New base 04 february 2020 energy news issue 1314 by khaled al awadi

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NewBase Energy News 04 February 2020 - Issue No. 1314 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502,Dubai, UAE
UAE:Adnoc to trial biofuel for ships to caps sulphur emissions
The national - Jennifer Gnana
The Abu Dhabi National Oil Company will trial biofuel as a bunkering fuel for ships as it looks at
alternative low-emission fuels to comply with global regulations to cap sulphur content released
into the world's oceans, according to the chief executive of the firm's logistics and services
subsidiary. Adnoc preparing its fleet for stricter regulations capping emissions set to come into
force in 2030 and 2050.
Low-emission fuels in shipping have become increasingly important for ship operators following
the introduction of new rules capping sulphur emissions earlier this year, which has caused a
spike in demand for certain categories of fuels.
"We're studying with one of our subsidiary companies the usage of biofuel and how that can
reduce fuel consumption to be meet some of the targets for [the] Adnoc group of companies,"
Captain Abdulkareem Al Masabi, chief executive of Adnoc Logistics and Services, told The
National in an interview.
"We are on [a] trial basis and I think within this year we can get the results of using how much
blended biofuel can help us in achieving these targets," he added. The biofuels trial comes as the
International Maritime Organisation mandated all vessels to reduce emissions of sulphur oxides
from all ships from January 1. Allowable sulphur emissions have been cut to 0.5 per cent of fuel
oil, from 3.5 per cent previously used.
Adnoc enforced the regulations across its entire fleet by November 2019, with the company now
exploring other alternatives such as liquefied natural gas, liquefied petroleum gas as well as
blended biofuel to carry its vessels. Biofuel sourced from Adnoc Distribution, the group's fuel
distribution arm will be used to ferry offshore support vessels in Abu Dhabi on a trial basis, said
Capt Al Masabi.
www.linkedin.com/in/khaled-al-awadi-38b995b

"These are medium-sized vessels that go from Mussafah all the way to offshore rigs. It's very
convenient for us because they don't go long distance[s] and they always come back to the
source," he added.
Mussafah, which is located in Abu Dhabi is an industrial district, with port facilities available for
major energy and manufacturing companies in the emirate. The results of the biofuel trial will be
known within a year, with the company currently studying how much biofuel could be blended.
Adnoc's Logistics and Services subsidiary is also looking at the feasibility of using LNG as a
bunkering fuel with some of its bigger clients. The company signed an agreement with Japan's
Inpex last year to look at opportunities for LNG bunkering in the UAE as well as in Southeast Asia.
"By that time if we see that it's feasible, that there's enough demand, we may go to another phase
in our relationship with Inpex," said Capt Al Masabi.
The UAE is the only Arab country that is a council member of the IMO and Adnoc Logistics and
Services is preparing for a future where the agency may require vessels to cap their sulphur
content even lower, to around 0.1 per cent.
"In all our new designs for new vessels, we'll make sure that we're prepared for even the 2030,
2050 regulations. This is one of our top priorities," said Capt Al Masabi.
He declined to comment on the timeline for the company to finalise its joint venture with China's
Wanhua Chemical, which was earlier set for the end of 2019, saying an announcement was
forthcoming.
The logistics and services arm is not targetting bringing in a foreign stakeholder or aiming to go
public for now, said Capt Al Masabi. "We're not looking at the moment for any direct investments
or taking it out to the markets. Our focus right now is on how to maximise the value and the
valuation of this company. Perhaps maybe later in the future, but there's no plan as of today," he
added.

UAE: Adnoc and Dubai's Dusup to develop new gas reservoir in Jebel Ali
The National
State-owned Abu Dhabi National Oil Company and Dubai Supply Authority are developing an 80
trillion cubic feet gas reservoir in Jebel Ali. The find is estimated to hold 80 trillion cubic feet of
gas.
The agreement was witnessed by Sheikh Mohammed bin Rashid, Vice President of the UAE and
Ruler of Dubai, and Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy
Supreme Commander of the UAE Armed Forces.
"Together with my brother
@HHShkMohd we
witnessed the
announcement of “Jebel Ali
Project” gas reservoir that
ADNOC will develop in
collaboration with DUSUP...
a new source of energy
supplies to support national
economy and sustainable
growth plans in UAE,"
Sheikh Mohamed bin Zayed
said following the signing on
Monday.

