New base energy news 25 sep 2018 no 1201 by khaled al awadi

Copyright © 2018 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,
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NewBase Energy News 25 September 2018 - Issue No. 1201 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:Dubai ENOC's jet fuel storage plans show how Iranian
sanctions upending oil market,, Report Reuters
Emirates National Oil Company (ENOC) has chartered at least one vessel to store jet fuel to ensure
supply to airlines in Dubai as pending U.S. sanctions on Iran have cut off its access to feedstocks
for producing the aviation fuel, said several industry sources.
ENOC has chartered the Suezmax-sized tankers Portman Square and NS Africa for 30 to 60 days
with an option to store oil products, according to two shipbrokers.The company will store jet fuel
onboard at least one of the vessels, which can store about 100,000 tonnes of jet fuel, two industry
sources said.

The price difference between current and forward month jet fuel swaps is in a narrow contango, a
market structure where the price of a later-dated commodity is higher than the prompt price. That
contango is not enough to cover the cost of storing the fuel on ships, making ENOC's move unusual,
said three trade sources.
Jet fuel differentials in the Middle East have been trading at low levels due to high refining run rates
and weak demand from Europe, one of the sources said. So, ENOC's demand for fuel to fill the
ships could boost the differentials, he added.
While the ship-borne storage will help ENOC ensure an immediate supply of jet fuel for Dubai
International Airport, the stockpiling also highlights ENOC's lack of access to Iranian condensate,
an ultra-light crude oil, used to produce jet fuel.
The United Arab Emirates (UAE) government asked ENOC to replace its Iranian condensate
purchases with other grades such as Eagle Ford from the United States after the announcement of
the U.S. sanctions against Iran, said three industry sources who track oil and gas cargoes closely.
The United States has already enacted sanctions limiting Iranian participation in the global banking
system and new edicts against the country's petroleum sector go into effect on Nov. 4.
ENOC processes Iranian condensate at its 140,000 barrels-per-day condensate splitter at the UAE
port of Jebel Ali, which typically yields about 20 percent jet fuel.
However, ENOC's alternative condensate supply yields less jet fuel than the Iranian grade, said one
of the three sources, which is reducing the overall jet fuel volumes.
The last Iranian condensate delivered into Jebel Ali was in August, according to Thomson Reuters
shiptracking data. The company has also bought U.S. and Saudi condensate since June, the data
showed.
ENOC did not immediately reply to a Reuters request seeking comment by email outside of business
hours. Qatar also produces condensates but the UAE, Saudi Arabia, Egypt and Bahrain are in the
midst of a diplomatic dispute with the country.

Iraq: Siemens closing in on $15bn power plant deal in Iraq
CEO Joe Kaeser met with Iraqi Prime Minister Haider Al-Abadi in Baghdad to discuss a plan to install 11
gigawatts of power generation capacity and create thousands of jobs
Siemens is closing in on what could shape up to be its biggest contract ever - worth an estimated
13 billion euros ($15 billion) - to build and refurbish power stations in Iraq that would increase the
country’s generating capacity by about half in the next four years.
Siemens CEO Joe Kaeser met with Iraqi Prime Minister Haider Al-Abadi in Baghdad to discuss a
plan to install 11 gigawatts of power generation capacity and create
thousands of jobs, the company said Monday in a statement.
A person familiar with the deliberations, who asked not to be named,
confirmed the potential value of the contract, which was first reported by
German newspaper Handelsblatt.
“We have had a series of meetings and positive feedback from the
government for the development of power infrastructure in the country,” Siemens said. “Repowering
Iraq is a core element in the road map but it extends far beyond that.”
Siemens’s chances for winning the order are “high,” Adel Jeryan, Iraq’s deputy electricity minister,
said in an interview, adding that the government hasn’t set a price tag yet on the order. General
Electric Co. is also competing for the project, he said.
Welcome boost
The contract would come as a welcome boost for either Siemens or GE’s struggling power and gas
divisions, which are suffering from a sharp slump in orders triggered by a global shift to renewable
energy sources.
Kaeser is cutting thousands of jobs at the
German firm as a result and GE is in the throes
of a deep revamp of the once-sprawling
conglomerate that includes shedding assets.
A spokesman for GE based in Paris said he
couldn’t provide immediate comment.
For Siemens, the Iraqi project would be bigger
than one completed earlier this year in Egypt for
power plants and wind farms generating a
combined 16.4 gigawatts. That order worth about
10 billion euros was described as the company’s
biggest-ever when it was signed in 2015.
Kaeser told CNBC that the company would move
quickly over the next three months to bring power
to 300,000 people as part of the larger project to
develop gas-fired power plants. “If the
government is ready today, we start tomorrow,”
he said in the broadcast.
Siemens shares rose 1.1 percent to 111.48 euros at 11:09 a.m. in Frankfurt, paring losses since the
start of the year to 4.1 percent.

