New base energy news issue 853 dated 18 may 2016

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NewBase Energy News 18 May 2016 - Issue No. 853 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE: ENEC approves formation of Nawah energy company
(Images by NewBase )
(WAM) -- The Board of Directors of the Emirates Nuclear Energy Corporation, ENEC, has given
approval for the formation of Nawah energy company (Nawah), a wholly-owned operating
subsidiary of ENEC, which will be mandated to safely operate and maintain Barakah Units 1-4.
According to an announcement of the Corporation, the Board of Directors has mandated ENEC
management to proceed with the formation of the operating company and to ensure the transfer
and provision of all required resources in this regard.
The formation of Nawah as ENEC’s subsidiary operating company will bring greater focus towards
the safe and quality delivery of Units 1-4 at Barakah, according to the ENEC, which says that
Nawah’s mission will be to safely and reliably generate electricity from nuclear energy. "This
energy will advance the UAE’s growth, development and quality of life for future generations.
Nawah aims to become a globally recognized nuclear utility in the safe operation of nuclear
energy plants," it added.
The ENEC further stated that the launch of the operating subsidiary will allow the Corporation to
focus on the delivery of the strategic issues related to the UAE peaceful nuclear energy
programme, with a special focus on guaranteeing project delivery of the Barakah plants and the
support and development of the UAE nuclear industry. ENEC will also continue to represent the
interests of the Government of Abu Dhabi in the UAE's peaceful nuclear energy programme.

Greece and partners sign off Trans-Adriatic Pipeline to widen gas supply
Source: Reuters via Yahoo! Finance
Five countries in south-east Europe formally signed off on the construction of a pipeline which will
transport Caspian gas to European markets in an attempt to ease their reliance on Russia. The
870-km (540-mile) Trans-Adriatic Pipeline (TAP) is part of the so-called 'Southern Corridor' that
will link Azerbaijan's giant Shah Deniz II field with Italy, crossing through Georgia, Turkey,
Greece, Albania and the Adriatic Sea. It is the largest endeavour to bring new supply sources to
European consumers.
'The energy map of south-east Europe is being redefined and this turns Greece into an energy
hub of the region,' Greek Prime Minister Alexis Tsipras said at an inauguration ceremony in the
northern Greek city of Thessaloniki on Tuesday.
The 5-billion-euro project will cross through Georgia, Turkey, Greece, Albania and the Adriatic
Sea. European regulators cleared the project in March as part of Europe's drive to secure energy
supplies.
Around 10 billion cubic metres (bcm) per year of Azeri gas should reach Europe by 2020 through
TAP as well as the South Caucasus Pipeline through Georgia and the Trans-Anatolian Pipeline
(TANAP) through Turkey.
'We are inaugurating an important part of one of the largest and most complex projects in the
history of energy industry,' said Georgian Prime Minister Georgy Kvirikashvili. 'Georgia, as a
transit country, reiterates its commitment to the diversification of energy supplies to Europe.'
TAP is owned by BP, Azeri state energy firm SOCAR, Italy's Snam, Belgian company Fluxys,
Spain's Enagas and Axpo. Construction is expected to begin this summer.
The European Bank for Reconstruction and Development is considering financing of up to 1.5
billion euros ($1.7 billion) for TAP, which would be the largest loan it has granted. Total project

costs - which include drilling, offshore platforms and terminals as well as pipelines - are $45
billion and the entire pipeline route will span 3,500 km, with TAP the final link into Europe.
Cash-strapped Greece has been seeking to boost its role as a regional energy hub and has said
that TAP fitted well with another gas pipeline scheme, Interconnnector Greece-Bulgaria (IGB),
and a planned liquefied natural gas (LNG) project off the northern Greek city of Alexandroupolis.
Government officials say the project is expected to create some 8,000 direct jobs in country with
a record unemployment of 24 percent and will mean hundreds of millions of euros in contracts for
Greek firms which will take part in construction works.
Pipeline construction in Greece
The length of the pipeline in Greece is approximately 550 kilometres. TAP’s longest section, it will
start at Kipoi, near the country’s border with Turkey, and finish at its border with Albania, south-
west of Ieropigi.
The Greek section will include one compressor station near Kipoi for 10 bcm and an additional
one near Serres should TAP’s capacity be upgraded to 20 bcm. There will be 23 block valve
stations along the Greek route.

