New base energy news issue 915 dated 25 august 2016

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,
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NewBase Energy News 25 August 2016 - Issue No. 915 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
LNG IN THE NEW OIL PRICE ERA, By Morten Frisch
The factors influencing the oil price are varied and many have demonstrated themselves in the
past 24 months both in terms of demand and in terms of supply putting downward pressure on the
price of crude oil and oil products.
In the main shale/ tight oil plays of the U.S. Lower 48 the falling number of wells
drilled and completed for production has halted overall US production growth.
However, advancements made since 2014 in enhanced oil recovery techniques,
reductions in drilling and cash operating costs together with the current WTI price
of some US$ 50 per bbl, now enable the international and the larger domestic E
& P companies operating in this oil play to achieve full cycle economics
equivalent to an IRR of 10%, the level required to secure financing for their
operations.

A high number of drilled but uncompleted wells are likely to allow U.S. shale/ tight oil production to
resume at the current WTI price levels, but a fast revival of the E&P industry is under question
when the dispersion of high pressure pumping crews used for hydraulic fracturing and completion
of wells is taken into account.
The oil price outlook is likely to be impacted by supply side and demand side wild cards. Although
this is the case and when assuming no further major deterioration of geopolitical situations, the oil
price could fluctuate between US$45 and US$60 in the short to medium term.
Gas production and, therefore, the price of gas will be influenced by oil market economics, as
increases in oil – related E&P activities likely will pull E&P resources away from gas in North
America.
A price increase to US$ 3-3.5
MMBtu is likely to be required
for the gas market in the U.S.
Lower 48 states to balance in
the medium term. This price
level could ease after 2018 as
most drilled, but uncompleted
gas wells or gas DUCs are
concentrated in areas of pipeline
capacity shortages, and these
shortages are due to be
removed in 2018 and beyond.
US delivered ex ship or DES
LNG cargos bound for Asia can
currently not be delivered above
the short run marginal cost of
production, when compared to
ICIS Heren East Asia Index for
LNG pricing.
LNG produced in the U.S. is already uncompetitive, despite the current low level of Henry Hub gas
prices. Should Henry Hub prices rise in the future as predicted, U.S. LNG will become even less
competitive in Asian markets and Europe is likely to be an alternative destination of “last –resort”
for flexible LNG cargoes.
US LNG projects under construction will be adding substantially to the current total global LNG
oversupply, particularly in the 2018 - 2020 period. Floating Storage Re-gasification Units or FSRU
technology appears to be an innovative solution for both buyers and LNG developers, as it creates
additional LNG demand in smaller, newer markets.
But oversupply will remain a problem for years to come, also beyond 2020, putting further
pressure on LNG supply chain costs and helping buyers command new, unprecedented
allowances in long term LNG agreements.
Click here to read LNG in the New Oil Price Era by Morten Frisch in full.
http://www.naturalgaseurope.com/pdfs/Morten%20Frisch%20-
%20LNG%20in%20the%20New%20Oil%20Price%20Era%20Final%206%20July%20%202016.pdf

Saudi Arabia Holds China Market Share Lead on Record Oil Output
Bloomberg - Anthony Dipaola
Saudi Arabia kept its spot as China’s biggest oil supplier for the first seven months this year after
pumping record output in July, even as Russia threatens to overtake the kingdom in their contest
for sales to the world’s largest energy consumer.
The biggest crude exporter shipped an average of 1.05 million barrels a day to China in the year
through July 31, giving it a market share of 14 percent, according to Bloomberg calculations based
on data that China’s General Administration of Customs published Wednesday. Russia’s share
was 13.6 percent, the data show. Russia has gained ground in China this year, exceeding imports
from Saudi Arabia in three months.
“There’s a market-share battle going on mainly among the Middle East producers and Russia,”
Olivier Jakob, managing director of Petromatrix, said by phone from Zug, Switzerland. “Rivals are
making a big push into China.”
Oil climbed more than 20 percent to enter a bull market last week amid speculation that supplier
talks in September in Algiers may lead to action to stabilize the market. The world’s biggest
producers are fighting for market share as prices are still at half the level of two years ago. Saudi
Arabia pumped 10.67 million barrels a day on average in July, while Russia’s output was 11.01
million barrels a day, according to the Organization of Petroleum Exporting Countries.
China bought more oil from Russia than from Saudi Arabia from March through May, according to
the customs data. For all of last year, Russia’s share was 12.6 percent against Saudi Arabia’s
15.1 percent.
Russia has gained ground on Saudi Arabia, in part, by selling crude on a spot basis to refineries
not owned by China’s state oil companies, Jakob said. Those smaller refiners, known as teapots,
have been allowed to import their own supplies in the past year. Russia sold 1.02 million barrels a
day in the first seven months, the data show. Saudi Arabia, which has historically sold most of its
crude under long-term contracts to large refiners, may try to sell more oil on a spot basis to win
buyers in Asia, Jakob said.