UK: Total announces major gas find offshore UK
Source: Total
Total has announced a major gas discovery on the Glendronach prospect, located offshore U.K.
West of Shetland. The well was drilled to a final depth of 4,312 meters and encountered a gas
column of 42 meters of net pay in a high quality Lower Cretaceous reservoir.
Preliminary tests confirm good reservoir quality, permeability and well production deliverability, with
recoverable resources estimated at about one trillion cubic feet (1 tcf).
Located on Block 206/04a, in water depth of
about 300 meters and in a formation below the
Edradour reservoir, the discovery can be
developed quickly with the existing
infrastructure around the Edradour field and
the Laggan-Tormore facilities of the Shetland
Gas Plant.
'Glendronach is a significant discovery for
Total which gives us access to additional gas
resources in one of our core areas and
validates our exploration strategy. Located on
an emerging play of the prolific West of
Shetland area, the discovery can be
commercialized quickly and at low cost by
leveraging the existing Laggan-Tormore
infrastructure,' stated Arnaud Breuillac,
President Exploration & Production at Total.
The Glendronach discovery is operated
by Total E&P UK with a 60% interest alongside partners Ineos E&P UK (20%) and SSE E&P
UK (20%).

US: Crude oil was the largest petroleum export in of 1st H 2018
Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Crude oil surpassed hydrocarbon gas liquids (HGL) to become the largest U.S. petroleum export,
with 1.8 million barrels per day (b/d) of exports in the first half of 2018. U.S. crude oil exports
increased by 787,000 b/d, or almost 80%, from the first half of 2017 to the first half of 2018 and set
a new monthly record of 2.2 million b/d in June.
Much of this crude oil went to destinations in Asia and Oceania such as China, South Korea, and
India. Europe was the second-largest market for U.S. crude oil exports, led by Italy, the United
Kingdom, and the Netherlands. Canada was the only major U.S. crude oil export destination where
exports decreased, down slightly in the first half of 2018 compared with the same period in 2017.

The United States exported 7.3 million barrels per day (b/d) of crude oil and petroleum products in
the first half of 2018, the largest amount of crude oil and petroleum product exports ever for the first
six months of a year.
During this period, exports of crude oil and HGL set record monthly highs. U.S. exports of crude oil,
HGLs, and motor gasoline grew in the first half of 2018 compared with the same period in 2017,
while distillate exports decreased.
HGLs—including propane, ethane, butanes, and natural gasoline—were the second-largest
petroleum export from the United States in the first half of 2018 at 1.6 million b/d. As with crude oil,
destinations in Asia and Oceania such as Japan, South Korea, China, and India were also the
primary recipients of U.S. HGLs. These countries have expanded petrochemical facilities that import
U.S. HGLs as a feedstock. Overall U.S. HGL exports set a new monthly record at 1.7 million b/d in
May.
Source: U.S. Energy Information Administration, Petroleum Supply Monthly
In the first half of 2018, the United States exported 1.3 million b/d of distillate, primarily to
destinations in Central and South America.
The decline in U.S. distillate exports in the first half of 2018 compared with the first half of 2017 was
mostly the result of lower exports to a number of destinations in Central and South America and in
Europe.
However, U.S. distillate exports are typically higher in the second half of the year. Compared with
other petroleum exports, U.S. distillate exports go to the most destinations: 49 different destinations
received at least 1,000 b/d of U.S. distillate in the first half of 2018.