Jebel Ali gas reservoir discovery the 'largest in 15 years'
The 80 trillion cubic feet gasfield will accelerate the UAE's move towards gas self-sufficiency
Around 10 appraisal wells were tested by Adnoc in the area straddling the two emirates. Source: Adnoc
The UAE's discovery of 80 trillion cubic feet of shallow gas reserves in an area straddling the
emirates of Abu Dhabi and Dubai is the biggest find in 15 years, analysts said. "The find ranks as
the largest global gas discovery since Galkynysh [South Yolotan]," said Liam Yates, Middle East
upstream analyst at Wood Mackenzie.
The Turkmen gasfield – the world's second-largest – was discovered in 2005 and is estimated to
hold about 500 trillion cf of gas.
"A discovery of this scale will be a clear priority for development, but the timing will be dependent
on where it fits into the UAE’s gas market. Large volumes of gas are associated with oil
production, which is on the rise," Mr Yates said.
On Sunday, state-owned Adnoc and the Dubai Supply Authority signed an agreement to explore
the resources jointly. Around 10 exploration and appraisal wells were drilled by Adnoc in its first-
ever exploration in Dubai over 5,000 square kilometres of land between Saih As Sidirah and Jebel
Ali.
Shallow gas refers to organic gas found in relatively shallow depths below the ground's surface.
The shallow nature of the resource will also ensure that the development costs of gas production
will be lower than unlocking Abu Dhabi's sour gas caps, Mr Yates said.
Sour gas refers to gas reserves containing significant volumes of sulphur. Much of the gas in Abu
Dhabi is sour, with Adnoc spending billions of dollars developing gas reserves previously deemed
uneconomical, especially in Hail and Ghasha, alongside foreign partners.

The deal with Adnoc would ensure "long-term energy security," said Sheikh Ahmed bin Saeed, the
director general of Dusup, which manages Dubai's energy needs by buying liquefied natural
gas on the basis of long-term energy contracts as well as spot cargoes to meet peak demand,
particularly during the summer months.
The gas output from the Jebel Ali project will be supplied to Dusup to power Dubai's economic and
industrial needs. The UAE accounts for about 4 per cent of global oil production, with much of the
output from fields owned and managed by Adnoc.
Adnoc announced the discovery of additional reserves of 7 billion "stock tank" barrels of oil, 58
trillioin trilliontrillion cf of conventional gas and 160 trillion cf of unconventional gas in November.
This pushed the UAE up the rankings in terms of hydrocarbon reserves, according to US Energy
Information Administration data.
The country also has unconventional reserves of 14.8 trillion cubic feet. The UAE, which imports
gas via the Dolphin Pipeline from Qatar to meet its electricity requirements, has been looking for
new gas finds to become self-sufficient in the resource.
The northern emirate of Sharjah announced last week it had discovered gas and condensate, with
flow rates of 50 million cf per day.
The discovery of shallow gas resources between Abu Dhabi and Dubai is a result of Adnoc's drive
to "efficiently accelerate the exploration and development of the UAE’s vast untapped
hydrocarbon resources and maximise its value for the benefit of the nation", said Minister of State
and Adnoc Group chief executive Dr Sultan Al Jaber.
Adnoc has the capital and its expertise in developing the reserves. Further exploration to assess
total volumes and development costs will be undertaken.
Adnoc will use both conventional and unconventional drilling technologies to extract the gas,
making use of horizontal drilling and hydraulic fracturing to free up the resource from beneath the
Earth's surface. This also allows for a limited number of drilling rigs to be deployed to extract the
gas.
“Longer term, the field is likely to play a pivotal role in the UAE’s gas market and could lead to
additional gas exports from the country," Mr Yates said.
The new finds in Abu Dhabi, Dubai and Sharjah will help the UAE to achieve its goal of reaching
self-sufficiency and eventually becoming a net exporter of the fuel. The discoveries and
associated upstream developments will give a boost to the country's gas industry.
The UAE is Opec's third-largest producer and Adnoc, its main producer, is on track to raise its
overall capacity to 4 million barrels per day by 2020.