India Gropes its Way towards Market Prices
Gas Asia + NewBase
The Indian government’s plan to push India towards a gas based economy was earlier this month
by the minister for petroleum, Dharmendra Pradhan. On May 5, in an interview with Reuters, he
said that the government would boost domestic gas production and increase the purchase of
liquefied natural gas to check the rise in carbon emissions.
This policy has been expressed before, first in India’s Hydrocarbon Vision 2025, published in
2000; and again in Integrated Energy Policy of 2006. Both have emphasized the role of natural
gas in India’s energy future.
In the past, this drive was largely influenced by rising global crude oil prices and their growing
impact on the economy: buying crude used up foreign reserves.
India’s Intended Nationally Determined Contribution (INDC), as part of the COP21 agreement,
commits to 40% of the total installed capacity being based on non-fossil fuels, the other 60%
comprising clean coal technologies, energy efficiency measures and the greater use of natural
gas in power plants.
The push towards natural gas could significantly enhance the share of natural gas from today’s
8% of primary energy consumption and support the government’s aim to curb oil import
dependency by 50% by 2030. Most imported crude oil is refined for the transport sector. A study
by Nielsen (India) in 2013 observed that 70% of the diesel and 99.6% of the petrol is consumed in
the transport sector alone.

Demand forecasts were too bullish
According to the report prepared in April 2013 by Industry Group for Petroleum & Natural Gas
Regulatory Board (PNGRB), titled, Vision 2030 – Natural Gas Infrastructure in India, India’s
“realistic natural gas demand[1]” is set to grow at a compound annual growth rate (CAGR) of 6.8%
from 242.6mn m³/d in 2012-13 to 746 mn m³/d in 2029-30.
Despite these trends, India’s natural gas demand did not pick up, owing to constrained supply
resulting from the fall in domestic production (Figure), which drew in more LNG imports. This was
not the cheapest way owing to high LNG prices during 2012-2014.
It was only with the oil price collapse in June 2014 and the glut in the market that LNG prices also
fell sharply, offering scope for many LNG importing countries to renegotiate their long term LNG
contracts.
Over the last ten years, India’s LNG imports grew almost 2.8 times, from about 6.705 bn m³ in
2005-06 to 18.536 bn m³ in 2014-15.The following fiscal year, which ended last March, saw a
quantum jump of LNG imports by 14.96% with an increase of 2.773.28bn m³.
This trajectory has continued, since the contract with RasGas was renegotiated in December,
effective from January 1, 2016, which brought down the price to around $6-$7/mn Btu.
LNG imports since then have risen more sharply, particularly in February and March, which
registered a growth of 63% and 58% respectively in comparison with the previous year.
Therefore, prevailing LNG prices will shape up India’s LNG demand from now, which has already
been visible from several LNG contracts which India is looking forward to with producers in the US
and Australia.
GAIL India has already booked through long-term contracts supply of 3.5mn mt/yr and 2.3mn
mt/yr from Sabine Pass and Cove Point, respectively, and the shipments are expected to start