The United States exported 913,000 b/d of motor gasoline in the first half of 2018, an increase of
144,000 b/d compared with the same period in 2017. More than half of U.S. motor gasoline exports
went to Mexico in the first half of 2018, the largest to a single destination of any U.S. petroleum
export.
Mexico has relatively low refinery utilization rates and in recent years has increased imports of motor
gasoline and other petroleum products from the United States. The 504,000 b/d of gasoline
exported from the United States to Mexico in the first half of 2018 was equivalent to more than 60%
of the gasoline consumed in Mexico in those months.

Russian oil output hits new post-Soviet era record
Production of 11.29 million to 11.36 million barrels a day beats the previous record of
11.25 million barrels a day set in October 2016 …. Bloomberg + NewBase
Russia’s crude production has jumped to a new post-Soviet record, boosting the nation’s budget
revenue as it prepares for talks with Opec+ on further cooperation, according to a government
official.
The country’s oil output is currently fluctuating between 1.54 million and 1.55 million tonnes a day -
driven mainly by state-run giant Rosneft - the official said, asking not to be named. That equates to
11.29 million to 11.36 million barrels a day, beating the previous record of 11.25 million barrels a
day set in October 2016 before Russia agreed with Opec to cut production.
Russia’s output increase comes just days before it meets in Algeria with other members of the group
known as Opec+.
The producers agreed in June to start rolling back their output cuts to offset losses from countries
including Venezuela and Iran while also responding to calls from US President Donald Trump to
ease pressure on prices. This weekend, ministers will discuss supply and demand forecasts for the
fourth quarter and the potential for extending cooperation into next year.

While Russia could boost its production by about 300,000 barrels a day above the October 2016
record within a year, there’s still no decision on tapping this spare capacity and the size of the
increase will depend on talks with the wider Opec+ group, Russian Energy Minister Alexander
Novak said last week.
Oil was trading near two-month highs in London, at almost $80 a barrel, as concern over demand
contraction amid US-China trade tensions is countered by supply losses from Iran and Venezuela.
Crude in roubles is close to the highest-ever levels reached earlier in September amid the currency’s
weakness. Russia’s budget gains from energy taxes are set to jump almost 46 percent this year to
a record-high 8.707 trillion roubles (Dh481.09 billion), according to estimates from the Russian
Finance Ministry.
Reliance on energy,
which President
Vladimir Putin has been
struggling to cut in the
past few years, is set to
exceed 46 per cent of
the country’s overall
budget, compared to 40
per cent in 2017. That
would be the highest
level since 2014.
If Russian producers
maintain September
levels through to the
end of the year, the
nation’s full-year output
target could be increased to 555 million tonnes, meaning an additional 2 million tonnes in the
remaining 100 days, the government official said. That equates to as much as 150,000 barrels per
day in addition to last month’s output of 11.21 million barrels.
Russia’s Energy Ministry and Rosneft, which accounts for more than 40 per cent of the nation’s
production, didn’t immediately comment. The highest level reached by the country during the Soviet
era, on an annual-average basis, was 11.416 million barrels a day in 1987, according to BP data.
While state forecasts anticipate an increase in production later this year, there’s no clarity yet on
2019 plans. The current Opec+ cuts deal expires at the end of this year, unless producers replace
it with a new one. Novak has said that Russia sees the need for continued cooperation across the
group. This could involve removing output quotas but with an option to use this tool in future if the
market requires.
Russia’s major oil producers have so far declined to comment on their output targets for next year.
Gazprom Neft, the nation’s third-biggest oil producer, said it has the capacity to increase output next
year.
“We in principle are aiming to show growth,” chief financial officer Alexey Yankevich said this month.
“But everything will depend on how the Opec+ agreement will look.” The company hopes there will
be some clarity by December when plans for 2019 are set.

NewBase September 25 - 2018 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil firm above $81as Iran sanctions loom; OPEC, Russia resist
calls to raise output
Reuters + Bloomberg + NewBase
Oil markets remained strong on Tuesday, with Brent crude near a four-year high reached the
previous session. Oil markets have been driven up by looming U.S. sanctions against Iran and an
unwillingness or inability by Middle East dominated producer cartel OPEC and Russia to raise
output.
Brent crude futures LCOc1 were at $81.32 per barrel at 0209 GMT, up 12 cents, or 0.2 percent, and
not far off the $81.48 a barrel peak reached the previous day, the highest since November 2014.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $72.10 a barrel, up 2 cents from
their last settlement.
Oil price special
coverage

