New base special 03 september 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 03 September 2014 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Economic cost of Omani power sector subsidy put at U$D 2.7 billion for 2014
OEPPA Business Development Dept + NeewBase
The economic cost of subsidising Oman’s rapidly expanding power generation and related water
desalination sector is projected at RO 973.7 million in 2014, according to the findings of the
Authority for Electricity Regulation, Oman (AER). This compares with a total economic cost
calculated at RO 871.7 million during 2013, representing an increase of nearly 12 per cent, the
regulator said in its latest Annual
Report.
The figures underscore the hefty
economic cost of financially
supporting the Sultanate’s
electricity and potable water
sector, which has been growing at
a phenomenal rate of around 10
per cent annually. Every year,
Oman’s Ministry of Finance
provides grants to licensed supply
and distribution companies in the
form of electricity subsidies
calculated by the Authority.
The subsidy amount is computed
on the basis of two calculations:
the first estimates the subsidy
payable to Muscat Electricity
Distribution Company (MEDC),
Majan Electricity Company and
Mazoon Electricity Company which
between themselves account for
all of the electricity supplied within the Main Interconnected System (MIS), serving much of the
northern half of the Sultanate.
Subsidies payable to the Rural Areas Electricity Company (RAECO), which serves areas not
connected to the MIS and the Salalah System, are calculated separately. Likewise, subsidies
payable to the Salalah System are calculated on the same basis as that applicable to the MIS
distribution companies following the successful restructuring of the Salalah electricity market.
Significantly, subsidy calculations for all three systems — MIS, RAECO and Salalah — are based
on two different criteria: Financial Subsidy and Economic Subsidy. According to the regulator, the
Financial Subsidy is the ‘direct’ subsidy allocated by the Ministry of Finance and reflects the
financial cost of natural gas of $1.5 mmBTu and an average diesel fuel cost of 140 baisa/litre.

The Economic Subsidy, on the other hand, reflects both the ‘direct’ and ‘indirect’ subsidy to the
electricity sector. “Consumers benefit from ‘indirect’ subsidy as the cost at which fuel is sold to
production facilities is below its economic ‘opportunity’ cost. This calculation therefore adjusts fuel
costs to reflect their opportunity costs,” the Regulator said.
“The electricity sector benefited from RO 304.6 million in support from the Ministry of Finance in
2013: RO 226.4 million of MIS subsidy, RO 47.7 million of RAEC subsidy and RO 30.5 million
financial support for the Salalah System. These subsidy figures reflect the financial cost of fuel
used to generate electricity.
If gas is costed at $9mmBTu and diesel consistent with an oil price of $105.5 per bbl, the 2013
subsidy increases to RO 871.7 million. The analysis suggests that electricity consumers derive
significant benefit from indirect fuel subsides in addition to direct subsidy,” commented Dr Amer
bin Saif al Hinai, Chairman, Authority for Electricity Regulation, Oman, in the newly released 2013
Annual Report
.
For 2014, the Financial Subsidy payable by the government to supply and distribution companies
in the Main Interconnected System (MIS) is estimated at RO 224.0 million. However, the
corresponding expenditure is estimated to be as high as RO 581.5 million for the year, of which
RO 357.5 million (61.5 per cent) is expected to be recovered through customer revenues.
The Economic Costs are even higher when calculated against an opportunity cost of gas of $6
mmBTu and $9mmBTu, according to the Regulator. “At a gas cost of $6 mmBTu, 2014 MIS
subsidy increases by 158.0 per cent to RO 577.9 million (25.2 baisa/kWh). At $9 mmBTu, subsidy

rises to RO 813.9 million (35.5 baisa/kWh) of which financial subsidy accounts for just 27.5 per
cent.”
For the Salalah System, the Authority estimates the financial subsidy of RO 27 million for 2014,
based on a total expenditure of RO 66.1 million. The subsidy increases to RO 62.7 million based
on a gas cost of $6mmBTu, rising to RO 86.5 million based on a gas cost of $9mmBTu, the
Regulator added.
Serving a total of 859,352 electricity customers, Oman’s power and related water sector has seen
its customer base grow by 69,115 accounts, up 8.7 per cent from the previous year’s tally of
790,277 accounts. Residential customers accounted for 70 per cent of the increase in accounts.
Since the restructuring of the electricity sector in 2005, the number of electricity accounts has
increased by 62 per cent, according to the Regulator.

