New base 784 special 10 februaury 2016

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NewBase 10 February 2016 - Issue No. 784 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, India energy ties to grow as Shaikh Mohammad Bin
Zayed visits India
Gulf News
The cooperation between India and the UAE in the energy sector is expected to grow following the three-
day visit of His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and
Deputy Supreme Commander of the UAE Armed Forces, to India on Wednesday.
The visit comes six months after Indian Prime Minister Narendra Modi came to the UAE to strengthen
bilateral ties and increase investments between the two countries. A number of new agreements are likely
to be signed including in oil and gas and renewable energy as part of Abu Dhabi Crown Prince’s visit to
India.
“India is a growing energy market particularly with the Chinese demand slowing. So far we haven’t seen
very much action by the Indian energy companies in the UAE so might be interesting to see if Indian
energy companies are going to play more role here,” said Robin Mills, Chief Executive Officer of Dubai-
based Qamar Energy.
He said none of the Indian companies have participated in Abu Dhabi Company for Onshore Petroleum
Operations (Adco) concessions but that might change. “Certainly that would be an interesting opportunity.
Abu Dhabi wants to tie up with some key customers and Indian companies want to expand their operations
and play more role in the Middle East,” he said.
Abu Dhabi has selected Japanese company Inpex, Korean firm GS Energy and French oil giant Total to
represent in the concessions. Other companies are yet to be finalised. The concessions, which last for 40
years, cover the fifteen principal onshore oilfields of Abu Dhabi and represents more than half of the
Emirate’s production.

When asked whether any of the UAE energy companies would be keen to invest in India, he said there is a
lot of room for investment in the Indian energy sector particularly in power generation.
Following the visit of Indian Prime Minister in August, the two countries decided to promote a strategic
partnership in the energy sector, including through UAE’s participation in India in the development of
strategic petroleum reserves, upstream and downstream petroleum sectors, and collaboration in third
countries.
“A Memorandum of understanding already exists between Adnoc [Abu Dhabi National Oil Company] and
the Indian Strategic Petroleum Reserve. India is seen as an important customer for UAE oil and the
cooperation could stretch to UAE investment in developing energy reserves of gas and oil in India,” said
Gary Dugan, Chief Investment Officer at Emirates NBD.
He said the drop in the oil price will not have much impact on the commitment of the UAE to invest in India.
“India is too large an opportunity for the current weakness of the oil price to prevent a significant
commitment from the UAE towards helping India develop.”
A number of UAE companies have invested in India including in the energy sector. Abu Dhabi National
Energy Company (Taqa) has a presence in India operating 250MW lignite-fired power plant in Neyveli in
the southern Indian state of Tamil Nadu. Another power plant of the company in the northern state of
Himachal Pradesh has commenced operations last year. India imports about 270,000 of crude oil per day
with the UAE being the sixth-largest supplier of the commodity to India.

Saudi Aramco Jazan refinery: Petrofac awards Gas Leaks
detection contract .. Arab News
Petrofac, a leading service provider to the international oil and gas industry, awarded a contract to
Bertin Technologies, a subsidiary of CNIM group, to supply, install and commission a pioneering
gas leak tracking system, Second Sight, at the Saudi Aramco -owned Jazan refinery.
This system opens up a new era in gas detection
methods for the land gas industry. Bertin
Technologies has achieved a major breakthrough
by customizing its own gas imaging camera.
Initially developed for defense and civil security
applications, Second Sight has been adapted
Saudi Aramco standards.
To enhance the level of safety on site, Bertin
Technologies will provide a turnkey solution that
detects and monitors explosive gas clouds. The
Second Sight solution has been selected by
Saudi Aramco and Petrofac because it offers
several benefits that complement conventional
gas detection methods.
It provides, in real time, a complete scene
visualization. In the case of an alarm activation, it
localizes the leakage source and direction of the
explosive gas cloud in the vicinity.
Explosive gas leaks are an ever-present risk that
has to be managed at refineries. Any leak has the
potential to accumulate into dangerous clouds
that can ignite when they reach a certain
concentration.
Traditional point detectors do not always give a full and accurate picture of the chemical
environment. A single explosive incident can cost billions of dollars and to mitigate against such
an event, additional layers of gas detection are implemented.
"Bertin Technologies has been supplying chemical and biological detection systems for more than
15 years in France and worldwide, for Defense and Homeland security," says Philippe Demigne,
Bertin Technologies' president.
"Our Second Sight technology already has a proven track record in the monitoring and
visualization of hazardous gas clouds for safety purposes. This solution has been used during
large events including the Football World Cup 2014, or in monitoring public buildings, from US to
South Korea."
While setting an advanced level in Chemical and Oil & Gas safety standards, Bertin Technologies
has demonstrated once again its agility in combining multiple fields of expertise in order to
develop dedicated systems for demanding safety requirements."

