More Related Content Similar to NewBase 614 special 28 May 2015 (20) More from Khaled Al Awadi (20) NewBase 614 special 28 May 20151. 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 28 May 2015 - Issue No. 614 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
GCC investments in key areas continue even with weak oil
Despite a projected slowdown in the GCC’s construction market, investments in key areas must
press ahead to alleviate the fall in oil prices, MEED’s Construction Leadership Summit has
been told.
Speaking at the summit in Dubai, Mohammed Al-Rais, Middle East president at the US’ Hill
International, said even if oil prices remain low, there are certain areas that should not see a
compromise in spending and investment. “Social projects for the people, which in certain areas fall
behind, must continue irrespective of the situation. The issue is prioritization by the authorities.”
Samer Khoury, president of engineering & construction at Athens-based contractor Consolidated
Contractors International Company (CCC), said “petrochemicals will slowdown but upstream will
improve. Aramco will expand outside of the core business, but other countries will only focus on oil
and gas upstream.”
The summit also heard
that major National Oil
Companies (NOC’s) will
continue to press ahead
with investment to
maintain production in
order to maintain
government revenues.
Low oil prices have forced
governments to
concentrate only on
essential schemes. The
first four months of this
year saw the second-
lowest level of contract
awards in the Middle
East’s construction sector
since 2008, as the impact
of low oil prices is felt in the industry. While work that was under way has largely continued
unaffected this year, the region is experiencing a fall in new contract awards.
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The total value of new contracts signed so far this year reflects this. $61bn worth of contracts have
been awarded in the GCC up to May 20, 2015, down nearly 28 per cent on the $85bn over the
same period in 2014.
With less new work being secured, diminishing backlogs may create a more significant slowdown
in construction activity on site in 2016, while at the same time offering some respite to a market
that in 2014 was starting to look overheated.
The impact is expected to continue throughout the year. Contract awards for work either directly or
indirectly associated with the Expo 2020 in Dubai or the 2022 FIFA World Cup in Qatar are
expected to still happen. But awards for projects that are not considered strategically important
could slow down or stop.
Saudi Arabia has propped up the construction market has several schemes in the pipeline.
In the UAE, the 12-month growth rate has dropped from 13.5 percent to 11.3 percent. It will not
significantly affect projects in 2015 but does mean a slowdown in the projects pipeline.
Given the outlook for oil prices, it is a trend that will continue as it is difficult to see where new
projects will come from. One city that is bucking the projects slowdown trend is Dubai, driven by
tourism. The emirate is tendering a raft of major new hotels, attractions and infrastructure to cater
for the 20 million visitors it hopes to welcome in 2020, when it hosts the Expo. Of particular
interest is the development of Route 2020, the metro extension to the Expo site.=
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Saudi-Kuwait :Chevron says output from joint Wafra oilfield remain shut
Reuters + NewBase
An jointly-operated onshore oilfield between Saudi Arabia and Kuwait will remain shut until
difficulties to operate there are resolved, a spokeswoman for U.S. oil major Chevron said on
Wednesday.
The Wafra field was shut for maintenance on May
11 for two weeks in a move apparently aimed at
giving the Gulf OPEC allies time to solve a
longstanding dispute. Last month, Saudi Chevron
told its partner, Kuwait Gulf Oil Company, that it
planned to shut down Wafra after failing to resolve
various disputes with Kuwait, mainly related to the
right to operate, according to industry sources.
Chevron has said it has faced problems obtaining
supplies and work permits for its expatriate staff,
which could hurt production in the Neutral Zone.
“Current difficulties in securing work permits and
materials have impacted the company’s
operations,” Chevron spokeswoman Sally Jones
said in a statement on Wednesday. Chevron
operates the Wafra onshore oilfield on behalf of Saudi Arabia.
“While efforts continue with all appropriate parties to resolve the issue, Saudi Arabian
Chevron and Kuwait Gulf Oil Company have stopped production at the onshore Partitioned
Zone. Production will remain shut in until the situation is resolved,” Jones said.
Production from the onshore fields in the Neutral Zone between Saudi Arabia and Kuwait was
about 190,000 barrels per day, a Kuwaiti industry source has said. The Neutral Zone is the
only place in Saudi Arabia and Kuwait where foreign oil firms have equity in fields, which are
otherwise owned and operated by state oil companies. Crude output is divided equally
between the two countries.
