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NewBase Energy News 28 April 2020 - Issue No. 1333 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: Adnoc and ADPower tender for subsea HVDC links
The National - Jennifer Gnana+ ( NewBase )
Abu Dhabi National Oil Company and ADPower issued a joint tender for a subsea transmission
system connecting offshore oil facilities to the onshore electricity grid. The joint tender will be for the
development and operation of the first high-voltage, direct current subsea system of its kind in the
region, the company said.
Requests for proposal have been dispatched to international oil companies with expertise in the
field. The project will comprise two independent subsea direct current transmission links and
converter stations that connect to ADPower's onshore electricity grid.
The grid is operated by the firm's subsidiary, Abu Dhabi Transmission and Despatch Company
(Transco) and has a total installed capacity of 3.2GW. The commercial operation of the scheme is
expected in 2025.
"This project will meet our future offshore power needs, even as our fields mature, using diverse
and sustainable sources," said Yasser Saeed Al Mazrouei, Adnoc upstream executive director.
www.linkedin.com/in/khaled-al-awadi-38b995b
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The project is also expected to lower Adnoc's carbon footprint in line with the UAE's drive to reduce
emissions, while at the same time allowing the firm to use natural gas used to power offshore
facilities for "higher-value purposes", he added.
The scheme would allow for a 30 per cent reduction in the carbon footprint of offshore facilities and
allow the operators to optimise power supply costs, a statement said.
Operational efficiency will also be achieved by replacing existing localised, offshore gas turbine
generators with more efficient, diverse and sustainable sources of energy, including renewables
and nuclear, the companies said.
The project will be financed through a special purpose vehicle in which Adnoc and ADPower will
each have 30 per cent stakes. The remaining 40 per cent will be owned by selected developers and
investors. The scheme will be executed on a build, own, operate, and transfer basis. Successful
bidders will develop and operate the transmission grid alongside the two companies. The completed
project will be handed ove r to Adnoc at the end of the transmission agreement period.
ADPower owns most of the power and water assets in Abu Dhabi. In February, the company
submitted an offer to transfer most of its water and electricity generation, transmission, and
distribution companies portfolio to the Abu Dhabi National Energy Company, also known as Taqa.
The transaction, which has been approved by Taqa's board, is effectively a reverse takeover which
will create a new, regional utilities champion.
The combined entity will have total assets worth Dh200 billion, with more than 85 per cent of its
revenue coming from regulated and contracted businesses.
The deal with Taqa is part of ongoing efforts in the UAE capital to consolidate assets. The emirate
has already seen large-scale mergers in the banking and finance industry following the slide in oil
prices in 2016.
The deal would make the new entity one of the top utility companies in the Europe, Middle East,
and Africa region and also make Taqa one of the largest listed companies on the Abu Dhabi stock
market.
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UAE: Drydocks World completes Turret Mooring System for
Johan Castberg FPSO
DUBAI, April 27th 2020: Drydocks World, the service provider to the marine, offshore, oil, gas and
renewable energy sectors has successfully completed construction on a Turret Mooring System
(TMS) for SBM Offshore and end-client Equinor. The TMS will be integrated with the Johan
Castberg Floating Production Storage and Offloading (FPSO) vessel in Singapore, and deployed
for operation offshore in the Norwegian Barents Sea.
The over 8,000T internal TMS will enable the vessel to passively weathervane around the anchor
legs, while simultaneously transferring fluids, power, and communications signals between the
vessel and the subsea equipment. Drydocks World completed the TMS in 4 units, and was
responsible for the production engineering, procurement, construction and testing of system
components.
Capt. Rado Antolovic PhD CEO of Drydocks World Dubai said “At Drydocks World we have the
expertise and facilities to deliver high quality offshore technology, and we are proud to successfully
deliver this project with 4.98 million injury free man-hours.
Despite the current challenges posed by the Covid-19 pandemic, we have put every necessary
measure in place to ensure our yard has the capabilities to keep production on-track, whilst
keeping our employees safe, ultimately allowing us to deliver on our project commitments.
We are very pleased for the opportunity to have worked with SBM Offshore and Equinor again,
and look forward to further future collaboration.” This is the 3rd TMS that SBM Offshore has
awarded to Drydocks World, a leader in specialist TMS fabrication, having previously completed
the world’s largest TMS together.
Company Profile:
Over the past 36 years Drydocks World-Dubai has become a leading provider of marine and
offshore services to the shipping, oil, gas and energy sectors. Conceived as an ambitious project
under the guidance of H.H. Sheikh Rashid Bin Saeed Al Maktoum the late Ruler of Dubai, the
yard is strategically located in a rapidly developing region of the world.
Drydocks World completes over 300 projects a year on average, with a record of handling 42
refurbishment projects simultaneously. The yard is spread over 200 hectares, 4 dry docks, with
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the largest dock capable of handling the world’s largest ship, and over 3,700m of berth space.
Innovative projects have been constructed in Drydocks World, breaking records for some of the
largest new build offshore fabrication projects worldwide.
The yard has received numerous awards and accolades including the British Safety Council’s
prestigious “5 Star” rating for the past 14 years and the “Sword of Honor” on 11 occasions.
Drydocks World aims to consistently deliver excellence and to achieve further success for the
UAE’s maritime industry, positioning Drydocks World as an international yard of choice.
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Oman: Salalah Free Zone to launch 10 new projects in 2020
Oman Observer - Conrad Prabhu
Salalah Free Zone (SFZ) – the Sultanate’s first free zone development — plans to bring into
operation 10 new factories and industrial ventures before the end of this year, further strengthening
its reputation as a major draw for industrial and economic investment.
The free zone, adjoining Salalah’s transhipment and logistics hub overlooking the Indian Ocean,
has announced a flurry of new investments since the start of this year, many of which have now
entered the construction phase.
Announcing an uptick in activity at the nation’s oldest free zone, Ali Mohammed Tabouk, CEO, said:
“Business in Salalah Free Zone is booming, with more than five factories currently under
construction at a good pace. We are targeting the operation of 10 new factories before the end of
2020,” he tweeted on Saturday, adding that the Free Zone is “sparing no effort in achieving its top
priority of creating job opportunities for citizens”.
