New base 992 special 26 january 2017 energy news

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NewBase 26 January 2017 - Issue No. 992 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE to fill Indian Mangalore strategic reserve with UAE oil
REUTERS/Adnan Abidi
The United Arab Emirates has signed a deal with India on Wednesday that allows the Gulf nation
to fill half of an underground crude oil storage facility at Mangalore that is part of New Delhi's
strategic reserve system.
New Delhi announced a series of pacts with the UAE ranging from defense, trade, maritime
cooperation to energy after a meeting between Prime Minister Narendra Modi and Abu Dhabi's
Crown Prince Sheikh Mohamed bin Zayed al-Nahyan.
UAE's Abu Dhabi National Oil Co will store about 6 million barrels of oil at Mangalore, taking up
about half of the site's capacity, said Sunjay Sudhir, joint secretary for international cooperation
at the Indian oil ministry.
India, hedging against energy security risks as it imports most of its oil needs, is building
emergency storage in underground caverns to hold 36.87 million barrels of crude, or about 10
days of its average daily oil demand in 2016.

"This will ... help to ensure India's energy security and enable us to meet the nation's growing
demand for energy," said Indian oil minister Dharmendra Pradhan. As one of the fastest growing
economies in the world, India needs massive investments in some key sectors, particularly
infrastructure.
During Modi's visit to the UAE in 2015, the two countries announced a $75 billion joint
infrastructure fund that would invest in India's infrastructure development. UAE is India's fifth
biggest oil supplier.
The crude supplies will begin in the last quarter of this year, Sudhir told Reuters. "We are talking
to them (ADNOC) for two-three grades and most likely it will Murban."
The two sides had discussed ways to advance their energy ties through specific projects,
including long-term supply contracts and joint ventures in energy, Modi said in a speech after his
meeting with the crown prince.
India in 2014 began talks to lease part of its strategic storage to ADNOC. Under those
discussions, India was to have first rights to the stored crude in case of an emergency, while
ADNOC would be able to move cargoes to meet any shift in demand. India has already filled the
other half of the Mangalore storage in Karnataka state with 6 million barrels of Iranian oil.
India, the world's third-biggest oil consumer, has also filled a Vizag storage site in southern
Andhra Pradesh with 7.55 million barrels of Iraqi oil and has invited bids from suppliers to fill an
18.3 million-barrel facility at Padur in Karnataka. The crown prince will be the guest of honor at
India's Republic Day parade on Thursday.
The storage deal with Indian Strategic Petroleum Reserves will allow Adnoc to store its crude at
the new Karnataka underground facilities in the southern city of Mangalore. Mr Al Jaber said this
provides a springboard for further energy deals between the two countries.
"We will utilise the Mangalore facility to not only build on our existing business relationships across
India but also to explore new downstream opportunities for Adnoc’s expanding range of refined
and petrochemical products," he said. Abu Dhabi has supplied about 8 per cent of India’s crude oil
needs in recent years.
During a ministerial visit to the UAE last year, Dharmendra Pradhan, India’s petroleum minister,
said the two countries were looking at potential refinery, petrochemical, pipeline and liquefied
natural gas terminal joint investments.