It survived the nationalisation of the Saudi oil industry in the 1970s. Since then, Saudi
reserves of 264 billion barrels, about a fifth of the world’s proven oil reserves, have been off
limits to international oil companies.
Industry sources say Kuwait was angry because it was not consulted when the Chevron
concession to operate Wafra was renewed by Riyadh in 2009 until 2039. But the row goes
back further to 2007, when a land dispute between Kuwait and Saudi Arabia led to a delay in
Kuwait’s plans to build an oil refinery.
Chevron holds a lease on some of the land on Kuwait’s side which was earmarked for the
new refinery. “I don’t think you will see any change of the status quo until the end of the third
quarter, people from Chevron will keep leaving the country because of the expiration of their
visas,” said an industry source in Kuwait.
The shutdown of Wafra, which has an output capacity of about 220,000 bpd of Arabian Heavy
crude, comes after the oil output from another jointly operated field, Khafji, was stopped in
October to comply with environmental regulations.
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Oman:firms vie for Musandam power plant PMCS contract
Oman IMES NEWS + NewBase
Eleven companies are in the race for a project management and consultancy services contract for
the Musandam independent power project.
These companies are Tractebel Engineering, Atlas International Engineering Consultants, Jacobs
CES, and AF Consult LTS, in addition to Electricite De France, Engineering Innovation Design
and Consulting, Moneco Consulting Engineers and Consolidated Consultants. Ramboll, Value
Engineering Centre and Mott Macdonald & Co are the others.
The project is being implemented by Musandam Power Company on a build-own-operate basis
under the terms of a power purchase agreement with Oman Power and Water Procurement
Company.
The project, which is going to be the first IPP in Musandam, will be able to meet the current and
future power demand in Musandam, northern Oman. The consultant, who will be appointed soon,
is expected to oversee construction, commissioning and testing of the 120MW-Musandam IPP
project.
In fact, the Musandam Power Company, which is a joint venture between state-owned Oman Oil
Company (OOC) and LG International, has signed an engineering, procurement and construction
(EPC) contract and long-term service agreement with Wartsila Muscat for building the dual-fuel
fired power plant at Tibat in Musandam in December, 2014.
According to earlier reports, the project's concession period is fixed at 15 years and the power
plant will be ready to begin full operations by the last quarter of 2016.
Musandam Power Company was established in 2014 as Oman's first IPP in Musandam and uses
fuel gas to be processed by OOC's wholly owned subsidiary, Oman Oil Company Exploration and
Production (OOCEP) from the adjacent Musandam gas processing plant, in order to integrate the
value chain and meet the growing demand for energy in Musandam.
Dec-2014 Musandam Power Company SAOC (MPC)
signed the e (EPC) contract and Long Term Service
Agreement (LTSA) with Wärtsilä Muscat LLC
5. 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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
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Saudi's summer oil demand for power generation to climb
Reuters+NewBase
Saudi Arabia's demand for oil products could increase by up to 20 per cent this summer from last
year as soaring temperatures stoke demand for power generation, but new refineries will limit the
need for imports, traders and analysts said.
Requirements for fuel oil, the cheapest form of oil to burn to generate electricity, could climb by up
to 20 per cent this year, although demand for pricier gasoil is likely to be unchanged from last
year.
Imports of the middle distillate into the country are expected to hit a record low this year due to
new refineries' ability to meet demand, potentially curbing Asian gasoil margins as this removes a
major outlet for barrels, traders said.
Saudi Arabia has added 800,000 barrels per day (bpd) of new capacity in its refineries of Yanbu
and Jubail over the past two years, reducing its reliance on imports and stalling term talks with
long-term supplier Reliance Industries.
The country became
a net annual diesel
exporter last year
for the first time
since 2007,
according to data
published by the
Joint Organisations
Data Initiative (Jodi).
This summer,
Saudi Aramco's
trading arm probably
bought about
300,000 to 1.5
million barrels of gasoil for May delivery in the spot market, down from the 5.7 million barrels
imported in May last year, traders said.
