New base energy news issue 868 dated 08 june 2016

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 Energy News 08 June 2016 - Issue No. 868 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
DEWA signs PPA & SHA with ACWA Power & Harbin Electric
consortium for Hassyan clean coal power project
DUBAI, 7th June, 2016 (WAM) - Saeed Mohammed Al Tayer, Managing Director & CEO of Dubai Electricity
and Water Authority (DEWA), signed a Power Purchase Agreement (PPA) and a Shareholders
Agreement (SHA) with Mohammad Abdullah Abunayyan, Chairman of ACWA Power and
representative of the ACWA Power and Harbin Electric consortium.
The agreement aims to implement the project to produce 2,400 megawatts (MW) of electricity
using clean coal. The Hassyan clean coal power project uses the Independent Power Producer
(IPP) procurement model on a Build Own Operate (BOO) basis.
This follows the sending of a letter of intent to ACWA Power and Harbin Electric consortium on 19
January 2016 in which DEWA selected the best bidder. The signing was attended by DEWA’s
Executive Vice Presidents, and senior officials from both ACWA Power and Harbin Electric.

The Project will be supported by a 25-year PPA with DEWA and the bidder has been required to
put in place a secure delivery of coal to the project over the 25-year life of the PPA. The first
2,400MW phase of the project comprises four 600MW units.
The second 1,200MW phase of the project includes two 600MW units with ultra-supercritical
technology. The project has a planned Commercial Operation Date of March 2023.
"DEWA’s Hassyan clean coal power project shows our commitment to achieving the vision of HH
Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and
Ruler of Dubai, to diversify the energy mix.
It also reflects DEWA’s commitment to its goals of energy diversification and sustainability of
resources, and achieving the Dubai Clean Energy Strategy 2050, which focuses on producing
electricity from clean coal as part of Dubai's energy mix.," said Al Tayer.
"DEWA works to achieve the fifth pillar of the Dubai Clean Energy Strategy 2050, which focuses
on creating an environmentally-friendly energy mix, with 25% coming from solar energy, 7% from
nuclear power, 7% from clean coal, and 61% from gas by 2030," added Al Tayer.
"Signing this agreement exemplifies the success of Public Private Partnerships and the
importance of involving the private sector in enhancing efficiency, productivity and cost reduction,
in addition to optimising resources, transferring the technology, and training and developing local
skills in the energy industry.

Moreover, signing a PPA with DEWA brings us closer to the completion of the financial close of
the project to start its construction as per the stated timeframe," said Abunayyan.
The Hassyan clean-coal power plan gained the interest of many international organisations. The
wide international participation in this field reflects the trust and interest of international investors
to invest in large projects supported by the Government of Dubai.
“This competitiveness and the competitive price for this project, reflects international investors’
trust in Dubai and in DEWA and the transparency in all our projects, and DEWA’s excellent
financial position as shown by improved credit ratings by Moody’s and Standard & Poor’s. I would
like congratulate the companies that have been selected to work with us on this leading project.
They will be a part of the success story of Dubai, the Emirate whose ambitions have no limits. I
would like also to thank all companies that submitted their proposals, wishing them success in
future projects,” concluded Al Tayer.
“DEWA and the Emirate of Dubai are to be congratulated on their vision of diversifying their
energy mix set out in the Dubai Integrated Energy Strategy 2030. We acknowledge and
appreciate the highly-professional approach demonstrated during the procurement process for
Hassyan project, and the consortium is committed to a smooth financial close and meeting the
target commissioning dates of the plant,” commented HE Mohammad Abunayyan, Chairman of
ACWA Power,
“Dubai has been promoting the diversification of its power market with a clear focus on clean
fuels. Hassyan clean coal project marks a major milestone in the pursuit of this strategy,” said Guo
Yu, Chairman and President of Harbin Electric International.