Gearing up to commence production is Magnificence Tech of Asia (FZ) LLC, which is setting up a
bus assembly plant at the free zone with an investment of $50 million. The company is targeting the
production and roll-out of around 1,000 coaches per annum for distribution across markets in the
Gulf, Middle East and Africa. It will be the second such investment in the Sultanate, after Oman’s
maiden bus assembly plant by Karwa Motors, which is currently under construction at Duqm Special
Economic Zone.
Also making headway is the Knowledge Academy – a training hub designed and equipped to
develop the technical and vocational skills of up to 1,000 young Omanis at any given time. At full
capacity, the Academy will be operated by a 160-strong faculty of trainers and administrative staff.
Total investment in the facility, promoted by Muscat-based Oman Technology Establishment, is
around RO 10 million.
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In the early stages of construction is Salalah International Exhibitions City – an integrated wholesale
hub that will leverage, on the one hand, its proximity to Salalah City – a rapidly expanding urban
destination – and a well-connected international maritime gateway.
At full build, the Exhibitions City will host as many as 2,000 commercial units that will be offered for
wholesale trading in a variety of goods and activities, including building materials, electronics,
vehicles, textiles, furniture, consumer goods, and luxury items. As many as 1,500 job opportunities
will be created when it is fully operational.
Work on the Free Zone’s first large-scale metallurgical plant is gathering pace as well. National
Steel Company, backed by a Saudi corporation, is investing $500 million in an integrated steel
complex that will produce around 25,000 tons per year of steel structures, 60,000 tons per year of
prefab metal structures, 2 million sq metres per year of sandwich paneling for industrial structures,
and 10,000 tons per year of industrial floors. Roughly two-thirds of this output is destined for
overseas markets.
Among the major ventures targeted for launch this
year is Philex Pharmaceuticals, which is being
developed in three phases with a total investment of
$365 million. The high-tech facility, backed by Qatari
investors, will produce an array of drugs and vaccines
as well.
Other initiatives that the Free Zone plans to launch this
year is a mammoth, integrated residential city with a
capacity to accommodate around `100,000 people,
remotely operated ‘smart’ warehouses, and renewable
energy projects.
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World: Oil traders book expensive U.S. vessels to store gasoline,
ship fuel overseas in sign of desperation .. Reuters + NewBase
Oil traders are hiring expensive U.S. vessels, normally only used for domestic shipments, to store
gasoline or ship fuel overseas, five shipping sources said, in a sign of the energy industry’s
desperation for places to park petroleum amid a 30% drop in worldwide demand.
Billions of people worldwide
are living under confinement
rules due to the coronavirus
pandemic, destroying demand
for gasoline and other fuels
and creating a supply glut.
Storage tanks onshore and
floating storage in tankers on
the water are rapidly filling,
leaving fewer options for
traders looking to sock away
oil.
Several shippers said they
have started to book Jones Act (JA) vessels for foreign voyages or to store refined products. The
century-old Jones Act requires that vessels traveling between domestic ports be owned and
operated by U.S. crews, and they are generally more expensive than other vessels.
“It’s very unusual to use JA tankers for international trips,” one shipping source said.
Those restrictions, and lack of availability, typically make the tankers more expensive than foreign-
flagged vessels that go to other countries. Around 45 products tankers are JA compliant, shipping
data reviewed by Reuters showed.
Rates for foreign-flagged fuel tankers such as medium-range and long-range vessels leaving from
the United States have jumped to about $60,000 and a record $100,000 a day, compared with
Jones Act medium-range tanker rates of about $55,000 to$70,000 a day, the sources said.
Refiner Motiva Enterprises [MOTIV.UL] is among companies looking to potentially charter a Jones
Act vessel for an overseas voyage, shipping sources said. Motiva did not immediately respond to
a request for comment.
Inventories of gasoline in the United States have surged to a record and U.S. refiners are operating
at about two-thirds of capacity. Roughly 85% of worldwide onshore storage was full as of last week,
according to Kpler data.
“The Jones Act sector is mirroring what we are seeing with the wider oil tanker market with a surge
in demand for tankers as refiners can’t sell gasoline or oil products. Utilization of Jones Act tankers
is at 100%,” said Basil Karatzas of New York-based shipping finance advisory firm Karatzas Marine
Advisors & Co, which is active in the Jones Act market.
He said some older JA tankers that had been planned to be scrapped may end up being used as
storage. Long-range tankers can carry between 345,000 barrels and 615,000 barrels of gasoline
or between 310,000 barrels and 550,000 barrels of light sweet crude.
Jones Act tankers usually are employed under time charters for over a period of a year.
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Low liquidity and limited available storage pushed WTI crude
oil futures prices below zero
 EIA, based on CME Group and Bloomberg, L.P.
On Monday, April 20, 2020, West Texas Intermediate (WTI) crude oil front-month futures traded on
the New York Mercantile Exchange (NYMEX) were priced in negative dollars per barrel (b) for the
first time since trading began in 1983. At about 2:30 p.m. ET, WTI traded as low as -$40.32/b; prices
remained below zero for part of the following trading day.
Market participants that hold WTI futures contracts through expiration must make or take physical
delivery of WTI crude oil in Cushing, Oklahoma, unless they have made other arrangements ahead
of time.
Typically, most market participants close any futures contracts ahead of their expiration through
cash settlement—buying or selling offsetting contracts—to avoid taking physical delivery; only about
1% of futures traded go to physical delivery. The extreme market events of April 20 and April 21
were driven by several factors, including the inability of traders who had purchased futures to find
other market participants to sell futures contracts to.
In addition, in this case, the scarcity and high cost of available crude oil storage meant several
market participants were heavily incentivized to close their positions before having to physically
settle their contracts, with some contract holders resorting to selling their futures contracts at
negative prices, in effect paying a counterparty to allow them to exit their positions.
Although the April 20 WTI price movements were extreme, several factors suggest that the
phenomenon of negative WTI prices will be confined to the financial market, with few sellers in
physical markets paying to sell their oil.
Under normal conditions, taking delivery of crude oil at Cushing purchased from the WTI futures
market is straightforward. The normal physical settlement process has been affected, however, by
the recent decline in the availability of uncommitted crude oil storage capacity.
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Consumption of crude oil and petroleum products has sharply declined following the travel
restrictions and general economic slowdown in mitigation efforts for the coronavirus disease
(COVID-19). As of the week ending April 17, U.S. refinery runs fell to 12.8 million barrels per day
(b/d), 4.1 million b/d (24%) less than the same time last year.
