New base 703 special 08 october 2015

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

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NewBase 08 October 2015 - Issue No. 703 Senior Editor Eng. Khaled Al Awadi

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE

Energy minister calls for Dh3.5bn savings in water and energy The National - Adam Bouyamourn

Energy chiefs aim to trim Dh3.5 billion from the power and water subsidy bill by encouraging people to turn off their taps and switch off their lights.

“Today, as never before, we see the urgent need to reduce consumption,” said the Minister of Energy, Suhail Al Mazrouei. “The squandering of resources is the enemy of development.

“We are working on supporting a culture of reasonable consumption in various government and private establishments, as well as in homes, schools and mosques.”

The low oil price makes generous discounts on already cheap commodities harder to afford. Mr Al Mazrouei hopes consumers will cut their consumption by 10 per cent – instead of increasing it at a rate of 6 per cent a year.

The ministry says it spends Dh35bn on subsidies for fuel and water. The

International Monetary Fund estimates that the actual bill to the government is higher, at about Dh46.4bn – but points out that the real cost in terms of pollution, forgone tax, overconsumption, traffic accidents and congestion is closer to Dh100bn.

The price of oil has more than halved since June last year. This has hit government revenues, more than half of which are earned from oil exports. This shortfall means that Government will run its first budget deficit since 2009, according to the IMF.

To counter this, the Government has trimmed Dh6.8bn from its spending on fuel subsidies this year. Abu Dhabi cut subsidies on electricity and water for expatriates at the beginning of the year, and the Ministry of Energy changed the way it sets fuel prices in August, which has led to increased prices at the pump.

Low prices, a lack of awareness about the real costs of electricity and water consumption, and the absence of uniform energy efficiency regulations for buildings all mean that consumers and businesses use more energy and water than they need to, said Glada Lahn, a senior research fellow at Chatham House.




Overconsumption of air conditioning, which accounts for 60 per cent of a building’s energy use, and a stock of energy-inefficient buildings mean the Government ends up spending an unnecessarily large amount on subsidies, Ms Lahn said.

“Apartments and skyscrapers haven’t been built with fuel or energy efficiency in mind, and there is a lot of inefficiency in the way people use air conditioning.”

“In Gulf countries, because energy and water are so available and plentiful, which is great, people lose a sense of the value of it. The answer is to make costs more transparent. People need to understand the full cost of the energy they’re using.

“It’s not part of many companies’ business considerations if it’s not making a dent in profits. And until it affects your budgeting, and you’re aware of it, you won’t be willing to spend money to reduce your bills.”

Understanding the Subsidy

As suggested above, the price of electricity in Abu Dhabi is a major contributing factor to its unsustainable consumption. Electricity is sold to consumers at a heavily-subsidized standard tariff, that is much lower than the total economic costs of electricity. Consumers are charged a subsidized unit rate per kilowatt hour (kWh) that is constant all year round, with domestic Emirati nationals and farms receiving the most generous energy subsidies. Current tariffs paid by Emirati and non-Emirati consumers can be seen in table 1, with lower tariffs implying that a higher subsidy is applied.




Algeria expects 4.1 pct rise in oil and gas exports in 2015 Reuters Algeria expects a 4.1 percent rise in oil and gas exports this year to 195 million tonnes of oil equivalent, after achieving increased yields at its Hassi Rmel, Hassi Messaoud, Berkine and El Merk fields, a presidential statement said. Algeria, a North African OPEC member and major gas supplier to Europe, has struggled in recent years to draw the foreign oil investment it needs to help increase stagnating energy production. The statement said energy output peaked at 233 million tonnes of oil equivalent in 2007 before steadily declining to 187 million tonnes by 2012. But hydrocarbon output is expected to reach 224 million tonnes of oil equivalent by 2019. It attributed the improvement to better recovery rates at Hassi Messaoud and Hassi Rmel, as well as acceleration in exploration at developments in Ahnet-Tidikelt, Tinhert, Timimoun and Reggane. Algeria is struggling with a dramatic fall in energy revenue after world oil prices fell sharply this year. Energy output makes up 95 percent of the state budget and around 60 percent of the country's exports.

