New base 993 special 29 january 2017 energy news

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NewBase 29 January 2017 - Issue No. 993 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE: OMV plans to increase its investments in Abu Dhabi, CEO
Gulg News - Fareed Rahman
The Austrian energy group is cautiously optimistic on Libyan oil production, seeks its money back
from Iran before it goes ahead with investments in Islamic republic
Austrian energy giant OMV Group plans to step up investments in the UAE by building on its
strong, existing partnerships with Abu Dhabi’s state-owned energy companies, the CEO of OMV
said.
“We are ready to increase our investments and further intensify our partnership with Ipic and
Adnoc. OMV has a clear vision about its business in Abu Dhabi. We would like to build step-wise,
an integrated business as an investor and as a strong partner of Adnoc,” said Rainer Seele
speaking to Gulf News over phone from Austria.
OMV has significant investments in Abu Dhabi and has three ongoing projects with Adnoc
including the sour gas project in Shuweihat with Wintershall, an appraisal project for undeveloped
offshore oil & gasfields in the north west of Abu Dhabi with Occidental Petroleum and an
exploration project for oil and gas in the Eastern region.
The company is also involved in the Borouge project for the production of petrochemicals through
Borealis (OMV has 36 per cent stake in Borealis).
“We are interested to increase our cooperation with Adnoc to further expand the Borouge
petrochemical site, which is the world’s largest integrated petrochemical complex. Together,
Adnoc and Borealis have invested around $10 billion and created 3,000 new jobs in Abu Dhabi,”
he said about Borouge.

Seele is optimistic about OMV’s future relationship with Abu Dhabi, post the Ipic (International
Petroleum Investment Company)-Mubadala merger, which was formalised this month. Ipic holds a
25 per cent stake in OMV.
“We are not in a position
to comment on the
merger. We have to wait
until the merger is
completed. Given the fact
that we do have such
good friendship between
Abu Dhabi and Austria,
we think this is a
successful partnership
between the two
countries and will
continue in the coming
years.”
In an agreement signed
last year, Ipic and the
Austrian holding OBIB
have decided to extend
their cooperation.
Suhail Al Mazroui, UAE Energy Minister and Managing Director of Ipic said in a statement last
year the continuation of the cooperation with OMV reflects strong energy ties between the two
countries and strong investment of strategy of Ipic around the world.
Libya oil production
Apart from Abu Dhabi, the oil and gas firm has a number of projects in the Middle East including in
trouble spots like Libya and Iran.
Seele expressed cautious optimism on Libya’s oil production.
“On Libya, we are cautiously optimistic and the country has the potential to increase its
production. Our production in Libya was about 3,000 barrels of oil per day in the fourth quarter
2016.”
Libya, which is exempted from Opec’s (Organisation of the Petroleum Exporting Countries)
agreement on production cuts has increased its production from 300,000 barrels a day in August,
to about 700,000 barrels a day in recent times due to improvement of the security situation in the
country.
On the Opec agreement, he said: “We have to be convinced that this is not just a verbal
agreement but it is going to be executed. There is a strong commitment from Opec as well from
non-Opec but they have to execute the deal effectively to remove the oversupply in the market for
an upside potential in oil price.”
Oil price — OMV’s assumptions
“We have planned 2017 with $55 per barrel. I don’t see any reason to change my plans. May be
Opec will do a great job, but I keep my plans on $55 per barrel.”

Iran investment strategy
The company has no plans to invest in Iran until it gets its money back, he said.
“We have invested quite a lot of money in Iran but because of the sanctions we could not continue
in all our projects and some money could not be transferred. Before I start investing in the country,
I would like to have my money back. That is fair.” The company did not disclose how much money
the Islamic republic owes to it.
OMV entered Iran in 2001 as the operator of the Mehr exploration block in western Iran, leading to
a successful discovery (Band-E-Karkheh) in 2005. In 2016 the National Iranian Oil Company and
OMV signed a Memorandum of Understanding concerning the evaluation of various fields in the
Zagros area in the west of Iran.
He also said everybody is negotiating some terms to invest in Iran and the project has to be
economically viable for investments to flow into Iran.
“It has to be an economically reliable project which means we need to have a stable framework
and our economic calculation needs to meet some profitability, then we are going to decide. Right
now, I have not reached a decision whether to invest any dollar in Iran.”
The company will continue with cost cutting measures due to low oil prices this year, he added.
Listed on the Austrian stock exchange, OMV has a market capitalisation of approximately 11
billion euros and has upstream production in eight countries including Romania, Austria, Norway,
Libya, Tunisia, Pakistan, New Zealand and Kazakhstan.
In 2015, OMV’s daily production stood at more than 300,000 barrels of oil per day. In downstream,
it has an annual refining capacity of 17.8 million tonnes.