Bahrain Looking to Distribute Russian LNG in Gulf Region
Gas Asia + NewBase
Bahrain is looking to distribute Russian LNG in the Gulf region, country’s energy minister told
Russian media. Abdulhussain Mirza told Russia Today that a centre for LNG distribution would be
established in Bahrain with an
approximate cost of $600 million,
according to Bahrain’s DT News.
“We have agreed with Moscow to
import this product and we offered to
utilise the centre to distribute it in the
Gulf,” Mirza told Russia Today.
Mirza’s statement comes on the
sidelines of Bahrain’s King Hamad bin
Isa Al-Khalifa’s visit to Russia this
week.
Mirza stated that Bahrain has agreed
with Gazprom company to import LNG
from Russia and that a special harbour
would be ready to operate in the first
half of 2018, DT News reported. Russia
and Bahrain are looking to deepen their
cooperation in the field of energy,
among other points.

Kuwait: Ball starts rolling in bid to slash subsidies
Kuwait Times 2016
The National Assembly yesterday held a rare meeting with the Supreme Planning Council to
review government plans to reform the economy in the face of falling prices of oil, which
contributes to more than 95 percent of public revenues.
The meeting discussed measures the government proposes to take to finance the budget deficit
projected at a record KD 11.5 billion, mainly by lifting subsidies on electricity, water and petrol.
Kuwait remains the only country in the Gulf Cooperation Council (GCC) not to raise the price of
petrol as all other five members - Bahrain, Oman, Qatar, Saudi Arabia and United Arab Emirates -
have taken such measures.
The meeting was attended by members of the economic development committee of the planning
council, the assembly speaker and 26 MPs, in addition to a number of Cabinet ministers.
Minister of Public Works and State Minister for Cabinet Affairs Ali Al-Omair said after the meeting
that the issue of subsidies occupied a small part of the meeting, which focused mainly on the
wider scope of economic reforms and measures to cut government spending.
The minister said that all sides are in agreement for the need to reform the Kuwaiti economy and
tackle imbalances in it, represented in its total dependence on oil as the main source of income.
Omair said the government will brief MPs today of its detailed plans to raise the prices of
electricity, water and petrol, ahead of a crucial Assembly session tomorrow. During this meeting,
the finance minister is due to explain to lawmakers the exact measures the government plans to
take to meet the budget deficit and any legislation needed for the purpose.
Head of the planning council economic committee Nasser Al-Roudhan said the projected deficit is
64 percent of the budget, and accordingly measures have to be taken in this direction to finance
the budget.

MP Yousef Al-Zalzalah meanwhile told Al-Anbaa newspaper yesterday that the government has
proposed to raise electricity charges from 2 fils per kilowatt currently to 5 fils/KW for the first 3,000
KW, 10 fils for between 3,000 and 6,000 KW and 15 fils for consumption above 6,000 KW.
He also reiterated that the government wants to raise petrol prices to 85 fils a litre for low-grade 90
octane fuel, and 105 fils a litre for 95 octane petrol.
MP Saleh Ashour said after the meeting that it focused on two points: That the budget depends
heavily on oil as the main source of income and that the government's civil servants are incapable
of running the country.
He said most of government staff was appointed through favoritism and other unprofessional
practices, and accordingly it cannot even run a supermarket and has failed to find any solution for
any problem. MP Askar Al-Enezi however said that MPs are ready to relinquish their benefits and
cars to cut spending, but reducing subsidies should be the last resort.
Meanwhile, the Assembly's public utilities committee yesterday began reviewing a draft law to set
up a special authority to run the Silk City mega project which envisages building a new city in
Subbiya along with many development projects.
Rapporteur of the committee MP Saud Al-Huraiji said the discussion of the law will take several
meetings because it includes many provisions that need to be reviewed carefully. He said that the
law grants the head of the authority more powers than the prime minister himself, adding that the
bill will not be debated by the Assembly in tomorrow's session.

