New base energy news issue 900 dated 04 august 2016

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NewBase Energy News 04 August 2016 - Issue No. 900 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Jordan: LNG imports reach 66 billion cubic feet – ministry
Jordan Times - Mohamed Ghazal
Jordan's imports of liquefied natural gas (LNG) have reached 66 billion cubic feet since the
opening of the country's first LNG terminal in 2015, a government official said on Tuesday.
At present, 82 per cent of Jordan's electricity is generated using the imported LNG, which has
saved the country millions of dinars and decreased the energy bill by reducing the Kingdom's
reliance on diesel and heavy fuel to generate power, said Haidar Gammaz, spokesperson of the
Ministry of Energy and Mineral Resources.
"The opening of the terminal has played a significant role in reducing energy spending in Jordan
and more shipments of LNG are to come to Jordan in the future as the country has signed several
deals in this regard," Gammaz told The Jordan Times.
Jordan has received around 20 shipments of LNG since the opening of the terminal, he said,
adding that each shipment consisted of 125,000 to 136,000 cubic metres of LNG. Jordan started
importing LNG in mid 2015 after the inauguration of the Sheikh Sabah Al Ahmad Terminal in
Aqaba, some 330km south of Amman.
Since then, the Kingdom's dependence on gas has contributed to a decrease in electricity costs
by 25 to 30 per cent. Previously, Jordan had been forced to switch to importing diesel and heavy
fuel for power generation after repeated cuts to the natural gas supply from Egypt and a complete
halt to supplies in early 2014.

Iran Adopts Oil Contract as Glut No Barrier to Boost Output
Bloomberg - Sam Wilkin + Reuters + New
Iran approved a new oil contract model, taking the OPEC nation a step closer to welcoming
foreign investment in its energy industry and boosting production even more into an oversupplied
market.
The contract model was approved at a cabinet meeting Wednesday, according to the official
Islamic Republic News Agency. Priority will be given to boosting output at jointly owned oil and
gas fields, state radio reported, citing Oil Minister Bijan Namdar Zanganeh. Iran wants to lure
international companies that can make long-term investments worth billions of dollars and bring
technology after sanctions were eased in January.
Iran has been working on the oil contract model for the past two years. The country hopes
companies will invest as much as $50 billion a year. It’s already succeeding in meeting its pledge
to regain market share it lost due to the sanctions over its nuclear program. Production was 3.55
million barrels a day in July, 27 percent higher for this year and the most since December 2011,
according to data compiled by Bloomberg.
“Any process is going to take time and a lot of steps before any investment goes into the ground,”
Edward Bell, commodities analyst at Emirates NBD in Dubai, said by phone. “This isn’t going to be
a step change in the way markets are going now.”
OPEC Ranking
Brent crude prices fell 15 percent in July amid a growing recognition the global surplus of crude
will take time to clear. Iran seeks to reach an eight-year high for daily output of 4 million barrels by
the end of 2016, with foreign investment helping it regain the position as OPEC’s second-largest
producer. It was third-largest in July, according to data compiled by Bloomberg.
Big oil companies, mostly from Europe and including Italy’s Eni SpA and France’s Total SA have
expressed an interest in developing Iran’s oil and gas fields. Calls to Eni and Total seeking
comment about their interest now weren’t immediately returned.
The new contract model was approved in a cabinet session presided by President Hassan
Rouhani on Wednesday. The Oil Ministry will review each contract to be signed by potential new
investors, including details on price, duration and other terms of the project, according to state

radio. The document still needs to be reviewed by parliament for final endorsement, Iran’s Oil
Ministry news service Shana reported.
Investors will want to know exactly what conditions they will face in Iran, such as joint venture
regulations and dispute resolution, Emirates NBD’s Bell said. “Once we get the full details on that,
we will get a much better sense of how attractive the contracts are.”
OMV unhappy with Iranian oil contracts
Iran’s oil contracts are not yet fit for the Austrian energy group OMV to invest in planned projects
in the country, which hopes foreign investment will revamp its ageing oil infrastructure, OMV’s
chief executivesaid on Wednesday.
In May, four months after most international sanctions against Iran were lifted after it agreed to
shrink its nuclear programme, OMV signed a memorandum of understanding with the National
Iranian Oil Company for several projects there.
The OMV chief executive Rainer Seele said talks to fine-tune a model contract for international oil
companies have not been successful yet.
"This process is still ongoing, this is taking quite a long time ... We have not yet defined a clean
framework for the projects that are interesting for us," Mr Seele said when asked how long this
might take.
"We can make an investment decision only when we really know what the framework and the
conditions are." OMV’s envisaged projects are in the Zagros area in western Iran, including the
Cheshmeh Khosh and Band-E-Karkheh fields where OMV had started operations in 2001, and the
Fars field in the south.
Iran’s cabinet on Wednesday approved a draft for the country’s new oil and gas contracts that
includes 150 changes to a previous model contract, the state broadcaster IRIB said.
Another hurdle for OMV to start injecting fresh money into Iran, which needs US$200 billion to
return to pre-sanctions output levels, is an outstanding debt Iran owes OMV to reimburse it for
past appraisal and exploration activities.
"If you owe me money and you’re not giving it back to me and then want to proceed with me in the
future, would you think that’s a good combination?" Mr Seele said of the debt linked to OMV’s
activities before international sanctions were imposed on Iran in 2006.
"We are in intensive talks [about this] that have not yet achieved their objective."