Saudi Arabia Scales Back Renewable Energy Target to Favor Gas
Bloomberg - Wael MahdiShare on FacebookShare on Twitter
Saudi Arabia is scaling back renewable power targets as the world’s biggest oil exporter plans to
use more natural gas, backing away from goals set when crude prices were triple their current
level, according to Energy Minister Khalid Al-Falih.
The kingdom aims to have power generation from renewable resources like the sun make up 10
percent of the energy mix, a reduction from an earlier target of 50 percent, Al-Falih said in Jeddah,
Saudi Arabia. Al-Falih provided new details of the country’s revived solar power program as he
joined other ministers to announce parts of a plan adopted by the cabinet on Monday to overhaul
the country’s economy.
“Our energy mix has shifted more toward gas, so the need for high targets from renewable
sources isn’t there any more,” Al-Falih said. “The previous target of 50 percent from renewable
sources was an initial target and it was built on high oil prices” near $150 a barrel, he said.
Saudi Arabia, which holds the world’s second-largest crude reserves, will double natural gas
production under the plan, and the government will expand the gas distribution network to the
western part of the nation. Generating more power from gas and renewables should make
available for export more crude, which would otherwise be burned for electricity for domestic use.
Solar-power should be the main renewable energy option for the nation, Ibrahim Babelli, the
country’s deputy minister for economy and planning, said in Dubai last month. Babelli directed
strategy at the government agency previously responsible for renewable energy policy. The cost
of building solar power plants is declining globally as Chinese panel makers boost manufacturing
capacity and slash costs.
Saudi Arabia aims to increase renewable energy production to 9.5 gigawatts, according to the
country’s Vision 2030 outline announced in April. State oil company Saudi Aramaco has a 10-
megawatt solar installation on the roof of a parking lot at its headquarters in Dhahran.
The Persian Gulf nation has already scaled back its renewable energy ambitions, including in
January 2015 when it delayed by nearly a decade the deadline for meeting its solar capacity goal,
saying it needed more time to assess technologies. The kingdom’s earlier solar program foresaw
more than $100 billion of investment in projects aimed at generating 41 gigawatts of power by
2040.

Nigeria : Forcados export pipeline Said to Be Under Repair
Bloomberg - Javier Blas javierblas2
Repair work on a key Nigerian crude oil pipeline operated by Royal Dutch Shell Plc is ongoing
under very tight security, according to a person familiar with the operations.
The repairs were being carried out in two different sites of the Forcados export pipeline, which
was hit by explosions in February and again last week, said the person, who asked not to be
named because of security concerns.
Earlier Chief Financial Officer Simon Henry said the company had to withdraw repair crews last
week after a second attack against the 48-inch Forcados pipeline that links onshore storage tanks
with an offshore port.
“We cannot operate or repair if our people are threatened,” Henry said in an interview at Shell’s
annual capital markets day.
Producers in Nigeria face a new level of insecurity as a wave of violence hits the oil-rich Niger
Delta, leaving output at its lowest in nearly three decades. The latest attacks have been more
destructive than in the past, Henry said.
“There is clearly better organization and targeting," according to the CFO.
Delta Avengers
The militants, which back in 2009 were loosely grouped around the Movement for the
Emancipation of the Niger Delta, now call themselves the Niger Delta Avengers. They claim to
represent the people of the region, portraying themselves as freedom fighters rather than rent
seekers.

The Avengers aim to bring production by foreign oil companies in Nigeria to “zero," according to a
statement on a recently created website. The site’s authenticity couldn’t be verified by Bloomberg
News.
Brent for August settlement rose 89 cents to $51.44 a barrel on the London-based ICE Futures
Europe exchange on Tuesday, the highest close since Oct. 9.
The resurgent conflict in Africa’s largest economy has a long history, interweaving corruption and
poverty with regional rivalries and presidential politics, but at its core is money.
Between 2006 and 2009, when the oil-rich region was rocked by similar campaign of violence, the
then president, Umaru Musa Yar’Adua, came up with a controversial solution: He offered a pardon
and monthly stipends to fighters willing to disarm. After his death in 2010, former President
Goodluck Jonathan doubled down on the strategy, awarding security contracts worth millions of
dollars to rebel leaders, who went from blowing up pipelines to protecting them.
Buhari Change
Thousands of fighters accepted the presidential amnesty, joining new private security companies
formed by their leaders and enjoying monthly payments from the government. The revolt, which at
its worst point had sunk oil production by about a third to 1.65 million barrels a day, quickly ended.
President Muhammadu Buhari, a 73-year old former general elected last year on an anti-
corruption platform, ended all pipeline security contracts and reduced the monthly stipends. In a
wave of attacks this month, the militants responded by blowing up key pipelines, cutting oil output
to a 27-year low of 1.4 million barrels a day.
Comprehensive Solution
The Forcados, Brass River and Bonny Light export terminals in Nigeria are under force majeure, a
legal term that allows companies to walk away from export commitments after several attacks.
The Escravos terminal is delaying shipments after attacks against facilities operated by Chevron
Corp., while a force majeure for Quao Iboe was lifted last week after Exxon Mobil Corp. carried
out repairs.
The militants -- perhaps building on the knowledge of their operations won through their security
contracts -- are striking firms including Shell Plc, Eni SpA and Chevron where it really hurts: key
oil-gathering hubs that knock down thousands of barrels of production at once as well as difficult-
to-repair underwater pipelines.
While the government has promised to quell the insurgency through military force, Shell said a
more comprehensive solution was needed. "The issue can not be resolved through security
only," Henry said.

