New base 520 special 18 january 2014

Copyright © 2014 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced,
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NewBase 18 January 2015 - Issue No. 520 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
UAE can save $2bn a year by ramping up renewable
energy generation, says Irena head
The UAE has the potential to increase its renewable energy generation, saving US$2 billion a year
by 2020, according to Adnan Amin, the International Renewable Energy Agency (Irena)
director general.
Irena conducted studies in collaboration with several Emirati
institutions that found the net result of savings in terms of costs from
subsidies would actually give the UAE $2bn a year. “Clean energy
for the UAE – especially Abu Dhabi – remains a priority,” he said.
His remarks come as Irena kicked off Abu Dhabi Sustainability
Week yesterday with its fifth annual general assembly. Delegations
spanning more than 151 countries gathered in the capital to discuss progress in renewable
energy. Fourteen more countries have joined Irena since last year.
As part of Abu Dhabi’s sustainability week, the World Future Energy Summit begins at the Abu
Dhabi National Exhibition Centre tomorrow. Organisers expect more than 30,000 policymakers
and business leaders from 170 countries. Companies will showcase technological advancements.
Conference sessions will cover project finance, research and development, growth markets and
more.
According to a country report to be released next month, renewables will make up more than 10
per cent of the UAE’s power
generation by 2030.
The UAE does not have a
target for renewable energy
implementation, but its two
main cities have released
figures supporting their
renewable ambitions. Abu
Dhabi has stated that it will
reach 7 per cent renewable
generation by 2020, and
Dubai has earmarked 5 per
cent by 2030.
One of the main reasons that
the UAE is trying to diversify
its electricity generation is

because the main power feedstock is heavily subsidised, meaning the government pays for part of
the total cost so the customer is able to get the product – such as natural gas – at cheaper rates.
Mr Amin said that the subsidising of energy consumption in the UAE equals a revenue loss.
Suhail Al Mazrouei, the Minister of Energy, said that the government was taking steps to become
less dependent on fuel subsidies, but the first part was to increase efficiency rates. “We are
working very hard on the management demand side, improving efficiency of plants and
distribution,” the minister said at a Gulf Intelligence forum in Abu Dhabi last week.
Mr Al Mazrouei added that
further measures had been
taken such as implementing
green building standards and
even going into a few
residential areas to install
energy-efficient products. By
diversifying the energy mix,
the fuel used to generate
power in the UAE could be
exported to other countries to
make a profit. Oil could be
sold, depending on the day,
for far more money. If the
UAE is taking one barrel of oil for its own purposes at $7, at the current oil prices, the UAE loses
out on $43 for each barrel it could have exported to places such as South Korea.
Mr Amin said that by using indigenous resources in a cost-effective way for power generation, the
country can use its hydrocarbons for higher value products like petrochemicals. “It’s optimising
economic use of resources, and it makes sense that the UAE would ramp up investment in clean
energy,” he said.
The plus side about renewable energy today is that with financial mechanisms evolving for the
field, renewable energy prices have become more cost competitive with conventional forms of
power generation like natural gas, coal and diesel.
And Mr Amin noted that the UAE was one of the most interesting places, particularly after bids
for Dubai Electricity and Water Authority’s Mohammed bin Rashid Al Maktoum 100- megawatt
solar park.
The winning bid came in below 6 US cents, which is below the current price for gas at 9 cents. Mr
Amin said that with new gas exploration coming online, the prices could rise up to 13 cents.
Although more gas would be generated with these new developments, it will not be cheaper since
the UAE has a high amount of sour gas.
Sour gas means that a high amount of hydrogen sulfide can be found, which makes the
hydrocarbon very expensive to process so that it can be used in various applications. The director
general said the costs of renewable energy developments like solar have become equal to gas in
many cases.
The improvements that the UAE has made, particularly as an oil producer, provide an example for
others. “We are very impressed at what Abu Dhabi and Dubai are doing,” said the Irena head.
Source: The National + NewBase