As a result of this extreme demand shock, excess imported and domestically produced crude oil
volumes are being placed into storage. According to U.S. Energy Information Administration
(EIA) storage capacity data, crude oil storage facilities at Cushing have 76 million barrels of working
storage capacity.
As of April 17, Cushing inventories totaled 60 million barrels, some of which (about 2 million barrels)
were in transit by pipeline, water, or rail. The remaining 58 million barrels are held in tank farms at
Cushing, implying that storage was 76% full.
Although EIA data indicate that some storage remains available at Cushing, some of this physically
unfilled storage may have already been leased or otherwise committed, limiting the uncommitted
storage available for financial contract holders without pre-existing arrangements. In this case, these
contract holders would likely have to pay much higher rates to storage operators for any
uncommitted space available.
Taken together, these factors suggest that the phenomenon of negative WTI prices is mainly
confined to the financial market.
The positive pricing of other crude oil benchmarks (with the Brent contract for June 2020 delivery
closing at $19.33/b on April 21), positive prices for longer-dated WTI prices, and positive spot prices
for other (but not all) U.S. crude oils suggest that the recent price movements were predominantly
driven by the timing of the May 2020 contract expiration against the backdrop of precipitous decline
in consumption.
The availability of storage in Cushing will remain an issue in the coming weeks, however, and could
still result in volatile price movements in the June WTI futures contract or other U.S. crude oil spot
prices that face limited storage options. EIA will continue to monitor these market developments
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NewBase April 28 -2020 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil drops cpntinues on fears of storagin filling
Reuters + NewBase
Oil prices WTI slid more than 15% during overnight trading, extending Monday’s nearly 25% decline
on ongoing fears that storage around the world is rapidly filling.
West Texas Intermediate, the U.S. benchmark, slid 15.3%, or $1.96, to trade at $10.82 per barrel,
while international benchmark Brent crude traded 4.8% lower at $19.03 per barrel. On Monday, WTI
fell 24.56%, or $4.16, to settle at $12.78 per barrel. International benchmark Brent crude fell 6.76%
to settle at $19.99. Each contract is coming off its eighth week of losses in nine weeks.
Oil price special
coverage
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The coronavirus pandemic has erased as much as a third of global demand for oil, according to
some estimates, which has sent prices tumbling to record lows.
“The June contract is falling due to the reality of demand levels being well below current production
levels and limited storage options,” Reid Morrison, PwC oil and gas advisory leader, told CNBC.
“Choppiness in the markets will be significant as economies deal with lockdowns and returning to
normal,” he added.
Prices were also pressured on Monday after the United States Oil Fund, which trades under the
ticker ‘USO’ and is popular with retail investors, said it would sell all of its contracts for June delivery
beginning Monday, in favor of longer-term contracts.
“The move [by the USO] is a recognition of the bleak prospects for the US oil sector in May and
June,” said Cailin Birch, global economist at The Economist Intelligence Unit.
As demand drops more and more producers have announced production cuts. But some believe
it won’t be fast enough to combat the unprecedented fall-off in demand from the pandemic.
Earlier in April, OPEC and its oil-producing allies agreed to a record production cut that will take 9.7
million barrels per day off the market beginning Friday, while Exxon and Chevron are among the
U.S.-based companies that have scaled back operations.
But sill, Birch noted that even as crude prices have dropped U.S. oil production held at a record
level in the first quarter of 2020, “filling up almost all available storage capacity.”
WTI and Brent are both on pace for their fourth straight month of losses for the first time since 2017.
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U.S. drillers cut most oil rigs in a month since 2015: Baker Hughes
U.S. energy firms cut the most oil rigs in a month in April since 2015 with oil prices down over 70%
since the start of the year as steps to curb the coronavirus pandemic cut global crude demand faster
than producers can shut wells, causing storage tanks to fill rapidly.
Drillers cut 60 oil rigs in the week to April 24, bringing the total count down to 378, the lowest since
July 2016, energy services firm Baker Hughes Co said in its closely followed report on Friday. The
oil rig count, an early indicator of future output, is down 53% from the same week a year ago when
805 oil rigs were active.
More than half of the total U.S. oil rigs are in the Permian basin in West Texas and eastern New
Mexico, where active units dropped by 37 this week to 246, the lowest since December 2016. That
was the biggest weekly cut since February 2015.
In April, drillers cut 246 oil rigs, the biggest monthly drop since January 2015.
Analysts at Raymond James projected total U.S. oil and natural gas rigs would collapse from around
800 at the end of 2019 to a record low of around 400 by the middle of the year and around 200 at
the end of 2020. The investment bank forecast the rig count would average a mere 225 rigs in 2021.
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The total number of oil and gas rigs active in the United States was down 64 to 465 this week,
closing in on the all-time low of 404 rigs during the week ended May 20, 2016, according to Baker
Hughes data going back to 1940.
In Canada, meanwhile, the total oil and gas rig count fell to a record low of 26, according to Baker
Hughes. The prior all-time low was 29 rigs during the week ended April 24, 1992.
U.S. crude futures traded around $17 per barrel on Friday, putting the contract on track for a third
straight weekly loss as production shutdowns failed to keep pace with the collapse in demand
caused by the coronavirus crisis.
Looking ahead, U.S. crude was trading higher at above $24 a barrel for the balance of 2020 and
below $32 for calendar 2021 on expectations demand will jump in coming months as the economy
snaps back after governments loosen travel and work restrictions once the spread of coronavirus
slows. That compares with an average of $57.04 in 2019.
U.S. financial services firm Cowen & Co said 32 of the independent exploration and production
(E&P) companies it tracks have cut their spending plans since the failed OPEC+ oil production cut
agreement between Russia and Saudi Arabia on March 6, implying a 41% year-over-year decline
in 2020 capex.
Before the failure of the OPEC+ agreement, Cowen said the independent E&Ps had expected to
cut spending by an average of 11% in 2020 from 2019 levels. In 2019, those companies cut
spending by around 10% from 2018 levels.
