New base special 02 march 2014

Copyright © 2014 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced,
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NewBase 02 March 2014 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Hawk Energy to bring the FIRST LNG Nano Liquefaction plant
in the world to the Middle East and Gulf
Press release www.Hawkenergy.net
Hawk Energy; a knowledge based solution provider to the oil, gas and power sectors has just
signed an agreement with Galilleo; an innovative company in alternative energy and natural gas
solutions, which is responsible for the first LNG Nano liquefaction plant in the world.
(An image of the LNG/CNG Nano liquefaction plant)
The Galileo plant (Cryobox) can process up to 16 tons of LNG per day and 40,000
Nm3 CNG per day without producing any emissions and at a low operative cost.
Mr. XXXXX from Galileo said “Cryobox can be used to transform natural gas from
pipelines, stranded associated gas from gas wells as well as bio methane, into
Virtual Pipeline®, LNG for vehicles, LBG, bunker fuel for ships and gas distribution”.

Mr. Mohamad Shihabi, Founder and CEO of Hawk Energy added “We are delighted
with this new venture with Galileo as we feel that the Middle East and Gulf regions
can really benefit from such state of the art technology for LNG and CNG, not only
with Cryobox but also with Galileo’s other technologies such as CNG compression
units, oil and gas compressors, pressure regulation station as well as Virtual
Pipeline®”.
About Hawk Energy LLC :-
Established in 2001, Hawk Energy is a knowledge based business solutions provider acting as an
ideal partner to professionally
service companies within the
oil, gas & power sectors. Using
the latest in technological
advancement in the oil & gas
industry, coupled with highly
professional and dedicated
staff, Hawk Energy offers solutions from gas treatment and off/shore, on/shore drilling, to the
latest in renewable energy solutions.
About Galileo :-
Since 1983 GNC GALILEO has become a world supplier, the state-of-the-art technology leader
and the only argentine
company to offer the entire
range of equipment for CNG.
Today, Galileo is a leading
company in natural gas
applied technology providing vehicle conversion, compression, adjustment and natural gas
transport equipment. It also has an international network of business associates, distributors and
representatives in Latin America, Europe and Asia.

Iraq hones in on oil production targetApril Yee , www.thenational.ae/business
Iraq exported 2.8 million barrels per day (bpd) last month, up from 2.2 million in January, said
Hussein Shahristani, the deputy prime minister for energy. The government is targeting exports of
3.4 million bpd in 2014 including output from the semi-autonomous Kurdistan region, part of an
overall target of pumping 9 million bpd by 2020.
Increasing exports this year will require nearly doubling payments to international oil companies
and, in the long term, costly investments to diversify the nation’s export infrastructure, which relies
on southern sea terminals and an often-shut pipeline to Turkey.
The government, which grants international oil companies service contracts rather than wholesale
concessions, estimates it will pay foreign partners US$12.5 billion this year, compared to $7bn in
2013. Capital expenditures for oil and gas, including the payments to BP, Royal Dutch Shell and
other supermajor, are expected to total $17.5bn, said Thamir Ghadban, the chairman of Iraq’s
Prime Minister’s Advisors Commission and the former interim oil minister.
Iraq needs to
focus on
increasing fuel
supplies to the
local market to cut
costs, he said.
“We are paying
quite a lot from
our treasury to
pay for gas and
gas oil for local
consumption,” he
said at an industry
conference this week in Dubai. “We should do our best to expand our refining capacity and
expand our gas production.”
The government has also set a timetable for building two pipelines to transport oil from Basra to
the north, then onwards to the Jordanian seaport of Aqaba – an $18 million project. The first would
be a 676-kilometre pipeline capable of transporting 2.25 million bpd from Basra to Haditha in
Iraq’s north-west. Tenders are expected this year for the 142-centimetre diameter pipeline,
pumping stations and storage facilities.
Iraq and Jordan are also preparing to tender the pipeline connecting Iraqi oil to export facilities in
Aqaba, with a deadline for commercial bids in July and financial close expected by the end of the
year.
“Diversifying crude routes is always a good strategic move,” said Shwan Zulal of Carduchi, a
Kurdistan-focused consultancy. “Given the current uncertainty with the Kurdish Regional
Government and significant security issues with the Kirkuk-Ceyhan [Turkey] pipeline, the project is
more relevant, although very costly.”
See Special Report on Iraq oil by end of today’s issue :-