Oman: OOCEP opens $1.3b AbuButabul gas field processing plant
TIMES OF OMAN + NEWBASE
Oman Oil Company Exploration and Production (OOCEP) has announced the commercial export
of 27 million standard cubic feet per day (MMscfd) of natural gas and 2,500 barrels per day (bpd)
of condensates from its newly developed block 60 tight gas field in Abu Butabul, located around
500 kilometres (kms) away from Muscat in the western region of Central Oman.
The company has so far invested $1.3 billion for developing the field, a processing plant, and
other related pipeline facilities and the total investment in the present phase will reach $2.5 billion
once the remaining work is completed
OOCEP has announced the official opening of the gas field and a state-of-the-art processing plant
on Thursday at a ceremony held at the field under the auspices of His Highness Sayyid Shihab
bin Tariq Al Said, advisor to His Majesty
Addressing the inaugural function, Salem bin Zahir Al Sibani, chief executive officer of OOCEP,
said that natural gas and condensate production would gradually reach 70 MMscfd and 6,000bpd,
respectively, by the middle of this year
"The investment in the project amounted to $1.3 billion until the end of 2014. Development will
continue as per the first plan for the project to reach about $2.5 billion," he added. In fact, the Abu
Butabul gas processing plant was commissioned on September 23, 2014, while production and
export of gas started in November 2014
"The project was completed in a record time of three years and is considered a global record at
this stage," said Al Sibani, adding, "The Sultanate is one of the first countries in the region to
extract non-conventional gas from deep reservoirs.
Abu Butabul, also known as Block 60, is a 1,500sqkm concession encompassing the wilayats of
Ibri and Haima, and is 100 per cent owned and operated by OOCEP – a wholly-owned subsidiary
of Oman Oil Company, which is the Oman government's investment arm in the energy sector.

The field is situated 50kms west to Mabrouk Field and 85kms from Barik Field. Abu Butabul Field
(Block 60) was discovered in 1998 by ABB-01 drilled by Petroleum Development Oman. The
concession was acquired by OOCEP in December 2010, after the previous operator relinquished
the block
The newly built gas processing plant, with a
capacity to treat 90 MMscfd of gas, 6,000 bpd of
condensates and 2,000 bpd of water, was
commissioned on September 23, enabling
processing and export of unconventional tight gas
into the Government Gas System – for the first
time in the country's modern history
The successful production of gas from the deep
and tight reservoir substantially enhanced gas
availability to meet the growing local demand –
which is vital for the economic development of the
country. Elaborating on the scope of development
work in the first phase, Al Sibani said the overall
development of the Barik gas reservoir included
preparation of geological studies and drilling of
hydraulically fractured 80 wells at a depth of
4.5kms, so that the gas can go out of its tight
reservoir. Other major facilities include a major
plant for treating natural gas and condensates,
construction of gathering network for well
products with a total length of 122kms, building an
integrated storage and export system with the
construction of dual pipelines of 90kms to
transport natural gas and condensates to Barik
"While the condensate is transported to PDO facilities, the gas is exported to the government gas
system run by Oman Gas Company.
While the concentration is to deliver the Barik project on stream, other opportunities have also
been matured utilising the drilled wells into Barik. Miqrat, Haushi (Gharif and Alkhlata) and Khuff at
ABB field have been realised as potential projects that can be delivered altogether with Barik to
enhance ABB project profitability. OOCEP has also found a number of exploration prospects of
which is currently drilling the first exploration well, Bisat structure.
The real value of this achievement is the success of establishing local expertise that can compete
in this industry and the establishment of lots of procedures, standards and policies that provide
foundations for the execution of future projects, added Suleiman Al Zakwani, project director of
OOCEP.
Block 60 development has been challenging in different aspects. The block is located in a remote
area away from any existing infrastructure, majority of the block is covered with sand dunes and
the block is located away from the known subsurface salt basins. The reservoirs under
development are at 4500 metre depth and they are treated as unconventional tight sandstones.
The inaugural function was attended by top-level officials including ministers, undersecretaries
and other officials from both government and private sector.