GCC: Power subsidy to cost GCC $150bln more till 2030
REUTERS/Parivartan Sharma ( By Issac John, Khaleej Times)
Electricity subsidy regime in the GCC will cost an additional $150 billion for governments in the
current decade as demand increases, a study has warned,
The current electricity pricing policy in the GCC, that has cost member countries more than $120
billion over the past 20 years, is unsustainable in the current fiscal environment, argue analysts at
Strategy&.
"Keeping existing policies in place until 2030 would cost an additional $150 billion as demand
increases," says a new study titled 'Electricity pricing reform: A bitter pill for GCC industries'
published by Strategy& Middle East, part of the PwC network.
Decades of subsidies have led to high consumption rates and wasted power, costing billions of
dollars, the study said.
Electricity Costs in the GCC $/Kwh
"The region needs reform to achieve its ambitious industrialisation agenda and have an
economically viable electricity sector. However, there is an erroneous perception among large
industrial companies that pricing reforms will put them at a competitive disadvantage thus creating
a large resistance to them," it said.
Dr Shihab Elborai, partner with Strategy& Middle East, said that properly structured electricity
pricing reforms can actually make electrical systems economically viable while also helping grow
the region's industrial base. "To achieve these dual goals, tariffs must closely reflect the
underlying costs that different types of users put on electrical systems".

Specifically, large end users - industries that consume significant electricity at steady base loads
with little or no variability throughout the year - have a very low cost to serve and should thus pay
a lower tariff, said the study.
"Companies that consume less power
but have large spikes in demand should
pay a higher tariff, to cover their
correspondingly large share of the costs
from expensive peaking and cycling
power generation assets. Electricity
makes up a much smaller share of the
overall costs for this second group of
customers. They have various options
for mitigating the increase, such as
becoming more energy-efficient,
reducing costs in other areas, or passing
modest increases on to their
consumers," said the report."It is natural
that these reforms could lead to
opposition and pushback, but governments can use targeted support for affected groups, giving
them time to adjust to higher tariffs", said Elborai.
"Such electricity tariff reforms will spread the cost of power generation, transmission, and
distribution infrastructure and operation more equitably among the full range of users, while
ensuring that large industrial companies remain competitive," he said.
The recent developments in the region have made the problem starker. The push to industrialize
GCC economies and to bring manufacturing supply chains to the region, along with increasing
electrification of industrial processes, is creating soaring industrial demand for electricity, said the
study.
At the same time, population growth and quality of life improvements in the context of the GCC
region's hot and harsh climate have translated into an ever-rising residential demand for
electrically powered cooling and refrigeration.
The study also argued that although residential tariffs are important, the focus should be on
policies for commercial and industrial tariffs that need to be reassessed as they have a different
political and social calculus as well as significant impact on the cost reflectiveness of the system.
"Cost-reflective tariffs pose a social challenge to GCC countries. They could create a perception
that the policy unfairly favors a few large industrial interests at the expense of many smaller
interests. To succeed, any cost-reflective policy needs to consider the perspective of smaller non-
energy intensive industrial and commercial users, and incorporate several measures to mitigate
the impact on users who face higher tariffs," said the study.
Any new policy framework for electric power pricing in the GCC needs to meet two broad criteria: It must
ensure that the electricity sector is financially sustainable, in that aggregate revenue for the system needs
to cover the full cost of current operations and fund future growth. Second, tariffs charged to individual
users should reflect the cost that they each impose on the system, the study pointed out.
"In light of growing demand, any reforms need to be crafted in such a way as to support the ambitious
industrialization plans that many governments have in place. Simply charging all users a higher tariff will
not work. Rather governments should charge tariffs that more accurately reflect customers' actual cost to
serve," said Ramzi Hage, principal with Strategy&, Middle East.

NewBase February 04-2020 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil falls as coronavirus hits demand; OPEC+ considers deeper cuts
Reuters + NewBase
Oil prices fell on Monday, dragged down by concern over demand in China after the coronavirus
breakout, though the possibility of deeper crude output cuts by OPEC and its allies offered some
price support.
Brent crude LCOc1 was down $1 at $55.62 a barrel by 1434 GMT, its lowest since January last
year. U.S. West Texas Intermediate (WTI) crude CLc1 fell 58 cents to $50.98 after hitting a
session low of $50.42, also the lowest since January last year.
As the coronavirus outbreak hit fuel demand in China, the world’s biggest crude oil importer,
refiner Sinopec Corp (0386.HK) told its facilities to cut throughput this month by about 600,000
barrels per day (bpd), or 12%, the steepest cut in more than a decade.
Oil price special
coverage