Indonesia: Lion Energy's Seram well boosts oil production by 20%
Source: Lion Energy
Australian company Lion Energy reports that the recently completed Oseil-26 development well in eastern
Indonesia is performing at above pre-drill expectations. The well was completed on 30 January 2014 and
has been producing
crude oil at an average
rate of 490 bopd (12.5
bopd net to Lion’s
interest). This
compares with pre-drill
predicted initial
production of 300
bopd.
Oil production from
Oseil and surrounding
oilfields has averaged
2831 bopd (71bopd net
to Lion), an increase of
20% from the
approximate 2350
bopd prior to Osiel-26
coming on line.
Production currently
exceeds guidance
production of 2500
bopd in Lion’s prospectus issued on 6 November 2013.
The Oseil-21 development well, due to spud this week, is designed to exploit undrained oil reserves on the
western flank of the Oseil-2 fault block. Drilling is expected to take about 90 days and, if successful, the
well should commence production in May 2014. Following Oseil-21, the joint venture plans to drill the
Lofin-2 well to appraise the exciting Lofin-1 discovery made in 2012. Current scheduling has the well
spudding in July 2014 following the completion of Osiel-21.
Lion’s CEO, Kim Morrison, said: 'We are delighted with the performance of the Seram Project, which
continues to surprise on the upside. While a 2.5% interest may seem modest, it still makes a meaningful
contribution to our company,' he said. 'We are optimistic that the Osiel-21 development well will further
enhance production and look forward to the high-potential Lofin-2 appraisal well later in the year.'
Seram (Non-Bula) Block PSC
Lion, via its wholly owned subsidiary, Lion International Investment, holds a 2.5% participating interest in
the Seram (Non-Bula) Block Renewal Production Sharing Contract (PSC), located onshore Seram Island
in eastern Indonesia. The major equity holder and operator of the joint venture is CITIC Seram Energy
(51%). Other partners are KUFPEC (Indonesia) (30%) and Gulf Petroleum Investment (16.5%). The block
contains the Oseil oilfield and surrounding structures that have produced cumulative crude oil production of
12,130,226 barrels since initial field start-up in January 2003 through to 31 January 2014.

TAQA shuts down UK Harding oil platform after worker dies
Source: Reuters
Abu Dhabi-based TAQA is shutting down its 12,000 barrels-per-day Harding oil platform in the UK
North Sea after a man fell to his death on Thursday, the company said. 'Production is being shut
down,' a spokesman for the Abu Dhabi National Energy Co. (TAQA) said, adding that the number
of staff present on the platform was being reduced to 35 from 108. In response to a question
about when production will resume he said: 'This is not currently our concern, our number one
priority is safety.'A 62-year old man died early on Thursday
after falling from the Harding platform, 300 km northeast of
Aberdeen, during maintenance work. He fell overboard at
around 0217 GMT and was rescued and airlifted to hospital
where he later died, TAQA said. All other 108 people on board
the platform are safe, the company added.
Scottish police said they were treating the incident as a work-
related death and were carrying out a joint investigation with
the Health and Safety Executive into the circumstances of the
incident. 'TAQA is liaising with Police Scotland and other
relevant authorities to investigate fully the incident,' the
platform owner said.
TAQA owns a 70 percent stake in the Harding platform, whilst
Maersk holds 30 percent. Crude oil retrieved via the platform
is transported from a submerged loading facility, unlike some
other platforms which are directly connected to the mainland
via pipeline. The platform started operating in 1996 and has a daily production rate of 12,000
barrels of oil equivalent.

OMV Signs Two New Exploration Licences in Pakistan
by Reuters
Austria's OMV and its joint venture partner Pakistan Petroleum Limited have signed two new
exploration licences in Pakistan, OMV said on Friday.
The Kuhan block in Baluchistan province will be operated by OMV, and the Margand Block, also
in Baluchistan, will be operated by PPL, it said. Both companies have a working interest of 50
percent in each block.
OMV said the joint venture would start exploration in the second half of this year, consisting of
seismic data acquisition and drilling of exploration wells.

