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NewBase 14 January 2016 - Issue No. 765 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Saudi govt to keep controlling stake ‘if it lists Aramco’
Reuters
Saudi Arabia’s government will keep a controlling interest in state-owned Saudi Aramco if it
decides on a share offering of the world’s largest oil firm, its chief executive said. Aramco has
crude reserves of about 265bn barrels, over 15% of all global oil deposits. If it goes public, it could
become the first listed company valued at $1tn, analysts have estimated .
“A range of options are being considered, including the listing in the capital markets of an
appropriate percentage of Saudi Aramco shares with the government retaining a controlling
interest, as well as the option to list a bundle of downstream businesses and interests,” Amin
Nasser wrote in a letter published in Aramco’s weekly magazine the Arabian Sun.
Nasser, who is chairing a steering committee overseeing the process, cited the government’s
privatization initiative and broader economic reforms as the two key drivers behind the move.
Deputy Crown Prince Mohammed bin Salman indicated in an interview with The Economist
magazine last week that Saudi Arabia might sell shares in Aramco, as part of a privatisation drive
to raise money in an era of low oil prices.
Last Friday, it issued a brief statement saying it was considering options including the stock
market listing “of an appropriate percentage of the company’s shares and/or the listing of a bundle
(of) its downstream subsidiaries”.
Copyright © 2015 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 2
Aramco chairman Khalid al-Falih
told the Wall Street Journal on
Monday there was no specific
timeline or concrete plan for the
listing. However, a listing of the
main company, which includes
upstream, as well as refining and
petrochemical assets was being
considered, he said.
Oil’s collapse has delayed $380
billion worth of investment on 68
major upstream projects,
according to industry consultant
Wood Mackenzie Ltd.
The developments account for
about 27 billion barrels of oil
equivalent and about 2.9 million
barrels a day of production is being deferred to early next decade, according to the Jan. 12 report.
Deepwater projects will be hit the hardest and account for more than half of new project deferrals,
it said.
Crude’s price plunge has forced companies and governments to reduce costs as revenues
from hydrocarbon sales plunge. BP Plcplans to cut 4,000 jobs, Petroleo Brasileiro SA slashed its
spending plan and Malaysia’s Petroliam Nasional Bhd. warned that it faces several tough years.
State-owned Saudi Arabian Oil Co., the world’s largest crude producer, is studying options for a
share sale.
“Companies are going into survival mode in 2016,” Angus Rodger, one of the report’s authors,
said by phone. “We expect to see further project deferments, reduced budgets and companies
doing everything they can to reduce how much expenditure they have. As a consequence, we see
this number growing through the year.”
Brent crude, the benchmark for most of the world’s oil, capped a third yearly decline in 2015 and
has fallen to the lowest in more than a decade as the Organization of Petroleum Exporting
Countries effectively abandons production limits amid a global glut. The grade dropped below $30
a barrel Wednesday for the first time since April 2004 amid speculation sanctions on Iran may be
lifted by Monday, paving the way for increased oil exports.
Concern that prices will remain “lower for longer” is limiting confidence for new investments,
according to the Wood Mackenzie report. The average break-even price of the delayed greenfield
projects is $62 a barrel, according to the report.
Ed Morse, Citigroup Inc. managing director and global head of commodities research, said 11
months ago oil could fall as low as $20 and Goldman Sachs Group Inc. has given a 50 percent
chance of crude hitting that level.
Copyright © 2015 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 3
Qatargas’ loading and storage facility completes seven years without LTI
Gulf Times
Berths at Ras Laffan Port from where LNG is loaded onto ships for delivery to customers of
Qatargas and RasGas across the globe. Implementation of the Incident and Injury Free (IIF)
programme has added value for Qatargas in maintaining an injury and incident free workplace
culture.
Recording yet another
significant safety milestone,
Qatargas’ Common
Liquefied Natural Gas (LNG)
Storage and Loading Asset
(CLNGSL) completed seven
consecutive years of
operations on December 31,
2015, without a Lost Time
Incident (LTI).
Operated by Qatargas, the
Common Lean LNG storage
and loading facilities were
built to store and load LNG
produced from Qatargas’
seven LNG production trains and RasGas Trains 6 and 7. The LNG is loaded from five berths
(berths 1, 3, 4, 5 and 6) at Ras Laffan port and delivered to customers of Qatargas and RasGas
across the globe.
The facilities started operations on December 31 with the introduction of gas during the start-up
phase of the Qatargas 2 (Trains 4 & 5) project. The asset has grown by receiving Qatargas 3 & 4
(Trains 6 & 7) LNG product as well as LNG from RasGas trains 6 & 7. The Jetty Boil Off Gas
(JBOG) facilities were added in 2014.
On the achievement, Qatargas chief executive officer Khalid bin Khalifa al-Thani said, “This is a
moment of great pride for all of us at Qatargas. This unique safety milestone is further enhanced
by a record 693 ship loadings in 2015, and an overall JBOG recovery of nearly 90%. All these are
the result of the company’s continuous commitment to safety by the leadership and workforce
alike and adopting an integrated approach to safety that involves working in a cooperative manner
to ensure the health and safety of all employees.”
This “remarkable” achievement was made possible thanks to the hard work, dedication and
commitment of everyone associated with CLNGSL. Implementation of the Incident and Injury Free
(IIF) programme has added value for Qatargas in maintaining an injury and incident free
workplace culture. The message that Qatargas reinforces across all levels of its operations is
clear – everyone is responsible for his own safety as well as the safety of those around him.
This safety milestone follows another significant performance achieved by Qatargas in the first
quarter of 2015 as the company completed some 13 years of operations on its offshore facilities
without an LTI. In April 2015, the Common LNG Storage and Loading Asset marked an important
milestone by loading the 5000th cargo on board the Q-Flex vessel, Al Karaana, at Ras Laffan
Port.