Oman’s PDO coping well despite $1.6 billion shortfall in 2016
Oman Observer - Conrad Prabhu
Petroleum Development Oman (PDO), the nation’s dominant oil and gas producer, says it is
weathering the oil price slump relatively well despite an estimated $1.6 billion shortfall in its 2016
spending plan.
According to Raoul Restucci, Managing Director, the majority Omani government owned company
continues to deliver on its core objectives notwithstanding the belt-tightening prompted by the
downturn.
“We’re doing pretty well,” Restucci said. “(Recently), we produced our highest production in
excess of 600,000 barrels per day. Our performance is very strong, exploration is very exciting,
and although the environment is challenging, PDO is delivering,” the Managing Director added in
exclusive comments to the Observer.
PDO has acknowledged that a $1.6 billion deficit in its investment plan for the current year could
potentially cause a degree of economic pain not only to the company, but to the wider contractor
community as well. But it has urged contractors to make the most of the crisis to economise,
improve efficiency, curb waste, and so on, in order to stay competitive.
For its part, PDO is doing what’s necessary to mitigate the impacts of the oil price slump, said
Restucci. “We are adopting more efficient ways of doing our work,” the Managing Director said.
“The commodities are cheaper, materials are cheaper, and services are in a more collaborative
style of working together.
We are removing inefficiencies and waste, and addressing every part of our business. We are
delivering more for less,” he remarked. PDO says its strategy is to try to stay the course despite
the low oil price environment, while focusing on delivering maximum value for the Sultanate and
driving greater efficiency and cost control.

Egypt: SDX Energy drills boosts production at NW Gemsa with
successful development well..Source: SDX Energy
SDX Energy, an oil & gas exploration and production company with assets in Egypt &
Cameroon, has announced that the Al Amir SE 23 development well in North West Gemsa,
has encountered significant oil bearing reservoir sections in both the Kareem Rahmi and Shagar
formations and will be completed as a producer in the Shagar.
Al Amir SE-23 Well:
Al Amir SE-23 (AASE-23) was drilled to a depth of 9,900 feet where both the Shagar and Rahmi
oil reservoirs were encountered. Log analysis indicates 23 feet of net Shagar oil pay and 28 feet
of net Rahmi oil pay. The well has been completed as an oil producer in the Shagar and has
flowed on test light 42.2°API oil at a rate of 3,860 BOPD with 2.55 MMSCFD of associated gas.
The well will be placed in production in the coming days as soon as the completion rig has
moved off location.
Commenting, Paul Welch, CEO of SDX Energy, said:
'The AASE23 well results were excellent and the well is expected to be another strong producer
from the Shagar. Drilling costs for the AASE-23 were down by 30%, on a comparative basis with
previous wells, making this well both a technical and also commercial success. The AASE-23 is
the first of two development wells to be drilled in the field this year. The drilling rig has now
moved to the next location (AASE-24) and we anticipate drilling to commence in the next few
days. The results of
these two development
wells combined with a 5
well work-over program
will allow us to maintain
production at these
increased rates for the
remainder of 2016. Field
production is currently
7,535 Bopd and 8.9
MMscfd.'
The North West
Gemsa concession is
located onshore on the
west side of the Gulf of
Suez, approx. 300 km
southeast of Cairo. Two
main oil fields are
producing light oil, the Al Amir SE field along with the Al Ola extension to the south and the
Geyad field to the north. SDX has a 10% working interest in the North West Gemsa
Concession.
The Company’s current net production in Egypt is 1,666 boepd with 903 boepd net from NW
Gemsa, 763 bopd net from Meseda.

Total Likely to Get Licence to Explore for Oil, Gas in Offshore Sri Lanka
EconomyNext + NewBase
France’s energy major Total is expected sign an agreement next week with the Sri Lankan
government to explore for offshore oil and gas, reported Economy next website on Wednesday.
Sri Lankan cabinet earlier this month gave a go ahead to Petroleum Resources Development
Secretariat to ink the deal. Total is expected to start exploration in Apr il or May.
"They will start by investing about 10 million dollars to acquire seismic data off the east coast of
Sri Lanka,” Petroleum Resources Development Secretariat Director General Saliya
Wickramasuriya said, reported Economy next.
As per the agreement, Total will get three years of exclusivity for the data it acquires after which it
can be viewed by other oil companies. The government will own the data from the point of
acquisition.
According to Economy next, Sri Lanka is also planning to launch a marketing campaign for the
gas reserves that Cairn India had discovered and abandoned.