Amine Mazouzi, chief of state energy firm Sonatrach , said on Monday the company planned to maintain most of its planned investments, but would look at reducing costs. He said the company would focus on increasing output capacity for crude and gas and on refineries and petrochemicals.




India: Big-Oil spending cuts lower ONGC’s cost of exploration Bloomberg

The worst commodity slump in a generation has a silver lining for India’s state-run energy explorer. Oil & Natural Gas Corp predicts exploration costs will drop a fifth as fees for rigs and vessels moderate after businesses including BP and Royal Dutch Shell curbed outlays.

That could mean a saving of Rs49bn ($749mn) on planned exploration spending of Rs245bn in the year through March 2016, Bloomberg calculations based on company estimates show.

“This is the only saving grace in the low oil-price regime,” ONGC’s Director Offshore Tapas Kumar Sengupta, who gave the estimate of a 20% drop in expenses, said in an interview in New Delhi. “We’ve awarded contracts for about 20 vessels and received a record 150 bids. We’ve placed orders at about half

the earlier rates.”

The biggest explorer in Asia’s third-largest economy is betting that its highest capital expenditure in at least six years will pay off once oil prices revive. In contrast, the slump in Brent crude costs in the past year has led global majors such as BP and Royal Dutch Shell to cut billions of dollars from spending budgets.

“One’s pain is another’s gain,” said Abhishek Kumar, senior energy and modelling analyst at Interfax Energy’s Global Gas Analytics in London. “ONGC should utilise these services on its ongoing projects as much as it can and capitalise on new projects once oil prices recover. This is a strategy common among government-run companies globally.”

ONGC shares rose the most in five weeks, gaining 4.2% to Rs257.75 at the close in Mumbai. The stock has dropped 35% in the past year, compared with a 2.9% increase in the S&P BSE Sensex. Brent crude, a global benchmark, has declined 43% over the period to about $53 per barrel.

ONGC plans Rs362.5bn of capital expenditure in the 12 months that began April 1, and some two-thirds of that figure is earmarked for exploration, company filings and presentations show. Net income rose 14% to Rs54.6bn in the three months ended June 30.

Indian Prime Minister Narendra Modi has made energy security a priority for a nation that imports the bulk of its oil. Production has declined in fields accounting for almost three-quarters of ONGC’s output, adding pressure on the company to find new reserves. ONGC intends to spend Rs11tn by 2030 to raise output. It’s seeking about 30 drilling vessels, including five deep-water rigs, Sengupta said in the September 23 interview.




S.Korea:SABIC, SK inaugurate new industrial plant Saui Gazette + Newbase

SABIC and South Korean petrochemical company, SK Global Chemical, Wednesday inaugurated

a new industrial plant to manufacture a range of high-performance polyethylene products using

the cutting-edge Nexlene Solution Technology.

Wednesday’s ceremony was attended by SABIC Chairman Prince Saud Bin Abdullah Bin Thinayan Al-Saud and Acting Vice Chairman, Chief Executive Officer Yousef A. Al-Benyan and Executive Vice Presidents Abdulrahman Al-Fageeh and Yousef Al-Zamel.

SK was represented by Group Chairman Chey Tae-won, SK Innovation CEO Chung Chul-Khil, and Cha Hwa-youp, SK Global Chemical CEO. Also in attendance were Trade, Industry and Energy Minister Yoon Sang-jick and Ulsan Mayor Kim Gi-hyeon. “This magnificent new industrial facility will enhance the petrochemical industries through innovating world unique solutions utilizing Nexlene technology,” said Prince Saud Bin Abdullah Bin Thinayan Al Saud. “Through this cutting-edge technology we will be able to meet our customers’ needs around the world, through a more advanced, high value, and unique, customer-focused selection of products.” The 50-50 joint venture holding company, SABIC SK Nexlene Company (SSNC) was established last July and is headquartered in Singapore. Its wholly-owned subsidiary, Korea Nexlene Company (KNC), owns the plant in Ulsan, which has an annual capacity of 230,000 tons. The aggregate purchase price for the technology and plant is approximately $640 million.




