New base energy news issue 939 dated 23 october 2016

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NewBase Energy News 23 October 2016 - Issue No. 939 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE committed to energy sustainability: Minister
WAM
Abu Dhabi: The UAE has succeeded in reducing the cost of producing electricity from solar
resources to record lows as it continues to deliver on its commitment to support all initiatives to
ensure sustainable development and energy supplies for all and achieve a green economy, Suhail
bin Mohammad Faraj Faris Al Mazrouei, Minister of Energy, said on Friday.
“The World Energy Day is an opportunity to increase awareness of the importance of rationalising
energy, reducing carbon emissions and protecting the environment. It is also a reminder for
institutions and individuals to combine efforts to curb practices damaging the environment,
preserve natural resources and ensure sustainability for the coming generations,” he said in a
statement on the occasion.
Observed every year on October 22, World Energy Day was declared in 2012 during the World
Energy Forum in Dubai and was first endorsed by His Highness Shaikh Mohammad Bin Rashid Al
Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, along with
representatives of 54 countries, the United Nations, the League of Arab States and the African
Union Commission, through the “Dubai Declaration — Energy for All”.
The UAE cut gasoline and diesel and gasoline subsidies in 2015 as part of efforts to achieve
sustainability and preserve natural resources, Al Mazrouei added.
The UAE will host the 24th World Energy Congress 2019 in Abu Dhabi as part of efforts to
transform into the world’s capital for energy.

Qatar; Noble scoops jack-up work in Qatar
Offshore Energy Today Staff
Offshore drilling contractor Noble Corporation has received a contract award for a jack-up drilling
rig in Qatar.
The company reported in its latest fleet status report on Thursday that the jack-up drilling rig Noble
Houston Colbert has been awarded a contract by JX Nippon in Qatar.
The contract, with an undisclosed dayrate, will start in December 2016 and last until May
2017. Noble Houston Colbert has been warm stacked at a shipyard in the UAE since July 2016.
The unit previously worked for Total in Argentina until June 2016.
The rig, of a Friede & Goldman JU3000N design, was built in 2014 by Sembcorp Marine’s Jurong
Shipyard.
Noble said in the report that four of its jack-up drilling rigs are expected to experience a number of
days of operational downtime, all at zero dayrate.
Noble Scott Marks is anticipated to have +/-30 days of operational downtime for maintenance/
repairs in 1Q 2017 and Noble Gene House is also expected to have +/-30 days of operational
downtime regulatory inspection in 3Q 2017.
Further, Noble Roger Lewis is anticipated to experience +/-15 days of operational downtime for
regulatory inspection in 1Q 2017.
And finally, Noble Joe Beall is anticipated to experience +/-90 days of operational downtime at
zero dayrate for regulatory inspection in 1Q 2017.

Saudi Arabia to Select Nuclear Power-Plant Site ‘Very Soon’
Bloomberg - Angelina Rascouet
Saudi Arabia will soon choose a site for its first nuclear power plant as the world’s biggest crude
exporter seeks to diversify its sources of energy.
“We will be selecting sites very soon that we will reserve for our first nuclear energy power plant,”
Khalid Al-Falih, the country’s energy minister, said Wednesday at the Oil and Money conference
in London. “We hope within the next 12 months that we will be announcing concrete plans.”
The government
wants to make sure
all “regulatory steps”
are taken
beforehand, he said.
Wind and solar
power will also play a
“very significant part”
of Saudi Arabia’s
energy mix, Al-Falih
said.
Saudi Arabia, which
laid out its ambitions
for diversifying
energy supplies in
2012, is trying to
reduce the
economy’s dependence on hydrocarbons as low oil prices strain the budget. The country raised
$17.5 billion this week in the biggest bond sale from an emerging-market nation as it seeks to
bridge a deficit that widened last year to about 15 percent of gross domestic product.
U.A.E. Reactors
The kingdom has a target of generating 6 to 7 gigawatts of electricity from nuclear power by 2032,
rising to 17 gigawatts by 2040, Maher al-Odan, an adviser to the government on renewables
planning, said in April of last year. Abu Dhabi in the neighboring United Arab Emirates is building
the Gulf Arab region’s first nuclear power plant. The reactor, one of four that the emirate is
planning, is scheduled for completion in 2017.
Emirates Nuclear Energy Corp. and Korea Electric Power Corp. signed a joint-venture agreement
on Thursday for a long-term partnership in the U.A.E.’s nuclear program, ENEC said in an e-
mailed statement. Korea Electric is taking an 18 percent stake in a venture representing the
commercial interests of the U.A.E.’s Barakah nuclear-plant project, with ENEC holding the rest,
according to the statement.
Construction of the U.A.E.’s four reactors is more than 71 percent complete, and all the plants are
to be finished in 2020, ENEC said. The U.A.E., like Saudi Arabia, a fellow member of the
Organization of Petroleum Exporting Countries, is trying to reduce its reliance on oil exports. It
expects to produce nearly a quarter of its electricity from nuclear energy by 2020, according to
ENEC’s website.