UKOG reports commencement of flow test operations at the
Horse Hill-1 oil discovery, Weald Basin, UK . Source: UKOG
UK Oil & Gas Investments (UKOG) has announced that it has been notified by Horse Hill
Developments Limited ('HHDL') that operations have now commenced at the Horse Hill site to
conduct the extended flow test over three separate zones in the Horse Hill-1 ('HH-1') oil
discovery well.
As previously reported, the extended flow test is designed to test both the oil bearing Upper
Portland sandstone and two Kimmeridge limestones beneath the Portland.
The HH-1 discovery well, drilled at the end of 2014, is located within onshore exploration
Licence PEDL137, on the northern side of the Weald Basin near Gatwick Airport. UKOG owns a
20.163% interest in PEDL137.
Stephen Sanderson, UKOG's Executive Chairman commented: 'We look forward to safe and
successful operations and to moving the project forward.'
UKOG's interest in Horse Hill
The HH-1 well is located within onshore exploration Licence PEDL137, on the northern side of
the Weald Basin near Gatwick Airport. UKOG owns a 30% direct interest in HHDL and a 1.02%
interest in HHDL via its 6% interest in Angus Energy Limited. HHDL is a special purpose
company that owns a 65% participating interest and operatorship of Licence PEDL137 and the
adjacent Licence PEDL246 in the UK Weald Basin.

US:Natural gas use for power generation higher this winter
Source: U.S. Energy Information Administration, based on Bentek
So far this winter, natural gas consumption in the electric power sector (gas burn) has been higher
than in any previous winter. According to Bentek Energy, gas burn in the electric power sector has
averaged 25.0 billion cubic feet per day (Bcf/d) so far this winter (November 1 through February
8), up 17% from last year's average of 21.4 Bcf/d during the same period and significantly higher
than the 18.8 Bcf/d average of the past five years.
Low natural gas prices have been the primary driver of increasing natural gas use for power
generation, although reductions in coal capacity and the availability of efficient gas-fired
generating units have also played a role.
On an annual average basis, the electric power sector is the largest consumer of natural gas,
using more than the industrial sector and each of the buildings sectors (residential and
commercial). Although consumption of natural gas in the power sector peaks during the
summer—when electricity demand is highest—the power sector's natural gas consumption during
the winter has been increasing as more generation switches to gas and more households rely on
electricity as a main heating source.
Spot natural gas prices at the Henry Hub in Louisiana, a national benchmark, averaged $2.61 per
million British thermal units (MMBtu) in 2015, the lowest annual average level since 1999. Prices
began the year relatively low and continued to fall throughout 2015—the December average was
$1.93/MMBtu, the lowest monthly price since March 1999.
Relatively low natural gas prices encouraged the increased use of natural gas to generate
electricity. EIA's Short-Term Energy Outlook expects natural gas prices to increase over the next
two years, leading to a slight reduction in the consumption of natural gas for power generation.
However, power-sector consumption of natural gas would still be near historically high levels.

Capacity factors of natural gas-fired plants have been rising for years, and over the past several
months, capacity factors for natural gas-fired combined-cycle plants have finally eclipsed coal-
fired plants as natural gas is increasingly used to generate electricity. Capacity factors reflect a
generator's actual output compared with its capacity, and they are a measure of how much a fleet
of generators is actually run.
In addition to lower natural gas prices, improvements in the efficiency of new natural gas plants
are helping to increase the economic attractiveness of dispatching gas-fired generation. In 2015,
about 40%—6,200 megawatts (MW)—of all new utility-scale plants of 1 MW or greater were
natural gas-fired plants. Another factor in the increasing gas burn is the growing number of coal
plant retirements. Preliminary reports indicate that nearly 15,000 MW of coal-fired capacity
was retired during 2015.
Gas burn has increased in almost all regions in the United States this winter, but the reasons for
the increase vary regionally. The Pacific Northwest region had the largest percentage increase in
natural gas burn because of lower-than-normal hydro generation in 2015.
The Southeast and Northeast regions use the most natural gas on a regional basis, and their gas
burn has increased by 17% and 15%, respectively, thus far this winter compared with the same
period last winter.
In the Southeast, both declining utilization rates for coal plants and continuing coal plant
retirements drove the increase in natural gas burn. States in the South Census Region alone
accounted for more than half of total coal retirements in 2015.
In the Marcellus region of the Northeast, natural gas has consistently been priced below gas at the
Henry Hub, making it even more economic in that region. Additionally, infrastructure
additions have made it easier to move natural gas to users.