Saudi plan to double gas production progresses with Fadhili
The National LeAnne Graves
Saudi Arabia is forging ahead with plans to double gas production with movement on its Fadhili
mega project.
The French energy giant Engie announced on Saturday it had secured financial close for the
US$1.2 billion cogeneration plant on the kingdom’s Fadhili independent power project. This will
provide electricity to Saudi Electricity Company (SEC) while steam and feedwater will be go to
Saudi Aramco, the kingdom’s national oil company.
The country has been making progress toward its National Transformation Plan, which includes
doubling its gas production to more than 17 billion standard cubic feet per day by 2020. The UK-
based Oxford Institute for Energy Studies said most of this gas will go into the power sector,
where over 13 gigawatts of gas-fired plants are due in the next few years.
"The Fadhili project is in line with our strategy that aims at concentrating on low carbon dioxide
activities via renewable energies and gas for power generation," said Isabelle Kocher, the chief
executive of Engie.
The combined cycle power plant uses both gas and steam to produce up to 50 per cent more
power compared to a traditional plant. The Fadhili facility will have a capacity of 1.5gigawatts,
which is enough power for 1.4 million people, while also producing 1,447 tonnes per hour of steam
and 768.8 tonnes per hour of feedwater.
Once the plant is completed in two years, Engie, the world’s largest independent power producer,
will operate four plants in Saudi Arabia.
"At the completion of the plant scheduled by end 2019, Engie’s gross production capacity will be
over 7GW of electricity," said Sebastien Arbola, Engie’s regional chief executive. "We firmly
believe in the energy and water opportunities in Gulf countries, which offer long-term offtake
contracts within a well-developed legal framework in a region with strong growth."

US Strategic Petroleum Reserve sales expected to start this month
Source: U.S. Energy Information Administration, based on Strategic Petroleum Reserve
Yesterday the U.S. Department of Energy's (DOE) Office of Fossil Energy awarded contracts for
the first of several sales of crude oil from the Strategic Petroleum Reserve (SPR). A Continuing
Resolution enacted in December 2016 included a provision for DOE to sell up to $375.4 million in
crude oil from the SPR. This sale will be the first of several planned sales totaling nearly 190
million barrels during fiscal years 2017 through 2025.
As the largest stockpile of government-owned emergency crude oil in the world, the SPR was
established to help alleviate significant oil supply reductions from occurrences such as major
geopolitical events, severe weather, unplanned production curtailments, transport disruptions, and
delivery outages. Located in four storage sites along the Gulf of Mexico, the SPR held more than
695 million barrels of crude oil as of January 13, or about 97% of its design capacity (713.5 million
barrels).
Several recent acts of Congress have authorized sales from the SPR:
The Bipartisan Budget Act (Section 404), enacted in 2015, includes authorization for funding an
SPR modernization program to support improvements deemed necessary to preserve the long-
term integrity and utility of SPR's infrastructure by selling up to $2 billion worth of SPR crude oil in
fiscal years 2017 through 2020. Although the estimated volumes presented in the chart above are
based on an assumed oil price of $50 per barrel, the actual final sales volumes will depend on
how SPR decides to allocate the sales volumes across those fiscal years and the actual price of

