New base 976 special 16 december 2016 energy news

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 17 December 2016 - Issue No. 976 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
What Global Oil Flows Might Look Like After OPEC’s
Supply Shock
Bloomberg - Brian Wingfield
OPEC’s quest to end a global crude glut already snapped a two-year slump in oil prices. Now
attention is turning to how the group’s surprise decision to cut output will transform international
trade flows of the world’s most important commodity.
The early signs are that Middle East suppliers will prioritize Asia, pushing competitors in Africa
and the Americas to keep cargoes in the Atlantic region. Saudi Arabia has indicated it will initially
maintain most flows to fast-growing Asia, while draining more heavily oversupplied Western
regions. Kuwait is doing much the same.

“They want to keep their market share to Asia,” Olivier Jakob, managing director at Petromatrix
GmbH in Zug, Switzerland, said of Middle East suppliers. “The routes they will restrict the oil flow
most will be to the U.S. and Europe.”
Understanding how and where oil flows matters to almost everyone in the supply chain. Crude
traders need to know as they exploit regional price gaps, tanker owners depend on the cargoes
being transported over long distances, while many refineries are configured to run most effectively
using specific varieties of crude.
Prioritizing Asia
If Middle East producers do indeed fight to keep their Asian market share, then higher proportion
of crude pumped in West Africa, the North Sea, the Black Sea and the Mediterranean could stay
within that region, according to Erik Nikolai Stavseth, a shipping analyst at Arctic Securities AS in
Oslo.
“The Saudis’ prioritizing growing Asian nations and leaving Western buyers more to themselves is
an obvious negative for crude tankers,” since it would imply shorter-distance shipping and fewer
cargoes, said Stavseth. Supertankers are already bracing for their worst year since 2013.
Still, there are many
moving parts that dictate
where barrels flow.
Demand for tankers would
take a hit if fewer cargoes
were moved between from
the Atlantic to Asia, a long-
distance route. Cheaper
shipping could then make
such deliveries financially
attractive. If one region gets
a bigger cut than another,
prices adjust, pulling
cargoes from one area to
another. Much will also
depend on the grades the producers cut.
Right Grades
Much of the Middle East’s reductions will be heavy grades that are cheaper, says Eugene Lindell,
a senior analyst at Vienna-based JBC Energy GmbH. If correct, then Venezuela and other Latin
American suppliers could make up the shortfall, he said. By contrast, Sadad al-Husseini, an
independent Dhahran-based analyst and former official at Saudi Arabia’s oil company, said he
expects the bulk of Saudi cuts to be Arab Light because demand for Heavy is high.
Through the first nine months of this year, Saudi Arabia shipped about 3.1 million barrels a day to
key Asian nations including China, Japan and South Korea, data compiled by Bloomberg show.
Flows to the OECD Americas measured 1.2 million barrels a day, and 826,000 daily barrels to
Europe.
OPEC pledged on Nov. 30 to cut supply by 1.2 million barrels a day, overcoming skepticism it
would do a deal. Non-member nations said Dec. 10 they would curb 558,000 barrels a day.

Cuts Underway
Nations participating in the curbs have begun to notify refiners of their plans for January deliveries,
indicating trade routes that will be hit. Saudi Arabian Oil Co., the state oil company known as
Saudi Aramco, plans to keep its full contractual supplies to at least five Asian refineries, according
to officials at those facilities. Kuwait is also prioritizing Asia, according to an official from the state
oil company.
While Saudi Aramco did curb January sales to parts of Southeast Asia, the nation also sold full
volumes under long-term contracts for next month to North Asian nations including China and
Japan -- key demand areas -- according to people familiar with the decisions. Keeping up supplies
to China matters to the world’s biggest crude exporter, which has seen shipments from rival
Russia growing steadily.
Meanwhile, Aramco has started to inform customers that it will begin to curb shipments to Europe
and North America. One European refiner will see its portion of Saudi crude decline by 20 percent
next month, according to a person familiar with the matter.
Consultants PIRA Energy Group and Energy Aspects Ltd. told clients the government in Riyadh
has begun reducing the amount refineries receive under long-term contracts. Saudi Arabia’s initial
approach is to keep crude that’s produced in the Atlantic Basin within that region, preventing it
from flowing to Asia, according to a Gulf official familiar with the matter.
Visible Markets
OPEC is aware of high inventories in “visible” markets like the U.S., which is another reason why it
will target cuts there, according to Petromatrix’s Jakob.
“Crude oil inventories in the U.S. impact prices more than any other part of the world,” he said. If
OPEC members “want to have a price impact, I think they will target lower flows to the U.S.”

SaudiCost of pump-at-will oil policy spurred Saudi OPEC u-turn
Sources say the kingdom may have stretched its current limits by extracting a record of around
10.7 million bpd this year … By Reuters
Saudi Arabia has long said it could produce as much as 12 million barrels per day (bpd) of oil if
needed, but that pump-at-will claim - which would require huge capital spending to access spare
capacity - has never been tested.
Sources say the kingdom may have stretched its current limits by extracting a record of around
10.7 million bpd this year, which could be one reason why Riyadh pushed so hard for a global
deal to cut production.
Riyadh, the world's top oil exporter, felt the burn of cheap oil this year when crude was trading
below $50 a barrel, as the reality of its costly war in Yemen and the task of shaking up its
economy to create thousands of jobs began to sink in.
With tight resources, Saudi Arabia found itself weighing the prospect of investing billions of dollars
to raise oil output further if it wanted to gain more market share under a strategy adopted in 2014.
Instead, cutting production amid a global glut and low prices to take the pressure off its oilfields,
secure better reservoir management and save itself unnecessary expenses, seemed the perfect
deal.
"You invest in raising your production when prices are high, not when they are low," a Saudi-
based industry source said.
"Choices are tougher now. The question is, would the Saudi government with its tight budget put
huge investment in raising production or put it somewhere else where it's needed more?"
Oil rose as much as 6.5 percent on Monday to an 18-month high after OPEC and some of its
rivals reached their first deal since 2001 to reduce output jointly. On Thursday, oil was trading
above $54 a barrel.

