Egypt signs new oil and gas exploration contracts

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NewBase 11 January 2015 - Issue No. 515 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Egypt signs six new oil and gas exploration
Reuters + NewBase
Egypt has signed six new oil and gas exploration contracts worth hundreds of millions of
dollars with foreign and Egyptian companies, the oil ministry said on Friday. The
agreements provide for the drilling of some 41 discovery wells in the western desert and Gulf of
Suez, the ministry said in a statement via the official news agency.
Among the major companies selected are Shell , ENI , BP and Canada's TransGlobe Energy.
Egypt has been struggling with soaring energy bills caused by the high subsidies it provides on
fuel for its population of 87 million. The subsidies have turned the country from a net energy
exporter into a net importer over the last few years.
The government is keen to develop untapped finds to reduce its reliance on imports but has
struggled to persuade companies to invest in the biggest finds, which are offshore, because the
amount it pays them barely covers the investment costs.
Economic turmoil has also caused the government to fall into arrears to existing producers. The oil
ministry said last month Egypt had repaid $2.1 billion of its debt to foreign energy firms as it seeks
to restore confidence and encourage investment. It still owes $3.1 billion.

BP and Egyptian Government in discussion to start North Alexandria
On the last months, the UK-based major BP and the German utility company RWE intensified
their discussions with the Egyptian Government through its Egyptian Natural Gas Holding
(EGAS) national oi company (NOC) to revive the stalled West Nile Delta (WND) development and
proceed with the deep water North Alexandria project offshore the west coast of Egypt.
The North Alexandria project is the master piece of the West Nile Delta development with more
than 5 trillion cubic feet (tcf) of recoverable reserves of natural gas. Beside North Alexandria,
the West Mediterranean (WM) concession is the second largest block of the West Nile Delta
development also idled while BP and RWE resolve their commercial terms and conditions
withEGAS and Egyptian Authorities.
The North Alexandria project requires
$10 billion capital expenditure while
West Mediterr should add $2 billion.
Together these projects tops the largest
oil and gas investments ever in
Egypt and should ensure this country of
energy self-sufficiency and economical
growth. In October 2003, BP signed the
first commercial agreement for North
Alexandria with a production expected
in 2007 at 375,000 cubic feet per day
(cf/d) of gas. In October 2006, the North
Alexandria project was redefined through
a new agreement to increase investment and gas production to 910,000 cf/d. In 2008,
EGAS and BP started to work again on a new contract to replace conventional production
sharing agreement (PSA) by a remuneration fees system that came into conclusion in 2010.’
In 2011, the revolution stopped all BP and RWE projects and opened a new context for the foreign
companies operating in Egypt. BP to double production from East and West Nile Delta.The
new Authorities subsidized the local gas market to help restarting the economy but with the
consequential effect to stop exploration and production investment.
As a result the production declined and the Egyptian Government diverted export volume to feed
the local market and reduce daily shortage in gas supply. In 2014, Egypt nearly
stopped gas exportation and negotiated liquefied natural gas (LNG) import fromAlgeria with the
lease of a floating storage and regasification unit from Norway.
This import substitute can compensate a couple of days Egypt consumption but cannot be a
sustainable policy as dramatically expensive. To resolve this critical situation, BP, RWE, EGAS
and the Egyptian Government worked hard together on the last quarter to investigate all
solutions around the blocking point of the $4.10 per million BTU remuneration fee considered as
far too low by the foreign companies.
In respect with the urgency of the situation, BP and RWE committed to invest $10 billion capital
expenditure to develop North Alexandria on fast track with a first production of 450 million cf/d
in 2017 and an expansion to 800 million cf/d by 2018. All together through its concessions in
East Nile Delta and West Nile Delta, BP is targeting to double its production in Egypt from 1
BCFD to 2 billion cf/d in the next five years.

