New base 480 special 17 november 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 17 November 2014 - Issue No. 480 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Kuwait To Sell Dow Chemical’s Petchem Venture Shares To Public -Exec
By Reuters + KUNA + NewBase
Kuwait plans to offer to the public the shares in Kuwaiti joint ventures which U.S.
petrochemicals giant Dow Chemical Co plans to sell off, state news agency KUNA quoted a
senior Kuwaiti executive as saying.
Dow Chemical announced last week that as part of a $7-
$8.5 billion divestiture plan, it wouldreduce its equity
positions in all of its Kuwaiti ventures, in order to release
capital for other strategic purposes. It did not give details.
The U.S. company’s investments in Kuwait include a stake
in EQUATE, a tie-up with the Kuwaiti government’s
Petrochemical Industries Co (PIC) and two other local
partners, Boubyan Petrochemical Co and Qurain
Petrochemical Industries Company. EQUATE produces over five million tonnes of
petrochemical products annually.
KUNA quoted PIC’s chief executive Asaad al-Saad as telling a news conference that the
shares which Dow Chemical divested would be offered to Kuwaiti citizens in initial public
offers.
He did not elaborate on how these offers would work or when they would occur. Consultants
will be hired to assess the size of Dow Chemical’s assets in Kuwait, and the U.S. firm will
remain a strategic partner of PIC, he said.
Dow Chemical’s other joint ventures in the country include Kuwait Olefins Co, which owns an
ethane cracker and an ethylene glycol production unit, and Kuwait Styrene Co, which makes
styrene monomer.
In the last several months, Kuwait’s government has shown renewed interest in offering
shares in state-controlled assets to the public, as a way to share the country’s oil wealth with
its citizens and impose market more discipline on companies.
Last month sovereign wealth fund Kuwait Investment Authority said it had decided to resume
selling stakes in big local firms to the public, aiming to offer its stake in Kuwait Investment Co
in the first half of 2015.
Dow Chemical has had a sometimes rocky relationship with PIC; last year it received $2.2
billion in damages from PIC after an international arbitrator ruled against the Kuwaiti firm for
pulling out of a planned plastics joint venture in 2008. However, Saad denied the dispute had
anything to do with Dow Chemical’s divestment decision, KUNA reported.

GCC chemicals Feed China’s appetite for Chemicals: GPCA
Gulf News + NewBase
China accounted for 39.5mn tonnes of chemicals from the GCC countries last year, data provided
by the Gulf Petrochemicals and Chemicals Association (GPCA) show.
The development of China’s manufacturing sector has enhanced demand for raw materials,
including chemicals. As a result, GCC chemicals exports to China grew by an estimated 13% a
year over the last ten years, with nearly 60% of GCC chemicals and plastics export going to Asia,
GPCA said.
“Given their significant feedstock advantage, petrochemical and chemical producers from the
GCC countries have established strong foothold in China as their exports to this market have
increased consistently over the past decade,” said Dr Abdulwahab al-Sadoun, GPCA secretary-
general.
“With US shale gas changing the global energy and petrochemical landscape, the relationship
between the GCC and China is ever more important.”
China is the world’s biggest chemical market, and is still growing at double digit rates, faster than
the country’s GDP. Last year, China’s chemical industry was valued at $1.31tn. China imported
5.52mn tonnes of polyethylene (PE) resins in the first seven months of this year, up by 14.6%.
Its polypropylene (PP) resins important totalled 2.98mn tonnes during the same period, up by
7.68%.
“This is a clear signal that China has an unquenchable thirst for consumer grade plastic — a
demand that can be ably filled by GCC producers over the next few years,” continued al-Sadoun
said.