Under the deal, Saudi Arabia, de facto leader of the Organization of the Petroleum Exporting
Countries, will from January cut output to around 10 million bpd - well below the 12 million bpd
that the state has affirmed it can produce.
Saudi-based industry sources and market insiders say the kingdom cannot sustain historically
high output for long. State oil giant Saudi Aramco has never tested 12 million bpd and would find it
hard to keep the needed investments flowing with current low oil prices, they said.
Aramco, responding to a Reuters request for comment, said only that the company does not
comment on current production levels. One source familiar with Aramco production management
said the firm's capacity stood at 11.4 million bpd and it was still working to boost that figure to 12
million by 2018.
"Twelve million bpd has been planned since 2008-2010 and every annual budget worked towards
that goal," the source told Reuters on condition of anonymity.
To achieve that goal, the company has annual operating expenses (opex) of $20 billion and
capital expenditure (capex) at around $40 billion, the source said. "When the 12 million bpd plan is
achieved by 2018, the overall capex will fall to $20 billion," he added.
In a note to clients in May, US consultancy PIRA estimated Saudi Arabia's instantly available
capacity at that time at 10.5 million bpd, after tracing expansion plans since 2008 and calculating
an annual decline rate of 4 percent.
"Saudi Arabia could produce more but it would likely come at the expense of optimal reservoir
practices. They could certainly bring on new fields but this is a lengthy process (years) and
expensive as well," PIRA wrote.
"So far the kingdom is not adding any significant new producing capacity based on project
announcements and rig activity but rather replacing the aforementioned 4 to 6 percent annual
decline rate."
Saudi oil officials have said they can produce up to 12 million or even 12.5 million bpd if needed,
particularly in the event of a sudden, global supply disruption.
Some say it is not a question of whether Saudi can do it, it is a matter of how soon. Former oil
minister Ali al-Naimi had said that to reach 12 million, Saudi Aramco would need 90 days to move
rigs from exploration work to drill new wells and raise production.
Saudi Arabia has been working for most of this year towards boosting prices, rather than leaving
that job to market forces, a shift from the strategy it had championed since November 2014.
The pain of cheap oil was enough to bring other producers to the negotiating table, but industry
sources said the kingdom was also keen to seal a deal as it plans to offload a stake in Aramco by
2018.
Riyadh's finances have been under pressure. With a big budget deficit last year, the kingdom was
forced to seek new sources of income, including taxes and other fees and to cut spending.
The government is trying to boost non-oil revenue and modernise the economy through an
ambitious reform plan called "Vision 2030", championed by Deputy Crown Prince Mohammed bin
Salman, of which the centrepiece is the Aramco stake sale.
But ironically, before cutting dependence on oil, the kingdom needs revenues from crude sales to
conduct its reforms

Qatar:RasGas supports India’s shift to clean energy with LNG
Gulf times
RasGas has extended its support to India’s transformation into a land powered by clean, reliable,
gas-based energy, as part of efforts to strengthen the economic and energy relationships with the
Asian country, the fourth largest importer of liquefied natural gas (LNG).
This was highlighted by Hamad Mubarak al-Muhannadi, chief executive officer of RasGas, in his
address at the recently held 12th International Oil and Gas Conference and Exhibition Petrotech in
New Delhi, India.
He welcomed the
Indian government’s
recognition that gas
needs to grow in the
country and
underlined the
suitability of LNG,
which is affordable,
efficient and
environmentally
sustainable for what
is considered the
world’s fastest
growing economy.
“In 2016, India will
become the second
largest buyer of spot
and short-term LNG
cargoes in addition
to being the world’s
fourth largest
importer overall,” he
said, adding “this is
the result of a clear choice by both the consumers and the government of India.”
RasGas has a strong and established history of supporting the gas growth within India with the
Qatari LNG entity first signing joint LNG sales and purchase agreement (SPA) with Petronet in
1999 for the delivery of 7.5mn tonnes per annum over 25 years, then the largest SPA ever signed.
Since then, RasGas’ presence in India has extended beyond its relationship with Petronet to
include Gas Authority of India Limited, Gujarat State Petroleum Corporation, and Reliance.
While it takes a mere three days to ship LNG from Qatar to India’s west coast, geographic
proximity aside, al-Muhannadi cited the long-established relationship between Qatar and India,
and RasGas’ ability to provide customers with a reliable, available and flexible supply, as key
factors in the company’s capacity to successfully meet its customers’ expectations.
“Those native to New Delhi are aware of the impact of coal and diesel particulates in the air, and
while it is true that coal is cheap, the price paid in terms of pollution and health is unacceptable,”
he said during a panel session titled “Natural Gas: Road Towards Cleaner and Prosperous
Future.”
India’s Minister of State for Petroleum and Natural Gas Dharmendra Pradhan with al-
Muhannadi and other RasGas officials at Petrotech in New Delhi. RasGas has a strong
and established history of supporting the gas growth within India with the Qatari LNG
entity first signing joint LNG sales and purchase agreement (SPA) with Petronet in 1999
for the delivery of 7.5mn tonnes per annum over 25 years, then the largest SPA ever

Saudi Aramco signs Landmark Joint Venture agreements with
Nabors and Rowan…. Saudi Gazette
Saudi Aramco signed two landmark agreements with Nabors Industries Ltd.(“Nabors”) and Rowan
Companies plc (“Rowan”), to create two new national champions focused on onshore and
offshore drilling.
The new joint ventures mark a major milestone towards the development of a competitive Saudi
energy sector, as encapsulated in the company’s In-Kingdom Total Value Add (iktva) program and
Saudi Vision 2030.
In a statement to Saudi Press Agency (SPA), Amin H. Nasser, Saudi Aramco President and CEO
said: “We look forward to successful partnerships with Nabors and Rowan to drive a best-in-class
drilling industry, provide opportunities to manage drilling costs through increased collaboration,
drive localization of the energy value chain, and enhance in-Kingdom technical capabilities.”
“These initiatives represent an unprecedented new largescale model of collaboration, with
substantial value creation for both Saudi Aramco and its partners through a closer working
relationship. These investments are part of a wider program to leverage our core activities, to help
enable the sustainable development of the Kingdom’s economy through diversification, and the
development of an internationally competitive and dynamic local energy sector, supported by