China Oil Giants Unmoved by Bull Rally After Worst-Ever Earnings
Aibing Guo
After posting their worst-ever half-year results, two of China’s oil giants aren’t getting carried
away by crude’s return to a bull market, forecasting a rocky path ahead.
PetroChina Co., the country’s biggest oil and gas company, and Cnooc Ltd., China’s main
offshore explorer, reported the weakest earnings since they were both publicly listed. About a
week after oil capped a 22 percent gain from its previous low, the two producers that together
account for about 70 percent of the country’s crude output both struck a cautious note about the
outlook for prices in the coming months.
“Looking ahead to the second half of the year, uncertainties still remain in both the international
and domestic macro environment,” Cnooc Chairman Yang Hua said in the company’s filing on
Wednesday. “Further recovery of international oil prices faces headwinds.”
Oil has whipsawed this year, flipping five times between bear and bull markets, as output from
nations outside the Organization of Petroleum Exporting Countries, including China and the U.S.,
declines in the wake of a price crash that began in 2014. The latest surge was driven by
speculation that informal discussions among OPEC members next month may lead to action to
stabilize the market.
Weak Recovery
PetroChina’s net income dropped 98 percent to 531 million yuan ($80 million), the state-run
explorer said in a statement to the Hong Kong stock exchange on Wednesday. The company
was saved from a loss by the 24.5 billion yuan gain it booked from the sale of Trans-Asia Gas
Pipeline Co., which it announced in November.

“In the second half of 2016, the recovery of the global economy will remain weak and financial
markets will tend to be unstable due to significant political events including Brexit,” PetroChina’s
Chairman Wang Yilin said in the company’s earnings release. “The overall supply in the
international oil market will continue to be sufficient and the global oil price is likely to keep
fluctuating at a low level.”
Brent crude has lost more than 50 percent in the past two years. The global benchmark was
trading at $49.62 a barrel at 9:47 a.m. in New York. Citigroup Inc. this week cut its forecast by $2
for the last two quarters of the year to $47 and $50 a barrel, respectively.
Positive Payout
Cnooc swung to a 7.74 billion yuan loss, compared with a net income of 14.7 billion yuan a year
earlier. It booked a 10.4 billion yuan impairment on its assets. Most of the charge was related to
its Canadian oil sands operations, Yang said Wednesday in Hong Kong.
Despite the loss, Cnooc decided to pay out a HK$0.12 interim dividend. PetroChina announced a
special dividend of 0.02 yuan per share on top of its usual dividend distribution of 45 percent of
profit.
“The positive here is the willingness to pay beyond its 45 percent payout policy” by PetroChina,
Aditya Suresh, an analyst at Macquarie Capital Ltd., said in a research note.
High production costs, aging fields and low prices have resulted in a decline in China’s domestic
crude output, helping drive imports by the world’s second-biggest consumer to a record. The
country’s crude production in July tumbled to the lowest since October 2011 and has slipped 5.1
percent in the first seven months of the year, according to data from the National Bureau of
Statistics.
PetroChina’s capital expenditures in the first half of the year fell 17.5 percent to 50.9 billion yuan.
Cnooc’s spending for the period dropped 33 percent to 22 billion yuan. The offshore producer will
attempt to control capital spending within the previously announced 60 billion yuan target through
2016, President Yuan Guangyu said Wednesday in Hong Kong.

Norway's Oil Investments To Fall Again In 2017
by Reuters
Investment in Norway's oil and gas sector, a cornerstone of the economy, will drop next year as
weak crude prices push energy companies to rein in their budgets, a national statistics agency
survey showed on Wednesday.
Norway's offshore sector generates a fifth of gross domestic product and a fall in crude prices has
forced energy firms to delay or cancel projects and lay off staff.
Oil and gas investments will reach 150.5 billion crowns ($18.4 billion) next year, down from a May
estimate of 153.2 billion crowns, Statistics Norway said. This year they will reach 163.5 billion
crowns, down from a May estimate of 165.9 billion.
Next year's drop is mainly due to firms, which have been on a cost-saving review for the past two
years, mothballing projects to decommission ageing installations at offshore oil and gas fields, it
said.
"Almost the entire decrease from the last survey is due to lower estimates in shutdown and
removal (of platforms)," the agency said in a statement. The estimate for those costs had dropped
25 per cent since May.
An economist said the numbers pointed to a lower rate path for the central bank.