Abu Dhabi: Siemens Hands Over Shuweihat S3 Power Plant
By Mary Sophia + NewBase
German conglomerate Siemens has handed over a combined cycle power plant in Abu Dhabi
to begin commercial operations, the company said in a statement. The work on Shuweihat S3
combined cycle power plant was carried out in partnership with its Korean consortium
Daewoo.
The Shuweihat S3 plant is owned by Shuweihat Asia Power Company, a consortium
comprising of Sumitomo Corporation of Japan, the Korea Electric Power Corporation and
local utility Abu Dhabi Water & Electricity Authority (ADWEA).
Situated approximately 260 kilometres west of Abu Dhabi, the power plant has an installed
electrical capacity of 1,600 megawatts and will be operated by Shuweihat Asia O&M
Company (SAOM), the statement said. Siemens was the consortium leader for the project as
it supplied four gas turbines, two steam turbines, six generators and the instrumentation and
control system for the plant.
Deawoo was responsible for the site construction, heat recovery steam generators and main
transformers along with ancillary and auxiliary system, the statement said. In addition to
supporting increasing power demand from Abu Dhabi’s rapidly growing population, the plant
will also deliver power to the emirate’s expanding industry including the nearby Ruwais
refinery.
Siemens is growing its presence in the GCC and has had several contracts in the emirate. It
has previously worked on the Shuweihat S1 and S2 seawater desalination plants and on Al
Taweelah A2 and Al Taweelah New B Extension projects. Recently, Siemens won a $253
million contract from the Qatar General Electricity and Water Corporation (Kahramaa) to
expand the Gulf state’s power supply system.
The contract includes the construction of nine turnkey substations for phase 11 of
Kahramaa’s Qatar Power Transmission System Expansion project. Under the contract,
Siemens will provide gas-insulated switchgears (GIS), with voltages including 220kV, 132kV
and 66kV, for the first stage of the phase 11 expansion.
The Shuweihat S3 power plant has an installed electrical capacity of 1,600 megawatts,
and will be operated by Shuweihat Asia O&M Company (SAOM).

UAE : National Drilling Company inaugurates 5 new rigs
WAM –Emirates News Agency + NeewBase
The National Drilling Company (NDC) has inaugurated five new rigs assigned for the maintenance of oil
wells, as part of NDC's fleet expansion plans that cover onshore and offshore operations.
Speaking on the occasion, NDC Chief Executive Officer, Abdalla Saeed Al Suwaidi, said that the company
has doubled the number of its owned rigs over the past four years from 28 in 2009 to 58, adding that the
company is eager to acquire more rigs and sophisticated equipment in the future to enhance performance
and raise the quality of its oil well drilling operations, processing and maintenance.
"Through cooperating with specialised, well-reputed international companies, NDC was able to access high
quality drilling equipment, carry out all types of drilling operations, and attract increasing numbers of
skilled manpower. This comes as part of the company's development strategy to fulfil the current and future
needs of its customers," said Al Suwaidi.

Iran Plans on Reviving Anahita Oil Refinary Construction
– Shana News + NewBase
Iran's Petroleum Ministry will pursue building the Anahita Oil Refinery which was approved for
construction in the western province of Kermanshah 8 years ago.
Managing Director of the National Iranian Oil Refining and
Distribution Company (NIORDC), Abbas Kazemi, told reporters in
an interview that basic engineering and designing works for starting
construction of the refinery have been completed.
Kazemi said even though under Article 44 of the Constitution, the
government cannot legally take part in building the refinery but it
plans to pursue building the refinery through holding different
meetings with private investors.
The current Kermanshah oil refinery being outdated, and being located inside the city, with its
negative impact on the environment, as well as the decision to replace crude oil sales with oil
products with higher added value were the reasons behind a decision made eight years ago by
the cabinet to build the 150,000-barrel Anahita oil refinery outside Kermanshah.
Completing Anahita oil refinery not only will pave the way for the creation of direct and indirect
jobs for thousands of local people, but will also prepare the ground for the exporting of its products
to the neighboring countries.
Enclosing the site of the refinery with fences, construction of access roads, setting up an electric
post and a cement water pool, and building an office near the site are among the preliminary
works to be done to revive the Anahita oil refinery construction.