Indonesia to decide on Masela LNG development plan within 2 weeks
LNG World News Staff
Indonesia is reportedly set to decide on the development of the Abadi gas field in the Masela
block within the next couple of weeks. Luhut Pandjaitan, Indonesia’s coordinating maritime
minister said, the discussions on the project capacity with Inpex and Shell are in progress,
Reuters reports.
According to Pandjaitan, Inpex and
Shell have proposed to increase the
output from the field by four times
above the initial plan. The proposed
onshore facility would have a
production capacity between 7.5 mtpa
and 9.5 mtpa.
In March this year, Indonesia’s
president Joko Widodo, rejected the
initial multi-billion dollar plan to
develop a Floating LNG facility and
instead instructed Inpex and Shell to
re-propose a plan of development for
the Abadi gas field based on an
onshore LNG plant.
The initial plan of development was based on developing the gas field in Arafura Sea in stages
and targeted the deployment of an FLNG plant with an annual processing capacity of 2.5 mtpa as
the first stage of development.
The official added that the onshore facility will be developed on the islands of Aru or Saumlaki.
Inpex currently has a 65 percent operating interest in the Masela block where the Abadi gas field
is located, while Shell holds the remaining 35 percent.

US Texas’ Permian Basin shale Oil Field Is Thriving Despite Low
Crude Prices… Bloomberg - AlexNussbaum
Although cheap oil has forced frackers to shut down drilling rigs across large swaths of the U.S.
shale patch, from the Bakken fields of North Dakota to the Eagle Ford in South Texas, there’s one
region where the profits are still flowing.
The Permian Basin, a 75,000-square-mile patch of scrubby desert stretching across West Texas
and into New Mexico, has emerged as the most resilient oil field in America. Overall crude
production in the U.S. is down by about a million barrels a day over the past 12 months, but output
from the Permian continues to grow. All signs indicate that the Permian will stay in the money in
2017, as drillers and investors flock to the region.
Even with oil prices below $50 a barrel, frackers have been able to turn a profit drilling into the
Permian’s dense layers of oil-soaked rocks. That’s because the underground geology makes it
less costly to extract oil and gas there than in other shale patches.
Drillers have added 67 rigs in the region since May, bringing the total in September to more than
200. Wells in the Permian are producing more oil at faster rates, enticing billions of dollars of fresh
investment. Permian-related oil and natural gas companies have raised $9 billion in new equity
this year. Explorers including Anadarko Petroleum, Pioneer Natural Resources, and EOG
Resources have spent $14 billion buying up some of the most productive sites.
The best land has gone for as much as $60,000 an acre, according to data compiled by
Bloomberg. “Available capital has been magnetically pulled to the best economics, and the
Permian has led the way,” says Robert Santangelo, Americas head of equity capital markets for
Credit Suisse.
In September, Houston-based Apache announced what amounts to a mega-discovery. Known as
Alpine High, the site along the western edge of the Permian may hold at least 3 billion barrels of
oil and 75 trillion cubic feet of natural gas, worth at least $8 billion by the company’s most