Algeria:Shale gas exploitation in In Salah save
APS
The exploitation of shale gas in In Salah doesn't present any danger, Energy Minister
Youcef Yousfi ensured during a meeting Thursday with representatives of the protesters
against the exploitation of this resource in the region, an official of Tamanrasset province said.
In this regard, the minister urged the representatives of the protesters to show wisdom and to be
assured about the results of the shale gas exploitation, even if we have to send a group of
protesters, with experts, abroad, to be sure about it, and if not, the exploitation of shale gas in the
region will be stopped, the source added.
According to the same official, the minister stressed, during the meeting held at Tidikelt Hotel in
the presence of the notables and the elected officials in the region, that the new extraction
techniques do not involve any "danger" with this type of gas and that "Algeria has had to diversify
its energy sources. ''
The South of Algeria contains "large quantities" of shale gas which ''quality is one of the best,''
said the same official, quoting the minister, who added the costs of extraction are not yet known,
as ''we are in the evaluation phase.''
In order to ensure the training of young people in the region,
Youcef Yousfi announced the upcoming opening of two technical
training institutes in In Salah and in Tamanrasset, and two gas
cylinders stations in these cities, which will be added to the two
projects of wind and solar power plants in Ghardaia and Hassi
Rmel, he added.
The protest against '' shale gas' was triggered last Tuesday in In
Salah.

Investors keen on growing Saudi water, power needs
Saudi Gazette + NewBase
Rapidly growing population growth and a sustained development boom in Saudi Arabia have
resulted in unprecedented demand for effective and efficient power and water supply. With new
power stations and desalination plants in high demand, operators in the Kingdom enjoy some of
the highest annual growth rates in the world, with strong profit margins for efficient companies.
Additional power generation capacity is planned and privatization
in the sector will also create attractive investment opportunities.
Against this backdrop, the 10th edition of the three-day Saudi
Water and Power Forum (SWPF) will kick off in Riyadh on Jan. 12
which will focus, among others, on the government stakeholders’
plans and priorities with regards to the key sector.
According to a ranking executive of CWC Group, one of the knowledge partners in the upcoming
SWPF event, national action plans and programs on achieving and sustaining water-energy-food-
security nexus are to be threshed out.
The London-based CWC is a twice winner of the Queen’s Award for Enterprise, with an
impressive 15-year track-record in delivering oil, gas and energy events & training globally, that
focus on water management, oil & gas exploration, among others.
Asked about its vision for the sector in the next 10 years, he forecast that decentralization will take
place aimed at sustainability and job creation at the same time. He noted that knowledge
economy will drive the sector forward through intensified desalination projects, thereby further
strengthening the national growth.
Moreover, privatization, unbundling and a pro-investment climate are making the sector more
friendly to the private sector. A majority of planned capacity increases will come from private
investors.
Regarding CWC’s role to effectively tackle the creeping shortage and ever-rising demand for
water and electricity in the Kingdom, the executive said “our
company’s vision is to play a leading role in the development
of key oil, gas and energy markets, and to work closely with
the major players in the industry – both governments and
corporates. By organizing high-level strategic conferences,
and ensuring all of the key stakeholders are in attendance,
we will create a forum for discussion and debate that will
hopefully contribute to solving these growing concerns.”
He stressed the company’s commitment to help Saudi
Arabia attain stability and sustainability in water and power
supply as demonstrated by its “10-year track record of
delivering the Saudi Water & Power Forum.” The “10th
Year Anniversary Edition” will focus on achievements
attained in the past 10 years for both the water and power
sectors, the SWPF said

U.S. gasoline prices at lowest levels since mid-May 2009
U.S. Energy Information Administration, Gasoline and Diesel Fuel Update
Across the country, retail prices for regular grade gasoline reached the lowest levels in four years
primarily as a result of falling crude prices in the second half of 2014. As of December 12, the
weekly retail price for regular gasoline in each city for which EIA collects data was below $3.00
per gallon (gal) for the first time since February 2010. Each city recorded its lowest 2014 gasoline
price on the last Monday of the year.
Each Monday, EIA collects and publishes data on retail gasoline and diesel fuel prices for multiple
locations across the country. Retail gasoline prices are published for ten cities, nine states, five
regions, and the United States as a whole. Gasoline prices across the country reflect differences
in gasoline quality, taxes, and the characteristics of regional market supply and demand balances.
East Coast (Boston, New York, and Miami). In New York and Boston, regular retail gasoline
prices reached yearly highs during the summer driving season in late June and early July,
respectively. Gasoline prices in Miami peaked earlier in the year during April, which is typical for that
city. Average prices along the East Coast moved within a range between $2.44/gal and $3.71/gal
over the course of the year.
Midwest (Chicago and Cleveland). Retail gasoline prices in the Midwest peaked at $3.71/gal in
mid-June and fell to a low of $2.09/gal on December 29. The Midwest covers a large geographic
area consisting of multiple semi-connected markets. Prices in Chicago were slightly above and
prices in Cleveland were slightly below the regional average in all weeks during 2014.