China: Chevron Completes First Stage of Chuandongbei Gas
Project in Southwest China…Natural Gas Asia
Chevron Corporation’s fully-owned subsidiary Unocal East China Sea, Ltd. has commenced
natural gas production from the third train at the Chuandongbei project in
southwest China marking the completion of the first stage. The first train achieved its first gas
earlier this year on January 25 and the second train achieved first gas on April 7.
Production of first gas from the third train marks the successful start-up of first stage development
of the project, the company said on Tuesday. Production is planned to ramp up over coming
months.
The three trains have a combined design outlet capacity of 258 million cubic feet of natural gas
per day. The Chuandongbei project is estimated to contain potentially recoverable natural gas
resources of 3 trillion cubic feet.
The Chuandongbei project is one of the largest onshore gas projects developed by an
international oil company and a national oil company in China. The project covers over 800 square
kilometers in Sichuan Province and the Chongqing Municipality.
The first stage of the project includes a gas processing plant, a sulfur plant, a comprehensive
pipeline network and safety monitoring systems.
Unocal East China Sea, Ltd. holds a 49 percent participating interest as the operator and China
National Petroleum Corporation holds a 51 participating percent interest.
The Nanba gas processing plant at the Chuandongbei project (Image: Chevron)

Indonesia: Cooper Energy announces sale of its production assets
Source: Cooper Energy
Cooper Energy has signed an agreement with ACL International, a Canadian oil and gas company
(through its wholly owned subsidiary Bow Energy International Holdings), and Lamara Energy, a
Singapore based oil and gas company, for the sale of its 55% interest in the Tangai-Sukananti
KSO, South Sumatra Basin,
Indonesia. Under the terms of
the agreement, Cooper
Energy will receive total
consideration of US$4.3
million (A$5.9 million)
inclusive of working capital.
The sale agreement is subject
to regulatory and joint venture
approvals.
A deposit of US$0.26 million
has been paid and Cooper
Energy will receive a further
US$3.4 million on completion
at 29 July 2016, with the
balance to be received
through deferred payments
and as receivables fall due.
Consistent with the advice of
the company’s Cleansing
Notice of 18 May the agreed
sale of the Indonesian
production assets will result in
an immaterial loss (approx.
A$2 million against the book value at 31 December 2015).
The transaction will complete the company’s withdrawal from Indonesia, announced earlier this
year as part of its strategy to concentrate on Australia and in particular on the Gippsland Basin
gas projects. The sale of the company’s Indonesian exploration assets was completed on 1 June
for total proceeds of US$9.07 million.
David Maxwell, Managing Director, Cooper Energy recognised the results achieved by the Indonesian team:
'The efforts and technical judgement of our team in Indonesia delivered a 260% increase in
proved and probable oil reserves in the KSO in our most recent reserves report.
Production has been increased around 13 times from approx. 60 barrels of oil per day prior to
being shut in under previous ownership to the current rate of approx. 800 barrels per day, with
substantial upside from the development plans the team has prepared.
These are commendable results and I record our appreciation of the contribution made by the
team in Indonesia. It is now appropriate, given the opportunities available to Cooper Energy in
Australia that the next phase of the Indonesian asset development be taken up by a new owner'
he said.

India's LNG Terminal Capacity Seen at 47.5 mtpa in Six Years
Natural Gas Asia
India’s oil ministry expects country’s LNG import terminal capacity to double in next six years amid
rising demand for imported fuel.
According to a document released by the ministry on June 3, country’s LNG terminal capacity will
likely rise to 47.5 million tonne per annum (mtpa) by 2022 from the current 21.3 mtpa as existing
terminals expand capacity and new ones get commissioned.
Demand for gas in India is expected to be driven by refineries, fertilizer and power plants. In 2015-
16, the natural gas consumption in the country rose barely 2 percent to 52 billion cubic meters, of
which 40 percent was imported as LNG.
However, with global prices ruling low, consumption has soared, rising 14 percent in April, pushed
by imports that rose 45 percent. LNG consumption in power sector has increased from the level of
3 mmscmd during April 2015 to a maximum level of 11.47 mmscmd during March 2016.
Currently, there are four LNG terminals at Dahej and Hazira in Gujarat, Dabhol in Maharashtra
and Kochi in the state of Kerala. Capacity expansion of Dahej LNG terminal is expected from 10
mtpa to 15 mtpa by end of 2016. Further, a firm plan is in place to augment another 2.5 mtpa
capacity at Dahej, the oil ministry document stated.
Work to develop a new LNG terminal of 5 mtpa at Ennore in southern Indian state of Tamil Nadu
is at an advanced stage. In addition, two new R-LNG terminals of 5 mtpa capacity each (at
Dhamra and Kakinada on the east coast) are also planned to be developed.