Algeria-EU: Studies on sustainable energy launched in 3 provinces
APS + Newbase
Studies for the development of sustainable energy action plans in three provinces of the
country have been launched as part of the European Union programme "Cleaner Energy
Saving Mediterranean Cities" (CES-MED), said the European Neighbourhood Info Centre on
its website.
The three concerned provinces are Batna, Boumerdes and Sidi Bel Abbes, said the source adding
that working groups in charge of collecting data have been set up.
The scope of intervention and a proposal for methods of data collection as well as the objectives
of the annual programme for 2015 in each of the three provinces had been already presented
during workshops held recently in Algeria.
The CES-MED project is an EU-
funded initiative aiming at
"providing training and technical
assistance to local and national
authorities in the southern
Mediterranean region, in order to
help them respond more actively
to sustainable policy challenges,"
the source said.
This initiative "ensures that the
actions proposed match with the
objectives of the Covenant of Mayors: to reach and even go beyond the European objective to
reduce CO2 emissions by 20% thanks to the improvement of energy efficiency and the increase of
the use of sustainable energy," the source added.
The three workshops on the launch of the Sustainable Energy Action Plan were held last
December with the participation of the National Agency for the Promotion and Rationalization of
Energy Use (APRUE).
Four working groups have been set up to collect data for Batna, two for Boumerdes and three for
Sidi Bel Abbes.
One of the world's first hybrid solar power plant is located
at Hassi R'Mel.

US: Judge Puts BP's Top Fine at $13.7 Billion for Gulf Oil
Disaster; U.S. Sought $18 Billion
Bloomberg . BP Plc (BP/) faces a maximum fine of $13.7 billion after a U.S. judge ruled that the
company dumped 3.2 million barrels of oil into the Gulf of Mexico in 2010 -- about 75 percent of
what the U.S. calculated.
The government’s 4.2 million-barrel estimate of the spill size was rejected yesterday by U.S.
District Judge Carl Barbier, decreasing the potential maximum fine from $18 billion. BP estimated
the flow at 2.45 million barrels. The maximum possible fine would still be the largest U.S. pollution
penalty.
Barbier previously found BP’s exploration unit acted with gross negligence in causing the largest
offshore oil spill in U.S. history. That decision triggered BP’s exposure to the maximum fines under
the Clean Water Act.
The ruling on the spill’s size sets the stage for a trial next week in New Orleans at which Barbier
will determine the amount of the fines, based on the law’s provision for as much as $4,300 per
barrel released and factors such as what BP did to minimize or mitigate the effects of the disaster.
BP still faces multiple claims by private parties and state governments. The company reached an
estimated $9.7 billion settlement of claims from most private parties who alleged they were
harmed by the spill. The company didn’t settle with banks, casinos, local governments and
businesses claiming harm from the deep-water drilling moratorium imposed by the government
after the spill. Louisiana, Alabama and other Gulf states are also seeking unspecified damages
for harm to natural resources.

Shares Rise
BP rose 4.7 percent to 411.2 pence at 3:29 p.m. in London, valuing the company at 74.9 billion
pounds ($113.9 billion). BP’s American depositary receipts rose 5.3 percent to $37.63 at 11:23
a.m. in New York.
“Today’s ruling is a major victory for BP and reduces by billions their potential liability,” said David
Uhlmann, a law professor at the University of Michigan and former head of the Justice
Department’s environmental crimes division.
“A fine in excess of $10 billion remains possible but is now less likely,” Uhlmann said yesterday in
an e-mail. The London-based oil company has set aside $3.5 billion to cover the pollution fines. It
has already spent more than $28 billion in spill response, cleanup and claims. It reached a $4.5
billion settlement of criminal allegations in 2012.
The company had taken a $43 billion charge to cover all the costs, according to an Oct. 28
earnings statement. The ultimate cost is “subject to significant uncertainty,” BP said.
BP’s Stance
The company doesn’t believe it deserves the maximum Clean Water Act fine, Geoff Morrell, a BP
spokesman, said in an e-mailed statement. “BP believes that considering all the statutory penalty
factors together weighs in favor of a penalty at the lower end of the statutory range,” he said.
Barbier isn’t likely to fine BP more than $9.2 billion, Fadel Gheit, an analyst at Oppenheimer &
Co., said today in an interview. Gheit bases this estimate on the 67 percent proportion of fault for
the incident Barbier assigned to BP. The fine may be as low as $3.5 billion, Gheit said.
BP deserves credit for its response to the spill, which should bring down the ultimate fine, Gheit
said. “They went beyond what any other company would do,” he said. “I would hope the judge
takes this into consideration.”
Wyn Hornbuckle, a Justice Department spokesman, said the agency was reviewing the ruling.