crude oil at the time of the sales. For the Section 404 sales, SPR must get an appropriation from
Congress to approve its requested sales revenue target.
Another section of the Bipartisan Budget Act (Section 403) mandates SPR crude oil sales for
fiscal years 2018 through 2025 on a volumetric basis, rather than on a dollar basis, as specified in
Section 404. The revenues from sales authorized under section 403 will be deposited into the
general fund of the U.S. Department of the Treasury.
The 21st Century Cures Act, enacted in December 2016, calls for the sale of 25 million barrels of
SPR crude oil for fiscal years 2017 through 2019. The first portion of these sales is expected in
late spring 2017.
The Fixing America’s Surface Transportation Act, enacted in December 2015, calls for SPR sales
totaling 66 million barrels from fiscal years 2023 through 2025.
One of the SPR's core missions is to carry out U.S. obligations under the International Energy
Program (IEP), the 1974 treaty that established the International Energy Agency (IEA). Under the
IEP, the United States must be able to contribute to an IEA collective action based on its share of
IEA oil consumption. Based on the most recent shares, the United States must be prepared to
contribute about 44% of the barrels released in an IEA-coordinated response. The United States
government relies on using oil in the SPR to meet this requirement. Previously, in response to oil
supply disruptions driven by hostilities in Libya in 2011, the United States contributed as much as
50% of the total IEA collective action.
As a member of the IEA, the United States is obligated to maintain stocks of crude oil and
petroleum products, both public and private, to provide at least 90 days of net import coverage.
Based on October 2016 levels of net crude oil and petroleum product imports, the SPR alone
holds crude oil stocks equivalent to 145 days of import coverage. Private (commercial) stocks of
crude oil provide another 489 million barrels, equivalent to another 102 days of import coverage.
Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Note: Days of import coverage reflects Strategic Petroleum Reserve level divided by net imports
of crude oil and petroleum products.

NewBase 29 January 2017 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices Settel at $53.17 and Brent at $ 55.30
Reuters + newbase
Oil prices slipped on Friday, extending losses after data suggested drilling is ramping up in the
United States, easing the focus on efforts by OPEC and other producers to support prices by
cutting supplies.
U.S. West Texas Intermediate (WTI) crude futures settled down 61 cents, or 1.1 percent, to
$53.17 a barrel, but ended the week 1.4 percent higher.
Brent crude futures, the international benchmark for oil prices, were down 75 cents, or 1.3
percent, at $55.49 per barrel at 2:35 p.m. ET (1935 GMT). They were on pace for a weekly loss.
The U.S. weekly oil and gas rig count from Baker Hughes showed that U.S. drillers added 15 oil
rigs in the week, the 12th gain in 13 weeks. That brought the total count to 566, the most since
November 2015.
"We're in a holding pattern at this point in time," said Mark Watkins, regional investment manager
at U.S. Bank Private Client Group. "Supply is a big factor right now and you have the U.S. really
filling that gap that OPEC has left open."
Prices had risen during Asian business hours, though activity was low due to the start of the Lunar
New Year holiday in most countries of the region, including China and Singapore.
Oil price special
coverage

The Organization of the Petroleum Exporting Countries (OPEC) and other producers, including
Russia, agreed to cut production by almost 1.8 million barrels per day (bpd) for the first half of
2017 to fight a two-year supply overhang.
But U.S. oil production has been rising, with the International Energy Agency forecasting total U.S.
production growth of 320,000 bpd in 2017 to an average of 12.8 million bpd.
John Kilduff, founding partner at energy hedge fund Again Capital, attributed a sharp drop in oil
prices around 9 a.m. ET to weak economic data released shortly before the decline, which could
spell further trouble for fuel demand.
"The durable goods and GDP hurt oil in particular. We're seeing gasoline demand down a lot," he
said.
There were fundamental factors that impacted prices this week, such as gains in Iran's monthly oil
exports in February and resilient production in Libya. A glitch in North Sea Buzzard crude
production provided support.
But market participants warned of more volatility ahead as speculators were reacting to even
small developments in the physical markets.
"Given that speculative net long positions in Brent and WTI are already at a record-high level, the
correction potential is therefore growing all the time," Commerzbank analyst Carsten Fritsch said
in a note.

