New base 737 special 26 november 2015

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NewBase 26 November 2015 - Issue No. 737 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE: Scottish engineering group Weir to triple
its manufacturing facility in Dubai
The National + Newbase
In a bid to cut costs and weather the downturn, Weir Group this month said it would be cutting
another 400 jobs to bring total cost savings this year to £110 million (Dh608.9m), with the
company’s chief executive Keith Cochrane warning that there would probably be worse to come in
the final three months of the year.
So, why is the company now expanding
significantly at the Jebel Ali Free Zone
(Jafza), where its new 25,000 square
metre engineering plant will employ about
250 people, nearly tripling its UAE
workforce?
“As a company we are making decisions
on a long-term basis and we know the
cycle is going to turn up again so this plant
is built to cater to the market for the next
25 years,” says Mr Handa.
Weir has a smaller facility in Jafza and the
expansion plant will be located in the new
Jafza south area. It will make parts that
include the “Christmas tree” pump and
valve contraptions that sit on top of all oil
or gas wellheads, and Mr Handa says the
plant will be the first in the region with this
manufacturing capability.
It has been a long time coming – the
factory was first announced four years ago
to coincide with a visit to the UAE of
Scotland’s then First Minister, Alex
Salmond. It took the intervening period to
finalise the land, build the facility, bring in
new machines and tools and install and
commission the plant. Indeed, Mr Handa
says, Weir searched in vain for plant space closer to its existing facility and saw no evidence of
excess capacity at Jafza or of soft rents.

“It is a huge, purpose built, one-of-a-kind facility with latest machines making it one of the largest
plants in the region,” says Mr Handa, who expects it to be fully operational early next year. With a
degree of bitter irony, the plant opening comes immediately in the wake of Weir’s reporting a year-
on-year decline of 58 per cent in orders at its oil and gas division in the third quarter.
That was put down mostly to
the tough conditions in Weir’s
North American operations,
reflected in the loss there of
140 jobs, as the shale oil and
gas bubble deflated. The
company’s headcount in the
North American market has
declined by 37 per cent in the
past year and hundreds of
jobs in the mining division
also have been lost, mainly in
Africa.
Mr Cochrane told
shareholders this month it
was the worst commodities
downturn he had seen in three decades but he put a brave face on it. “We’re putting more focus
on research and development and on technology innovation in particular, because I want to make
sure we emerge stronger from this downturn than we entered,” he told shareholders.
So, why would this be the right time to expand capacity in the Middle East?
“People say you got the timing wrong because the market is down,” says Mr Handa. “I say we got
it the other way around: if I didn’t have the plant I wouldn’t be able to meet growing customers’
demand. Our labour costs in Dubai are one-third that in the US or Europe.”
Why, in that case, didn’t Weir expand sooner in Dubai?
“Because we could still maintain market share while manufacturing elsewhere and the business
was more US-centric,” so manufacturing was based mainly in Houston, Texas,” he says.
The other factor, of course, is that the industry has gone from one that was seeing chronic inflation
to one seeing heavy downward pressure on costs, not least from the regional national oil
companies that are demanding price cuts on supply and service contracts.
The Abu Dhabi National Oil Company and its various divisions have all indicated that they are
looking for cuts in the order of 25 per cent.
“The 25 per cent target is very realistic,” says Mr Handa. “We are definitely discounting by that
much because we have the spare capacity. The strategy for the oil companies is to capitalise on
the oversupply and re-tender contracts and ask for discounts. They have to anyway as oil prices
are down so much.”
The expansion of Dubai and contraction of North America can also be seen as vindication of the
Saudi Arabia-led strategy that has been in place now for a year – to force higher-cost oil suppliers

to reduce their output at a time of oversupply rather than the old policy of letting the lower cost
producers in the Arabian Gulf curtail output to balance the market.
If the downturn forces a shift of
production in the engineering facilities
and jobs to the region that would
underline the economic efficacy of the
policy.
“I’m very pleased to be in this market in
the Middle East,” says Mr Handa. “Even
in the last downturn, nobody reduced
headcount,” and Weir’s overall
employment in the region had grown to
1,500 in the region even before the new
Dubai plant.
Interestingly, though, whereas
employment of locals in the sector has
tended to be relatively high in other
countries – for example, 50 per cent in Iraq and 95 per cent in Azerbaijan – it is virtually non-
existent in the UAE.
“In manufacturing there just isn’t the available labour pool,” says Mr Handa, adding that most of
Weir’s plant operatives come from the Indian sub-continent.