Qatar LNG Export Capacity = 77 Tonnes per year , as 2012 till date
Copyright © 2015 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 4
Pakistan expects to agree Qatar LNG price this month or next
Reuters + NewBase
Pakistan is still in negotiations to finalise a multibillion-dollar liquefied natural gas (LNG) import
contract with Qatar and expects to reach a price for the deal by end of this month or the next, its
petroleum minister said yesterday.
The 15-year deal was struck last year and will be for 1.5mn tonnes a year of LNG.
“The price has not been finally agreed yet; the only thing left is price right now,” Minister of State
for Petroleum Jam Kamal Khan told Reuters in Abu Dhabi. “I think the final agreement will be
either this month or in February,” he said, adding that he expects the deal to be finalised during a
visit to Qatar by Pakistan’s Prime Minister. He did not give a date for the visit.
“The price will be linked to Brent crude so the current price environment is quite suitable for
Pakistan,” Khan said. Gas is used to generate nearly half of Pakistan’s electricity. It produces
about 4.1bn cu ft per day but needs around 6bn cu ft per day, depending on the time of year.
Khan put Pakistan’s deficit figure higher saying it amounted to 2.5bn cu ft per day and another 2bn
cu ft per day of constrained demand adding up to more than 4bn cubic feet per day. “This is why
we are in need of a long-term contract,” he said.
Pakistan has already been importing LNG through spot buying in the past eight months, with
twelve vessels already received. Imports from the Qatari agreement are expected to flow within
weeks of signing the final deal on price, he said.
Pakistan is receiving the LNG shipments through its terminal at Port Qasim in the southern city of
Karachi where a second terminal is also being added to expand capacity. A third terminal at Port
Gwadar will raise total capacity to 1.8bn cu f per day, according to Khan.
The Gwadar terminal, which is close to the border with Iran, will be linked to a $1.7 pipeline being
built by the China Petroleum Pipeline bureau. Once complete and should economic sanctions on
Iran be lifted, Pakistan would be able to easily link that pipeline to Iran to receive gas.
“Its a 700-km pipeline linking into our main network system and at the same time if things improve
with Iran in the coming year we will be adding a 70-km link to Iran,” Khan said. Apart from long
term contracts and spot buying, Pakistan also launched a tender for a medium term contract for 3-
5 years.
“That tender should be finalised within the coming month and a half,” he said. Volumes for the
tender are unspecified. India’s biggest gas importer Petronet LNG will buy LNG from Qatar’s
Rasgas at almost half the original price, in a renegotiated deal that will save it about $605mn a
year.
Copyright © 2015 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 5
Tanzania: Aminex signs Kiliwani gas sales agreement - set to
start first production in Africa .. Source: Aminex
Aminex has executed a fully-termed Gas Sales Agreement ('GSA') with the Tanzania
Petroleum Development Corporation ('TPDC') for its Kiliwani North gas field, which moves
the Company into its much anticipated production phase.
HIGHLIGHTS:
• Milestone agreement moves the Company into producing phase;
• Take-or-pay depletion contract with gas revenues payable in US Dollars;
• Initial gas price of US$3.00 per mmbtu (approximately US$3.07 per mcf);
• Effective date of GSA 31 December 2015;
• Annual indexation of gas price from 1 January 2016; and
• Agreed payment security mechanism
Participants in the Kiliwani North
Development Licence are: -
N.Resources(Aminex) 55.575%
RAK Gas 23.75%,
Bounty Oil & Gas 9.5%,
Solo Oil6.175% and
TPDC 5%.
The Kiliwani North GSA allows
for the expected depletion of
production from the field over
time. In each contract year
TPDC will be required to
purchase, take delivery of or pay
for a pre-determined volume of
gas. In the event that TPDC
elects not to take delivery of the
pre-determined volume, it will
pay for the equivalent of 85% of
the agreed commercial rate of
gas to be supplied, adjusted
each year in accordance with the
terms of the GSA. Gas from
Kiliwani North will be supplied to
the recently completed Songo
Songo gas processing plant.
Final well preparations, which
are currently ongoing, are being
completed prior to testing and
commissioning of the new plant.
During this phase production
rates will be varied to optimise
Copyright © 2015 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 6
well life and establish commercial rates. During the testing and commissioning phase, the TPDC
will be invoiced for gas produced at the end of each month and will be required to pay on
invoice.
The start of commercial operations will be mutually agreed between the TPDC and the Company
after testing and commissioning has been completed. Each month, the TPDC will be required to
pay one month’s revenues in advance, secured with a letter of credit issued by the Tanzania
Investment Bank. Monthly revenues will be calculated based on actual production, and
adjustments will be made at the end of each month for any discrepancy between estimated and
actual throughput.
Gas will be sold at US$3.00 per mmbtu (approx. US$3.07 per mcf) and the price will be adjusted
annually by applying an agreed United States Consumer Price Index. The gas price is not linked
to any commodity price so is unaffected by current commodity market conditions.
Gas revenues will be invoiced and payable in United States Dollars and the gas delivery point
will be at the outlet flange of the Kiliwani North wellhead. By selling the gas at the wellhead, the
joint venture partners will not be responsible for pipeline transportation and processing fees.
Shareholders are reminded that Solo Oil retains an option to purchase a further 6.5% stake in the
KNDL (before TPDC back-in) for a period of 30 days following signing of the GSA, according to
the terms of an agreement previously advised to shareholders.
As previously announced, Bowleven and Aminex have signed a Heads of Terms agreement for
future cooperation in Tanzania, including Bowleven’s participation in Kiliwani North, which
remains subject to shareholder and all regulatory approvals.
Aminex Chief Executive, Jay Bhattacherjee, commented:
'Aminex has operated in Tanzania for over 13 years, always working closely with the Tanzanian
authorities, and the Kiliwani North Gas Sales Agreement represents a major milestone as the
Company’s first commercial production in Tanzania.
Achieving this agreement has been a long time coming but the final version is comprehensive
and will allow production to commence with clarity and security. We are grateful to shareholders
for their support and patience. With a mix of production from Kiliwani North and upcoming
appraisal and development drilling in the highly prospective Ruvuma basin, we consider Aminex
to be well placed for further growth.'