Dana Gas to Upgrade Egypt Plant, Up Gas Output by 25%
http://www.naturalgasasia.com
Dana Gas plans to upgrade its El Wastani plant in Egypt intending to expand its production output
capacity by 40 mmscfd to 200 mmscfd, a 25% increase. The additional capacity will allow
increased production from the Salama/Tulip, Faraskur and South Abu El Naga fields via a new
pipeline tie-in, Dana Gas said.
“A scheduled shutdown of the El Wastani facility for capacity enhancement and maintenance was
planned as soon as we had received permission to commercialize the new fields. It is a necessary
work and the tie-in of the new wells along with the maintenance program ensures that the plant is
also fully upgraded prior to new wells coming on stream during the year. The result will see our
production rise by 6,650 boepd and is in line with our stated ambition of increasing production to
meet the local demand,” Mark Fenton, Dana Gas Egypt General Manager, said.
Last week, the company announced that it had signed an agreement with the Egyptian
government to develop its first offshore concession in Egypt, in the North El Arish 2,980 sq. km.
(Block 6) Concession Area, offshore the eastern Nile Delta.
Dana Gas also announced that it had been awarded a new development lease at Balsam, in
addition to increasing the areas of its current El Basant and Sama development leases to
encompass the Allium and West Sama discoveries, respectively.
Dana Gas is currently the 6th
largest gas producer in Egypt, and operates in the Nile Delta through
the El Wastani Petroleum Company (Wasco), Dana Gas’ joint-venture company with the Egyptian
Natural Gas Holding Company (EGAS).

NewBase Special Report : Iraq’s crude oil exports
So let’s have a look at monthly data from Iraq’s State Oil Marketing Company Somo:

Kirkuk crude oil (exported to Turkey) is on a 3 year decline while exports from Basrah have been
increasing. The total has been on a bumpy plateau of around 2.5 mb/d since April 2012.
This graph with data from OPEC’s Annual Statistical Bulletins shows the longer trend since the late 90s
with a low in the year of the Iraq war in 2003.
IEA’s scenarios for Iraq

In its WEO 2012 the IEA predicted Iraq to produce 4.2 mb/d in 2015 and 6.1 mb/d by 2020
http://www.worldenergyoutlook.org/publications/weo-2012/
Let’s put that table into a graph:
We see that 5 Middle East OPEC countries (without Iraq) are projected to decline up to around 2030.
Therefore, the whole growth is supposed to come from Iraq.

IEA’s WEO 2012 contains a special report on Iraq with more details and 3 widely varying scenarios for oil
production and exports:
http://iea.org/publications/freepublications/publication/WEO_2012_Iraq_Energy_OutlookFINAL.pdf
The period of immediate interest is up to 2020:
We see that at present actual crude production seems to head towards IEA’s delayed scenario.

In the above graph, the WEO 2012 oil export figure for 2011 (Table 4.1 above) has been increased from 1.9
mb/d to the actual 2.2 mb/d as reported in IEA’s monthly oil market report Jan 2012. Note that Iraq’s
export ratio is high because the population is “only” 33 million (compared to 75 million in Iran) although
growing at 2.2% pa (+700,000 every year)
Iraq under produced oil
An increase in Iraqi oil production can be expected on the basis of oil-geology alone. This is because Iraq
under produced oil for 3 decades:

As a result of this chequered history, Iraq’s depletion rate shortly after the 2003 Iraq war was a low 22%:
http://www.ecolo.org/documents/documents_in_english/oil-forecasts-04.pdf
This graph from PFC Energy presented to the Centre for Strategic and International Studies in 2004 (and
updated with EIA crude oil data) shows that Iraq has the lowest depletion level of all OPEC countries.
According to item 430 of ASPO’s newsletter #46 http://www.resilience.org/stories/2004-10-05/aspo-
october-newsletter Iraq’ cumulative production up to end 2003 was 28 Gb. Another 6 Gb have been
produced until end 2010 so the total at the start of the IEA scenarios was 34 Gb.
Iraq’s oil reserves
Jean Laherrere estimates Iraq’s 2P technical remaining reserves to be around 100 Gb, much lower than
OPEC’s proved (1P) reserves of more than 140 Gb:
http://www.theoildrum.com/node/9389

Note that Iran’s 2P technical reserves are 40% lower than Iraq’s. That will create geo-political problems in
future. The IEA’s production scenarios for Iraq have been based on what Jean calls political reserves of 143
Gb:
What stands out in this table:
• Rumaila in the South is nearing the 50% depletion mark
• Kirkuk in the North is beyond the half way mark at 62%
• Both these fields have produced around 80% of the cumulative total so far
• Production growth therefore solely depends on new fields like West Qurna and Majnoon
.