US: Most natural gas production growth is expected to come
from shale gas and tight oil playsU.S. Energy Information Administration, Annual Energy Outlook 2016
The growth in total U.S. dry natural gas production projected in the Annual Energy Outlook
2016 (AEO2016) Reference case results mostly from increased development of shale gas and
tight oil plays. Natural gas resources in tight sandstone and carbonate formations (often referred
to as tight gas) also contribute to the growth to a lesser extent, while production from other
sources of natural gas such as offshore, Alaska, and coalbed methane remains relatively steady
or declines.
Natural gas production from shale gas and tight oil plays now makes up about half of the U.S. total
dry natural gas production. In the AEO2016 Reference case, production from shale gas and tight
oil plays is projected to grow from about 14 trillion cubic feet (Tcf) in 2015 to 29 Tcf in 2040,
making up 69% of the 2040 total dry natural gas production.
This category includes natural gas produced from shale formations as well as from tight oil plays,
which are low-permeability sandstones, carbonates, and shale formations. The specific plays
included in this category are the Sanish-Three Forks (part of the Bakken), Eagle Ford, Woodford,
Austin Chalk, Spraberry, Niobrara, Avalon-Bone Springs, and Monterey formations.
Tight gas production is the second main contributor. Although supply from these resources
increases by 31% from 5 Tcf in 2015 to 6.6 Tcf in 2040, its share of total dry natural gas
production remains relatively constant.
Tight gas became a separate wellhead pricing category when the Natural Gas Policy Act of 1978
was passed and established an incentive to produce tight gas resources when natural gas
resources were believed to be scarce. When wellhead natural gas prices were deregulated, tight
gas lost its specific market-related definition and now refers to natural gas produced from low-
permeability sandstone and carbonate reservoirs.

U.S. offshore natural gas supply remains at 1.4 Tcf until 2020 in the AEO2016. After 2020, it
decreases to 1.2 Tcf, reflecting declines from legacy offshore fields. As production from new
discoveries after 2027 offsets the decline in legacy fields, offshore natural gas production
increases to 1.7 Tcf in 2040.
In the AEO2016 Reference case, natural gas spot prices at the Henry Hub rise to about $5 per
million British thermal units (MMBtu) through the mid-2020s from an average of $2.62/MMBtu in
2015, then remain near or below $5/MMBtu (in 2015 dollars) through 2040.
In recent years, because of improvements in drilling technology and abundant domestic
resources, natural gas production has continued to grow despite relatively low natural gas prices.
In the Reference case projection, growth in demand for natural gas in the industrial and electric
power sectors and growth in exports of liquefied natural gas place upward pressure on domestic
natural gas prices.
Drilling technology improvements that are expected to continue through 2040 will help production
keep pace with demand (both domestic consumption and exports), resulting in relatively stable
natural gas prices throughout the projection period.
Other scenarios to be released in the coming weeks include different assumptions about future
world oil prices, macroeconomic growth, resource estimates, and technology costs that will affect
projected natural gas production and consumption.
As a result of growth in production, domestic production is soon expected to surpass domestic
consumption of natural gas, and by 2018 the United States becomes a net exporter of natural gas
for the first time since the 1950s. By 2040, net exports of natural gas reach 7.5 Tcf, which is 18%
of total U.S. production.