Anadarko’s Role
Anadarko Petroleum Corp., which owned a 25 percent share of the doomed well, will also be a
defendant in the penalty phase of the trial. Barbier previously ruled Anadarko wasn’t responsible
for the spill and is on the hook for pollution fines as a part owner of the well. The U.S. said last
month it was seeking no more than $1 billion from Anadarko,
which is based in the Woodlands, Texas.
“Today’s ruling regarding the volume does not change the court’s
previous findings that we had no direct operational involvement in
this event,” John Christiansen, an Anadarko spokesman, said in
an e-mail yesterday.
BP didn’t extend the spill by lying about its size or misrepresenting
the efforts to contain it, Barbier found. “BP was not grossly
negligent, reckless, willful or wanton in its source control planning and preparation,” Barbier said.
The blowout of the Macondo well off the coast of Louisiana in April 2010 killed 11 people aboard
the Deepwater Horizon drilling rig and spewed oil for almost three months into waters that touch
the shores of five states.
Three Companies
The accident sparked thousands of lawsuits against BP, as well as Vernier, Switzerland-based
Trans ocean Ltd. (RIG), the owner of the rig that burned and sank, and Houston-
based Halliburton Co. (HAL), which provided cementing services for the project.
Transocean’s $1 billion settlement with the U.S. in 2013 is the largest civil penalty for Clean Water
Act violations, according to the Environmental Protection Agency.
Barbier conducted two trial phases in 2013, one on fault and gross negligence, the other on the
size of the spill and the efforts to contain it.
Lawyers for the U.S. and oil-spill victims contended in the first phase that BP was over budget and
behind schedule, prompting it to cut corners and ignore safety tests showing the well was
unstable.
They alleged that Halliburton’s cement job was defective and that Transocean employees made a
series of missteps on the rig, including disabling safety systems and failing to adequately train its
crew and maintain the installation.
Finger-Pointing
During the trial, BP also accused Transocean of failing to maintain the drilling rig and Halliburton
of providing defective cementing services. Transocean and Halliburton pointed fingers back at BP.
Barbier on Sept. 4 found that BP’s exploration unit was “reckless,” while Transocean and
Halliburton were merely negligent. He apportioned fault at 67 percent for BP, 30 percent for
Transocean and 3 percent for Halliburton.

BP Exploration & Production is “subject to enhanced penalties under the Clean Water Act”
because the discharge of oil was the result of its gross negligence and willful misconduct, Barbier
held Sept. 4.
BP has appealed that decision.
In the second phase of the trial, which ended in October 2013, the U.S. government contended
BP’s well put 4.2 million barrels of oil into the Gulf before it was capped almost three months later.
BP estimated the flow at 2.45 million barrels.
Captured Oil
Both agreed that their numbers would have been higher if 810,000 barrels hadn’t
been captured by a siphoning device at the wellhead.
Barbier concluded that 4 million barrels of oil spewed from the well, and he subtracted the amount
captured at the wellhead. That left 3.19 million barrels that will be considered in determining the
civil penalty, he said.
In the penalty phase, Barbier will consider eight criteria in setting the fine, including the
seriousness of the violation, the degree of culpability, any history of prior violations, any other
penalties for the same incident, and what BP has done to minimize or mitigate the effects of the
spill.
Barbier also must consider the possible economic impact of any penalty on the company.
The U.S. said in court papers last month that it was seeking $16 billion to $18 billion in fines,
based on its estimate of the size of the spill.
The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20,
2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

Oil Price Drop Special Coverage
The same move yet under two starkly different scenarios
Syed Rashid Husain + NewBase
Very much into the footsteps of his predecessor, the firebrand, left protagonist late Hugo Chavez,
the current Venezuelan President Nicolas Maduro too has been traveling all around, pleading
immediate action to support falling oil prices. He has been endeavoring to bring producers to a
common ground so as to push the oil prices up and to garner support and financial aid for the
faltering Venezuelan economy in the wake of crashing oil markets.
The price of Venezuelan oil, which accounts for about 95 percent of its export revenue, fell last
week to $42.44 a barrel from a peak of $100.64 on June 27. The largest decline in oil prices since
2008 has brought Venezuela on brink of default, default as foreign currency reserves are ebbing
and the economy is contracting.
Maduro was hence on a mission - to change all this - to prop the oil prices somehow.
And thus in a bid to change the tide, very much in the style of his predecessor, Maduro too
undertook a whirlwind tour - far and wide - taking him to China, Iran, Saudi Arabia, Qatar, Algeria
and finally Russia.
Maduro’s first stop was China, the country’s biggest financial backer. China has already granted
Venezuela more than $50 billion in loans since 2007, with about $20 billion of that still being
outstanding. And during the visit,China reportedly agreed to invest another $20 billion over the
next decade in a variety of energy, social and industrial projects in the country.
However, Maduro’s diplomatic push for an OPEC oil output cut seems to have failed to soften the
stance of fellow OPEC members - at least for the time being. “There’s a push from Venezuela for
a cut, this is what they argued in Vienna and this is what they are lobbying for now. But from what
I see there is no sign of cutting production from the Gulf states,” a Gulf OPEC delegate told
Reuters.
“The only solution is to have the market absorb this surplus and the extent of that will be assessed
by OPEC ministers during their meeting in June.” Another delegate added: “You need to give it
some time to see the effect on prices. I think the Saudi oil minister was very clear on that.”
He had though receptive ears in Tehran, where Iran’s supreme leader Ayatollah Ali Khamenei told