national champions.” The joint ventures with Nabors and Rowan were announced as part of
Saudi Aramco’s iktva Forum 2016, which marks its one year anniversary.
In December 2015, Saudi Aramco launched iktva, a major localization initiative designed to drive
domestic value creation and maximize long-term economic growth, diversification, job creation
and workforce development, to support a rapidly changing Saudi economy. Iktva aims to achieve
70% localization of all spending on goods and services, and to enable 30% export of Saudi energy
sector products by 2021.
The onshore and offshore drilling Joint
ventures will invest $6bn to $7bn to
purchase onshore rigs and offshore jackups,
manufactured in Saudi Arabia by Saudi
Aramco manufacturing joint ventures, which
are in the process of being setup. The Joint
ventures will create an additional 5,000 jobs
with an aim to achieve 80% Saudization
levels. It is anticipated that the Joint
ventures will commence operations in the
second quarter of 2017.
The onshore joint venture will combine
Nabors and Saudi Aramco’s existing
onshore drilling operations in Saudi Arabia,
with the joint venture covering segments of
our current and future onshore oil and gas
fields in the Kingdom. It will initially own 15 contributed rigs (five from Saudi Aramco and 10 from
Nabors) and manage the remaining Nabors-owned rigs currently in Saudi Arabia, for a total fleet
of 41 rigs.
The total value of initial contributions from both partners through domestic operations, assets,
equipment and capital is estimated at over $1 billion dollars. In addition, the joint venture has
committed to a substantial order of newbuild rigs over a 10-year period from an in-Kingdom
manufacturing joint venture.
The offshore joint venture will combine Rowan and Saudi Aramco’s existing offshore drilling
operations in Saudi Arabia, with the joint venture covering segments of our current and future
offshore oil and gas fields in the Kingdom.
It will initially own 7 contributed jack-up rigs (two from Saudi Aramco and five from Rowan) and
will manage an additional four Rowan owned jack-ups currently in Saudi Arabia. The total value of
initial contributions from both partners through domestic operations, assets, equipment and capital
is estimated at over $1.2 billion dollars. In addition, the offshore joint venture has similarly
committed to acquire and operate newbuild jack-ups over a 10-year period from an in-Kingdom
Maritime complex.

Tunisia: Cooper Energy finalises agreement for operations
Source: Cooper Energy
Cooper Energy has advised that the company has finalised the process and agreements
for completion of its operations in Tunisia, consistent with its previously announced strategy of
concentrating on its gas growth projects in Australia.
Bargou permit
The company has agreed to assign its sole remaining Tunisian interest, the Bargou joint venture,
to joint venture partner Dragon Oil. Cooper Energy elected not to participate in the renewal of the
permit and, through a
deed of assignment
agreed with fellow joint
venture partner Dragon
Oil, has transferred its
30% interest and
Operatorship effective
from 7 November.
Cooper Energy will
continue to perform
Operator responsibilities
under contract until the
Hammamet West well
abandonment is
completed, which is
anticipated by end-
January 2017. Cooper
Energy’s share of the
abandonment cost has
been provided for in the FY16 accounts and is expected to be less than US$200,000. The
assignation does not involve any cash payment by either party.
Hammamet Joint Venture dispute settled
Cooper Energy has agreed terms with the Hammamet Joint Venture (Medco Ventures
International and DNO Tunisia) for the settlement of the dispute between the parties and the
cessation of the arbitration advised to the ASX on 24 March 2016. The terms of the settlement do
not require any immediate or firm cash payment by Cooper Energy. However, should the
Hammamet Joint Venture elect to withdraw from the permit, Cooper Energy will fund a 35% share
of any agreed exit fee up to an agreed, undisclosed, ceiling.
Cooper Energy previously held a 35% interest in the Hammamet Joint Venture prior to its
withdrawal in June 2015. The settlement resolves a dispute between the company’s wholly owned
subsidiary CE Hammamet Ltd and the Hammamet Joint Venture regarding any ongoing liability to
pay for work obligations which may be undertaken during the extension period of the permit
following Cooper Energy’s withdrawal.
As a result of the settlement, there are no outstanding matters in respect of the company’s prior
involvement in the Hammamet permit. The company will cease all operations in Tunisia in January
with the completion of the Hammamet West well abandonment.

Morocco: Sound Energy provides Tendrara TE-7 update -
confirms TE-8 location..Source: Sound Energy
Sound Energy, the African and European focused upstream gas company, has provided an
update on the Company's Tendrara licence, onshore Morocco.
Further to the Company's announcement of 24 November 2016, the Company has retrieved
the TE-7 bottom hole memory gauges following the open hole well test and can confirm that the
reservoir pressure correlates with the gas gradient recorded at all previous wells on the structure.
Location of Tendrara well TE-7 (Source: Sound Energy)
The Company also confirms that the TE-8 vertical and side-track locations have been finalized
some 12 kms to the Northeast of TE-7, subject only to consent of the Company's partners. TE-8,
the first outpost well at Tendrara, is expected to spud in February 2017 and will drill both the TAGI
and the Palaeozoic horizons.
The Company's current internal estimates are that success at TE-8 would establish best estimate
original gas in place at Tendrara of upto 1.5 Tcf gross. Prior to the drilling of TE-8, the Company
internally estimates best estimate original gas in place volume of between 0.3 Tcf and 0.5 Tcf
gross. Sound Energy, with its 27.5% interest in the Tendrara licence, intends to commission a
Competent Persons Report on Tendrara following TE-8, which will confirm the contingent
resources based on the field development plan.
The extended well test at TE-7 is ongoing and is expected to confirm production sustainability and
aid field development planning.