UAE NPCC wins Aramco contract for oil rig ‘jackets’
The national Anthony McAuley
Abu Dhabi’s UAE National Petroleum Construction Company (NPCC) has won an offshore
contract under the long-term agreement (LTA) it signed with Saudi Aramco in autumn, helping to
secure jobs for its Mussaffah yard.
The contract is for 17 jackets – the steel frames supporting offshore rigs – for the Berri and Marjan
offshore oilfields in the Arabian Gulf, north of the port town of Jubail.
The tender win comes three months after NPCC signed its Aramco deal, putting it in a closed
group of five companies that can bid for Aramco offshore engineering contracts in the value range
of between US$100 million and $300m. Subsidiaries of McDermott and Dynamic Energy of the
US, Italy’s Saipem and an Indian consortium led by Larsen & Toubro are also in the mix.
The initial contract will take about 11 months to complete, said Aqeel Madhi, the chief executive of
NPCC, who added that the Saudi deal, which runs initially for six years, could bring significant
additional business.
"Such a strategic agreement with a global major, Saudi Aramco, is an endorsement of NPCC’s
state-of-the-art expertise," Mr Madhi said.
NPCC is a joint venture between Abu Dhabi government conglomerate Senaat, which owns 70
per cent, and the rest is held by Consolidated Contractors International Company, the Athens-
based firm owned by the Lebanese Khoury family.
"Frequently, in the past couple of months they have sent us packages to bid on," he said. "We are
now also pricing for topsides", which are the big decks on the offshore platforms.
NPCC employs about 14,000 people, mostly in its giant 1.4 square kilometre yard in Abu Dhabi’s
Mussaffah industrial area.
Mr Madhi said the company "has had to trim here and there" during the oil industry downturn of
the past couple of years, but was able to keep work and employment rates up because of huge
contracts won for Abu Dhabi’s offshore fields as well as other projects.
"But we need to win more contracts for 2018" to keep the backlog of projects at a healthy level, Mr
Madhi said.
NPCC has worked with Aramco on large and smaller projects since 1985. Under new contract
terms the LTA group has also committed to meet Saudi’s "in kingdom total value added" goals,
which include local procurement and jobs targets.
Neither company said what the value of the jackets contract was, although the trade press
reported the tender had a value of $225m.

Libya’s Oil Output Is at Three-Year High and Rising
by Grant Smith and Laura Hurst
Libya is pumping 715,000 barrels a day of oil, the most since 2014, and is on track to keep
boosting output this year as the country restores much of the production lost amid political chaos
and conflict, the state oil company’s chairman said.
Blockades at the North African state’s main oil ports have ended, and output may reach 1.25
million barrels a day by year end of 2017, National Oil Corp. Chairman Mustafa Sanalla said
Tuesday at a conference in London. Additional production may create a challenge for OPEC and
other major suppliers that agreed to pump less crude starting Jan. 1 in an effort to end a global
glut.
“Every single major oil-export route is now open, although some are operating at significantly
reduced levels due to damage suffered in conflicts,” Sanalla said, according to the text of his
speech. “For the moment the oil is flowing. This can be an important foundation of stability in
Libya, if we build on it.”
Libya, with Africa’s largest crude reserves, is trying to revive its oil production and exports in spite
of continuing political uncertainty. Last month it re-opened its biggest oil field, Sharara. The
production figures Sanalla announced represent a 23 percent increase from the 580,000 barrels a
day that Libya pumped in November, according to data compiled by Bloomberg.
OPEC Exemption

The country pumped 1.6 million barrels a day before a 2011 revolt set off years of fighting
between rival governments and militias. The Organization of Petroleum Exporting Countries
exempted Libya from cutting output as the nation works to restore its oil industry.
The Sharara field, operated by Repsol SA, is pumping about 153,000 barrels a day, and NOC is
targeting output there of 250,000 barrels a day by May, Sanalla said in an interview in London.
The Eni SpA-run El-Feel field remains shut, he said. El-Feel, or Elephant, was also due to re-open
in December but guards demanding benefits prevented that, NOC said earlier this month. The two
western Libyan fields have a combined capacity of 450,000 barrels a day.
Of all the nation’s oil terminals, Es Sider requires the most repairs, Sanalla said. Only five of the
terminal’s 19 storage tanks are working, he said in the interview. Benchmark Brent crude was
trading 4 cents higher in London at $55.27 a barrel at 12:47 p.m. local time.
Seeking Investment
“Libyan oil production today stands at 715,000 barrels a day, the highest level in three years,”
Sanalla said. According to Bloomberg calculations, current production is the most since October
2014, when Libya pumped 850,000 barrels a day.
Libya needs investment of
$100 billion to $120 billion to
rebuild its oil industry, Sanalla
said.
“We intend in the coming
months to lift our self-imposed
moratorium on foreign
investment in new projects,”
he said. “We have been
waiting for a legitimate
government with a mandate
from the people to come to
power to do so, but we can
wait no longer.”
The UN-backed Government
of National Accord, based in
Tripoli, has the sole authority
to export Libyan oil, but forces
loyal to Khalifa Haftar, a
military commander based in
the east of the county, control
the major oil ports, Sanalla
said. While each side has a
key to Libya’s “treasure room,”
both keys are needed to to
open the door, he said.