UK: Solo Oil announces commencement of drilling at Horse Hill-1, Weald basin
Source: Solo Oil + NewBase
Solo Oil has announced that drilling operations on the Horse Hill-1 well have now commenced. The Horse
Hill-1 well in the onshore UK Weald Basin is planned to be drilled to a Total Depth of 2,646 metres (8,680
feet) and is designed to test a number of conventional stacked oil targets in the Jurassic in the proven
productive Portland sandstone, Corallian sandstone and Great Oolite limestone formations, as well as a
deeper conventional gas target in the Triassic.
Solo has a binding agreement in place to own a 10% interest in Horse Hill Development Ltd ('HHDL'), a
special purpose company, which owns a 65% participating interest and operatorship of onshore licence
PEDL137 in the UK Weald Basin. HHDL is the drilling operator.
The participants in the Horse Hill-1 well are HHDL (Operator) with a 65% working interest and Magellan
Petroleum Corporation with a 35% interest.

UK: Nexen says North Sea Buzzard oilfield may be shut for another week
Source: Reuters
The operator of the North Sea Buzzard oilfield said on Tuesday production could be shut for
another week as it works to demobilise a drilling rig during a window of good weather.
Calgary-based Nexen, which operates the field, said Buzzard could be shut for 'up to 10
consecutive days' starting from Saturday Aug. 30 when output from the oilfield was last
stopped. Nexen was bought by China's state-backed CNOOC last year.
'This operation is highly weather dependent and requires calm conditions at sea for up to ten
consecutive days,' Nexen said in a statement. 'With fair weather forecast the decision was
made to shut down on Saturday 30 August and good progress is being made.'
Industry sources said earlier the firm had been eyeing a possible restart of the field later on
Tuesday.
Buzzard is closely watched by oil traders worldwide as it is the biggest contributor to the
Forties oil stream, the largest of the four benchmark crudes underpinning the price of
international benchmark Brent crude oil futures.

Russia’s Asia focus could open gas markets for Mideast suppliers
Anthony McAuley + NewBas
Russian rhetoric in recent days has highlighted its strategic focus on Asia’s energy markets for
future growth, which for Middle East natural gas exporters could mean tougher competition there
but more opportunity in Europe. Yesterday, Russia’s energy minister, Alexander Novak, used a
closed-door session of energy officials
attending the Asia Pacific Economic
Cooperation meeting in Beijing to make
pointed comments about Asia’s growth
prospects, while also warning that the
West’s sanctions could risk world energy
security.
“Taking into account Europe’s stagnation
and demand saturation in the United
States, I can state with certainty that the
Asia-Pacific role in the world energy
industry will be only increasing,” Mr
Novak said, according to Russia’s state
news agency, Itar-Tass. Mr Novak noted
energy policy in the West was often driven by politics, adding: “Not all are satisfied with Russia’s
high status in the world energy industry. Often, in a bid to weaken our positions, these countries
act even to the detriment of themselves … The less politicised Asia-Pacific markets are more
attractive for us.”
Meanwhile, on Sunday, the head of Russia’s largest oil company, Rosneft, made a similar point.
Western countries “want to isolate Russia but it is impossible”, the Rosneft chief executive, Igor
Sechin, said in an interview with the German magazine Der Spiegel.
Referring to Germany’s ban on exports of oil equipment following Russia’s annexation of
Ukraine’s Crimea region in May, Mr Sechin said if the Germans did not want to supply them to
Russia, “we can buy such rigs in South Korea or China”.
Russia has been looking to Asia’s energy growth markets since well before the current crisis, but
the rhetoric is seen as underlying its strategic shift. The timing of May’s US$400 billion deal
between Russia and China to pipe natural gas from far eastern Russia to China’s rapidly growing
market was widely regarded as politically driven – talks on the deal had been going on for years.
The implications for the world’s natural gas markets could be far-reaching. Already, Asia has
accounted for an oversized share of liquefied natural gas (LNG), with China and Japan taking half
the world’s supply in 2013.
Meanwhile, Qatar is the dominant Middle East supplier of LNG, accounting for a third of world
supply, according to the International Energy Agency (IEA). Other regional producers consume
most natural gas in their own rapidly growing markets, although Abu Dhabi and Yemen sell small
amounts into world markets.
“Qatar has been playing a smart game of optimising LNG sales between Asia and Europe,” said
Laszlo Varro, the head of gas analysis at the IEA. Most supplies have been going to Asia in the

past few years as China’s economic growth and anti-pollution policies, and Japan’s needs
following the Fukushima nuclear disaster, have driven prices there. But it has maintained sales to
Europe and could refocus there if the market dynamics were to change.