US:Crude-by-rail volumes to the East Coast are declining
EIA Petroleum Supply Monthly
Movements of crude oil by rail within the United States averaged 443,000 barrels per day (b/d) in
the first five months of 2016, down 45% from the same period last year. Fewer shipments of crude
oil by rail from the Midwest (PADD 2) to the East Coast (PADD 1) account for about half of the
decline.
Crude oil shipments by rail have generally decreased since last summer for several reasons,
including narrowing price differences between domestic and imported crude oil, the opening of
new crude oil pipelines, and declining domestic production in the Midwest and Gulf Coast onshore
regions.
The economics of crude-by-rail transportation depend largely on the relationship between the
prices of domestic and international crude oils. Domestic crude oils priced in the Midwest and
western Texas are no longer heavily discounted relative to imported crude oils priced in the North
Sea.
The narrower the spread between domestic and imported crude oils, the more likely coastal
refiners will choose to run imported crudes rather than domestic supplies shipped by rail.
Crude oil carried by rail from the Midwest to the East Coast remains the country's largest crude-
by-rail movement at 176,000 b/d, or 45% of the total crude oil moved by rail within the United
States in May 2016.
Crude oil imports processed by East Coast refineries have generally increased since early 2015,
averaging 760,000 b/d in May 2016, up from 666,000 b/d in May of last year.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly
EIA develops the crude oil and biofuels rail movement data using information provided by the
Surface Transportation Board (STB), along with data from Canada's National Energy Board, other
third-party sources, and several EIA surveys. EIA's energy-by-rail data are subject to revision as
new information becomes available, especially the most recent one to three months of rail data
from the STB. More information is available in EIA's energy-by-rail data methodology report.

NewBase 04 August 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices bounce after US gasoline inventory draw
Reuters + NewBase
Oil prices rose early today 04th August 2016 , extending gains from the previous session following
a large draw on U.S. gasoline inventories.
U.S. West Texas Intermediate (WTI) crude futures were trading at $41.15 per barrel at 0139 GMT,
up 32 cents, or 0.8 percent, after rising 3.3 percent and back over $40 the previous session.
International Brent crude futures were trading at $43.39 per barrel, up 29 cents, or 0.7 percent,
from their last close.
The jumps on Wednesday and Thursday marked at least a temporary end to a sharp downward
trend since June, which saw crude futures lose some 20 percent of their value.
"Oil prices rallied after the EIA weekly report showed gasoline inventories declined the most at this
time of the year for at least five years," ANZ bank said.
Stocks dropped 3.26 million barrels to 238.2 million barrels, according to data from the U.S.
Energy Information Administration (EIA). Despite the price gains, traders said that overall market
conditions remained weak, with a production overhang in both crude and refined products
weighing on markets.
Oil price special
coverage