Copyright © 2015 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 7
Drilling Downturn Hits US Oil Consumption
Reuters - John Kemp
Oil and gas production was one of the fastest-growing industries in the United States between
2009 and 2014 according to the U.S. Bureau of Economic Analysis (BEA). Oil production
increased by more than 60 percent while natural gas production was up by more than 25 percent
thanks to the shale revolution.
What is less well-known is that oil and gas production is also very energy intensive and the drilling
boom contributed significantly to fuel consumption, especially diesel. Now the drilling boom is
over, lower fuel demand from oil and gas producers helps explain why diesel consumption in the
United States has been unusually weak over the last 12 months.
Fuel consumption by oil and gas producers themselves is an example of what is known in control
systems theory as positive feedback. The more oil and gas the drillers produced, the more fuel
they and their suppliers consumed, creating even more demand, and stimulating even more
production.
Systems characterised by positive feedback tend to be prone to instability and boom-bust cycles.
In the oil and gas sector, positive feedback contributes to the instability of supply, demand and
prices.
Fuel consumption by oil and gas producers and their suppliers is not the only example of
destabilising positive feedback in oil and gas markets, and may not even be the most important.
Oil and gas lending and the state of the economy are also subject to positive feedback effects
which destabilise oil and gas markets. But the fuel requirements of oil and gas production are
significant enough that they are having a noticeable impact on consumption and prices, especially
for diesel.
Copyright © 2015 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
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Input-Output Accounts
In 2014, oil and gas producers required around 10 cents worth of oil and gas production to
produce $1 of oil and gas output, according to the BEA ("Commodity-by-industry direct
requirements" 2014).
Drilling rigs and hydraulic fracturing pumps mostly employ high-horsepower diesel-electric engines
that run 24 hours per day consuming enormous quantities of diesel. Most of the heating, lighting
and other services at remote well sites are also provided by diesel-electric generators.
Fuel consumption is one of the largest operating costs for oil and gas drilling firms, especially
when diesel prices are high. In addition to all this direct demand for oil and gas created by the
drilling industry, there is also the indirect demand created by all the other products used by the
drilling industry.
For example, fracturing
requires sand, which is
quarried using trucks and
other heavy equipment
that run on diesel. Drilling
requires steel drill pipes,
which must be produced
at steel plants that
themselves use diesel
and natural gas.
The raw materials for
drilling and fracturing
arrive at the well site by
road and rail on trucks
and trains that consume
diesel fuel. Once oil and
gas has been produced, it
is carried away in trucks,
railroad tank cars and pipelines that consume even more diesel and natural gas.
The quarries, steel mills, trucking firms, railroads and pipelines which supply the oil and gas
industry all have their own suppliers, which in turn consume diesel, gasoline, natural gas and
other petroleum-based fuels.
Oil and gas production therefore has a powerful multiplier effect on both economic activity and fuel
consumption. Producing $1 worth of oil and gas required $1.58 of gross output by all domestic
industries in 2014, according to the BEA ("Commodity-by-commodity total requirements" 2014).
Once all the direct and indirect effects are taken into account, U.S. oil and gas producers
stimulated $1.12 worth of oil and gas demand for every $1 that they produced in 2014. Both the
direct requirements and total requirements created by drillers themselves are contained in input-
output accounts published on the BEA's website
(http://www.bea.gov/iTable/index_industry_io.cfm).
During the boom, oil and gas drillers created enormous extra demand for raw materials, transport
and workers, all of which in turn stimulated more oil and gas demand. Now the process has gone
into reverse, worsening the slump.
Copyright © 2015 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 9
Copyright © 2015 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 10
NewBase 14 January 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
US crude edges up in early Asian trade amid market gloom
Reuters + NewBase + CNBC
U.S. crude futures eked out gains for a second day in early Asian trade on Thursday, though the
market remains vulnerable to gloom over a world awash with supply and concerns about
economic growth hitting equity markets.
West Texas Intermediate (WTI) was up 16 cents at $30.64 a barrel at 0052 GMT. It settled at
$30.48 on Wednesday, up 4 cents, after dropping as low as $30.10, the first gains in 2016.
WTI is down about 20 percent from a high on the first day of trading in 2016 and fell through the
important $30 barrier on Tuesday before recouping some of the losses.
On Wednesday it was the global benchmark's turn to fall below $30 a barrel, dropping to a new
12-year low at $29.96 a barrel, before settling at $30.31 a barrel, down 55 cents or 1.8 percent.
A bearish report from the U.S. Energy Information Administration on Tuesday underlined concerns
that demand is stagnating as more supply comes to market.
Data showing that crude inventories rose 234,000 barrels last week, much less than expectations,
was overshadowed by reported builds of 8.4 million barrels in gasoline and over 6 million in
distillates, which includes diesel and heating oil.
Oil price special
coverage
Copyright © 2015 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
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Concerns about the U.S. economy also amplified the gloom and the Standard and Poor's 500
index dipped below 1,900 for the first time since early October.
Copyright © 2015 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 12
Energy experts expect oil prices to average $40 per barrel in ‘16
Gulf News + NewBase
The price of oil this year will most likely average $40 per barrel in 2016, according to energy
industry experts polled during a recent survey in the UAE.
At the 7th UAE Energy Forum on Tuesday, Gulf Intelligence asked 250 participants, including
government officials, heads of oil and gas companies and analysts about where they think crude
prices are headed this year.
More than half (51 per cent) of the respondents said they expect oil prices to average $40 per
barrel, while nearly one-third said the price would stick to $30 per barrel.
Forum participants included representatives of companies like Breitling Energy Corporation, Shell,
Mubadala Petroleum, Oxy Oil and Gas, among many others.
About 45 per cent of the respondents indicated that the “restrained budgets” in the Gulf region will
be the centre of attention this year as it is the top macroeconomic factor that could impact the oil
and gas sector in 2016.