In the short term, this looks unlikely, despite the crisis, according to Katya Zaplentnyk, a European
gas analyst at ICIS. “It is a completely different situation than it was in 2008-09 when Russia
completely cut off gas supplies to Europe for two weeks,” she said.
The disruption in 2008 and 2009 was because of a long-standing payment dispute with Ukraine,
but the negative impact for Russia – which included a renewed push to find alternative gas
supplies for many European countries – has meant it is highly reluctant to repeat the exercise,
whatever the rhetoric. “There is no desire by Russia to stop the gas flows this time,” Ms
Zaplentnyk said.
The European market is far less vulnerable to disruption than it was six years ago after a rapid
buildup of gas import infrastructure, including many LNG intake terminals that currently are
operating well below capacity. Also, the economics of the market – with the US supplies of gas
depressing prices there, which in turn pushed cheap coal on to the world markets – has meant
Europe is amply supplied with inexpensive fuel, including cheap Russian gas.
Qatar is the pivotal LNG supplier, both in the short and longer term, said Mr Varro. “Anything
which relieves tightness on world markets is good news for Europe and in the event of a disruption
you could see the Qataris readjusting and some spot LNG cargoes from Yemen and other Middle
East suppliers,” he said. Sustained higher prices in Europe in the absence of Russian gas would
probably result in a strategic refocus by Qatar and others, but the short-term readjustment would
take time, as evidenced by the time it took for Qatar to supply gas to Egypt after the recent turmoil
there.

Russia’s oil production rises to 10.52mbd
Reuters + NewBase
Russian oil output rose 1 percent in August to 10.52 million barrels per day (bpd), supported by
an increase in condensate production at Gazprom and projects with foreign companies, Russian
Energy Ministry data showed. Production in Russia, which includes crude oil and gas condensate,
was still the world’s highest in August.
Western nations have imposed sanctions on Moscow over its annexation of Crimea in March and
its stance over the war in eastern Ukraine, warning of further measures if Russia does not help to
stop the conflict escalating. The ministry data showed production at state-controlled Gazprom
jumped by 36 percent month-on-month to 306,000 bpd. Output at projects under production-
sharing agreements (PSA) rose 12 percent to 241,000 bpd.
There are three PSAs in Russia - the Total-led Kharyaga project, ExxonMobil -led Sakhalin-1 and
Gazprom-controlled Sakhalin-2. Alexander Kornilov, an analyst with Alfa Bank, said that Gazprom
was just returning to usual condensate production levels after a drop in July following
maintenance works.
Gazprom’s Surgut plant was out of operation for most of July. Valery Nesterov, an analyst with
Sberbank CIB, said that monthly production at PSA projects is volatile because of maintenance
issues, including at some offshore production platforms. In June, it was 303,000 bpd. Rosneft and
Exxon plan to start production at another Sakhalin-1 project, Arkutun-Dagi, by the end of this year,
which will add 90,000 bpd within three years to Russia’s total output.
In tons, Russian oil output reached 44.472 million in August versus 43.949 million in July.
Gas production was 42.74 billion cubic meters (bcm) last month, or 1.38 bcm a day, versus 42.68
bcm in July. State-controlled gas producer Gazprom produced 26.28 bcm, or 848 mcm per day, in
August, down from 26.72 bcm a month earlier.