According to China’s national customs agencies, the country imported 3.01mn tonnes of
polyethylene from the GCC countries in 2013, which accounted for 34% of the country’s total PE
imports that year. China imported 1.18mn tonnes of PP in 2013, with GCC material accounting for
24%.
According to the GPCA, more PE and PP volumes are expected to flow from the GCC to China
going forward in view of new plants scheduled to come on stream in the Gulf region over the next
few years. “The chemical industries in the GCC and China have boomed in parallel over the last
30 years,” al-Sadoun said.
“GCC producers are seeking a role as enabler of the economy of the future and are indispensable
players in China’s economic development. At the same time, GCC petrochemical producers are
seeking to develop the downstream hydrocarbon industry as part of their Gulf-based sustainability
efforts.”
“Both markets have to move to higher value products, accelerated by increased competition from
the US. Partnerships are therefore an important way forward and during our the annual flagship
conference for the GCC petrochemical and chemical industry in the region, the 9th Annual GPCA
Forum, we have dedicated a special seminar to how China’s economic outlook with impact the
GCC and what factors are essential to a successful China-GCC partnership — from the
perspective of both parties,” al-Sadoun added.
The annual ‘Facts & Figures’ report of the Gulf Petrochemicals and Chemicals Association will be
released during the 9th Annual GPCA Forum taking place in Dubai from November 23 to 25.

Saudis discuss Indian oil storage at G20 talks
The National + NewBase
Saudi Arabian and Indian officials met at the G20 meeting in Brisbane on Sunday to discuss,
among other matters, investment by the kingdom in strategic oil storage in India.
The talks come as Saudi policymakers weigh moves to help deal
with a slide in oil prices that has resulted in world oil benchmarks
falling by more than 30 per cent since midsummer highs, and
which shows no sign of abating any time soon.
Indeed, the International Energy Agency said on Friday that oil
prices were likely to weaken further in coming months because of
seasonally weak demand. Even when a pickup in the world
economy helps to soak up the excess supply, which is forecast for next year, the world oil markets
look to be heading into a period of structural oversupply, the IEA said.
“It is increasingly clear that we have begun a new chapter in the history of the oil markets,” the
IEA, the Paris-based rich countries’ energy think tank, concluded in its latest world oil market
report.
Meanwhile, Saudi Arabia’s deputy premier, Crown Prince Salman bin Abdulaziz Al Saud, met the
Indian prime minister Narendra Modi on the sidelines of the G20 meeting to discuss energy and
other matters, according to Saudi Press Agency.
This follows a meeting two weeks ago when India’s petroleum minister, Dharmendra Pradhan,
met his Saudi counterpart, Ali Al Naimi, and invited Saudi investment in strategic oil storage
capacity in India, which imports 70 per cent of its crude and relies on the kingdom for about a fifth
of those imports.
Saudi Aramco owns or leases oil storage facilities around the world to help manage the supply of
its oil to the market, including Rotterdam (3.9 million barrels), Sidi Kerir (the Sumed pipeline
terminal on Egypt’s Mediterranean coast) and Japan (6.3m barrels). At the end of last year, the
Saudis extended their strategic storage deal with Japan, which was initiated in 2007, for another
three-year period and increased its capacity.
Storage has proved to be an important
way to relieve at least some pressure
on world markets, with governments
and commercial interests putting oil in
storage when there are temporary
declines in price.
The Chinese, for example, were
building their strategic petroleum
reserve this year as prices declined,
according to the IEA. But as oil supply
has consistently outstripped demand
for months now, the world’s storage
levels have gone above their average for this time of year and seem to be headed higher,
especially as the Chinese strategic storage space seems to be full.

