use the meeting as a cover to meet OPEC ministers,
exploring common ground. Much is definitely at stake!
Iran To Hold Market Share Talks With Saudi At OPEC – IRNA
By Reuters + NewBase
Iran’s oil minister said he will talk with top oil exporter Saudi Arabia about market share when
OPEC meets next week in Vienna, as Tehran plans for the possible end of sanctions and
unfettered crude exports.
Zanganeh said Iran’s oil exports would increase by two fold within
two months of lifting the sanctions, although analysts say it may take
longer. Iran exports around 1.3 barrels of oil per day.
“The countries in the south of the Persian Gulf are interested in
keeping their market share and a decrease in market share will be
difficult,” Iran Oil Minister Bijan Zanganeh was cited as saying by the official news agency
IRNA on Thursday.
“Under no circumstance, will we reduce our global market share, even by one barrel.”
The Vienna OPEC meeting on Nov. 27 is shaping up to be one of the most important in years.
Some in the producing group have called to cut supplies to support oil prices which have
fallen by over 25 percent since July.
Iran is in talks with six major powers on curbing its nuclear programme in exchange for an
end to Western sanctions. But it a comprehensive deal by a Nov. 24 deadline appears
unlikely, a U.S. official has said.
In the past two weeks, Zanganeh has visited Gulf Arab states Qatar, Kuwait and the United
Arab Emirates in a bid to win support for action to stabilise oil markets. He also held talks in
Tehran with Venezuela. Both OPEC members need a higher oil price to balance their budget
than Gulf Arab oil producers.
On Sunday, Zanganeh accused some countries of making up excuses to justify their refusal
to stabilise prices by cutting output, a possible reference to Saudi Arabia. Saudi Oil Minister
Ali al-Naimi has reaffirmed the kingdom’s longstanding policy of seeking stable global markets
and dismissed talk of a “price war”.
Mohammad Al Sabban, a former senior advisor to Naimi said he expects OPEC will keep its
output ceiling of 30 million bpd unchanged. “Saudi Arabia has re-instated repeatedly, that
OPEC, as a whole should swing and not only them. The Saudis are ready to do their part in
defending the market,” he told Reuters.
“Therefore, given the short time to coordinate not only within OPEC but also with non-OPEC,
a rollover is going to be the best compromise.”

Russia plans oil output cut: Energy minis
Reuters + NewBase
Russia may cut oil production to shore up flagging prices, but its ability to change output is limited
and no decision has been made yet, its energy minister said, underlining Moscow’s desire for a
higher oil price.
Before Opec meets next week, Russia has already spoken to members Venezuela and Saudi
Arabia about the need to support the oil market, and Moscow expects to send a high-ranking
delegation to Vienna before the meeting to press the message on prices. Russia’s already weak
economy has been hit by the falling price of oil, which together with natural gas generates half of
state revenue.
A price of at least $100 a barrel is needed to balance the government budget, and some experts
say Russia may need oil prices to be as high as $115, because the budget has to cover increased
social and military spending and compensate for sanctions over Ukraine that have cut Moscow off
from Western financial markets.
Asked whether Russia is ready to cut production, Energy Minister Alexander Novak told reporters
yesterday: “This issue requires careful consideration ... But on the whole, this question is being
discussed, but there are no final decisions on it.”
The minister said a production cut would be difficult for Russia, because the budget relies on
revenues from oil exports, and the country lacks what he described as the “technology” to act
quickly to alter supply. Analysts say Russia can do little to shore up the oil price, which had fallen
by a third since June to under $80 a barrel, because it lacks storage facilities and may be unable
to stop pumping at wells for fear they will freeze over.