The United States from November will target Iran’s oil exports with sanctions, and Washington is
putting pressure on governments and companies around the world to fall in line and cut purchases
from Tehran.
“Iran will loose sizeable export volumes, and given OPEC+ reluctance raise output, the market is ill-
equipped to fill the supply gap,” Harry Tchilinguirian, Global Head of Commodity Markets Strategy
at French bank BNP Paribas, told the Reuters Global Oil Forum on Tuesday. OPEC+ includes
Russia.
U.S. President Donald Trump has demanded that the Organization of the Petroleum Exporting
Countries (OPEC), of which Iran is a member, and Russia increase their supplies to make up for
the expected fall in Iranian exports.
OPEC and Russia, however, have so far rebuffed such calls.
“The oil market is, in my view, likely to hold on to these price gains... Any formal decision on oil
output by the producer group, barring an extraordinary meeting, will only take place at the December
meeting. Thus the window period for oil prices to potentially extend gains is quite wide as Iran looses
exports and OPEC+ remains on standby,” Tchilinguirian said.
Ashley Kelty, oil and gas research analyst at financial services firm Cantor Fitzgerald said oil prices
could soon hit $90 per barrel. “We don’t believe OPEC can actually raise output significantly in the
near term, as the physical spare capacity in the system is not that high.” Kelty said.
Bank of America Merrill Lynch said it has lifted its average Brent crude oil price forecast for 2019
from $75 per barrel to $80 per barrel, while it increased its WTI crude oil forecast by $2 to $71 per
barrel in 2019.
The U.S. bank said “the Iran factor may dominate the market near-term and cause a (crude price)
spike,” although it added that emerging market “demand concerns could reappear thereafter.”
Indian refiners - struggling from high crude feedstock prices and a sliding rupee - are planning to
reduce oil imports in what could be a first sign that high prices are starting to hurt demand.

Major Traders Are Talking About $100 Oil Again
Major oil trading houses are predicting the return of $100 crude for the first time since 2014 as
the market braces for the loss of Iranian supplies because of U.S. sanctions. Mercuria Energy
Group Ltd. co-founder Daniel Jaeggi said prices may spike to over $100 a barrel in the fourth
quarter because the market doesn’t have much capacity left to replace more than 2 million barrels
a day of Iranian exports that could be lost to sanctions. Trafigura Group co-head of oil trading
Ben Luckock sees $90 oil by Christmas and $100 in early 2019.
Key Takeaways
 Such a price rally would mark the first time since the summer of 2014 that oil would return to
the $100-a-barrel level that became the norm in the early part of this decade.
 Such prices made oil companies like Exxon Mobil Corp. the world’s most valuable firms and
spurred investment in risky billion-dollar oil projects.
 The talk of $100 crude comes just hours after OPEC and its allies rebuffed pressure from
U.S. President Donald Trump to immediately boost production to lower oil prices.
 It could prompt Washington to consider extraordinary measures, including the use of the
Strategic Petroleum Reserve, to cool down fuel prices ahead of the U.S. mid-term elections.
“The market does not have the supply response for a potential disappearance of 2 million barrels a
day in the fourth quarter,” Jaeggi said in a speech at the S&P Global Platts Asia Pacific Petroleum
Conference (APPEC) in Singapore. “In my view, that makes it conceivable to see a price spike north
of $100 a barrel.”