Oil oversupply fears are back to weigh on crude prices
The National - Paul Young
Monthly Oman crude oil trading on the Dubai Mercantile Exchange (DME) fell for the first time in
six months as weaker sentiment returned on renewed oversupply fears, briefly knocking Oman
crude prices under US$40 a barrel for the first time since April.
The monthly average price of the DME for July, which is used by Oman and Dubai to set their
official selling price, was $43.40 a barrel for September-loading crude, and down $3.20 a barrel or
7 per cent from the June monthly average of $46.60. Oman crude traded in a range of $39.83 to
$46.56 over the month and closed on the final day of July at the monthly low.
Increases in global production have been led by Opec, with last month’s output said to be at the
highest in recent history, as Iraq and Nigeria pump more crude despite ongoing militant attacks on
oil installations. Reuters reported that supply from Opec has risen to 33.4 million barrels per day
last month.
The leading Opec exporter Saudi Arabia has kept output close to a record high, Reuters found, as
it meets seasonally higher domestic demand and focuses on maintaining market share rather than
trimming supply to boost prices. Opec’s production could also increase further should talks to
reopen some of Libya’s oil facilities succeed, said Reuters.
Adding to the weaker market outlook global stocks remain high, particularly in the US. The oil
brokerage PVM noted that oil inventories in the US have now reached 70.4 days at the end of
June, up from 68.1 days at the start of the year.
This puts US summer stockpiles at a 20-year high, which concerns analysts as demand usually
peaks in the summer because of the long distances covered by US motorists. More worrying for
market bulls are US petrol stocks, at 241.5 million barrels, or 12 per cent higher than this time a
year ago, according to the US Energy Information Administration.
Strong global demand for petrol (in part encourage by the lower pump prices of the past two
years) had encouraged refiners to maximise petrol production, which has caused a supply glut
across the globe. Petrol in Asia averaged $12 a barrel over Brent crude last year, but in July the
premium dropped to less than $2, impacting refiners’ profits. This in turn cuts demand for crude
oil, hence the price downturn over the summer.
Market watchers say that about 1 million bpd of processing capacity in Asia will be shut in
October, the biggest shutdown this year as refiners try to cope with weak refining margins and
high fuel inventories.
The softer market has also lead to weaker differentials for regional crude grades. For instance,
Saudi Arabia has slashed the September price for its Arab Light crude oil for Asian customers by
$1.30 a barrel, the largest cut for the Kingdom’s main export grade in nearly a year.
Qatar’s Al Shaheen, which although is only a small volume typically sets the price of Dubai, is also
an important regional benchmark. Al Shaheen for September loading was trading last month at
more than a $1 a barrel discount, while Abu Dhabi’s Upper Zakum crude for September loading
traded as low as around 80 cents a barrel discount (against Dubai).
However, the Oman benchmark has closed the gap on other benchmark crudes, with oil prices in
the West falling faster than those in the Middle East. The US WTI crude benchmark recently stood
at around $1.40 a barrel over Oman compared to about $3 a month ago, while the European
Brent against Oman was trading at about $2.50 a barrel compared to $4 early last month.

Oil Prices: What’s Behind the Drop? Simple Economics
The New York Time - CLIFFORD KRAUSS UPDATED
The oil industry, with its history of booms and busts, has been in its deepest downturn since the
1990s, if not earlier.
Earnings are down for companies that made record profits in recent years, leading them to
decommission more than two-thirds of their rigs and sharply cut investment in exploration and
production. Scores of companies have gone bankrupt and an estimated 250,000 oil workers —
roughly half in the United States — have lost their jobs.
The cause is the plunging price of a barrel of oil, which at one point fell more than 70 percent
compared with June 2014 levels.
Prices have recovered a few times over the last year, but they are falling again and are below
what producers need to drill profitable wells.
Executives think it will be years before oil returns to $90 or $100 a barrel, a price that was pretty
much the norm over the last decade.
What is the current price of oil?
Brent crude, the main international benchmark, was trading at around $43 a barrel
on Wednesday. The American benchmark was at around $41 a barrel.
Why did the price of oil drop in the first place?
This a complicated question, but it boils down to the simple economics of supply and demand.
United States domestic production has nearly doubled over the last several years, pushing out oil
imports that need to find another home. Saudi, Nigerian and Algerian oil that once was sold in the
United States is suddenly competing for Asian markets, and the producers are forced to drop
prices.