Saudi Aramco seeks discounts on drilling costs-sources
Reuters + NewBase
State-run Saudi Aramco has asked oilfield service companies to extend discounts to next year as
the oil giant cuts costs amid falling oil prices, industry sources familiar with the matter said.
"The oilfield service companies have been asked to give discounts and they will do it since
discounts granted this year are due to expire by year-end. Other suppliers will be next," said a
source who declined to be identified.
In an e-mailed comment to a Reuters inquiry, Saudi Aramco said it had no information to release
on the matter. The rig count is holding steady and is expected to be kept steady next year,
although it could go up if prices rise, a second source said.
Saudi Aramco wants to maintain the same activity at lower prices but "they can also save money
through efficiency", he said, while another source said some companies have been asked for
steeper discounts.
"They issued a lot of tenders to keep rigs busy at low price. At the same time materials are low so
they think projects overall should be cheaper," said a fourth source. "There are a lot of projects
offshore to maintain potential on all fields ... There are ongoing bids one after the other," he said.
Earlier this year, Saudi Aramco made a similar request to cut costs on drilling services after oil
prices tumbled from as much as $115 in the middle of last year. Aramco has also secured lower
daily rates for rigs.
The collapse of crude prices has prompted some oil companies to cut spending.
Aramco is now deploying around 212 rigs for oil and gas, a level which has been held steady this
year mainly to maintain maximum sustainable capacity at 12.5 million barrels per day, industry
sources say.

Egypt: Developers of Leviathan field sign preliminary Egypt gas deal
Reuters + Gulf Times
Nov 25 Natural gas from Israel's vast Leviathan offshore gas field will be pumped to Egypt via an
existing subsea pipeline for up to 15 years under a preliminary deal announced by the field's
developers on Wednesday.
Leviathan, which is expected to begin production in 2019 or 2020, will supply Egypt's Dolphinus
Holdings with up to 4 billion cubic metres (bcm) of gas a year for 10 to 15 years, the companies
said in a statement to the Tel Aviv Stock Exchange.
Signing a letter of intent, the two sides agreed to negotiate terms for a final deal. The price of gas
is similar to other contracts and is linked to the cost of Brent oil and includes a floor price, they
said.
"We've worked with Dolphinus before and we expect to reach a final agreement quickly," Yossi
Abu, chief executive of Israel's Delek Drilling, told Reuters. Development of Leviathan, which
holds an estimated 622 bcm of gas, is being led by Texas-based Noble Energy and Delek Group
through its units Delek Drilling and Avner Oil and Gas.
Shares in the Delek companies were up by 1-3 percent in afternoon trade on Wednesday.
Dolphinus is a company that represents non-governmental, industrial and commercial consumers
in Egypt.
"The Egyptian market is thirsty for gas, both for domestic use and for their export facilities. There
is a lot of room for cooperation there," Abu said. The gas would pass through an underwater
pipeline built nearly a decade ago by East Mediterranean Gas (EMG).

EMG oversaw an Egypt gas deal that collapsed in 2012 after months of attacks on the pipeline by
militants in the country's remote Sinai Peninsula.
The companies said the new deal, which is still subject to numerous approvals, would not affect
negotiations between Leviathan's partners and Britain's BG Group on a potential supply deal to
BG's liquefied natural gas plant in Iduku, Egypt.
The two sides last year signed a preliminary supply deal for 7 bcm a year for 15 years. Egypt has
said it still wants to import Israeli gas despite Italy's ENI discovering the large Zohr gas field off
Egypt's coast in August.
Earlier this year, Dolphinus agreed a seven-year deal to buy at least $1.2 billion of gas from
Israel's Tamar field, near Leviathan. "Egypt is becoming a regional hub through cooperation with
the Leviathan and Tamar partners, and together with Israel and Cyprus," Abu said.
A source in Egypt's Petroleum Ministry said that companies wishing to import foreign gas must
obtain state approval. It "must achieve a national interest for Egypt and must have added value for
the economy", the source said.
The state, the source added, does not mind allowing private sector companies that wish to import
gas for their own use or for a range of industries to use the infrastructure and facilities owned by
the state in exchange for a tariff to be agreed.
Leviathan's $6 billion development was halted when Israel's antitrust regulator ruled that Noble
and Delek's control of Israel's gas reserves constituted a monopoly, leading to a dispute with
Prime Minister Benjamin Netanyahu.
The regulator resigned and Economy Minister Aryeh Deri stepped down last month, giving
Netanyahu control of the ministry. He is expected to give rapid approval to the deal to develop
Leviathan.
Energy Minister Yuval Steinitz expects Netanyahu to sign a waiver by the end of the year to
bypass antitrust concerns. Jordan has also agreed to buy g as from Leviathan for 15 years, worth
up to $15 billion, though the deal has yet to be finalised.

