New base energy news issue 891 dated 24 july 2016

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NewBase Energy News 24 July 2016 - Issue No. 891 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Solar Impulse: Zero-fuel plane begins final flight
By Jonathan AmosBBC Science Correspondent
The zero-fuel aeroplane, Solar Impulse, has left the Egyptian capital, Cairo, on the last leg of its
global tour. The aircraft should take about 48 hours to reach Abu Dhabi, UEA - the place it began
the circumnavigation in March 2015.
Pilot Bertrand Piccard is at the controls one final time. His flight ought to be fairly straightforward,
although his team has some concerns about how the heat in the Middle East may affect the plane.
Mr Piccard is likely to have to spend a lot of time at high altitude on oxygen to get above the
thermals and the turbulence they induce. The warmer, thinner air above the Saudi desert also
means Solar Impulse's motors will have to work harder to propel the vehicle forward.
This will require careful management of the energy reserves in the plane's lithium polymer
batteries, to be sure they can sustain the aircraft through the night hours.
"We thought it was going to be an easy flight because it's always good weather between Egypt
and Abu Dhabi across Saudi. But actually, it's extremely difficult to find a good strategy," Mr
Piccard told BBC News.
Solar Impulse has covered some 30,000km in its quest to become the first plane to circle the
world using no fuel, just the energy from the Sun.
The Cairo-Abu Dhabi flight marks the 17th and final segment in the journey, which has included
crossings of the Pacific and Atlantic oceans.

Mr Piccard has alternated pilot duties with his friend and business partner Andre Borschberg. The
pair had hoped to complete the challenge last year but progress was not quite swift enough to get
the best of the weather in the Northern Hemisphere's summer.
And when battery damage was sustained on an epic five-day, five-night passage over the western
Pacific in June/July 2015, the decision was taken to ground the effort for 10 months.
Media captionBertrand Piccard: "The Solar Impulse project does not end in Abu Dhabi" For Mr
Piccard, landing back in Abu Dhabi will represent the closure of a 17-year undertaking to prove
that a solar plane could circumnavigate the globe.
The idea was born when he made the first, non-stop, round-the-world flight in a balloon in 1999.
His Breitling Orbiter 3 envelope only just made it, landing in the Egyptian desert with virtually no
reserves left of the propane gas it had been using in burners to stay aloft.
Mr Piccard said he vowed then that "there had to be another way".
He acknowledges that airliners are not about to swap their jet engines for photovoltaic cells, but
argues solar will play a role in the future of aviation.
"I make the bet that in 10 years we will have electric aeroplanes flying with 50 passengers for
short- to medium-haul flights," he said.
"You can fly with no pollution and no noise - purely electric - and landing in urban airports, making
no disturbance for the neighbours.
"So, it will be a market for aviation and transport. And maybe sometimes people will say this all
started with a crazy idea of flying around the world in a solar aeroplane, and the outcome was
useful for everyone."

GCC to benefit from low oil production cost: BMI Research
National oil companies (NOCs) have increased their share of global oil production through the
down cycle, but remain encumbered by inefficiency and debt, BMI Research has said in a report.
GCC countries, the report said, are “poised to benefit due to the low production cost and an
extensive conventional resource base.”
National oil companies (NOCs) and independent oil companies (IOCs) have reacted very
differently to the fall in oil prices. Independent companies have become more nimble and
innovative in tackling areas of their business where they can reduce costs and improve
efficiencies.
By contrast, NOCs have had less pressure to optimise their operations due to the already low
production costs at vast conventional resource bases. Instead, NOCs have largely used
legislative means to reform energy subsidies and encourage foreign investment to reduce the
impact of lower oil prices on government budgets.
Due to the greater flexibility of IOCs, job losses, downsizing and restructuring has been more
prevalent in the private sector, with a substantial amount of the global production losses coming
from this sector. Since oil prices began falling in mid-
2014, Opec’s share of global production has
increased by approximately 2%.
As the global oil market moves closer to
rebalancing, it will become increasingly dependent
on the ability of less flexible NOCs to meet demand
in the short-term. In Latin America and Africa, the oil
downturn has pushed many foreign investors out of
low return NOC-dominated oil producing countries,
encumbering state-run companies with a greater
proportion of the upstream sector.
Within this context, it will be particularly difficult to encourage development as significant debt
loads restrict greater capital expenditure.
Most oil producing nations still require further cuts in domestic social spending or a strong oil
price recovery in order to achieve a fiscal balance. Year to date, Brent crude has averaged
$41.6/b, well below the fiscal breakeven of many key producing countries.
The first indications of this trend arose from the final investment decisions on the Tengiz and
Tangguh projects, which both benefited from significant cost reductions, making their
advancement more feasible at a lower oil price, it said.