Oil Falls as U.S. Drillers Replace Barrels Lost in OPEC-Led Cuts
by Mark Shenk
Oil dropped from a three-week high amid speculation that increased U.S. drilling will boost output,
offsetting cuts by OPEC and other producers.
Futures fell 1.1 percent in New York after failing to extend Thursday’s 2 percent rally. Rigs
targeting crude in the U.S. rose this week by 15 to 566, the highest since November 2015,
according to Baker Hughes Inc. data reported Friday. American crude output is the highest level
since April, government data show. Oil supplies from OPEC are plungingthis month, according to
tanker-tracker Petro-Logistics SA.
"We pushed to the upper end of the band and ran out of steam," Gene McGillian, manager of
market research for Tradition Energy in Stamford, Connecticut, said by telephone. "We’re
probably going to consolidate and build up for another run higher. When prices move to the upper
end of the range we run into a wall of fear that even if the promised cuts are made, they will be
made up by higher production in North America."
Last month’s pact between the Organization of Petroleum Exporting Countries and 11 other
nations gave hope to a market stuck in a 2 1/2 year slump. While Saudi Arabia says more than 80
percent of the agreed cuts have been implemented, analysts and investors are waiting for data to
gauge the extent of the decrease. The International Energy Agency says rising prices will spur
U.S. shale output, and drillers are adding more rigs.
West Texas Intermediate for March delivery fell 61 cents to $53.17 a barrel on the New York
Mercantile Exchange on Friday. Total volume traded was about 25 percent below the 100-day
average.
Earnings Pain

Brent for March settlement dropped 72 cents, or 1.3 percent, to $55.52 a barrel on the London-
based ICE Futures Europe exchange. The global benchmark crude closed at a $2.35 premium to
WTI.
Energy shares slipped after Chevron Corp. posted its first annual loss since at least 1980,
signaling the difficulties faced by the world’s biggest oil companies as they struggle to emerge
from the worst collapse in a generation. The S&P Oil & Gas Exploration and Production Select
Industry index fell 1 percent.
U.S. crude output climbed by 17,000 barrels a day to 8.96 million in the week ended Jan. 20,
according to an Energy Information Administration report on Wednesday. Rigs targeting crude
have risen by 250 to 566 since touching a seven-year low in May, according to Baker Hughes
data.
A committee that was formed to monitor the production cuts will meet in Kuwait in mid-March,
Boutarfa said in Algiers. Some countries haven’t yet made the full output reduction, but they will
increase curbs over the coming months and all are “highly committed” to the deal, Kuwait’s Oil
Minister Essam Al-Marzouk said Wednesday.
Photographer: HAIDAR MOHAMMED ALI/AFP via Getty Images
Mideast Drilling Booms for Baker Hughes Even as OPEC Cuts Output
Baker Hughes Inc., which will soon be the world’s second-largest oil services provider, called the
Middle East a positive environment for expected work in the first half this year. The region was
one of the main reasons the company stopped a sales slide of seven straight quarters at the end
of last year.
"There’s a bit of a disconnect between the OPEC cuts that were announced and what we’re
forecasting at least for the next six months in terms of activity," Martin Craighead, chief executive
officer at Baker Hughes, told analysts and investors Thursday on a conference call. "We see no
pullback that would correlate to the announcement on a production cut. We still expect it to be

relatively steady. A couple pockets of the more midsize to smaller players in the Middle East are
actually going to increase."
The healthy outlook for drilling in the region underscores the temporary nature of the output cuts,
and the potential for production to recover swiftly after global prices rebounded to above $55 a
barrel. The deal between the Organization of Petroleum Exporting Countries and several non-
members to reduce supply will last for six months before being reviewed.
The biggest source of the planned cuts is Saudi Arabia, which has said more than 80 percent of
targeted reduction has been implemented. Some customers in the Middle East haven’t wavered
from their output goals for 2020 and 2025, he said.
Middle East
The region that includes the Middle East is Baker Hughes’ second-largest market in terms of
revenue, trailing North America. The company that helps explorers drill and maintain oil wells
boosted quarterly sales for the first time since the end of 2014, thanks in part to year-end growth
in the Middle East, it said Thursday in an earnings statement.
The number of active rigs in the Middle East fell in December to the lowest since August 2013,
Baker Hughes data show. Baker Hughes is expected to close by mid-year its merger with the
oilfield unit of General Electric Co. to become the No. 2 service and equipment supplier.
OPEC and other producers are likely to fully comply with the curbs, bringing global crude markets
into balance early this year, according to Kuwait’s oil minister.
The market is “becoming a bit more comfortable that OPEC may very well deliver the cuts it
promised,” Bart Melek, the head of global commodity strategy at TD Securities in Toronto, said by
telephone. “OPEC has continued to inform us that they are accelerating the cuts, so this market
from the supply side looks well-disciplined.”