conservative estimates. Production could begin by the second half of 2017. “I think we surprised a
lot of folks to step out with a new play of this size and scope right under everybody’s nose,” says
Chief Executive Officer John Christmann.
Starting in 2014, Apache quietly amassed 350,000 acres in southern Reeves County, paying an
average of $1,300 an acre. Most explorers had written off the land, but Apache saw tantalizing
signs in old drilling logs and other data. Apache has sold oil and gas assets from Argentina to
Australia to the deepwater Gulf of Mexico to focus on what it considers better growth prospects in
U.S. shale. “We felt like we could be as good as anybody, and we had a tremendous acreage
position,” Christmann says.
Laying oil and gas pipelines and other infrastructure in the isolated area will probably cost Apache
at least $1 billion, says Richard Tullis, a Capital One Securities analyst in New Orleans. Apache is
spending about a quarter of its $2 billion capital budget on Alpine High this year and will continue
the build-out in 2017, Christmann says.
The company has moved four rigs to the area, each capable of drilling four wells a month. It
expects to drill at least 60 wells a year beginning in 2017. “This is a giant onion that is going to
take us years to peel back,” Christmann says. “It’s a story that’s going to get bigger and better.”
There’s no drop-off likely for the rest of the Permian either, says Credit Suisse’s Santangelo.
Consolidation will probably continue as bigger companies buy smaller operators, but the basin’s
biggest gains will come in further perfecting drilling technologies and increasing returns. “The
Permian is going to be the ground zero of the U.S. unconventional oil business,” Santangelo says.
“And that, I think, is here to stay.”

US Crude oil imports increase during first half of 2016, the first
increase since 2010.. Source: U.S. Energy Information Administration, Petroleum Supply Monthly
U.S. gross crude oil imports increased by 528,000 barrels per day (b/d), or 7%, during the first half
of 2016 compared to the first half of 2015. This increase reverses a multiyear trend of decreasing
U.S. crude oil imports as a result of increasing U.S. production.
Imports from Nigeria, Iraq, and other members of the Organization of the Petroleum Exporting
Countries (OPEC) rose by 504,000 b/d. Declining imports from Mexico, which fell 118,000 b/d,
more than offset the
increase in imports from
Canada, limiting the net
change in imports from
non-OPEC countries to
an increase of less than
24,000 b/d.
Changes in crude oil
price spreads were a
significant factor in the
rise of U.S. oil imports
during the first half of
2016. The narrowing
price differences
between U.S. crudes and
international benchmarks provided an incentive for increased imports by refiners in areas where
imported crudes now had a delivered cost advantage relative to similar domestic crudes.
Additionally, lower overall crude prices contributed to a decline in U.S. crude production from an
average of 9.5 million b/d in the first half of 2015 to 9.0 million b/d in the first half of 2016, resulting
in higher net crude oil imports.

As a result of shifting price, supply, and logistical dynamics, East Coast (defined as Petroleum
Administration for Defense District, or PADD, 1) crude imports rose by 244,000 b/d (41%) in the
first half of 2016 compared to the same period in 2015, nearly three-quarters of which were
supplied by Nigeria.
Nigerian production actually declined during the first half of 2016 as a result of elevated supply
disruptions. However, falling U.S. production and increasing competitiveness for seaborne light
sweet crudes into the East Coast more than offset lower production levels, enabling imports from
Nigeria to displace crude oil received from the Midwest (PADD 2).
In the Midwest (PADD 2), crude imports rose by 104,000 b/d (5%) during the first half of 2016
compared with the same time last year. Canada accounted for almost all of the increase despite
wildfires in Alberta that disrupted production later in the second quarter. Canada is the largest
source of crude oil imported into the United States, and its heavy crude is particularly well suited
for U.S. refiners in the Midwest and Gulf Coast.
Gulf Coast (PADD 3) imports increased 88,000 b/d (3%), with rising imports from Middle East and
African countries offsetting declines from Latin America. Imports from Iraq increased by 142,000
b/d, more than the next four countries combined. Iraq’s production in 2015 rose by 700,000 b/d,
enabling more of their production to be exported to the United States.
The Rocky Mountain region (PADD 4) is the only region with declining imports during the first half
of 2016, with volumes down by 24,000 b/d (9%). PADD 4 is relatively isolated from import
infrastructure compared with other regions, and imports have been entirely sourced from Canada
for more than a decade, a trend that continued during the first half of 2016.
Imports to the West Coast (PADD 5) rose by 116,000 b/d (11%). Saudi Arabia, Canada, and
Ecuador are the top three sources of West Coast crude imports, accounting for about two-thirds of
crude oil imports into the region and about 86% of the region’s import growth during the first half of
2016. Although EIA's Short-Term Energy Outlook does not forecast gross crude oil imports, EIA
expects annual imports of crude oil on a net basis to increase in both 2016 and 2017.