GCC: Why VAT is necessary in GCC amid lower oil prices
By Jeanine Daou
Value Added Tax (VAT), referred to as Goods and Services Tax (GST) in some countries was first
introduced in France in 1954. VAT is a tax on consumption of goods and services that is borne by
the final consumer. How is this done? Based on the self-assessment mechanism, VAT is collected
by businesses at each stage of the production and distribution chain with a credit for VAT incurred
on inputs.
VAT is generally seen as an efficient tax for authorities, neutral for businesses and transparent for
consumers. This has led to a rise in the number of governments turning to VAT as a major source
of revenue.
Since the introduction of VAT in 1954, over 150 countries across the world have introduced and
implemented a VAT system. In terms of revenue, VAT constitutes a substantial source of
governments’ revenue. According to the Organisation for Economic Co-operation and
Development (OECD), the share of VAT revenue as a percentage of GDP in the OECD countries
has significantly increased, from 0.6% in 1965 to 6.6% in 2012.
In the same period, VAT accounted for approximately 20% of the total tax revenue on average,
compared to 1.8% in 1965. The International Monetary Fund (IMF) estimates that, even at low
rates, VAT can generate between 1.5-2 % of GDP in revenue to the GCC states.

The IMF, World Bank and the OECD have been at the forefront promoting governments to
introduce VAT as a more sustainable source of revenue in the wake of global economic crisis
coupled with the drop in oil prices.
For instance, in June 2009, the OECD ministers, noted that growth-oriented tax reforms need to
focus on shifting revenue from corporate and personal taxation towards consumption and property
taxes because they are more growth friendly. During the period 1975 to 2007, consumption taxes
in the OECD countries increased by 27% while combined revenues for personal taxes and income
taxes decreased by 5%.
For many years, the oil and gas industry has been the backbone for the Gulf Cooperation Council
(GCC) economies. For instance, during the years 2011–14, oil revenues accounted for between
70%–95% of government revenues. The recent decline in oil prices has put pressure on
governments budget as most of these governments have committed to major capital expenditure
and huge infrastructure projects.
The present GCC tax systems, characterised with low tax rates and narrow tax base, cannot fill
the budget deficit gap projected to remain at 6.5% of GDP in 2020. As such, tax reforms in the
GCC are much needed.
Against this backdrop, the GCC States are in the process of approving a common legal framework
for the introduction of VAT in the region. Each member state will then be compelled to introduce
their own VAT legislation. Most, if not all, of the member states are working towards implementing
a VAT system by 1 January 2018.
There are various common models of VAT systems in the world such as the New Zealand model,
the European model and the Japanese model. The New Zealand model is regarded as the
simplest and most efficient with most supplies taxable at a standard rate and very few exemptions.
Japan’s model levies VAT at a flat rate of 8% with no exemptions or zero rate while the European
model is characterised by multiple rates and varying degrees of exemptions per country which
make it one of the most complicated in terms of administration for the tax authority and
compliance for businesses.
Generally, a well-designed VAT system is based on simple laws and procedures, well-structured
and resourced administration, and compliance measures complemented by taxpayer education
and audit programs. If the above is well managed, it generally leads to higher levels of taxpayer
compliance, lower administration costs and greater revenue collections.
The envisaged system expected to be implemented in the GCC is a standard fully fledged VAT
with most supplies of goods and services being taxed and potentially very few exceptions. It is
expected that VAT is applied at a standard rate of 5%, which is considered low as per
international and regional standards and well below the average OECD standard rate of 19.2%.
As previously mentioned, the IMF estimates that a 5% VAT may generate an average 1.38% of
GDP in GCC Member States. A number of specific supplies including international supplies will be
subject to VAT at zero rate and a limited number of supplies will potentially be exempt from VAT
for economic or social considerations.
Zero-rated supplies may include Further, certain means of transport, export of goods and the
provision of international services are expected to be zero rated in line with the destination
principle according to which VAT is charged at the country of destination. Conversely, certain
supplies like healthcare or education services could be exempt from VAT. In which case, VAT is
not charged on the supply and any VAT incurred on purchases is irrecoverable.

Under a VAT system, a person (individual or corporate) who supplies or expects to supply taxable
supplies is required to register for VAT upon attaining a set annual turnover threshold. Upon
registration, there is a requirement to issue tax invoices, charge the appropriate rate of VAT on
supplies made, file VAT returns and pay the correct amount of VAT due.
Ordinarily, VAT-registered persons are allowed to recover the VAT incurred on their purchases by
offsetting this against the VAT charged on their sales. In this regard, VAT is ultimately borne by
the final consumer while businesses act as collecting agents for the tax authority.
As we look forward to the pronouncement of the GCC VAT framework and country specific VAT
legislations, businesses need to put their foot forward and start planning for VAT implementation.
This can be done through reviewing their business processes and identifying changes required to
IT systems to develop an implementation plan in readiness for VAT go live date of 01 January
2018.
The tax authorities also have much to do; the establishment of a seamless administration
including registration and filing processes; communication and education to ensure there is
sufficient guidance for businesses to comply with the VAT requirements. This will mitigate against
last minute rush and ensure that the businesses comply with the VAT laws and mitigate against
penalties after VAT go live date.

