New base 526 special 26 january 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,
redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained
in this publication. However, no warranty is given to the accuracy of its content . Page 1
NewBase 26 January 2015 - Issue No. 526 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Mena energy subsidies fall by $60bn
The National + NewBase
Energy subsidies in the Mena region have fallen by US$60 billion and could continue to decline
should oil prices drop further, a senior IMF official has said.
Oil, gas and electricity subsidies now total $200bn, according to IMF calculations. Before oil prices
began to correct, the IMF had calculated subsidies of $260bn or 6.5 per cent of regional GDP,
based on 2013 data. Brent crude is trading ju st above $48 a barrel, down from a peak of $115 a
barrel last summer.
The reduction in subsidies was almost entirely attributable to the fall in oil, as gas and electricity
prices tend to be fixed over a longer period, said Masood Ahmed, the director of the Middle East
and Central Asia department of the IMF.
Energy prices charged to consumers in Middle East and North Africa are typically below
international prices. Subsidies should be phased out gradually, but with safety nets, to avoid
creating shocks to the economy and poorer segments of the population, said Mr Ahmed.
“When you do energy subsidies reform it shouldn’t be done in one go,” said Mr Ahmed. “The
countries which tried to do it all in one go generally had to reverse their reforms. So it’s better to
do it gradually, phased over time and also it has to be accompanied with a safety net to protect
the people who really need help.”

Gulf countries have taken small steps to reform subsidies ranging from diesel to gas as the price
of oil has dropped by more than 50 per cent to near six-year lows, slapping the region’s oil
exporters with a $300bn loss of oil revenue and driving most of them into fiscal deficits.
Abu Dhabi raised electricity tariffs this month as part of efforts to rein in consumption. Qatar, the
world’s biggest exporter of liquefied natural gas, last year raised the price of diesel by 50 per cent.
Kuwait, the only Gulf country expected to post a surplus this year based on IMF calculations,
tripled diesel and kerosene prices and is studying raising prices on electricity. Oman doubled gas
prices for industries this month, while Bahrain plans to raise the price of gas to industrial users
from April 1.
The IMF, which has lowered its forecast for growth in the Gulf region to 3.4 per cent this year
because of the oil price slump, is also forecasting deficit in the region for next year, he added.The
IMF had projected in an update released last week that the fiscal surplus of 4.6 per cent of GDP
forecast for last year would turn into a deficit of 6.3 per cent of GDP this year.
“For the GCC countries as a group we do expect a deficit next year as well. But if you take
countries individually then Kuwait of course will not have a deficit,” said Mr Ahmed. “In some
cases, it will be smaller than this year because the price of oil is expected to go up a little bit and
spending is being moderated.” The IMF has said most GCC states can weather the oil price slump
and tap surpluses they have accumulated, but it warned that spending must be tempered to
contain the fiscal deficits.

“Although there is a lot of uncertainty about where oil prices are going to go, we need to be clear
oil prices can stay at a relatively lower level than was the case before they went down. So the
prudent approach for countries is now to begin slowly and gradually to begin to adapt their
spending plans in ways that reflect the new realities on the oil market,” Mr Ahmed said.
Besides reducing energy subsidies, the IMF has also urged the GCC states to raise non-oil
revenue such as taxes and diversify their economies away from oil.
“The challenge going forward is to make sure that the diversification of the economy and the
private sector firms that are there in the normal sector are not so dependent on the resources from
oil to generate their business,” said Mr Ahmed. “You need to make the private sector more
competitive, particularly in the areas where currently they are not globally competitive, so they
would be competitive with imports and also to be able to do more exports and that would make for
a private sector that is more sustainable and less reliant on government spending.”