For June, the company probably bought 1.2 to 2.5 million barrels of gasoil, down from 9.06 million
in June 2014, they added. Saudi Arabia's Yasref refinery, a joint venture between Saudi Aramco
and China's Sinopec, started production last year and is currently running at more than 80 per
cent of capacity, which has helped reduce imports, traders said.
Demand for fuel oil for power generation during summer in Saudi Arabia – which accounts for
nearly a third of the region's requirements - is expected to reach between 420,000 and 430,000
bpd from 300,000 to 410,000 bpd last year, analysts from Boston-based ESAI Energy and Vienna-
based Energy Aspects said. (Oil local demand / consumption 1.30 MPD)
Saudi Arabia exports most of its fuel oil surpluses, which are expected to decline by around 30 per
cent to less than 100,000 bpd on average this year. Despite the increases in refining capacity, fuel
oil output had not increased, given refineries' ability to convert fuel oil into more valuable products,
Megan Wu from ESAI Energy said. "This is significant because fuel oil demand in the region is
rising," Wu added.
6. 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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
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Algeria PM says ready to relaunch Galsi gas project
Reuters+ NewBase
Algeria is ready to build the proposed Galsi gas pipeline to bring Algerian gas to Italy, Prime
Minister Abdelmalek Sellal said on Wednesday during a visit to Rome. "This is a project that we
intend to relaunch as part of this
new vision of security for Italy and
Europe through alternative sources
of energy supply from Algeria," he
said.
The Galsi project has been in limbo
after years of repeated delays but
Italy, heavily dependent on energy
imports from Russia, has been
interested in securing alternative
supplies in case the crisis with
Ukraine escalates.
Algeria used to be Italy's biggest gas
supplier but, as the North African
country has earmarked increasing
amounts of production for domestic
use and shipped more gas to more
remunerative Asian markets,
volumes have declined.
GALSI partners selected a route
crossing the Mediterranean Sea to
Porto Botte in Sardinia, running
through the island up to Olbia in the
north where it would turn subsea
again up to Toscany.
From the 900 kilometers length of
the GALSI project, 600 kilometers of
the pipeline will be subsea with a
maximum depth of 2,800 meters.
Estimated to require $3 billion
capital expenditure, the GALSI
Pipeline project should include:
- Gas compression stations
- Cathodic protection system
- Offsites and Utilities.
With all the permits already
submitted to Italy and Algeria
Authorities, Sonatrach, Edison,
Enel, Hera Group and SFIRS are
now expecting to award the
engineering, procurement and
construction (EPC) contracts on early 2015 for the first stream by 2018.
7. 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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
publication. However, no warranty is given to the accuracy of its content. Page 7
Oman:Waste-to-Energy project feasibility report by Q3
Oman Observer + NewBase
Oman Environmental Services Holding Company — also known as Bee’ah — says a detailed
feasibility study of its landmark Waste-to-Energy initiative is due to be completed by the third
quarter of this year.
A provisional study of the proposed venture, part of a wider strategy by the state-run utility to
restructure and privatise the Sultanate’s solid waste sector, has been determined as “very
promising”, according to a high-ranking executive of Be’ah.
“The Waste-to-Energy initiative is still in the study phase,” said Mohammed Sulaiman al Harthy,
Executive Vice President — Corporate Strategic Development. “But a preliminary feasibility study
has shown (the proposed project) to be very promising.
We are now working on the detailed feasibility study, which has been tendered as well,” he stated
in comments to the Observer. Last month, Bee’ah unveiled a proposal centring on the
establishment of a commercial-scale seawater desalination plant powered by electricity generated
from the conversion of solid waste to energy.
A 2013 study of the proposed scheme concluded that 2,100 tonnes per day of recycled calorific
waste could produce 73 million cubic metres of potable water annually, representing around 30
per cent of the country’s total installed desalination capacity.
Commenting on the significance of the initiative, Al Harthy said: “This is a strategically important
project, and so we will need to work on the nitty-gritty — the design, composition of the waste,
source of waste, and so on — all of which are part of the detailed study. In 3-4 months’ time, we
should have the (report of the) study ready, based on which we can then move forward.”
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or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
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Bee’ah’s proposal calls for the segregation of solid municipal waste to allow for calorific waste like
plastic, cartons, paper, and so on, to be extracted and used as feedstock for a Waste-to-Energy
scheme.
