New base 516 special 12 january 2014

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NewBase 12 January 2015 - Issue No. 516 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Kuwait plans $155b projects despite oil slump
AFP + NewBase
Kuwait’s government on Sunday announced plans to spend 45.5 billion dinars (Dh569 billion,
$155 billion) on projects over the next five years despite the plunge in world oil prices, a lawmaker said.
The spending is slated to cover 523 key projects
in a five-year development plan starting in the
fiscal year which begins on April 1, said
parliament’s financial and economic affairs
committee secretary, Mohammad Al Jabri.
He said the oil-rich Gulf country’s state minister
for planning and development, Hind al-Sabeeh,
discussed the draft development plan with his
panel. The committee was assured that the
sharp drop in oil revenues would not affect the
projects of Kuwait, which has a massive
sovereign wealth fund and invested billions of
dollars in a “future generations fund”.
Oil revenues in the new budget from April will be
calculated on the basis of $45 a barrel, down
from $75 a barrel in the current fiscal year, Jabri
said. The price of Kuwaiti oil closed on $43.21 a
barrel on Friday, compared to a price of over
$110 a barrel in June 2014. Oil income makes
up around 94 per cent of public revenues in
Kuwait.
The government has vowed to cut current
spending, especially subsidies, which
constitutes over 85 per cent of total
expenditures but insisted it will not reduce
capital spending on projects. The Opec member
has posted a budget surplus in each of the past
15 fiscal years and is expected to post a surplus
in the current year ending March 31.
But officials and lawmakers warned that an actual deficit is expected in the next fiscal year unless
oil prices rise. The emirate has scrapped subsidies on diesel, kerosene and aviation fuel as a first
step in revising heavily-subsidised electricity, water and petrol. Local media said Kuwait’s fiscal
reserves grew to $548 billion as of June 30. The emirate has a native population of 1.25 million
and is also home to about 2.8 million foreigners.

UAE:WFES to showcase growing Mideast clean-energy market
News Agencies + NewBase
THE growing renewable energy investment opportunity in countries across the Middle East and
North Africa (MENA) is garnering attention by international investors who will be at January’s
World Future Energy Summit (WFES) to explore project opportunities. Through Masdar, Abu
Dhabi’s renewable energy company and the host of WFES, the UAE is quickly becoming a
leading renewable energy player regionally and globally.
WFES is part of Abu Dhabi Sustainability Week (ADSW) on January 17-24, an annual platform
that addresses the interconnected challenges of energy and water security, climate risk and
sustainable development.

“Through its energy leadership, the UAE has helped galvanize the tremendous rollout of
investment into renewables that we are seeing in countries across the Middle East,” said Dr.
Ahmad Belhoul, CEO of Masdar. “As a platform that brokers partnerships, attracts investments
and launches new innovations, WFES is an essential component in driving the region’s renewable
energy growth.”
With 32,000 attendees expected from 170 countries over four days from January 19-22 in Abu
Dhabi, WFES 2015 will bring together the key players – from industry, technology, finance and
government – needed to accelerate commercial opportunities in the renewable energy and clean
technology sectors.
The WFES agenda will offer delegates unmatched insight about the growing market opportunities
in the Middle East and Africa, home to six of the world’s 10 fastest growing economies. As the
region is attracting significant attention by international investors, several sessions are devoted to
understanding the regulatory and institutional frameworks being put into place to encourage
investments for renewable energy projects.
MENA countries are planning to install up to 37 gigawatts of renewable energy projects within the
next 10 years, and several major initiatives by the UAE are helping to realize this goal.
The UAE is already the largest renewables market in the Gulf Cooperation Council (GCC) region,
with plans to grow. Abu Dhabi intends to source 7 percent of its domestic power needs from
renewables by 2020. Overall, the UAE has more than 120 megawatts of installed renewable
energy capacity, the largest project being Masdar’s Shams 1, a 100 megawatt concentrated solar
power (CSP) facility in Abu Dhabi. Masdar’s renewable energy projects extend around the world,
with nearly two gigawatt of clean power in operation or under development in Jordan, Oman, the
UK, and Spain, among other countries.
Other major renewables commitments in the MENA region include a US$9 billion solar power
project underway in Morocco; US$2.1 billion worth of clean energy investments planned in Jordan,
and US$1 billion of investments planned for solar power in Egypt.
Hosted by Masdar, Abu Dhabi’s renewable energy company, WFES also receives support from
ADNOC and Emirates Global Aluminium (EGA). In addition to WFES, ADSW will feature the third
International Water Summit, the second edition of EcoWASTE, and the seventh Zayed Future
Energy Prize Award Ceremony, as well as the Fifth General Assembly of the International
Renewable Energy Agency.

