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New base energy news issue 894 dated 27 july 2016

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Greetings,


Attached FYI (NewBase Special 27 July 2016 ) , from Hawk Energy Services Dubai . Daily energy news covering the MENA area and related worldwide energy news. In today’s issue you will find news about:-


• Siemens ships its first "Made in KSA" gas turbine to power Jazan Economic City
• Iran: A Year After nuclear Deal, Oil Flows But The Money’s Stuck
• US: Tesla is hurrying to finish the 'gigafactory' to meet demand
• Norway: Lundin granted drilling permit for well 7220/6-2 R in PL 609
• Russia: Rosneft may yet bid for Bashneft as it ‘isn’t a state company’
• US: Increased drilling may slow pace of crude oil production declines
• Oil dips to remain near 3-month lows as headwinds persist
• Renewed oil weakness sparks demand fears
• Oil Majors Lost One Engine; Now the Second One Is Sputtering
• BP Profit Sinks as Lower Oil, Weak Refining Strain Industry
• Oil giants face slippery slope of earnings season
• Statoil Seeks Standardization to Optimize Offshore Operations



we would appreciate your actions to send to all interested parties that you may wish. Also note that if you or your organization wish to include your own article or advert in our circulations, please send it to :-

khdmohd@hotmail.com or khdmohd@hawkenergy.net





Best Regards.

Khaled Al Awadi
Energy Consultant & NewBase Chairman - Senior Chief Editor
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME meme since 1995
Hawk Energy since 2010

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New base energy news issue 894 dated 27 july 2016

  1. 1. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 1 NewBase Energy News 27 July 2016 - Issue No. 894 Edited & Produced by: Khaled Al Awadi NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE Siemens ships its first "Made in KSA" gas turbine to power Jazan Economic City Zawya - Baschar Kassar In line with the Saudi Vision 2030 and Saudi Aramco's In-Kingdom Total Value Add (iktva) program, Siemens delivered the first shipment of its locally produced gas turbines to the Integrated Gasification Combined Cycle (IGCC) power plant in Jazan. This is the world's largest power plant of its kind that will be fueled with gasified refinery residues, which contributes significantly to increasing the energy efficiency. Siemens is supplying a total of 10 gas turbines - that were specifically designed for synthesis gas (syngas) - to Saudi Aramco's landmark project. These engineering masterpieces will power the 4000 MW power plant and generate 600 tons of high pressure steam per hour to Aramco's refinery, which is an essential part of the overall development of Jazan Economic City. The shipment of the first locally produced gas turbine falls in line with the event held by Aramco with its partners for the Fadhili project. Prof. Siegfried Russwurm, Member of the Managing Board and CTO of Siemens AG said during the festivities, "Today we celebrate another milestone together with our partners. We built these high-tech gas turbines in Saudi Arabia with local talent and are proud to deliver them to their new home in Jazan.
  2. 2. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 2 We have kept our promises and are grateful to Saudi Aramco for their confidence in Siemens. We assure Aramco and the people of Saudi Arabia of Siemens' continuous strong commitment and contribution to the realization of the Kingdom's Vision 2030." Siemens is a leader in building energy-efficient and resource-saving technologies. In addition, Siemens' contribution to the Saudi society extends beyond supporting the successful operation of the Kingdom's power plants and achieving best-in-class efficiency standards. Siemens adds lasting value to local communities and has made sustainable development the cornerstone of all its activities, and that means acting responsibly on behalf of future generations and keeping the three dimensions of sustainability - people, planet and profit - in balance. Siemens in Saudi Arabia: Being active in the Kingdom for more than 85 years, with more than 2,000 employees today, Siemens is delivering innovative solutions to its customers, partners and the society in Saudi Arabia, contributing significantly to the development of the country's infrastructure. Together with our shareholder and long-term partner, E.A. Juffali and Brothers, we will carry on with our commitment and contribution to the development in Saudi Arabia. "We make real what matters." That's our aspiration. That's what we stand for. That's what sets us apart. A reflection of our strong brand, it's the mission that inspires us to succeed. Siemens AG (Berlin and Munich) is a global technology powerhouse that has stood for engineering excellence, innovation, quality, reliability and internationality for more than 165 years. The company is active in more than 200 countries, focusing on the areas of electrification, automation and digitalization. One of the world's largest producers of energy-efficient, resource-saving technologies, Siemens is No. 1 in offshore wind turbine construction, a leading supplier of gas and steam turbines for power generation, a major provider of power transmission solutions and a pioneer in infrastructure solutions as well as automation, drive and software solutions for industry. The company is also a leading provider of medical imaging equipment - such as computed tomography and magnetic resonance imaging systems - and a leader in laboratory diagnostics as well as clinical IT.
