New base 744 special 09 december 2015

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,
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NewBase 09 December 2015 - Issue No. 744 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Indonesia eyes partnerships with Qatar in oil and gas exploration
Gulf Times + NewBase
Indonesia is open to oil and gas explorations through potential partnerships with energy
companies in Qatar, ambassador Deddy Saiful Hadi has said.
At the end of 2014, Indonesia’s proven oil
reserves stood at 3.7bn barrels, according to
the BP Statistical Review of World Energy.
This figure reflects a stark contrast to
Indonesia’s 5.9bn barrels of proven reserves
in 1991.
To tap Indonesia’s energy reserves, Hadi said
companies like Qatar Petroleum or RasGas
could explore and develop potential oil fields
under a production contract sharing scheme.
“There is a lot of opportunities for Qatar to partner with Indonesia, particularly oil and gas
explorations and the possible production contract sharing with companies like Qatar Petroleum
and RasGas,” Hadi told Gulf Times.

The ambassador’s proposal was an integral part of PT Medco Power Generation Indonesia
president director Lukman Mahfoedz’s discussion during yesterday’s “CEO Plenary Session” at
the 9th International Petroleum Technology Conference (IPTC) here. According to Mahfoedz,
while Indonesia has limited oil reserves, the country has around 103tn cubic feet (tcf) of gas and
574 tcf unconventionals.
“However, the remaining reserves are located in
hard-to-reach areas in Indonesia’s eastern side
and needs significant investments and
technology to recover them,” Mahfoedz said
during the session entitled “Technology and
Partnerships for a Sustainable Future.”
Another area for partnership, according to
Mahfoedz, is geothermal energy. He said
Indonesia provides 40% of the world’s
geothermal supply.
Hadi said the $1bn Joint Investment Fund (JIF) signed during President Joko Widodo’s visit to
Qatar last September will play a significant role in enhancing Indonesia’s liquefied natural gas
(LNG) imports.
Citing figures from Indonesia’s Ministry of Trade, Hadi said the country imports $1.5bn worth of oil
and gas from Qatar every year. Meanwhile, Mahfoedz said Indonesia’s daily oil imports reach
around 800,000 barrels.
Mahfoedz also said the energy demand in Indonesia in the next four years will be 6.1mn bpd of
fuel, including coal. “By 2019, Indonesia will be a net importer of energy, including coal,” he said,
adding that by 2025, Indonesia’s cap on oil and gas will be around 2.5mn bpd.
He added that the JIF will help fast track the construction of mega infrastructure projects like the
35,000-MW power plant, which is expected to be completed in 2019.
Asked about the impact of the low oil prices, Mahfoedz said the downturn “is, to some degree,
beneficial to Indonesia as an energy importer.” Hadi added, “Since we are importing oil and gas
for our energy consumption, the low oil prices have a direct benefit to importers such as
Indonesia.”

Saudi Arabia shipping more Nov-Dec crude to Asia to meet robust demand
Reuters
Saudi Arabia is shipping more crude oil to Asia over the last two months of the year as strong
refining margins boost demand, trade sources said, helping the top oil exporter defend its market
share amid fierce competition.
Cheap Saudi oil - in comparison with prices for other Middle Eastern grades - has drawn several
Asian refiners to request a few million barrels above contractual volumes as they ramp up crude
run rates to capture robust margins.
The increment in demand will require Saudi Arabia to pump at near record volumes just as a
battle over global market share is expected to intensify following the failure of the Organization of
the Petroleum Exporting Countries (Opec) to set a production quota, and ahead of higher exports
from Iran next year once sanctions over its nuclear programme are lifted.
"There is a bigger call for Saudi crude as monthly supply nominations from Asian refiners have
gone up," said an industry source familiar with the matter, adding that the kingdom will raise
shipments to Asia by a few million barrels over November and December.
The trend may continue into early next year as a drop in exports from key light sour producer Abu
Dhabi has increased demand for Saudi grades of a similar quality.
Nearly half of Saudi's crude production is exported to Asia. Saudi Arabia's major Asian customers
received about 4.6 million barrels per day (bpd) of crude in the first 11 months this year, up 12 per
cent from the same period a year ago, data from Thomson Reuters Research & Forecasts
showed.
Saudi Arabia last raised oil exports to Asia over contract volumes in January and February this
year to meet peak winter demand in the Northern Hemisphere. The Opec member's offers of extra
crude in low-season October, however, failed to attract interest from Asia.
Demand for Saudi crude picked up again in November and December as refining margins
rebounded. At least four Asian refiners lifted more crude as Saudi Aramco set more competitive
official selling prices (OSPs), sources close to the matter said.