from 2017-18 till 2037-38. It has further imported a spot LNG cargo from the US; Cheniere has
said that one cargo went to Dahej in India. All this will give further impetus to India’s LNG
dynamics.
India is also planning to set up an LNG
terminal at Chabahar port in Iran. This
will help India ship back natural gas from
Iran.
The government has also come up with a series of measures to boost domestic natural gas
production. These measures include the following:
1. Intensification of domestic production and exploration activities through the new
‘Hydrocarbon Exploration and Licensing Policy’ (HELP), which has replaced the ‘New
Exploration and Licensing Policy’ introduced in 1999. HELP will have uniform license for
exploration and production of all forms of hydrocarbon, through an open acreage policy, which
shall be open throughout the licensing period. HELP would be based on revenue sharing
model, which is easy to monitor. This will also provide marketing and pricing freedom for the
crude oil and natural gas produced.
2. In order to enhance the share of natural gas in India’s primary energy basket, the
government is moving towards unconventional hydrocarbons such as shale gas and gas
hydrates. While shale gas policy has already been introduced for nomination blocks for Indian
upstream Public Sector Undertakings, research and development work for gas hydrates has
been started.
3. New gas pricing for discoveries in deep water/ultra- deep water, high pressure/high
temperature areas was also introduced, keeping in mind the global low oil price regime. These
discoveries are yet to start commercial production as on January 1, 2016. The producers were
allowed marketing and pricing freedom subject to a ceiling price on the basis of landed price of
alternatives fuels.

Thus it is expected that these reforms which offers more freedom to the producers would help in
augmenting the domestic oil and gas resources in India.
Notably, given the limited availability of domestic natural gas in the country, the government of
India has already formulated a gas utilization policy for allocation of domestic gas in an objective
manner. This policy allocates gas to core and non-core sectors. For the core sector, the priority in
which the gas is available to them is as follows:
(1) Gas-based fertilizer plants producing subsidized fertilizers.
(2) Gas-based LPG plants.
(3) Gas-based power plants supplying power to distribution companies at regulated tariff
(4) City gas distribution (CGD) entities for supply to domestic (PNG) and transport sectors
(CNG).
Consumers outside that core may use re-gasified LNG (RLNG), which is imported under open
general license on the terms and conditions mutually agreed upon between the buyers and
sellers.

However, the demand of RLNG is price sensitive for sectors like fertilizers and power, which
prompted the government to introduce the mechanism to help use of RLNG to power sector and
production of urea, briefed as under.
On March 25, 2015, the Cabinet Committee on Economic Affairs (CCEA), approved a major policy
intervention, wherein an effort would be made to revive and improve utilization of the stranded gas
based power generation capacity, which is lying idle or under-utilized due to shortfall in the
production of domestic natural gas in the country. RLNG would be made available to these
stranded power plants.
Under the above mechanism, the idea was to forego of the respective taxes and levies by the
central and states’ governments and a lower transportation tariff, marketing margin and re-
gasification charges by gas transporters and re-gasification terminals, so as to keep the cost of
power affordable.
Similarly, to supply gas by mixing domestic gas with imported RLNG at a uniform delivered price
to all fertilizer plants on the gas grid for production of urea, the government on March 31, 2015,
came up with policy intervention through a pooling mechanism. It was expected that the cost of
production of urea at pooled price would be less than the price of imported urea, which will
encourage the existing urea units to produce beyond their reassessed capacity.
While greater gas use is intended to curb coal based electricity production, coal demand, which
contributes 60.8% or 167.2 GW of India’s installed capacity, will be mostly through clean coal
policies. Coal will continue to play a dominant role in India’s future power generation. But now all
new large coal based generating stations have been mandated to use the highly efficient
supercritical technology, while about 144 old thermal stations have been instructed to improve
energy efficiency.
But poor gas grid connectivity and insufficient LNG infrastructure continues to make demand for
gas elusive. This calls for speeding up of planned gas grid network and LNG infrastructure to get
align with the demand to make optimum use of low LNG price, which should be in addition to
recent upstream reforms undertaken by the government so far.
Policies and the timely development of natural gas infrastructure have to be developed in tandem
so that gas demand can be fully met.