  3. 3. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 3 Iran: A Year After nuclear Deal, Oil Flows But The Money’s Stuck Bloomberg - Ladane Nasseri LadaneNasseri A jump in oil exports, business deals signed with global companies and inflation tamed: One year since Iranian negotiators gathered with the world’s top diplomats to unveil their nuclear accord and Iran’s economy is on the mend. That’s the good news for President Hassan Rouhani in the final year of his first term. Not so welcome are the foreign banks deterred from lending by remaining U.S. sanctions, Congressional threats of new curbs, and the billions of dollars held in foreign accounts yet to reach Iran. Jobs are scarce. “On the whole, the economic consequences have been disappointing but there was over- optimism,” says Robert Powell, Middle East and Africa regional manager at the Economist Intelligence Unit. “Many in Iran probably expected too much, too soon.” Here are four charts to highlight Iran’s economic performance. Oil is the bright spot Oil sanctions were the weapon designed to force Iran to the negotiating table over its atomic program. Six months after they were lifted, Iran’s producing 3.8 million barrels a day, 2 million of which are exported. Holding out against efforts by some OPEC members to freeze bloc output and lift prices, it has regained 80 percent of market share held before the U.S. and European Union tightened crude sanctions in 2012, says Mohsen Ghamsari, National Iranian Oil Co.’s director of international affairs.
  4. 4. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 4 Exports have “arguably surpassed expectations,” says Powell. Yet oil’s slumping value means revenue is expected to be less than half of what it was in 2011. That’s about $50 billion in 2016 against $119 billion five years ago, according to EIU estimates. Life is more affordable -- if you have work Helped by greater monetary and fiscal discipline, prices are rising slower than at any point in the past quarter-century. Inflation slowed into single digits in June, meeting the central bank’s stated goal and delivering on a Rouhani commitment. The president has “a clean bill of health” on inflation though the same can’t be said of another policy challenge -- tackling chronic youth unemployment, says Ellie Geranmayeh, Middle East and North Africa fellow at the European Council on Foreign Relations. While authorities expect Iran’s economy to expand as much as 4.5 percent in the year to March, Rouhani’s target of 8-percent annual expansion would require major changes, according to Powell. An “expedited privatization program” would break authorities’ stranglehold on the economy, he says, and offer investors transparent partners. Conservative rivals will likely stand in the way. Executive air miles Iran’s 80 million people are a mouth-watering prospect for major companies battling sluggish growth at home. So following the July accord, dozens of chief executives booked flights to Tehran. The deals have built up: a $27 billion order for 118 Airbus Group SE planes and a contract with Boeing Co. worth $17.6 billion. Siemens AG in March signed a preliminary rail accord worth as much as $2.3 billion. Foreign direct investment rose to $4.5 billion in the first quarter of this year, with 26 projects, the highest uptick in over a decade in Iran, according to fDi Intelligence, a division of the Financial Times Ltd. That’s still way below the government’s hopes of drawing $30 billion to $50 billion in foreign financial resources a year.
  5. 5. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 5 “Real inflows will happen when sentiment toward investing into the Iranian economy improves among global banks and institutional investors,” says Payam Afzali, head of investment banking at Kian Capital in Tehran. “When Iran’s risk is efficiently priced in international debt markets, we can expect a more fluid movement of capital.” Stocks get real The value of the Tehran Stock Exchange has jumped as investment deals favoring local manufacturers such as car company Iran Khodro were announced. But the mood has since turned more subdued. “There was euphoria all the way to March and then a reality check. What’s happening today is in line with the fundamentals of the economy,” says Reza Soltanzadeh, chief executive of Iran Industries Investment Co., of this year’s roller-coaster ride for Iranian stocks. “The excitement that zillions of dollars will be coming, that’s not reality.”