IEA releases Oil Market Report for February
Having peaked, at a five-year high of 1.6 million barrels per day (mb/d) in 2015, global oil demand
growth is forecast to ease back considerably in 2016, to 1.2 mb/d, pulled down by notable
slowdowns in Europe, China and the United States, the newly released IEA Oil Market
Report (OMR) for February informs subscribers. Early elements of the projected slowdown
surfaced in the last quarter of 2015.
Global oil supply dropped 0.2 mb/d to 96.5 mb/d in January, as higher OPEC output only partly
offset lower non-OPEC production. Non-OPEC supplies slipped 0.5 mb/d from a month earlier to
stand close to levels of a year ago. For 2016 as a whole, non-OPEC output is expected to decline
by 0.6 mb/d, to 57.1 mb/d.
OPEC crude oil output rose by 280 000 barrels per day in January to 32.63 mb/d as Saudi Arabia,
Iraq and a sanctions-free Iran all turned up the taps. Supplies from the group during January stood
nearly 1.7 mb/d higher year-on-year.
OECD commercial stocks built counter
seasonally by 7.6 mb in December to stand at
3 012 mb at month end, 350 mb above
average. Refined products covered 32.3 days
of forward demand, 0.1 day above the level at
end-November. Preliminary information
indicates that inventories have continued
building into January.

Global refinery runs fell by 1.3 mb/d in January
to 79.8 mb/d, as the onset of seasonal
maintenance in the United States and
weakening refinery margins curbed runs.
Global throughputs nevertheless stood more
than 1.7 mb/d above a year earlier, with gains
particularly strong in the United States and the
Middle East.
The February OMR is an abbreviated version
of the monthly report, featuring these
highlights, a news overview and the OMR’s
valuable tables of data. That’s because on 22
February the IEA will release the Medium-Term Oil Market Report 2016, which is provided
to OMR subscribers. The usual OMR format with detailed written analysis will resume with the
March edition .
False Dawn?
The collapse in oil prices which characterised the first half of January looked to have halted earlier
this month. On January 20th closing prices for WTI and Brent reached nadirs of $28.35/bbl and
$27.88 / bbl respectively, since when Brent has moved briefly above $35/bbl and WTI has lagged
a little behind. Perhaps some of the more fevered forecasts of oil prices falling to as low as
$10/bbl are extreme and better days do lie ahead for oil prices. However, before victory over the
bearish forces is declared we should look at the main factors driving this optimism.

Persistent speculation about a deal between OPEC and leading non-OPEC producers to cut
output appears to be just that: speculation. It is OPEC's business whether or not it makes output
cuts either alone or in concert with other producers but the likelihood of coordinated cuts is very
low. This removes one driver of bullishness.
Another widely-held view is that
OPEC production, other than Iran,
will not grow as strongly in 2016 as
it did in 2015. Although it is still
early in the year, Iraqi output in
January reached a new record and
it is possible that more increases
could follow. Iran has ramped up
production in preparation for its
emergence from nuclear sanctions
and preliminary data suggests that
Saudi Arabia's shipments have
increased. Thus, another driver
might be removed.
Another driver of bullishness is that
oil demand growth will receive a
boost from the collapse in oil prices
to below $30/bbl. We retain our
view that global oil demand growth will ease back considerably in 2016 to 1.2 mb/d - at 1.2% still a
very respectable rate - but our analysis so far sees no evidence of a need to revise it upwards.
Estimates by the International Monetary Fund that global GDP growth in 2016 will be 3.4%
followed by 3.6% in 2017 is heavily caveated with risks to growth in Brazil, Russia and of course
slower growth in China. Economic headwinds suggest that any change will likely be downwards.
A factor that helped sentiment is the recent fall in the value of the US dollar against some
currencies and the perception that this reduces the cost of imported oil. Although it is widely
believed that interest rate hikes in 2016 in the United States and the United Kingdom are
increasingly unlikely, the dollar is still likely to remain strong as it benefits from its safe haven
status with other economies faring relatively worse. Another driver removed.
The expected fall in non-OPEC output is another driver of possibly higher prices later this year.
Our current assumption is that total non-OPEC output will fall by a net 600 kb/d in 2016. The
number could be higher of course and many senior international oil company figures have said so
but there is a lingering feeling that the big fall-off in production from US shale producers is taking
an awful long time to happen. Perhaps resilience still has some way to go.
With major doubts around these five drivers of recent relative price strength we are left with our
revised supply/demand balance. In this report we suggest that the surplus of supply over demand
in the early part of 2016 is even greater than we said in last month’s OMR. On the assumption –
perhaps optimistic - that OPEC crude production is flat at 32.7 mb/d in Q116 there is an implied
stock build of 2 mb/d followed by a 1.5 mb/d build in Q216. Supply and demand data for the
second half of the year suggests more stock building, this time by 0.3 mb/d. If these numbers
prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices
can rise significantly in the short term. In these conditions the short term risk to the downside has
increased.