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NewBase Special Coverage
The Energy world - Special 02- April-2020
The Next Chapter of the Oil Crisis: The Industry Shuts Down
Bloomberg - Javier Blas + NewBase
Negative oil prices, ships dawdling at sea with unwanted cargoes, and traders
getting creative about where to stash oil. The next chapter in the oil crisis is now inevitable: great
swathes of the petroleum industry are about to start shutting down.
The economic impact of the coronavirus has ripped through the oil industry in dramatic phases. First
it destroyed demand as lockdowns shut factories and kept drivers at home. Then storage started
filling up and traders resorted to ocean-going tankers to store crude in the hope of better prices
ahead.
Now shipping prices are surging to stratospheric levels as the industry runs out of tankers -- a sign
of just how distorted the market has become.
The specter of production shut-downs -- and the impact they will have on jobs, companies, their
banks, and local economies -- was one of the reasons that spurred world leaders to join forces to
cut production in an orderly way. But as the scale of the crisis dwarfed their efforts, failing to stop
prices diving below zero last week, shut-downs are now a reality. It’s the worst-case scenario for
producers and refiners.
“We are moving into the end-game,” Torbjorn Tornqvist, head of commodity trading giant Gunvor
Group Ltd., said in an interview. “Early-to-mid May could be the peak. We are weeks, not months,
away from it.”
In theory, the first oil output cuts should have come from the OPEC+ alliance, which earlier this
month agreed to reduce production from May 1. Yet after the catastrophic price plunge on Monday,
when West Texas Intermediate fell to -$40 a barrel, it’s the U.S. shale patch that is leading.
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The best indicator of how the U.S. industry is reacting is the rapid drop in the number of oil
rigs in operation, which last week fell to a four-year low. Before the coronavirus crisis hit,
oil companies ran about 650 rigs in the U.S. By Friday, more than 40% of them had stopped
working, with only 378 left.
“Monday really focused people’s minds that production needs to slow down,” Ben Luckock,
co-head of oil trading at commodity merchant Trafigura Group, said. “It’s the smack in the
face the market needed to realize this is serious.”
Trafigura, one of the largest exporters of U.S. crude from the U.S. Gulf of Mexico, believes
that output in Texas, New Mexico, North Dakota and other states will now fall much faster
than expected as companies react to negative prices, which have persisted for several days
last week in the physical market.
Until prices collapsed on Monday, the consensus was that output would drop by about 1.5m
barrels a day by December. Now market watchers see that loss by late June. “The severity
of the price pressure is likely to act as a catalyst for the immediate turndown in activity and
shut-ins,” said Roger Diwan, oil analyst at consultant IHS Markit Ltd.
The price shock has been particularly intense in the physical market: producers of crude
streams such as South Texas Sour and Eastern Kansas Common had to pay more than $50 a
barrel to offload their output last week. ConocoPhillips and shale producer Continental
Resources Inc. have all announced plans to shut in output. Regulators in Oklahoma voted to
allow oil drillers to shut wells without losing leases; New Mexico made a similar decision.
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North Dakota, which for years was synonymous with the U.S. shale revolution, is witnessing
a rapid retrenchment. Oil producers have already closed more than 6,000 wells, curtailing
about 405,000 barrels a day in production, or about 30% of the state’s total.
The output cuts won’t be limited to the U.S. From Chad, a poor and landlocked country in
Africa, to Vietnam and Brazil, producers are now either reducing output or making plans to
do so.
“I wouldn’t want to get sensational about it but yes, clearly there must be a risk of shut-ins,”
Mitch Flegg, the head of North Sea oil company Serica Energy, said in an interview. “In
certain parts of the world it is a real and present risk.”
In emergency board meetings last week, oil companies small and large discussed an outlook
that’s the most somber any oil executive has ever witnessed. For the small firms, the next
few weeks will be all about staying afloat. But even for the bigger ones, like Exxon Mobil
Corp. and BP Plc, it’s a challenge. Big Oil will offer an insight into the crisis when companies
report earnings this week.
Saudi Arabia, Russia and the rest of the OPEC+ alliance will join the output cuts on Friday,
slashing their output by more than 20%, or 9.7 million barrels a day. Saudi Aramco, the
state-owned company, is already trimming to reach the target. And Russian oil companies
have announced exports of their flagship Urals crude would drop in May to a 10-year low.
Even so, it may not be enough. Every week, 50 million barrels ofcrude are going into storage,
enough to fuel Germany, France, Italy, Spain, and the U.K. combined. At that rate, the world
will run out of storage by June. What’s not stored onshore, is stashed in tankers. The U.S.
Coast Guard on Friday said there were so many tankers at anchor off California that it was
keeping an eye on the situation.
US Coast Guard says it’s keeping an eye on 27 oil tankers anchored off the coast of Southern
California. Another great example of floating storage build-up as demand for oil and refined products
Copyright © 2020 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 endeavors 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
Before the crisis hit, the world was consuming about 100 million barrels a day. Demand
now, however, is somewhere between 65 and 70 million barrels. So, in a worst-case
scenario, about a third of global output needs to be shut.
The reality is likely to be less severe as storage would continue to bridge the gap between
supply and demand. Plus, oil traders say consumption has probably hit a bottom, and will
start a very gentle recovery.
Refiners Shut
But before that takes hold, the great shutdown will spread through oil refining too.
Over the past week, Marathon Petroleum Corp., one of the biggest U.S. refiners, announced it would
stop production at a plant near San Francisco. Royal Dutch Shell Plc has idled several units in three
U.S. refineries in Alabama and Louisiana. And across Europe and Asia, many refineries are running
at half rate. U.S. oil refiners processed just 12.45 million barrels a day on the week to April 17, the
lowest amount in at least 30 years, except for hurricane-related closures.
More refinery shutdowns are coming, oil traders and consultants said, particularly in the U.S. where
lockdowns started later than in Europe and demand is still contracting. Steve Sawyer, director of
refining at Facts Global Energy, said that global refineries could halt as much as 25% of total
capacity in May.
“No one is going to be able to dodge this bullet.”