  6. 6. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 6 US: Tesla is hurrying to finish the 'gigafactory' to meet demand CNBC - Robert Ferris | @RobertoFerris ( Source: Tesla ) Tesla has doubled the labor force working on its $5 billion high-tech factory in the Nevada desert, attempting to finish construction on a new and much tighter schedule, according to a report in The Wall Street Journal. The company wants to have the factory ready for the launch of its Model 3, a $35,000 car meant to be a more affordable version of its high-end electric sedans and sports cars, the paper said. About 1,000 workers are keeping construction up seven days a week to meet Tesla's new plan to produce lithium-ion battery c ells by early 2017, according to the report. Tesla has been building the factory in phases, and it will be ready to produce batteries before vehicles. The factory is already producing battery packs, but Tesla has to buy the actual lithium- ion cells from Panasonic. Last week, Tesla Chief Executive Elon Musk released his "Master Plan, Part Deux," where he outlined some of his strategies for the company over the next several years. "What really matters to accelerate a sustainable future is being able to scale up production volume as quickly as possible," Musk wrote. "That is why Tesla engineering has transitioned to focus heavily on designing the machine that makes the machine — turning the factory itself into a product." The Model 3 is expected to use 4.9-Amp-hour cylindrical cells from Panasonic in the 26650 format, somewhat larger than the 3.4-Ah 18650 cells used in the Model S and Model X. To ramp up to the required battery-pack volumes for Musk’s Model 3 targets, LG Chem, Samsung, or SK Innovation would have to offer cells in that format that offer the same energy and power characteristics as the Panasonic cells—which Tesla likely helped to design. Tesla Gigafactory, March 2016, shown in drone footage posted to YouTube by Above Reno
  7. 7. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 7 Norway: Lundin granted drilling permit for well 7220/6-2 R in PL 609 Source: NPD The Norwegian Petroleum Directorate has granted Lundin Norway a drilling permit for well 7220/6- 2 R in production PL 609. Well 7220/6-2, will test the Neiden Prospect and will be drilled from the Leiv Eirikss on drilling facility at position 72°34' 13.1" north and 20°58' 19.66" east. The drilling programme for well 7220/6-2 R relates to an extension of previous wildcat well 7220/6-2, drilled in 2015 in production licence PL 609. Lundin Norway is the operator with a 40 per cent ownership interest, and the licensees are Idemitsu Petroleum Norge with 30 per cent and DEA Norge with 30 per cent. The production licence consists of blocks/parts of blocks 7220/6, 7220/9, 7220/11, 7220/12 and 7221/4. The production licence was awarded in the 21st licensing round in 2011. Wildcat well 7220/6-2 R will be an extension of the sixth exploration well in production licence PL 609. The permit is contingent on the operator securing all other permits and consents required by other authorities prior to commencing the drilling activity. Lundin temporarily suspended operations on exploration well 7220/6- 2 on the Neiden Prospect in November 2015 due to winter restrictions on the use of the Island Innovator drilling rig in the Barents Sea South. Location of the Neiden Prospect (Source: Lundin Petroleum) According to information on the Lundin Petroleum web site: the Neiden Prospect has estimated net (40%) unrisked prospective resources of 82 MMboe and an estimated chance of geological success of 30%. The Neiden Prospect is a shallow four-way dip closure with main target in the Triassic Snadd Fm comprising a stacked alluvial channel system. Good hydrocarbon indicators have been identified.
  8. 8. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 8 Russia: Rosneft may yet bid for Bashneft as it ‘isn’t a state company’ Bloomberg + NewBase Rosneft PJSC, Russia’s most acquisitive oil producer, may yet be able to bid in the government’s sale of Bashneft PJSC, despite indications that state companies would be barred from the sale. “From a formal point of view, it isn’t a state company, one can say that straight away, but without a doubt there are different points of view on the issue,” Kremlin spokesman Dmitry Peskov told journalists yesterday. The government has said it plans to sell part or all of its stake in Bashneft this year and is also weighing a sale of Rosneft as it disposes of assets to help plug a deficit after the collapse in crude prices sapped revenue. A meeting headed by Prime Minister Dmitry Medvedev concluded that the privatisations shouldn’t be open to government companies, including majority state-owned Rosneft, two people with knowledge of the matter said last week. Even after that meeting, Rosneft told the government’s consultant on the Bashneft deal, VTB Capital, that it’s potentially interested in buying a stake, newswire Interfax reported yesterday. Rosneft spokesman Mikhail Leontyev declined to comment on the report.