Nigeria:LNG carrier run a ground off Bonny Coast
Teekay + NewBase
Teekay confirmed its fully loaded, 165,600cbm LNG carrier, Magellan Spirit has run aground
6 miles off Nigeria.
According to the company’s spokesperson Jonathan Anthony the vessel grounded in soft mud
while under pilotage exiting the Bonny Island LNG terminal in Nigeria, reports gCaptain.
Teekay further said that tugs are on station to assist and the safety of the crew or the cargo has
not been compromised. Anthony added that the company mobilized its emergency team and is
currently considering options to refloat the vessel.
There is a possibility to dredge under the vessel or lighten the LNG tanker by a Ship-to-Ship
transfer of a portion of its bunker fuel or cargo. Teekay has scheduled another attempt to refloat
the vessel for early next week .

Oil Price Drop Special Coverage
Another battle opens up in the oil markets
New York: As a test of wills between Opec nations and US shale drillers fuels a global oil market
slump, a brewing battle between Canadian and Saudi Arabia heavy crudes for America’s Gulf
Coast refinery market threatens to drive prices even lower.
Two factors will come into play over the next few weeks: From the North, new oil pipelines will
pump record volumes of Canadian crude to the southern refineries, many better equipped to
process heavy crudes than lighter shale oil.
From the Middle East, top exporter Saudi Arabia is offering crude at discounted prices in an
attempt to defend its remaining share of the important regional market, which has shrunk by more
than half in recent months.
“So far, the Gulf Coast has suffered from an oversupply of light oil, but now there’s competition for
heavier crude,” said Sandy Fielden at RBN Energy. With the Saudis already facing fierce
competition for their light grades, the arrival of Canadian crude “could add insult to injury”, he said.
Saudi Aramco has stepped up its counteroffensive, cutting its monthly US-bound price for Arab
Medium for a sixth straight month, putting it at the deepest discount against the regional sour
crude benchmark since December 2013.
The timing of this clash may magnify its market impact as Houston-area oil refiners shut down for
maintenance in early spring, further reducing their demand by an estimated 1 million barrels a day
(bpd). “We’ll see that overhang into the summer, at least,” said one physical crude trader. That will
put further pressure on US prices and may spur investors in New York and London to extend a
sell off in crude futures.

The looming clash of barrels comes at a time when oil markets already face a global glut expected
to last for a year or longer. Large volumes of foreign heavy oil reaching the Gulf Coast will give
many US refiners more choice after they have upgraded their systems to process cheaper,
heavier crudes. The new supply also marks a breakthrough in Canada’s years-long effort to bring
its growing Alberta oil sands crude output to new markets.
Enbridge Inc.’s 600,000 bpd Flanagan South pipeline, which runs from Illinois down to the
Cushing, Oklahoma, oil hub began commercial service on December 1. Enterprise Product
Partner announced that its 450,000 bpd Seaway Twin pipeline from Oklahoma to Freeport, Texas,
shipped its first volumes on December 21.
That promises another quantum leap for Canadian crude after its US Gulf Coast sales already hit
a record 274,000 bpd in October, nearly three times as much as a year earlier, according to US
data.
The new flows will compete with other crudes as well. Some refiners see Saudi’s medium crude
as a more direct substitute for Mexican and Venezuelan crudes.
However, some refiners are likely to blend oil sands crude with overabundant super-light US
condensate, creating medium blends that may rival Saudi Arabia’s main grade, said Citi global
commodities strategist Ed Morse. He warns the clash could set up another tumble in global prices.
The growing pressure on the Gulf market is already showing up in pricing and inventories. Mars
Sour, a domestic grade similar to Arab Medium, has fallen to a discount of $1.90 a barrel
compared with US crude futures after trading at a premium over 45 cents two months ago.
Crude oil inventories in the US Gulf have risen to nearly 200 million barrels, a record high for late
December and up some 15 per cent from a year earlier. The build-up comes as Saudi Arabia
shifts its focus to fiercely defend what remains of its market in the US — the world’s largest
consumer of oil.