US: Residential electricity prices are rising
Source: U.S. Energy Information Administration,
U.S. retail residential electricity prices for the first half of 2014 averaged 12.3 cents per
kilowatthour, an increase of 3.2% from the same period last year. This is the highest year-over-
year growth in residential prices for the first half of the year since 2009. Average prices rose in all
areas of the country except for the Pacific Census Division (excluding Alaska and Hawaii).
Electricity customers in New England experienced the largest price increases, averaging 11.8%. Beyond
taxes, fees, and other charges, there are two main components of electricity bills: the generation component,
which reflects the costs of generating the electricity, and the delivery portion, which reflects the costs of
transmitting and distributing that electricity. All New England states, with the exception of Vermont, have
restructured the industry so that residential customers have the option of choosing an alternative retail
electricity supplier for the generation (energy) component of their electricity bill. More than one-quarter of
all residential customers in New England pay a retail supplier other than the regulated utility for the
generation of their electricity. Customers of both full-service utilities and restructured retail suppliers have
experienced similar rate increases of just under 12% so far this year.

The primary driver of the recent increase in New England retail rates was the sharp rise in
wholesale power prices. For the first six months of 2014, the day-ahead wholesale power price in
the ISO-New England control area averaged $93 per megawatthour, 45% higher than the average
wholesale price during the same period last year. The increased cost of producing electricity in
New England is evident in the 21% increase in the energy-only component of restructured retail
suppliers' rates. In contrast, the delivery-only component of restructured retail customers' bills has
risen only 2% this year. This component of electricity prices has been rising in part because
utilities have been spending more on the transmission infrastructure necessary for delivering
electricity to customers.
The 2.5% year-to-date decline in Pacific residential electricity prices is distorted by a temporary dip in
revenues for California utilities during the month of April. This drop was a result of a credit averaging about
$35 to the electric bills of most customers of the state's investor-owned utilities. The California Climate
Credit is a refund of money that the state receives from the sale of allowances for greenhouse gas emissions
through their cap-and-trade system. Excluding the month of April when the refund was issued, prices paid
by residential customers in the Pacific region rose 0.9% above the same period last year. In California alone,
prices (excluding April) were 1% higher.
How does EIA calculate retail electricity prices?
Electricity prices can be difficult to determine, as they depend on the customer's rate structure, which can
differ greatly from company to company. EIA does not directly collect retail electricity rates or utility
tariffs. However, using data collected on revenues and kilowatthours sold to each customer group
(residential, commercial, and industrial), EIA calculates average retail revenue per kilowatthour as a proxy
for retail electricity prices. The Utility Rate Database, sponsored in part by the U.S. Department of Energy,
is one useful source of rate structure information.

Your partner in Energy Services

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.Oil & Gas sector.Oil & Gas sector.Oil & Gas sector.
CurrenCurrenCurrenCurrently working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ withtly working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ withtly working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ withtly 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 , Mostexternal voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Mostexternal voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Mostexternal 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 Opeof the experience were spent as the Gas Opeof the experience were spent as the Gas Opeof the experience were spent as the Gas Operations Manager in Emarat , responsible for Emarat Gas Pipelinerations Manager in Emarat , responsible for Emarat Gas Pipelinerations Manager in Emarat , responsible for Emarat Gas Pipelinerations Manager in Emarat , responsible for Emarat Gas Pipeline
Network Facility & gas compressor stations . Through the years , he has developed great experiences in theNetwork Facility & gas compressor stations . Through the years , he has developed great experiences in theNetwork Facility & gas compressor stations . Through the years , he has developed great experiences in theNetwork Facility & gas compressor stations . Through the years , he has developed great experiences in the
designing & constructingdesigning & constructingdesigning & constructingdesigning & constructing of gas pipelines, gas metering & regulating stations andof gas pipelines, gas metering & regulating stations andof gas pipelines, gas metering & regulating stations andof gas pipelines, gas metering & regulating stations and in the engineering of supplyin the engineering of supplyin the engineering of supplyin the engineering of supply
routes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreementsroutes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreementsroutes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreementsroutes. 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 Conferencesalong with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferencesalong with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferencesalong with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences
held iheld iheld iheld in the UAE andn the UAE andn the UAE andn the UAE and Energy program broadcasted internationally , via GCC leading satellite Channels .Energy program broadcasted internationally , via GCC leading satellite Channels .Energy program broadcasted internationally , via GCC leading satellite Channels .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 03 September 2014 K. Al Awadi

New base special 03 september 2014

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