  9. 9. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 9 Kremlin-approved acquisitions have enabled Chief Executive Officer Igor Sechin, a long-time ally of President Vladimir Putin, to build Rosneft from a bit player into the world’s largest traded crude producer. The company acquired assets from Yukos Oil Co in forced auctions and then bought BP’s venture TNK-BP in 2013. In 2014, Russia nationalised Bashneft, taking the shares held by Vladimir Evtushenkov’s holding company AFK Sistema amid a money-laundering case against the billionaire. The state owns 50.08%, or 60.16% of ordinary voting shares, valued at about 248bn roubles ($3.7bn). Rosneftegaz, a structure fully owned by the Russian government, owns a 69.5% share of Rosneft, BP holds 19.75%, and most of the remaining shares are in free-float, according to Rosneft’s website. Russia may gain greater value by allowing Rosneft to acquire Bashneft and then selling stakes in the combined company, Otkritie analysts Artem Konchin and Mitchell Jennings said in an e-mailed note last week. Rosneft is valued at a premium to Russian peers, suggesting Bashneft would get a boost if it were part of a combined entity, the analysts wrote. While state-run companies shouldn’t make purchases in privatisation auctions, here is no formal decree banning them from bidding, Kremlin spokesman Peskov told journalists by telephone.
  10. 10. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 10 US: Increased drilling may slow pace of crude oil production declines Source: U.S. Energy Information Administration, Short-Term Energy Outlook, July 2016; Baker Hughes Higher and more stable crude oil prices are contributing to increased drilling in the United States, which may slow the pace of production declines. Benchmark West Texas Intermediate (WTI) crude oil prices averaged $46.59 per barrel (b) over the past three weeks, a 40% increase over the average price in the first quarter of 2016. The rig count for active onshore rotary rigs in the Lower 48 states, as measured by Baker Hughes, stood at 352 rigs on July 22, 45 rigs above the number at the end of June. Although declines from existing wells are expected to result in a net decrease in production, increased drilling and higher well productivity are expected to partially offset the decline. Released each Friday, the Baker Hughes rig count measures the number of active rigs in various basins across North America. Increases in rig counts suggest that production companies are drilling more new wells, which likely will be reflected in higher levels of production from new wells after several months. In addition to having more rigs drilling new wells, the average productivity of rigs continues to increase. The new-well oil production per rig through July 2016 averaged 796 barrels per day (b/d) in the Bakken region, 983 b/d in the Eagle Ford, and 470 b/d in the Permian, according to EIA's latest Drilling Productivity Report. These levels represent
  11. 11. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 11 productivity increases of 155 b/d, 226 b/d, and 111 b/d per well, respectively, over the 2015 averages for these regions. The July Short-Term Energy Outlook (STEO) forecasts crude oil production from the Lower 48 states to continue to decline through the rest of 2016, then level off in the first and second quarters of 2017. This production forecast is based on the WTI price forecast in STEO, which rises from an average of $47/b in third-quarter 2016 to an average of $50/b in second-quarter 2017. The price forecast is highly uncertain, and any significant divergence of actual prices from the projected path could change the pace of new-well drilling, which would in turn affect the production forecast.
  12. 12. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 12 NewBase 27 July 2016 Khaled Al Awadi NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE Oil dips to remain near 3-month lows as headwinds persist Reuters + NewBAse Oil prices dipped in Asian trading on Wednesday as plentiful supplies and slowing economic growth weighed on markets, although some analysts said that the current downtrend would be modest and see a recovery later this year. International Brent crude oil futures were trading at $44.81 at 0148 GMT, down 6 cents from their previous close. U.S. West Texas Intermediate (WTI) crude were at $42.87, down 5 cents. Brent hit $44.14 the previous day, the lowest since May, and the contract has shed over 15 percent in value since peaking in June as a refined product glut as well as slowing economic growth dent the demand outlook for crude oil. Analysts said they expected more price declines in the short-term as oversupply continued while demand growth stutters. "My view is that oil prices will find a low between $39 and $42 per barrel over the coming weeks due to headwinds," said Ric Spooner, chief market analyst at CMC Markets in Sydney, Australia. "After that, however, we are coming closer to seeing a balanced market again," he added, saying that $50-60 per barrel would represent such a supply and demand balance. Oil markets have been dogged by oversupply in the last two years, which pulled down prices by as much as 70 percent between 2014 and early 2016, when Brent hit a more than a decade low of around $27 per barrel. Oil price special coverage