Iraq oil exports set to rise from southern and northern ports in
July, despite leak Reuters+ Gulf News + NewBase
Iraq’s oil exports are set to rise in July, according to loading data and an industry source, putting
supply growth from OPEC’s second-largest producer back on track after two months of declines.
Iraq in 2015 provided OPEC’s biggest rise in supply. The growth has slowed this year due to
maintenance and technical problems, and Iraqi officials say seasonally higher domestic use has
curbed volumes available for export.
Exports from southern Iraq in the first 21 days of July have averaged 3.28 million barrels per day
(bpd), according to loading data tracked by Reuters and an industry source. That would be up
from 3.18 million bpd in June.
The increase comes despite a pipeline leak that shipping and trade sources said prompted a brief
suspension of loadings at two of the southern terminals. The Iraqi oil ministry said on July 11 the
leak was repaired.
“I think they had only a small dip in exports,” said another industry source, who added cargoes
were facing loading delays of about 12 days in the south. “They have an incentive to try to catch
up on the delays.” The south pumps most of Iraq’s oil. Iraq also exports smaller amounts of crude
from the north by pipeline to Turkey.
Northern shipments of crude from fields in the semi-autonomous Kurdistan region have risen to
550,000 bpd so far in July, according to loading data, from 514,000 bpd in June.
The shipments were running at 600,000 bpd at the start of the year but have slowed due to
pipeline sabotage and a decision by the central government in Baghdad to suspend pumping
Kirkuk crude into the line.
Iraq last year boosted production by more than 500,000 bpd, despite spending cuts by companies
working at the southern fields and conflict with Islamic State militants. Iraqi officials say they
expect slower growth in 2016.
This year, Iran has provided the biggest rise in supply from the Organization of the Petroleum
Exporting Countries as it recovers from Western sanctions.

Saudi Arabia beats Russia as top crude supplier to China
Reuters + newBase
Saudi Arabia, the world’s biggest oil exporter, regained its position as China’s top crude supplier
in June, after losing out to Russia over the previous three months, customs data showed
yesterday.
China imported 4.569mn tonnes of crude from Saudi Arabia in June, or 1.112mn barrels per day
(bpd), down 14.2% on the year but beating 961,000 bpd in May. Saudi imports edged up 0.24%
in the first six months of the year versus a year ago to an average of 1.06mn bpd.
Russian exports to China have benefited from good demand by independent refiners since late
2015 after the country allowed them to import crude for the first time. China imported 4.107mn
tonnes, or around 999,420 bpd, of crude in June from Russia, down from a record 1.24mn bpd in
May.
Russian imports rose 35.3% in the first half to 1.05mn bpd, just behind Saudi Arabia.
“Beijing is probably quite pleased with the competition for shares of China’s crude oil market,”
said Washington-based China energy expert Erica Downs of the Eurasia Group. “The
government doesn’t want to be too dependent on any one supplier, so competition between
major suppliers is a welcome development, especially if it results in lower prices.”
Nicknamed “teapots” due to their relative smaller scale, independents contributed more than half
of China’s 930,500 bpd incremental crude buys during the first half. Stockpiling to boost
government reserves was another driver for imports, as new tanks became available.

Imports from Iran rose 16.1% in June over a year earlier to 780,175 bpd, up from 671,176 bpd in
May. Imports for the January-June period gained 2.5%.
Shipments have held relatively steady as Tehran has been focusing on recouping lost markets in
Europe after sanctions were lifted, Iranian oil sources say. Sharp gains in Chinese imports also
came from smaller Opec producer Kuwait as well as Venezuela.
Kuwait supplied 45% more in June at 1.336mn tonnes, or 325,100 bpd. Supplies from
Venezuela shot up 88% in June and for the first six months rose 35.5% to 9.936mn tonnes, or
398,500 bpd.
While China’s total crude imports in June were the lowest on a daily basis since February, at
7.45mn bpd, refined fuel exports were the second-highest on record at 4.22mn tonnes,
suggesting a growing fuel surplus.
Yesterday’s data showed China’s gasoline exports hit a record high at 1.1mn tonnes in June,
more than double a year ago.
Diesel exports gained 64% to nearly 1.1mn tonnes, the fourth consecutive month in which they
topped 1mn tonnes.
The National Development & Reform Commission said yesterday China’s refined fuel
consumption rose 4.4% in the first half compared to a year ago. It said gasoline demand gained
13.7% while diesel demand fell 3.1% during the period.
China’s top economic planner did not explain how it had calculated the numbers.