Canadian and Iraqi oil production and exports are rising year after year. Even the Russians, with
all their economic problems, manage to keep pumping at record levels.
There are signs, however, that production is falling because of the drop in exploration
investments. RBC Capital Markets has calculated that projects capable of producing more than a
half-million barrels a day of oil were canceled, delayed or shelved by OPEC countries alone last
year, and this year promises more of the same.
Recently, oil companies in Canada severely pulled back or stopped pumping altogether after a
forest fire devastated the oil sands region. Production there dropped by a million barrels a day,
roughly 40 percent of the area’s output.
Rebel attacks in Nigeria have also curtailed supplies in that region. These fluctuations, however,
may be short-lived.
On the demand side, the economies of Europe and developing countries are weak and vehicles
are becoming more energy-efficient. So demand for fuel is lagging a bit, although there are signs
that demand is growing in the United States.
Who benefits from the price drop?
Any motorist can tell you that gasoline prices have dropped. Diesel, heating oil and natural gas
prices have also fallen sharply.
The latest drop in energy prices — regular gas nationally now averages $2.18 a gallon, roughly
down about 56 cents from the same time a year ago — is also disproportionately helping lower-
income groups, because fuel costs eat up a larger share of their more limited earnings.
Households that use heating oil to warm their homes are also seeing savings.
Who loses?
For starters, oil-producing countries and states. Venezuela, Nigeria, Ecuador, Brazil and Russia
are just a few petrostates that are suffering economic and perhaps even political turbulence.
The impact of Western sanctions caused Iranian production to drop by about one million barrels a
day in recent years and blocked Iran from importing the latest Western oil field technology and
equipment. With sanctions now being lifted, the Iranian oil industry is opening the taps on
production.
In the United States, there are now virtually no wells that are profitable to drill.
Chevron, Royal Dutch Shell and BP have all announced cuts to their payrolls to save cash, and
they are in far better shape than many smaller independent oil and gas producers. Exxon has
reported record low quarterly profits, and was recently stripped of its top AAA credit rating (leaving
Microsoft and Johnson & Johnson as the lone American companies in the rarefied AAA group).
States like Alaska, North Dakota, Texas, Oklahoma and Louisiana are facing economic
challenges. There has also been an uptick in traffic deaths as low gas prices have translated to
increased road travel. And many young Saudis have seen cushy jobs vanish.
What happened to OPEC?
Over the last year, Iran, Venezuela, Ecuador and Algeria have all pressed OPEC, a cartel of oil
producers, to cut production to help firm up prices. At the same time, Iraq is actually pumping
more, and Iran is expected to become a major exporter again.

OPEC countries, at a recent meeting, decided to make no change, citing the recent rise in prices.
(Benchmark prices recently — although briefly — went back above $50 a barrel.)
Analysts have said that setting a production ceiling might only have limited value in regulating
prices. That is because many of the biggest producers, including Saudi Arabia, are already
pumping near top capacity.
There was a recent shake-up in the Saudi oil industry, though it’s still unclear what longer-term
impact that may have. The country’s king, Salman bin Abdul-Aziz Al Saud, may in any case find it
difficult to persuade other OPEC members to keep steady against the financial strains. The
International Monetary Fund estimates that the revenues of Saudi Arabia and its Persian Gulf
allies will slip by $300 billion this year.
Is there a conspiracy to bring down the price of oil?
There are a number of conspiracy theories floating around. Even some oil executives are quietly
noting that the Saudis want to hurt Russia and Iran, and so does the United States — motivation
enough for the two oil-producing nations to force down prices. Dropping oil prices in the 1980s did
help bring down the Soviet Union, after all.
But there is no evidence to support the conspiracy theories, and Saudi Arabia and the United
States rarely coordinate smoothly. And the Obama administration is hardly in a position to
coordinate the drilling of hundreds of oil companies seeking profits and answering to their
shareholders.
When are oil prices likely to recover?
Oil markets have bounced back considerably since hitting a low of $26.21 a barrel in New York in
early February. There was a similar recovery last spring, but that didn’t last.
Some analysts still question how long the current recovery can be sustained because the global
oil market remains substantially oversupplied. In the United States, domestic stockpiles are at
their highest levels in decades, though they are coming down as seasonal driving picks up.
But over the long term, demand for fuels is recovering in some countries, and that could help
crude prices recover in the next year or two.