NewBase 10 February 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices rebound from sharp selloff; more volatility expected
Reuters + NewBase
Crude oil prices pushed higher on Wednesday after Iran said it was open to cooperation with
Saudi Arabia, partly recovering from an 8 percent fall in the previous session led by concerns over
demand and weak equities.
Prices were supported by comments from Iran's oil minister that Tehran is ready to negotiate with
Saudi Arabia over the current conditions in global oil markets.
The International Energy Agency (IEA), meanwhile, said the Organization of Petroleum Exporting
Countries (OPEC) is unlikely to cut a deal with other producers to reduce ballooning output. It
predicted the world will store unwanted oil for most of 2016 as declines in U.S. oil output take
time.
"Another day of heightened volatility is expected as concerns over global growth prospects remain
elevated," analysts at ANZ said in a note.
The front-month Brent contract was 75 cents, or 2.5 percent, higher at $31.07 a barrel by 0219
GMT. The contract fel for a fourth straight session on Tuesday to end down $2.56, or 7.8 percent.
U.S. crude for March delivery was 58 cents higher at $28.52 a barrel. The contract fell 5.9 percent
on Tuesday to settle $1.75 lower.
Oil price special
coverage

NewBase Special Coverage
News Agencies News Release 10 February 2016
IEA Raises Estimate of Surplus Oil Supply on Higher OPEC Output
Bloomberg - Grant Smith
The global oil surplus will be bigger than previously estimated in the first half, increasing the risk of
further price losses, as OPEC members Iran and Iraq bolster production while demand growth
slows, according to the International Energy Agency.
Supply may exceed consumption by an average of 1.75 million barrels a day in the period,
compared with an estimate of 1.5 million last month, and the excess could swell if OPEC adds
more output, the IEA said. Iran raised production in January following the removal of international
sanctions, Iraqi volumes reached a record and Saudi Arabia also ramped up output. The agency
trimmed estimates for global oil demand.
“With the market already awash in oil, it is very hard to see how oil prices can rise significantly in
the short term,” the Paris-based adviser to 29 nations said in its monthly market report. “In these
conditions the short term risk to the downside has increased."
Oil prices remain capped near $30 a barrel after slumping to a 12-year low in late January. While
prices recovered on speculation that the Organization of Petroleum Exporting Countries might
agree to production curbs with non-members, “the likelihood of coordinated cuts is very low,”
according to the IEA. No agreement to restrain supply emerged last week after Venezuelan Oil
Minister Eulogio Del Pino toured oil capitals from Moscow to Riyadh.