the Venezuelan president he backed coordinated action between Tehran and Caracas to reverse
a rapid fall in global oil prices. “(Khamenei) endorsed an agreement between the presidents of
Iran and Venezuela for a coordinated campaign against the slide in oil prices,” the official IRNA
news agency said.
Earlier on the day, Iranian President Hassan Rouhani too said that Iran and Venezuela “can
undoubtedly cooperate to thwart world powers’ strategies ... and to stabilize prices at a reasonable
level in 2015.”
During Maduro’s visit to Saudi Arabia, it was agreed that a high-level commission between the two
countries would meet every four months to review the (oil) market, a diplomatic source was
While in Doha, though concern was expressed by Qatar about (the lowering oil) prices yet,
reportedly no promises or commitments as to what action should be taken, were made. However,
Maduro was able to garner some support for his struggling economy. Speaking during the trip,
Maduro announced securing “several billion dollars” from Qatari banks to help Venezuela muddle
through its cash shortfall in the wake of falling oil prices.
“We are finalizing a financial
alliance with banks from Qatar
that will give us sufficient oxygen
to help cover the fall in oil prices
and give us the resources we
need for the national foreign
currency budget,” Maduro said
following a meeting with Qatari
Emir Sheikh Tamim bin Hamad Al
Thani. The president added he
was working to secure financing
“not just for 2015, but also for
2016.” Good news will keep coming,” Maduro later added in a televised interview from Doha.
And then via Algeria, where the president emphasized once again on coordinated output cuts,
Moscow was the next stopover of President Nicolas Maduro. Slumping oil price was reportedly the
main topic of conversation when Venezuelan President Nicolas Maduro met his Russian
counterpart Vladimir Putin last Thursday. “Of course, today’s situation with prices and crude oil
markets is being discussed one way or another at all levels,” Russian Energy Minister Alexander
Novak told Russia’s Tass news agency.
This whirlwind tour of President Nicolas Maduro reminds one of a bygone era. Faced with the
daunting task of stabilizing volatile crude markets, the late President Chavez also undertook a visit
of the region in 2000, heralding a new era in bilateral relations.
But it was an altogether different scenario then, one needs to underline. The challenges faced by
he markets then were totally different. This correspondent vividly remembers the red carpet rolled
out to President Chavez and his entourage when he landed in Riyadh then. An ailing King Fahd
on a wheelchair, was himself at the tarmac to receive Chavez. Virtually the entire Saudi leadership
including the then Crown Prince and now King Abdullah, were also present to welcome the
important visitor.
The issue under the radar then too was to seek ways to stabilize the oil markets. “We discussed