  13. 13. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 13 Renewed oil weakness sparks demand fears U.S. oil prices topped $50 a barrel in June, boosting optimism a two-year price rout might end. Six weeks later, the long hoped for recovery has yet to take hold. Mounting fears that demand has fallen short of expectations as production increases and rig counts rise has analysts believing that any oil price recovery may be a year or more in the future. The demand response has been slower than bulls had hoped. U.S. drivers have covered fewer miles than expected this summer, and as they speed toward the Labor Day holiday in September, the overhang of gasoline in storage may put downward pressure on crude and refined product prices. "Right now, the only thing that would drive prices higher is robust demand," said John Paisie, executive vice president at Stratas Energy Advisors, a Houston-based consultancy. The growth must be across the board, for products including distillates like diesel and jet fuel, as well as gasoline. "Demand just can't be made up by one product," he said, and demand for diesel has been lagging. Instead of seeing $60 a barrel, which would support an increase in production, the demand questions, and ongoing supply concerns, mean oil could fall further. U.S. crude settled at $43.13 on Monday, after earlier hitting a three-month low. "Demand is growing very moderately," said veteran oil economist and independent consultant Phil Verleger. "There's no real surge to it - call it the great moderation." While gasoline prices have declined, the lower cost at the pump has only a moderate effect on consumer's buying habits, Verleger said. Instead of racing out to fill their tanks, consumers are using the savings to pay down debt, he said. The U.S. Department of Energy has trimmed its outlook for gasoline demand growth for the remainder of the year, and now forecasts growth of 160,000 bpd, compared with 220,000 bpd previously. Gasoline demand data often lags by two months or more, but as figures for the beginning of this year's summer driving season have been released, analysts have trimmed their outlook for 2016 growth. U.S. drivers logged two percent more miles in May than a year earlier, compared with 2.2 percent in April, according to the U.S. Department of Transportation. U.S. gasoline demand rose by a modest 0.8 percent in April according to the Department of Energy. May data is due out on Friday. Experts agree that rebalancing the market will take strengthening demand, as crude from shale formations and deep water fields has continued to come into production despite lower prices. "There's got to be a reckoning that we only have a few weeks left of peak gasoline demand, and then we hit a shoulder season," said Michael Cohen, head of energy commodities research at Barclays. In the so-called shoulder season during the autumn, diesel usually drives petroleum demand. European diesel demand also may be weaker than expected because of Britain's Brexit vote to leave the European Union, Cohen said. In China, stockpiles have built, which may limit Asian demand growth.
  14. 14. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 14 Without a surge in demand, the market will be unable to use up the gasoline that refiners stockpiled ahead of a summer driving season that shaped up to be more lackluster than expected. Cohen said he did not expect to see prices fall into the $20s or $30s as in January and February. However, he said, "our view continues to be slightly lower than where we are." Oil Majors Lost One Engine; Now the Second One Is Sputtering Bloomberg - Javier Blas JavierBlas2 If Big Oil was a two-engine airplane, you could say it’s been flying on a single engine since energy prices crashed in 2014. Now, the second motor is sputtering. The major integrated oil companies, including Exxon Mobil Corp., Total SA and BP Plc, have relied on their so-called downstream businesses, which include refining crude into gasoline, oil trading and gas stations, to cushion the losses on their upstream units, which pump crude and natural gas. “The crash in oil prices in late 2014 brought refineries worldwide a pleasant surprise: booming margins,” said Amrita Sen, chief oil analyst at consulting firm Energy Aspects Ltd. in London. “But now, the market is changing.” BP, the first major to report second-quarter results, showed the impact on Tuesday. The British company said its downstream earnings fell to $1.51 billion from $1.81 billion in the first quarter and $1.87 billion a year ago. Refining margins were the weakest for the April-to-June period in six years, BP said.