Iraq boosts oil sales to China, U.S., India
Reuters -By Florence Tan and Chen Aizhu
Iraq is selling more crude oil to its biggest customer, China's Unipec, people familiar with the
matter say, digging a deeper foothold in the global supply market just before production cuts
agreed with OPEC and other producers are scheduled to kick in.
With new deals with Indian and U.S. refiners also coming on stream, the expanded contract with
the trading arm of Asia's largest refiner Sinopec (600028.SS) means Baghdad will have to reduce
supply to other clients to honor its commitment to cut output by 210,000 barrels per day (bpd) from
2017.
Three people with knowledge of the
matter said the Unipec contract was
signed just before the Organization of the
Petroleum Exporting Countries (OPEC),
of which Iraq is a member, agreed with
other producers led by Russia to cut
output by as much as 1.8 million bpd in
an effort to reduce a global fuel supply
overhang and prop up prices.
Speaking on condition of anonymity
because they weren't authorized to speak
to media, the people said Iraq's Oil
Marketing Company (SOMO) has
boosted Basra crude forward export sales to Unipec by 3 percent to a total of 40 million-60 million
barrels each quarter - 435,000-652,000 bpd - for 2017.
"If Iraq increases its sales to China while others have to cut back or just hold their volumes steady,
Iraq will inevitably gain market share in what is arguably the most important oil market," said a
trader who specializes in sending crude to China but is not allowed to speak publicly.
Iraq is OPEC's second-biggest producer behind Saudi Arabia and now ranks third among crude
suppliers to China - after Russia and Saudi Arabia - having recorded a 15 percent year-on-year
jump to about 723,000 bpd between January and October.
As part of the expanded Chinese deal, one of the people said, Unipec is expected to load 2 million
barrels of Basra Heavy crude every quarter. "Basra is now an established grade with stable quality
and reliable supplies," said another trader, who buys Iraqi crude but isn't authorized to speak to
the media.
SOMO will also supply Basra Heavy crude under new term contracts to Exxon Mobil (XOM.N),
Chevron Corp (CVX.N) and Indian refiner Essar Oil ESRO.CL for 2017, according to a person
close to the matter and a preliminary January loading schedule for the oil.
The contracts contribute to an expected jump in Basra exports to 3.53 million bpd in January
SOMO did not reply to an e-mail from Reuters seeking comment. Exxon and Chevron said they
don't comment on operational matters, and Essar declined to comment.
In India, crude imports from Iraq rose 24 percent in the first 10 months this year to 784,000 bpd,
making Iraq the second-largest crude supplier after Saudi Arabia. Iraqi crude exports to the United
States have more than doubled in the first nine months of 2016 from the same period a year ago
to nearly 350,000 bpd as Venezuelan supplies declined, data from the Energy Information
Administration showed.

China to scrap fuel export quotas for 'teapot' refineries: sources
Reuters
Beijing will not issue fuel export quotas for independent refineries next year, dealing a blow to the
upstart group of companies and scrapping a key component of a scheme that has transformed
China's oil markets, three sources said.
The surprise move ends a policy launched at the start of this year that allowed some privately run
refineries - known as 'teapots' - to sell their diesel, gasoline and naphtha abroad, just a few
months after Beijing first allowed them to import crude oil.
Ending the scheme will hand control of the lucrative export business back to China's big four
state-run oil majors, but it was not immediately clear whether this will affect the country's
burgeoning refined products exports.
Record Chinese fuel exports, which totaled 30 million tonnes of gasoline, diesel, jet fuel and
naphtha combined in the first 10 months of the year, have contributed to a glut in Asia which
weighed on refining margins, although teapots accounted for roughly three percent of the total.
The move means quotas held by 11 firms for around 1.5 million tonnes of fuel exports will expire
this month, and no new quotas will be issued for 2017, three sources familiar with the government
plan said.
The Ministry of Commerce told managers at state firms of the plan at a meeting on Dec. 2,
according to two sources directly briefed.
The ministry did not immediately respond to a request for comment.
Zhang Liucheng, vice president of Shandong Dongming Petrochemical Group, China's largest
teapot and one of the sector's largest fuel exporters, said the government had not yet made a
formal policy statement.

"We're hoping to see a fair policy that applies to both state-run and private players," Zhang said,
adding that teapots were still lobbying the government.
Zhang said his company may divert cargoes domestically in the absence of quotas.
The move may temper the rise of teapots, which contributed over 90 percent of China's 2016
import growth at 925,000 bpd, or 12 percent of China's total crude oil imports.
"With the majors back in control of all fuel exports, teapots will lose their bargaining chips in
domestic fuel marketing, which could in turn hit their plant operations," said a Beijing-based trader
with an independent firm.
The new players have snared a slice of the domestic market by selling fuel at discounts to state-
run giants Sinopec and PetroChina, forcing them to cut output and ship excess product into a
saturated global market.
However, China's total refinery output is still set to rise next year as state refiners bring online new
processing facilities and more teapots win crude import quotas.
"I don't think (the policy uncertainty) will affect total exports materially," said Nevyn Nah, analyst at
Energy Aspects.
The reversal of the policy was partly driven by concerns about a loss of tax revenues as teapots
looked to export more refined fuel.
Both consumption tax and value-added tax are currently waived for fuel exports, but the
government has been pushing majors to adopt a scheme where refiners first pay value-added tax
and then receive a rebate after exports have been fulfilled,.

NewBase 17 December - 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
US crude settles at $51.90, & 55.19 for Brent
Reuters
Oil rose on Friday, edging closer to new 17-month highs as producers showed signs of adhering
to a global deal to reduce output.
Oil producers including Kuwait, Saudi Arabia, and Abu Dhabi, who are members of the
Organization of the Petroleum Exporting Countries (OPEC), have notified customers that they
would cut supplies from January as part of an effort by OPEC and other producers led by Russia
to balance an oversupplied market.
Brent crude oil futures were trading at $55.19 per barrel up $1.17, or 2.2 percent, at 2:39 p.m. ET
(1939 GMT). U.S. West Texas Intermediate (WTI) crude settled up $1, or 2 percent, at $51.90 per
barrel.
"The petroleum markets are extending their recovery from Thursday's low as some confidence in
planned production cuts returns to the market," Tim Evans, Citi Futures' energy futures specialist,
said in a note.
OPEC members have agreed to reduce output by a combined 1.2 million barrels per day (bpd)
from Jan. 1, their first such deal since 2008. Russia and other non-OPEC producers plan to cut
about half as much.
Oil price special
coverage