ways of strengthening bilateral ties, oil market stability and support to OPEC,” President Chavez
then said after the meetings with the Saudi leadership.
But the two scenarios were starkly different. When Chavez came to office in late 1998, the price of
oil was less than $10 a barrel. Production quotas set by OPEC were not being stuck to. Venezuela
was regarded as the top quota buster within OPEC.
Saudi Arabia and its allies within the OPEC wanted the group members to bring some order into
their outputs so as to stabilize the markets. And Chavez was key to it. Once President Chavez
was won over, thanks to the tireless efforts of Minister Naimi then, the road to market stability was
clear.
Today the scenario is strikingly different - and so is the response. The issue of market share is
dominating radars at major OPEC oil producers today, Saudi Arabia including. Most believe that in
case OPEC decides to cut output, it may not help stabilize the markets. Rather other players
would grab the market share relinquished by OPEC. Hence the call of Maduro to restrain OPEC
output is not getting the ears, as Chavez once got, in this part of the energy-rich world.
Amid US oil crash, cost cutting ripples through industry
Reuters + NewBase
Any lingering doubt about the depth of the crisis facing the US energy industry is quickly
evaporating as even the biggest firms slash spending amid the steepest oil price crash since the
recession, sending ripples across the vast sector.
In a stark sign of how a sudden, 60%
drop in oil prices is biting, oil services
giant Schlumberger Ltd on Thursday said
it will reduce spending this year by 25%
and fire 9,000 workers worldwide,
surprising investors with the size of the
cuts.
As activity slows and drillers idle rigs at
the fastest pace in more than 20 years,
the magnitude and speed of the changes
are surprising firms that provide some of
the raw materials and equipment
essential to drilling that even two months
ago hoped to dodge the ill effects of the
slowdown.
“There is total chaos and uncertainty and
it is impacting the whole ecosystem,” said
Aamer Sarfraz, chief executive of United
Guar, which provides guar gum used in fracking to major oil service firms, but not Schlumberger.
Schlumberger’s announcement lays bare the strain that a supply glut and subsequent dive in

prices is putting on the engine room of the US fracking boom: the oil service firms like
Schlumberger and rivals Baker Hughes and Halliburton that provide drilling services for thousands
of wells across the country.
Service firms, desperate to cut costs, asked Sarfraz to lower the price of his company’s guar by
30% as soon as possible in meetings held in recent days. Other suppliers are being met with
similar demands, he said, and even existing contracts are being withdrawn.
The cost reductions come as little surprise. After five boom years for the oil industry, a pullback is
only natural when prices slide. Producers are cutting spending budgets and calling on
Schlumberger and others to cut prices. Service firms are simply passing that on to their suppliers
of raw materials, including sand and guar.
But the speed at which it is happening and the depth of the cuts being asked for is an indication of
the desperation in the industry.
“There is no negotiation, it is a demand,” said Sarfraz. “It has erased our margins.”
Service firms are also asking sand providers to cut prices as oil prices dip. Sand firms say that
long term contracts will shield them from oil price swings. Even so, some are reducing prices.
Hi-Crush Partners, which produces sand for drilling in various shale plays across the US, has
reduced prices by up to 25%, in part by shaving transportation and storage costs, Chief Financial
Officer Laura Fulton said.
Fulton said that sand demand remains strong. In a presentation earlier this month the company
said that it has 6.6mn tonnes of sand contracted in 2015, up from 3.8mn in 2014.
Still, for firms reliant on orders from the energy industry alone, it has been a rough ride and may
get worse.
Oil prices have dropped from nearly $110 a barrel in June to below $50 this month as rocketing
production, particularly in the US, outpaces tepid demand.
While projects have been postponed or canceled across the globe, the price drop is likely to have
a “significantly more dramatic” impact on North America than on the rest of the world,
Schlumberger said on Friday, following the release of its earnings a day earlier.
The company plans to cut spending this year by a billion to $3bn.
Texas-based Galtway Industries, which has 300 employees, normally receives orders six months
out from the major service firms like Schlumberger for the forged metal parts used in fracking
pressure pumps.
But it says business has fallen 30% over the past year. Now, orders are being postponed at the
last minute, pushed back while clients decide if they can afford the new materials.
“We’ve experienced everything from push-outs in delivery dates to order cancellations,” said
Galtway President Trey Smith. “We’re definitely in the fall out phase. It’s going to get ugly.”