  15. 15. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 15 Worse, the company said the refining margins will remain “under significant pressure.” So far in the third quarter, its in-house measure of margins stood at $10.70 a barrel, little more than half the $20 it achieved between July and September 2015. Valero Energy Corp., the largest U.S. refiner, also said on Tuesday it faced “weaker gasoline and distillate margins” during the quarter. While the downstream business is sputtering, it’s still keeping the plane aloft. Margins remain well above the depressed levels of $5 to $7 a barrel of the late 1990s and early 2000s. In part, Big Oil sowed the seeds of its problem. Companies pushed their refining units as hard as possible in late 2015 and early 2016, using them to cushion the impact of low energy prices. All went well while demand growth was robust, but as soon as it slowed, refined products, particularly gasoline, swamped the market. U.S. gasoline futures prices briefly fell below $1.31 per gallon on Tuesday, the lowest for this time of the year in at least a decade. The drop in gasoline is dragging down crude as investors fear that refiners, facing low margins, will cut processing rates. In New York, West Texas Intermediate fell as low as $42.36 a barrel, down 18 percent from its most recent peak of $51.67 in early June. Getting Worse With oil and natural gas production barely profitable at current prices, the drop in refining margins foreshadows a difficult second half for majors that rely on their “integrated” model of upstream and downstream businesses to cushion periods of low prices. Over the last few quarters, downstream “has been the key cash generator” for major oil companies, Nitin Sharma, an oil analyst at JPMorgan Chase & Co. in London, said in a note to clients ahead of the reporting season. With refining now faltering, Harold “Skip” York, vice president of integrated energy at consulting firm Wood Mackenzie Ltd. in Houston, said companies will need to tighten their belts further. “The majors aren’t going to get the cash flow from downstream that they were hoping,” he said. “They have some discretionary capital spending they could cut in 2017.” BP signaled the path ahead, tweaking its forecast for capital investments in 2016 from “about” $17 billion to “below” the same figure. Since the crisis started, Big Oil bosses have been trying to lighten their loads to weather the storm. BP, for example, spent nearly $23 billion in 2014. For next year, it’s likely to invest as little as $15 billion. Royal Dutch Shell Plc and Total are scheduled to publish earnings on Thursday, and Exxon and Chevron Corp. the following day.
  16. 16. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 16 NewBase Special Coverage News Agencies News Release 27 July 2016 BP Profit Sinks as Lower Oil, Weak Refining Strain Industry Bloomberg - Rakteem Katakey rakteem BP Plc posted a 45 percent slump in earnings, pointing to a poor set of results from the industry as oil production barely breaks even and profits from refining sputter. The U.K. company, the first oil major to report second-quarter results, said adjusted profit dropped to $720 million from $1.3 billion a year earlier, missing analyst estimates. Weak refining margins weighed on the downstream result. BP’s earnings signal trouble for the world’s major energy producers, which relied on refining profits last year to weather crude’s collapse. While Chief Executive Officer Bob Dudley continues to rein in spending, he faces a difficult road ahead as debts climb and oil’s rally fades amid slowing demand growth and returning production from Canada to Nigeria. The company’s top global competitors report later this week. “There will be weakness in the second half of this year because of refineries,” said Ahmed Ben Salem, an analyst at Oddo & Cie in Paris. “Even though the companies have been successful in reducing costs, there are still some big challenges ahead for BP and the other oil majors.” BP’s shares fell as much as 2.6 percent to 428.75 pence on Tuesday, the lowest this month. They traded down 1.4 percent at 434 pence as of 8:36 a.m. in London.
  17. 17. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 17 Spending Program Refining margins were the lowest for the second quarter since 2010 and will continue to be under “significant pressure,” BP said in a statement. The company’s belt-tightening saw it spend just $8.1 billion in the first half, allowing it to tweak its full-year budget to less than $17 billion from an earlier forecast of “about” $17 billion. Dudley is borrowing more so he can continue to pay dividends, the company’s top financial priority. At the end of the quarter, net debt totaled $30.9 billion, up from $24.8 billion a year earlier. Net debt to capital, also known as gearing, was at 24.7 percent, compared with 18.8 percent previously. The company announced a quarterly dividend of 10 cents a share. Oil Spill BP can finally draw a line under the 2010 oil spill in the Gulf of Mexico. The company settled almost all costs related to the disaster this month, allowing Dudley to increase his focus on operations. BP says it will be able to balance cash flow with shareholder payouts and capital spending at an oil price of $50 to $55 a barrel next year. Benchmark Brent is currently trading below $45 a barrel in London. That’s down from an average $47.03 in the second quarter and $63.50 a year earlier, but up from $35.21 in the first quarter of this year. The price decline that began in mid-2014 forced explorers to delay projects, cut billions of dollars of spending and eliminate thousands of jobs. BP’s production was 2.09 million barrels of oil equivalent a day in the second quarter, 1 percent lower than a year earlier. Third-quarter output will continue to fall because of maintenance, BP said. Downstream earnings fell to $1.51 billion from $1.87 billion. While cheaper crude previously boosted income for BP’s refineries, margins have been contracting. Global refining margins averaged $13.80 a barrel in the quarter through June, and have dropped to $10.70 a barrel this month, according to the company’s website. At the same time, the rebound in crude prices is petering out. Production shuttered by wildfires in Canada and by militant attacks in Nigeria is returning and shale drillers in the U.S. are bringing back some rigs. While there’s still consensus that the worst of the oil glut is over, the International Energy Agency cautioned this month that “the road ahead is far from smooth.” Royal Dutch Shell Plc and Total SA are scheduled to publish earnings on Thursday, and Exxon Mobil Corp. and Chevron Corp. the following day.