Iraq:Kurd producers unrelenting to boost supply at low oil prices
Bloomberg + NewBase
Oil producers in Iraqi Kurdistan are unrelenting in their goal to boost output even after the collapse
in international prices to below $50 a barrel. Genel Energy, headed by former BP chief Tony
Hayward, is sticking with plans to increase capacity 74% to 400,000 bpd this year at its Kurdish
Taq Taq and Tawke fields. Norway’s DNO owns 55% of Tawke.
“The operational side of the business remains very resilient and very strong and we maintain our
production increase targets,” Genel chief financial officer Julian Metherell said by phone from
London. “Even at $50 a barrel we are looking at a revenue of $350mn to $400mn.”
Gulf Keystone Petroleum Ltd, another oil producer in the semi-autonomous region, last month
raised output by 60% to 40,000 bpd and sees 70,000 bpd in 2017. The company will keep
increasing its output and seek to cut transportation costs by about 60%, chief executive officer
John Gerstenlauer said in a phone interview.
Oil prices dropped below $50 a barrel this month from $115 in June as the US pumped crude at
the fastest rate in more than three decades and the Organisation of Petroleum Exporting
Countries resisted calls to cut output. The UAE and Qatar estimate surplus crude of 2mn bpd.
Prices may be near a bottom and should start to rise in “a few months,” said Gerstenlauer, who
has worked in the industry for 38 years and seen three or four similar routs in the market. “First
the oil price finds a bottom, which I think we might be there, then the price bounces along the
bottom for a few months,” he said. “Because of low energy costs, the economy starts to pick up
and the price starts to increase. If we are not at the bottom right now, we’re close to it.”
Iraq is pumping at a record pace and will continue to boost exports this year amid a supply glut
that’s pushed prices down, Oil Minister Adel Abdul Mahdi said on January 19. The nation, holder
of the fifth-largest crude reserves, is rebuilding its energy industry after decades of wars and
economic sanctions.
“Because of the new challenges, especially the price of oil, Iraq has to try its best to raise its oil
production and exports,” Deputy Prime Minister Rowsch Nuri Shaways said last Wednesday at the
World Economic Forum in Davos, Switzerland.
An agreement in December resolved months of feuding between Iraq’s Kurdish region and the
central government in Baghdad over who had the right to export crude from the semi-autonomous
area.

The deal allowed for as much as 550,000 bpd to be shipped through Turkey from northern Iraq,
including 250,000 a day from the Kurdish region. The central government previously threatened
legal action against buyers of crude from Kurdistan.
Genel’s share of output from its two oilfields in the area rose 58% to 69,000 bpd in 2014 and it
targets 90,000 to 100,000 bpd this year, it said on Wednesday. “Genel is exposed to some of the
lowest cost rocks globally with a big resource base that should be the envy of many,” Thomas
Adolff, an analyst at Credit Suisse Group, said in a note to investors.
“Within the Kurdish Region of Iraq, it has the best asset base, and there is positive above-ground
momentum politically and operationally.” Operating expenditure is about $2 to $3 a barrel and
“cash break-even” is $30 to $35 a barrel, Genel’s Metherell said.
Oil prices may yet fall further as members of Opec, which includes Iraq, resolve to keep pumping
crude and US supply rises, according to Harry Tchilinguirian, head of commodity markets strategy
at BNP Paribas SA in London.
Prices have yet to fall as much as in 2008, when benchmark Brent crude reached $36.20 in the
wake of the financial crisis. Genel is “well positioned to continue to grow even in a period of
sustained low oil prices,” CEO Hayward said on Wednesday in a statement.