UK: Scottish Nationalists as oil revenue estimates for next
year plunge by 94%
By The Telegraph - Tara Cunningham, Business Reporter
Once one of the Treasury’s main tax receipts from the business world, North Sea oil revenues are
forecast to fall by 94pc this fiscal year as the beleagured industry continues to decline. Data from
the Office for Budget Responsibility (OBR) estimates that UK oil and gas revenues will be down
94pc in the 2015-16 year at £130m, from £2.2bn in 2014-15.
Analysts last night criticised the Chancellor for “abandoning” the sector, after he failed to provide
any additional support for the industry.
Instead, George Osborne used the industry’s plight to make a jibe at Scottish nationalists. “Of
course, if Scotland had voted for independence, they would have had their own Spending Review
this autumn,” he said.
“With oil prices falling, and revenues from the North Sea forecast by the OBR to be down 94pc,
we would have seen catastrophic cuts to Scottish public services.” However, there was little more
consideration given to what the Treasury could do to support the under pressure oil and gas
sector.
Ian McLelland, of Edison Investment Research, said: “The Treasury is abandoning the UK’s
struggling oil and gas industry.” He warned the statement offered “no material support to combat
the pain of sustained low oil prices or arrest the plummeting levels of investment” that is expected
sector-wide.
While the recently established Oil & Gas Authority has been credited with doing a stellar job in
encouraging activity in the North Sea, the Treasury still needs to provide additional assistance,
sources said.
“It is a dangerous game and one that will likely result in a growing number of oil and gas
companies falling by the way, either through M&A or simply running out of room to stay in
business,” Mr McLelland added.
It came as a survey by the Aberdeen & Grampian Chamber of Commerce showed that the
confidence of North Sea oil and gas contractors is at an all-time low. Some four in five contractors
said that hey are less confident in their prospects than a year ago.
An independent Scotland would have started life with “catastrophic” cuts to public services thanks
to a 94 per cent reduction in oil revenues, George Osborne has said as Nicola Sturgeon faced
demands to apologise for “deceiving” voters during the referendum.

The Chancellor told the Commons that Scotland would have staged its own “savage”
Comprehensive Spending Review (CSR) this autumn if voters had backed separation, ahead of
the SNP’s projected ‘independence day’ of March 26 next year.
But he said Scotland’s public finances would have been in “complete tatters” thanks to a £20
billion “hole” created by the collapse in North Sea oil and gas revenues. David Cameron said that
a separate Scotland’s CSR would have consisted of “cuts, cuts, cuts, taxes, taxes, taxes.”
New estimates produced by the Office for Budget Responsibility (OBR) predicted oil is expected to
generate just £100 million in the 2016/17 tax year and revenues will remain “very low” until at least
2020/21.
This compares with the 2016/17 projection of between £6.8 billion and £7.9 billion in Alex
Salmond’s White Paper on independence – between 68 and 79 times higher than the latest
forecasts.

U.S. gasoline prices this Thanksgiving are the lowest in 7 years
Source: Provided by GasBuddy.com
U.S. retail regular-grade gasoline prices continue to decline, averaging $2.09 per gallon (g) as of
November 23, 73 cents lower than this time last year and the lowest heading into a Thanksgiving
holiday weekend since 2008.
Traditionally, the Thanksgiving holiday
is one of the heaviest travel times of
the year in the United States, and
much of that travel is by car. AAA
estimates that during this Thanksgiving
holiday period (November 25-29), 46.9
million people in the United States will
travel more than 50 miles from home,
with nearly 42 million people traveling
by car. The estimated number of miles
traveled is a slight increase compared
with last year, and the estimated
number of travelers is the highest for
Thanksgiving since 2007.
Based on data for the selected major metropolitan areas surveyed in EIA's Gasoline and Diesel
Fuel Update, retail gasoline prices as of November 23 range from a low of $1.83/g in Houston,
Texas, to $2.79/g in Los Angeles, California.
Lower gasoline prices since 2014 are linked to lower crude oil prices. As global petroleum and
other liquids production continued to outpace consumption in 2015, the resulting increases in
global inventories of crude oil and petroleum products have put significant downward pressure on
oil prices. Spot prices of North Sea Brent oil fell to $44.75 per barrel (b) in the second week of
November, $34/b lower than the $79/b average during November 2014. Similarly, the U.S.
average regular-grade gasoline price has fallen $0.82/g from the November 2014 average of
$2.91/g.
EIA's November 2015 Short-Term Energy Outlook (STEO) projects the U.S. average retail price of
regular gasoline will continue to decline for the remainder of the year and will average $2.06/g in
December. The STEO forecast of annual average U.S. regular gasoline retail prices is $2.43/g in
2015 and $2.33/g in 2016, well below the $3.36/g price in 2014.