Russia Low oil prices have affected Russian petroleum companies and
government revenues..U.S. Energy Information Administration, based on Russia Federation Ministry of Finance
Russian federal revenue from oil and natural gas production has declined significantly in response
to low oil prices. However, Russian oil and natural gas companies’ capital investment programs
have been less affected, if at all. Russia’s two main hydrocarbon taxes are calculated by formulas
that result in lower tax rates at lower crude oil prices. As oil prices fall, petroleum companies retain
a larger share of revenue, but government revenues from oil and natural gas production fall even
faster than prices.
In 2015, the Brent crude oil price, measured in U.S. dollars per barrel, declined by 47% versus
2014, and the price for the first half of 2016 is down an additional 31% versus the first half of
2015.
Because of changes in the exchange rate, the decline in the Brent price as measured in Russian
rubles is not as dramatic: a 16% decline from 2014 to 2015, and an additional 16% from the first
half of 2015 to the first half of 2016. Over the same periods, Russian federal budget revenues
from oil and natural gas fell by 21% and 29%, respectively. Many Russian petroleum companies
have, in ruble terms, increased investment or seen only modest declines in investment over the
same period.
State-owned Rosneft and independent Lukoil are Russia’s two largest oil producers. Together, the
two companies account for about half of Russia’s roughly 11 million barrels per day oil production.
While oil prices and government revenues declined in 2015, Rosneft increased its capital
expenditure on exploration and production for projects in Russia by 30% compared with 2014.

Rosneft’s exploration and production capital expenditure in the first half of 2016 was 33% higher
than in the first half of 2015. In comparison, Lukoil’s spending on exploration and production for
projects in Russia declined 11% in 2015 versus 2014, and expenditures in the first half of 2016
were 2% lower than in the first half of 2015.
The favorable tax structure and exchange rate for Russian oil companies, the subsequent
continued high investment levels at Rosneft, Lukoil, and other Russian oil and natural gas
companies, and slower production declines at old fields all have helped push production to record
post-Soviet levels. Considerable investment has also been made in many new fields that have
recently started up or are due to start in the near future.
The Russian government has implemented or proposed various measures to increase revenues
that could affect companies’ future investment plans. The Russian government has changed the
two main hydrocarbon taxes (minerals extraction tax and export tax) several times in recent years.
The most recent changes and proposals for upcoming changes all tend to raise the taxes paid by
oil and gas companies.
In January 2015, the Russian government announced its intention to sell some of its shares in
several Russian companies, including Bashneft and Rosneft. Bashneft was one of Russia's 10
largest oil producers. On October 12, 2016, the federal government sold its 50.08% controlling
stake in Bashneft to Rosneft, Russia's largest oil producer, for $5.3 billion. The Russian
government currently owns 69.5% of Rosneft. It also intends to sell up to 19.5% of Rosneft,
retaining a controlling interest.
In addition to taxes, the Russian government also collects dividends from oil and gas companies
in which the state is a shareholder. In April 2016, the Russian government directed state-
controlled companies to pay 50% of 2015 net income out as dividends, nearly double the
dividends companies would normally pay. Oil companies have objected to the tax and dividend
increases, arguing they divert money from capital investment programs.