Under oil contracts, the seller or buyer can adjust loading volumes, depending on demand and
shipping logistics, using an operational tolerance that ranges from plus to minus 10 per cent of the
contracted volume.
"The OSP is not bad and the (refining) margin is wonderful," said a trader with a North Asian
refiner that has requested more Saudi crude. Saudi Aramco's Arab Extra Light OSP is about $7 a
barrel below Abu Dhabi's Murban, the widest discount since August.
Light sour crude supply is expected to tighten early next year as Abu Dhabi National Oil Company
has cut Murban and Das crude exports on field maintenance and higher domestic demand. Light
crudes typically yield more light products such as naphtha, whose crack to Brent averaged
$111.93 a tonne in November, the highest since September 2014.
This helped boost refining margins at a typical
complex refinery in Singapore to the highest in
eight months in November. Taking the strong
refining margins in Asia into greater
consideration, Saudi Arabia cut its January
OSPs for most of the crude grades it sells to
Asia by a smaller extent than expected last
week.
Asian refiners are now waiting for other Middle
Eastern producers to set their prices before
deciding on how much Saudi crude to ask for in
January, sources said. Now waiting for other
Middle Eastern producers to set their prices
before deciding on how much Saudi crude to ask for in January, sources said.

Saudi: Sadara starts up first Solution polyethylene plant in Mideast
Sadara Chemical Company (Sadara), the world’s largest chemical complex ever built in a single
phase, has successfully started up its
first production plant, moving on
schedule from the construction to the
operational phase.
Sadara’s first product – linear low
density polyethylene (LLDPE) – was
produced in the company’s polyethylene
plant using proprietary technology from
The Dow Chemical Company.
The plant is the first Solution PE plant in
the Middle East and is designed to
produce products for specialIty
applications such as the manufacture of
food grade plastics, industrial and
consumer packaging and health and
hygiene films.
Ziad Al Labban, chief executive officer of Sadara, thanked all those involved in making the Sadara
dream a reality, saying: “We’ve made history! The successful start-up of the first production facility
is a major milestone for Sadara, thanks to the great teamwork between Sadara’s employees and
with the support from our stakeholders and partners.”
The plant is the first to come on stream among the 26 world-scale manufacturing plants that are
being built in the Sadara complex in Jubail Industrial City II. “We are continuing with our
commissioning and start-up efforts to bring the remaining 25 units on stream safely, efficiently and
effectively,” Al Labban added.
Sadara has to date achieved more than 60 per cent Saudisation as construction of the Sadara
complex reached 97 per cent completion by November 2015.
Sadara is a joint venture developed by the Saudi Arabian Oil Company (Saudi Aramco) and The
Dow Chemical Company. With a total investment of about $20 billion, Sadara is building a world-
scale chemical complex in Jubail Industrial City II in Saudi Arabia’s Eastern Province.
Comprising 26 world-scale manufacturing units, the Sadara complex is the world’s largest to be
built in a single phase and will be the first in the Middle East to use refinery liquids, such as
naphtha, as feedstock.
By using best-in-class technologies to crack refinery liquid feedstock, Sadara will enable many
industries that either currently do not exist in Saudi Arabia or only exist through imports of raw
materials.
The adjacent PlasChem Park, a unique collaboration between Sadara and the Royal Commission
for Jubail and Yanbu, will create more value downstream, generating unprecedented investment,
innovation, economic growth and thousands of jobs. -- Trade Arabia News Service