Batinah South Governorate has been identified as a potential location for the establishment of
Oman’s first such venture in conjunction with a water desalination project. “Upon the completion of
the detailed study, we will (work) with the authorities to pinpoint an optimum location, which is
important for logistical purposes,” the Executive Vice President said.
“We will look at different models as well. And we will need investment partners too, whether local
funds, international investments, and so. At the end of the day, we will (identify) the best option for
Oman. We have the blessing of the different authorities for this promising project,” he added.
In the region, Qatar was the first GCC state to set up a Waste-to-Energy plant as part of an
integrated solid waste treatment project that came into operation in 2011.
The facility, with a capacity to process up to 2,300 tons per day of solid waste, has been built
alongside a 34MW electricity generation plant. Kuwait has also made headway in plans for a
waste-to-energy facility with a capacity to handle 3,000 tonnes of waste per day. Abu Dhabi is
looking at a 100MW facility that will receive around 1 million tons of municipal solid waste annually
as feedstock. Similar initiatives are also in various stages of implementation elsewhere in the GCC
and wider Middle East.
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Indonesia: Lofin-2 flows gas - confirms material discovery
Source: Lion Energy
JV partner Lion Energy has advised that the Lofin-2 well appraising the2012 Lofin-1
discovery has met key pre-drill objectives. It has significantly extended the proven gas column
and provides valuable geological and engineering data including fluid samples, core data and
wireline log data. Wireline pressure tests and samples, supported by the ongoing open hole test
results, indicates a potential gas column of at least 1106m. This gas column could be up to 1300m
based on evaluation of gas readings and interpretation of pressure data.
Testing of an open hole section of Lofin-2 is ongoing with the well flowing gas at up to 17.8
mmcfpd through a 52/64” choke at 2250psi flowing pressure. The well is also flowing some water
interpreted to be from the lower part of well below the substantial gas column. The well is currently
undergoing a multi-rate test to provide valuable reservoir engineering data. The forward plan is
currently under discussion within the joint venture.
Commenting on the results Lion’s CEO Kim Morrison noted 'The test results confirm the
significant gas potential in the Lofin feature. Valuable data has been obtained and we look
forward to working with the operator in the evaluation and integration of well results on this
material discovery for Lion.'
The well is operated by CITIC Seram Energy (51%) with other co-venturers in theSeram
PSC being Kufpec (Indonesia) (30%) and Gulf Petroleum Investment Company (16.5%).
• Lofin-2 tests gas at up to 17.8 mmcfpd from the Manusela limestone
• Results support a gas column of at least 1106m, and up to 1300m
• Combined with the size of the structure, this points to a potentially sizable
gas/condensate accumulation
10. 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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
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S.Africa: Chevron Seeks to Share $1 Billion SA Refinery Cost
Bloomberg + NewBase
South Africa, which sets gasoline prices that fuel producers can charge, needs to ensure
companies, can recover the cost of upgrading their facilities to handle cleaner fuels, Chevron
Corp.’s local unit said.
“Petroleum companies are unable through normal market mechanisms to recoup the investments
needed to upgrade refineries to produce cleaner fuels,” Chevron South Africa Chairwoman
Nobuzwe Mbuyisa said in an e-mailed response to questions Tuesday. The costs “are substantial
and, in the absence of a mechanism to recover these costs from the consumer, they are simply
not commercially viable,” she said.
Upgrading Chevron’s
facility in Cape Town to
meet planned clean-fuel
standards will cost as
much as $1 billion,
Mbuyisa said last
month. Refiners are
refusing to invest in
production of cleaner
fuels without a subsidy,
Rod Crompton, a
member of the National
Energy Regulator of
South Africa, told
lawmakers Tuesday.
About 40 billion rand
($3.3 billion) will be needed over five years to upgrade South Africa’s six refineries to meet new
fuel specifications that will reduce vehicle emissions, the National Treasury said in its 2013 budget
review. It said basic fuel prices would be adjusted to accommodate the cost recovery.
In draft regulations released in March 2011, the government said sulfur levels in fuel should be cut
to 10 parts per million from a maximum of 500 parts, while the benzene content should be
reduced to 1 percent from 5 percent. At that time, the oil industry estimated it would cost about
$3.1 billion for all refineries to comply with Euro 4 fuel standards, or $3.7 billion to meet Euro 5
standards.