Baker Hughes: US Drillers Extend Rig Recovery With Oil Over $50/B
by Reuters
The number of rigs drilling for oil in the United States this week rose by the most in two months,
extending its second-best streak of no cuts into a 17th straight week, with analysts expecting more
additions as crude prices hold over $50 a barrel.
Drillers added 11 oil rigs in the week to Oct. 21, bringing the total count up to 443, the most since
February, but still below the 594 rigs seen a year ago, according to energy services firm Baker
Hughes Inc on Friday.
That 17-week streak of not
cutting rigs matched a
stretch in 2010, making it
the second-longest run
since 1987, following 19
weeks in 2011.
The Baker Hughes oil rig
count plunged from a record
of 1,609 in October 2014 to
a six-year low of 316 in May
after crude prices collapsed
from over $107 a barrel in
June 2014 to near $26 in February 2016 due to a global oil glut. But after U.S. crude briefly
climbed over $50 a barrel in May and June, drillers have added 127 oil rigs. Analysts said prices
over $50 were high enough to prompt energy firms to return to the well pad.
About two-thirds of the rigs added since May, or 75, were in the Permian basin in west Texas and
eastern New Mexico, bringing the total there up to 212, the most since November 2015.
U.S. crude futures continued to trade over $50 a barrel for much of this week, spurred by
continued talk of an OPEC production cut and a surprisingly large drop in U.S. inventories for the
sixth week out of seven.
That put the front-month on track to rise for a fifth week in a row, its longest winning streak since
March, gaining about 18 percent during that time.
With oil prices expected to continue rising in 2017 and 2018 amid a forecast tightening of the
supply-demand balance, analysts said energy firms will boost spending on drilling.
Futures were trading above $53 a barrel for calendar 2017 and around $55 for calendar 2018.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week
forecast total oil and natural gas rigs would average 500 in 2016, 666 in 2017 and 876 in 2018.
That compares with an average of 978 oil and gas rigs active in 2015 and 486 so far this year,
according to Baker Hughes data.

NewBase 22 October 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil up on Russia-OPEC hopes; U.S. rig count jump limits gains
REUTERS
Oil settled up on Friday on hopes Russia and OPEC will reach agreement at the weekend on
market support initiatives to keep crude above $50 a barrel, although traders cautioned about
pressure from a double-digit rise in the U.S. oil rig count.
Russian Energy Minister Alexander Novak said he would make proposals to his counterpart from
OPEC leader Saudi Arabia this weekend on price-supportive measures that could include an oil
production freeze.
Some traders were skeptical about Russia's commitment after Novak also said the country might
produce up to 11 million barrels per day next year to hit a new post-Soviet record. OPEC, led by
Saudi Arabia, has also been pumping crude at or near record levels.
"Market bulls are counting on Russia's credibility to seal a deal with OPEC to take prices to new
levels above $50," said Phil Flynn, analyst at the Price Futures Group in Chicago.
Also pressuring the market, oil services firm Baker Hughes reported that U.S. oil rigs rose by 11
this week, the first double-digit growth since August. Brent LCOc1 settled up 40 cents, or 0.8
percent, at $51.78. For the week, it ended flat.
U.S. West Texas Intermediate crude settled up 22 cents, or 0.4 percent, at $50.85 a barrel. WTI
hit a July 2015 high of $51.93 on Wednesday and ended the week 1 percent higher.
Oil price special
coverage

Oil prices, which in February hit 12-year lows of around $26, have risen more than 13 percent
since Sept. 27, when the Organization of the Petroleum Exporting Countries announced plans to
curb production for the first time in eight years to rein in a global crude glut that has halved prices
from mid-2014 highs above $100 a barrel.
Analysts have warned for weeks that U.S. shale oil drillers, responsible for much of the crude glut,
could ramp up activity once prices return above $50.
"This is what we've been anticipating. With prices at these levels and rising, rig count increases
will likely be in the double digits hereon," said Tariq Zahir, crude trader at Tyche Capital Advisors
in New York.
Some traders think the U.S. government will report a weekly rise in crude inventories next week to
counter the surprise draw in this week's report that drove WTI prices to July 2015 highs. [EIA/S]
"We've shorted WTI at $51 in the hope of reaching $47.50 if there's be a build big enough to
counter the recent draw," said Phil Davis, trader at PSW Investments in Woodland Park, New
Jersey.
Oil Market Glut Grows Bigger as Saudi Arabia Says Worst Is Over
Listen to Saudi Arabia and hear the oil market is rebalancing. Look at the screen, and Brent is
indeed holding above $50 a barrel. But dig deeper into the world of physical oil, and bearish
signals abound, at least in the European market that helps dictate global prices.
The price difference between Brent crude for delivery in two months and three months -- a
yardstick telling traders how well supplied the market is -- widened to minus 69 cents on
Thursday, the biggest discount since February. Back then, the headline price for the grade was
barely above $35 a barrel.
The weakness in the so-called time-spreads for Brent contrasts with a rally in headline prices
above $50 a barrel as speculators bought in after OPEC surprised traders by announcing the
outline of a production cut in Algiers last month.
"Any deal is still far from being completed," said Carsten Fritsch, commodity analyst at
Commerzbank AG. "In the very short-term the market remains oversupplied not only by a small
margin, but by a large one."