Mexico Receives Record $6.3B From Oil Hedge Program
by Reuters
Mexico's Finance Ministry on Tuesday said it received a record $6.284 billion from its oil hedge
program to help the government offset a drop in income from crude oil sales by state-run Pemex.
Mexico was paid on Monday for put options it bought last year with an average price of $76.40 per
barrel, the ministry said in a statement.
For more than a decade, Mexico's government has paid for a hedge every year in what is
considered the biggest sovereign oil derivatives trade in the world.
The hedge helps the government offset a shortfall in income from oil sales after Congress had
approved the 2015 budget with an estimated price of $79 per barrel before global oil prices sank
late last year.
Mexico's crude mix has averaged just above $43 per barrel this year, according to Reuters data.
Mexico cut spending this year and dialed back its budget plans for 2016 after the slump in oil
prices.
Mexico's hedging agreement for next year, completed in August, guaranteed a price of $49 per
barrel for 2016.
Global oil prices have fallen to their lowest since 2009 this week on concerns of a supply glut. The
Mexican crude mix traded at $32.60 per dollar on Tuesday, its lowest since the start of 2009.

NewBase 09 December - 2015 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices edge up amid ongoing commodity downturn
Reuters + NewBase
Crude prices found at least temporary support early on Wednesday after the dollar weakened and
China's commodity imports came out surprisingly strong, but oversupply means prices are
expected to remain low for some time.
U.S. crude futures were at $38.11 per barrel at 0048 GMT, up 60 cents from their last settlement.
Traders said the recovery on Wednesday was largely a result of short covering, a dip in the dollar
which makes oil more expensive for importers using other currencies domestically, and strong
Chinese oil imports as the government takes advantage of cheap oil to build up its strategic
reserves.
Analysts said there was a plethora of factors, including the strong dollar, weakening global
demand, soaring supplies as well as the unwinding of the quantitative easing (QE) premium with
the U.S. Federal Reserve expected to hike rates soon.
"Whatever the case, a CRB index hovering around 13-year lows and oil prices close to seven year
troughs suggest that commodity producers in general are doing it tough," ANZ bank said, referring
to the Thomson Reuters Core Commodity CRB Index falling below 178 points for the first time
since 2003.
Oil price special
coverage

In oil, a ballooning glut is seen between 0.5-2 million barrels of crude a day in excess of demand,
prices are down by almost two-thirds since 2014, and most analysts say they do not see prices
rising much until late 2016 at the earliest.
"Low oil prices will continue to weigh on the sovereign credit profiles of major exporters in 2016,"
rating agency Fitch said. Fitch forecasts Brent to average $55 per barrel next year and $65 per
barrel in 2017.
"Price falls represent a windfall to consumers and downstream users. The close to 30 percent fall
in oil prices since the start of the year presents a major deflationary impulse," ANZ said.

Oil's prices plunge hammers U.S. funds, humbles savviest investors
REUTERS - TIM MCLAUGHLIN
The plunging price of crude oil is causing pain at every kind of U.S. mutual fund this year,
humbling even the industry's best portfolio managers as their mistimed bets in the energy sector
continue to cause losses for investors.
The sector's bottom has been more of a trap door for many fund managers. On Tuesday, for
example, U.S. crude futures fell below $37 a barrel for the first time since early 2009. The oil price
recovery that many predicted for 2015 is now being forecast for 2016, though investment bank
Goldman Sachs has said prices could drop as low as $20 a barrel.
Last week, a policy meeting at the Organization of the Petroleum Exporting Countries resulted in
no decision to cut output, fanning fears of a growing global crude oil glut.
The $11 billion Energy Select Sector SPDR ETF , used by mutual funds and hedge funds alike, is
off 10 percent in the past month. Even when fund managers point to optimistic signs in the oil
market their message sounds somewhat pessimistic.
"Nothing fixes low oil prices like
low oil prices," says John Dowd,
who runs Fidelity's $2 billion
Select Energy Portfolio,
describing how the industry is
usually self correcting with lower
production and rising demand.
Dowd's total return this year is
minus 17.77 percent, but that's
better than most of his energy
fund peers who average a nearly
20 percent negative return.
Bond giant Pimco is adding
energy-related securities to some
of its portfolios as the Newport
Beach, Calif- firm expects an
increase in oil prices over the next 12 months, Dan Ivascyn, group chief investment officer, said in
an interview on Tuesday.
"We are becoming constructive in this sector because we expect oil higher in price over the next
12 months or so," Ivascyn added . Earlier this year, RiverFront Investment Group LLC sold off
positions tied to pipelines and other companies it felt were dependent on higher-priced oil.
But the firm, which specializes in picking exchange-traded funds, kept the Market Vectors Oil
Services ETF , which has fallen 10 percent over the past week, as of afternoon trading on
Tuesday. That ETF is the sixth-largest holding in the RiverFront Moderate Growth & Income Fund
, according to Morningstar Inc.