Until recently, it seemed to be holding its own in part thanks to a major expansion of its joint-
venture Motiva Enterprises refinery. Saudi crude sales to the US Gulf rose by a third to a record
high of nearly 1 million bpd in the two years to 2012, a period where gushing shale production had
begun to displace foreign suppliers.
But this year it has begun to lose ground, with shipments tumbling to 461,000 bpd in October, data
from the US Energy Information Administration showed. Ironically enough, the decline was driven
partly by a one-third cut in imports by Motiva, jointly owned by Saudi Aramco and Royal Dutch
Shell. Other customers have also turned away.
Valero Energy Corp.’s cut imports by 85 per cent in the first 10 months of 2014, with Saudi
purchases falling to just 35,000 bpd, according to EIA data. Marathon Petroleum Co. cut Gulf
Coast imports to 33,000 bpd in October from 205,000 bpd 10 months earlier.
While most Saudi customers agree on annual contracts with little room to reduce purchases, the
Kingdom’s state oil firm knows it needs attractive prices to retain long-term buyers. “As refiners
look at Canadian crude availability long term, they’ll be thinking about ways to give themselves
more options” said Richard Mallinson, an analyst at Energy Aspects in London.
Opec has no duty to fight this energy market
The National (Steven Kopits ) + NewBase
Seven years ago, when I first turned my attention full time to oil, one of the strangest concepts I
encountered was the “call on Opec”. The call on Opec means different things in different contexts,
but fundamentally, it is as non-economic and culturally imperialist a term as one could imagine.
The call on Opec works like this: non-Opec countries are assumed to produce as much as they
can, guided essentially by price signals. Whatever demand is left over can be served by Opec.
Opec is thus assumed to “balance the market” and the number of barrels necessary to do so is
the “call on Opec”.
Now, imagine this grafted onto, say, automobile production. Suppose an American policymaker
argued that GM and Ford should produce as many cars as they like and then Toyota could supply
any demand left over. From an economic viewpoint, this would be incomprehensible. And
moreover, the political uproar would be deafening. The reaction would be complete outrage – and
rightly so.
And yet, when the call on Opec has a similar effect, no one complains.
Now, the call on Opec does exist for certain practical reasons. First, the cartel is assumed to act in
concert. In theory, unified Opec decisions can affect oil production and prices in ways that
hundreds of profit-maximising firms cannot. Therefore treating Opec as a kind of entity makes
some sense.
Further, Opec production decisions are assumed to be geared to meeting national fiscal needs
rather than maximising profits. If Exxon ran, say, the Algerian oilfields, then production would be
much higher than today, but the resource would be depleted much faster as well. Profit-
maximisers will behave differently than revenue-satisfiers.
Finally, Saudi Arabia is the only country with material spare capacity that can be called, and the
only Opec country with the financial reserves to buffer any lost revenues due to curtailed
production. Nor have the Saudis renounced this role.