The plant will produce metallocene linear low density polyethylene (mLLDPE), polyolefin plastomers (POP) and polyolefin elastomers (POE) that will meet the growing needs of diverse industries such as advanced packaging, automotive, healthcare, footwear and electrical & lighting.

“We are very pleased to take this latest step in our partnership with SK Global Chemical, which further expands SABIC’s presence worldwide,” said Yousef Al-Benyan, SABIC’s Acting Vice Chairman and CEO. “This new plant symbolizes our determination to open new markets and underscores our position as a global leader — a major goal of our 2025 strategy.”

Nexlene will offer customers better performance — including excellent impact strength, enhanced toughness, superior transparency, and much more. These unique properties and characteristics of products using Nexlene technology offer a range of possibilities for the development of innovative product and differentiated applications. The packaging industry will benefit from mLLDPE to manufacture flexible food packaging and wrapping materials. The exceptional heat-sealing properties of POP will improve a variety of packaging products that require low temperature sealing, adhesion, and optics. Industries that require elasticity will also see important advantages from POE. These include the automotive industry, consumer products like footwear, and wire and cable for the utility and construction industries. Abdulrahman Al-Fageeh, SABIC Polymers Executive Vice President, said the new plant would enable both partners to grow in the highly specialized polyethylene market. “The products that will be coming from this plant will provide high-value polymer products to global customers,” he said. “With Nexlene solution technology, SABIC now has access to the most complete polyethylene technology platforms within the petrochemical industry.” In addition to the new manufacturing facility, SABIC and SK will on Thursday inaugurate a new state of the art research and development facilities in Daejon. It will feature departments focusing on process development, as well as catalyst and product development. The center will also sponsor and oversee research programs at universities and third party facility, in Korea and around the world. These new facilities mark the latest SABIC investments in manufacturing and research capability in the Far East after its partnership with the China Petrochemical Corporation (Sinopec) and the SABIC Technology Center in Shanghai, inaugurated in 2013.




Hungary imports oil from Iraq's Kurdistan at expense of Russian crude REUTERS - GLEB GORODYANKIN

Hungary has increased oil imports from Iraq's Kurdistan region at the expense of Russian crude in a sign that Middle East producers could be gaining ground in a battle with Moscow for global market share, according to trading sources.

This would also be the first confirmation of large Kurdish oil shipments to Europe as autonomous Kurdistan is locked in a standoff with Baghdad over lucrative exports and faces repeated sabotage of the pipeline carrying crude to Turkey's Ceyhan port.

Hungarian oil group MOL receives the bulk of its oil imports from Russia. But it has stepped up imports of oil from Kurdistan since the summer, the sources told Reuters without giving specific volumes, part of a wider increase in seaborne crude purchases for the country's main refinery, Szazhalombatta.

"These are serious volumes, almost 40 percent of Szazhalombatta's needs," a trader said of total seaborne imports. The sources said this would inevitably involve a reduction in imports of Russia's Urals blend, which come via the Druzhba pipeline.

MOL declined to say if it was buying blends from Kurdistan. It confirmed, however, that it was increasing purchases of blends other than Urals, but added that Urals would remain the main blend for its refineries.

The firm said it planned to ship in 12-18 cargoes of oil from sea this year, up from eight in 2014 and three in 2013.

Global oil prices have more than halved since June last year. Top exporter Saudi Arabia has refused to cut production as it guards market share, saying higher-cost oil producers would ultimately reduce output and help the market to rebalance

But U.S. oil output has proved more resilient than expected and Russia has continued to increase production in the past few months, further worsening the global glut. And Iraqi production has been also growing, both in the north and south.




DISPLACEMENT

A displacement of Russian volumes from Hungary - Russia's fourth-biggest oil export market, accounting for about a tenth of its pipeline oil exports to Europe - could illustrate how the supply glut is reshaping the global market.

Urals supplies to Hungary declined in January-August to 3.25 million tonnes from 3.7 million tonnes in the same period a year earlier. Kurdistan ramped up independent oil exports in June, saying it had no other choice but to sell oil itself after Baghdad failed to allocate money to the region from its budget.

Baghdad has repeatedly described independent Kurdish sales as illegal and explained low budget allocations by saying Arbil was not transferring enough oil to state energy firm Somo.