Global crude oil balances expected to tighten through 2018
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2017
EIA estimates that crude oil and other liquids inventories grew by 2.0 million barrels per day (b/d)
in the fourth quarter of 2016, driven by an increase in production and a significant, but seasonal,
drop in consumption.
Global production and consumption are both projected to increase through 2018, but consumption
is expected to increase at a faster rate than production. As a result, global balances are expected
to tighten.
The production increase in the fourth quarter of 2016 largely reflects members of the Organization
of the Petroleum Exporting Countries (OPEC) ramping up production in advance of implementing
the November agreement on production cuts.
Global production is expected to have increased by 1.6 million b/d in the fourth quarter of 2016,
with OPEC accounting for 0.9 million b/d, or 55%, of this increase. EIA estimates that total global
production averaged 96.4 million b/d in 2016. Global production is expected to increase to 97.5
million b/d in 2017 and to 98.9 million b/d in 2018.
The large seasonal consumption declines in the fourth quarter of 2016 are not expected to
continue as global consumption of petroleum and liquids is forecast to grow at a faster rate than
production through 2018.

Annual petroleum and liquids consumption for 2016 is estimated at 95.6 million b/d and is forecast
to increase to 97.2 million b/d in 2017 and 98.7 million b/d in 2018. On a quarterly basis,
consumption is expected to be greater than production in the third quarter of both 2017 and 2018,
leading to stock draws in both periods.
Global inventories are expected to have increased an average of 0.9 million b/d in 2016. The
January 2017 Short-Term Energy Outlook forecasts annual crude oil balances to tighten over the
next two years, with 2017 averaging a 0.3 million b/d stock build and 2018 averaging a 0.1 million
b/d stock build. By the second half of 2018, inventories are expected to decline by an average of
0.1 million b/d.
With annual inventory builds, along with a lack of a significant draw on existing inventories, prices
remain below $60/b through the end of 2018.
Brent crude oil spot prices are expected to remain fairly flat during 2017, in part as a result of the
responsiveness of U.S. tight oil production to rising oil prices in late 2016, and they are expected
to average $53/b for the year. EIA forecasts Brent prices will slowly increase in 2018, beginning
the year at $54/b in January and ending the year at $59/b in December, averaging $56/b annually.

NewBase Special Coverage
News Agencies News Release 29 Jan. 2017
Climate change backlash may hit gas demand, says BP
Key uncertainty - risks to gas demand
Gas consumption grows faster than oil and coal, but there are risks. Demand growth could be
slower if less priority is attached to moving away from coal
Natural gas is projected to grow at more than twice the rate of either oil or coal, with its share
within primary energy increasing throughout the Outlook.
The strength of natural gas demand partly reflects gas gaining share from coal, helped by
government policies encouraging a shift away from coal and supporting growth in gas.
The ‘faster transition’ cases illustrate how tighter climate policies may cause the growth of gas to
be slower than anticipated. It is also possible that the growth of natural gas may be threatened if
there is less government support encouraging a switch from coal into gas.

To explore this possibility, we created an alternative ‘slower gas’ case where the demand for coal
is more resilient than in the base case, with slower growth in gas consumption.
The growth of natural gas is a third slower (1.1% p.a. versus 1.6% p.a.), such that the share of
gas within primary energy falls between now and 2035. The share of coal continues to fall in this
alternative case, but less rapidly than in the base case.
The strength of natural gas demand could be challenged
This alternative case assumes that climate and environmental polices tighten by less than
expected in the base case. In particular, the set of regulatory policies aimed at promoting a shift
away from coal and towards natural gas are considerably weaker and there is effectively no
support from carbon pricing.
This is equivalent to assuming an increase in the price of gas relative to coal of around 50%
compared to the base case.
In China - which accounts for one-third of the global reduction in gas demand relative to the base
case - the share of coal within China’s total energy still declines, but at a slightly slower rate. The
impact on Chinese gas consumption is more marked, with the share of gas in China’s energy mix
increasing only slightly, rather than almost doubling as in the base case.
This alternative case, together with the faster transition cases, demonstrate that the strength of
natural gas demand envisaged in the base case could be challenged by alternative assumptions
about the strength of future climate and environmental policies, with both stronger and weaker
policy assumptions posing potential threats.
In our alternative ‘slower gas’ case, the
growth of natural gas is a third slower
between now and 2035
Our alternative case assumes an
increase in the price of gas relative to
coal of 50% compared to the base case

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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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 January 2017 K. Al Awadi

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