Pakistan: Mari Petroleum increases gas production at Zarghun South
Source: Jura Energy
JV partner Jura Energy announced November 12 the successful full commissioning of the surface
processing facilities at the Mari Petroleum-operated Zarghun South gas field and a consequent
significant increase in sale gas volumes from the field.
As disclosed in Jura’s press release dated August 13, 2014, 'off specification' gas was being sold
from the field under an interim gas sale arrangement (the 'Interim Arrangement') due to a delay in
the commissioning of an Amine Sweetening Unit. The “off specification' gas was being sold at a
30% price discount.
Following full commissioning of the processing facilities, gas supplied to Sui Southern Gas
Company Limited ('SSGCL') now meets the specification requirements provided under the Gas
Sale and Purchase Agreement with SSGCL and is no longer being sold at a 30% price discount
for 'off specification' gas. The field is now producing approx. 17 MMcfd (6.8 MMcfd net to Jura) of
sales gas, a significant increase from sales gas volumes during the Interim Arrangement of
approx. 4 MMcfd (1.6 MMcfd net to Jura). The condensate to gas ratio is in the range of 1.2 to 1.9
bbl per MMcf.
Approx. 80% of Zarghun South’s reserves are certified as 'tight gas' under Pakistan’s Tight Gas
(Exploration and Production) Policy, 2011. Tight gas is expected to be entitled to a price of US$
6.74 per MMBtu. Conventional gas will be to be sold at US$ 2.73 per MMBtu. Accordingly, the
expected monthly revenue to Jura from the Zarghun South gas field is estimated to be US$
715,000 (net of 12.5% royalty).
'Bringing Zarghun South into full scale production is a highly significant event for Jura. Zarghun South is
Jura’s second-largest asset, by reserves, and is now by far our largest asset in production. The cashflows
projected from the field mean that 2015 is expected to be Jura’s first ever profitable year,' commented
Shahid Hameed, Jura’s Chief Executive Officer.
The Zarghun South lease covers an area of approx. 124 sq km in the western part of the Sulaiman Fold
and Thrust Belt of the Middle Indus Basin. It is strategically located near the gas demand centre of the city
of Quetta. Jura holds a 40% working interest in Zarghun South, which is operated by Mari Petroleum
Company.

Statoil risks millions of dollars in Canada
Reuters + NewBaase
Norway’s Statoil risks millions of dollars in extra costs in Canada — a test case that could spell
problems for other oil firms too as coastal states extend their seabed territories far into resource-
rich ocean depths.
Coastal nations are using UN laws to extend and define new limits to their seabed territories,
pushing beyond a previously established 200-nautical mile (370 kms) zone for drilling and mining
as technology opens new frontiers in finding deepwater oil and gas.
But that extended territory comes
with a bill to pay a percentage of
future revenues to the UN body
that monitors the international
seabed – something governments
are seeking to pass on to oil and
mining firms.
The rules – articles of the UN
Convention on the Law of the Sea
– have thus far been irrelevant
because the regions beyond the
previous limit are so remote they
would have cost too much to
develop. But industry advances
have lately opened up huge
deepsea possibilities from the
Arctic Ocean to the Pacific:
specialist firm Transocean drilled
a well in a record 3,174 metres
(10,411 feet) of water off India
last year. Dozens of states have
made submissions to the UN
Commission looking at seabed
rights. However all eyes are on
Canada’s extended territories as the test case for oil companies because Statoil has found
potential new fields there. Assuming oil production goes ahead, Canada and Statoil will be the first
to become liable to Article 82 - the part of UN law that lays out the terms of the payments to the
International Seabed Authority (ISA).
The payments start at one% of revenues in the sixth year of production and rise by one
percentage point a year to a maximum of 7% from the 12th year. “It does seem likely that the
Statoil field will be the first Article 82 area to go into production,” said Michael Lodge, legal counsel
to the Jamaica-based ISA, which would collect revenues and redistribute them, mostly to
developing nations.
Statoil this month started appraisal drilling, the second step after initial exploration, with its partner
Husky Energy, 270 nautical miles (500km) off Newfoundland in Canada - a remote area near
where the Titanic sank in 1912.