Oil exports from northern Iraq rose in September to an average of 600,463 barrels per day (bpd), up by around 127,000 bpd from August, according to the Kurdistan region's ministry of natural resources.

The destinations of those exports have so far been unclear, since little information has been disclosed given Somo's repeated threat to take Kurdish oil buyers to court.

The trading sources also said that MOL had been using the JANAF utilized oil pipeline to bring in Kurdish imports from the Croatian port of Omisalj, displacing Urals in a conduit used to take the Russian blend from Hungary to Bosnia and Herzegovina.

"They get one to two cargoes a month. The pipeline from Croatia to the refinery is filled completely with Kirkuk," one trader said.




US: Oilfield cannibals: to save cash, U.S. drillers strip idle rigs Reuters/Andrew Cullen

Cam Hewell runs Premium Oilfield Technologies, a small company that makes equipment and spare parts for drilling rigs from North Dakota to Texas. Like his rivals, he is trying to withstand the worst oilfield downturn in six years, but they face a vexing obstacle: cannibals.

In a bid to save cash, rig owners are cannibalizing parts such as motors and drill pipe from idled rigs to fix 800 active ones in the U.S. when stuff breaks.

In good times, they would buy new equipment from companies like Hewell's or industry leader National Oilwell Varco Inc when parts fail. Now, they just pick over any of about 1,100 rigs idled by the price crash.

Cannibalization is so widespread in this downturn that services companies and others say even after oil prices recover it will take six months or more to see a significant rebound in drilling and production - a timeframe that will allay fears of a quick uptick in drilling promptly sinking prices again.

NOV has said so many rigs are idled that firms could cannibalize drill pipe for up to a year before placing new orders. "(Cannibalization) will slow the industry's ability to ramp the rig count back up so it will delay the production response from oil prices," said James West, oilfield services analyst with Evercore ISI.

While there are no official statistics available, cannibalization has been so pervasive in this slump that industry experts say it is possible a majority of the 1,100 rigs that are not working have been scoured for parts.




Land rig utilization is hovering around 60 percent for larger U.S. drilling contractors, according to data from Tulsa, Oklahoma-based Helmerich & Payne Inc, which has a higher utilization rate because it has a fleet of newer rigs.

The slowdown in drilling prompted by a 50 percent slide in crude from $100 a barrel last year is expected to cause a drop in U.S. oil output. The Energy Information Administration sees U.S. crude production falling 4 percent to 8.8 million barrels a day in 2016.

There are lots of spares available because the U.S. rig fleet was near a 15-year high when prices started to tumble. While most parts are scavenged from onshore rigs, offshore driller Noble Corp Plc took off a helipad and the floor from a crew cabin from a rig that was slated for retirement and used the parts to make improvements on a rig contracted to Hess Corp.

NOV has said that its sales of spare parts were being hurt by companies cannibalizing parts from idle rigs. "Cannibalizing is not an uncommon practice in the industry, and more so on land than offshore, but it has gone up in the downturn because more rigs are being retired or idled now," said Grant Almond, senior vice president of technology and product development at National Oilwell.

While that may hurt the Houston-based company's business now, a rebound in orders is expected when exploration and production companies start investing again in new wells and putting rigs back to work. Sales at the National Oilwell's spare parts and repair business, the rig aftermarket division, fell 16 percent to $657 million in the last-reported quarter.

Stacey Locke, chief executive of contract driller Pioneer Energy Services Corp's, said the majority of the 25 rigs the company had divested in the earlier part of the year were sold for parts and pieces to smaller drilling contractors and equipment dealers. His company also keeps some refurbished pieces on standby.

Investors, still seeing an oversupply of rigs, and are encouraging companies to scrap more rigs to halt the slide in daily rental rates, now around $20,000, depending on the rig's speed and power. "Companies have to continue to scrap idle rigs and do all that they can to balance supply with demand," said Robert Thummel, a portfolio manager at Tortoise Capital Advisors.

However, the scrapping of more rigs would likely increase the number of those ripe for cannibalizing, analysts said. To escape the downturn

gripping the U.S. shale market, Premium Oilfield is expanding in the Middle East.