NewBase 26 November - 2015 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil Gains Fourth Day as U.S. Drilling Slows Amid Global Glut
Oil gained for the fourth day, the longest winning streak since April, on signs the pace of drilling is
slowing in the U.S. amid a global oversupply.
Futures added as much as 0.6 percent in New York, after advancing 6.6 percent the previous
three days. The number of rigs targeting oil fell by 9 to 555, the lowest level since June 2010,
Baker Hughes Inc. said on its website. Crude stockpiles in the world’s biggest oil consumer
increased for a ninth week to near a record, according to the Energy Information Administration.
Oil has slumped more than 40 percent the past year amid speculation the surplus will be
prolonged with U.S. inventories more than 100 million barrels above the five-year seasonal
average and as OPEC pumps above its quota. Iran will pitch more than 50 oil and natural gas
projects to foreign investors at a conference in Tehran starting Saturday as the government
prepares for the end of sanctions.
“The short-term trend for prices has been up, but oil has started to lose momentum,” Ric Spooner,
a chief analyst at CMC Markets in Sydney, said by phone. “There is not a lot of change in the
underlying crude stockpile data, the U.S. figures are consistent with what we’ve seen in recent
weeks.”
U.S. Supplies
West Texas Intermediate for January delivery gained as much as 26 cents to $43.30 a barrel on
the New York Mercantile Exchange, and traded at $43.20 at 11:53 a.m. Hong Kong time. The
contract added 17 cents to $43.04 on Wednesday. The volume of all futures traded was about 32
percent below the 100-day average.
Brent for January settlement rose as much as 15 cents to $46.32 a barrel on the London-based
ICE Futures Europe exchange. The contract increased 5 cents to $46.17 Wednesday. The
European benchmark crude was at a premium of $3.03 to WTI.
Oil price special
coverage

U.S. oil drillers have idled more than half the country’s rigs since December, according to Baker
Hughes, an oilfield-services company. The number of active machines have dropped for 12 of the
past 13 weeks.
Crude stockpiles increased by 961,000 barrels last week to 488.2 million, the EIA report
Wednesday showed. Supplies rose to 490.9 million barrels in April, the highest level in weekly
data since 1982. Inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest
U.S. oil-storage hub, expanded a third week to 58.6 million barrels.

Oversupply in the oil market continues to be a concern
Gul Times + NewBase
The Opec meeting on December 4 will gain “additional importance” with prices approaching the
“financial crisis low in 2008”, according to a senior banker.
Crude oil, both Brent and WTI, has returned to the lows of the year as the intense focus on
oversupply continued to pressure the market, points out Ole Hansen, head (Commodity
strategy) at Saxo Bank.
US stockpiles expanded for an eighth week and
that helped maintain a stockpile more than 100mn
barrels above the five-year average, he said in a
note here.
“Lack of signs of production cutbacks, not least
from non-Opec producers, will help create a very
nervous environment ahead of the first quarter of
2016. During this quarter, which tends to be a
period where inventories rise the market will also
have to deal with increased supplies from Iran,
and the potential for a stronger dollar in the
aftermath of a US rate hike,” Hansen said.
“While the short-term outlook for oil remains challenging, we maintain the view that the current
price level is low enough to eventually trigger a further reduction in non-Opec production, not least
from US shale oil producers. Only then will Opec be able to make an announcement on
production cut backs which should further help the price stabilise and eventually move higher in
the second half of 2016,” the Saxo Bank executive said.
He said oversupply in the oil market continued to be a concern, not least considering the
uncertainty about when the adjustment process kicks off in earnest.
While the oil market can take comfort from the fact that demand is rising, the same cannot be said
about industrial metals. This sector is suffering from the combination of oversupply and slowing
demand, not least from China where the process of moving away from an investment and export
driven economy towards a consumer driven economy has taken its toll on raw materials such as
copper, steel and iron ore.
On dollar, Hansen said the December outlook to a rate hike in the US and more quantitative
easing in Europe should help the greenback make additional gains. The stronger dollar maintains
a stranglehold on gold and the periods of gold weakness are also the periods where the dollar has
been rising.
“Much therefore depend on investors attitude to the greenback in the aftermath of a near certain
rate hike on December 16. The future speed of additional rate hikes will play a big part in the
attractiveness of the dollar and to what extend this will create some additional headwind to
precious metals.
“With just under four weeks to go before the Federal Open Market Committee meeting, we see
limited upside to precious metals during this time. The market will be headline-driven and barring
any major geopolitical event, these headlines should mostly be gold negative considering the
intense focus on the rate hike,” the Saxo Bank executive said