We see the challenge in Kirkuk to produce the rest of the oil up to a high recovery factor of almost 60% of
the oil in place which will require advanced secondary and later tertiary recovery strategies.

Oil production targets
Total production given in this table from these new projects in June 2012: 2.2 mb/d (actual production of
Basrah crude in Somo statistics: 2.06 mb/d). Adding the plateau targets gives a whopping 12 mb/d. Note
the unattractively low fees per barrel paid by the Iraqi government to the IOCs. The Kurdistan Regional
Government (KRG) offered more attractive production sharing contracts and that created tensions with
Baghdad.
No wonder that Exxon signaled its intention to sell its 60% share in West Qurna-1 but still continues to
invest:
25/3/2013
(Reuters) – Exxon Mobil has allocated $1.65 billion to develop Iraq’s West Qurna 1 oilfield in 2013, up from
$1.6 billion last year, the head of the joint management committee for the field said.
An Iraqi oil ministry official said the budget indicated Exxon’s commitment to developing the southern field
in 2013, which it offered to sell out of last year after riling Baghdad by signing six deals with the

autonomous Kurdistan region.
http://www.reuters.com/article/2013/03/25/iraq-exxon-idUSL5N0CH2AJ20130325
What this is all about can be seen in this graph in an article of the Oil & Gas Journal showing how oil
revenue is split up between an oil company (here CNPC) and the government for the Ahdab oil field.
http://www.ogj.com/articles/print/volume-109/issue-31/drilling-production/iraq-s-ahdab-oil-field-
development-limits.html
It has to be remembered that the government will of course have to invest much of the oil revenue to
build-up all the necessary infrastructure (pipelines, power stations, storage tanks, refineries etc.) to bring
the additional oil to domestic refineries or to the crude oil export terminal.
Given the modest cash flows for companies there must be strategic, not commercial interests.
Who is winning the battle for Iraq’s oil?
6/6/2013
“The Chinese are the biggest beneficiary of this post-Saddam oil boom in Iraq … They need energy, and they
want to get into the market.”
http://www.iraq-businessnews.com/tag/exxon/
Iraqi oil export destinations

And we can clearly see where the Iraqi oil goes:
OPEC quotas
Extract from the 163rd OPEC meeting in May 2013:
In light of the foregoing, the Conference again decided that Member Countries should adhere to the
existing production ceiling of 30.0 mb/d. Once more, the Conference agreed that Member Countries would,
if required, take steps to ensure market balance and reasonable price levels for producers and consumers,
and Member Countries reiterated their readiness to rapidly respond to developments that might place oil
market stability in jeopardy.
http://www.opec.org/opec_web/en/press_room/2553.htm

The graph shows that OPEC without Iraq never produced much more than 30 mb/d since 2005. Since Aug
2012, OPEC without Iraq produced slightly less than the latest 30 mb/d quota which is in place since the
160th
(Dec 2011) meeting. If Iraq produced much more than now, it will have to be integrated into the
quota system. But by how much?
Iraq at centre of internal OPEC debates
30/5/2013
Iraq has been officially excluded from the Opec quota system since the first Gulf war in 1990-91. But as
production rises to a 20-year high , Iraq has grown too big to be ignored. At over 3m b/d, Baghdad is
already the second-largest producer in Opec, and it is also competing directly for market share with Saudi
Arabia in the fast-growing Asian market – where Baghdad has been offering its Basra Light crude at a
discount of around $1 to Saudi’s Arab Medium in recent months.
http://www.ft.com/intl/cms/s/0/addaa2d8-c8f4-11e2-9d2a-00144feab7de.html#axzz2bHVe9eiV
But it seems the discount is a bit more than $1

Data from: http://www.opec.org/opec_web/static_files_project/media/downloads/publications/OB06_072013.pdf
Iraq headed for 1st annual oil output drop
For Opec, however, “This is good news. It delays the challenge from higher Iraqi production for another
year,” said a Gulf delegate to the group, who requested anonymity. “And it’s good for the oil market. Prices
will stay above $100 and that’s acceptable for everyone.”
But slower growth from Iraq and ongoing outages from Iran and Libya will mean that big cuts from other
members – mostly Saudi Arabia – are not needed.
http://www.tradearabia.com/news/OGN_240296.html