"Our U.S. domestic customers, the oil producers, are shutting off all capital spending on just about anything," said Hewell, whose Houston company is backed by Houston-based private equity firm Global Energy Capital LP.




NewBase 08 October - 2015 Khaled Al Awadi

NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE

Oil rebounds, shrugging of U.S. stockpile build Reuters + NewBase

Crude oil futures rose in Asian trade on Thursday, shrugging off a surprise build in U.S. inventories as some Chinese traders returned following a weeklong National Day holiday period. U.S. crude stocks rose by 3.1 million barrels to 461 million last week as refineries reduced production and idled capacity. Analysts had expected an increase of 2.2 million barrels.

Both major oil benchmarks rose more than 1 percent on Thursday although trading was thin in the early part of the Asian session. With China open for business trading is likely to be more volatile in commodities, ANZ said in a morning note.

U.S. crude was up 24 cents at $48.05 at 0245 GMT and traded as high as $48.39 earlier. The contract fell 1.5 percent on Wednesday after three days of gains. Brent crude, the global oil benchmark, was up 21 cents at $51.54 a barrel and rose to as high as $51.89 in earlier trading. The contract fell 1.1 percent on Wednesday.

With little data out this week, apart from industry and government inventory numbers, and China on holiday for the first three days, the market has focused on longer-term demand trends that have supported prices. A U.S. Energy Information Administration report on Tuesday predicted global oil demand for 2016 would rise by the fastest rate in six years, suggesting the crude surplus that has pushed prices down about 50 percent since June last year is easing faster than expected.

"That is where we have seen a little bit of a pick up over the last couple of sessions, but ever so slightly back to reality over the last 10 or 12 hours," said Ben le Brun, market analyst at Options Xpress in Sydney.

Oil price special

coverage




Four Ways the Oil Price Crash Is Hurting the Global Economy Luke Kawa

Lower oil prices were roundly celebrated as a tailwind for global growth.

In theory, the movement of wealth from commodity producers, which often stow away oil revenue in sovereign wealth funds, to consumers, which spend a far larger portion of their income, is a positive for economic activity.

But strategists at Credit Suisse believe that so far, the global economy has seen only the storm from lower crude, not the rainbow that follows.

"The fall in the oil price was considered by many investors, and ourselves, to be a significant positive for global GDP growth," a team led by global equity strategist Andrew Garthwaite admitted.

The net effect of this development, according to their calculations, has turned out to be a 0.2 percent hit to the global economy. The negative effects of lower oil—namely the large-scale cuts to capital expenditures—are having a large and immediate impact on global gross domestic product.

"The problem is that commodity-related capex accounts for circa 30 percent of global capex (with oil capex down 13 percent and mining capex down 31 percent in the past 12 months)," wrote the strategists, "and thus the fall in U.S. and global commodity capex and opex has taken at least circa 0.8 percent off U.S. GDP growth in the first half 2015 and circa 1 percent off global GDP growth over the last year."

Garthwaite and his group highlight three other channels through which soft oil prices have adversely affected the American economy: employment, wages, and dividend income.

Employment in oil and oil-related industries has declined by roughly 8 percent since October 2014, with initial jobless claims in North Dakota, a prime beneficiary of the shale revolution, at extremely elevated levels.




During this period, average hourly wages for those employed in oil and gas extraction shrank nearly 10 percent after growing at a robust clip in the previous two years. And the payouts to investors who own oil stocks have also been cut, which Credit Suisse deems to be a modest negative for household income.

"A fall in capex brings with it a fall in direct employment and earnings (total payroll income in the U.S. energy sector is down by 18 percent since November last year, for example), as well as second-round effects on other industries servicing the capex process, from machinery producers to catering and hotels," the team wrote.

The team also found that the declines in capital spending have much less of a front-loaded shock on growth than in the 1980s, the decade in which we last saw a supply-driven plunge in oil prices:

"As a result, even once the oil price has decisively troughed, the lag in both cutting (and re-starting) capex projects is such that capex could remain a drag on GDP for a number of quarters," wrote Garthwaite's team. On the flip side, the positive effects for consumers have been slow to manifest, best depicted through the rise in the percentage of income consumers elect to save.