Turkey’s Geothermal Projects Pollute More Than Coal Power Plants
Anna Hirtenstein ahirtens
Geothermal wells usually provide a steady supply of clean energy flowing from the natural heat of
the Earth. In Turkey, because of a quirk in the geology, some of those wells pollute as much as
coal-fired power plants.
The nation has a layer of subterranean limestone, which lets loose carbon dioxide when it comes
in contact with steam as hot as 280 degrees Celsius (536 Fahrenheit) tapped by geothermal wells,
according to a report commissioned by the European Bank for Reconstruction and Development,
a government-backed institution helping fund the projects.
The results mark a rare example where renewable energy is producing a greenhouse gas. They’re
disputed by at least one of the companies singled out in the EBRD report and have prompted the
industry to search for ways to pare its emissions. They’ve also put a spotlight Turkey’s ambition to
boost geothermal capacity 60 percent by 2023, making it one of the world’s top markets for the
technology. The standard-setting Climate Bond Initiative said none of the projects pass its
sustainability criteria.
“It is clear that in some areas of Turkey, the present concentration of CO2 is quite high,” said
Adonai Herrera-Martinez, director of energy efficiency and climate change at the EBRD in Turkey.
“There is a clear momentum by all parties to actually understand how to manage this.”

India expands crude oil refinery capacity
The National - Rebecca Bundhun
The world’s largest crude oil refinery, on the western coast of the Indian state of Gujarat, is spread
over 3,035 hectares and has the capacity to process 1.2 million barrels per day (bpd).
The Jamnagar complex is owned by Reliance Industries, the Indian conglomerate controlled by
the country’s richest man, Mukesh Ambani. Through this sprawling network of pipes and metal
structures, crude oil – much of which comes from the Middle East – is refined into products such
as petrol, diesel, kerosene used for cooking, jet fuel for airplanes and liquefied petroleum gas
(LPG), a household and industrial fuel. These products are then distributed across the country and
exported globally.
India has rapidly expanded its capacity to refine crude oil over the past decade and the country
has become a major centre for petroleum refining. And it is continuing to grow the sector.
There are plans to build a vast refinery in the state of Maharashtra, to be developed by the India
Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum, all state-controlled
refiners. With a planned capacity of 1.2 million bpd, it is set to rival the Reliance plant. The first
phase, which will have the capacity to refine 800,000 bpd, is projected to cost more than 1 trillion
rupees (Dh54.6bn).
"India is emerging as a preferred refining hub," says Mike van Croonenburg, the chief executive of
Petrol Storage Broker, an independent broker based in the Netherlands. The slump in crude oil
prices has hit refiners’ revenue, but at the same time is helping companies sell product, he says.
In terms of its total refining capacity, India ranks fourth globally, with only the United States, China
and Russia ahead of it, according to the International Energy Agency (IEA).
The Reliance refinery in Gujarat state is the world’s largest such facility and can process 1.2 million barrels a
day. India’s refinery capacity rose to 215 million tonnes a year in the financial year to March 2015. AFP