NewBase Special Coverage
News Agencies News Release 01 August 2016
Kemp: Why Is Oil Market Rebalancing Taking So Long?
by Reuters - John Kemp
Rebalancing the oil market is proving a long and frustrating process because the oil-exporting
countries hit hardest by the slump were the themselves some of the fastest growing oil consumers
before prices tumbled.
As oil revenues have shriveled, their economies have slowed or gone into recession, removing
one of the most dynamic drivers of oil demand, and leaving the rest of the world economy to fill
the gap.
The slowdown in demand from oil-exporting countries has worsened the oversupply situation and
prolonged the market rebalancing process ("Commodity slump intensifies risks to emerging
markets", Reuters, Oct. 8).
Rebalancing has come to rely on production cuts, and stimulating additional demand from China
and India, as well as the advanced economies which had showed little or negative growth prior to
2014.
The first stage of the rebalancing process is therefore proving exceptionally difficult and slow
because it is fighting the headwinds caused by the drop in oil prices.
Once prices start rising significantly, however, the market is likely to tighten faster than many
analysts expect because oil consumption in emerging markets is likely to accelerate again with the
extra oil revenues.
New Consumers
Oil-exporting countries accounted for more than one-third of the global increase in oil consumption
outside the United States between 2004 and 2014, as rising oil revenues fuelled a boom in their
domestic economies.
Between 2004 and 2014, oil consumption outside the United States increased by 11.4 million
barrels per day (bpd) ("Statistical Review of World Energy", BP, 2016).
Fifteen oil-exporting countries identified separately in the BP Statistical Review accounted for 4.2
million bpd of extra demand (Canada, Mexico, Colombia, Ecuador, Venezuela, Norway,
Azerbaijan, Kazakhstan, Russia, Algeria, Iran, Kuwait, Qatar, Saudi Arabia and United Arab
Emirates).
Consumption growth was especially rapid in Saudi Arabia (+1.7 million bpd), Russia (+0.6 million
bpd), Iran (+0.5 million bpd) and the United Arab Emirates (+0.3 million bpd).
But with the exception of Mexico, every one of the 15 oil exporting countries analysed separately
in the review reported increased domestic oil consumption during the decade to 2014.
All the rest of global oil consumption growth was attributable to China (+4.4 million bpd), India
(+1.3 million bpd) and Brazil (+1.2 million bpd).

Brazil experienced its own oil and agriculture-driven boom between 2004 and 2014 despite
remaining a net oil importer throughout. Brazil behaved like an oil-exporting economy even though
the country continued to import refined fuels.
Oil consumption surged by 1.2 million bpd between 2004 and 2014 while oil production rose by
just 800,000 bpd. Brazil has subsequently been hit hard by the drop in oil and other commodity
revenues ("Brazil's fuel consumption falls as the economy shrinks", Reuters, May 6).
If Brazil is analysed as an oil-exporting economy, then the group accounted for nearly half of all
the growth in global oil consumption between 2004 and 2014.
Positive Feedback
Commentators tend to divide the world into "net consuming" and "net exporting" countries but the
15 major exporters accounted for 17.3 million bpd of oil consumption in 2014, up from 13.1 million
a decade earlier.
Surging oil prices between 2004 and 2014 brought an enormous influx of revenue for exporters,
stimulating their economies and resulting in a surge in internal demand for everything from
vehicles to electricity and construction.
Paradoxically, higher oil prices helped tighten the global oil market because they stimulated even
more demand growth in oil-exporting economies.
The price-revenue-demand relationship is one of many positive feedback mechanisms operating
in the oil market which have tended to amplify price swings and intensify the price cycle.
Once oil prices slumped, however, the mechanism shifted into reverse. Falling revenues caused
oil exporting economies to slow and forced cutbacks in government, business and household
spending.
Since the middle of 2014, domestic oil demand in the major oil exporting countries has levelled off
or even started to fall ("Middle East economic slowdown will cut oil demand growth", Reuters, Jan.
20 ).
Total oil consumption in the 15 major exporters actually declined by 90,000 bpd in 2015 and is
likely to decline again in 2016.
The slump in oil exporting economies is a major reason why global economic growth and trade
have been so sluggish in the last two years.
Lower oil prices have produced a negative shock for the global economy because the hit to
investment and consumption in exporting countries is large and immediate while gains for
consuming countries are smaller and take longer to materialise.
Slow Adjustment
So far, the United States has been excluded from the analysis because it is both a larger oil
producer and consumer, has been a limited exporter until recently, and has a large and diversified
economy, unlike any other major oil exporter.
U.S. oil consumption declined by 1.6 million bpd between 2004 and 2014, mostly as a result of
increased efficiency, while domestic production rose by around 4.5 million bpd, mostly thanks to
shale.

In many ways, the United States was responsible for the end of the oil boom by reducing its own
oil demand while boosting supply, resulting in an enormous net shift in the global oil balance.
The country is slated to play an outsized role in rebalancing, with shale production already down
sharply, and oil consumption increasing for the first time since 2005 (excluding the post-recession
rebound in 2010).
The other advanced economies in Europe and Asia account for a relatively small share of global
consumption and are not dynamic enough to contribute much to rebalancing on either the demand
or supply sides.
So rebalancing will rely on China, India and the United States in the early stages, with oil-
exporting countries likely to accelerate the rebalancing later in the cycle.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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Khaled Malallah Al Awadi,
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 04 August 2016 K. Al Awadi

New base energy news issue 900 dated 04 august 2016

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