This rise in savings ratio in the U.S., Japan, and continental Europe speaks to concern about the how long these lower gas prices will endure. If households believe the relief at the pump is only temporary, they're less likely to deploy those funds in more discretionary areas. Garthwaite and his team note that consumers are coming around to the notion that lower oil prices might be a permanent development and are loosening their purse strings.

As such, Credit Suisse maintains that lower oil prices will eventually prove to be a net benefit for global growth that—thanks to the transfer of wealth to entities with a higher marginal propensity to consume—as well as the prospect for more accommodative fiscal and monetary policy linked to softness in crude.




NewBase Special Coverage

News Agencies News Release 08 Oct.. 2015

IMF trims forecast for global growth amid China slowdown Oman Observer

The International Monetary Fund on Tuesday cut its 2015 global economic growth forecast, as it factored in the global effects of the slowing economies in China and other emerging markets. The IMF predicted 2015 world growth of 3.1 per cent, down 0.2 percentage points from the Washington-based crisis lender’s July forecast.

For 2016, the IMF pared its forecast by 0.2 points to 3.6 per cent. Emerging market and developing economies had been the engine of global growth for years, as Europe and the United States lagged since the 2008 financial crisis.

Now, China’s growth is slowing, many commodities exporters are reeling from the crashes in oil and metals prices, and investment flows into emerging and developing countries have slowed sharply. An August correction in Chinese share prices sent global stock markets reeling.

“In an environment of declining commodity prices, reduced capital flows to emerging markets and pressure on their currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging market and developing economies,” the IMF said in its World Economic Outlook. The IMF predicts growth in advanced economies this year at 2 per cent and 2.2 per cent in 2016, up from 1.8 per cent recorded last year and 1.1 per cent in 2013.




For emerging markets and developing economies, the IMF forecasts 4 per cent growth this year, down from 4.6 per cent in 2014 and 5 per cent in 2013. “For emerging market and developing economies as a whole, our forecast is that 2015 will mark the fifth consecutive year of declining growth,” IMF Chief Economist Maurice Obstfeld said.

In Asia, China is forecast to grow this year by 6.8 per cent and 6.3 per cent in 2016, while India is pegged at 7.3 per cent this year and 7.5 per cent next year.

China’s once-galloping growth has slowed as the government tries to implement a policy — long recommended by the IMF — of rebalancing the economy to increase domestic consumption and reduce dependence on exports.

The Chinese slowdown is “in line with forecasts,” but the “cross-border repercussions” have exceeded expectations, the IMF said. The global economy is being buffeted by the Chinese slowdown, the fall in commodity prices and the looming tightening of interest rates in the United States, Obstfeld said.

“Amid these very important developments, near-term global growth remains moderate and uneven,” he said in Lima, where the IMF is holding its annual meeting this week. The world faces “higher downside risks” than were apparent in July. “Robust and synchronised global expansion remains elusive,” Obstfeld said. China’s slower growth rate — which still easily tops all the major advanced economies — is a major factor in weaker commodity prices.

Reduced exports into the world’s most populous country from other economies in East Asia also weigh on those prices.

While growth in advanced economies is picking up, especially as the euro zone recovers from its long-running crisis, “deflationary pressures remain,” said Obstfeld, a former economic adviser to US President Barack Obama.

Uncertainty has hampered investment in many economies, only worsening the outlook for growth into the medium-term, feeding what Obstfeld called a “vicious cycle.” In some countries, political instability has deterred investment, he said.

Obstfeld, who took over the IMF’s economic research last month, noted the migration crisis in Europe, where refugees and others are streaming in from the Middle East and Africa. “In its more extreme forms, political conflict

has created a large global stock of displaced persons, both within and across borders,” he wrote.




Why lifting oil export ban can help U.S. foreign policy REUTERS - EMMA ASHFORD

A House of Representatives bill is due to go to the floor this week, one step closer to lifting the 40-year-old ban on the export of U.S. crude oil. The window of opportunity was opened by the continuing plunge in oil prices, now at a six-year low, as falling demand and booming production have created an overabundance of global supply.

Congress must seize this opportunity: Lifting the ban on crude oil export would not only be good for the economy, it could also benefit U.S. foreign policy.