NewBase 08 June 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil hovers near 8-month highs on US inventory draw
Reuters + NewBase
Oil prices stood steady near their highest level in about eight months on Wednesday, helped by
industry data showing a larger-than-expected drawdown in U.S. crude inventories and by worries
about attacks on Nigeria's oil industry.
London Brent crude for August delivery was unchanged at $51.44 a barrel by 0151 GMT, after
settling up 89 cents on Tuesday. It earlier touched $51.55, the highest since Oct. 12.
NYMEX crude for July delivery was up 4 cents at $50.40 a barrel, after closing up 67 cents on
Tuesday to settle above $50 for the first time since last July.
U.S. commercial crude inventories fell by 3.6 million barrels last week, data from industry group
American Petroleum Institute showed on Tuesday after the market settlement, compared with
expectations for a 2.7 million barrel draw according to a revised Reuters poll.
The U.S. Energy Information Administration (EIA) will issue official inventory numbers at 1430
GMT on Wednesday.
Worries about global supply disruptions also supported the market, analysts said. The southern
Delta swamps in Nigeria have been hit by militant attacks on oil and gas pipelines which have
brought the African nation's oil output to a 20-year low.
Nigeria's government said it would scale down a military campaign and talk to the militant group.
Oil price special
coverage

Takayuki Nogami, senior economist at Japan Oil, Gas and Metals National Corp (JOGMEC), said
the start of summer gasoline season, supply disruptions in Nigeria and Canada and talk of a
possible delay in the timing of U.S. rate hike have combined to push up the market.
"The Nigerian militants have pledged to continue attacks until production becomes zero, so there
are worries over a further slump in output," he said.
The EIA on Tuesday raised its 2016 U.S. oil demand growth forecast, saying demand will grow by
220,000 bpd from 140,000 bpd previously.
But concerns about global demand weighed on prices. The World Bank slashed its 2016 global
growth forecast on Wednesday to 2.4 percent from the 2.9 percent estimated in January due to
stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and
diminishing capital flows.
Japan's economy grew faster than initially estimated in the first quarter, data showed on
Wednesday, as capital spending fell less than was first reported, but worries remain over slow
consumer spending and weak exports.

Oil demand growing ‘strongly’ says Trafigura as Opec strategy pays off
Bloomberg
Trafigura Group has joined other leading energy trading houses in saying oil demand is growing
“strongly" this year, suggesting that Opec’s cheap oil strategy is spurring consumption despite
weak economic growth in China and other emerging nations.
Oil ministers attending last week’s Opec meeting also expressed optimism about the outlook for
global oil demand.
“From the beginning of the year until now, the market has been correcting itself upward," the UAE
Oil Minister Suhail Al Mazrouei said in Vienna.
“Strong consumption growth", led by
petrol demand in the United States and
China, Trafigura said in its interim
report on Tuesday. The Singapore-
based company said it is now trading
more that 4 million barrels day of crude
and refined products for the first time,
up 46 per cent year-on-year.
“The much-anticipated rebalancing of
supply and demand now seems within
reach," said the Trafigura chief
executive Jeremy Weir said.
As oil’s rallied more than 80 per cent
since January to US$50 a barrel, most
analysts have focused on supply,
especially declining US oil production
and unplanned stoppages in Canada
and Nigeria, but a growing number of
traders and producers are pointing to
buoyant demand. The boss of Royal
Dutch Shell said on Tuesday oil
demand was set to grow 1.5 million
barrels a day in 2016, higher than the
1.2 million forecast by the International
Energy Agency.
The increase in consumption has largely been driven by petrol as lower fuel prices spur people to
buy news cars – often larger, less efficient models – and drive them further. US petrol demand will
average 9.3 million barrels a day this year, surpassing the peak set in 2007, the US Energy
Information Agency said in its most recent monthly report.
Marco Dunand, the chief executive and found of the Geneva-based Mercuria Energy, one of
Trafigura’s competitors, said last month that oil demand could grow by 1.5 million barrels a day to
1.8 million barrels a day in 2016.
“The rebalancing is happening a bit faster than anticipated because of the disruptions," Mr
Dunand said. “Demand is also stronger than expected" in countries from India to the US, he said.