The weakness in Chinese markets is something to watch out for as well, with 38 per cent of the
respondents saying it could also affect the sector.
However, the weakening economies in most of the BRIC countries (Brazil, Russia, India and
China) and the United States Federal Reserve decision to increase interest rates were not seen to
have a major impact, gaining only 10 per cent and 8 per cent, respectively, of the votes.
After hitting a 12-year low of $29.93 on Tuesday, crude increased to $30.81 per barrel on
Wednesday.
Copyright © 2015 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
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Crude oil prices to remain relatively low through 2016 and 2017
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2016
The Short-Term Energy Outlook (STEO) released on January 12, which is the first STEO to
include projections for 2017, forecasts Brent crude oil prices will average $40 per barrel (b) in
2016 and $50/b in 2017. West Texas Intermediate (WTI) crude oil prices are expected to be $2/b
lower than Brent in 2016 and $3/b lower than Brent in 2017.
EIA recognizes that there is still high uncertainty in the crude oil price outlook. For example, EIA's
forecast for the average WTI price in April 2016 is $37/b, while the market expects WTI prices to
range from $25/b to $56/b (at the 95% confidence interval) based on the recent prices of futures
and options contracts for April 2016 delivery.
Crude oil prices are expected to remain low as supply continues to outpace demand in 2016 and
more crude oil is placed into storage. EIA estimates that global oil inventories increased by 1.9
million b/d in 2015, marking thesecond consecutive year of inventory builds.
Inventories are forecast to rise by an additional 0.7 million b/d in 2016, before the global oil market
becomes relatively balanced in 2017. The first forecasted draw on global oil inventories is
expected in the third quarter of 2017, marking the end of 14 consecutive quarters of inventory
builds.
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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 14
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2016
Since 2012, the United States has been the source of much of the global increase in production of
petroleum and other liquids. In 2016 and 2017, however, members of the Organization of the
Petroleum Exporting Countries (OPEC) are expected to account for most of production growth.
EIA expects non-OPEC production to decline by 0.6 million b/d in 2016, which would be the first
decline in non-OPEC production since 2008. About two-thirds of this forecasted decline in 2016
comes from the United States.
Copyright © 2015 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 15
Note: Production from Indonesia, which recently regained OPEC membership, is included in
OPEC totals for both history and forecasts.
Changes in non-OPEC production are driven by changes in U.S. tight oil production, which is
characterized by highdecline rates and relatively short investment horizons that make it among the
most price-sensitive production globally.
Forecast total U.S. liquid fuels production declines by 0.4 million b/d in 2016 and remains
relatively flat in 2017, as low oil prices contribute to drilling rig counts falling below levels required
to sustain current production rates.
OPEC crude oil production is forecast to increase by 0.5 million b/d in 2016, with Iran accounting
for most of that increase. Iran is expected to increase its production once international sanctions
targeting its oil sector are suspended.
Although uncertainty remains as to the timing of sanctions relief, EIA assumes this occurs in the
first quarter of 2016. EIA's timing reflects Iran's progress in meeting key obligations required under
the Joint Comprehensive Plan of Action, which has been faster than previously anticipated.
EIA expects global consumption of petroleum and other liquid fuels to grow by 1.4 million b/d in
both 2016 and 2017. Forecast real gross domestic product (GDP) for the world, weighted by oil
consumption, which increased by an estimated 2.4% in 2015, rises by 2.7% in 2016 and by 3.2%
in 2017.
Copyright © 2015 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 16
NewBase Special Coverage
News Agencies News Release 06 January 2016
Russian deputy FinMin says low oil prices may prompt production closures
Reuters
Persistently low oil prices may result in the closure of some crude oil-producing assets in
Russia, Russian Deputy Finance Minister Maxim Oreshkin was cited by local news
agencies as saying on Wednesday.
"The current oil prices may lead to quite hard and fast closures of certain oil producers in coming
months," he was quoted as saying by TASS news agency in an interview to RBC TV.
While US WTI crude briefly stumbled below $30 for the first time in 12 years, Russia's Urals blend
is already below that mark trading at $27.14 a barrel. Given the new reality, the Kremlin has
ordered stress tests with $25, $35 and $45 oil.
Russia’s federal budget for 2016 relies on an average annual oil price of $50, which almost
corresponds to the last year average price - $51.4 per barrel. According to business daily
Vedomosti, Russia’s First Deputy Prime Minister Igor Shuvalov has instructed the ministries to
work on different scenarios, both bearish and bullish.
The most recent collapse in energy prices from November means the Russian budget will lose
300 billion rubles (about $4 billion) in oil revenue in the first two months of 2016, according to the
newspaper’s ministerial source.
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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 17
The updated macroeconomic forecast will be presented by Economic Development Minister
Aleksey Ulyukaev later this month. In the meantime, the government has decided to cut spending
by 10 percent.
According to Ulyukaev, Russia shouldn’t fear collapsing crude prices.
"It seems to me that you don't need to be afraid that oil will cost $20 or $15. The logic of the
markets says the lower something falls today, the more likely there will be a rebound tomorrow. It
is not the biggest risk. The biggest risk is that oil prices could stay low for years or decades," he
said at the Gaidar Economic Forum on Wednesday.
Also at the forum, Russian Finance Minister Anton Siluanov acknowledged that the budget had
not yet adapted to falling oil prices.
He said that if the government fails to change the budget for the new economic situation, "then it
will be the same as it was during the Russian crisis of 1998-1999, when the citizens paid with
inflation for our failure to bring the budget into line with the new realities."
The current Central Bank shock scenario assumes oil prices of $35 per barrel as well as projected
2-3 percent GDP contraction and seven percent inflation. But the country’s leading bank Sberbank
has already begun to make a $25 stress test.
"We had a $30 scenario. But now it's irrelevant. In our business plan, it was the worst-case
scenario, which became real at the beginning of the year," Sberbank CEO Herman Gref told the
Interfax news agency.