Jordan:Aapproves investing in building LPG tanks Terminal
© Jordan News Agency - Petra 2015
In a significant move, the Cabinet on Sunday gave its nod to investing in projects to
construct tanks for Liquefied Petroleum Gas (LPG) in Aqaba but also added the rider that
there will be no government guarantees to purchase LPG from these companies.
At a meeting headed by Prime Minister Abdullah Ensour, the Council of Ministers approved that
dealing with requests for construction of tanks for LPG in Aqaba as per certain standards, but with
the proviso that no government guarantees will be provided for the purchase of LPG from these
companies.
Also, it approved that these companies be granted licenses by the Aqaba Special Economic Zone
Authority (ASEZA), and that there will be no government guarantee that these facilities will be
used in the future.
The Cabinet stressed on using global codes and practices of good industry in designing such
projects in the future and in full compliance with local legislation, since such projects were very
serious in nature. It delegated ASEZA to take appropriate decision regarding approving such
projects as investment opportunities on a competitive basis.
The project aims to achieve the strategic objectives of the state in reducing the energy crisis that
the Kingdom is facing, and ensure energy security while diversifying its sources, besides securing
sufficient storage supply.
The Cabinet also approved the technical assistance agreement for the implementation of the
regional project to support and establish trade and transport corridors between Jordan and the
European Investment Bank.

Oman:Energy masterplan sees 15pc share from renewables
(OEPPA Business Development Dept)+ NewBase
A long-term power infrastructure master plan formulated by Oman’s electricity authorities
envisions a roughly 15 per cent share from renewables in the Sultanate’s energy mix by the year 2030.
This equates to around 3,000 megawatts (MW) of generation capacity based on concentrated
solar power, wind, and photovoltaic (PV) energy resources, according to a study undertaken by
Oman Electricity Transmission Company (OETC), which operates the northern half of the nation’s
electricity grid.
The study – also dubbed the Oman Electricity Transmission System Master Plan – articulates for
the first time a well-defined target for harnessing the Sultanate’s prodigious but largely untapped
renewable energy resources, chiefly solar and wind power, to help meet the country’s galloping
electricity demand, currently averaging 10 per cent annually.
First initiated in 2013, the Oman Electricity Transmission Master Plan (2014–2030) was aimed at
determining the required transmission infrastructure investments over the planning horizon. Well-
known global energy services consultancy Tractebel Engineering was commissioned to undertake
the master plan study which, among other things, was also designed to ensure that the electricity
demand is supplied in a least-cost approach, while ensuring the power system security and
reliability.
Importantly, an updated version of the same study (2017–2030) also provides the basis for
conducting feasibility studies of renewable energy potential at several locations where the grid is
not available. The study considers a scenario assuming 15 per cent of renewable energy share in
the energy mix by 2030, which translates to an estimated 3,000MW of renewables-based
capacity. Factored into this scenario is a projection that around 1,000 MW of conventional
capacity will be supplanted by renewables by 2030.
According to the International Renewable Energy Agency (IRENA), targets for renewable energy

contribution to energy supplies are indispensable benchmarks for the design, implementation, and
administration of renewable energy programmes and for adapting policy instruments over time to
changes in market conditions. Absence of targets may result in renewable energy initiatives
becoming uncoordinated, which in turn could increase the perceived risks associated with
renewable energy investments.
“Setting targets therefore contributes to enabling renewable energy technology deployment and is
recommended as an integral part of Oman’s national renewable energy strategy. However, for
targets to fulfil this role they need to be consistent with the policy visions of the national renewable
energy strategy and reflect a realistic assessment of the renewable energy resource base and of
what is obtainable economically,” the Abu Dhabi based global body said in recently published
assessment of Oman’s renewable energy readiness.
From an economic standpoint, the Sultanate has the potential for developing renewable energy for
electricity production in both on-grid and off-grid applications, says IRENA. The agency’s
assessment study underlines the potential for utility-scale solar PV at the best sites in the north
Oman and Salalah grids. Equally promising are wind farms connected to the Salalah System, as
well as wind energy produced along the coast in relatively small capacities connected to nearby
diesel generation plants in rural areas.
Evidence of this potential is demonstrated in the recent decision of the Rural Areas Electricity Co
(RAECO) to set up a 50MW wind farm in Dhofar Governorate in partnership with Masdar, Abu
Dhabi’s renewable energy company.
The $125 million project, featuring up to 25 wind turbines, will generate enough clean electricity to
power 16,000 homes. Construction work on this first ever facility is due to start before the end of
this year.