Those deals, clinched over the past two weeks, have boosted expectations in the market that a
two-year supply overhang will clear soon and prices remain near highs last seen in July 2015.
Russia said on Friday that all of the country's oil companies, including top producer Rosneft, had
agreed to reduce output.
The prospect of lower production led U.S. bank Goldman Sachs to raise its WTI price forecast to
$57.50 per barrel from $55 per barrel previously for the second quarter of 2017. For Brent,
Goldman expects prices between $55 and $60 per barrel after the first half of 2017.
Despite the possible price floor, Goldman said there was also limited room for market upside prior
to 2017's cuts, and that its December WTI price forecast was $50 per barrel."There will be little
evidence of production cuts until mid to late January which we believe will be the next catalyst for
the next large move in prices," Goldman said.
There were, however, some ongoing doubts about the willingness of other OPEC members to
comply.
Iraq, the group's second biggest producer after Saudi Arabia, has signed new deals that will
increase its sales to Asian customers like China and India despite its commitment to reduce
output by 210,000 bpd.
Libya, which is allowed to ramp up production as part of the OPEC deal, is close to increasing
output crimped by unrest after a group of oil guards said they had reopened a long-blockaded
pipeline linking some of the country's biggest oilfields.
Libya's National Oil Corp has said it hopes to raise production to 900,000 bpd in the near future,
and to 1.1 million bpd next year.
Baker Hughes reported its weekly count of U.S. oil rigs in operation rose by 12 to 510 in the last
week. That was the highest level since the end of January, when drillers also had 510 oil rigs in
operation.

world oil demand growth is forecast at 1.15 mb/d to average
95.56 mb/d, OPEC
(WAM) -- In 2017, world oil demand growth is forecast at 1.15 mb/d to average 95.56 mb/d,
according to OPEC Monthly Oil Market Report.
''World oil demand growth is estimated at 1.24 mb/d in 2016 supported by the transportation
sector, reflecting low retail prices and better-than-anticipated vehicle sales. In the non-OECD,
Other Asia and China saw solid-to-steady oil demand growth.
In Latin America and the Middle East, oil requirements were lower than initial projections as
slower economic developments and a high level of substitution dampened oil consumption. In
2017, world oil demand is projected to grow by 1.15 mb/d,'' the report said.
In OECD, it added, oil demand is projected to rise in OECD Americas, flatten in Europe and
continue declining in Asia Pacific. In non-OECD, improvement in economic activities is assumed
to provide support to oil demand growth, particularly in Latin America and the Middle East.
''Non-OPEC oil supply in 2016 is estimated to contract by 0.78 mb/d. The main contributors to this
decline are the US, China, Mexico, Colombia and other OECD Europe, while growth is anticipated
to come from Russia, Brazil, Congo and the UK. Low oil prices led to a decline of 420 tb/d in US
oil production. Declines are also seen coming from Colombia and China, as well as Canadian
conventional crude output,'' it indicated.

In 2017, non-OPEC oil supply is projected to grow by 0.3 mb/d, despite initial projections in July
2016 for a contraction (Graph 2). This is mainly due to higher price expectations for 2017. The
main contributors to non-OPEC supply growth are Brazil with 0.25 mb/d, Kazakhstan with 0.21
mb/d, and Canada with 0.17 mb/d. In contrast, Mexico, US, China, Colombia, and Azerbaijan are
expected to show the main declines.
''However, this forecast remains subject to a number of uncertainties, including the pace of
economic growth, potential new policies and price developments,'' it noted.
''Based on the above forecasts, the demand for OPEC crude in 2017 is expected to stand at 32.6
mb/d, which is slightly higher than the 32.5 mb/d level referred to in the most recent OPEC
Ministerial Conference. This, combined with the joint cooperation with a number of non-OPEC
countries in adjusting production by around 0.6 mb/d, will accelerate the reduction of global
inventories and bring forward the rebalancing of the oil market to the second half of 2017,'' the
report said.

Nobody Agrees When Oil Market Will Re-Balance After OPEC Deal
Bloomberg - Grant Smith and Javier Blas
The first half. No, the second. Certainly this year. Or next.
That’s the range of views you’ll hear if you ask the International Energy Agency, OPEC, Saudi
Arabia and the U.S. government when the production cuts announced last week will end the
global oil glut.
The Dec. 10 agreement between OPEC and 11 other producers could begin to reverse three
years of oversupply within the next six months, according to the IEA, Paris-based adviser to 29
industrialized nations. The Organization of Petroleum Exporting Countries itself is less hopeful,
predicting that stockpiles won’t fall until the second half of 2017.
Khalid Al-Falih, energy minister of OPEC’s biggest and most influential member, Saudi Arabia,
was less precise than either institution on Wednesday, saying that he sees supply and demand
aligning at some point this year without specifying when.
For the Energy Information Administration, a unit of the U.S. Energy Department, that may still be
too soon. The EIA’s latest market outlook on Dec. 6 projected that inventories will accumulate by
an average 420,000 barrels a day next year.

“Given the paucity of timely supply data, the market has to take a lot on faith,” said Harry
Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.
OPEC and 11 other producers including Russia and Kazakhstan agreed to jointly cut output by
about 1.8 million barrels a day in an effort to end a three-year surplus that’s battered both their
economies and investment by the world’s biggest oil companies.
While prices have climbed, the rally may be losing momentum as traders question how far
producers will comply with the deal and when it will disperse an inventory surplus of more than
300 million barrels, enough to supply China for almost a month.
Different Views
Anyone hoping for a quick answer to that question may be disappointed: behind the institutions’
opposing views on when the market will re-balance are differing estimates of global oil demand.
OPEC sees total consumption averaging 95.6 million barrels a day in 2017, the EIA anticipates 97
million barrels a day, and the IEA predicts 97.6 million.
They also disagree on how much oil non-OPEC nations will produce, with the OPEC forecasting
56.5 million and the IEA 57 million. The difficulty of forecasting oil supply and demand on a global
scale is underscored by the major agencies inability to even agree on how much oil the world
used last year.
There’s a gap of about 1.6 million barrels a day between the 2015 demand estimates of the IEA
and OPEC -- roughly equivalent to all the crude pumped each day by OPEC member Nigeria.
Higher Crude Seen Buying Time for Gulf Arabs to Kick Oil Habit
Gulf Arab nations that rely on energy for most of their revenue will benefit if oil prices rise, though
their long-term fiscal health hinges on how well they use this opportunity to wean their economies
off crude, an International Monetary Fund official said.
Saudi Arabia, the world’s biggest oil exporter, and its Arab neighbors have drawn up plans to
diversify their economies since benchmark Brent crude tumbled from more than $115 a barrel in
June 2014 to as little as $28 in January. Brent has staged a partial recovery, trading Wednesday
at about $55, and while this may make reforms less difficult, the need for restructuring remains
crucial, said Natalia Tamirisa, an IMF economist.
The price rally “has provided some breathing space, has eased financial pressure on these
countries,” Tamirisa said Wednesday at a conference in Dubai. Even so, “oil exporting countries
will continue to run fiscal deficits in the medium term,” she said.
The six members of the Gulf Cooperation Council, led by Saudi Arabia, participated in a deal
among OPEC members and other major producers such as Russia to pump less oil to end a
global glut and shore up prices. Their efforts pushed crude above $55 per barrel for the first time
since July 2015. Kuwait is the only GCC country that can balance its budget at this price next
year, as it’s the sole member with a break-even price below $60 dollars a barrel, according to IMF
data released in October.