Copyright © 2020 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 endeavors 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
The Editor :”Khaled Al Awadi” 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
www.linkedin.com/in/khaled-al-awadi-38b995b
Mobile: +971504822502
khdmohd@hawkenergy.net or 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 2020 K. Al Awadi
Copyright © 2020 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 endeavors 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 energy news 28 april 2020 issue no. 1333 senior editor eng. khaled al awadi

  • 1. Copyright © 2020 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 endeavors 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 Energy News 28 April 2020 - Issue No. 1333 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: Adnoc and ADPower tender for subsea HVDC links The National - Jennifer Gnana+ ( NewBase ) Abu Dhabi National Oil Company and ADPower issued a joint tender for a subsea transmission system connecting offshore oil facilities to the onshore electricity grid. The joint tender will be for the development and operation of the first high-voltage, direct current subsea system of its kind in the region, the company said. Requests for proposal have been dispatched to international oil companies with expertise in the field. The project will comprise two independent subsea direct current transmission links and converter stations that connect to ADPower's onshore electricity grid. The grid is operated by the firm's subsidiary, Abu Dhabi Transmission and Despatch Company (Transco) and has a total installed capacity of 3.2GW. The commercial operation of the scheme is expected in 2025. "This project will meet our future offshore power needs, even as our fields mature, using diverse and sustainable sources," said Yasser Saeed Al Mazrouei, Adnoc upstream executive director. www.linkedin.com/in/khaled-al-awadi-38b995b
  • 2. Copyright © 2020 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 endeavors 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 The project is also expected to lower Adnoc's carbon footprint in line with the UAE's drive to reduce emissions, while at the same time allowing the firm to use natural gas used to power offshore facilities for "higher-value purposes", he added. The scheme would allow for a 30 per cent reduction in the carbon footprint of offshore facilities and allow the operators to optimise power supply costs, a statement said. Operational efficiency will also be achieved by replacing existing localised, offshore gas turbine generators with more efficient, diverse and sustainable sources of energy, including renewables and nuclear, the companies said. The project will be financed through a special purpose vehicle in which Adnoc and ADPower will each have 30 per cent stakes. The remaining 40 per cent will be owned by selected developers and investors. The scheme will be executed on a build, own, operate, and transfer basis. Successful bidders will develop and operate the transmission grid alongside the two companies. The completed project will be handed ove r to Adnoc at the end of the transmission agreement period. ADPower owns most of the power and water assets in Abu Dhabi. In February, the company submitted an offer to transfer most of its water and electricity generation, transmission, and distribution companies portfolio to the Abu Dhabi National Energy Company, also known as Taqa. The transaction, which has been approved by Taqa's board, is effectively a reverse takeover which will create a new, regional utilities champion. The combined entity will have total assets worth Dh200 billion, with more than 85 per cent of its revenue coming from regulated and contracted businesses. The deal with Taqa is part of ongoing efforts in the UAE capital to consolidate assets. The emirate has already seen large-scale mergers in the banking and finance industry following the slide in oil prices in 2016. The deal would make the new entity one of the top utility companies in the Europe, Middle East, and Africa region and also make Taqa one of the largest listed companies on the Abu Dhabi stock market.
  • 3. Copyright © 2020 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 endeavors 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 UAE: Drydocks World completes Turret Mooring System for Johan Castberg FPSO DUBAI, April 27th 2020: Drydocks World, the service provider to the marine, offshore, oil, gas and renewable energy sectors has successfully completed construction on a Turret Mooring System (TMS) for SBM Offshore and end-client Equinor. The TMS will be integrated with the Johan Castberg Floating Production Storage and Offloading (FPSO) vessel in Singapore, and deployed for operation offshore in the Norwegian Barents Sea. The over 8,000T internal TMS will enable the vessel to passively weathervane around the anchor legs, while simultaneously transferring fluids, power, and communications signals between the vessel and the subsea equipment. Drydocks World completed the TMS in 4 units, and was responsible for the production engineering, procurement, construction and testing of system components. Capt. Rado Antolovic PhD CEO of Drydocks World Dubai said “At Drydocks World we have the expertise and facilities to deliver high quality offshore technology, and we are proud to successfully deliver this project with 4.98 million injury free man-hours. Despite the current challenges posed by the Covid-19 pandemic, we have put every necessary measure in place to ensure our yard has the capabilities to keep production on-track, whilst keeping our employees safe, ultimately allowing us to deliver on our project commitments. We are very pleased for the opportunity to have worked with SBM Offshore and Equinor again, and look forward to further future collaboration.” This is the 3rd TMS that SBM Offshore has awarded to Drydocks World, a leader in specialist TMS fabrication, having previously completed the world’s largest TMS together. Company Profile: Over the past 36 years Drydocks World-Dubai has become a leading provider of marine and offshore services to the shipping, oil, gas and energy sectors. Conceived as an ambitious project under the guidance of H.H. Sheikh Rashid Bin Saeed Al Maktoum the late Ruler of Dubai, the yard is strategically located in a rapidly developing region of the world. Drydocks World completes over 300 projects a year on average, with a record of handling 42 refurbishment projects simultaneously. The yard is spread over 200 hectares, 4 dry docks, with
  • 4. Copyright © 2020 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 endeavors 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 the largest dock capable of handling the world’s largest ship, and over 3,700m of berth space. Innovative projects have been constructed in Drydocks World, breaking records for some of the largest new build offshore fabrication projects worldwide. The yard has received numerous awards and accolades including the British Safety Council’s prestigious “5 Star” rating for the past 14 years and the “Sword of Honor” on 11 occasions. Drydocks World aims to consistently deliver excellence and to achieve further success for the UAE’s maritime industry, positioning Drydocks World as an international yard of choice.
  • 5. Copyright © 2020 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 endeavors 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 Oman: Salalah Free Zone to launch 10 new projects in 2020 Oman Observer - Conrad Prabhu Salalah Free Zone (SFZ) – the Sultanate’s first free zone development — plans to bring into operation 10 new factories and industrial ventures before the end of this year, further strengthening its reputation as a major draw for industrial and economic investment. The free zone, adjoining Salalah’s transhipment and logistics hub overlooking the Indian Ocean, has announced a flurry of new investments since the start of this year, many of which have now entered the construction phase. Announcing an uptick in activity at the nation’s oldest free zone, Ali Mohammed Tabouk, CEO, said: “Business in Salalah Free Zone is booming, with more than five factories currently under construction at a good pace. We are targeting the operation of 10 new factories before the end of 2020,” he tweeted on Saturday, adding that the Free Zone is “sparing no effort in achieving its top priority of creating job opportunities for citizens”. Gearing up to commence production is Magnificence Tech of Asia (FZ) LLC, which is setting up a bus assembly plant at the free zone with an investment of $50 million. The company is targeting the production and roll-out of around 1,000 coaches per annum for distribution across markets in the Gulf, Middle East and Africa. It will be the second such investment in the Sultanate, after Oman’s maiden bus assembly plant by Karwa Motors, which is currently under construction at Duqm Special Economic Zone. Also making headway is the Knowledge Academy – a training hub designed and equipped to develop the technical and vocational skills of up to 1,000 young Omanis at any given time. At full capacity, the Academy will be operated by a 160-strong faculty of trainers and administrative staff. Total investment in the facility, promoted by Muscat-based Oman Technology Establishment, is around RO 10 million.