KSA, Venezuela discuss oil market developments
Saudi Gazette + NewBase
Crown Prince Salman Bin Abdulaziz, deputy premier and minister of defense, discussed with
Venezuelan President Nicolas Maduro bilateral ties, regional issues and global oil market
developments at a meeting here on Sunday.
Maduro arrived in Riyadh late on Saturday where Prince Muqrin Bin Abdulaziz, deputy crown
prince and second deputy premier, received him, the Saudi Press Agency said. “The Venezuelan
president was accompanied by a number of ministers,” it said.
Saudi Arabia is the world’s largest crude exporter and the biggest producer in the 12-member
Organization of the Petroleum Exporting Countries (OPEC), to which Venezuela also belongs.
While Saudi Arabia says it is financially strong enough to withstand the drop in world oil prices,
which fell about 50 percent last year, the budgets of Venezuela is under strain.
Venezuela has said it is willing to cut production to support prices but OPEC decided in November
to maintain an output ceiling of 30 million barrels per day. The decision intensified the price slide
that began in the middle of the year, blamed on softer growth in demand and a stronger United
States dollar as well as oversupply.
Prince Abdulaziz Bin Abdullah, deputy minister of foreign affairs, received on Sunday the Minister
of Foreign Affairs of Republic of Venezuela Delcy Eloina Rodriguez Gomez. During the meeting,
they discussed bilateral relations, ways of their development, and regional and international issues
of common concern. The meeting was attended by Undersecretary of Foreign Ministry for
Economic and Cultural Affairs Dr. Yusuf Al-Sadoun, and a number of officials

Saudi Arabia: $28 billion boost for downstream petrochem
The National + NewBase
The downstream industry in Saudi Arabia is set to receive a boost as nearly US$28 billion worth of
petrochemicals plants come online this year, creating thousands of jobs and diversifying income
away from oil, Saudi officials said yesterday.
The state-owned Saudi Aramco’s efforts are part of a government strategy to turn the spotlight on
petrochemicals production as it invests more than $100bn over the next decade in the
downstream sector.
Sadara Chemical, a $19.3bn joint venture between Saudi Aramco and Dow Chemical of the US, is
more than 80 per cent complete and is expected to start production in the second half of this year
and reach full capacity in 2016, said Ziad Al Labban, the company’s chief executive, at a plastics
conference in Dubai.
The Sadara project, which will produce 3 million tonnes of petrochemicals a year, is the world’s
largest petrochemicals facility to be built in a single phase. It is also the first in the Middle East to
use refinery liquids, such as naphtha, as feedstock. The plant will also use mixed feedstock of
ethane gas and liquids, unlike other plants in the region which rely on ethane to produce
petrochemicals.
Production from naphtha allows for a greater variety of products. Saudi Refining and
Petrochemical (PetroRabigh), a joint venture between Saudi Aramco and Japan’s Sumitomo
Chemical, will start production in December from the $8.5bn plant expansion known as
PetroRabigh II. It is expected to reach full capacity in the first quarter of 2016, Abdullah Al
Suwailem, the company’s chief executive, said at the same conference.
“Initially a good amount of products will be going out for export for the simple reason we are
introducing new speciality chemicals and petrochemicals,” said Sadara’s Mr Al Labban. “As a
result we have to develop the customer base within the kingdom of Saudi Arabia as well as the