Euro 4 standard gasoline contains no more than 50 parts per million of sulfur, while Euro 5 has no
more than 10 parts. While the Energy Ministry wanted clean fuels to be available from this year
and all refineries to be revamped by 2017, upgrades have been delayed amid disagreement over
who will pay.
Petroliam Nasional Bhd.’s Engen unit, Royal Dutch Shell Plc and BP Plc are among the
companies that operate plants in South Africa. Chevron’s refinery has capacity to handle 100,000
barrels a day.
11. 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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
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Angola: Total produces two billion barrels on deep offshore 17
Source: Total
Total has achieved the significant milestone of producing a cumulative two billion barrels from its
operated deep offshore Block 17l located 150 km off the coast of Angola. With the recent start
up of CLOV, Block 17 has become Total’s most prolific site with production of over 700,000
BPD.
The Group operates four Floating Production Storage and Offloading (FPSO) units on the major
production zones of the block: Girassol, Dalia, Pazflor and CLOV.
'Block 17 is a global benchmark in the deep offshore and represents a unique industrial
adventure, with 15 discoveries and a very high level of production. Thanks to the commitment of
our teams and a number of technological world firsts over the past 14 years, the production of
Block 17 has continuously ramped up,' outlined Arnaud Breuillac, President, Exploration &
Production. 'This milestone is a symbol of our strong position in the deep offshore sector.
The Group is already the leading deep offshore operator in West Africa and is using this
expertise to grow in other regions: in Brazil through its participation in the Libra field as well as in
the United Kingdom with the coming start up of the Laggan-Tormore project in the deep offshore.'
12. 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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
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US: Proposed Clean Power Plan rule cuts power sector
CO2 emissions to lowest level since 1980s
Source: U.S. Energy Information Administration, Analysis of the Impacts of the Clean Power Plan
In June 2014, the U.S. Environmental Protection Agency (EPA) proposed a rule to regulate
carbon dioxide (CO2) emissions from existing power plants under section 111(d) of the Clean Air
Act. EIA's newly released analysis of the proposed rule shows power sector CO2 emissions falling
to about 1,500 million metric tons per year by 2025, a level not seen since the early 1980s, in the
Base Policy case.
The goal of the proposed Clean Power Plan rule is to reduce carbon dioxide emissions from
existing electricity generation units that burn fossil fuels. EPA's proposed rule specifies interim
state-level compliance targets for 2020 through 2029 and final compliance targets for 2030 that
are maintained thereafter. The targets are expressed in terms of emissions from affected units
divided by affected generation.
However, because the affected generation (i.e., the compliance formula denominator) used for
compliance calculations includes generation from specified non-emitting sources, as well as
reductions in load resulting from energy efficiency programs, the targets are not simple emissions
rates.
The emission rates used for compliance take into account emissions and generation from existing
fossil-fired plants, as well as existing none-hydro renewable generation, all new renewable
generation, 6% of existing nuclear generation plus nuclear generation from plants under
construction, and contributions from energy efficiency programs that reduce electricity sales.
States subject to the proposed rule have freedom to exercise discretion in developing compliance
plans. Available strategies include, but are not limited to, the following:
• Increasing use of existing natural gas-fired capacity and lower use of existing coal-fired
generators.
• Increasing use of lower-carbon technologies.
• Implementing efficiency improvements at existing generators to lower energy input per
unit of net electricity generation (heat rate improvement).
• Introducing new or expanded demand-side energy efficiency programs that reduce
electricity sales.
13. 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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
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Oil Price Drop Special Coverage
Oil prices edge up after two days of steep falls
Crude oil prices recovered on Thursday after a two-day slide, although high U.S. stocks and
strong global production, along with a firm dollar, were keeping markets under pressure. The
gains followed two days of steep falls as a resurgent dollar weighed on the market amid concerns
that U.S. crude supplies may have started rising again after three weeks of draws.
Industry group American Petroleum Institute (API) said after the market's settlement that U.S.
crude inventories rose by 1.3 million barrels last week, following three weeks of straight
withdrawals. The U.S. dollar index .DXY ticked lower, but remained near one-month highs.