It estimates that finds off Canada in depths of about 1,200 metres at the Bay du Nord field could
be 300-600mn barrels of
recoverable oil, another at
its Mizzen field 100-
200mn. A third find,
Harpoon, has yet to be
fully assessed. Based on a
scenario in which Statoil
produced just 400mn
barrels of oil from Bay du
Nord and Mizzen, over a
typical field lifetime of 15
years and with oil prices
around the current $80 a
barrel, the ISA could be
owed some $1bn.
That assumes that
payments are based on
gross revenues — Article
82 does not specify
whether gross or net.
Francois Lasalle,
spokesman for Canada’s
Foreign Affairs
department, said the government had yet to figure out exactly how to pay but that a decision was
not needed until the sixth year of any production.
Statoil declined to comment on how Article 82 might affect its business, including whether it was
making provisions for extra costs. “We are now focused on building a better understanding of the
geology and resource potential,” spokesman Knut Rostad said of an 18-month appraisal drilling
programme.
Under UN rules, nations own the seabed beyond 200 miles when it is an “extended continental
shelf”, usually of shallow water. But rules to define the outer limits let states stake out bigger-than-
expected areas, sometimes to depths of 5,000 metres.
“Interpretation can be quite open,” said Yannick Beaudoin, head of the Marine Division at GRID-
Arendal, an independent foundation in Norway that works with the UN and helps developing
states map rights to the shelf. That is almost the size of Africa and nearly double the size of early
estimates.
The Commission cannot rule on overlapping claims – Russia, Canada and Denmark all claim the
North Pole - and it has a big backlog. But it has approved about a dozen submissions. That
means, says Canadian legal expert Wylie Spencer, that many oil firms could be affected in future
by Article 82 if they start to operate in frontier areas such as off West Africa, Brazil or Russia.
“They have to beware,” said Spicer, who has briefed the UN about the risks. “Everybody used to
say that Article 82 was dormant but now it’s waking up.” Canada, Norway and the US, which has
not signed up to the law of the sea, have already started warning potential bidders for leases far
offshore of the risks of Article 82, he said.

US:Natural gas is the dominant heating fuel in colder parts of the country
Source: U.S. Energy Information Administration, Short-Term Energy Outlook
Natural gas consumption varies widely by region of the country. The majority of households that
heat with natural gas are located in the Midwest and Northeast. In the upcoming winter months,
homes in the East North Central Census division are expected to consume the most natural gas,
but not as much as last winter.
Extreme cold weather in natural gas-intensive regions caused unexpectedly high consumption
during the winter of 2013-14.
Residential and commercial consumers use natural gas primarily for space heating. The East
North Central Census division (Wisconsin, Michigan, Illinois, Indiana, and Ohio) is the largest
residential and commercial natural gas-consuming division in the country, making up 28% of all
residential consumption and 24% of commercial consumption in 2013.
Because the East North Central Census division has the largest number of households heating
with natural gas, its collective response to changes in weather (as measured by heating degree
days) is greater than in any other region (see maps below).
The response to changes in heating degree days in the South Atlantic Census division (which has
about 6 million homes that heat primarily with natural gas) is similar to that of the Pacific and Mid-
Atlantic Census divisions (where 10.2 and 9.4 million households, respectively, heat with natural
gas).
This response may be attributable to natural gas used as a secondary heat source, like in natural
gas fireplaces or as the supplemental heat source to air-source heat pumps. When temperatures
drop below a certain threshold (usually around freezing temperatures), heat pumps rely on a
supplemental heat source.

The National Oceanic and Atmospheric Administration projects that temperatures this coming
winter will be closer to normal. The most recent Short-Term Energy and Winter Fuels
Outlook projects that residential and commercial prices will be higher than they were last year,
largely because through 2014 (when utilities began buying natural gas for the upcoming winter)
prices have averaged higher than year-ago levels, and are currently higher than a year ago.
However, EIA projects lower residential heating bills for consumers because of lower
consumption.