region, and that will take time. During that tenor we will be exporting, but the intent is to grow the
demand for our products within the kingdom and other GCC members.”
The new products from Sadara that will be introduced to the regional market include Isocyanates,
which are key ingredients used to make polyurethane rigid foams and other speciality
applications.
The output from Sadara will also find use in producing automotive parts, medical equipment,
healthcare products and building materials. This is part of the kingdom’s plans to attract local and
international investors to build industries and create jobs in the downstream sector.
PetroRabigh’s focus meanwhile has been on the domestic sector, particularly downstream as it
stopped exports in December 2013. “It also presents an opportunity for us to contribute to the
employment,” said Mr Al Suwailem. “We need to ensure our industrial sustainability by going and
integrating into the downstream and not continue exporting …
And last but not least, it will be an opportunity to diversify
more away from oil.”
Prices of petrochemicals, however, have been hard hit by the
near halving of oil prices. Brent last year slid 48 per cent to
around $57 a barrel because of an oil supply glut, weaker
demand in Asia and Europe, and a strong dollar. Brent has
since fallen to around $50 a barrel so far this year.
“Whenever oil prices come down, what it does is reduce the
margin. Reducing the oil prices also … what it does is it gives
more income for the consumer market to spend on products
that we will be producing. So I see it as a positive and negative,” Mr Al Labban said.
Project Description
The Sadara project is world scale chemical project being constructed in Jubail Industrial City in Saudi
Arabia. Construction work on the project has already started and is scheduled to be completed by
early 2015. Production from the first units is expected to begin in the second half of 2015, all units
are expected to be running by 2016. The fully integrated complex is planned to consist of 26
chemical manufacturing units and be one of the largest of its kind in the world. Sadara will produce
polyeurethanes, propylene oxide, propylene glycol, elastomers, linear low-density polyethylene, low
density polyethylene, glycol ethers and amines.

Egypt set to finalise Gazprom deal soon
Reuters + NewBase
Egypt will complete an agreement with Russia’s Gazprom for the company to supply it with
liquefied natural gas (LNG) shipments later this month, Egyptian Oil Minister Sharif Ismail said
yesterday.
Egypt agreed in principle last April for Gazprom to supply seven LNG shipments to help it meet
gas supplies needed to face its worst energy crisis in decades.
A Gazprom delegation would visit Egypt in mid-January, Ismail said. If successful, the Gazprom
deal would be the second LNG import agreement since Egypt finalised a deal for the necessary
import infrastructure in November.
Egypt signed an agreement with Algeria for six LNG cargoes in late December. The country of 86
million relies heavily on gas to generate power for households and industry, but has had difficulty
securing imports because it lacks a terminal to process LNG, which is natural gas chilled into a
liquid state.
But after two years of delays, Egypt contracted Norway’s Hoegh LNG for a floating storage and
regasification unit, opening the door to LNG imports. The terminal is meant to be operational by
the end of March.
Egypt has turned from an energy exporter to a net importer due to increasing consumption and
decreasing production. The government has cut fuel subsidies to curb consumption and has tried
to reduce its debt to foreign energy companies to encourage investment.

India:SunEdison,Adani to invest $4bn in Indian solar panel plant
Reuters + NewBase
Solar power firm SunEdison and Indian conglomerate Adani Enterprises plan to invest up to $4bn
in what would be one of India’s largest solar panel makers, a boost for Prime Minister Narendra
Modi as he hosts an investment summit.
On the sidelines of Vibrant Gujarat gathering of statesmen and business leaders, the two firms
said yesterday that the new joint venture project would manufacture low-cost photovoltaic solar
panels, helping turn sunlight directly into electricity at cheaper rates.
Solar energy in India costs up to 50 percent more than power from sources like coal. “This facility
will create ultra-low cost solar panels that will enable us to produce electricity so cost effectively it
can compete head to head, unsubsidised and without incentives, with fossil fuels,” said Ahmad
Chatila, President and Chief Executive Officer of US-based SunEdison, already a significant
player in India.
The deal — though still subject to further analysis over the coming months — is a boon for Modi,
who has sought to encourage both alternative energy and manufacturing through his “Make in
India” campaign. India gets twice as much sunshine as many European countries that use solar
power. But the clean energy source contributes less than 1 percent to India’s energy mix, while its
dependence on erratic coal supplies causes chronic power cuts.
Modi wants companies from China, Japan, Germany and the United States to lead investments of
$100bn over seven years to boost India’s solar energy capacity by 33 times to 100,000 megawatts
(MW). This plant, which is expected to take three years to build, would add up to 20,000 jobs to
the local economy.