Michael Jones, chief investment officer at RiverFront, said companies in the oil-services sector
have already priced in "an unbelievably distressed market" and he doesn't expect prices to move
lower. He said oil declines over the last week will help the company's stock ETF positions in Japan
and Europe, regions that can profit from low oil prices.
Overall, U.S. mutual
funds have slashed their
exposure to the energy
sector by nearly 40
percent over the past
three years, according to
Lipper Inc. The average
allocation has dropped to
5.11 percent from 8.36
percent among those
funds with an energy
allocation during that
three-year span.
A number of funds, for
example, have bet on a
recovery at Chesapeake Energy Corp , only to see the natural gas producer's stock drop even
more. Among the many managers burned by that bet is Bill Nygren who runs the $6 billion
Oakmark Select Fund
Nygren, considered a top stock picker in the mutual fund industry, increased his share count in
Chesapeake by nearly 40 percent to 25.7 million shares during the six-month period that ended
Sept. 30. Since then, Chesapeake's stock has dropped about 41 percent.
Chesapeake is a big reason why Nygren's fund has a total return of minus 2.48 percent this year,
lagging 86 percent of peers, according to Morningstar Inc. He was not available for comment.
Kathleen Gaffney, who runs the $1 billion Eaton Vance Bond Fund, said she's betting on
Chesapeake debt, 1 percent of the fund's assets, because the company has valuable assets and
enough liquidity to make it through this turbulent cycle in the energy market.
But she has noticed the dramatic pricing gaps among junk-rated energy bonds, reminiscent of the
2008 financial crisis.
Energy junk bond spreads surged Monday by the most in 3-1/2 months and to their widest since
March 2009 at 1169 basis points, according to BAML fixed income indexes. It made for a total
return on the day of negative 1.63 percent.
That is a dramatic move in the world of bonds, as the magnitude of the move is more than 5
standard deviations from the norm and the index has seen only four worse days than yesterday
since the height of the credit crisis.
"It's not a vicious unwind like 2008," Gaffney said. "It's the shock of the price moves that reminds
me of that time."

NewBase Special Coverage
News Agencies News Release 09 Dec.. 2015
Global E&P Spending to Continue to Fall; Possible Recovery Seen Late 2016
Rigzone - Karen Boman
Global exploration and production (E&P) spending – which declined by 20 percent in 2015 – will
fall another 11 percent in 2016, marking the first consecutive annual decline since the mid-1980s,
according to Evercore ISI’s “Global 2016 E&P Spending Outlook: An Industry Mired in Recession.”
The downturn dominated the industry in 2015 as depressed commodity prices forced an
impromptu overhaul of the entire business, resulting in significant declines to upstream spending
and a profoundly deleterious impact to oilfield services, equipment and drilling companies, said
Evercore ISI Senior Managing Director and Partner James C. West in a Dec. 8 webinar.
However, Evercore ISI believes that the oil and
gas industry will resume growth in late 2016, with
12 percent growth expected in 2017 and 18
percent in 2018. Evercore ISI expects North
America to rebound first with the strongest
recovery, following by international markets, and
then finally, offshore.
“We continue to believe current spending levels as
well as oil prices are unsustainable and the longer
spending remains subdued, the stronger and
longer the coming upcycle will be,” West said. “It’s
a cycle like the others, and it always looks the
worst at the bottom of the CAPEX [capital
expenditures] cycle which we are approaching;
once we have visibility on this capital spending
bottom, the recovery comes into view.”
Not surprisingly, low oil prices was the primary
determining factor for 2016 budgeting decisions among the 300 oil and gas companies surveyed.
Seventy-four percent of surveyed companies said oil prices were the key determinant for 2016
budgets. Fifty-nine percent of survey respondents cited cash flow as the key to determining 2016
budgets, and 54 percent of survey respondents cited natural gas prices as the primary factor in
determining 2016 spending plans.
Only 35 percent of respondents cited capital availability as the main driver in determining 2016
budgets, down from 60 percent in 2015. This is likely a byproduct of a less draconian fall
redetermination cycle than expected and a more disciplined approach to spending.
Twenty-two percent of companies expect to spend above cash flow in 2016, compared with 45
percent in 2015 and 47 percent in 2014. While 55 percent of respondents spent in line with cash
flows in 2015, 78 percent expect to be cash neutral in 2016.