US Trump Advances Keystone and Dakota Pipelines
by Jennifer Jacobs
President Donald Trump took steps to advance construction of the Keystone XL and Dakota
Access pipelines, marking the start of an era with fewer constraints on the oil industry to the
chagrin of environmentalists who have bitterly fought the projects.
The moves, among Trump’s first actions since taking office, are a major departure from the
Obama administration, which
rejected TransCanada Corp.’s
Keystone proposal in 2015 and has
kept Dakota Access blocked since
September. Environmentalists,
concerned about climate change
and damage to waters, land and
Native-American cultural sites, now
face an executive branch that’s less
sympathetic to their efforts. For the
oil industry, it heralds more freedom
to expand infrastructure and ease
transportation bottlenecks.
"We are going to renegotiate some
of the terms," Trump told reporters
today in the Oval Office as he signed the two measures. "We will build our own pipelines we will
build our own pipes."
Foreshadowing Trump’s plans, the president told U.S. auto executives at a White House meeting
Tuesday morning: "We’re going to make the process much more simple for the oil companies and
everybody else that wants to do business in the United States."
TransCanada climbed as much as 2.9 percent to C$64.36 at 11:24 a.m. in New York. Energy
Transfer Equity LP and Energy Transfer Partners LP, the developers of the Dakota project,
climbed as much as 4 percent and 2.4 percent, respectively.
TransCanada had no immediate comment on the president’s actions before they were
announced, and Energy Transfer didn’t immediately respond to requests for comment. A
spokeswoman for the Standing Rock tribe that opposes the Dakota project says she would
comment "if it happens."
White House press secretary Sean Spicer on Monday said both Dakota Access and Keystone are
examples of projects that would "increase jobs, increase economic growth, and tap into America’s
energy supply more." He said Trump wanted to balance environmental protection with activity that
can grow jobs and the economy.
It wasn’t immediately clear what mechanism the documents Trump signed today would take. But
his advisers have urged the new president to direct the U.S. Army Corps of Engineers to grant an
easement that would allow construction of the final portion of Dakota Access, reversing the
Obama administration’s conclusion that more environmental scrutiny was needed.
The advisers had also urged the president to pave the way for Keystone XL by rescinding a 49-
year-old directive from former President Lyndon B. Johnson that assigned the State

Department responsibility for determining whether proposed cross-border energy projects serve
the "national interest."
TransCanada may need to submit another formal application to build the pipeline. The company’s
plans for Keystone XL already have been vetted, with years of environmental scrutiny culminating
in Obama’s 2015 decision that the pipeline was not in the U.S. interest.
TransCanada has not said it would reapply for permission to build the pipeline, but the day after
Trump’s election, the Calgary-based company said it was looking for ways to convince the new
administration of the project’s benefits to the U.S. economy. The company has previously said it
remains "committed to Keystone XL."
Environmentalists fiercely battled the project, making it a flashpoint in broader debates about U.S.
energy policy and climate change. Landowners in the pipeline’s path warned that a spill of dense
crude could contaminate the Ogallala aquifer, a source of drinking water that stretches from Texas
to South Dakota. And activists said it would promote further development of oil sands in Alberta,
Canada that generally require more energy to extract.
Dakota Access opponents say the pipeline would damage sites culturally significant to Native
Americans and pose an environmental hazard where it crosses the Missouri River. Earlier this
month, the Department of the Army withheld the final easement necessary for construction
beneath the lake.
Energy Transfer has argued it went through the full permitting process and has the necessary
approvals. The company has said the line will be in service in the first quarter of this year, a delay
from its original expectations that Dakota Access would be operational by the end of 2016.
Swift approval of Dakota Access could reinvigorate the sometimes violent protests at the site of
the proposed construction. Environmental activists vowed to continue battling both projects.