U.S. firms have been unable to export crude oil since 1974 — a legacy of the energy security fears in the wake of the Arab oil embargo. The only exceptions are crude oil exports to Canada, and oil produced in Alaska. There are similar, if less draconian, export restrictions on natural gas, which requires a Department of Energy waiver.

These restrictions were an overreaction. But recent changes in the global oil market have made matters worse. Over the past decade, new technologies — particularly hydraulic fracturing or “fracking” — have enabled the extraction of oil and natural gas in previously inaccessible areas. The result has been a shift away from some traditional energy-producing countries — such as Russia or members of the Organization of Petroleum Exporting Countries – and toward newer producers.




The biggest beneficiary of these technological advances has been the United States, now the world’s largest producer of oil and natural gas. Even under current restrictions, U.S. crude exports to Canada have risen dramatically, from essentially zero in 2007 to more than 100,000 barrels a day by March 2013. U.S. producers could contribute far more globally, but are largely prevented from doing so under the current bans.

The new oil produced is also at odds with U.S. refining capacity, which complicates domestic consumption. Fracking usually produces light sweet crude oil. U.S. refineries, however, are primarily set up to process heavier crude oils from Mexico and Venezuela.

This has led to domestic market distortions. Refiners can buy oversupplied crude on the cheap, but then charge consumers world market prices for gasoline, pocketing the difference.

Various studies have shown, however, that ending the ban would help the U.S. economy. It would add an estimated 630,000 jobs, increase manufacturing and boost the gross domestic product in the long-term. Though some supporters of the ban argue that lifting it could raise pump prices, as more oil it made available for export, it is most likely to lower them in the long run.

A lack of domestic refining capacity now discourages production by lowering the prices that refineries pay for crude oil. If producers are instead able to export their excess crude oil, they would likely increase production, which would lower global oil prices.

Lifting the ban would also produce real benefits for U.S. foreign policy. Authoritarian regimes would no longer be able to cite Washington’s reluctance to open its energy markets to free trade as an excuse for their own unfair practices. It is harder, for example, for the United States to chide China on issues like currency manipulation while maintaining protectionist economic policies like the crude export ban.

More important, exporting U.S. oil and natural gas increases diversification within world energy production. Though energy security concerns can be overblown, increasing production in the United States would reduce global reliance on oil from volatile regions like the Middle East.

It’s certainly true that today’s low oil prices may make increased production less attractive to U.S. producers in the short-term. Yet states like those in Eastern Europe may well choose to switch to U.S. suppliers from Russia for non-economic reasons. Then, once oil prices rise again, the influx of U.S. oil and natural gas into the world market from new domestic production would certainly keep prices lower than they would have been otherwise. That would reduce the income and influence of various authoritarian states, which have long been among the world’s biggest producers of oil, such as Venezuela or Russia.

Lifting export bans on liquefied natural gas would be particularly helpful for U.S. allies in Central and Eastern Europe. These states rely on Russia for the majority of their energy, which limits their




range of political and economic responses to Moscow’s recent aggression. By building liquefied natural gas terminals, these states would be able to import U.S. liquefied gas, and divest themselves of dependence on Russian gas over the long-term.

There has been other recent momentum in Congress on lifting the export ban. A bill passed the Senate Energy and Natural Resources Committee this summer, and is awaiting full hearings. House Speaker John Boehner (R-Ohio) in July had also signaled his support for ending the ban, comparing it to the sanctions on Iranian oil and gas producers.

Today’s depressed oil market is an ideal time to remove these outdated export restrictions. With oil prices so low, any protests about potential increases in gasoline prices would be muted. Lifting the ban on crude oil exports is long overdue. Increased U.S. production has also removed any solid justification for keeping it. Congress should seize the opportunity now to lift the ban, and reap the economic and foreign policy benefits so sure to follow.




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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

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Khaled Al Awadi is a UAE National with a total of 25 years of experience in the Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operations Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years, he has developed great experiences in the designing & constructing of gas pipelines, gas metering &

regulating stations and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation, operation & maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcasted internationally, via GCC leading satellite Channels.

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NewBase 08 Octopber 2015 K. Al Awadi




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New base 703 special 08 october 2015