Brent crude, the benchmark for more than half the world’s oil, was trading up 1.6 percent at $80.02
a barrel at 1:34 p.m. Singapore time.
When Trump in May announced plans to reimpose sanctions on Iran’s oil exports, the market
estimated a cut of about 300,000 to 700,000 barrels a day, according to Trafigura’s Luckock.
However, the consensus has now moved to as much as 1.5 million barrels daily as the U.S.
is “incredibly serious” about its measures, he said.
“It’s going to be significantly less than it was, and probably lower than most people expected when
the sanctions were announced -- hence the higher prices,” Luckock said at the APPEC event.
In addition to U.S. sanctions cutting Iranian supply, the world is also dealing with a decline in
Venezuelan oil production due to an economic crisis in the Latin American nation, according to
Trafigura’s Luckock. The biggest source of new global supply, U.S. shale, is also experiencing
growing pains as pipeline bottlenecks and workforce issues may hamper growth, he said.
“While Citi is pricing in Brent (ICE) crude at around $80 for the quarter ahead, balances are
precarious and the lack of spare capacity could see crude pricing well above $90 or even $100
should all of the potential risk in the market materialize,” analysts including Ed Morse said in the
note.
New Mega-Refineries and the old Iranian oil export down
When the Navarin, an oil supertanker carrying 2 million barrels of Middle East crude, docks at the
Malaysian port of Pengerang on Monday, the arrival will signal the start of a torrid time for Asia’s oil
market.
The ship is delivering the first cargo to a new mega-refinery, one of three scheduled to come on line
in the region in the next few months. They’ll add a total of 1.1 million barrels a day of processing
capacity, enough to swallow the entire output of OPEC member Libya. The extra demand comes
just as physical oil supplies are made scarcer by U.S. sanctions on Iran.
"Refiners will have to buy whatever crude they can get their hands on," said Amrita Sen, chief oil
analyst at consultant Energy Aspects Ltd.
Supplying the new refineries, and their impact on the wider oil market, will be one of the topics of
conversation at the annual Asia Pacific Petroleum Conference in Singapore, where hundreds of oil
traders from across the region will gather to strike deals this week.
The first plant to to start up is the
300,000 barrel-a-day Refinery and
Petrochemicals Integrated
Development, or Rapid, a venture
between the state-owned
companies of Saudi Arabia and
Malaysia in Pengerang, less than
15 miles from Singapore.
Navarin’s Voyage
The Navarin’s voyage started
nearly a month ago at the Ju’aymah
terminal, where it took on a cargo of
Saudi crude, before topping up at

the Basra terminal with a second load of Iraqi crude. If all goes as planned, the refinery will start
slowly turning on units over the next few weeks, and reach full output early next year.
Rapid will be followed by two giant 400,000 barrel-a-day projects in China: Rongsheng Petro
Chemical Co.’s plant in Zhejiang, and the Hengli Petrochemical Co.’s refinery in Dalian. The two
refineries will come online between the first and second quarters of next year.
"Oil markets are facing mounting supply uncertainty as Iran sanctions bite," said Roger Diwan, oil
analyst at consultant IHS Markit Ltd. in Washington, forecasting Brent in the $75 to $90 range from
now until mid-2019.
On top of the new refiners, the Asian market is already contending with a plant that just came on-
stream over the last few weeks after several delays: the 200,000 barrel-a-day Nghi Son Refinery
and Petrochemical facility in Vietnam. The refinery is consuming a diet of mostly Kuwaiti crude.
As oil refiners from India to South Korea scramble to find alternative supplies to Iranian crude, they
are pushing up the prices of crudes that can substitute for lost shipments. For many in the physical
trade in Asia, the regional market is on fire.
Oman crude has recently traded at more than $2 a barrel over the Dubai benchmark, the highest in
eight years, according to Bloomberg data. ESPO Blend, a Russian crude that arrives into China via
pipeline from Siberia, is selling at its highest premium to its benchmark in four years, traders said.
Iranian Oil Imports
Iranian oil exports into Asia fell to 880,000 barrels a day in the first half of September, down from
1.6 million barrels a day in April, before U.S. President Donald Trump ripped up the diplomatic deal
that curtailed Tehran’s nuclear program.
The Rapid plant is set to import most of its crude from Saudi Arabia and, to a lesser extent, Iraq.
The Rongsheng plant was meant to buy a mix of crude from Brazil, Saudi Arabia and Iran, but with
U.S. sanctions on Tehran, it’s so far replacing Iranian with Omani and Iraqi supplies. The Hengli
refinery is designed to process mostly Saudi crude, with a bit of Qatari oil on top.
In total, the three new refineries will probably import at least 600,000 barrels a day of Saudi crude
when they reach full capacity by the middle of next year, a significant boost for the kingdom, which
usually exports 7 million to 7.5 million barrels a day of crude. With Riyadh already pumping near a
record to offset the loss of Iranian barrels, the requirements of the new plants could push Saudi oil
production into uncharted territory.