Front-month Brent futures LCOc1 climbed half a dollar to $62.56 a barrel by 0202 GMT on
Thursday. U.S. crude futures CLc1 were up 31 cents from their last settlement at $57.82 per
barrel. Brent's premium over U.S. prices CL-LCO1=R has come off over 45 percent since mid-
April, with record OPEC production weighing on Brent.
The American benchmark, meanwhile, received some support from the peak demand summer
driving season, almost a month of steady stock draws that only came to an end this week, and
raging Canadian wildfires that forced the evacuation of several oil and gas sands production sites.
Technical market indicators implied that the spread could narrow further as U.S. oil could rebound
into a range of $58.14-$58.41 per barrel while Brent was expected to drop to $61.50 per barrel,
according to Reuters' technical analyst Wang Tao.
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GCC national oil firms can face challenges of oil slump: A.T. Kearney
Gulf Times + NewBase
The depressed oil prices predominant since late last year could herald a lasting trend if, as
evidence suggests, we are now facing the low-price segment of oil ‘super cycle’, according to the
latest paper from global strategy and management consulting firm A.T. Kearney. This new
situation would pose both challenges and opportunities to
Middle East companies and countries,
According to A.T. Kearney, there was still much volatility in
the global oil industry regarding oil price, and a lot of
speculation on how long the depressed oil prices will
continue. But, evidence suggests the industry may have to
face depressed oil prices for a long period, as experienced
in the 1980s.
Sustained lowered oil prices will reshape the industry and
in particular the upstream segment. How oil majors respond depends on a range of factors, but
the report discussed that the scenario would likely favour national oil companies and fields in the
Middle East.
A long period of low oil price would be due to the long-term nature of upstream investments,
assuming the historical high oil prices in recent decade have led to excess global oil production
capacity development. When the oil price drops it can take many years for actual demand to catch
up with the available capacity and drive oil prices up again, i.e. what is known as a ‘commodity
super cycle’.
Sustained low oil prices will primarily impact the upstream segment of the industry. The dominant
focus of upstream business investments tends to shift in response to low prices, away from
exploration and more towards improving the efficiency of existing production.
Oil producing countries of the Middle East and their respective regional National Oil Companies
(NOCs) will face significant challenges if low oil prices remain in the long-term, but are still better
placed than many International Oil Companies.
“A scenario of crude prices at $60-80 a barrel for several years is possible if we’re entering the low
point of a super cycle. Middle East NOCs would be uniquely placed to take advantage of the
situation due to their low production costs,” said author Sean Wheeler, partner, A.T. Kearney
Middle East.
“In contrast IOCs and independent oil companies would be under considerable financial pressure,
and likely need to reallocate resources away from high cost — unprofitable reservoirs. Regional
NOCs could consider capitalising on this reaction by acquiring and absorbing this expertise into
their operations, which would be very effective when applied to the lower-cost Middle East
basins,” he added.
The downstream and petrochemical segments would also be impacted. Typically, when crude
prices fall but GDP (and subsequent demand for oil products) continues to rise there is higher
refinery utilisation. Global economic growth is currently slow, but the 1980s super cycle scenario
demonstrated that global GDP growth will resume before oil prices rise again.
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And, when this happens, A.T. Kearney said investment in refining once again becomes attractive.
A similar situation is witnessed in petrochemicals, with demand heavily dependent on GDP —
although low oil prices are likely to benefit naphtha-based processes more than gas-based
procedures.
Co-author Eduard Gracia, principal, A.T. Kearney, said,: “If we are indeed starting a sustained
period of low oil prices, the challenges for oil companies both globally and regionally are going to
be significant.
Everything the industry took for granted in the price hike years will be reversed: what used to be
profitable may no longer be, whereas formerly blow priority activities suddenly become relevant.
How each segment of the industry responds to this will vary, but it will be critical for Middle East
NOCs to effectively leverage their control of the world’s most cost-competitive oil reserves to take
advantage of the opportunities that arise.”
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or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
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Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile: +97150-4822502
khdmohd@hawkenergy.net
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Khaled Al Awadi is a UAE National with a total of 25 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 28 May 2015 K. Al Awadi
17. 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,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
publication. However, no warranty is given to the accuracy of its content. Page 17