Independent refineries in Shandong province, which collectively import about a fifth of China’s
crude, cut output by 30-50% in a little more than a week, executives and analysts said.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as
OPEC+, are considering a further 500,000 bpd cut to their oil output, three OPEC sources and an
industry source told Reuters.
The Wall Street Journal reported that another option being considered would involve a temporary
cut of 1 million bpd by Saudi Arabia to jolt oil markets.
The OPEC+ group is also considering holding a ministerial meeting over Feb. 14-15, one of the
OPEC sources said, ahead of a previously scheduled March meeting.
“The market needs assurances that the supply/demand equation remains in balance for prices to
hit a floor. This suggests a commitment from OPEC not just to extend oil supply cuts, but even
implement deeper ones beyond March,” said FXTM analyst Hussein Sayed.
Iranian Oil Minister Bijan Zanganeh said that the oil market is under pressure, with prices dropping
below $60 a barrel, and “efforts must be made to balance it”.
Ratings agency Fitch on Monday said that the coronavirus epidemic could push the global oil
market into surplus and that OPEC+ may need to cut production further if the outbreak lasts for
several months.
On the first day of trade in China after the New Year holiday, investors erased $393 billion from
the nation’s benchmark equities index, sold the yuan currency and dumped commodities as
coronavirus fears dominated markets.
“Clearly travel restrictions and the extended shutdown of large parts of the Chinese industrial
sector have weighed on oil demand and this is reflected in the weakness that we are seeing in
ICE Brent time spreads,” said ING analyst Warren Patterson.
The premium of the first-month Brent contract to the second-month contract LCOc1-LCOc2
narrowed to 9 cents a barrel on Monday, from 70 cents a month ago, indicating that traders are
not concerned about supply tightness because of the demand impact of the coronavirus.

Russian oil output up to 11.28 MBPD in January, highest since August
Reuters + NewBase
Russian oil and gas condensate output C-RU-OUT rose to 11.28 million barrels per day (bpd) in
January, from 11.26 million bpd in December, Interfax news agency reported on Sunday, citing
Energy Ministry’s data.
This is in line with what sources told Reuters last week and the highest since it reached 11.29
million bpd in August. In tonnes, oil output rose to 47.72 million versus 47.63 million in December.
Reuters uses a 7.33 conversion ratio in its calculations when converting tonnes to barrels.
Gas condensate, a light oil, has been excluded from Russia’s production quota in a global pact
aimed at curbing oil production and balancing out the energy markets. There has been no
information available on the breakdown of condensate and oil production for January in Russia.
The global deal between the Organization of the Petroleum Exporting Countries and other leading
oil producers, known as OPEC+, expires after March.
Russia’s Energy Minister Alexander Novak said on Friday Russia was ready to bring forward a
meeting of OPEC and its allies to February from March to address a possible hit to global oil
demand from a new coronavirus outbreak in China.
OPEC oil output plunged in January to a multi-year low as top exporter Saudi Arabia and other
Gulf members over-delivered on a new production-limiting accord and Libyan supply dropped due
to a blockade of ports and oilfields.
Russian gas production was at 65.51 billion cubic meters (bcm) last month, down from 67.21 bcm
in December, Interfax reported.

NewBase Special Coverage
The Energy world – Special Feb- 04-2020
conomics
Debt Is Outside the Law for Gulf’s Laggard Draining Reserves
Bloomberg - Abeer Abu Omar and Fiona MacDonald
From an unpredictable monetary policy to its noisy domestic politics, Kuwait is often the odd one
out in the Gulf.
It boasts the region’s first female finance minister and, uniquely for a Gulf monarchy, has an
elected legislature. But acrimony between lawmakers and the appointed government has resulted
in eight administrations in as many years, and the fallout on fiscal policy is becoming harder to
contain.
Unlike most of its neighbors, OPEC’s fourth-largest producer has failed to introduce taxes after
taking a hit from lower oil prices since 2014, earning the moniker of the “slowest reformer” among
Gulf Arab economies from Fitch Ratings. For the year starting April 1, AA rated Kuwait expects to
run its biggest-ever budget deficit on anticipation of a decline in oil income and output.
The government’s financing needs “are projected to grow rapidly,” the International Monetary
Fund warned last week.
The collateral damage also includes the government’s ability to borrow, which it lost after
issuing debut Eurobonds in 2017 because the country’s public-debt law lapsed the same year.
The main option for covering the budget deficit is to draw down the holdings of the smaller of the
country’s two wealth funds that could be fully depleted next fiscal year.
Finance Minister Mariam Al-Aqeel has said the government “will fight for getting this law
approved.”
Missing Out
Kuwait hasn't issued sovereign bonds since 2017