Oil to see massive demand thrust through 2040: Opec
OPEC.ORG
Oil is expected to remain the fuel with the largest share in the energy mix through 2040, said Opec
in its World Oil Outlook 2018, raising the long-term oil demand upward for the second consecutive
year, with demand at over 111.7 million barrels per day (mb/d) in 2040.
Total primary energy is set to expand by a robust 33 per cent between 2015 and 2040, driven
predominantly by developing countries, which see almost 95 per cent of the overall energy demand
growth, added the Opec outlook.
Natural gas witnesses the largest demand growth in absolute terms, and renewable the largest
growth in percentage terms, it said.

The 2018 Opec World Oil Outlook (WOO) launched in Algiers, Algeria yesterday (September 23),
offers a thorough review and assessment of the medium- and long-term prospects to 2040 for the
global oil industry, as well as analysis of various sensitivities that have the potential to impact the
petroleum industry in the years ahead.
In launching the WOO, Mohammad Sanusi Barkindo, Opec secretary general said that the past
year had been a historic one for the Organization, as well as the global oil industry, with the historic
‘Declaration of Cooperation’ “helping accelerate the return of balance to the global oil market,
bringing more optimism to the industry, which in turn, has had a positive effect in the global economy
and trade worldwide.”
He added that “the importance of these recent developments, specifically in terms of helping achieve
sustainable market stability, is clearly vital across all timeframes,” which is evidenced in the analysis
provided in the WOO 2018.
This year’s publication, the 12th edition, presented by Dr Ayed Al Qahtani, director of research
Division, Opec, highlights the industry’s various linkages, and considers developments in areas
such as the global economy, energy demand, oil supply and demand, both in the upstream and
downstream, policy and technology developments, and environment and sustainable development
concerns. This all helps provide the framework for the WOO’s Reference Case, including
breakdowns by region, sector and timeframe.
The year’s WOO launch, alongside the 10th Meeting of the Joint Ministerial Monitoring Committee
(JMMC), is part of the celebrations of the 2nd Anniversary of the seminal Algiers meeting (the 170th
(Extraordinary) Meeting of the Opec Conference) that took place on 28 September, 2016.

Some specific highlights from this year’s WOO include:
• All forms of energies will be required in the future; it is not about choosing one form of energy
over another.
• Demand growth is driven by non-OECD regions, which see a huge increase of around 23 mb/d
to 2040.
•There is no expectation for peak oil demand over the forecast period to 2040.
•Long-term demand growth comes mainly from the petrochemicals (4.5 mb/d), road transportation
(4.1 mb/d) and aviation (2.7 mb/d) sectors;
•The total vehicle fleet – including passenger and commercial vehicles – is projected to increase
to around 2.4 billion in 2040.
• The majority of the growth continues to be for conventional vehicles, but the long-term share of
electric vehicles in the total fleet is projected to expand and reach a level of around 13 per cent
in 2040, supported by falling battery costs and policy support.
• Non-Opec liquids supply is forecast to increase by more than 9 mb/d between 2017 and 2027,
with the major driver being US tight oil, but beyond this period non-Opec supply is set to decline
by around 4 mb/d.
• The demand for Opec crude is projected to increase to around 40 mb/d in 2040, up from 32 mb/d
in 2018.
• The share of Opec crude in the global oil supply is estimated to increase from 34 per cent in
2017 to 36 per cent in 2040.
• Global refinery additions are projected mainly in developing regions, led by the Asia-Pacific and
the Middle East, but also Africa and Latin America.

• Fast evolving trade patterns for crude oil and refined products will continue to evolve, driven
initially by additional flows from the US & Canada, and in the long-term by the Middle East,
mostly attributed to increasing imports to the Asia-Pacific.
• In the period to 2040, the required global oil sector investment is estimated at $11 trillion.
• Opec remains fully engaged and supportive of the Paris Agreement on climate change, and it is
vital that we collectively develop and adopt technologies, as well as all-inclusive energy policies,
that transform the environmental credentials of all energies.
• Energy poverty remains a major global challenge, with almost one billion people still without
access to electricity and three billion lacking access to clean fuels for cooking.