Saudi Arabia, the United Arab Emirates, Kuwait and Qatar are members of the Organization of
Petroleum Exporting Countries. Oman and Bahrain are among the non-OPEC producers that
agreed with OPEC on Dec. 10 to participate in the collective output cuts. GCC countries account
for almost half of the pledged reduction in supply, due to take effect on Jan. 1.
Strengthened Finances
The agreement between OPEC and non-OPEC producers has already strengthened the finances
of oil exporters. Most participants will cut production by less than 5 percent, while prices have
climbed more than 18 percent since Nov. 30 when OPEC met.
Analysts at BNP Paribas SA, Commerzbank AG and Societe Generale SA are among those who
expect oil prices to stay at or below $60 per barrel in 2017. While crude may rise above $60 a
barrel if OPEC and other nations cut production as promised, a rebound in U.S. shale output
would bring prices back to $55, according to a Dec. 11 report from Goldman Sachs Group Inc.
Oil at that price would be too cheap for most GCC nations including Saudi Arabia, which the IMF
said will need crude at $77.70 a barrel to balance its budget next year.
“Many countries have already made important progress toward reining in spending to cope with
lower oil revenues,” Tamirisa said. “Looking ahead, tighter spending would need to be sustained
until fiscal positions are on a more sound footing.”

Land rush! US oil drillers pack into the Permian Basin, but only
the strong will survive… CNBC -Tom DiChristopher | John W. Schoen
Oil exploration and production companies have piled into the Permian — a rich formation beneath
Texas and New Mexico — because they can produce crude there more cheaply than in many
other U.S. basins. Those low break-even costs for drillers are top of mind, with U.S. crude oil
trading near $50 a barrel, about half the price it fetched at the peak of 2014.
But the rush threatens to push up the cost of doing business in the Permian as drillers compete to
book the best workers and oilfield services companies. Demand for those employees and services
could eventually exceed capacity — perhaps as early as next year.
Drillers will also need to start producing acreage swiftly and efficiently after shelling out princely
sums for land.
"The question is who can insulate themselves best from the inflation?" said Lloyd Byrne, an
analyst at Nomura Group's brokerage Instinet. "We think it's going to become a big-company
game."
Eye-popping land prices
Prices have skyrocketed in two parts of the Permian, the Midland and Delaware basins. The
average price for the three most expensive deals in the Midland Basin this year was nearly
$49,000 per acre, compared with an average of $38,300 per acre for the top three purchases in
2014.
The run-up has been even more spectacular in the Delaware Basin. RSP Permian paid $48,157
per acre in the region's most expensive deal this year. Primexx Energy paid just $14,615 per acre
in the Delaware's biggest acquisition of 2014.
Oil companies are using similar drilling methods in the two basins, but the Delaware is less
developed than the Midland, said Andrew Dittmar, mergers and acquisitions analyst at PLS, a
Houston-based oil and gas research firm.

"People knew there was a lot of oil in the Delaware before, and it took a while to crack the nut to
get it out," he told CNBC. "They've cracked the code on the Delaware, and they're getting some
really strong results there."
Diamondback Energy is
one company chasing
Permian gold. On
Wednesday, the driller
paid $2.43 billion to
purchase two companies
and their land in the
Delaware Basin, making
it the third largest deal
ever struck there. In
2014, Diamondback was
also behind the year's
third largest deal by price
by acre.
Immediately squeezing
profits out of those
acquisitions is critical for
companies like
Diamondback
and Parsley Energy, said
Instinet's Byrne.
Right now, the shares of
both companies trade at
a high multiple — or
premium based on
expectations of future
growth. After making pricey purchases, they need to execute their drilling operations well in order
to deliver that growth.
Both Diamondback and Parsely have executed well in the past, according to Byrne.
Too much of a good thing
However, if too many drillers are simultaneously trying to make good on their expensive
purchases in the Permian, all that activity could inflate wages and oilfield service costs, analysts
warn. That would put pressure on drillers' profit margins, which are already slim.
Laid-off workers may not return to the oil patch until they think the recovery has legs, and those
who do return may demand higher pay or better benefits, according to John Daniel, senior
research analyst for oil services at Simmons & Company International. Many of those workers
may have found work elsewhere, he wrote in a research note.
It's possible that oilfield services companies will bring in equipment from other areas where oil
output remains depressed, but the Permian will likely experience at least a mild bottleneck, said
Pearce Hammond, co-head of exploration and production at investment banking firm Simmons &
Co. Service providers can then charge more, which will cut into drillers' profits.