NewBase Special Coverage
News Agencies News Release 26 Nov.. 2015
Gulf braces for austerity as crude income slump bites
AFP + Gulf Times
Faced with heavy losses from low oil prices, Gulf states have embarked on belt-tightening
measures to cut spending and boost non-crude revenues, but analysts warn much more needs to
be done.
After more than a decade of abundant surpluses thanks to high oil prices, the six Gulf Cooperation
Council (GCC) states are projected to post a combined record budgetary shortfall of $180bn in
2015 and the drought is expected to continue for years.
Some countries have already cut subsidies, while others are considering measures to reduce their
spending. International Monetary Fund chief Christine Lagarde told GCC finance ministers in
Qatar this month that “global energy prices could remain low for years” and urged them to adjust
their budgets.
Lagarde warned that the GCC, which has relied on energy income for 90% of their revenues,
should reduce dependence on oil and gas. In 2014, GCC states — Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia and the UAE — posted a small surplus of $24bn, down from $182bn the previous
year, according to IMF figures.
Each of Bahrain, Oman and Saudi Arabia ended 2014 in the red for the first time since the global
financial crisis in 2009. World oil prices have dropped by more than 50% since June 2014 and the
IMF has projected that it will result in a $275bn drop in GCC revenues this year.
But having amassed a wealth of around $2.7tn over the past decade, the IMF advised GCC states
to take a gradual approach to implementing reforms and diversifying the economy.
Although the measures may not be easy to enforce, analysts believe this time fiscal consolidation,
diversification and reforms must be deeper, long-term and sustainable.

“The magnitude of the problem is much larger this time because subsidies and salaries have
immensely increased in the past few years — together they form 90% of current expenditure,”
said the head of economic research at Kuwait Financial Centre (Markaz), MR Raghu. “They
cannot roll back on salaries because this is too sensitive,” Raghu told AFP.
Spending in Gulf states, mostly on salaries and subsidies, almost doubled to $550bn between
2008 and 2013, according to IMF statistics. The six nations have a population of 50mn, half of
them foreigners, and pump around 18mn bpd.
The steep rise in expenditures
greatly increased the breakeven
price for oil, to $106 a barrel in the
case of Saudi Arabia from under
$70 a few years ago. It is higher
for Bahrain and Oman. The IMF
and the World Bank estimate that
the direct cost of energy subsidies
in the GCC was $60bn last year.
Steps taken by the GCC states to
cut spending and raise non-oil
income have been modest so far.
The UAE took the lead by
liberalising fuel prices in June and
raised electricity charges in Abu
Dhabi. Both measures are expected to save billions of dollars.
Having the most diversified economy in the Gulf, the UAE said it has earmarked more than $80bn
for projects away from oil. Kuwait began selling diesel and kerosene at market prices at the start
of 2015. It has cut spending by 17% and is in the process of raising petrol prices and charges on
electricity and water.
However, it has still awarded projects worth a record $30bn so far this year, according to officials
and experts.
Saudi Arabia, for its part, said it was considering delaying “unnecessary” projects and studying
energy subsidies reforms. Qatar said it is also considering some spending cuts and reducing
subsidies. Oman and Bahrain, the poorest members of the GCC in terms of energy wealth, have
announced similar plans.
“This is not enough. They have a long way to go,” said Shanta Devarajan, World Bank chief
economist for the Middle East and North Africa. “This is just the beginning ... the measures must
focus on reforms, unemployment and diversification. Much more steps are needed,” Devarajan
told AFP.
The IMF said reforms should include comprehensive energy efficiency and price alterations,
expanding non-oil revenues, reviewing capital and current expenditures and reducing the
government wage bill.
The IMF said Saudi Arabia, Oman and Bahrain will spend all their fiscal reserves in under five
years if they fail to take additional austerity measures.
“GCC states must be serious this time ... The $100 a barrel days are gone and they have to live
with a $40-$50 price,” Raghu said.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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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 25 November 2015 K. Al Awadi

New base 737 special 26 november 2015

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