Analysts, therefore, treat Opec as a separate analytical category, and divining Opec intentions has
become a skill unto itself.
Until the plunge in oil prices, however, analysts believed that the kingdom was prepared to cut
production to maintain market stability. Of course, this proved untrue. Regardless, Saudi Arabia
has drawn extensive criticism for failing to “do its duty”.
Why analysts should believe that the kingdom has a duty in contravention of its own interests is a
paradox, but one that is resolved by “the call on Opec”, which creates the illusion of obligation
where none should exist.
And that in turn leads to unwarranted criticism, for Saudi Arabia is not responsible for the collapse
of oil prices. Today, Saudi oil production is only modestly higher than its level three years ago and
lower than in either 2012 or 2013. Indeed, Saudi production is lower than the same period last
year. The kingdom has actually cut production, even if not by much.
That is true of Opec as well. Opec output would be all but unchanged since 2011 if not for the
recovery of Libyan output since the middle of last year. Indeed, Opec output is lower than its level
during 2012 and much of 2013.
If we are looking for an aggressor, look no further than US shale. US production is more than 4
million barrels per day more than its 2011 level. The US shale producers are the ones upsetting
the apple cart. They are doing the attacking, and Saudi Arabia is merely holding well-established
production levels.
This does not mean the kingdom is without options. Saudi Arabia can still cut around the margins,
when prices are unnaturally low or high and the market dislocation is temporary. For example, oil
prices today are so depressed that the Saudis may have room for an intermediate production cut
without hurting their long-term interests.
Nevertheless, we simply do not know how much shales can produce, at what pace and what
price. The Saudis, therefore, are allowing price discovery, painful as that may be to US oil
producers and Opec budgets – and until the actual effect of low prices can be seen, that is the
right thing to do. At the margins, the call on Opec can still have some meaning.
But the cost is too high. The call on Opec creates the illusion of duty by the Saudis where none
exists — nor should it. It allows investors and oil companies the mistaken sense of security that
Saudis will subordinate their interests even when the maths flatly contradict the proposition. In
short, whatever benefits the call on Opec may have had in the past, today, it is more of a liability
than an asset. It is time to scrap the whole notion.

Iran, Venezuela vow to ‘neutralise’ oil price problem
AFP
Iran’s President Hassan Rouhani, flanked by Venezuelan counterpart Nicolas Maduro, vowed
yesterday to “neutralise” the threat posed to both countries by plummeting oil prices.
Opec members Iran and Venezuela are reeling from a slide in the cost of crude to around $50 per
barrel from $100 just six months ago, a precipitous fall that is straining their budgets.
Losses accelerated after the Organisation of Petroleum Exporting Countries group, of which Iran
and Venezuela are founders, chose late last year not to cut output despite lower prices and
oversupply.
Rouhani, his oil minister and other top officials in Tehran have criticised fellow Opec member
Saudi Arabia for not supporting steps to support higher crude prices. Rouhani was meeting with
Maduro when he again appeared to point the finger at Riyadh, in remarks carried on the Iranian
government’s website.
Maduro arrived in Tehran late Friday, accompanied by his ministers for oil, foreign affairs, finance
and industry, plus Venezuela’s Central Bank chief, on what Iranian state media said would be a
24-hour trip.
According to the official remarks, Maduro echoed Rouhani, “calling for the cooperation of oil
exporting countries to bring back stability.” Iran’s present budget was based on an oil price of
$100, leaving a big shortfall in recent months. In December, Tehran unveiled a draft budget for
next year based predicated on $70 per barrel.
Iran and Venezuela pledged to reach agreements during Maduro’s trip that would “expand trade
and investment, export of technical and engineering services and collaboration in
pharmaceuticals.” “Venezuela can be a suitable base for the export of Iran’s goods and services
to Latin American countries,” said Rouhani, who is seeking to reduce Iran’s reliance on oil sales by
boosting non-oil exports.
Venezuela has the world’s largest proven oil reserves but its economy - 96% of the government’s foreign
currency comes from crude — has been gutted by inflation and basic goods shortages.
In late December, recession-hit Venezuela reported that inflation for the 12 months to November topped
63%—one of the highest rates in the world.
Maduro travelled to China this week in search of investment and said he secured $20bn.
“Iran can cooperate to remove Venezuela’s needs in housing, road construction, food products and
medicine,” Rouhani added yesterday.
Iran’s President Hassan Rouhani and his
Venezuelan counterpart Nicolas Maduro (right)

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Khaled Malallah Al Awadi,
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MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
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Mobile : +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
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 11 January 2015 K. Al Awadi

Egypt signs new oil and gas exploration contracts

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