Some analysts say there’s a certain way to cut expenses – to cut military costs.“The country in
such a position cannot spend four percent of GDP on defense,” said economist Vladimir Nazarov.
Copyright © 2015 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 18
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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 14 January 2016 K. Al Awadi
Copyright © 2015 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 19

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New base 765 special 14 january 2016

  • 1. Copyright © 2015 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 14 January 2016 - Issue No. 765 Edited & Produced by: Khaled Al Awadi NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE Saudi govt to keep controlling stake ‘if it lists Aramco’ Reuters Saudi Arabia’s government will keep a controlling interest in state-owned Saudi Aramco if it decides on a share offering of the world’s largest oil firm, its chief executive said. Aramco has crude reserves of about 265bn barrels, over 15% of all global oil deposits. If it goes public, it could become the first listed company valued at $1tn, analysts have estimated . “A range of options are being considered, including the listing in the capital markets of an appropriate percentage of Saudi Aramco shares with the government retaining a controlling interest, as well as the option to list a bundle of downstream businesses and interests,” Amin Nasser wrote in a letter published in Aramco’s weekly magazine the Arabian Sun. Nasser, who is chairing a steering committee overseeing the process, cited the government’s privatization initiative and broader economic reforms as the two key drivers behind the move. Deputy Crown Prince Mohammed bin Salman indicated in an interview with The Economist magazine last week that Saudi Arabia might sell shares in Aramco, as part of a privatisation drive to raise money in an era of low oil prices. Last Friday, it issued a brief statement saying it was considering options including the stock market listing “of an appropriate percentage of the company’s shares and/or the listing of a bundle (of) its downstream subsidiaries”.
  • 2. Copyright © 2015 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 2 Aramco chairman Khalid al-Falih told the Wall Street Journal on Monday there was no specific timeline or concrete plan for the listing. However, a listing of the main company, which includes upstream, as well as refining and petrochemical assets was being considered, he said. Oil’s collapse has delayed $380 billion worth of investment on 68 major upstream projects, according to industry consultant Wood Mackenzie Ltd. The developments account for about 27 billion barrels of oil equivalent and about 2.9 million barrels a day of production is being deferred to early next decade, according to the Jan. 12 report. Deepwater projects will be hit the hardest and account for more than half of new project deferrals, it said. Crude’s price plunge has forced companies and governments to reduce costs as revenues from hydrocarbon sales plunge. BP Plcplans to cut 4,000 jobs, Petroleo Brasileiro SA slashed its spending plan and Malaysia’s Petroliam Nasional Bhd. warned that it faces several tough years. State-owned Saudi Arabian Oil Co., the world’s largest crude producer, is studying options for a share sale. “Companies are going into survival mode in 2016,” Angus Rodger, one of the report’s authors, said by phone. “We expect to see further project deferments, reduced budgets and companies doing everything they can to reduce how much expenditure they have. As a consequence, we see this number growing through the year.” Brent crude, the benchmark for most of the world’s oil, capped a third yearly decline in 2015 and has fallen to the lowest in more than a decade as the Organization of Petroleum Exporting Countries effectively abandons production limits amid a global glut. The grade dropped below $30 a barrel Wednesday for the first time since April 2004 amid speculation sanctions on Iran may be lifted by Monday, paving the way for increased oil exports. Concern that prices will remain “lower for longer” is limiting confidence for new investments, according to the Wood Mackenzie report. The average break-even price of the delayed greenfield projects is $62 a barrel, according to the report. Ed Morse, Citigroup Inc. managing director and global head of commodities research, said 11 months ago oil could fall as low as $20 and Goldman Sachs Group Inc. has given a 50 percent chance of crude hitting that level.
  • 3. Copyright © 2015 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 3 Qatargas’ loading and storage facility completes seven years without LTI Gulf Times Berths at Ras Laffan Port from where LNG is loaded onto ships for delivery to customers of Qatargas and RasGas across the globe. Implementation of the Incident and Injury Free (IIF) programme has added value for Qatargas in maintaining an injury and incident free workplace culture. Recording yet another significant safety milestone, Qatargas’ Common Liquefied Natural Gas (LNG) Storage and Loading Asset (CLNGSL) completed seven consecutive years of operations on December 31, 2015, without a Lost Time Incident (LTI). Operated by Qatargas, the Common Lean LNG storage and loading facilities were built to store and load LNG produced from Qatargas’ seven LNG production trains and RasGas Trains 6 and 7. The LNG is loaded from five berths (berths 1, 3, 4, 5 and 6) at Ras Laffan port and delivered to customers of Qatargas and RasGas across the globe. The facilities started operations on December 31 with the introduction of gas during the start-up phase of the Qatargas 2 (Trains 4 & 5) project. The asset has grown by receiving Qatargas 3 & 4 (Trains 6 & 7) LNG product as well as LNG from RasGas trains 6 & 7. The Jetty Boil Off Gas (JBOG) facilities were added in 2014. On the achievement, Qatargas chief executive officer Khalid bin Khalifa al-Thani said, “This is a moment of great pride for all of us at Qatargas. This unique safety milestone is further enhanced by a record 693 ship loadings in 2015, and an overall JBOG recovery of nearly 90%. All these are the result of the company’s continuous commitment to safety by the leadership and workforce alike and adopting an integrated approach to safety that involves working in a cooperative manner to ensure the health and safety of all employees.” This “remarkable” achievement was made possible thanks to the hard work, dedication and commitment of everyone associated with CLNGSL. Implementation of the Incident and Injury Free (IIF) programme has added value for Qatargas in maintaining an injury and incident free workplace culture. The message that Qatargas reinforces across all levels of its operations is clear – everyone is responsible for his own safety as well as the safety of those around him. This safety milestone follows another significant performance achieved by Qatargas in the first quarter of 2015 as the company completed some 13 years of operations on its offshore facilities without an LTI. In April 2015, the Common LNG Storage and Loading Asset marked an important milestone by loading the 5000th cargo on board the Q-Flex vessel, Al Karaana, at Ras Laffan Port. Qatar LNG Export Capacity = 77 Tonnes per year , as 2012 till date