“A powerful alliance of indigenous communities, ranchers, farmers, and climate activists stopped
the Keystone pipeline the first time, and the same alliance will come together to stop Keystone
again if Trump tries to raise it from the dead," said Travis Nichols, a spokesman with Greenpeace.
Josh Nelson, the deputy political director of the CREDO activist group said the action would show
Trump is "in the pocket of big corporations and foreign oil interests."
"Fierce grassroots activism has stopped these pipelines over and over again,” he said. "CREDO
will do everything in its power to stop the Dakota Access and Keystone XL pipelines, and keep
dirty fossil fuels in the ground where they belong.”
Pipeline supporters said a final easement for the project would illustrate Trump’s commitment to
building out energy infrastructure needed to ferry oil and gas around the U.S. Although Keystone
XL would transport oil sands crude from Canada, some space on the line is slated to be filled by
supplies from North Dakota’s Bakken shale play.
Dakota Access, likewise, is aimed at giving Bakken producers a new route to energy markets,
allowing them to forgo more costly rail shipments that have been a backstop when existing pipes
fill up. With a capacity of about 470,000 barrels a day, Dakota Access would ship about half of
current Bakken crude production and enable producers to access Midwest and Gulf Coast
markets.
Craig Stevens, spokesman for the Midwest Alliance for Infrastructure Now said moves to advance
Keystone XL and Dakota Access would be a "positive development" for "our nation’s resource
development energy infrastructure as a whole.
Energy Transfer owns the Dakota Access project with Phillips 66 and Sunoco Logistics Partners
LP. Marathon Petroleum Corp. and Enbridge Energy Partners LP announced a venture in August
that would also take a minority stake in the pipeline.

The Trump Energy Shock
One thing that should be abundantly clear at this point, though, is that what's good for America's
fossil-fuels business isn't necessarily great for the rest of the industry:
Made In America
The U.S. shale boom helped to upend the global oil market in late 2014
The chart above shows oil, but one on natural gas would look more or less the same. With coal,
the trends are a bit more nuanced: U.S. output has been falling in response to lower demand,
chiefly because of competition from all that natural gas.
In all three cases, excess supply has pushed prices down and American energy exports up --
transmitting that price pressure to the wider world.The other thing to bear in mind is that U.S.
shale oil and gas operates on a faster timetable than most other types of supply. The critical input
is capital.
And, as the past two years have shown, shale production costs have been dropping, with at least
some of that decline likely to last.All of which means that, if shale was a shock to the market, then
the new U.S. administration is a big aftershock.
Think of it this way: The country with the biggest potential to ramp up oil and gas supply quickly is
adopting policies tailor-made to encourage just that. Take Dakota Access, for example. If Trump's
signature clears the final barrier to completion, then the pipeline could be up and running later this
year.

Assuming 90 percent utilization, it could carry 450,000 barrels a day from the Bakken shale basin
toward refineries on the Texas coast, according to Afolabi Ogunnaike, a senior analyst at Wood
Mackenzie.Bakken output has been falling since December 2014 as E&P companies have shifted
focus to lower-cost regions such as the Permian basin in Texas.
Bakken Down
Bakken oil production has declined by 235,000 barrels a day, or 19 percent, in the past two years
One reason the Bakken lost out is that about 200,000 to 300,000 barrels a day has to be shipped
on higher-cost rail cars due inadequate pipeline capacity. Railing oil to the Gulf Coast costs about
$12 a barrel compared with $7 for a new pipeline, Ogunnaike estimates.
With Wood Mackenzie estimating the average breakeven price of Bakken production now being
around $52 a barrel, that $5 spread is significant.More pipes, more land, and a generally looser
approach to federal regulation won't spark a boom on their own.
Lower frictional costs will shift some marginal prospects into the viable column, though. Still,
prices remain paramount.This is where a new tax policy could really step things up. As I explained
here, a border-adjustment tax would tend to leave U.S.-produced oil trading at a big premium to
international crude.
In a report published this week, Goldman Sachs estimated that, at a 20 percent tax rate and
current Brent crude oil prices, West Texas Intermediate might immediately swing to a premium of
$10 a barrel. Under this scenario, Goldman forecasts U.S. oil output might rise by 1.5 million
barrels a day in 2018, almost double its current projection. And higher oil production usually
means extra gas along with it, meaning that market would also be affected.This would throw down