"The numbers are slightly weaker than expected," said Kari Due-Andresen, chief economist at
Handelsbanken. "It looks like it is weaker than the central bank's own forecasts."
She said she did not expect Norges Bank to reduce rates at its next policy meeting on Sept. 22,
but sees further cuts later.
The central bank was until recently widely expected to cut rates from the current 0.50 percent, but
recent data including stronger-than-expected inflation for July suggested it might hold rates this
time.
Brent crude oil currently trades at around $49 per barrel. The price has risen since the start of the
year but is still down around 57 percent since June 2014.

Kenya: Work Begins on 2D Seismic Survey in Wajir Kenya
by Rigzone Staff
Essel Group Middle East (EGME) and Simba Energy Inc. confirmed Wednesday that work has
commenced on the 2D seismic survey of Block 2A in Wajir, Kenya.
The testing will cover
an area of
approximately 332
miles and roughly 248
miles has already been
cleared in preparation
for shooting. Survey
production has been
completed on over half
of the testing area and
the technical team has
started shooting,
according to EGME.
This survey is being
carried out by AGS
Oilfield Services Ltd
and will identify and
evaluate areas with
hydrocarbon potential
in Block 2A. The two
specific aims for the
seismic survey are to
pinpoint the optimum
locations for drilling and
to estimate depths and
volumes for primary
and secondary targets.
In addition to the latest
seismic news, EGME
also revealed that it
has entered into a
definitive agreement to
acquire a new skid
mounted drilling rig.
The AC-VFD rig will be
used by the company during its oil exploration activity on Block 2A.
“The work on the seismic survey and the acquisition of this drilling rig is further evidence of the
progress we are making in developing our portfolio of oil assets,” said Gagan Goel, managing
director of EGME and chairman of Simba Energy.
“The testing is ongoing and we remain extremely confident in the prospects for Block 2A. We look
forward to working with DNV GL on bringing the rig into operation.”

Kenya: First Kenyan Oil Due by March 2017; Exports to Follow
Bloomberg - Helen Nyambura-Mwaura
Tullow Oil Plc will put Kenya on the map of oil producers by the first quarter of 2017 and drill eight
additional exploration wells in the African nation’s North Lokichar region, President Uhuru
Kenyatta said.
Exports will commence three months later,
with the crude being transported by road to
the Indian Ocean port city of Mombasa,
Kenyatta said in an e-mailed statement
after he met with Tullow’s chief operating
officer, Paul McDade. Kenya’s recoverable
resources are estimated at 750 million
barrels.
Tullow will sink more wells to increase that
figure to over a billion barrels, according to
the statement. Initial production will be
2,000 barrels per day, with road transport
to Mombasa a stopgap measure until
Kenya constructs a pipeline.
Kenya’s government has signed an agreement to develop that conduit with Tullow, Africa Oil
Corp. and Maersk Oil Gas AS, according to the statement. The pipeline will link fields in the
northwestern Lokichar region to a planned port in the coastal town of Lamu.
East Africa’s biggest economy is racing ahead with production plans after neighboring Uganda
spurned it as host of a pipeline to transport that country’s own estimated 1.7 billion barrels of
resources. Kenyan authorities in June said they would begin work on a 865-kilometer (538-
mile) pipeline in 2018.