As well as producing petroleum products for use within the country, India is a major exporter of
refined products.
Its capacity has risen to 215 million tonnes a year in the financial
year to March 2015, compared with 62 million tonnes in the financial
year to March 1999, government data shows.
Out of 23 refineries operating in India, 18 are owned by state-run
companies; three are in the private sector; and two are joint
ventures, according to a report by the consultant Pricewaterhouse
Coopers.
"The growth in refining capacity has transformed India from a net
importer of petroleum products until 2000 to 2001, to one of the
world’s largest exporters of refined petroleum products in 2014 to
2015," PwC says.
But production of crude oil within India is very limited, which means
the country is heavily dependent on imports – and this dependency
is growing.
"The indigenous production of crude oil in India is not keeping pace
with the increased refining capacity," PwC says. "The challenge
before Indian companies is to take effective measures for enhancing
the exploration and production of petroleum resources.
Simultaneously, the infrastructure for refining, distribution and
marketing, import, export and conservation of petroleum products
must be improved."
India is the third-largest importer of crude oil, behind the US and
China, and is dependent on imports for more than three-quarters of
its supply. Its large refining industry is a major contributing factor in
this.
The IEA projects that India’s reliance on oil imports will rise by 90
per cent by 2040, when crude imports will rise to 7.2 million bpd, second only to China, sourced
predominantly from the Middle East.
"India’s refinery capacity is projected to rise steadily," it says. But the IEA adds, "Indian refiners
face an evermore competitive product-export market", with the Middle East expanding its refining
capacity.
The agency says India is one of a few countries, along with the US and South Korea, to rely on
imports of crude oil while also being a significant net exporter of refined products. Its domestic
crude oil production at 900,000 bpd is far less compared with its refinery capacity, at 4.4 million
bpd.
Its expanded capacity in the sector has led to India having a surplus of refined products, the IEA
says. India is a net exporter of all refined products, apart from LPG.
"India has been an important supplier of diesel to Europe and a regular supplier of transport fuel to
the Asia Pacific and Middle East countries. Its exports come mainly from the private-sector
refiners Reliance and Essar, while the public-sector refiners supply the domestic market."
India is successfully competing with other countries in the refining space, according to the IEA.

"India’s more modern, privately owned refineries, which are capable of efficiently processing
Middle Eastern oil into high-quality products, were able to gain market share from less complex
refineries in Europe and Japan."
India’s energy demands are being driven by factors such as the country’s large population, rising
incomes, the expanding economy and a push to increase manufacturing.
"The refining sector plays an important role in energy security by ensuring the total energy
demand for petroleum fuels is met from domestic and overseas supplies in a timely manner,"
according to PwC. Companies have ploughed investment into the sector to meet India’s future
energy demands.
The expansion of refineries in the Middle East and India’s dependence on oil from the region has
led India refiners to "sharpen their focus on improving their performance through modernising and
upgrading their refinery configurations", PwC says.
"In India’s economy, the refining industry plays an important part," says Pradeep Gupta, the
executive director of Jagson International, an offshore drilling company for oil and gas exploration
in India. He says the Indian refining industry is set to continue its expansion. "We expect the
demand to accelerate in the 2016 through to 2017 time frame.
"As India’s transport and industrial sectors continue to expand under economic development, and
because of the oil price declines and recent government policy initiatives to increase motorway
and road infrastructure to promote Indian manufacturing, these factors will help demand grow."
But India’s refining sector faces a number of challenges, experts say. Mr van Croonenburg
highlights that these include a lack of innovation and operational efficiency, as well as escalating
project costs. Also, he points out that the effect on the environment of refineries, which leads to
pollution, is another major area of concern.
"Many of the refineries in India are old and need a lot of investment to maintain efficient
operations," Mr van Croonenburg says. "It is time to retire some of India’s old refineries and set
up new ones with bigger capacities."

U.S. Oil Drillers Add Rigs in Longest Streak Since August
Loomberg - Rachel Adams-HeardShare on Twitter
U.S. oil producers continue to revive drilling in the shale patch, adding rigs for the fourth
consecutive week in the longest streak of increases since August.
Rigs targeting crude in the U.S. rose by 14 to 371, after 27 had already been added since the start
of the month, Baker Hughes Inc. said on its website Friday. Natural gas rigs declined by 1 to 88,
bringing the total for oil and gas up by 15 to 462.
"The North America market has turned," Dave Lesar, chief executive officer at Halliburton, told
analysts and investors earlier this week on a conference call. "We expect to see a continued
modest uptick in the U.S. rig count during the second half of the year."
Still, the increase in drilling may not have momentum, said Luke Lemoine, an analyst at Capital
One Southcoast in New Orleans.
"The oil rig count popping 14 rigs this week is likely due to recent oil prices that were closer to
$50," he said in an e-mail. It’s "quite possible that we continue to see a few more weeks of follow-
through, but if oil prices stay in the low $40s, the rig count’s upward momentum will likely be
halted."
After nearly doubling from a 12-year low in February, a rebound in oil has prompted American
producers to expand drilling in recent weeks after idling more than 1,000 oil rigs since the start of
last year. Prices have since started to moderate, with West Texas Intermediate on track for its
second weekly decline in three weeks. The U.S. benchmark was down 2 percent to $43.85 at 1:30
p.m.
The return of idled rigs to service has led some to speculate that a rise in output will follow. U.S.
production rose by 9,000 barrels a day to 8.49 million in the week ended July 15, EIA data show.