a gauntlet to OPEC and other countries -- including Russia -- trying to support oil prices with
supply cuts. They could choose to take more barrels offline to make way, but that could just create
more room for U.S. producers to take more market share -- the same dilemma that has been
dogging them since 2014.
In all likelihood, international crude prices would instead fall in an oversupplied market, taking
U.S. prices down with them (although still at a tax-induced premium).We shouldn't forget the
demand side of the picture: After all, the president's aim is to boost U.S. growth.The difficulty is
that, when it comes to demand, the U.S. definitely isn't in the driver's seat. America's economy just
isn't as oil-intensive as it used to be:
Fuel Efficient
The amount of oil required to produce a dollar of U.S. GDP has dropped by 61 percent in the past
40 years
Note: Oil consumption divided by real U.S. GDP.
On average, U.S. GDP has increased by 2.4 percent annually in the two decades through 2015.
Oil demand rose by about 0.5 percent a year, roughly 20 percent of the economy's pace, but with
all the growth happening in the first decade.
Say, in very crude terms, U.S. GDP grew by 4 percent now -- something it hasn't done since the
dot-com bubble in 2000 -- and increased manufacturing helped push the oil-to-GDP growth ratio
back up from about 20 percent to 40 percent. Under this scenario, oil demand might rise by
around 300,000 barrels a day.
That number, replete with caveats as it is, would be significant.
But it would be naive to focus only on the perceived benefits of upending decades of trade policy
without considering the risks.

NewBase 26 January 2017 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices rise on weakening dollar, but plentiful supplies cap gains
Reuters + NewBase
Oil prices rose on Thursday, driven up by a weakening dollar, but gains were capped by plentiful
supplies and inventories despite an effort by OPEC and other producers to cut output and prop up
the market.
Brent crude futures, the international benchmark for oil prices, were trading at $55.59 per barrel at
0313 GMT, up 51 cents, or 0.93 percent, from their last close. U.S. West Texas Intermediate
(WTI) crude futures were at $53.22 a barrel, up 47 cents, or 0.89 percent.
Traders said that the increase was largely down to a weakening dollar, which has lost 3.9 percent in value
since its January peak. Since oil is traded in dollar, a cheaper greenback makes fuel purchases less costly
for countries using other currencies, potentially spurring demand.
However, oil price gains were capped by data from the U.S. Energy Information Administration (EIA) which
showed a 2.84 million barrels increase in commercial crude inventories to 488.3 million barrels, which add
to a 6.3 percent rise in U.S. oil production since the middle of last year to 8.96 million barrels per day (bpd).
"EIA estimates that crude oil and other liquids inventories grew by 2.0 million barrels per day in the fourth
quarter of 2016, driven by an increase in production and a significant, but seasonal, drop in consumption,"
the agency said.
Rising U.S. inventories and output are countering efforts by the Organisation of the Petroleum Exporting
Countries (OPEC) and other producers including Russia to cut supplies by a almost 1.8 million bpd during
the first half of 2017 in an effort to end a global glut.
Key customers in Asia are also being spared any significant cuts as producers fear losing market share to
competitors.
Oil price special
coverage

Expensive Oil Means China's Foreign Reserves Will Shrink Even Faster,
Source: Goldman Sachs
Reserve losses in 2017 could exceed those in 2015 and 2016.
Much focus is on how China's capital outflows will impact the world's biggest pile of foreign-
exchange reserves, but another issue in need of attention here is the rally in crude, argues
Goldman Sachs Group Inc.
In a country where oil prices play "a disproportionate role" in the balance of payments — and
China's crude output is forecast to fall as much as 7 percent this year — the commodity's bullish
outlook poses a serious threat to reserves that have already shrunk more than 20 percent in the
past two years.
"The outlook for the balance of payments has deteriorated from a year ago, because oil prices are
now on an upward trajectory, which could push the current-account surplus to around $200 billion
this year, down from $331 billion as recently as 2015," Goldman analysts Robin Brooks and
Michael Cahill wrote in a Jan. 23 note.
That 40 percent slump is part of the picture for reserves, which contracted to $3.01 trillion at the
end of 2016 from a record $3.99 trillion in mid-2014. A stronger dollar will also drive outflows.
Goldman estimates the greenback will strengthen 15 percent by the end of 2019 against its major
developed-market peers, so China is likely to keep weakening its currency fixing to maintain
stability. The analysts reckon this could trigger a renewed pick-up in capital flight, which abated to
$532 billion in 2016 from $736 billion in 2015. China even registered net inflows via its capital and
financial accounts in December for the first time for 1 1/2 years.