Oil traders say the European and Mediterranean market is awash with crude as Nigeria and Libya
ramp up production following sabotage, Russia increases output, and Kazakhstan’s massive
Kashagan oilfield in the Caspian Sea starts pumping. North Sea production is also returning from
summer maintenance. At the same time, refineries that process the oil are themselves undergoing
seasonal work, eroding their demand.
More Crude
“More light-sweet crude will be making its way into the Atlantic Basin and competing with Brent,”
said Harry Tchilinguirian, head of commodity markets at BNP Paribas SA in London.
A further complication is that freight costs have risen from summer lows, hampering long-haul
shipping and preventing traders from selling the European surplus into Asian markets or putting it
into floating storage.
"The gloomy export outlook for Brent-related crudes to Asia is made all the more somber by the
growth in crude production in the already well-supplied Atlantic Basin," said Stephen Brennock, at
brokerage PVM Oil Associates Ltd in London.
The weakness in physical markets comes at time when money managers have been betting more
than ever that oil prices will increase. Speculative net bullish, or long, positions in Brent and West
Texas Intermediate combined rose to their highest level in data going back to 2011 last week.
The glut of crude in the physical market may spur some investors to shun those long positions
before Brent futures for December expire at the end of the month. If traders want to maintain
those positions, they will have to accept some losses to buy January contracts that are trading at
a higher level, a condition called contango.
Speculators “now have to decide to either take profit" or "roll into a widening contango to maintain
length into the next OPEC meeting” on Nov. 30, Olivier Jakob, head of consultant Petromatrix
GmbH, said on Friday.
The biggest challenge for speculators is perhaps Nigeria, where production is returning after
months of disruptions. The West African OPEC country is expected to pump this month about 1.7-
1.8 million barrels a day, up from a three-decade low of 1.39 million barrels a day in August.
Nigeria cut the price of every type of crude it sells on Tuesday in an effort to regain share of the
global energy market at a time when its state-owned oil company said there’s a "huge" glut of
cargoes. Libya, another OPEC member, is also producing more. The country’s National Oil Corp.
said last week it was pumping 560,000 barrels a day, which would be the highest level since
November 2014, data compiled by Bloomberg show
In Kazakhstan the first barrels from the $50 billion Kashagan field have started to flow while
Russian production is running so far this month at 11.2 million barrels a day, up about 100,000
barrels a day from last month and roughly 500,000 barrels a day higher than in August. The
Russian increase in two months is equal to the output of OPEC member Ecuador.
The flood of crude into Europe is at odds with comments from Khalid Al-Falih, Saudi Arabia’s
Minister of Energy and Industry. The oil market is “clearly rebalancing,” bringing the industry to the
end of a “considerable downturn,” he said at a conference in London on Oct. 19.
Oil traders are unsure what will give. If time-spreads narrow that would support a rise in headline
prices; should the contango keep widening, that could help bring down Brent. OPEC, which meets
November 30 in Vienna, will likely decide.