Exxon grabs reins in InterOil hunt as rivals bow out of deal
Bloomberg/Sydney
Exxon Mobil Corp has a clear path to expanding its reach in Papua New Guinea after its rivals
said they wouldn’t counter a $2.5bn bid for gas explorer InterOil Corp.
Oil Search and Total had offered to buy InterOil in May in a deal that valued the company at
$2.2bn. Exxon topped it with its offer on July 18. Oil Search said Exxon buying InterOil will achieve
the same synergies it sought with its bid. A Total spokesman said by e-mail that it won’t make a
counter offer because its original bid represented fair value. InterOil officials said they planned to
release a statement soon.
An Exxon deal is welcome for Oil Search because it would drive integration between Papua New
Guinea’s two liquefied natural gas projects, lowering costs and making them more competitive in
an over-supplied market, Oil Search managing director Peter Botten said in an interview with
Bloomberg TV. Exxon already operates the existing PNG LNG plant, and buying InterOil would
give it a portion of the proposed Papua LNG terminal. Oil Search has stakes in both.
“We work very well with Exxon Mobil as we do with Total,” Botten said in an interview in
Bloomberg’s Sydney office. “The cooperation between the two projects does have the capacity to
drive down the capital costs, optimize the timing, the use of resources and contributions of various
fields into the next phase of growth.”
An Exxon spokeswoman said the company doesn’t comment on commercial discussions.
All four companies are involved in the Papua New Guinea gas industry. Exxon and Oil Search run
the country’s only liquefied natural gas terminal, PNG LNG. Oil Search, Total and InterOil are
partners in the Elk-Antelope gas field and a second proposed terminal, Papua LNG. Exxon buying
InterOil means that two and possibly three new liquefaction trains will be built in Papua New
Guinea, according to Botten.
Oil Search shares in Sydney rose as much as 3.1% and closed up 1.1% to A$7.41.
“We see Oil Search as the winner of this arrangement as they get the alignment without dilution,”
Neil Beveridge, a Hong Kong-based analyst with Sanford C Bernstein & Co said in a research
report. With Exxon’s entry, the probability that two additional LNG trains or more will be
sanctioned has “increased significantly.”

InterOil said Exxon had offered it a fixed price of $45 per share, which values the company at
$2.5bn, including $188mn in net debt. Exxon also included a so-called contingent-value right,
offering $7.07 per share for each trillion cubic feet of likely gas reserves above 6.2tn found in
InterOil’s Elk-Antelope fields, capped at 10tn cubic feet.
While gas-export projects globally are being delayed or scrapped amid a downturn in the energy
industry, Papua New Guinea is seen as one of the most promising locations due to lower
development costs and gas reserves that also include condensates, a type of light oil that adds
extra revenue.
The Elk-Antelope fields are 340 kilometres (211 miles) away from the proposed site of the LNG
plant near the capital, Port Moresby, less than half the distance for the resources feeding the PNG
LNG project, according to an InterOil presentation in January.
If construction of the separate Papua LNG project starts in 2018, it would take until 2022 before
first shipments leave the terminal, according to BMI Research. Papua New Guinea exported
8.76bn cubic metres of LNG last year, a level that should increase to more than 20bn by 2024,
BMI said in a report on Wednesday.
If the companies integrate PNG LNG and Papua LNG, they could save $2bn to $3bn in capital
costs by sharing assets and power generation, Oil Search said in a June presentation.
Lower development costs will allow the companies to offer more flexibility to potential LNG buyers,
who are looking for shorter contracts in an over-supplied market, according to Botten. LNG supply
and demand probably won’t come into balance until the early 2020s, he said.
“We think, especially with cooperation between the two projects in PNG, that we’re very well
suited to being the lowest-cost producer feeding into that market,” said Botten.