Oil Price Drop Special Coverage
Oil must be left to supply and demand, says Saudi F.M
Saudi Gazette + NewBase
The G20 summit in Brisbane did not focus on the instability of oil prices as there is general
agreement that the issue must be left to supply and demand, Saudi Arabian Finance Minister
Ibrahim Al-Assaf said on Sunday.
“...In the past the Kingdom’s role in oil market stability has been praised, so the issue has been
discussed before and therefore didn’t get the same attention like the previous meetings,” Al-Assaf,
who attended the meeting, told Al Arabiya television. “Everybody agrees that the issue is subject
to supply and demand and has to be left to supply and demand.
Al-Assaf was replying to a question on whether the recent plunge in oil prices was on the G20
agenda. The oil prices fell to a four-year low level across all baskets as sluggish demand, ample
supply and a strong US dollar continued to be the key points pressuring the oil market, said a
report released by KAMCO Investment Research Department Sunday
“The OPEC Reference Basket slumped to a four-year low this month to average around $85.1/b in
October, the lowest level since Dec-2010, down substantially by $10.9/b or around 11.4 percent
below last month’s price level when it reached an average of $95.98/b, and closed the month at a
low of $81.97/b,” the report said
“Moreover, the basket saw a further drop during the early part of November by around 7.5
percent, to reach a low of $77.27/b as of Nov. 11, 2014 and average around $78.66/b, a level last
seen since Sept. 2010.
The basket’s accumulated loss since it peaked in June up till Nov. 11, 2014 reached around
$29.2/b, reflecting the ongoing pressure on all crude oil prices. “Likewise, on a Year-to-date (YTD)
basis, OPEC Reference Basket’s value was 3.8 percent lower compared with the same period
one year earlier, standing at an average of $101.79/b compare to an average of $105.79/b a year
ago,” KAMCO added.
The report stated that the oil prices losing streak continued for the fourth consecutive month in
Oct. 14 across all baskets on concern that supply from US unconventional fields is rising faster
than global demand as well as about the pace of global economic growth
“Likewise, oil futures tumbled further during October as weak oil market fundamentals, a stronger
dollar and financial-related sell-offs continued to pressure crude oil markets,” noted the report.
“On the other hand, Kuwait Blend Spot Price FOB averaged $84.6/b, down from an average of
$96.2/b in Sep. 2014 or by around 12.1 percent, and closed the month at a low of $81.12/b;
moreover, prices continued the downward movement to drop by around 8.5 percent during the
first week of November to reach $72.96/b as of Nov. 13, 2014.” Meanwhile, the data also showed

that European Brent Spot Price FOB averaged around $87.4/b, down from an average of $97.3/b
recorded during Sept. 2014. The basket closed the month at $84.17/b.
With regard to the world oil demand, the KAMCO estimated that the total world oil demand growth
for 2014 at 1.05 mb/d, or an increase of 1.17 percent, to stand at 91.19 mb/d compared to 90.14
mb/d for the year 2013.
Moreover, the report expected
that the total world oil demand
for 2015 would expand at a
higher rate than the previous
year, growing by 1.19 mb/d from
the 2014 level to average around
92.38 mb/d.
“The expected growth level in
2015 of around 1.31 percent
implies an increase of 0.14 mb/d
from the growth forecasted for
this year. According to OPEC
Monthly Oil Report, the data shows that non-OECD countries are expected to lead oil demand
growth with 1.20 mb/d in total demand while OECD nations are predicted to show a marginal drop
of 20 tb/d,” reads the report.
“The key factor affecting the world oil demand projections in 2015 remains the progress of
economic development in major economies around the globe,” it noted. Oil prices are expected to
drop into 2015, the International Energy Agency said in its Oil Market Report Friday morning.
Downward price pressure is expected to continue into the first half of next year, with oil demand
falling to five-year lows while oil production shows no sign of decreasing. Crude oil prices have
dropped around 30 percent since June to a four-year low, with a strong US dollar and rising US
light oil output outweighing any disruptions in the global oil distribution. Brent and WTI crude were
both below $80 per barrel as of Thursday morning.
Kuwait Cabinet Calls For Steps To Address Oil Price Slide
KUNA + NewBase
Kuwait’s cabinet called for practical steps to address the slide in oil prices on Sunday at a
special session convened to examine weakening energy markets, official media in the
petroleum-dependent OPEC member country reported.
“They stressed the necessity of initiating practical measures to face the impact of potential
further decline in prices and remedying the existing economic imbalances,” the official KUNA
news agency reported, referring to officials.
Participants reviewed a report on prices submitted by Minister of Oil Ali al-Omair and senior
officials at the Kuwait Petroleum Corporation, and discussed “the potential risks and
implications of the drop in state revenue, the budget and on the national economy and
economic plan in general”, KUNA said.