Russia’s Rising Oil-Output Forecasts Give Leverage in OPEC Talks
Bloomberg - Elena Mazneva Dina Khrennikova
As Russia gets ready for talks on cooperation with OPEC on Monday, it’s using the playbooks of
Iran, Iraq and Venezuela to gain leverage.
Just days before Energy Minister Alexander Novak heads to Vienna for discussions that could
include output curbs, Russian officials emphasized the nation’s ability to keep increasing record
output to even loftier heights. They were echoing several other OPEC member that claim the
group is underestimating their own production -- a strategy that could secure them advantageous
terms in any supply deal.
"What most OPEC countries do ahead of any OPEC meetings is to talk up their own production
prospects so that when they make any concessions, those concessions are not necessarily as big
as they might have been," James Henderson, senior research fellow at the Oxford Institute for
Energy Studies, said by phone. "I suspect Russia is playing the same game."
After reaching a surprise agreement on the first production cuts in eight years last month, OPEC is
now trying to establish which members will reduce output, and by how much. Russia, which is
vying with Saudi Arabia for the title of the world’s largest oil producer, has pledged cooperation,
but President Vladimir Putin has sent mixed messages over whether he’s willing to lower the
nation’s output, or simply freeze at September’s post-Soviet record. These details, due to be
finalized by OPEC’s Nov. 30 meeting, will determine whether the deal can finally end three years
of oversupply.
New Optimism
The latest draft of Russia’s energy strategy published recently on the ministry’s website included
for the first time this year an “optimistic” scenario. This estimate sees annual oil production

potentially rising from 534.1 million tons last year to 555 million metric tons, or 11.1 million barrels
a day, by 2020 and stabilizing through to 2035. It compares with the existing “conservative”
outlook for production of 548 million tons in 2020 declining to 490 million tons by 2030.
Igor Sechin, a close adviser of Putin and chief executive officer of Russia’s largest oil producer
Rosneft PJSC, went several steps further on Oct. 20, saying Russia has the capacity to add as
much as 200 million tons of annual production capacity, or 4 million barrels a day, by 2045 should
the global market need it.
Strategic Plans
Russia’s energy minister said long-term forecasts have little bearing on the negotiations with
OPEC. Even if an agreement is reached there’s no need for the nation to change its energy
strategy, Novak told reporters at an industry forum in Ufa, Russia.
"The freeze, it won’t last forever, it will be there for a limited time, maybe for six months", he said.
"So it does not affect our strategic plans in any way."
Nevertheless, he implied short-term increases are negotiable. Russia’s annual production could
set another post-Soviet record of 548 million tons, or about 11 million barrels a day, next year,
although the plan may be adjusted if there’s an OPEC deal, Novak said. Output has averaged
10.9 million barrels a day this year, according to Energy Ministry data.
"Russia is trying to create a very optimistic story of a healthy oil industry" to pursue its own goals
in upcoming negotiations, something OPEC nations also do, Chris Weafer, a partner at Macro
Advisory consultancy in Moscow, said by phone. "It’s like a game of poker where everybody is
very focused on their own hand".

NewBase Special Coverage
News Agencies News Release 23 October 2016
After Lean Years, Big Oil May Emerge Stronger Than Ever
By CNBC - Nelson D. Schwartz
After a heart-stopping plunge in the price of crude over the last two years, along with slashed
dividends and the elimination of tens of thousands of jobs, the biggest oil companies are proving
surprisingly adept at again pumping profits, as well as oil, out of the ground.
Indeed, with oil trading in a range of $40 to $50 barrel for most of the 2016, experts say the
biggest energy producers are poised to rebound if prices remain stable.
"It's a hunger games environment, but they are learning how to be more efficient," said Evan
Calio, an equity analyst with Morgan Stanley. "Two years ago, nobody thought costs could drop as
quickly as they did. It's staggering, and there's no doubt this has surprised people."
Not that it has been easy.
Over the last 12 months, drillers have eliminated nearly 20,000 jobs in the United States,
according to the Labor Department, and Morgan Stanley expects domestic oil production to finish
2016 half a million barrels below where it started. Deepwater drilling has been curtailed in places
like the Gulf of Mexico, as have multibillion dollar projects around the world.
In the continental United States, once red-hot regions like North Dakota, where the fracking boom
transformed the economy, have abruptly cooled. Individual companies that were especially
aggressive about seeking new finds have been humbled.
Besides being forced to cut its dividend, ConocoPhillips reduced its capital budget for exploration
and production by more than $10 billion — or roughly two-thirds. Since late 2014, its shares have
fallen from over $70 to around $40 recently.
But if crude prices can stay above
$40 a barrel, the dividends, and
stock prices, of the big American oil
companies should be secure. And if
oil stays above $50, or even hits $60
in the coming months or years, Big
Oil may well emerge from the recent
lean years stronger than ever.
"Whoever survives this is going to
win," said Michael Rothman, a
veteran oil analyst who is president
of Cornerstone Analytics, a New
Jersey-based research firm. "They're
going to come out smelling like roses."
What is more, the big pullback in exploration has caused a steady drop in the cost of completing
those projects that are still underway, as prices for steel, drilling rigs and other services have