  18. 18. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 18 Oil giants face slippery slope of earnings season CNBC - Catherine Boyle | @cboylecnbc With the slump in oil prices showing no signs of abating, 2016 does not look like a vintage year for the industry's biggest companies. A plunging oil price seems to be the culprit, with WTI, the main U.S. indicator, down 10.76 percent in July, and apparently set for its worst monthly performance since December 2015. Supply seems to have recovered, at the same time as concerns about global demand for oil grew. BP was the first of the publicly listed oil giants to report this earnings season on Tuesday, ahead of Shell results on Thursday and Exxon Mobil on Friday. The market wasn't particularly encouraged by the results as it warned refining margins (the difference between the price of oil as a raw material and its products) would stay under significant pressure in the third quarter, and reported underlying replacement cost profit falling to $720 million, below analyst expectations. Bob Dudley, the company's chief executive, warned of a "challenging" environment and its share price dipped by around 1 percent in early London trade. Exxon was one of the biggest fallers on the Dow Monday, as energy stocks performed poorly. The sector posted its worst daily performance since June 27, the second trading session after the Brexit vote, when it fell 2.54 percent. The oil price is being weighed down as broader economic concerns are dampening many traders' expectations for demand. The prospect of Brexit — and subsequent uncertainty around Europe and the U.K.'s trading relationships and its consequences for manufacturing — is seen as one of the biggest risks to the price of oil. Member countries of the Organization of the Economic Co- operation and Development and Europe drove the unexpectedly high demand earlier this year – and if their need for oil doesn't meet forecasts, they may have to be cut. Many of the oil companies are about to raise capital expenditure in the third quarter of the year in the hope of greater prices, according to a forecast by Pantheon Macroeconomics. Major agency forecasts still suggest demand growth, and the International Energy Agency (IEA) recently upgraded its 2016 demand growth forecast on stronger demand than expected in developed markets. However, many in the markets sense that the second half of 2016 is going to be worse than thought for demand, with 2017 even trickier. Analysts at UBS blamed "rising prices and macroeconomic headwinds" for a predicted slowdown in 2017 in a research note.
  19. 19. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 19 Statoil Seeks Standardization to Optimize Offshore Operations by Karen Boman|Rigzone Staff|Monday, July 25, 2016 Statoil's recent agreement with AspenTech illustrates the overall industry trend towards optimizing operations through standardization. Oil and gas companies have long sought to solve the challenges of high-cost, high-risk offshore production. These ongoing challenges, combined with the more recent obstacles of drastically lower oil prices and increasing regulatory and safety requirements, has prompted oil and gas companies to explore all avenues of enhancing operational productivity, efficiency and safety. This includes new technologies made possible by web-based interfaces, high-computer power and cutting edge data science that allow operators to put data-driven optimization in place. Companies are exploring Big Data analytics, integration of sensors of Internet of Things (IoT) technologies, and advancements in machine learning to enhance operational efficiency, allowing for quick problem-solving as field issues arise. The recent downturn also has prompted companies to examine their operational standards to enhance productivity and efficiency. Robert Golightly Robert Golightly, Senior Product Marketing Manager, AspenTech Technology Inc.Senior Product Marketing Manager, AspenTech Technology Inc. Production optimization through data management has been the goal behind Statoil ASA’s partnership with Bedford, Mass.-based AspenTech Technology Inc. Statoil has used AspenTech’s data management solutions for more than 10 years in its oil refineries and a number of offshore platforms, said Robert Golightly, senior product marketing manager for AspenTech, in a statement to Rigzone. AspenTech provides software that optimizes process manufacturing for industries such as energy, chemical, engineering and construction, and industries that manufacture and create products from a chemical process. This allows process manufacturers to implement best practices for optimizing their operations. Recently, Statoil selected AspenTech’s aspenONE Manufacturing Execution Systems (MES) as its Information Manufacturing Systems (IMS) technology standard. In the past, oil and gas companies had often relied on different site and installation teams to use their own systems to optimize production. Like other companies, Statoil had used different IMSs to collect, store and display process data at different work sites, said Golightly. The result was multiple tools in use throughout companies, said Golightly. In the case of Statoil, the multiple tools it used to gather, store and display process data, hindered its visibility objective in monitoring and understanding its operations. Since most providers of data historian platforms feature its own proprietary viewer that does not necessarily work with other systems, accessibility and full insight into operations was limited, Golightly stated. “A good overview of historical process measuring data is essential for good operation of the plants,” Statoil spokesperson Ola Anders Skauby told Rigzone. “Each plant has thousands of measuring points that are read continuously. The measuring points form the basis for key decisions to understand and analyze what has happened, and to optimize and improve plant operations. By introducing one standard solution for storing and presenting process data, Statoil will achieve considerable cost savings and simplification.”