Kuwait has one of the strongest fiscal positions among the Gulf oil exporters; it needs a crude
oil price of just $54 per barrel for its state budget to break even, according to the International
Monetary Fund.
But its heavy dependence on oil income makes its economy more vulnerable to lower crude
oil prices and output. Benchmark brent crude LCOc1 dipped under $80 per barrel last week, a
four-year low, compared with a June high above $115.
Iran Oil Minister Slams Producers For Not Cutting Output
By Reuters
Iran’s oil minister accused some countries on Sunday of making up excuses to justify their
refusal to stabilise prices by cutting output, a
possible reference to Saudi Arabia as a Saudi
official insisted the issue should be left to market
forces.
“Certain countries had raised their production after
the exit of several countries from the cycle of oil
production,” Iran’s Bijan Zanganeh said, referring
to international sanctions that have forced his
country to cut its exports sharply.
“Now it is difficult for them to reduce their production for market stability and they fabricate
different pretexts for their action,” Zanganeh said, quoted by his ministry’s news agency
Shana.
Zanganeh did not name the countries but he may have been referring to Saudi Arabia, the
world’s top oil exporter and dominant force within the Organization of the Petroleum Exporting
Countries.
Saudi Finance Minister Ibrahim Alassaf said on Sunday that while his country had been
praised in the past for preserving oil market stability, “Everybody agrees that the issue is
subject to supply and demand and has to be left to supply and demand.”
Brent crude oil last week hit four-year lows below $80 a barrel on concerns about oversupply.
Oil has fallen from a June high above $115 . Few analysts think OPEC will do much to prop
up prices when it meets on Nov. 27.
Zanganeh visited Qatar and Kuwait last week, ahead of the meeting, in a bid to win support
for action to stabilise oil markets, though there was no sign that those countries would
cooperate with Iran. He plans to visit the United Arab Emirates on Tuesday.
On the Qatari and Kuwaiti positions, “We cannot tell one hundred percent how close our
views are…” Zanganeh said.
Iran needs a much higher oil price to balance its state budget than Saudi Arabia, so oil’s
tumble in recent months has put it under severe financial pressure. Zanganeh said on
Saturday that Tehran would dip into its sovereign wealth fund to cope with the economic
impact.

He also said on Sunday that low oil prices were disrupting the stability and growth of shale oil
production, and that the OPEC meeting was expected to discuss the effects of shale oil on
the market.
Oil price fall fuel energy sector deal speculation
BY REUTERS
Talks that could lead to oilfield services provider Halliburton buying rival Baker Hughes may herald
increased deal-making in the energy business as companies bet on a protracted drop in oil prices,
industry bankers said
Competing service companies including National Oilwell Varco and Weatherford International may
also be targets, bankers and lawyers said. In any deal, the incentives will be the same:
consolidation would allow them to better weather the downturn and resist pressure from oil
producers to slash prices.
The Baker Hughes/Halliburton talks have stalled after the companies weren't able to agree on
issues including price, people familiar with the matter said
As oil prices fall, oil field service companies get squeezed, one industry lawyer said. That's
because when prices fall far enough, it's no longer economical to get oil out of the ground. If it's
too expensive to drill, there's no need to pay an oilfield service company. "The services guys are
the last marginal dollar," the lawyer said
While services companies are likely to feel the effect of lower oil prices sooner, overleveraged
exploration and production companies may also be pushed to do deals over the medium term,
bankers said. Such companies could include Apache, Hess, Marathon Oil or Devon Energy,
bankers said
Those four exploration companies along with the oil services companies including Baker Hughes,
In any deal, the incentives will be the same: consolidation would allow them to better weather the
downturn and resist pressure from oil producers to slash prices. Photo - File