  • 4. Copyright © 2015 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 4 Pakistan expects to agree Qatar LNG price this month or next Reuters + NewBase Pakistan is still in negotiations to finalise a multibillion-dollar liquefied natural gas (LNG) import contract with Qatar and expects to reach a price for the deal by end of this month or the next, its petroleum minister said yesterday. The 15-year deal was struck last year and will be for 1.5mn tonnes a year of LNG. “The price has not been finally agreed yet; the only thing left is price right now,” Minister of State for Petroleum Jam Kamal Khan told Reuters in Abu Dhabi. “I think the final agreement will be either this month or in February,” he said, adding that he expects the deal to be finalised during a visit to Qatar by Pakistan’s Prime Minister. He did not give a date for the visit. “The price will be linked to Brent crude so the current price environment is quite suitable for Pakistan,” Khan said. Gas is used to generate nearly half of Pakistan’s electricity. It produces about 4.1bn cu ft per day but needs around 6bn cu ft per day, depending on the time of year. Khan put Pakistan’s deficit figure higher saying it amounted to 2.5bn cu ft per day and another 2bn cu ft per day of constrained demand adding up to more than 4bn cubic feet per day. “This is why we are in need of a long-term contract,” he said. Pakistan has already been importing LNG through spot buying in the past eight months, with twelve vessels already received. Imports from the Qatari agreement are expected to flow within weeks of signing the final deal on price, he said. Pakistan is receiving the LNG shipments through its terminal at Port Qasim in the southern city of Karachi where a second terminal is also being added to expand capacity. A third terminal at Port Gwadar will raise total capacity to 1.8bn cu f per day, according to Khan. The Gwadar terminal, which is close to the border with Iran, will be linked to a $1.7 pipeline being built by the China Petroleum Pipeline bureau. Once complete and should economic sanctions on Iran be lifted, Pakistan would be able to easily link that pipeline to Iran to receive gas. “Its a 700-km pipeline linking into our main network system and at the same time if things improve with Iran in the coming year we will be adding a 70-km link to Iran,” Khan said. Apart from long term contracts and spot buying, Pakistan also launched a tender for a medium term contract for 3- 5 years. “That tender should be finalised within the coming month and a half,” he said. Volumes for the tender are unspecified. India’s biggest gas importer Petronet LNG will buy LNG from Qatar’s Rasgas at almost half the original price, in a renegotiated deal that will save it about $605mn a year.
  • 5. Copyright © 2015 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 5 Tanzania: Aminex signs Kiliwani gas sales agreement - set to start first production in Africa .. Source: Aminex Aminex has executed a fully-termed Gas Sales Agreement ('GSA') with the Tanzania Petroleum Development Corporation ('TPDC') for its Kiliwani North gas field, which moves the Company into its much anticipated production phase. HIGHLIGHTS: • Milestone agreement moves the Company into producing phase; • Take-or-pay depletion contract with gas revenues payable in US Dollars; • Initial gas price of US$3.00 per mmbtu (approximately US$3.07 per mcf); • Effective date of GSA 31 December 2015; • Annual indexation of gas price from 1 January 2016; and • Agreed payment security mechanism Participants in the Kiliwani North Development Licence are: - N.Resources(Aminex) 55.575% RAK Gas 23.75%, Bounty Oil & Gas 9.5%, Solo Oil6.175% and TPDC 5%. The Kiliwani North GSA allows for the expected depletion of production from the field over time. In each contract year TPDC will be required to purchase, take delivery of or pay for a pre-determined volume of gas. In the event that TPDC elects not to take delivery of the pre-determined volume, it will pay for the equivalent of 85% of the agreed commercial rate of gas to be supplied, adjusted each year in accordance with the terms of the GSA. Gas from Kiliwani North will be supplied to the recently completed Songo Songo gas processing plant. Final well preparations, which are currently ongoing, are being completed prior to testing and commissioning of the new plant. During this phase production rates will be varied to optimise
  • 6. Copyright © 2015 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 6 well life and establish commercial rates. During the testing and commissioning phase, the TPDC will be invoiced for gas produced at the end of each month and will be required to pay on invoice. The start of commercial operations will be mutually agreed between the TPDC and the Company after testing and commissioning has been completed. Each month, the TPDC will be required to pay one month’s revenues in advance, secured with a letter of credit issued by the Tanzania Investment Bank. Monthly revenues will be calculated based on actual production, and adjustments will be made at the end of each month for any discrepancy between estimated and actual throughput. Gas will be sold at US$3.00 per mmbtu (approx. US$3.07 per mcf) and the price will be adjusted annually by applying an agreed United States Consumer Price Index. The gas price is not linked to any commodity price so is unaffected by current commodity market conditions. Gas revenues will be invoiced and payable in United States Dollars and the gas delivery point will be at the outlet flange of the Kiliwani North wellhead. By selling the gas at the wellhead, the joint venture partners will not be responsible for pipeline transportation and processing fees. Shareholders are reminded that Solo Oil retains an option to purchase a further 6.5% stake in the KNDL (before TPDC back-in) for a period of 30 days following signing of the GSA, according to the terms of an agreement previously advised to shareholders. As previously announced, Bowleven and Aminex have signed a Heads of Terms agreement for future cooperation in Tanzania, including Bowleven’s participation in Kiliwani North, which remains subject to shareholder and all regulatory approvals. Aminex Chief Executive, Jay Bhattacherjee, commented: 'Aminex has operated in Tanzania for over 13 years, always working closely with the Tanzanian authorities, and the Kiliwani North Gas Sales Agreement represents a major milestone as the Company’s first commercial production in Tanzania. Achieving this agreement has been a long time coming but the final version is comprehensive and will allow production to commence with clarity and security. We are grateful to shareholders for their support and patience. With a mix of production from Kiliwani North and upcoming appraisal and development drilling in the highly prospective Ruvuma basin, we consider Aminex to be well placed for further growth.'