Still, Goldman sees capital outflows slowing this year to $500 billion, and it expects reserve losses
to accelerate to $394 billion from $369 billion in 2016 because the deterioration in the current
account, led by surging oil prices, is "so sizable."

NewBase Special Coverage
News Agencies News Release 26 Jan. 2017
OPEC Clears Way for Cheap U.S. Oil to Sail to Biggest Market
Bloomberg - Serene Cheong
Add Southern Green Canyon and Mars Blend to the growing list of American crude that’s
challenging OPEC’s dominance in the world’s biggest oil market.
Cargoes of the two varieties produced in the Gulf of Mexico, which are heavier and more sulfurous
than supply from U.S. shale fields, are poised to flow into Asia as they turn cheaper relative to
similar-quality crudes from nations such as Saudi Arabia and Oman.
The deal between producers worldwide to cut output and ease a glut is boosting the cost of Middle
East supplies, priced against the Dubai benchmark, because most of the reductions are coming
from the region.
Meanwhile, U.S. marker West Texas Intermediate is turning relatively weaker as a rebound in
global crude prices from the worst crash in a generation is spurring more American rigs into
action. Shale oil that was already cheap enough to sail to Asia is now being joined by cargoes
from more traditional fields.
“Flows of Mars and Southern Green Canyon to Asia are extremely rare,” said Nevyn Nah, a
Singapore-based analyst at industry consultant Energy Aspects Ltd. But “the move is currently
viable as Dubai has strengthened against other benchmarks such as WTI, following the Saudi-led
output cut,” he said.

Asia is buying oil from as far away as the U.S. because of a shortage of supplies of medium-
heavy crudes, according to Nah. Refinery shutdowns for maintenance work on the U.S. Gulf
Coast mean that grades such as Southern Green Canyon are available and cheap enough to be
shipped to other regions, he said.
WTI’s cost fell below Dubai in December for the first time in at least three months. The U.S.
benchmark was at a discount of $1.08 a barrel to Dubai on Tuesday. Mars and Southern Green
Canyon are even cheaper than WTI because they are more difficult to refine.
Oil explorers last week put the most rigs back to work in U.S. oil fields in almost four years,
according to data from Baker Hughes Inc. Oil output in the nation rose to the highest level since
April in the week ended Jan. 6, while crude stockpiles surged by the most since November during
the same week.
Japanese refiner Tonen General Sekiyu K.K. bought Southern Green Canyon from BP, while
Mars Blend is being offered to Asian customers. The tanker Manifa is sailing to Singapore after
loading Southern Green Canyon, Eagle Ford shale crude and fuel oil via a series of ship-to-ship
transfers, according to Matthew Smith, director of commodity research at ClipperData LLC, a firm
that analyzes and tracks oil flows globally.
Such arbitrage trades became viable as cargoes turned relatively cheaper compared with similar-
quality Oman crude, a Bloomberg survey showed last week. Additionally, the premium for Brent
crude, the benchmark for more than half the world’s oil, against Dubai narrowed to a 16-month low
of $1.46 a barrel this month, providing an incentive for Brent-linked grades to flow from the Atlantic
Basin to the Asian market.
Market Competition
Such shipments from the Americas as well as Europe and Africa are making oil sales to Asia
more competitive. It’s also influencing the strategy of traditional dominant suppliers such as Saudi
Arabia. In January, the largest oil exporter was focusing its output curbs on its Arab Medium and
Arab Heavy grades while continuing to pump lighter crudes to compete better with U.S. shale and
African supply.
But that’s in turn boosted the cost of more sulfurous heavy crudes in Asia, creating an opportunity
for relatively cheaper and similar quality U.S. supply to flow east.
“Newer and complex refineries in Asia have no problem refining heavier crudes from the U.S. Gulf
Coast, as long as the economics make sense after factoring freight and market structure,”
said Tushar Tarun Bansal, director at industry consultant Ivy Global Energy in Singapore.
“Arbitrage flows of heavier crudes from U.S. Gulf Coast to Asia will remain an opportunistic trade.”