  • 6. Copyright © 2020 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 endeavors 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 In the early stages of construction is Salalah International Exhibitions City – an integrated wholesale hub that will leverage, on the one hand, its proximity to Salalah City – a rapidly expanding urban destination – and a well-connected international maritime gateway. At full build, the Exhibitions City will host as many as 2,000 commercial units that will be offered for wholesale trading in a variety of goods and activities, including building materials, electronics, vehicles, textiles, furniture, consumer goods, and luxury items. As many as 1,500 job opportunities will be created when it is fully operational. Work on the Free Zone’s first large-scale metallurgical plant is gathering pace as well. National Steel Company, backed by a Saudi corporation, is investing $500 million in an integrated steel complex that will produce around 25,000 tons per year of steel structures, 60,000 tons per year of prefab metal structures, 2 million sq metres per year of sandwich paneling for industrial structures, and 10,000 tons per year of industrial floors. Roughly two-thirds of this output is destined for overseas markets. Among the major ventures targeted for launch this year is Philex Pharmaceuticals, which is being developed in three phases with a total investment of $365 million. The high-tech facility, backed by Qatari investors, will produce an array of drugs and vaccines as well. Other initiatives that the Free Zone plans to launch this year is a mammoth, integrated residential city with a capacity to accommodate around `100,000 people, remotely operated ‘smart’ warehouses, and renewable energy projects.
  • 7. Copyright © 2020 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 endeavors 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 World: Oil traders book expensive U.S. vessels to store gasoline, ship fuel overseas in sign of desperation .. Reuters + NewBase Oil traders are hiring expensive U.S. vessels, normally only used for domestic shipments, to store gasoline or ship fuel overseas, five shipping sources said, in a sign of the energy industry’s desperation for places to park petroleum amid a 30% drop in worldwide demand. Billions of people worldwide are living under confinement rules due to the coronavirus pandemic, destroying demand for gasoline and other fuels and creating a supply glut. Storage tanks onshore and floating storage in tankers on the water are rapidly filling, leaving fewer options for traders looking to sock away oil. Several shippers said they have started to book Jones Act (JA) vessels for foreign voyages or to store refined products. The century-old Jones Act requires that vessels traveling between domestic ports be owned and operated by U.S. crews, and they are generally more expensive than other vessels. “It’s very unusual to use JA tankers for international trips,” one shipping source said. Those restrictions, and lack of availability, typically make the tankers more expensive than foreign- flagged vessels that go to other countries. Around 45 products tankers are JA compliant, shipping data reviewed by Reuters showed. Rates for foreign-flagged fuel tankers such as medium-range and long-range vessels leaving from the United States have jumped to about $60,000 and a record $100,000 a day, compared with Jones Act medium-range tanker rates of about $55,000 to$70,000 a day, the sources said. Refiner Motiva Enterprises [MOTIV.UL] is among companies looking to potentially charter a Jones Act vessel for an overseas voyage, shipping sources said. Motiva did not immediately respond to a request for comment. Inventories of gasoline in the United States have surged to a record and U.S. refiners are operating at about two-thirds of capacity. Roughly 85% of worldwide onshore storage was full as of last week, according to Kpler data. “The Jones Act sector is mirroring what we are seeing with the wider oil tanker market with a surge in demand for tankers as refiners can’t sell gasoline or oil products. Utilization of Jones Act tankers is at 100%,” said Basil Karatzas of New York-based shipping finance advisory firm Karatzas Marine Advisors & Co, which is active in the Jones Act market. He said some older JA tankers that had been planned to be scrapped may end up being used as storage. Long-range tankers can carry between 345,000 barrels and 615,000 barrels of gasoline or between 310,000 barrels and 550,000 barrels of light sweet crude. Jones Act tankers usually are employed under time charters for over a period of a year.
  • 8. Copyright © 2020 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 endeavors 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 Low liquidity and limited available storage pushed WTI crude oil futures prices below zero
 EIA, based on CME Group and Bloomberg, L.P. On Monday, April 20, 2020, West Texas Intermediate (WTI) crude oil front-month futures traded on the New York Mercantile Exchange (NYMEX) were priced in negative dollars per barrel (b) for the first time since trading began in 1983. At about 2:30 p.m. ET, WTI traded as low as -$40.32/b; prices remained below zero for part of the following trading day. Market participants that hold WTI futures contracts through expiration must make or take physical delivery of WTI crude oil in Cushing, Oklahoma, unless they have made other arrangements ahead of time. Typically, most market participants close any futures contracts ahead of their expiration through cash settlement—buying or selling offsetting contracts—to avoid taking physical delivery; only about 1% of futures traded go to physical delivery. The extreme market events of April 20 and April 21 were driven by several factors, including the inability of traders who had purchased futures to find other market participants to sell futures contracts to. In addition, in this case, the scarcity and high cost of available crude oil storage meant several market participants were heavily incentivized to close their positions before having to physically settle their contracts, with some contract holders resorting to selling their futures contracts at negative prices, in effect paying a counterparty to allow them to exit their positions. Although the April 20 WTI price movements were extreme, several factors suggest that the phenomenon of negative WTI prices will be confined to the financial market, with few sellers in physical markets paying to sell their oil. Under normal conditions, taking delivery of crude oil at Cushing purchased from the WTI futures market is straightforward. The normal physical settlement process has been affected, however, by the recent decline in the availability of uncommitted crude oil storage capacity.