plunged. That should enable major energy firms to take advantage of economies of scale and
increase their profit margins further.
"Capital spending has come down massively, and majors have taken a lot of the fat out of their
organizations," said Neil Mehta, who tracks the North American integrated oil and refining industry
for Goldman Sachs.
Now, after investing tens of billions of dollars,
many of these giant projects are set to come
online in the next few years, and Mr. Mehta said
he expected Big Oil to move from investment
mode to what he termed "harvest mode."
"You spend a lot upfront and the capital is sunk,
but now free cash flow profiles are going to get
better," Mr. Mehta said.
For example, Chevron's large Gorgon natural
gas project in Australia saw costs balloon to more than $50 billion from a projected $37 billion.
That strained the company's budget, but as Gorgon's production finally increases, Chevron's
bottom line will benefit, with Japanese and Korean customers lined up to take delivery of natural
gas.
Next year and 2018 "look to be an inflection point for Chevron," said Phil Gresh, an analyst with
JPMorgan, noting that as projects like Gorgon near the finish line, the company's free cash flow
should rise, providing additional support for Chevron's 4.2 percent dividend.
What if oil prices do, in fact, start tumbling again, or at least don't budge from their current level of
about $50 a barrel? If benchmark oil prices dip below $40, sustaining dividends will be tough,
according to Mr. Mehta. "At $50, American companies can make it, Europeans maybe not," he
said. "At $60, it's likely everybody can sustain their dividends."
And the oil bulls do have some long-term trends in their favor.
Despite the push to reduce dependence on fossil fuels in many countries in the face of climate
change, as well as the increasing popularity of electric cars in the United States, the global
appetite for oil is still expected to rise.
Mr. Mehta estimates oil will trade in the $50 to $60 range from 2017 to 2020, with global demand
rising annually by slightly more than one millions barrels a day. "There are many countries that
want to work their way up the economic ladder, and that means more demand for energy," he
said.
Indeed, even with slower growth than in years past, China continues to consume more crude as
new drivers hit the roads. India, too, has a growing middle class that will need gasoline and other
fuels to power new automobiles. Many American drivers, not to mention Detroit automakers, still
favor gas-guzzling sport utility vehicles and other large cars.
At the same time, Middle East oil producers as well as Russia have been showing a bit more
willingness to work together to maintain price stability after the volatility of 2014 and 2015.
To be sure, there's no guarantee oil prices will rise — or even stay where they are.

A little more than two years ago, when oil was trading higher than $100 per barrel, many experts,
not to mention executives, had no inkling a crash was coming. With prices high, they borrowed –
and drilled – as fast as they could.
Some small exploration and production companies in the United States were forced to file for
bankruptcy, unable to sustain debt payments as crude collapsed. But that weakness actually has
provided an opening for bigger companies to scoop up assets, essentially drilling for oil on Wall
Street by buying struggling firms on the cheap.
Even if prices do drop again, the biggest energy companies that possess both upstream
production capacity and downstream businesses like refining, chemicals and retail outlets will still
fare better than smaller rivals, Mr. Rothman said.
"There's an advantage to being an integrated oil company with both upstream and downstream
operations and gas stations," Mr. Rothman said. "It's interesting that retail gas stations make more
money selling beer and cigarettes than gasoline."
Chevron's Gorgon natural gas project in Australia strained the company's budget, but now has
Japanese and Korean customers lined up.

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 23 October 2016 K. Al Awadi

New base energy news issue 939 dated 23 october 2016

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New base energy news issue 939 dated 23 october 2016