Oil Traders Seen Storing Millions of Barrels at Sea on Slump
Blooberg + NewBase
Oil companies are seeking supertankers to store 20 million barrels of crude as a collapse in the
price of the commodity creates a trading opportunity last seen during the 2008-09 recession, a
Greek shipping company said.
Companies inquired
about booking 10
very large crude
carriers for storage in
the past several days,
Odysseus Valatsas,
the chartering
manager for
Dynacom Tankers
Management Ltd.
near Athens, said by e-mail today. A “handful” have already been hired for the trade, he said,
citing discussions with shipbrokers and others working in the shipping market. Dynacom’s fleet
can carry about 65 million barrels of oil.
Oil collapsed 48 percent in 2014 and prices for later this year are now so far above current costs
that traders can make money from buying cargoes and storing them on ships, according to JBC
Energy GmbH. As many as 60 million barrels could be held offshore within the next several
months, the Vienna-based consultant predicted on Jan. 6. Traders stored 100 million barrels at
sea in 2009, Frontline Ltd., a tanker owner, said at the time.
Oil Prices
“It looks more and more likely that you’ll see more floating storage and it’s going to be good” for
ship owners, Eirik Haavaldsen, a shipping analyst at Pareto Securities SA in Oslo, said by phone.
“The re-emergence of floating storage is what could move the crude tanker market this year from
being rather good to possibly very very good.”
Frontline Surge
Shares of Frontline rose as much as 14 percent in Oslo today to the highest in almost a year.
They closed up 9.5 percent at 28.70 krone ($3.74). Shipping costs gained today, with day rates for
supertanker shipments to Japan from Saudi Arabia climbing 1 percent to $82,216 a day, the
most for the time of year since at least 2009, according to data from the Baltic Exchange in London.
Brent crude for August traded at $55.87 a barrel as of 4:20 p.m. in London, a premium of $6.75
compared with February. That gap needs to be about $6.50 to cover hiring a ship and other costs
associated with storing crude, according to E.A. Gibson Shipbrokers Ltd. in London.
JBC estimates that 30 million to 60 million barrels will be stored offshore in the next several
months. The higher end of that forecast is about the same as Denmark’s annual consumption.

Brazil: Presalt oil and natural gas provide increasing share of production
Source: U.S. Energy Information Administration, Agência Nacional do Petróleo, Gás Natural e Biocombustíveis
In 2013, Brazil produced 2.0 million barrels per day (bbl/d) of crude oil and nearly one trillion cubic
feet (Tcf) of gross natural gas. Within these figures, the share of production from presalt resources
found under thick layers of salt thousands of feet below the ocean's surface remains small but
continues to increase.
Crude oil production from the presalt layer was 15% of total production in 2013, a significant
increase from 0.4% of total production in 2008 when oil from the presalt was first produced.
Similarly, Brazil's presalt natural gas production represents 14% of total production, up from 0.5%
of total production in 2008.
Exploration and development of Brazil's presalt layer began in and around the Tupi field almost a
decade ago, with first production in 2008. Further exploration showed hydrocarbon deposits in the
presalt layer spread through the Santos, Campos, and Espirito Santo basins. Following Tupi, pilot
projects in the Lula and Sapinhoa fields began production in 2009 and 2010, respectively.
With the exception of the Libra field, all presalt areas currently under development were
noncompetitively granted to state-controlled Petrobras, the dominant participant in Brazil's oil
sector. Through the Transfer of Rights Agreement of 2010, in exchange for $42 billion (USD) of
Petrobras shares, the government gave Petrobras rights to explore and produce 5 billion barrels
of oil equivalent (boe) from six presalt areas in the Santos Basin: Florim, Buzios, Sul de Guara,
Entorno de Iara, Sul de Lula, and Nordeste de Tupi.
Petrobras discovered significant reserves in addition to the original five billion boe. In June 2014,
the government granted Petrobras the rights to produce surplus volumes estimated at 9.8-15.2
billion boe found in the Buzios, Entorno de lara, Florim, and Nordeste de Tupi areas. Petrobras
expects first production from the Transfer of Rights areas by 2016 and from the surplus volumes
by 2021.