NewBase Special Coverage
News Agencies News Release September 25-2018
OPEC, Like a Dying Star, Is About to Go Supernova
A Saudi-Russia axis may emerge from the debris.
By Julian Lee
OPEC is dying. President Donald Trump will probably rejoice. But he may not like what takes its
place any better.
For a while, in its youth, the group burned so very bright, helping members wrest control over their
oil industries and stand up to foreign producers — and their governments. But now, like every star,
it is about to implode.
When a star runs out of hydrogen fuel its core contracts and heats up, while the outer layers expand.
It will then go one of two ways — either collapsing into insignificance to become a black dwarf, or
exploding as a supernova.
Red Giant
OPEC has more members than ever, yet its share of global production is at a 27-year low
Source: OPEC
OPEC is turning into the latter. Though its ranks have swelled in each of the last three years, its
new members have done little to bolster its production potential.
But just like that ball of gas in space, no external agency is required to bring about the end of
OPEC. Trump’s tweets, and threats of antitrust legislation, are sideshows and serve to endow the
group with a luster that masks its waning light.

Falling Star
OPEC's share of global oil production has been hit by rising supply from the U.S. and Russia
Source: Bloomberg calculations from OPEC & BP data
Note: OPEC crude as a share of world oil production
The world has changed. OPEC is no longer relevant in the way it once was. Though the group has
never had more members in its 58 years of existence, the volume of crude it produces represents
just a third of all the oil extracted in the world — the smallest share it has commanded in almost
three decades. Not exactly the “monopoly” railed at by Trump.
The group’s ability to influence oil prices by either boosting or cutting output has also waned. Spare
capacity available to lift production at short notice has become increasingly concentrated in the
hands of a dwindling band of Persian Gulf Arab countries.
The inclusion of Russia in the group’s latest supply management push reflects its waning power.
Alone, it was both unwilling and unable to agree to remove sufficient volumes of oil from the market
in 2016 to balance supply and demand. But Russia made all the difference.
Now that OPEC needs to boost output, its lack of power becomes even more obvious.
Only a small group of countries — led by Saudi Arabia — have the ability to lift production. For
Venezuela and Angola, steep drops in output are involuntary and cannot be reversed. Libya and
Nigeria were exempted from the deal and are already producing as much as they can. Iran’s exports
are falling faster than most analysts anticipated, and Trump wants to drive them to zero by early
November.
This is a recipe for oil prices to continue to rise.
Internally, the political and economic differences between OPEC’s founding members now
outweigh the common ground that brought them together in 1960. Now, far from rallying around a
fellow member facing an external threat, two OPEC countries — perhaps Saudi Arabia and the
United Arab Emirates — are seeking to damage the group and carry out “anti-Iranian policies” at
the behest of the U.S., according to the nation’s oil minister, Bijan Namdar Zanganeh.

Rising Star
Saudi Arabia's oil production could surpass the record set in 2016 as sanctions hit Iran's output
Source: Bloomberg
He may be right, but there is little he can do to stop it. Iran’s oil exports are down by more than a
third since April, and are set to fall further this month and next, as buyers flee. Saudi Arabia,
meanwhile, has boosted its own production by 420,000 barrels a day over the same period and
could test the record levels it reached in 2016 before the end of the year.
Sure, this is not the first time that OPEC members have found themselves on different sides. The
group weathered attacks by a founding member on two neighbors in about a decade, when Iraq
attacked Iran in 1980, and then Kuwait in 1990. But the current disagreement seems more damaging
to the heart of OPEC, perhaps because the Saudi-Iranian tensions feel more fundamental than the
aggression of Saddam Hussein.
Sunday’s meeting of the Joint Ministerial Monitoring Committee, set up to oversee the 2016
OPEC/non-OPEC deal on production, doesn’t have the authority to alter the group’s policy. But it is
becoming the instrument of the new Saudi-Russian axis.

Critical Mass
Sanctions on Iran are boosting OPEC+ over-compliance with the 2016 output deal once more
Source: Bloomberg calculations from IEA and OPEC data
Note: Negative numbers indicate cuts bigger than pledged
The fall in Iranian supply as a result of Trump’s sanctions means that overall production by the
OPEC+ group is once again falling below the level agreed in 2016. Having decided in June that they
should strive to bring overall compliance back to 100 percent, Saudi Arabia and Russia will argue
that those who can lift production should do so. And who can do this most quickly? Saudi Arabia
and Russia.
The death of a star takes billions of years. OPEC’s will happen a little quicker. But President Trump
may not like a subsequent Saudi-Russian alliance any better.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
The Editor :”Khaled Al Awadi” Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
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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 28 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 September 2018 K. Al Awadi

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