South Africa to grant Karoo shale gas licences in 2015
Source: Mail & Guardian
The South African government plans to grant oil companies licences to begin exploring the Karoo
for gas from as early as July this year. Exploration of shale gas in South Africa is expected to
commence as soon as July. Falling global energy prices have put oil companies under pressure to
rethink investments, but exploratory drilling in the Karoo will almost certainly go ahead.
Timelines presented by the department of mineral resources to the National Council of Provinces
in October indicate it is likely that regulations for shale gas exploration will be published in the
Government Gazette in the next few weeks. Exploration licences would then be granted – as
early as July or August – and exploration could commence immediately thereafter.
Shale gas, should it be judged to be viable, will mainly be used to produce electricity and not fuel.
It is for this reason the economics of investing in extracting shale gas remain favourable,
according to energy experts.
In 2013, the US Energy Information Administration (EIA) estimated there were 390-trillion cubic
feet of shale gas reserves in South Africa – although there are a number of varying estimates.
The government says just 30-trillion cubic feet of shale gas is enough to meet half of the
country’s current electricity generation requirement for more than 20 years.

US: EIA updates Eagle Ford maps to provide greater geologic detail
Source: U.S. Energy Information Administration,
Recent updates to the Energy Information Administration's maps and geologic information for
the Eagle Ford tight oil and shale gas play in Texas help to characterize the formation's structure,
thickness, and surface area, as well as the gas-to-oil ratio of its producing wells from January
2000 to June 2014.
This information provides a better understanding of recent production within the context of key
geologic parameters. The updates can be seen in the following four tabs. The first tab provides
additional information on the mix of oil and natural gas hydrocarbons produced by well location.
Tabs 2 through 4 provide updated geological information.Thickness Contours.
The mixture of oil and natural gas production by well is shown for a particular formation by
mapping the initial gas-to-oil ratio (GOR), which is the ratio of natural gas to oil produced by a well
over the second through fourth contiguous producing months. GORs are expressed as cubic feet
per barrel (cf/bbl). High initial GORs (meaning gas-rich) wells of the Eagle Ford play are shown in
orange and red along the southern edge of the play, and lower initial GOR (meaning oil-rich) wells
are shown in green along the northern portion.
The distribution of initial GORs from Eagle Ford play wells generally corresponds to the depth of
the hydrocarbons being accessed. Deeper wells (up to 15,000 feet) in the southeast have higher

initial GORs, or a relatively greater share of natural gas, while the shallower wells in the northwest
(below 6,000 feet) have lower initial GORs, or a relatively greater share of oil.
In the eastern half of the play, wells that intersect the formation between 5,000 and 12,000 feet
depth have initial GORs of 6,000 cf/bbl or less (producing more oil relative to gas). The western
half of the play includes a wider depth distribution of wells, intersecting the formation from as deep
as 14,000 feet to as shallow as 2,000 feet, and has initial GORs of 6,000 cf/bbl or higher
(producing more gas relative to oil).

Oil Price Drop Special Coverage
Oil price rebound likely by ’15 end on lower shale output
QNB + GulfTimes
A rebound in oil prices is expected later in 2015 once the current oil glut is reduced through lower
oil shale production, QNB has said in its “Global markets update” quoting some commentators.
Oil prices fell further as Saudi Arabia indicated an unchanged oil production policy following the
passing away of King Abdullah.
Commodity prices were generally lower,
except for precious metals on hedging
bets against global deflation, most
commentators expect commodity prices to
continue to weaken on deflationary risks
and once US short-term interest rates start
rising, QNB said.
On key takeaways, QNB said the dollar
strengthened on the European Central
Bank (ECB) announcement of a scaled-up
€60bn a month open-ended Quantitative
Easing (QE) plan.Euro has fallen to a new
eleven-year low against the dollar
following the ECB QE announcement.
The ECB QE announcement, QNB said
was higher than market expectations in
terms of size, pace and duration. Euro is
forecast to weaken further against the
dollar going forward, unless the Eurozone
economy recovers.
“Most commentators expect dollar to strengthen further going forward on expectations of higher
US short-term interest rates in 2015,” QNB said. Global bond yields were mainly lower on the ECB
QE plan, which includes the purchase of Eurozone sovereign debt.
German and Japanese sovereign bond yields fell to new historical lows as investors continue to
hedge against deflation. Long-term German and Japanese sovereign bond yields are expected to
fall further, following the ECB announcement “Most commentators expect yields to rise in
emerging markets (EMs) as the date of the first US interest rate hike approaches,” QNB said.
Global equities rallied on the ECB announcement as well as stronger than expected global PMI
data. Most commentators expect G20 equity markets to level off at lower valuations once US
short-term interest rates start to rise, it said.
Equity markets were broadly highly in QNB Group countries in line with global equities. Most