BHP Lifts Shale Spending as Oil Gains Lure Drillers to Add Rigs
Perry Williams and David Stringer
BHP Billiton Ltd., the largest overseas investor in U.S. shale, boosted spending on its onshore oil
and gas division as rising prices lure drillers to add rigs and spur a deals spree.
The company boosted spending on the unit to $165 million in the three months to Dec. 31, from
$108 million the previous quarter, according to a BHP statement Wednesday. It also boosted
overall planned petroleum exploration spending by 17 percent to $820 million for fiscal 2017 after
its successful bid for Mexico’s Trion field and positive drilling results in the Gulf of Mexico.
The oil industry is expected to raise spending for the first time in three years after slashing almost
half a million jobs globally during the downturn, industry consultant Graves & Co. said this month.
Projects in BHP’s petroleum division will account for about half of its capital expenditure over the
next five years, according to Macquarie Group Ltd.
“We will accelerate our counter-cyclical oil exploration efforts this year,” said BHP Chief Executive
Officer Andrew Mackenzie. “After the first successful rig, our onshore U.S. gas hedging program
will also be expanded to secure attractive returns.”
BHP, which last year booked writedowns of $7.2 billion against the shale unit, lifted the number of
operating rigs in its U.S. onshore division to three from two at the end of September following the
successful execution of its hedging pilot, according to the statement.
BHP, which earns about 21 percent of revenue from its petroleum business, including offshore
assets, sees oil and natural gas as better placed for price gains into next year than iron ore, its top
earner.
Oil prices have risen since the Organization of Petroleum Exporting Countries reached a deal to
curtail supply last year. The Nov. 30 agreement has prompted a surge in activity in the U.S., which
is not an OPEC member, as oil and gas producers increase drilling from last year’s record low.

Shale Frackers’ Weak Sales Leave Investors Asking What Growth?
by David Wethe
Reporting a profit might not be enough Thursday for Baker Hughes Inc., after its two larger rivals
failed to impress investors with anemic sales growth.
Schlumberger Ltd.’s adjusted earnings surpassed estimates by a penny, Halliburton Co. earnings
were 2 cents a share better than expected. Even Patterson-UTI Energy Inc., the rig contractor and
fracking-service provider that’s buying rival Seventy Seven Energy Inc. for $1.4 billion, announced
preliminary results that also are better than forecasts.
Still, sales for the two largest oil-service companies didn’t grow as fast as the increase in North
American drilling implied, and shares slid. Schlumberger sank 3.4 percent in the two days after its
Jan. 20 earnings release. Halliburton fell 2.9 percent Monday and Patterson-UTI tumbled 4.2
percent.
Investors are dissatisfied with the pace of growth, focusing on sales in North America, the driver of
the global oil industry recovery, according to Credit Suisse. Shale explorers are seen increasing
spending four times faster than the global average this year. The number of rigs drilling for oil and
gas in the U.S. and Canada has more than doubled since May, after the promise of OPEC
production cuts helped stabilize oil prices above $50 a barrel.
"Right now the street is fixated on how fast we recover," James Wicklund, an analyst at Credit
Suisse in Dallas, said in a phone interview. "So people aren’t as concerned about the quality of
the recovery as much as the pace of the recovery."
Even in the final three months of last year, the number of oil and gas rigs working in North
America grew by 19 percent. Yet Halliburton’s revenue in the region rose just 9 percent from the
previous quarter, while Schlumberger climbed 4 percent.

"If Halliburton and Schlumberger would have announced revenues in line with the nominal
increase of the rig count, everybody would have said, ‘Ok, looks like we’re on track,’" Wicklund
said. "There will definitely be more interest in the breakdown of numbers than there would have
been before."
Expectations for stronger frack pricing heading into earnings was pretty high for the two dominant
service providers, Colin Davies, an analyst at Bernstein in New York, said in a phone interview.
Enthusiasm has since been tempered.
He added in a note to investors: "We are now at cash positive margins for pressure pumping but
both companies indicate we are a long way from acceptable – we agree." Ultimately, the slower
sales growth is not a huge, clear indictment against the service providers, Wicklund said.
"It just sows that tiny seed of doubt," he said. "If you’re not growing as fast as the nominal rig
count, who is? And what does that tell me about the future? The question isn’t answered, but it
allows the question to be raised."

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Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
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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 January 2017 K. Al Awadi

New base 992 special 26 january 2017 energy news

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