In October 2013, Brazil concluded its first presalt licensing round for the Libra field, estimated to
hold 8-12 billion barrels of recoverable reserves. The lone and winning bid was a consortium of
Petrobras, Royal Dutch Shell, Total, and Chinese national oil companies China National
Petroleum Corporation (CNPC) and China National Offshore Oil Corporation (CNOOC). First
production is scheduled for 2017 with peak production of 1.3 million bbl/d expected by 2030.
In November 2013, a month after concluding its first presalt licensing round for the Libra field,
Petrobras announced its discovery of the Franco field, a presalt finding, which could be larger than
the 8-12 billion barrels of recoverable reserves found in the Libra field. Additionally, in May 2014,
Petrobras made another presalt finding of potentially 5 billion barrels in the Entorno de lara block.
Brazil anticipates oil production from the presalt layer will account for most of its projected
production growth through 2030.

Oil Price Drop Special Coverage
More losses for Russian bonds as rating heads back to junk
Reuters
Russia’s credit rating looks set to tumble into junk for the first time in more than a decade, a move
that would exclude its bonds from a couple of high-profile indexes and may set off another wave of
capital outflows.
The Fitch agency cut its rating on
Russia to ‘BBB minus’ from
‘BBB’ on Friday, citing a
significant deterioration in the
country’s economic outlook due
to the slump in oil prices and
falling value of the rouble. That
is still investment grade, the
category that implies low default
risk, but only one notch away
from so-called junk, the grade
Russia rose out of in 2004.
Bigger rival Standard & Poor’s
has Russia already at ‘BBB
minus’, with a negative outlook,
meaning the next move will likely
push
it into junk. It says it will review
the rating in mid-January and
again in April. “A downgrade to
junk for Russia...is a foregone
conclusion,” said Hung Tran, executive managing director at global industry body, the Institute of
International Finance. A fall to junk will deal a blow both to Russia’s already-battered economic
prospects and to its image as a global power. Peers in
the Brics group of big world economies — China, India, Brazil and South Africa — are all rated
investment grade. Markets are already pricing Russia as junk, according to bond yields and debt
insurance costs, and as this graphic shows.
While that should cap capital outflows from the move itself, knee-jerk losses are still likely.
Many conservative funds are barred from buying sub-investment grade securities, so loss of this