  • 9. Copyright © 2020 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 endeavors 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 Consumption of crude oil and petroleum products has sharply declined following the travel restrictions and general economic slowdown in mitigation efforts for the coronavirus disease (COVID-19). As of the week ending April 17, U.S. refinery runs fell to 12.8 million barrels per day (b/d), 4.1 million b/d (24%) less than the same time last year. As a result of this extreme demand shock, excess imported and domestically produced crude oil volumes are being placed into storage. According to U.S. Energy Information Administration (EIA) storage capacity data, crude oil storage facilities at Cushing have 76 million barrels of working storage capacity. As of April 17, Cushing inventories totaled 60 million barrels, some of which (about 2 million barrels) were in transit by pipeline, water, or rail. The remaining 58 million barrels are held in tank farms at Cushing, implying that storage was 76% full. Although EIA data indicate that some storage remains available at Cushing, some of this physically unfilled storage may have already been leased or otherwise committed, limiting the uncommitted storage available for financial contract holders without pre-existing arrangements. In this case, these contract holders would likely have to pay much higher rates to storage operators for any uncommitted space available. Taken together, these factors suggest that the phenomenon of negative WTI prices is mainly confined to the financial market. The positive pricing of other crude oil benchmarks (with the Brent contract for June 2020 delivery closing at $19.33/b on April 21), positive prices for longer-dated WTI prices, and positive spot prices for other (but not all) U.S. crude oils suggest that the recent price movements were predominantly driven by the timing of the May 2020 contract expiration against the backdrop of precipitous decline in consumption. The availability of storage in Cushing will remain an issue in the coming weeks, however, and could still result in volatile price movements in the June WTI futures contract or other U.S. crude oil spot prices that face limited storage options. EIA will continue to monitor these market developments
  • 10. Copyright © 2020 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 endeavors 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 April 28 -2020 Khaled Al Awadi NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE Oil drops cpntinues on fears of storagin filling Reuters + NewBase Oil prices WTI slid more than 15% during overnight trading, extending Monday’s nearly 25% decline on ongoing fears that storage around the world is rapidly filling. West Texas Intermediate, the U.S. benchmark, slid 15.3%, or $1.96, to trade at $10.82 per barrel, while international benchmark Brent crude traded 4.8% lower at $19.03 per barrel. On Monday, WTI fell 24.56%, or $4.16, to settle at $12.78 per barrel. International benchmark Brent crude fell 6.76% to settle at $19.99. Each contract is coming off its eighth week of losses in nine weeks. Oil price special coverage
  • 11. Copyright © 2020 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 endeavors 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 The coronavirus pandemic has erased as much as a third of global demand for oil, according to some estimates, which has sent prices tumbling to record lows. “The June contract is falling due to the reality of demand levels being well below current production levels and limited storage options,” Reid Morrison, PwC oil and gas advisory leader, told CNBC. “Choppiness in the markets will be significant as economies deal with lockdowns and returning to normal,” he added. Prices were also pressured on Monday after the United States Oil Fund, which trades under the ticker ‘USO’ and is popular with retail investors, said it would sell all of its contracts for June delivery beginning Monday, in favor of longer-term contracts. “The move [by the USO] is a recognition of the bleak prospects for the US oil sector in May and June,” said Cailin Birch, global economist at The Economist Intelligence Unit. As demand drops more and more producers have announced production cuts. But some believe it won’t be fast enough to combat the unprecedented fall-off in demand from the pandemic. Earlier in April, OPEC and its oil-producing allies agreed to a record production cut that will take 9.7 million barrels per day off the market beginning Friday, while Exxon and Chevron are among the U.S.-based companies that have scaled back operations. But sill, Birch noted that even as crude prices have dropped U.S. oil production held at a record level in the first quarter of 2020, “filling up almost all available storage capacity.” WTI and Brent are both on pace for their fourth straight month of losses for the first time since 2017.
  • 12. Copyright © 2020 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 endeavors 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 U.S. drillers cut most oil rigs in a month since 2015: Baker Hughes U.S. energy firms cut the most oil rigs in a month in April since 2015 with oil prices down over 70% since the start of the year as steps to curb the coronavirus pandemic cut global crude demand faster than producers can shut wells, causing storage tanks to fill rapidly. Drillers cut 60 oil rigs in the week to April 24, bringing the total count down to 378, the lowest since July 2016, energy services firm Baker Hughes Co said in its closely followed report on Friday. The oil rig count, an early indicator of future output, is down 53% from the same week a year ago when 805 oil rigs were active. More than half of the total U.S. oil rigs are in the Permian basin in West Texas and eastern New Mexico, where active units dropped by 37 this week to 246, the lowest since December 2016. That was the biggest weekly cut since February 2015. In April, drillers cut 246 oil rigs, the biggest monthly drop since January 2015. Analysts at Raymond James projected total U.S. oil and natural gas rigs would collapse from around 800 at the end of 2019 to a record low of around 400 by the middle of the year and around 200 at the end of 2020. The investment bank forecast the rig count would average a mere 225 rigs in 2021.
  • 13. Copyright © 2020 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 endeavors 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 The total number of oil and gas rigs active in the United States was down 64 to 465 this week, closing in on the all-time low of 404 rigs during the week ended May 20, 2016, according to Baker Hughes data going back to 1940. In Canada, meanwhile, the total oil and gas rig count fell to a record low of 26, according to Baker Hughes. The prior all-time low was 29 rigs during the week ended April 24, 1992. U.S. crude futures traded around $17 per barrel on Friday, putting the contract on track for a third straight weekly loss as production shutdowns failed to keep pace with the collapse in demand caused by the coronavirus crisis. Looking ahead, U.S. crude was trading higher at above $24 a barrel for the balance of 2020 and below $32 for calendar 2021 on expectations demand will jump in coming months as the economy snaps back after governments loosen travel and work restrictions once the spread of coronavirus slows. That compares with an average of $57.04 in 2019. U.S. financial services firm Cowen & Co said 32 of the independent exploration and production (E&P) companies it tracks have cut their spending plans since the failed OPEC+ oil production cut agreement between Russia and Saudi Arabia on March 6, implying a 41% year-over-year decline in 2020 capex. Before the failure of the OPEC+ agreement, Cowen said the independent E&Ps had expected to cut spending by an average of 11% in 2020 from 2019 levels. In 2019, those companies cut spending by around 10% from 2018 levels.