Lawmakers have resisted efforts by the government to reclaim access to debt, accusing it of
mismanaging public finances and demanding a fix before it can borrow again.
Read: Kuwait’s Budget to Stay in Red After Half Decade of Deficits
“Unless it’s under real pressure, there will be no reform to fiscal policy,” said Jassim Al-Saadoun,
head of Kuwait-based Al-Shall Economic Consultants. “They have to convince people they will
use it wisely, and they have failed to do so.”
On track for its sixth straight fiscal shortfall and lacking a new debt law, the government has relied
on the General Reserve Fund, managed by the Kuwait Investment Authority, the world’s oldest
sovereign wealth fund. Tapping the KIA’s much larger Future Generations Fund, designed as a
buffer for the time when Kuwait’s oil runs out, would require a legislative change.
Kuwait doesn’t publicly disclose the size of its wealth fund holdings.
Downward Bound
Kuwait's budget deficit set to widen further in coming years
Source: International Monetary Fund
Note: Numbers are after transfers to the Future Generations Fund and exclude investment income
“The urgency to update the debt law is growing,” said Maya Senussi, senior economist at Oxford
Economics. “The problem with the outdated debt law is that in the current dynamics of low-
trending oil prices, Kuwait will continue to run deficits, maintaining pressure on GRF resources,
which are of course finite.”
Parliamentary elections later this year will likely sideline discussions of reform and put off approval
of the law, which Fitch now expects to be delayed until the 2020-2021 fiscal year.
The dearth of sovereign debt has also been a complication for Kuwaiti banks. To comply with local
liquidity rules, lenders need to invest 18% of dinar customer deposits in instruments issued by
central bank or the government.

‘Difficult Situation’
“Yet, due to the lack of sovereign issuance, banks find themselves in a difficult situation, racing for
limited Central Bank of Kuwait bonds or keeping part of their dinar deposit in cash or placed with
the central bank at low returns,” said Bloomberg Intelligence analyst Edmond Christou.
Talk of an economic revamp, by means of taxing people or cutting subsidies, is currently the most
contentious issue in parliament. Lawmakers have vowed to grill Al-Aqeel over any reference to
such measures, insisting Kuwaitis must never bear the brunt of any fiscal reform.
Meanwhile, GRF’s readily available assets might dry up by the end of next March, according to
Moody’s Investors Service.
Drying Up
Kuwaiti sovereign wealth fund's assets are set to resume declines
Source: International Monetary Fund
While there have been no reforms on the revenue side, the government has tried to cut wasteful
spending. By continuing to keep expenditure in check, Kuwait may be able to avoid withdrawing
money from the Treasury next year, according to Al-Aqeel. Still, the legislation is a priority since
“the cost of borrowing is less than the cost of withdrawing from the reserves,” the finance minister
said at a briefing this month in response to a question from Bloomberg.
Wealth, Oil
The paradox is that despite the strain on Kuwait’s finances, its wealth still sets it apart. Boosted
annually by mandatory transfers of 10% of total revenue, assets in the KIA amount to over $400
billion, according to the IMF, while Kuwait’s proven oil reserves could last around a century at the
current rate of production.

Kuwait has two Eurobonds outstanding. Its $4.5 billion of notes maturing in March 2027 have
rallied in the past year, sending the yield down 1.3 percentage points in that period to 2.2%, below
Saudi bonds of similar maturity.
S&P Global Ratings estimates that at 420% of gross domestic product, the government’s net
general asset position was the highest of all rated sovereigns at the end of 2019. Kuwait is ranked
at the third-highest investment grade level by the three major credit assessors.
But in a borrowing outlook the IMF calls “unprecedented,” debt would have to grow to over 70% of
GDP in 2025, from just 15% last year, should the government face no legal roadblock to finance
its needs by raising capital in the market.
'Unprecedented' Borrowing
IMF sees Kuwait's debt surging once government can borrow again
“It would be cheaper to issue debt
than draw on reserves or sell
assets,” said Abdul Kadir
Hussain, head of fixed-income
asset management at Arqaam
Capital in Dubai. “It would be
good practice to start putting in
place some fiscal consolidation
measures like reduction in
subsidies and some tax reforms.”

NewBase For discussion or further details on the news below you may contact us on +971504822502,Dubai, UAE
The Editor :”Khaled Al Awadi” 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
www.linkedin.com/in/khaled-al-awadi-38b995b
Mobile: +971504822502
khdmohd@hawkenergy.net or khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 28
years ofexperience 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 broadcastedinternationally, via GCC leading satellite Channels.
NewBase :For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase Jan 2020 K. Al Awadi

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