Canada: Alberta wildfire destroys oil sands work camp
as thousands of staff evacuated
Situation worsens for oil production sites north of Fort McMurray, while explosions in city itself
highlight uncertainty over when it will be safe to return
CNBC - Ashifa Kassam, Canada correspondent
The wildfire raging through northern Alberta has swelled in size and surged north of Fort
McMurray, consuming an evacuated oil sands camp on Tuesday and threatening several other
facilities in the region.
“It continues to burn out of control,” said Rachel Notley, the Alberta premier, one day after the
shifting fire forced the evacuation of 8,000 non-essential staff from more than a dozen camps and
sites in the oil sands region.
Tinder-dry conditions and temperatures in the mid-20s Celsius helped fuel the wildfire’s growth to
355,000 hectares on Tuesday – a significant jump from 285,000 hectares one day earlier. “Mother
nature continues to be our foe in this regard and not our friend,” Notley said.
Winds pushed the fire into an area dotted with oil sands work camps, completely destroying a
665-bed camp belonging to Horizon North Logistics just hours after the area was ordered
evacuated. The company said every staff member was safe and accounted for.
Two nearby camps for oil sands workers – the 3,700-room Noralta Lodge and 360-room Birch
Creek – were being carefully monitored as the flames approached. “We expect fire growth in the
area of many of these camps today,” Notley said.

Winds were expected to shift the fire east towards the Syncrude and Suncor Energy oil sands
facilities. Officials described both facilities as resilient to the risk of fire, pointing to the wide
firebreaks surrounding both sites and their private crews of highly trained firefighters.
Suncor said on Tuesday that it had begun shuttering its base plant operations as a precautionary
measure.
Hot spots continued to flare in the city of Fort McMurray – the oil sands hub ordered evacuated
two weeks ago as flames flickered in the trees on its outskirts. More than 88,000 people hurriedly
fled, with many of them now scattered across Alberta and the rest of the country.
Plans to allow evacuees to return to were being challenged by the continued threat of the fire as
well as the heavy blanket of smoke that stubbornly hovers in the region. On Monday the air quality
index, normally measured on a scale of 1 to 10, had soared to 38. By Tuesday it had dropped to
13 but officials warned it would likely rise again and hamper recovery efforts in the city.
Notley said she hoped to offer residents – who are now entering their third week since being
evacuated – a tentative timeline on re-entry later in the week.
Safety remains the primary concern, with two separate explosions igniting fires and damaging
roughly 10 homes on Tuesday. The cause of the explosions was under investigation.
“When you start turning on a switch ... in a city of 90,000 people, sometimes stuff happens,” said
Notley. “What those two incidents last night demonstrated to us is that’s the right way to go, that
we need to make sure we’ve got everything cued up before people come back in because we
want to make sure it’s safe.”

The fire cut a path of destruction through Fort McMurray, destroying entire neighborhoods but
mostly sparing critical infrastructure like the hospital, water treatment plant and airport. About
2,400 structures were consumed by the fire, but about 90% of the city was left intact.
The wildfire was expected to reach the neighbouring province of Saskatchewan on Tuesday, said
Chad Morrison, Alberta’s manager of wildfire prevention. The lack of rain in the forecast
suggested little relief was in sight for firefighters struggling to gain control over the blaze, he
added.
As the fire raged out of control in the region, production of oil sands crude dropped by roughly a
million barrels of oil per day. In recent days oil sands workers had begun returning to the camps
north of Fort McMurray in the hope of ramping up production. Monday’s evacuation and the
volatile nature of the fire have raised concerns that the region may suffer a prolonged production
outage.
Alberta’s GDP
The reduced production will cut Alberta’s gross domestic product by about 0.33 percent this year,
and erode Canada’s GDP by 0.06 percent, the Conference Board said. The rebuilding effort to
replace the 2,400 homes and buildings in Fort McMurray destroyed by the fires will add about
C$1.3 billion to the economy next year.
The Conference Board estimates are in the range of what the Alberta government is considering,
though it’s too early to provide specific figures, Notley said.
Wildfires came within a kilometer of the Cheecham oil terminal where crude is stored and shipped
out from the Athabasca region about 75 kilometers southeast of Fort McMurray, operated by
Enbridge Inc. Winds are pushing the fire away from the terminal, heading east, Notley said.
Enbridge sought to widen an existing firebreak around the terminal and spray down the facilities
Graham White, a company spokesman, said by e-mail Monday. Some pipelines in and out of the
terminal were operating.
Work Camps
Other work camps are currently threatened by the fire, in addition to the Horizon North facility that
was already destroyed, officials said on Tuesday. Highway 63, the main road in and out of Fort
McMurray that has been closed for periods during the fire, is very likely threatened again and may
close, Notley said.
The blazes, now burning for 17 days, forced more than 80,000 people out of their homes in Fort
McMurray earlier this month. Winds from the south and west and hot weather are expected to
cause them to continue to spread, Travis Fairweather, an Alberta Forestry spokesman, said by
phone on Tuesday.
Oil-sands production came offline as companies took precautionary measures including
evacuating workers and shutting down power lines and pipelines. Companies are taking similar
measures again. Inter Pipeline Ltd. said Tuesday it had partially shut down its Polaris and Corridor
systems due to fires. Horizon’s Blacksand lodge, a 665-room facility near, was safely evacuated
and the company assumes it was entirely lost, Rod Graham, chief executive officer, said in a
phone interview.
“If the workers are being evacuated, it would delay getting back to full capacity,” in the oil sands,
Graham said. “This fire is unpredictable and volatile.”