coveted rating can trigger selling of existing securities and raises future borrowing costs for a
country and its companies.
S&P last month placed the country on “Creditwatch Negative”, implying a 50% chance of a
downgrade in the next three months. Its own “market derived” score for Russia indicates a rating
five notches below current levels.
Moody’s rates Russia two notches above junk but with a negative outlook, and is expected to
follow S&P later in 2015. Western sanctions imposed over Moscow’s role in the Ukraine crisis and
oil’s price collapse are tipping Russia’s economy into
recession, while central bank reserves have fallen by more than $100bn — unlike during the 2008
crisis, reserve volumes fall short of total debt. “We expect Russia to fall from the investment grade
category by March or early April,” Societe Generale strategist Regis Chatellier
said, predicting some forced selling of Russian debt. Russian officials were unavailable for
comment due to the country’s extended New Year break but Finance Minister Anton Siluanov
said late last month the dangers were “exaggerated”.
“We are working (with rating agencies) and explaining the economic situation,” he told reporters.
“It seems to me that foreign understanding doesn’t always correspond to what is actually the
case.” An oil price bounce or a lifting of sanctions could bring respite. But Moody’s said on
December 22 it expected “limited upward
pressure on ratings”, while predicting downward moves if oil prices stayed at “current levels”.
Since then, crude futures have tumbled another $10 a barrel. The biggest impact would be felt
with both Moody’s and S&P cutting Russia to junk because that would lead to the country’s
ejection from Barclays’ Global Aggregate index that is estimated to be have $2tn benchmarked
against it worldwide.
Adding in sovereign and corporate debt in roubles and hard currency, Russia has a 0.7% weight
that Barclays reckons amounts to $140bn. Dedicated emerging market funds would be less
affected because most EM indexes include non-investment grade credits.
But JPMorgan said Russia could be
removed from the investment-grade
portion of its GBI-EM index for
emerging currency bonds, a portion to
which around $5-7bn is benchmarked.
A lot of foreign funds, including those
following the Barclays index, have
already dumped their Russian holdings
and the cost of insuring Russia
exposure via credit default swaps
(CDS) exceeds that of Pakistan and
Lebanon whose ratings are deep in
junk.

Norway mulls steps to back economy , Oil slump
Bloomberg + NewBase
Norway is considering tapping reserve funds to shield western Europe’s biggest oil producer from
the worst slump in crude prices in more than half a decade. Prime Minister Erna Solberg said the
government is now “on alert” to respond to the rout. “If the
economic situation requires it, we can react quickly,” she said on
Saturday at a conference in Oslo organised by Norway’s
confederation of industry. A 56% plunge in the price of Brent crude
since a June high has undermined Norway’s currency and beaten
back its stock market.
The krone has lost 20% against the dollar over the period.
Norway’s benchmark equity index is down 9%. Oil producers
including the country’s biggest, Statoil, and service companies
have already cut thousands of jobs to adjust and unions are calling
for government measures to protect the industry. “The decline has been stronger and gone faster
than we had expected,” Eldar Saetre, chief executive officer of state-backed Statoil, said on
Saturday in an interview.
“The development we’re seeing is a reminder that we’re in a cyclical industry, and that we need to
have a cost level in this industry that can sustain these types of cycles and let us be competitive
over time.” Scandinavia’s richest economy is now facing the flipside of an oil reliance that has
supported an economic boom over the past
decade. Though successive governments have sought to avoid overheating by channelling oil
income into the country’s $840bn sovereign wealth fund, Norway’s plight now shows those efforts
weren’t enough to wean it off oil.
“Right now, there’s somewhat of a state of emergency in the oil industry — some would call it a
panic,” Walter Qvam, CEO of Kongsberg Gruppen, a Norwegian defence and oil services
company, said in an interview.
“Norway needs this reminder, and it’s very good that we’re getting it now. We’re going to stay an
oil nation, but we now need to create the next version of Norway, because the version we’ve been
living in for the past 35 years is on the wane.”
Solberg said her government is working on models that will help the $510bn economy speed up
its shift away from fossil fuels and over to other industries. “The long-term adjustments that come
from this will be good for Norway,” Solberg said. Oil and gas today account for more than
one-fifth of gross domestic product.
The government has already pledged to spend a record amount of the nation’s oil wealth —
or about 6.4% of GDP — on expenditure this year to support the economy. Oeyvind Eriksen, CEO
at Aker — billionaire Kjell Inge Roekke’s holding company said the oil price slump could create
“opportunities” for its holdings, which include Aker Solutions and Det Norske Oljeselskap.
“Aker has resources and is willing to invest in our companies, provided that it creates shareholder
value for us and our fellow shareholders,” he said in an interview. “That goes for Det Norske and
in principle for all the other companies in our portfolio.”