NewBase Special Coverage
News Agencies News Release 08 June 2016
Shell Deepens Spending Cuts, Promises Higher Savings From BG
Bloomberg - Rakteem Katakey rakteem
Royal Dutch Shell Plc cut spending plans further and promised increased savings following its
record purchase of BG Group Plc as it continues to adjust to the slump in oil prices.
Europe’s biggest energy company will spend $29 billion this year, it said Tuesday. That compares
with a May forecast for capital expenditure “trending toward” $30
billion, which was down from an earlier projection of $33 billion.
Synergies from the BG acquisition will provide $4.5 billion in
savings in 2018, up from an earlier estimate of $3.5 billion.
Chief Executive Officer Ben Van Beurden, who staked his
reputation to buy BG as oil prices sank, is promising investors
higher returns and cash flows at lower oil prices as he resets the company following the $54 billion
acquisition. He has renegotiated contracts, eliminated thousands of jobs, maintained Shell’s
asset-sale program and sought to improve efficiency to weather the oil-market slump.
“By capping our capital spending in the period to 2020, investing in compelling projects, driving
down costs and selling non-core positions, we can reshape Shell into a more focused and more
resilient company,” Van Beurden said in a statement.
Stock Performance
Shell’s B shares, the most widely traded, have increased 11 percent this year in London, after a
31 percent gain last year. BP Plc has risen 4.1 percent and Total SA 0.4 percent.
Brent crude, the international benchmark, has rallied about 80 percent from a 12-year low in
January. Still, prices are less than half their level two years ago. That means companies are still
having to borrow to maintain dividend payouts even after cutting billions of dollars of spending.
Shell is banking on BG’s assets to boost production and cash flow. Yet the acquisition of BG is
driving up Shell’s debt gearing, which has risen above 26 percent from 14 percent at the end of
last year. Debt concerns resulted in a credit-rating cut by Fitch Ratings in February, potentially
increasing Shell’s cost of borrowing.
This remains a challenge for Shell. It’s still unable to cover its spending and dividend payouts with
cash flows at current oil prices. Rival BP said in April it could balance its books at oil prices of $50
to $55 a barrel next year.
Cash Outlook
Shell pledged to raise free cash flow to $20 billion to $25 billion and boost the return on capital
employed to 10 percent by 2020 at an oil price of $60 a barrel. That compares with an average
$12 billion free cash flow and 8 percent return on capital at $90 oil from 2013 to 2015.

How successful Shell is in its $30 billion asset-sale program will determine how quickly it can
balance its sources and use of cash. Crude’s slump has meant oil fields are not attractive to
buyers. Still, Shell plans sales in the U.K. North Sea and Gabon.
Shell has deepened job cuts this year as it continues to adjust to the slump in oil prices. It
announced last month 2,200 more jobs will be eliminated, taking the tally of losses to 12,500 from
2015 to 2016.
Shell's Big Find
Shell is learning not to waste a crisis. The Anglo-Dutch oil major is pulling on every lever to deal
with the consequences of agreeing a takeover of rival BG Group just before the oil price collapsed
last year. Shareholders can only hope that the zeal it now shows for running a tight ship will
endure once the company is on a surer footing.
The $54 billion cash-and-shares purchase of BG was completed in the first quarter, just as the oil
price hit rock bottom. As of March 31, Shell's net borrowings had shot up from $27 billion to $70
billion. Operating cash flow on a 12-month rolling basis was $23 billion -- too low for a company
then targeting $33 billion of annual capital expenditure and accustomed to paying $10 billion of
cash dividends annually, even allowing for a contribution from BG. No wonder analysts have been
penciling in dividend cuts.
Shell has now come up with a plausible self-help program. It says the yearly pretax operating
savings from integrating BG will be $1 billion higher than previously thought, at $4.5 billion in
2018. Capital investment has been revised down to $25-$30 billion annually up to 2020.
The targeted proceeds from selling off assets rise from $5 billion annually to an average $10
billion over the next three years. What's more, Shell expects new projects to start contributing $10
billion annually by 2018. A few billion here, a few billion there, and it looks like Shell can afford its
dividend after all.
Meanwhile, every $10 on the oil price is worth $5 billion on Shell's cash flow. Shell has
been contending with oil prices below $50 per barrel. Assume, as Shell does, that prices recover
to $60 and it's plausible that by 2020 Shell could have about $45 billion at its disposal to fund

ongoing capex and leave at least $20 billion of free cash flow to fund dividends and share
buybacks -- as Shell forecasts.
On an 8 percent free cash flow yield, the company would then be worth $250 billion, against $206
billion today, as ABN Amro analysts point out.
What could go wrong? Shell still needs to realize good prices for its disposals, and it can't control
the trajectory of crude prices. Plus the first use of any surplus cash will be to cut debt. To get
Shell's gearing down from 26 percent to its targeted 20 percent today would mean paying off $15
billion of borrowings.
So there you have it. Four years of belt-tightening and capital expenditure discipline at a company
renowned for a laissez-faire approach when managers ask for resources. It will be a long slog. If
Shell sticks at it, its culture may be lastingly more shareholder friendly.
C R E D I T : R E Z A / C O N T R I B U T O R

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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Khaled Malallah Al Awadi,
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MS & BS Mechanical Engineering (HON), USA
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Mobile: +97150-4822502
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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 08 June 2016 K. Al Awadi

New base energy news issue 868 dated 08 june 2016

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