US: EIA’s Annual Energy Outlook is a projection, not a prediction
Source: U.S. Energy Information Administration, Annual Energy Outlook 2016 Reference case
The U.S. Energy Information Administration provides a long-term outlook for energy supply,
demand, and prices in its Annual Energy Outlook (AEO). This outlook is centered on the
Reference case, which is not a prediction of what will happen, but rather a modeled projection of
what might happen given certain assumptions and methodologies. Today, EIA released an
annotated summary of the AEO2016 Reference Case—which includes the Clean Power Plan—
and a side case without the Clean Power Plan.
The AEO is developed using EIA's National Energy Modeling System (NEMS), an integrated
model that seeks to reflect how various drivers of the U.S. economy and the different components
of energy production and use will interact to determine energy supply, demand, and prices.

The Reference case, which incorporates only existing laws and policies, is not intended to be a
most likely prediction of the future. EIA's approach to addressing the inherent uncertainty
surrounding the country's energy future is to develop multiple cases that reflect different sets of
internally consistent assumptions about key sources of uncertainty such as future world oil prices,
macroeconomic growth, energy resources, technology costs, and policies.
The alternative cases in the report show the model's sensitivity to different assumptions, which
EIA updates and publishes each year. The assumptions that inform the modeling play an
important role, and any results should be interpreted with the underlying assumptions in mind.
These assumptions and results are discussed in the Annual Energy Outlook and EIA's policy
analysis reports such as the studies of removing restrictions associated with U.S. crude oil
exports or the then-proposed version of the Clean Power Plan.
Policy assumptions tend to be especially complicated. In the United States, policies at the federal,
state, and local levels can all affect energy supply, demand, and prices. Often these policies have
timelines or other attributes that are revised by subsequent legislation or interpreted by executive
departments.
Some policies can interact in ways that are difficult to foresee. The AEO Reference case generally
reflects current laws and regulations within the simplified but often expanding modeling
parameters of NEMS.
Technological advances are also inherently difficult to anticipate. The Reference case typically
projects technological evolutions rather than technological revolutions.
For instance, energy production methods may become more effective and energy-consuming
equipment may become more efficient in the Reference case, but EIA does not attempt to identify
disruptive technologies or the timing of their availablity and widespread adoption.
The energy sector has always been dynamic and undoubtedly will continue to change in the
future. EIA has tried to make its projections as objective, reliable, and useful as possible.
However, the projections in the AEO should be interpreted with a clear understanding of the
assumptions that inform them and the limitations inherent to any modeling effort.