NewBase 25 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 fall as market focus returns to global supply overhang
Reuters + NewBase
Crude prices edged lower on Thursday as brimming U.S. and Asian fuel inventories returned
investors' attention to a large global supply overhang, cutting short a price rally and restricting
Brent crude futures to below the $50 a barrel mark.
International benchmark Brent crude oil futures were trading at $48.95 per barrel at 0132 GMT in
early Asian trade, down 10 cents, after closing down 1.8 percent previously. U.S. West Texas
Intermediate (WTI) crude futures were at $46.68 a barrel, down 9 cents, after falling 2.8 percent
on Wednesday.
Traders said price falls this week had truncated a
rally that pushed crude up by more than 20
percent earlier in August on talk of a potential
deal by oil producers to freeze output in an effort
to rein in oversupply.
Hopes of a deal were dampened by record output
from theOrganization of the Petroleum Exporting
Countries (OPEC) and little prospect of voluntary
restrictions.
"Brent also came under pressure after (OPEC-
member) Iraq said it still isn't producing as much
oil as it should be, raising concerns that OPEC supply will continue to increase," ANZ bank said
on Thursday.
With output high, not just from OPEC
but also other top producers like
Russia, and the demand outlook
shaky, analysts said there was little
prospect of an end to the glut, which
has pulled down crude prices from
over $100 a barrel to their current
sub-$50 levels since 2014.
"Ample inventories were due to
weaker demand in Asia, but more
generally were driven by excess supply generated by refiners maximizing runs, notably to produce
gasoline in the U.S.," BNP Paribas said.
"In Asia, China's July economic statistics confirmed loss of growth momentum," it added. The
French bank said that the "lacklustre demand prospects (and) the augmented capacity of the
global refining system ... suggest (that) a distillate supply overhang will persist."
Oil price special
coverage

NewBase Special Coverage
News Agencies News Release 25 August 2016
As Japan and South Korea import less LNG, other Asian
countries begin to import more
Source: U.S. EIA, compiled from several countries' statistical departments
Japan, South Korea, and China are the three largest importers of liquefied natural gas (LNG) in
the world, accounting for more than half of global LNG imports in 2015. Combined LNG imports in
these countries averaged 18.2 billion cubic feet per day (Bcf/d) in 2015, a 5% (0.9 Bcf/d) decline
from 2014 levels and the first annual decline in these countries' combined LNG imports since the
global economic downturn in 2009.
Declines in LNG imports in these countries were partially offset by increasing LNG imports
elsewhere in Asia. Imports in India and Taiwan, the fourth- and fifth-largest LNG importers,
respectively, increased slightly in 2015. However, most of the increase in LNG imports came from
emerging Asian LNG markets, such as Malaysia, Singapore, Thailand, and Pakistan. Although
LNG demand growth prospects are limited in the more mature markets of Japan and South
Korea, LNG demand in China, India, Taiwan, and emerging Asian markets is expected to grow in
the future.
In Japan, South Korea, and China, reduced demand for natural gas in the power sector, driven by
slower economic growth and lower-priced competing fuels, resulted in reduced LNG consumption
in 2015. Cooler-than-usual temperatures as a result of effects from El Niño also contributed to
lower electricity consumption andreduced LNG imports in those countries.

Potential for LNG demand growth in both Japan and South Korea may be limited. Japan's total
electricity consumption has fallen for five consecutive years, and nuclear generation is gradually
returning to service, likely reducing natural gas use for electricity generation. In South Korea,
government policies that favor the use of coal and nuclear over natural gas for electricity
generation led to a greater use of coal-fired and nuclear power plants.
In China, the lower prices of competing fuels and the slowdown in the growth of the Chinese
economy drove the 2015 decline in LNG imports. Natural gas use in China may increase for
several reasons: the implementation of environmental policies promoting use of natural gas in the
power, industrial, and transportation sectors; the availability of imported global LNG supply at
relatively low prices; and growing capacity of LNG regasification.
Emerging Asian LNG import markets, including Thailand, Malaysia, Singapore, and Pakistan,
currently account for a small share of total Asian LNG imports, but they may have the potential to
increase their LNG imports soon. LNG import growth in these countries is driven primarily by the
increased use of natural gas for power generation.
In Thailand, the combined effects of declining domestic natural gas production near consuming
centers and strong growth in natural gas demand are driving LNG import growth. Although LNG
imports provide a relatively small share of natural gas supply in Thailand, the country's LNG
imports are projected to increase because of limited growth potential for domestic production and
for pipeline imports from Myanmar, its two main supply sources.
Malaysia began importing LNG in 2013. The country's LNG imports are projected to grow
moderately, limited by competition from lower-priced coal and domestic natural gas prices.
Prospects for LNG demand growth in Singapore depend on the country becoming an LNG trading
hub in the region. Singapore is increasing regasification capacity and launched the SGX LNG
index in an effort to establish a regional Asian LNG hub.
Pakistan began importing LNG in March 2015. Pakistan's LNG imports are projected to double in
the next two years. Declining domestic production and rapidly growing natural gas demand in the
power generation and industrial sectors, results in increases in LNG imports.

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

New base energy news issue 915 dated 25 august 2016

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New base energy news issue 915 dated 25 august 2016