commentators expect equity markets in QNB countries to stabilise, although the security situation
and lower oil prices in some countries presents considerable risks, QNB said.
China: Oil Price Slump Spurs CNPC to Focus on Natural Gas and
Cut Costs
Bloomberg + NewBase
Stung by the slump in crude oil prices, China National Petroleum Corp., the nation’s biggest
energy producer, said it will speed up natural gas exploration in 2015 and take “revolutionary
measures” to cut costs.
CNPC also signaled its caution on the outlook for crude by pledging to focus on domestic oil and
gas fields over foreign projects, according to comments from Chairman Zhou Jiping posted to the
state-owned company’s website today.
CNPC is using its annual work conference in Beijing, which runs from Sunday through Tuesday,
to set its strategy for the year ahead. Zhou’s comments follows a steep cut in Citigroup Inc.’s 2015
target price on the company’s main listed unit, PetroChina Co. (857), citing the impact of lower oil
prices.

Big oil companies are ratcheting back investment and costs as they deal with a 56 percent drop
in the price of Brent crude since June due to a global glut. CNPC and its state-owned peers are
also in the throes of delivering on government-mandated reforms to give markets a more decisive
say in China’s economy.
“Natural gas could be the more economical fuel to produce than crude under the low oil price
environment,” said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. “In the longer
term, natural gas has more growth potential in China than crude as the latter is more likely to just
post slow-paced growth for many years to come.”
Maintaining steady domestic supplies of oil and gas given uncertainty on the outlook for crude is
“the right way to maintain China’s energy security no matter what happens outside the country,”
said Yu.
Promises Change
Zhou promised changes to CNPC’s structure, to foster new growth areas with lower
costs. The company will elaborate on its plans later this year, with a view to allowing
its business units more freedom to make decisions, according to his comments.
For Citigroup, which cut PetroChina’s target price to HK$6 from HK$7.65, the year
ahead will be difficult for the company. “Management did an excellent job at
reducing the rate of cost growth in 2014,” Citigroup’s Hong Kong-based analysts led
by Graham Cunningham said in an e-mailed research note dated Jan. 22.
“But, since our estimates already factor in significant cost savings in 2015, we see
little room from upside surprises from cost control.” The analysts also said that the
company’s reform efforts are likely to disappoint.
PetroChina shares fell 1.2 percent to HK$8.81 as of 11:30 a.m. in Hong Kong,
while the city’s benchmark Hang Seng Index was little changed.
CNPC produced 113 million metric tons of crude and the equivalent of 86 million
tons of natural gas in China in 2014, the company said Jan. 20. By comparison,
overseas oil and gas output surpassed 120 million tons last year, it said.

Your Guide to Energy events in your area

Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
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 26 January 2015 K. Al Awadi

New base 526 special 26 january 2014

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (20)

Similar to New base 526 special 26 january 2014

Similar to New base 526 special 26 january 2014 (20)

More from Khaled Al Awadi

More from Khaled Al Awadi (20)

New base 526 special 26 january 2014