NewBase 18 May 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices remain near 2016 highs on global supply disruptions
Reuters + NewBase
Oil prices were trading near 2016 highs on Wednesday, as supply disruptions and output cuts
continued to tighten the market, although traders cautioned that high global crude inventories
were still weighing on markets.
International Brent crude futures were trading at $49.31 per barrel at 0047 GMT, 3 cents above
their last settlement, while U.S. West Texas Intermediate crude futures were unchanged at $48.31
a barrel.
Both contracts remained near their 2016 highs of $49.75 and $48.76 per barrel, respectively, hit
during intra-day trading the previous day.
"With oil continuing to suffer from supply disruptions... EIA inventory data will be key to price
action. Any further decline in stockpiles could see oil's run higher continue," ANZ bank said. The
U.S. Energy Information Administration (EIA) is scheduled to release official storage data later on
Wednesday.
"With wildfires shifting back towards oil sands operations, the risk of supply disruptions extending
into June has increased substantially. Combined with further falls in exports from Nigeria, the
physical market is particularly tight," ANZ added.
The oil industry is also keeping an eye on Venezuela, where economic and political turmoil is
threatening oil production.
"Supply outages, when set alongside concerns over Venezuelan supply (due to insufficient funds
to pay oil companies or spend on the maintenance of loading terminals), represents a significant
Oil price special
coverage

amount of oil lost in the short-term, which in turn is reflected in firm time spreads at the front of the
curve," BNP Paribas said.
Despite the disruptions, BNP Paribas said that there was still a large storage overhang that would
have to be reduced before the market could swing back into balance. The bank even said that
global crude inventories were still edging up despite the supply disruptions, implying that there is
still more oil being produced than consumed.
Oil has surged more than 80 percent since slumping to the lowest in 12 years earlier this year on signs the
global glut will ease as U.S. output declines. The market moved into a deficit earlier than expected
following supply disruptions in Nigeria and an increase in demand, according to Goldman Sachs Group Inc.
“Disruptions to supply, rising demand and falling U.S. output have helped to push prices up near the $50
level,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “Demand looks much more
solid than we’ve seen for some years and will probably flow through into 2017. The high inventories in the
U.S. will continue to act as a strong headwind against any sustained rally.”
West Texas Intermediate for June delivery gained as much as 27 cents to $48.58 a barrel on the New York
Mercantile Exchange and was at $48.47 at 10:55 a.m. Hong Kong time. The contract gained 59 cents to
$48.31 on Tuesday, the highest close since Oct. 9. Total volume traded was about 27 percent below the
100-day average.
U.S. Stockpiles
Brent for July settlement added as much as 21 cents, or 0.4 percent, to $49.49 a barrel on the London-
based ICE Futures Europe exchange. The contract increased 31 cents to $49.28 Tuesday, the highest
close since Nov. 3. The global benchmark crude traded at a premium of 29 cents to WTI for July.
Crude inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub,
increased by 508,000 barrels, the API said Tuesday, according to a people familiar with the figures.
Nationwide stockpiles probably fell by 3.5 million barrels, according to the median estimate in a Bloomberg
survey before a report from the Energy Information Administration.