Pipelines may also struggle to carry all that crude out of the Permian. Currently, oil transporters
have spare capacity there, but some see that pipe space running low by late 2017 or early 2018.
That would force drillers to put oil on rail cars — a more expensive option.
"It depends on how fast the Permian ramps, and it depends on how fast projects get done, but
either way, we see a need for
more long-haul pipe to get
installed in the Permian,"
Hammond said.
The companies poised to do
well as challenges mount in the
Permian are larger drillers with
advantages in other areas of
the industry, Byrne said.
For example, Anadarko
Petroleum has pipeline and
storage operations that will
help it transport its Permian
haul, while EOG
Resources owns mines that
provide the sand it needs to
carry out hydraulic fracturing,
the process of releasing oil and
gas from shale rock by blasting
water, minerals and chemicals underground.
Ultimately, some small players will likely sell their positions in the Permian because they can't
compete, Byrne said.
Greener pastures?
Investors, too, are considering where their money can be better spent. Capital One analysts report
the buzz at the bank's annual energy conference was not swirling around the Delaware or Midland
basins, but North Dakota's Bakken shale formation.
"Although we are still bullish on the Permian, conversations with investors suggest that some have
gotten more cautious on the basin given lofty acreage valuations in the last several months,
growing concerns around infrastructure bottlenecks and price differentials" Capital One analysts
said.
Basins beyond the Permian may start to look more attractive with oil prices on the rise following
an agreement by OPEC and other producers to cut output in a bid to balance an oversupplied
market.
Still, others say the oil well economics in the Permian are too good to ignore for those with the
ability to stomach high land prices. Drillers are now exploring more remote parts of the Delaware,
including a southern section called the Alpine High, where Apache Corp. says it has found 3 billion
barrels of oil.
"The bottom line is in the Delaware, you are seeing the opening up of new economic benches,
and those haven't been as heavily drilled recently, so it's a basin that is opening up very rapidly,"
said Dittmar.

NewBase Special Coverage
News Agencies News Release 17 Dec. 2016
World Energy Hits a Turning Point: Solar That's
Cheaper Than Wind
Bloomberg - Tom Randall
There’s a transformation happening in global energy markets that’s worth noting as 2016 comes
to an end: Solar power, for the first time, is becoming the cheapest form of new electricity.
There have been isolated projects in the past where this happened: An especially competitive
auction in the Middle East, for example, resulting in record-cheap solar costs. But now
unsubsidized solar is beginning to outcompete coal and natural gas on a larger scale, and notably,
new solar projects in emerging markets are costing less to build than wind projects, according to
fresh data from Bloomberg New Energy Finance.
The chart below shows the average cost of new wind and solar from 58 emerging-market
economies including China, India, and Brazil. While solar was bound to fall below wind eventually,
given its steeper price declines, few predicted it would happen this soon.

“Solar investment has gone from nothing—literally nothing—like five years ago to quite a lot,” said
Ethan Zindler, head of U.S. policy analysis at BNEF. “A huge part of this story is China, which has
been rapidly deploying solar” and helping other countries finance their own projects.
Half the Price of Coal
This year has seen a remarkable run for solar power. Auctions, where private companies
compete for massive contracts to provide electricity, established record after record for cheap
solar power. It started with a contract in January to produce electricity for $64 per megawatt-
hour in India; then a deal in August pegging $29.10 per megawatt hour in Chile. That’s record-
cheap electricity—roughly half the price of competing coal power.
“Renewables are robustly entering the era of undercutting” fossil fuel prices, BNEF chairman
Michael Liebreich said in a note to clients this week.
Those are new contracts, but there are plenty of projects reaching completion this year, too. When
all of the 2016 completions are tallied in coming months, it’s likely that the total amount of solar
photovoltaics added globally will exceed that of wind for the first time. The latest BNEF
projections call for 70 gigawatts of newly installed solar in 2016 compared with 59 gigawatts of
wind.
The overall shift to clean energy can be more expensive in wealthier nations, where electricity
demand is flat or falling and new solar must compete with existing billion-dollar coal and gas
plants. 2 But in countries that are adding new electricity capacity as quickly as possible,
“renewable energy will beat any other technology in most of the world without subsidies,” said
Liebreich.
Turning Points
The world recently passed a turning point and is adding more capacity for clean energy each year
than for coal and natural gas combined. Peak fossil fuel use for electricity may be reached within
the next decade.
Thursday’s BNEF report, called Climatescope, ranks and profiles emerging markets for their ability
to attract capital for low-carbon energy projects. The top-scoring markets were China, Chile,
Brazil, Uruguay, South Africa, and India.
When it comes to renewable energy investment, emerging markets have taken the lead over the
35 member nations of the Organization for Economic Cooperation and Development (OECD),
spending $154.1 billion in 2015 compared with $153.7 billion by those wealthier countries, BNEF
said. The growth rates of clean-energy deployment are higher in these emerging market states, so
they are likely to remain the clean energy leaders indefinitely, especially now that three quarters
have established clean-energy targets.
Still, the buildup of wind and solar takes time and fossil fuels remain the cheapest option for when
the wind doesn’t blow and the sun doesn’t shine. Coal and natural gas will continue to play a key
role in the alleviation of energy poverty for millions of people in the years to come.
But for populations still relying on expensive kerosene generators, or who have no electricity at all,
and for those living in the dangerous smog of thickly populated cities, the shift to renewables and
increasingly to solar can’t come soon enough.

Nations will move forward on climate goals irrespective of US:
Global business group
Anmar Frangoul
The world will push ahead with plans to tackle climate change with or without the United States,
the chairman of the Climate Disclosure Standards Board told CNBC on Friday.
"I don't think that the framework for movement forward on climate change rests on any single
country or indeed on any single government," Richard Samans said.
"There is a very broad consensus for movement, as was made clear at the climate negotiating
meeting
that
occurred
last
month in
Morocco.
There are
nearly
200
countries
that are
committed to move forward on this," he added.
Samans was referring to November's Marrakech Climate Change Conference, otherwise known
as COP22.
A year earlier, at COP21 in Paris, world leaders agreed to make sure global warming stayed "well
below" 2 degrees Celsius and to "pursue efforts" to limit the temperature rise to 1.5 degrees.
There are fears that President-elect Donald Trump may pull the U.S. out of the Paris Agreement.
"Irrespective of what the ultimate posture of the new U.S. administration is, there's going to be a
lot of movement and action to follow through on the commitments that these couple hundred
countries made in those negotiations," Samans said.
"I believe that the other countries are going to move forward irrespective of the United States,"
Samans went on to state.

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 December 2015 K. Al Awadi

New base 976 special 16 december 2016 energy news

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