  • 7. Copyright © 2015 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 7 Drilling Downturn Hits US Oil Consumption Reuters - John Kemp Oil and gas production was one of the fastest-growing industries in the United States between 2009 and 2014 according to the U.S. Bureau of Economic Analysis (BEA). Oil production increased by more than 60 percent while natural gas production was up by more than 25 percent thanks to the shale revolution. What is less well-known is that oil and gas production is also very energy intensive and the drilling boom contributed significantly to fuel consumption, especially diesel. Now the drilling boom is over, lower fuel demand from oil and gas producers helps explain why diesel consumption in the United States has been unusually weak over the last 12 months. Fuel consumption by oil and gas producers themselves is an example of what is known in control systems theory as positive feedback. The more oil and gas the drillers produced, the more fuel they and their suppliers consumed, creating even more demand, and stimulating even more production. Systems characterised by positive feedback tend to be prone to instability and boom-bust cycles. In the oil and gas sector, positive feedback contributes to the instability of supply, demand and prices. Fuel consumption by oil and gas producers and their suppliers is not the only example of destabilising positive feedback in oil and gas markets, and may not even be the most important. Oil and gas lending and the state of the economy are also subject to positive feedback effects which destabilise oil and gas markets. But the fuel requirements of oil and gas production are significant enough that they are having a noticeable impact on consumption and prices, especially for diesel.
  • 8. Copyright © 2015 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 8 Input-Output Accounts In 2014, oil and gas producers required around 10 cents worth of oil and gas production to produce $1 of oil and gas output, according to the BEA ("Commodity-by-industry direct requirements" 2014). Drilling rigs and hydraulic fracturing pumps mostly employ high-horsepower diesel-electric engines that run 24 hours per day consuming enormous quantities of diesel. Most of the heating, lighting and other services at remote well sites are also provided by diesel-electric generators. Fuel consumption is one of the largest operating costs for oil and gas drilling firms, especially when diesel prices are high. In addition to all this direct demand for oil and gas created by the drilling industry, there is also the indirect demand created by all the other products used by the drilling industry. For example, fracturing requires sand, which is quarried using trucks and other heavy equipment that run on diesel. Drilling requires steel drill pipes, which must be produced at steel plants that themselves use diesel and natural gas. The raw materials for drilling and fracturing arrive at the well site by road and rail on trucks and trains that consume diesel fuel. Once oil and gas has been produced, it is carried away in trucks, railroad tank cars and pipelines that consume even more diesel and natural gas. The quarries, steel mills, trucking firms, railroads and pipelines which supply the oil and gas industry all have their own suppliers, which in turn consume diesel, gasoline, natural gas and other petroleum-based fuels. Oil and gas production therefore has a powerful multiplier effect on both economic activity and fuel consumption. Producing $1 worth of oil and gas required $1.58 of gross output by all domestic industries in 2014, according to the BEA ("Commodity-by-commodity total requirements" 2014). Once all the direct and indirect effects are taken into account, U.S. oil and gas producers stimulated $1.12 worth of oil and gas demand for every $1 that they produced in 2014. Both the direct requirements and total requirements created by drillers themselves are contained in input- output accounts published on the BEA's website (http://www.bea.gov/iTable/index_industry_io.cfm). During the boom, oil and gas drillers created enormous extra demand for raw materials, transport and workers, all of which in turn stimulated more oil and gas demand. Now the process has gone into reverse, worsening the slump.
  • 9. Copyright © 2015 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 9
  • 10. Copyright © 2015 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 10 NewBase 14 January 2016 Khaled Al Awadi NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE US crude edges up in early Asian trade amid market gloom Reuters + NewBase + CNBC U.S. crude futures eked out gains for a second day in early Asian trade on Thursday, though the market remains vulnerable to gloom over a world awash with supply and concerns about economic growth hitting equity markets. West Texas Intermediate (WTI) was up 16 cents at $30.64 a barrel at 0052 GMT. It settled at $30.48 on Wednesday, up 4 cents, after dropping as low as $30.10, the first gains in 2016. WTI is down about 20 percent from a high on the first day of trading in 2016 and fell through the important $30 barrier on Tuesday before recouping some of the losses. On Wednesday it was the global benchmark's turn to fall below $30 a barrel, dropping to a new 12-year low at $29.96 a barrel, before settling at $30.31 a barrel, down 55 cents or 1.8 percent. A bearish report from the U.S. Energy Information Administration on Tuesday underlined concerns that demand is stagnating as more supply comes to market. Data showing that crude inventories rose 234,000 barrels last week, much less than expectations, was overshadowed by reported builds of 8.4 million barrels in gasoline and over 6 million in distillates, which includes diesel and heating oil. Oil price special coverage
  • 11. Copyright © 2015 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 11 Concerns about the U.S. economy also amplified the gloom and the Standard and Poor's 500 index dipped below 1,900 for the first time since early October.
  • 12. Copyright © 2015 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 12 Energy experts expect oil prices to average $40 per barrel in ‘16 Gulf News + NewBase The price of oil this year will most likely average $40 per barrel in 2016, according to energy industry experts polled during a recent survey in the UAE. At the 7th UAE Energy Forum on Tuesday, Gulf Intelligence asked 250 participants, including government officials, heads of oil and gas companies and analysts about where they think crude prices are headed this year. More than half (51 per cent) of the respondents said they expect oil prices to average $40 per barrel, while nearly one-third said the price would stick to $30 per barrel. Forum participants included representatives of companies like Breitling Energy Corporation, Shell, Mubadala Petroleum, Oxy Oil and Gas, among many others. About 45 per cent of the respondents indicated that the “restrained budgets” in the Gulf region will be the centre of attention this year as it is the top macroeconomic factor that could impact the oil and gas sector in 2016. The weakness in Chinese markets is something to watch out for as well, with 38 per cent of the respondents saying it could also affect the sector. However, the weakening economies in most of the BRIC countries (Brazil, Russia, India and China) and the United States Federal Reserve decision to increase interest rates were not seen to have a major impact, gaining only 10 per cent and 8 per cent, respectively, of the votes. After hitting a 12-year low of $29.93 on Tuesday, crude increased to $30.81 per barrel on Wednesday.