NewBase 24 July 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil settles down 1.25% as glut fear persists
Reuters + CNBC + NewBase
Oil prices were on track to a weekly loss as potentially higher Iraqi crude exports and bearish U.S.
inventory data weighed on the market.
Also on Friday, the number of rigs operating in the
United States rose for a fourth consecutive week,
increasing by 14 to a total of 371 rigs, oilfield
services firm Baker Hughes reported.
While many expect global oversupply of oil to ease in
the near term, huge amounts of crude remain in
vessels at sea and storage tanks on land as the
rebalancing takes longer than some had anticipated.
Brent crude was down 54 cents, or 1.17 percent, at
$45.66. It fell as low as $45.26 earlier, the lowest
since May 11. The contract was on pace for a weekly loss of nearly 5 percent.
U.S. West Texas Intermediate (WTI) settled down 56 cents, or 1.25 percent, at $44.19 a barrel,
and last fell 57 cents, or 1.27 percent, to $44.18.
In the Middle East, Iraq's oil exports are set to rise in July, according to loading data and an
industry source, putting supply growth from OPEC's second-largest producer back on track after
two months of decline.
Oil price special
coverage

Exports from southern Iraq in the first 21 days of July have averaged 3.28 million barrels per day
(bpd), according to loading data tracked by Reuters and an industry source. That would be up
from 3.18 million bpd in June.
The rise came as a report by BMI Research on Friday said fundamentals in the Asian diesel
market remain weak, as demand for the fuel continues to wane in key Asian markets.
"Tight margins, ample supplies and brimming stockpiles at key diesel storage hubs suggest that a
pullback in diesel output is imminent," the report said.
While U.S. production has been falling, crude inventories are at 519.5 million barrels, historically
high for this time of year, the government's Energy Information Administration said this week.
U.S. crude and oil product stocks rose 2.62 million barrels to an all-time high of 2.08 billion barrels
as gasoline stocks posted a surprise summer build of 911,000 barrels.
Adding to that, market intelligence firm Genscape reported on Thursday a build of 725,176 barrels
for the week to July 19 at the Cushing, Oklahoma delivery point for U.S. crude futures, traders
said.
"These large and increasing stocks will not only up the likelihood of additional commercial short
hedges, but will also encourage the commercials to defer long hedges given the comfort of more
than ample supply availability," said Jim Ritterbusch of Chicago-based oil markets consultancy
Ritterbusch & Associates.
Falling prices in the United States,
coupled with low shipping costs,
have also encouraged traders to
send U.S. oil to Europe, which
would add to supply in the region.
This has helped the market shake
off further disruptions in Nigeria,
where the largest stream of crude is
under force majeure and pipeline
attacks have cut some 700,000
barrels per day from production,
according to state oil firm NNPC.
"There is so much oil in storage that
it will take months to truly feel the
erosion of the overhang," Energy Aspects said in a note. Inventories of oil products have also
been climbing in Europe and Asia, with gasoline stocks in the Amsterdam-Rotterdam-Antwerp hub
at record highs and BMI Research warning of "brimming stockpiles" in Asia.
"The narrative of a balanced oil market (in the second half of 2016) has so far been an illusion,"
UBS oil analyst Giovanni Staunovo said. "Supply might actually increase in the near term with
the further return of disrupted production and higher Middle East production, while demand growth
is set to slow in emerging Asia."
Even so, some market participants braced for volatile trading.
"Our view is that WTI will fall to $40 in the near term but rebound to $60 or even $70 by the year-
end," said Salvatore Recco, who helps oversee about $2 billion of client money at Gravity
Investments in Denver, Colorado.

Oil Glut Deeper Than Just Crude Exposed as Recovery Stumbles
Bloomberg - Grant Smith + NewBase
For almost two years, the spotlight in the global oil market has been on a surplus of crude. The
latest stumble in prices has shown that the glut extends further.
As the U.S. shale boom sputters and the nation’s crude inventories post the longest pullback on
record, there are signs that, although stockpiles remain abundant, the excess is clearing. Oil’s
retreat to a two-month low this week demonstrates that surpluses in other parts of the market,
most notably refined fuels like gasoline, are holding back any lasting recovery.
Combined inventories held by industrialized nations of all forms of oil -- from crude to refined
products to natural gas liquids -- reached a record of more than 3 billion barrels last month, data
from the Paris-based International Energy Agency shows.
In the U.S., gasoline stockpiles were at the highest for the time of year since 1984 as record
consumption failed to drain the glut refiners created when crude was cheap, according to the
Energy Information Administration.
“In many ways, the bigger issue is the total inventory overhang,” Amrita Sen, chief oil analyst at
consultant Energy Aspects Ltd. in London, said by e-mail. “It is the plight of oil products -- in
particular the light products such as gasoline -- that is slowing the pace of total stock-draws even
as crude stocks fall, and of the eventual re-balancing.”
U.S. oil futures retreated to a two-month low near $43 a barrel on July 20, after failing to sustain a
move above $50 in late May. While industry figures from the IEA to Saudi Arabia’s energy minister
agree that crude oversupply has finally come to an end as low prices force drillers to slash
investment, the latest price slump affirms that properly re-balancing global markets will take much
longer.