Prudence should be Opec’s watchword
The recently released World Oil Outlook 2014 discusses Opec’s forecasts for the oil market all the
way up to 2040. The study, which runs close to 400 pages, couldn’t have come at a worse time for
it and the oil markets. The price of Opec’s basket of crude oils has fallen from close to $120
(Dh440) a barrel in April to just below $74 on November 17, and there is the potential for further
decline.
Yet, the Opec Secretariat is upbeat about the long run by ignoring the current market conditions
on the hope that these should not impair the vision well down the line to 2040. The price of oil is
assumed to remain close to $100 a barrel in 2013-dollar terms throughout the period.
The assumption is driven by the marginal cost of producing a barrel in the high cost regions of
deep seas, oil sands and even for tight oil in the US. The relative stability of oil prices in the last
few years — of between $110 and $100 a barrel — does mean something for investors.
While marginal costs may be less than that, oil companies also want their profits to enable them to
invest more. Here one has to remember that capital and operating costs have more than doubled
since 2004 and further increases cannot be ruled out.
Other assumptions relate to the economic growth of 3.5 per cent a year on average, a world
population growth from 7.1 to 9 billion of whom 60 per cent would be city dwellers. As for energy
policies, the study takes into account those already in place including the Chinese National Plan
on Air Pollution and local car sales control; Japan’s reconsideration of the nuclear option; and
efficiency targets on land and shipping.
Based on these assumptions, the study recognises two periods where, in the first, oil demand
would grow annually by one million barrels a day (mbd) up to 2019 to reach 96mbd. At the same
time non-Opec liquids’ supply increases by 6.4mbd due essentially to US shale and Canada oil
sands increases. Therefore, the prospect for Opec crude oil production is rather negative as the
required production from it is expected to fall from about 30mbd in 2013 to 28.7mbd in 2019.
Regulations
In the second period, things would be more optimistic as oil demand is forecast to reach 111mbd
by 2040. This would be the result of oil use in the petrochemical sector in China and India while

“the rate of penetration of new technologies has led to downward pressures on oil demand”. Also
“oil demand for marine bunkers sees a downward adjustment reflecting the IMO’s regulations on
efficiency and emissions, and the possible longer term impacts of moves to LNG use in the
sector”.
Gasoline and diesel will continue to dominate the transportation sector with their share of car fuels
only falling from 97 to 92 per cent in 2013 and 2040 respectively. Oil demand in the OECD is
expected to fall while developing Asia is to account for 71 per cent of the growth.
Non-Opec supplies would still increase but at a slower rate and therefore Opec is forecast to
produce 39.7mbd of crude oil by 2040. But there are many uncertainties with respect to world
economic growth and non-Opec supplies.
On economic growth, the study assumes “asymmetric uncertainty, with downside risks greater
than upside potential”. Therefore if economic growth falls from 3.5 to 3.1 per cent a year or a
higher economic growth of 3.9 per cent a year transpires, then “in the low economic growth
scenario, oil demand by 2040 is 6.9mbd lower. In the high growth scenario, demand is 4.7mbd
higher”.
Accordingly “the amount of crude required from Opec ranges from 33—44mbd by 2040.”
Downside
On the supply side, there is further potential for tight crude oil and oil sands if development picks
up further in the US, Canada and Russia to the tune of further 3mbd by 2040. Additional 2mbd
could come from increases in Brazil, Russia and biofuels.
But the downside relates to tight oil where “known constraints and challenges such as steep
decline rates, the initial development of ‘sweet spots’, concerns over environmental impacts, and
the possibility of rising costs” have been well identified. Also, “biofuels targets have been overly
optimistic, (while) oil sands projections have repeatedly been brought down”.
This downside supply scenario forecasts non-Opec liquids supply at close to 5mbd lower by 2040.
The “upstream investment requirements for additional capacity amount to $7.3 trillion, in 2013
dollars. Most of this investment will be made in non-Opec countries” where high cost and higher
decline rates prevail. And “Opec would need to invest an average of close to $40 billion annually
in the remaining years of this decade, and over $60 billion annually in the longer term”.
These uncertainties have great implications for Opec and other oil producers and prudence will be
advisable.

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For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MSc. & BSc. Mechanical Engineering (HON), USA
ASME member since 1995
Emarat member since 1990
Mobile : +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 25 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 23 November 2014 K. Al Awadi

New base 484 special 23 november 2014

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