We see that so far Iraq’s growth failed to compensate even for Iran’s decline (by 300 Kb/d). Note also that
Saudi Arabia could not offset Libya’s production drop during the war.
And this story is very interesting:
OPEC Again Excludes Iraq from Oil Quotas
31/7/2013
The Iraqi Ministry of Oil affirmed that Baghdad’s share in oil production will not be part of the
OPEC specified quotas for 2014
Assem Jihad, the spokesman for the Iraqi Ministry of Oil added, “the Iraqi current crude production does
not match the official reserve estimated at 115 billion barrels, since Iraq was banned for years after the
Gulf War and the UN blockade on Iraq from exporting oil”. Jihad pointed out that the production rates
have not improved post-2003; therefore, Iraq remained far from achieving its real production capacity,
even if the development in the oil sector continued at a normal pace.
Talking about the production ceiling under normal circumstances, Jihad noted, “OPEC experts decide on it
according to the reserve of each country, and even if Iraq was able to produce 4 million barrels a day by
next year, as expected, its share will remain less than what OPEC would have specified if Iraq’s oil industry
developed normally”
http://www.al-monitor.com/pulse/originals/2013/07/iraq-oil-production-increase-opec-quotas.html
The reference to oil reserves being a factor in determining quotas reminds us of the so-called OPEC quota
wars in the 1980s when OPEC member countries increased their reserve numbers without backing up their
claims with new oil discoveries. Details are here:
http://crudeoilpeak.info/opec-paper-barrels
Fiscal break even oil price
Will more Iraqi oil mean lower oil prices? Not likely. The IMF has calculated a fiscal break even oil price for
Iraq of $100 a barrel. Lower oil prices would mean “potential challenges” (IMF country report 13/218
dated July 2013, p 18) for the Iraqi government even if future oil production grows as projected by the IEA
in its central scenario.

http://www.imf.org/external/pubs/ft/scr/2013/cr13218.pdf
And there are higher estimates of $100 – $150 of the Arab Petroleum Investments Corporation. More
about that in the next post.
Conclusion:
Maintaining growth of Iraqi oil production and exports will be a tough job. In addition to the problems
mentioned in this article much will depend on the timely and coordinated provision of oil related
infrastructure which has not been covered in this post. If oil revenue is not used to improve living
standards of people this project is likely to experience further delays. Those who speculate on 6.1 mb/d
by 2020 should pray not only for an enduring peace but also for social justice in Iraq.
Street scene in undeveloped part of Basrah

Your partner in Energy Services
Khaled Malallah Al Awadi,
MSc. & BSc. Mechanical Engineering (HON), USA
ASME member since 1995
Emarat member since 1990
Energy Services & Consultants
Mobile : +97150-4822502
khalid_malallah@emarat.ae
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 years of experience in theof experience in theof experience in theof experience in the Oil & Gas sector. Currently working asOil & Gas sector. Currently working asOil & Gas sector. Currently working asOil & Gas sector. Currently working as
Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation forTechnical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation forTechnical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation forTechnical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for
the GCC arthe GCC arthe GCC arthe GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operationsea via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operationsea via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operationsea 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 , heManager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years , heManager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years , heManager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years , he has developedhas developedhas developedhas developed
ggggreat experiences in the designing & constructingreat experiences in the designing & constructingreat experiences in the designing & constructingreat experiences in the designing & constructing of gas pipelines, gas metering & regulating stations and in the engineering of supplyof gas pipelines, gas metering & regulating stations and in the engineering of supplyof gas pipelines, gas metering & regulating stations and in the engineering of supplyof 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 mroutes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreements along with mroutes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreements along with mroutes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreements along with many MOUs forany MOUs forany MOUs forany MOUs for
the local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE andthe local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE andthe local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE andthe local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcastedEnergy program broadcastedEnergy program broadcastedEnergy program broadcasted
internationally , via GCC leading satelliteinternationally , via GCC leading satelliteinternationally , via GCC leading satelliteinternationally , via GCC leading satellite ChannelsChannelsChannelsChannels ....
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase 02 March 2014 K. Al Awadi

New base special 02 march 2014

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