OPEC To See Market Share Drop Even As Shale Boom Slows
Reuters+ NewBase
The collapse in oil prices is starting to slow growth in U.S. output, OPEC said on Thursday,
although the slowdown will not prevent demand for the exporter group’s oil falling in 2015 to
its lowest in a decade.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast
demand for the group’s oil would drop to 28.78 million barrels per day (bpd) in 2015, down
140,000 bpd from its prior estimate and the lowest since 2004.
Oil prices have fallen almost 60 per cent since June, partly because OPEC in November
decided against cutting output to retain market share against rival suppliers. The rout has put
forecasts for a boom in U.S. output in the spotlight.
“The steep drop in global oil prices could endanger the marginal barrel’s output from
unconventional sources,” OPEC said in the report, written by its economists at the group’s
Vienna headquarters. “As drilling subsides due to high costs and a potentially sustained low
oil price, production could be expected to follow, possibly late in 2015.”
At OPEC’s meeting, top exporter Saudi Arabia urged fellow members to combat the growth in
supply from competing sources including U.S. shale, which needs relatively high prices to be
economic and has been eroding OPEC’s market share.
In the report, OPEC lowered its forecast of total U.S. oil supply in 2015 by 100,000 bpd to
13.81 million bpd. It still forecasts hefty U.S. supply growth of 950,000 bpd year-on-year.
OPEC is not the only oil forecaster to see a slowdown in U.S. supplies. The U.S. government
said on Tuesday it expects domestic oil output in 2016 to grow by only 2.2 per cent, the
slowest pace in years.
Even so, this year’s average demand for OPEC crude is expected to be the lowest since
28.15 million bpd in 2004, using the December reports published on OPEC’s website each
year as a comparison.
Steepest Oil-Rig Drop Shows Shale Losing Fight to OPEC
By Lynn Doan + NewBase
U.S. drillers have taken a record number of oil rigs out of service in the past six weeks as OPEC
sustains its production, sending prices below $50 a barrel.
The oil rig count has fallen by 209 since Dec. 5, the
steepest six-week decline since Baker Hughes Inc.
(BHI) began tracking the data in July 1987. The count was
down 55 this week to 1,366. Horizontal rigsused in U.S.
shale formations that account for virtually all of the nation’s
oil production growth fell by 48, the biggest single-week
drop.

Analysts including HSBC Holdings Plc say the decline shows that the Organization of Petroleum
Exporting Countries is winning its fight for market share and slowing the growth that’s propelled
U.S. production to the highest in at least three decades. OPEC’s decision not to curb its output
amid increasing supplies from the U.S. and other countries has driven global oil prices down 58
percent since June.
“OPEC’s strategy is working, and it will be obvious in U.S. production by midyear when growth
from shale plays will come to a halt,” James Williams, president of energy consulting company
WTRG Economics in London, Arkansas, said by telephone Friday. “You can imagine the impact
on any industry from a 50 percent impact on sales.”
West Texas Intermediate for February delivery rose
$2.44 on Friday to settle at $48.69 a barrel on
the New YorkMercantile Exchange, up 33 cents for
the week, the first gain since November. Brent, the
international benchmark, rose $1.90 to end the day
at $50.17 on the London-based ICE Futures Europe
Exchange, a weekly gain of 6 cents for the front-
month contract.
Shut-Ins
“Prices are being forced toward levels that would force outright shut-ins in high-cost
areas, mainly in Canada and the U.S.,” Societe Generale SA (GLE) analysts including Mark
Keenan, its head of commodities research for Asia in Singapore, said in a research note
Jan. 14.
The slump in oil rigs has yet to stop the unprecedented growth in U.S. oil production, which added
60,000 barrels a day in the week ended Jan. 9 to 9.19 million, Energy Information Administration
data show. That’s the most in weekly data since at least 1983.
Meanwhile, projects are being canceled and budgets cut around the globe. Royal Dutch Shell
Plc (RDSA) called off a $6.5 billion project in Qatar. Contract drillers Helmerich & Payne Inc.
(HP)and Pioneer Energy Services Corp. (PES) lost U.S. rig contracts. Mexican oil service
companies cut more than 10,000 people. Suncor Energy Inc. (SU) fired workers in Canada.
Permian Basin
The Permian Basin of Texas and New Mexico, the largest U.S. oil field, lost the most rigs this
week, declining by 15 to 487, Baker Hughes data show. Rigs in Texas’s Eagle Ford formation
dropped 12 to 185, and the Williston Basin, home of North Dakota’s prolific Bakken formation,
declined by six to 165.
“We are seeing leading indicators of weak prices starting to drive the rebalancing that OPEC is
seeking to achieve,” HSBC analysts including Gordon Gray said in a research note Jan. 15. Rigs
drilling for natural gas in the U.S. dropped by 19 to 310. Inventories of the heating fuel in the
lower 48 states totaled 2.853 trillion cubic feet last week, 11 percent above year-earlier
levels.Natural gas for February delivery dropped 3.1 cents to settle at $3.127 per million British
thermal units on the Nymex Friday, down 29 percent in the past year.

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For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile : +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 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 18 January 2015 K. Al Awadi

New base 520 special 18 january 2014

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