all have market values that range between about $20 billion and $31 billion. In the end, price
expectations will decide whether upstream exploration and production companies turn into sellers.
If sellers' management believe the oil price will rebound fairly soon, sellers would wait until then,
hurtin g chances for large deals. Brent crude traded at $79.60 a barrel on Friday, down from
$115.06 on June 19
Until prices stabilise, exploration and production company deals will likely remain asset-level deals
in distressed situations such as Samson Resources' sale of its Bakken assets. "Certainly there will
be instances where you will find more compromised balance sheet operators possibly being more
inclined to sell their entire position," said Ted Harper, a fund manager at Frost Investment
Advisors in Houston
Not all will be targets, he said. Some exploration and production companies will seek to buy at a
discount additional potential reserves near where they are already drilling "to enhance returns
from existing production," he said
Because exploration and production companies will slow or stop drilling if they are not making
money, there is enormous pricing pressure on oil field services providers as oil prices fall. Indeed,
the tumbling price may have pushed the companies into a dialog, especially if Halliburton's
management believes that oil prices could remain low for some time
While Halliburton 'has first mover advantage' in its bid to acquire Baker Hughes, "it's common
knowledge that Schlumberger made a run at Baker Hughes years ago to plug a major hole in
(well) completions. That hole remains unfilled," Bill Herbert, oilfield analyst at energy-focused
investment bank Simmons told clients on Friday
"Further, General Electric (GE) is lurking in the shadows as well, manufacturing cultures are
comparable," said Herbert. General Electric has a large oil and gas business. While another
bidder for Baker Hughes may not emerge, oilfield services companies and private equity firms will
be looking to buy up any Baker Hughes business units shed to meet antitrust requirements if the
Halliburton deal goes through, bankers said
"There is going to be reasonably competitive bidding on the part of the General Electrics, the
National Oilwell Varcos and some of the midcap players," said Frost's Harper.
Hallibaker’ merger bid shows consolidation as early symptom of oil price slide
The National + NewBase
The year’s most striking oil merger bid turned hostile on Friday when Baker Hughes said that
Halliburton was seeking to replace its entire board.
World No 2 oil services company Halliburton and No 3
Baker Hughes confirmed on Thursday that they were in
talks to combine, but discussions soon stalled over the
price and planned asset sales.
The merger would create a company with a market
capitalisation of more than US$71 billion, second only to
sector leader Schlumberger’s $122bn. Baker Hughes is the descendant of Hughes Tool
Company, the most profitable but least flashy part of the business empire of Howard Hughes.

Wildcatters in the chilly waters of the Arctic or the Kurdish mountains, or the giants of the oil
business such as Shell and Total, tend to get the headlines. But oil services are essential to the
industry’s smooth functioning. The firms conduct seismic surveys to locate possible oil and
gasfields; drill wells; log them to determine what rocks they are passing through; and equip them
for maximum and safe production.
BP’s disastrous Macondo well, where the well was not properly cemented to block the flow of
unwanted fluids, is a reminder of how crucial these tasks are. These days, the service firms – not
the oil companies – develop most of the industry’s new technology.
The timing of the deal may be opportunistic. Baker Hughes shares were down 30 per cent since
their high in July, as the fall in oil prices encouraged their customers to cut spending. But
consolidation in the service industry has been looming. Many new entrants in recent years,
attracted by demand from shale operators, do not have the economies of scale of the bigger
service companies, nor the strength to resist being squeezed on price by their customers.
Profits margins at Baker Hughes in hydraulic fracturing are only about half of those at Halliburton.
However, the combined company would have had higher revenues than Schlumberger for last
year, although its net profit margin of 6 per cent was well below Schlumberger’s 15 per cent.
About half of the merged business may raise “antitrust” or competitive concerns, with the
authorities likely to require sales of assets totalling about $10bn. “Hallibaker” would have more
than half of the market for cementing wells and completing them for production, and about 40 per
cent of drill bits (the ceramic or diamond teeth that actually cut through the rock) and hydraulic
fracturing – the technology behind the shale boom.
These service companies are particularly important in the Middle East. International oil companies
are hardly present in Saudi Arabia and Kuwait, but Halliburton, Schlumberger and their peers are
essential to the operations of Saudi Aramco, Kuwait Oil Company, and the giant fields of southern
Iraq. In turn, Halliburton and Baker Hughes both make about half of their revenues from North
America, but the next 17 to 18 per cent comes from the Middle East and Asia, and one of
Halliburton’s two global headquarters is in Dubai’s Emirates Towers.
So the merger may concern the region’s national oil companies – which always negotiate
resolutely on price, sometimes to the exclusion of quality. A more consolidated oil services sector
with pricing power would hamper efforts to reduce costs, at a time that Oman and Saudi Arabia
are contemplating massive hydraulic fracturing programmes. On the other hand, “Hallibaker”
would compete more directly with Schlumberger for the very biggest projects.
We can expect more such
deals as companies
struggle to survive, cut
costs and shed unwanted
assets. And it may be a
chance for Chinese, or even
Middle Eastern, service
companies to pick up new
technologies and grow
overseas. Whether
completed or not, this
merger bid shows how the
effects of the lower oil price are already being felt throughout the industry.

NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Your partner in Energy Services
Khaled Malallah Al Awadi,
Energy Consultant
MSc. & BSc. Mechanical Engineering (HON), USA
ASME member since 1995
Emarat member since 1990
Mobile : +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with aKhaled Al Awadi is a UAE National with aKhaled Al Awadi is a UAE National with aKhaled Al Awadi is a UAE National with a
total of 24 yearstotal of 24 yearstotal of 24 yearstotal of 24 years of experience in theof experience in theof experience in theof experience in the Oil &Oil &Oil &Oil &
Gas sectGas sectGas sectGas sector. Currently working as Technical Affairs Specialistor. Currently working as Technical Affairs Specialistor. Currently working as Technical Affairs Specialistor. Currently working as Technical Affairs Specialist
for Emirates General Petroleum Corp. “Emarat“ withfor Emirates General Petroleum Corp. “Emarat“ withfor Emirates General Petroleum Corp. “Emarat“ withfor Emirates General Petroleum Corp. “Emarat“ with
external voluntary Energy consultation for the GCC area viaexternal voluntary Energy consultation for the GCC area viaexternal voluntary Energy consultation for the GCC area viaexternal voluntary Energy consultation for the GCC area via
Hawk Energy Service as a UAE operations base , Most ofHawk Energy Service as a UAE operations base , Most ofHawk Energy Service as a UAE operations base , Most ofHawk Energy Service as a UAE operations base , Most of
the experience were spent as tthe experience were spent as tthe experience were spent as tthe experience were spent as the Gas Operations Managerhe Gas Operations Managerhe Gas Operations Managerhe Gas Operations Manager
in Emarat , responsible for Emarat Gas Pipeline Networkin Emarat , responsible for Emarat Gas Pipeline Networkin Emarat , responsible for Emarat Gas Pipeline Networkin Emarat , responsible for Emarat Gas Pipeline Network
Facility & gas compressor stations . Through the years , heFacility & gas compressor stations . Through the years , heFacility & gas compressor stations . Through the years , heFacility & gas compressor stations . Through the years , he
has developed great experiences in the designing &has developed great experiences in the designing &has developed great experiences in the designing &has developed great experiences in the designing &
constructingconstructingconstructingconstructing of gas pipelines, gas metering & regulatingof gas pipelines, gas metering & regulatingof gas pipelines, gas metering & regulatingof gas pipelines, gas metering & regulating
stastastastations and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation , operation &tions and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation , operation &tions and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation , operation &tions 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 &maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil &maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil &maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil &
Gas ConferenGas ConferenGas ConferenGas Conferences held in the UAE andces held in the UAE andces held in the UAE andces held in 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 17 November 2014 K. Al Awadi

New base 480 special 17 november 2014

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