North America is expected to again lead the spending decline next year, falling nearly 20 percent
versus an 8 percent decline expected internationally, West said. North American capital spending
fell by 34 percent in 2015.
“Following a severe 43 percent decline, Canada could test recent troughs established during the
2008/2009 financial crisis,” said West. “Spending in the United States held up marginally better,
but is set to fall another 20 percent to less than $100 billion.”
E&P Liquidity ‘Not As Bad As Initially Feared’
West noted that E&P liquidity was not as bad as initially feared. Some forecasts expected the fall
redetermination season could see facilities cut by 35 percent to 40 percent, but the average
reduction was closer to the mid-teens. Relative to fourth quarter 2014, Evercore ISI found liquidity
for 73 E&P companies – including North American independents, international oil companies and
international E&Ps – has only fallen by a “surprisingly low” 5 percent, likely a function of a busy
year of asset sales and capital raises within the industry.
With banks using their own price decks – which never got revised up at the peak and are unlikely
to fully reflect the trough, Evercore ISI has seen credit facilities decline by only 6 percent, based
on 44 U.S., Canadian, and international E&Ps. Half of the companies also saw their borrowing
bases either reconfirmed or raised, with borrowing bases down by 16 percent on aggregate for the
remaining 22 companies who did see their facilities downsize.
“Looking out to spring 2016, we believe redeterminations will be less impactful than they were in
the fall as pricing decks already reflect lower commodity assumptions,” West noted.
Evercore partially attributed the resiliency of North America shale production to the effect of
hedges, but this trend will subside substantially next year as hedges roll off with only 24 percent of
production is hedged compared to 41 percent this year, said West.
Exploration activity also will continue to be sharply curtailed, with only 14 percent of survey
respondents planning to increase their exploration spending. Forty-six percent of companies
surveyed scaled back exploration in 2015, and 52 percent will do so in 2016. The decline in
exploration activity will continue to pressure seismic companies, West noted.
“The good news, or at least less bad news, is that further oil service price concessions are not

reflected in most budgets,” said West.
The survey found that 57 percent of E&Ps aren’t budgeting further service price deflation.
Additionally, 15 percent expect further concessions of less than 15 percent, and 28 percent expect
concessions of less than 15 percent.
“We estimate overall service pricing has fallen by 20 to 50 percent from 2014 peak levels,
dependent on product lines, geography, service provider and a host of other variables.”
Further concessions aren’t incorporated into budgets, they are generally expected to decline
further; 53 percent of E&Ps expect further decreases and 47 percent expect prices to remain
stable. Labor, tubulars and equipment are expected to decline the most, and completions and
transportation are expected to remain the most stable, said West.
With oil prices below Evercore ISI’s assumptions of $47.50/barrel for West Texas Intermediate
and $51/barrel for Brent, Evercore ISI anticipates near-term capital expenditures announcements
to disappoint over the next few weeks. However, upward revisions could be ahead if prices climb
higher throughout the year as we expect, West noted.
The survey came out of discussions with companies or analysis of financial and strategic
documents to assess the industry’s health and outlook. The number of companies surveyed is
smaller than in recent years, with several smaller E&Ps and private companies having already
been acquired in the current downturn. Evercore ISI expects more companies to disappear as the
downturn persists.
One risk to increased spending is consolidation among oil and gas majors. Faced with depleting
reserves and the vast majority of known reserves controlled by national oil companies, these
companies must either replace reserves organically or pursue mergers and acquisitions. Evercore
ISI Integrated Oil Analyst Doug Terreson sees elevated pressure on management teams in the
space to create value as the shareholder response to underperforming, legacy strategies become
more punitive.
“Generally speaking, one budget plus a second budget does not equal two in consolidations; the
combined budget is usually smaller. However, this would put capital in more disciplined hands,
which is ultimately good for the oil price.”

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 09 December 2015 K. Al Awadi

New base 744 special 09 december 2015

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