Crude inventories in the U.S., the biggest oil user, sank for a ninth week in the period to July 15,
EIA data shows. Conversely, the country’s gasoline supplies are so swollen that at least five
tankers hauling the fuel to New York were turned away over the past few weeks, according to
traders and ship-tracking data compiled by Bloomberg.
Even China, the world’s biggest energy consumer, has been dumping excess gasoline overseas
to alleviate swelling stockpiles at home. The nation’s exports of the motor fuel surged 75 percent
from January to June, data from the General Administration of Customs in Beijing showed.
“What we had anticipated was very significant gasoline strength, and that was going to give us a
bit of lift in the summer,” Jan Stuart, global energy economist at Credit Suisse Group AG, said in a
Bloomberg television interview. “We don’t see that gasoline strength. That means we don’t get the
lift.”

NewBase Special Coverage
News Agencies News Release 24 July 2016
An Ugly Hump Day for Oil
Liam Denning in San Francisco at ldenning1@bloomberg.netENERGY
When it comes to the great rebalancing of the global oil market, Wednesday will not be
remembered very fondly. In no particular order:
• Oilfield services giant Halliburton, reporting second quarter results, said it believed the U.S.
rig count had bottomed out. Chief executive David Lesar declared : “Today, our customers
are thinking about growing their business again rather than being focused on survival. “
• Russia's energy minister told Reuters that the notion of coordinating supply cuts with OPEC
was dead. (Remember the freeze? Good times.) The day before the interview was
published, Goldman Sachs published a report forecasting Russian oil output by the end of
2018 to surpass the record set by the Soviet Union in 1987.
• The chief executive of Saudi Aramco, the biggest oil producer in the world, told
reporters low oil prices wouldn't stop the company from drilling for more or derail plans to
sell shares in the company.
• The latest set of weekly numbers from the Energy Information Administration showed that,
despite a decrease in U.S. crude oil inventories, combined stocks of crude and refined
products hit almost 1.39 billion barrels, the highest on record.
Glut Check
Commercial crude oil and product inventories are the highest since records began
Source: Energy Information Administration -Note: Excludes Strategic Petroleum Reserve.
The oil glut that has kept prices pretty firmly below $50 a barrel over the past year resulted from
the U.S. shale boom and the reaction to it of competing producers such as Saudi Arabia and
Russia.
In short, the fact that 5 million barrels per day of new output could materialize from the supposedly
elderly U.S. oil patch in the space of six years upended old notions of organizations such as
OPEC conserving supply in order to extract higher prices in the future.

The result is a war for market share, decidedly slushy hopes of a supply freeze, and those plans
by Riyadh to cash in on Saudi Aramco somewhat sooner rather than later.
What is particularly fascinating about Halliburton's comments is that the company is calling a
bottom on the decline in U.S. shale drilling despite oil remaining below $50. The reasons for that
are manifold, ranging from the likes of Halliburton being squeezed on pricing by struggling E&P
companies to more profound developments, such as the use of new techniques toraise
productivity in shale fields and the dented but remarkably resilient ability of oil companies to keep
raising capital.
To be clear, Halliburton isn't suggesting U.S. oil output is about to suddenly jump back to its pre-
crisis levels. The damage wrought on equipment and crews won't disappear overnight; and, in any
case, Halliburton believes a worldwide downturn in oil investment means a shortfall of oil supply is
inevitable within the next five years, unless prices rise enough to encourage much more drilling.
On that score, Halliburton may be right. But that depends on demand for oil remaining robust, a
notion undermined somewhat by recent developments in the markets for refined products such
as gasoline.
Above all, the process of clearing the glut and rebalancing supply and demand in the global oil
market will be dragged out further by the manifest desire of petro-states such as Saudi Arabia
and, to a lesser degree, Russia to maximize output in the face of a U.S. industry that is still alive
and kicking almost two years into this crash.
Rather than in America, the expectation of supply cuts leans increasingly toward pullbacks
elsewhere. It is notable that, while the number of rigs drilling for oil in the U.S. has dropped by
about 80 percent in the past two years, the decline elsewhere is a relatively modest 40 percent.
Offshore Drilling
Oil rigs have been taken out of operation much more rapidly in the U.S. than elsewhere
Source: Bloomberg, Baker Hughes
Investors should scrutinize results from Schlumberger, due Thursday, for more information on how
well drilling is holding up outside the U.S. Beyond that -- and on a grimmer note -- the burden of
rebalancing the oil market may well rest more heavily on those nations where low prices have
ramifications far beyond trading screens. Keep a close eye on Venezuela and Nigeria.