NewBase Special Coverage
News Agencies News Release 18 May 2016
Is Saudi Arabia calling the market's bluff over oil?
CNBC - Holly Ellyatt | @HollyEllyatt
Oil market watchers have been keeping a close eye on Saudi Arabia ever since it announced last
month that it could very well increase oil production if and when it wanted to, but analysts at
Energy Aspects explained on Tuesday that the major oil producer could be calling the market's
bluff.
Saudi Arabia threatened to boost its already record-breaking oil output following the failure of a
meeting of OPEC and non-OPEC producers in Doha in April to discuss a possible freeze of global
oil production at current levels in an effort to support low oil prices.
The talks failed, mainly after Iran said it would not participate in a freeze, leading other Middle
Eastern producers, such as Saudi Arabia, to refuse to do so unilaterally. Following the failure,
Saudi's Deputy Crown Prince Mohammed bin Salman warned that the kingdom could immediately
increase output by more than a million barrels a day to 11.5 million.
Saudi Arabia is already widely blamed for a glut in supply in global oil markets as it, and the wider
OPEC group, decided in November 2014 to defend its market share in the face of rival producers
rather than to support prices, leading to a global decline in oil prices.
Oil prices fell on that threat and while they have since rebounded on outages in Canada and
Nigeria, Saudi Arabia has been closely watched for any signs it is actually preparing to ramp up
production.
Changes at the top of Saudi's oil ministry and industry have only heightened those expectations,
including a well-publicized IPO of its state oil company Saudi Aramco (whose Chief Executive
Amin Nasser suggested last week that the company was ready to meet any call on it) and a
replacement of its oil minister, with the influential long-time oil minister Ali al-Naimi replaced by
Aramco chairman Khalid al-Falih.
Empty threats and obstacles
Any increase is unlikely to happen anytime soon though, according to analysts at energy
consultancy firm Energy Aspects, which published a noted on Tuesday suggesting that there is no
reason to fear an imminent change of Saudi policy.
In fact, Energy Aspects said that Saudi Arabia would not even be producing its usual amount of
around 10.2 million barrels a day (mb/d), according to OPEC monthly reports, this month and was
unlikely to reach a high of 12.5 mb/d – Saudi Arabia's reported full production capacity, according
to Saudi Aramco's Nasser – by the end of 2017.
"A lot has been happening in the oil market lately. Yet, what has caught everyone's attention
amidst this drastic U-turn in balances is Saudi Arabia. Undoubtedly these are uncertain times, but
Saudi Arabia will not be producing 11 mb/d this month (especially since it has maintenance) and

will not be reaching 12.5 mb/d by end-2017. Oil rigs have been falling, and output has been
remarkably steady at 10.2 mb/d since August 2015," Energy Aspects' team said in the note.
The research consultancy also stated that any potential increase would not only take time, but
would need more oil infrastructure, such as oil rigs, and that markets had generally jumped to
conclusions about Saudi Arabia's oil output plans.
"Moreover, Saudi Arabia has made no announcements that it will increase productive capacity.
And while it would like to be prepared for a higher call on its crude as non-OPEC supplies fall fast,
increasing capacity takes time. The 1.5 mb/d increase in productive capacity to 12.5 mb/d took six
years to complete, by 2010. Even increasing production and maintaining it at 11 mb/d or higher
needs more rigs, much like sustaining output at 10 mb/d required 20 more rigs," it said.
In addition, Energy Aspects said that even the IPO of Saudi Aramco was "fraught with challenges,
and has hardly generated interest amongst investors while several of the recent reforms may soon
be reversed."
"Of course, change is occurring, but the lack of institutional capacity to undertake such deep
reforms means it takes time to implement such changes, and there will be plenty of obstacles
along the way."
Assumptions being made
The note blamed the media for its "perilous habit" of "boiling everything down to a soundbite,
hardly helps, with various comments, taken entirely out of context, adding further fuel to the fire"
and said that there was nothing concrete to suggest oil output was about to rise.
It said that a number of expectations about Saudi Arabia's oil strategy were being based on
assumptions and conjecture, rather than fact.
"Saudi Arabia will not change its policy of accommodating others (but) it does not mean (new
energy minister) Al-Falih will purse the opposite policy of increasing production to flood the
market. He has even taken to Twitter to reiterate that Saudi Arabia will continue with stable oil
policies — if only the market would listen."
Saudi's former oil minister Al-Naimi once said that that "scenarios to raise the country's oil
production capacity to 15 mb/d had been studied and could be set in motion if global demand
required it", but again, Energy Aspects said that there was no reason for Saudi Arabia not to make
such strategies clear and that as non-OPEC production fell, the call on OPEC crude was likely to
rise anyway.
"Undoubtedly, Saudi Arabia would want the call on OPEC crude to become the call on Saudi
crude and to be ready to supply the market if there is demand. So, the Kingdom may well look into
raising capacity over time, but whenever this happens, it will be driven by its expectations of
demand — not to prove a point and flood the market."
C E D I T : R E Z A / C O N T R I B U T O R

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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 18 May 2016 K. Al Awadi

New base energy news issue 853 dated 18 may 2016

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New base energy news issue 853 dated 18 may 2016