  • 13. Copyright © 2015 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 13 Crude oil prices to remain relatively low through 2016 and 2017 Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2016 The Short-Term Energy Outlook (STEO) released on January 12, which is the first STEO to include projections for 2017, forecasts Brent crude oil prices will average $40 per barrel (b) in 2016 and $50/b in 2017. West Texas Intermediate (WTI) crude oil prices are expected to be $2/b lower than Brent in 2016 and $3/b lower than Brent in 2017. EIA recognizes that there is still high uncertainty in the crude oil price outlook. For example, EIA's forecast for the average WTI price in April 2016 is $37/b, while the market expects WTI prices to range from $25/b to $56/b (at the 95% confidence interval) based on the recent prices of futures and options contracts for April 2016 delivery. Crude oil prices are expected to remain low as supply continues to outpace demand in 2016 and more crude oil is placed into storage. EIA estimates that global oil inventories increased by 1.9 million b/d in 2015, marking thesecond consecutive year of inventory builds. Inventories are forecast to rise by an additional 0.7 million b/d in 2016, before the global oil market becomes relatively balanced in 2017. The first forecasted draw on global oil inventories is expected in the third quarter of 2017, marking the end of 14 consecutive quarters of inventory builds.
  • 14. Copyright © 2015 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 14 Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2016 Since 2012, the United States has been the source of much of the global increase in production of petroleum and other liquids. In 2016 and 2017, however, members of the Organization of the Petroleum Exporting Countries (OPEC) are expected to account for most of production growth. EIA expects non-OPEC production to decline by 0.6 million b/d in 2016, which would be the first decline in non-OPEC production since 2008. About two-thirds of this forecasted decline in 2016 comes from the United States.
  • 15. Copyright © 2015 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 15 Note: Production from Indonesia, which recently regained OPEC membership, is included in OPEC totals for both history and forecasts. Changes in non-OPEC production are driven by changes in U.S. tight oil production, which is characterized by highdecline rates and relatively short investment horizons that make it among the most price-sensitive production globally. Forecast total U.S. liquid fuels production declines by 0.4 million b/d in 2016 and remains relatively flat in 2017, as low oil prices contribute to drilling rig counts falling below levels required to sustain current production rates. OPEC crude oil production is forecast to increase by 0.5 million b/d in 2016, with Iran accounting for most of that increase. Iran is expected to increase its production once international sanctions targeting its oil sector are suspended. Although uncertainty remains as to the timing of sanctions relief, EIA assumes this occurs in the first quarter of 2016. EIA's timing reflects Iran's progress in meeting key obligations required under the Joint Comprehensive Plan of Action, which has been faster than previously anticipated. EIA expects global consumption of petroleum and other liquid fuels to grow by 1.4 million b/d in both 2016 and 2017. Forecast real gross domestic product (GDP) for the world, weighted by oil consumption, which increased by an estimated 2.4% in 2015, rises by 2.7% in 2016 and by 3.2% in 2017.
  • 16. Copyright © 2015 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 16 NewBase Special Coverage News Agencies News Release 06 January 2016 Russian deputy FinMin says low oil prices may prompt production closures Reuters Persistently low oil prices may result in the closure of some crude oil-producing assets in Russia, Russian Deputy Finance Minister Maxim Oreshkin was cited by local news agencies as saying on Wednesday. "The current oil prices may lead to quite hard and fast closures of certain oil producers in coming months," he was quoted as saying by TASS news agency in an interview to RBC TV. While US WTI crude briefly stumbled below $30 for the first time in 12 years, Russia's Urals blend is already below that mark trading at $27.14 a barrel. Given the new reality, the Kremlin has ordered stress tests with $25, $35 and $45 oil. Russia’s federal budget for 2016 relies on an average annual oil price of $50, which almost corresponds to the last year average price - $51.4 per barrel. According to business daily Vedomosti, Russia’s First Deputy Prime Minister Igor Shuvalov has instructed the ministries to work on different scenarios, both bearish and bullish. The most recent collapse in energy prices from November means the Russian budget will lose 300 billion rubles (about $4 billion) in oil revenue in the first two months of 2016, according to the newspaper’s ministerial source.
  • 17. Copyright © 2015 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 17 The updated macroeconomic forecast will be presented by Economic Development Minister Aleksey Ulyukaev later this month. In the meantime, the government has decided to cut spending by 10 percent. According to Ulyukaev, Russia shouldn’t fear collapsing crude prices. "It seems to me that you don't need to be afraid that oil will cost $20 or $15. The logic of the markets says the lower something falls today, the more likely there will be a rebound tomorrow. It is not the biggest risk. The biggest risk is that oil prices could stay low for years or decades," he said at the Gaidar Economic Forum on Wednesday. Also at the forum, Russian Finance Minister Anton Siluanov acknowledged that the budget had not yet adapted to falling oil prices. He said that if the government fails to change the budget for the new economic situation, "then it will be the same as it was during the Russian crisis of 1998-1999, when the citizens paid with inflation for our failure to bring the budget into line with the new realities." The current Central Bank shock scenario assumes oil prices of $35 per barrel as well as projected 2-3 percent GDP contraction and seven percent inflation. But the country’s leading bank Sberbank has already begun to make a $25 stress test. "We had a $30 scenario. But now it's irrelevant. In our business plan, it was the worst-case scenario, which became real at the beginning of the year," Sberbank CEO Herman Gref told the Interfax news agency. Some analysts say there’s a certain way to cut expenses – to cut military costs.“The country in such a position cannot spend four percent of GDP on defense,” said economist Vladimir Nazarov.
  • 18. Copyright © 2015 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 18 NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE 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 14 January 2016 K. Al Awadi
  • 19. Copyright © 2015 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 19