  20. 20. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 20 In April, Statoil reported a surprise profit for first quarter 2016 due to the success of its cost-cutting measures offsetting the lowest crude prices in nearly 12 years. Statoil Chief Executive Officer Eldar Saetre attributed the results to strong operational performance across all business areas, high production efficiency and results in line with expectations from liquids trading and refining. Software has changed production optimization by allowing users to quickly aggregate data from multiple sources, including competitors’ historians - or software programs that record and retrieve production and process data by time – and data distributed over a wide geographic area, into graphics, trends and dashboards, said Golightly. “Users are able to aggregate and analyze large quantities of data on demand and accommodate data requests from a large number of users within a reasonable amount of time,” Golightly explained. By standardizing on aspenONE MES products, owner-operators can apply data-driven optimization to a costly and risky part of the business, Golightly said, adding that this optimization will allow Statoil to achieve significant savings and simplify its operations. The combined pressures have made a technology approach based on a system of success very attractive, Golightly explained. Integrated, advanced software ensures all areas of sustainability – environment, health and safety and profitability – are simultaneously addressed to drive efficiencies and performance improvements into the business, said Golightly. “Having a comprehensive overview of historical measurement data from the process is important for the effective operation of the plants,” Golightly explained. “The measuring points are the basis of understanding and analyzing what has happened, so that important decisions can be made to optimize and improve plant operations.” The trend toward the use of mobile devices such as cell phones and tablets to track operations – coupled with bringing younger oil and gas engineers up to speed and capturing knowledge from retiring older workers – has prompted the needs for technology solutions such as web-based functionality and performance, which require no installation and offer quick and easy access to advanced reports, trend curves and process graphics on mobile devices. This allows users to gain access to vital information and can keep up to date with operational challenges anytime and anywhere, Golightly explained. Additionally, tools that allow for “Google-like” searches across all processes and plant data throughout a company’s global facilities also are needed as oil and gas companies look to enhance their visibility across operations, Golightly stated. The capability will impact day-to-day operations by making things more efficient. AspenTech has worked with a number of major global companies in the upstream and downstream sectors. One global chemicals producer utilized AspenTech’s visualization solution, aspenONE Process Explorer, to reduce the time, cost and complexity of installation and upgrades typical of deploying software with desktop components. The solution also offers reduced cybersecurity vulnerability, along with lower deployment and maintenance costs. Golightly noted that, in larger organizations, the savings can be over a million dollars per deployment. All production environments today require operational excellence, which comes from the ability to optimize all production assets, Golightly noted. In their efforts to cope with low oil prices, U.S. exploration and production players have sought to optimize operations by reducing their production costs significantly, especially since 2015, according to a 2016 Deloitte Center for Energy Solutions report, The Crude Downturn for Exploration & Production Companies: One
  21. 21. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 21 Situation, Diverse Responses. By mapping productivity, production, and costs together, it appears high well productivity was the dominant driver in reducing industry costs per barrel of oil equivalent in the second half in 2014, following by switching from marginal to core fields in late 2014 and early 2015. The new normal of lower oil prices has not only laid bare the inefficiencies of oil and gas companies, but will push even the efficient ones to find ways to preserve their top and bottom lines, according to a 2015 Deloitte University Press report, Connected Barrels: Transforming Oil and Gas Strategies with the Internet of Things. But technologies such as the Internet of Things, which integrates sensing, communications, and analytics capabilities, offers the promise not only of helping oil and gas companies directly manage their existing assets, supply chains or customer relationship. IoT technology also creates an entirely new asset: information about these elements of their businesses. Deloitte sees three business objectives relevant to IoT deployments in the oil and gas industry: improving reliability, optimizing operations, and creating new value. “Upstream companies focused on optimization can gain new operational insights by analyzing diverse sets of physics, non-physics, and cross-disciplinary data,” Deloitte noted. Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com
  22. 22. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 22 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 26 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 27 July 2016 K. Al Awadi
  23. 23. 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, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its content. Page 23

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