Production from OPEC’s 13 members climbed by 280,000 barrels a day last month to 32.63
million, the IEA said. That’s about 900,000 a day more than the average required from the group
in 2016.
Iran expanded production by 80,000 barrels a day to 2.99 million in January after reaching a deal
with world powers that lifted oil sanctions in return for limits on the nation’s nuclear program. Iraq
increased output by 50,000 barrels a day to 4.35 million and could raise that further, according to
the IEA, which had predicted in October that the country would struggle to add new supplies.
Saudi Arabia, OPEC’s biggest member and de facto leader, boosted production by 70,000 barrels
a day to 10.21 million.
The IEA lowered its estimates for global oil demand for last year and 2016, by 100,000 barrels a
day, leaving the level of growth for this year unchanged at 1.2 million barrels a day to average
95.6 million a day. That growth is weaker than the five-year peak of 1.6 million barrels a day
reached in 2015, amid slowdowns in Europe, China and the U.S.
Oil inventories in developed nations increased in December, a month when they normally decline,
by 7.6 million barrels to 3 billion. That left stockpiles about 350 million barrels above average,
according to the report.
Supplies outside OPEC slipped by 500,000 barrels a day in January from the previous month,
halting annual growth. While non-OPEC production will drop by 600,000 barrels a day this year as
the U.S. shale boom sputters, the decline is “taking an awful long time to happen,” the agency
said.
High-profile oil forecasters see market bottoming out, but IEA thinks otherwise
The National
The International Energy Agency (IEA) is not one of them, however, with its gloomy monthly
market prognosis yesterday concluding that “the surplus of supply over demand in the early part of
2016 is even greater than we said in last month’s” report.
Others, including Bank of America Merrill Lynch (BoAML) and Deutsche Bank, are seeing the
market probably bottoming out.
But the IEA – energy watchdog for the big consuming countries – is not convinced by the price
recovery, which has lifted benchmark North Sea Brent from a 13-year low in mid-January of
US$27.10 per barrel to above $33 per barrel this week, calling it a “false dawn”.
“Perhaps some of the more fevered forecasts of oil prices falling to as low as $10 per barrel are
extreme and better days do lie ahead for oil prices,” the IEA said. “However, before victory over
the bearish forces is declared we should look at the main factors driving this optimism.”
It dismissed the speculation that Opec and some non-members – especially Russia – might
coordinate output cuts. The Venezuelan oil minister visited Moscow last week as part of what
many industry observers considered to be a desperate and futile mission.
But the IEA said “the likelihood of coordinated cuts is very low”.
The agency also took a downbeat stance on other variables for the market. On demand, it expects
global growth to slow to 1.2 per cent this year from 1.6 per cent last year.

It also expects supply to fall only slowly, with the US shale slowdown not as rapid as anticipated,
and with the major Opec producers – Saudi Arabia, Iran and Iraq – still aiming to pump full out.
Given its assumptions, the IEA says the rise in oil inventories will continue into the second half of
the year, “and with the market already awash in oil, it is very hard to see how oil prices can rise
significantly in the short term”.
The more bullish case maintains that oil prices at current levels will lead to a shortage just over
the horizon.
Francisco Blanche, the head of commodities research at BoAML, points out that energy
consumption as a percentage of the global economy is at its lowest for nearly 20 years.
“So cheap oil will likely encourage strong demand growth ahead … as consumers no longer rush
to buy smaller and more fuel-efficient cars and consumption speeds up in Asia,” he said.
If oil prices stay as low as they are at present, then the world oil market would end up 4.8 million
barrels per day short of supply by 2020 because of the huge amount of investment in new
exploration and development that has already been cancelled, he said.
BoAML thus expects oil prices will recover to average of somewhere between $55 and $75 per
barrel over the next five years, which would mean a recovery soon.
Deutsche Bank likewise is expecting a recovery, predicting $50 per barrel for oil by the end of the
year after a weak first half and an average of $40 for the whole year.
The German bank’s chief investment officer, Stefan Kreuzkamp, agreed that prolonged low oil
prices now would soon lead to an “oil price shock” as supply failed to keep pace with demand
when economic growth ticks up.
One of the factors keeping the oil market oversupplied, Mr Kreuzkamp acknowledged, is the
surprising resilience of the US shale producers.
A new report by Wood Mackenzie points out, in fact, that worldwide only 0.1 per cent of oil
production – about 100,000 bpd – has been shut in because of low oil prices, even though it
estimates that 3.4 million bpd is “cash negative” at $35 per barrel, including 2.2 million bpd in
Canada and a 190,000 bpd in the US.
Budget cuts “have slowed investment, which will reduce future volumes, but there is little evidence
of production shut-ins for economic reasons”, said Robert Plummer, a researcher at WoodMac.
The point of agreement for oil market analysts, including the IEA, is that there is a point at which
demand will catch up with supply and start to eat into bulging world inventories. But the timing of
that inflection point is a moving target.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
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 10 February 2016 K. Al Awadi

New base 784 special 10 februaury 2016

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