  • 14. Copyright © 2020 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 endeavors 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 NewBase Special Coverage The Energy world - Special 02- April-2020 The Next Chapter of the Oil Crisis: The Industry Shuts Down Bloomberg - Javier Blas + NewBase Negative oil prices, ships dawdling at sea with unwanted cargoes, and traders getting creative about where to stash oil. The next chapter in the oil crisis is now inevitable: great swathes of the petroleum industry are about to start shutting down. The economic impact of the coronavirus has ripped through the oil industry in dramatic phases. First it destroyed demand as lockdowns shut factories and kept drivers at home. Then storage started filling up and traders resorted to ocean-going tankers to store crude in the hope of better prices ahead. Now shipping prices are surging to stratospheric levels as the industry runs out of tankers -- a sign of just how distorted the market has become. The specter of production shut-downs -- and the impact they will have on jobs, companies, their banks, and local economies -- was one of the reasons that spurred world leaders to join forces to cut production in an orderly way. But as the scale of the crisis dwarfed their efforts, failing to stop prices diving below zero last week, shut-downs are now a reality. It’s the worst-case scenario for producers and refiners. “We are moving into the end-game,” Torbjorn Tornqvist, head of commodity trading giant Gunvor Group Ltd., said in an interview. “Early-to-mid May could be the peak. We are weeks, not months, away from it.” In theory, the first oil output cuts should have come from the OPEC+ alliance, which earlier this month agreed to reduce production from May 1. Yet after the catastrophic price plunge on Monday, when West Texas Intermediate fell to -$40 a barrel, it’s the U.S. shale patch that is leading.
  • 15. Copyright © 2020 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 endeavors 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 The best indicator of how the U.S. industry is reacting is the rapid drop in the number of oil rigs in operation, which last week fell to a four-year low. Before the coronavirus crisis hit, oil companies ran about 650 rigs in the U.S. By Friday, more than 40% of them had stopped working, with only 378 left. “Monday really focused people’s minds that production needs to slow down,” Ben Luckock, co-head of oil trading at commodity merchant Trafigura Group, said. “It’s the smack in the face the market needed to realize this is serious.” Trafigura, one of the largest exporters of U.S. crude from the U.S. Gulf of Mexico, believes that output in Texas, New Mexico, North Dakota and other states will now fall much faster than expected as companies react to negative prices, which have persisted for several days last week in the physical market. Until prices collapsed on Monday, the consensus was that output would drop by about 1.5m barrels a day by December. Now market watchers see that loss by late June. “The severity of the price pressure is likely to act as a catalyst for the immediate turndown in activity and shut-ins,” said Roger Diwan, oil analyst at consultant IHS Markit Ltd. The price shock has been particularly intense in the physical market: producers of crude streams such as South Texas Sour and Eastern Kansas Common had to pay more than $50 a barrel to offload their output last week. ConocoPhillips and shale producer Continental Resources Inc. have all announced plans to shut in output. Regulators in Oklahoma voted to allow oil drillers to shut wells without losing leases; New Mexico made a similar decision.
  • 16. Copyright © 2020 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 endeavors 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 North Dakota, which for years was synonymous with the U.S. shale revolution, is witnessing a rapid retrenchment. Oil producers have already closed more than 6,000 wells, curtailing about 405,000 barrels a day in production, or about 30% of the state’s total. The output cuts won’t be limited to the U.S. From Chad, a poor and landlocked country in Africa, to Vietnam and Brazil, producers are now either reducing output or making plans to do so. “I wouldn’t want to get sensational about it but yes, clearly there must be a risk of shut-ins,” Mitch Flegg, the head of North Sea oil company Serica Energy, said in an interview. “In certain parts of the world it is a real and present risk.” In emergency board meetings last week, oil companies small and large discussed an outlook that’s the most somber any oil executive has ever witnessed. For the small firms, the next few weeks will be all about staying afloat. But even for the bigger ones, like Exxon Mobil Corp. and BP Plc, it’s a challenge. Big Oil will offer an insight into the crisis when companies report earnings this week. Saudi Arabia, Russia and the rest of the OPEC+ alliance will join the output cuts on Friday, slashing their output by more than 20%, or 9.7 million barrels a day. Saudi Aramco, the state-owned company, is already trimming to reach the target. And Russian oil companies have announced exports of their flagship Urals crude would drop in May to a 10-year low. Even so, it may not be enough. Every week, 50 million barrels ofcrude are going into storage, enough to fuel Germany, France, Italy, Spain, and the U.K. combined. At that rate, the world will run out of storage by June. What’s not stored onshore, is stashed in tankers. The U.S. Coast Guard on Friday said there were so many tankers at anchor off California that it was keeping an eye on the situation. US Coast Guard says it’s keeping an eye on 27 oil tankers anchored off the coast of Southern California. Another great example of floating storage build-up as demand for oil and refined products
  • 17. Copyright © 2020 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 endeavors 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 Before the crisis hit, the world was consuming about 100 million barrels a day. Demand now, however, is somewhere between 65 and 70 million barrels. So, in a worst-case scenario, about a third of global output needs to be shut. The reality is likely to be less severe as storage would continue to bridge the gap between supply and demand. Plus, oil traders say consumption has probably hit a bottom, and will start a very gentle recovery. Refiners Shut But before that takes hold, the great shutdown will spread through oil refining too. Over the past week, Marathon Petroleum Corp., one of the biggest U.S. refiners, announced it would stop production at a plant near San Francisco. Royal Dutch Shell Plc has idled several units in three U.S. refineries in Alabama and Louisiana. And across Europe and Asia, many refineries are running at half rate. U.S. oil refiners processed just 12.45 million barrels a day on the week to April 17, the lowest amount in at least 30 years, except for hurricane-related closures. More refinery shutdowns are coming, oil traders and consultants said, particularly in the U.S. where lockdowns started later than in Europe and demand is still contracting. Steve Sawyer, director of refining at Facts Global Energy, said that global refineries could halt as much as 25% of total capacity in May. “No one is going to be able to dodge this bullet.”
  • 18. Copyright © 2020 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 endeavors 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 The Editor :”Khaled Al Awadi” 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 www.linkedin.com/in/khaled-al-awadi-38b995b Mobile: +971504822502 khdmohd@hawkenergy.net or 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 2020 K. Al Awadi
  • 19. Copyright © 2020 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 endeavors 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 For Your Recruitments needs and Top Talents, please seek our approved agents below