Norway’s non-oil businesses are already seeing renewed investor interest.Yara International, one
of the world’s largest makers of fertilisers, is up 24% over the past six months and aluminum
producer Norsk Hydro has surged 21%.
“Lower energy prices are positive for Yara,” Torgeir Kvidal, acting CEO of Yara, said in an
interview. “We export most of our production,” so the company “benefits from a stronger dollar.”
Jon Fredrik Baksaas, CEO at Telenor, the largest Nordic phone company, also said it might not be
a “bad thing” for Norway to recalibrate its economy.
“A lot of the competence built around the oil industry can clearly be shifted towards other areas,”
he said in an interview. “That’s going to happen. We’ve succeeded at such shifts earlier.”
Norway’s Prime Minister Erna Solberg gestures as she speaks during an interview at her office in
Oslo (file). The government is now “on alert” to respond to the situation arising from the worst
slump in crude prices in more than half a decade, she said on Saturday.
Stop looking for grand design in the oil price crash
Robin Mills + The National + NewBase
As the oil price has fallen past US$100 per barrel, then $80, now $50, one major newspaper has
decided to stop talking of “psychologically important barriers”, which seem to be bypassed as
easily as the Maginot Line.
Despite plenty of muttering about
plots, in fact neither of the key
players in this oil price crash
actually did anything voluntarily to
cause it. Unlike their actions in
1986 and 1998, the Saudis have
not increased production sharply;
rather they have trimmed it slightly
but not made major cuts, active
only in masterly inactivity.
And a cursory examination of the
vagaries of US energy policy
should dispel any idea of a coherent grand strategy. The thousands of individual shale oil
producers are in cut-throat competition, not collusion.
If the US government had wanted to maximise its oil leverage, it would by now have permitted the
Keystone XL pipeline, freed up US oil exports and opened more federal land to drilling. The
current administration has had the sense not to do too much to discourage production, rather than
encouraging it much.
The current price slump will clearly lead to delays and cancellations of high-cost conventional
projects, with companies already postponing ventures in areas such as the Arctic and warning of a
collapse in North Sea production.
Various eminent commentators differ on the impact on shale oil output. Falling prices must already
have set back plans for shale developments outside North America. In the US, Citigroup’s Ed

Morse suggests that production will continue to grow, as costs fall and drilling concentrates on
well-established basins with existing infrastructure. Conversely, Reuters’ John Kemp sees
production starting to fall by the end of this year if prices do not recover.
Does this matter for US strategic goals? Becoming self-sufficient in oil or gas should not be the
goal in itself. Rather, the aim should be to maximise the gain of cheaper, more abundant energy to
the economy and to exploit the opportunities to put pressure on energy-exporting rivals. This can
be achieved yet more if prices stay low, even at the cost of falling US output.
The US has not had a strategy to increase production or crash prices, but having received the
unexpected gift of energy abundance, policymakers have not been slow to try to deploy it. They
have enforced sanctions against Iran and Russia that would have been unthinkable in a world of
soaring prices and tight supplies. Meanwhile, Saudi Arabia has stumbled into a strategy of
moderate prices that it should have adopted years ago.
The question is where a new equilibrium may be. In the next year or two, prices may bounce back
strongly as a US shale sector riven by debt and bankruptcies is unable to repeat its feats. US
liquefied natural gas may prove uncompetitive in Europe against Russian supplies
and Opec countries may be able to repeat their strategy of restraining production increases and
targeting high prices.
But even then they would know that keeping prices above $100 per barrel for a long time would be
risky.
Or prices may settle at a lower level where robust demand growth can accommodate increasing
production from Opec and a slower growth of shale oil output. By that point, economic pressure
plus sanctions might have gained the US a favourable outcome in its disputes with Russia and
Iran. Saudi Arabia and its Gulf allies would have reminded Opec rivals of their higher pain
threshold.
Grand energy strategy without substance is not much use, as governments from Venezuela to
Russia are now discovering. Rather than imagining that the global energy landscape can be
dominated by seizing the commanding heights of the economy, the victors grasp unexpected
opportunities to avoid previously impassable obstacles.

Your Guide to Energy events in your area

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Khaled Malallah Al Awadi,
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Mobile : +97150-4822502
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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 12 January 2015 K. Al Awadi

New base 516 special 12 january 2014

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New base 516 special 12 january 2014