Facebook’s solar-powered Internet drone takes flight
News Agencies
Facebook Inc (FB.O) said on Thursday it had completed a successful test flight of a solar-powered
drone that it hopes will help it extend Internet connectivity to every corner of the planet.
Aquila, Facebook’s lightweight, high-altitude aircraft, flew at a few thousand feet for 96 minutes in
Yuma, Arizona, Zuckerberg wrote in a post on his Facebook page. The company ultimately hopes
to have a fleet of Aquilas that can fly for at least three months at a time at 60,000 feet (18,290
meters) and communicate with each other to deliver Internet access.

Facebook FB wants to bring the Internet to the whole world — using a giant, solar-powered drone
with the wingspan of an airliner. And it flies on the power of roughly three hair-dryers. That drone,
dubbed “Aquila,” completed its first successful flight in Yuma, Arizona.
The drone is intended to be one of a fleet of drones flying at 60,000 feet for months at a time and
beaming the Internet to remote parts of the world.
After two years of development, the drone stayed in the air for 96 minutes,
but it’s not ready for full-scale operation yet. Zuckerberg said the 1,000-pound drone will need to
be made lighter to last in the air for longer spans.
Facebook is also working on adjusting power, weight capacity and a communications payload that
will use lasers to transfer data more than 10 times faster than existing systems.
“Over the next year we’re going to keep testing Aquila — flying higher and longer, and adding
more planes and payloads,” Zuckerberg said in a post on Facebook. “It’s all part of our mission to
connect the world and help more of the 4 billion people who are not online access all the
opportunities of the Internet.”
Google parent Alphabet Inc has also poured money into delivering internet access to under
served areas through Project Loon, which aims to use a network of high-altitude balloons to made
the internet available to remote parts of the world.
Yael Maguire, Facebook’s engineering director and head of its Connectivity Lab, said in an
interview that the company initially hoped Aquila would fly for 30 minutes.
“We’re thrilled about what happened with our first flight,” Maguire said. “There are still a lot of
technical challenges that need to be addressed for us to achieve the whole mission.” He said he
hoped the system might be brought into service “in the near future.”
Zuckerberg laid out the company’s biggest challenges in flying a fleet of Aquilas, including making
the plane lighter so it can fly for longer periods, getting it to fly at 60,000 feet and creating
communications networks that allow it to rapidly transfer data and accurately beam down lasers to
provide internet connections.
Maguire said Aquila will go through several more test flights and hopes it will soon break the world
record for the longest solar-powered unmanned aircraft flight, which currently stands at two
weeks.
Facebook, which has more than 1.6 billion users, has invested billions of dollars in getting more
people online, both through an initiative called internet.org – which offers a pared-down version of
the Internet to poor areas – and by building drones.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile: +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 25 years of experience in
the Oil & Gas sector. Currently working as Technical Affairs Specialist for
Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy
consultation for the GCC area via Hawk Energy Service as a UAE
operations base , Most of the experience were spent as the Gas Operations
Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility &
gas compressor stations . Through the years, he has developed great
experiences in the designing & constructing of gas pipelines, gas metering & regulating stations
and in the engineering of supply routes. Many years were spent drafting, & compiling gas
transportation, operation & maintenance agreements along with many MOUs for the local
authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE
and Energy program broadcasted internationally, via GCC leading satellite Channels.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase 24 July 2016 K. Al Awadi

New base energy news issue 891 dated 24 july 2016

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New base energy news issue 891 dated 24 july 2016