New base 776 special 31 january 2016

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 31 January 2016 - Issue No. 776 Edited & Produced by: Khaled Al Awadi

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

UAE: Dewa invites proposals to develop Dh100 billion clean energy fund

The National - John Everington

Dubai’s utility company has invited proposals from consultants to develop a Dh100 billion clean energy fund. Dubai Electricity and Water Authority issued a request for proposals to develop the Dubai Green Fund, a key part of the recently launched Dubai Clean Energy Strategy 2050.

The scope of the work includes the provision of consultancy services to develop the Green Fund Concept, the fund’s governance structure, underlying regulations and framework, contractual structure and execution plan.

Interested parties will have until the end of February to apply. Dewa did not respond to requests for comment on when the contract would be awarded.

“At Dewa, we support all efforts to further build and develop a greener economy, as part of our vision to become a sustainable innovative world-class utility,” said Saeed Mohammed Al Tayer, the chief executive of Dewa and vice chairman of the Dubai Supreme Council of Energy.

The Dubai Green Fund is one of the central planks in Dubai’s Clean Energy Strategy 2050, unveiled in November, which sets a target for the provision of 7 per cent of Dubai’s energy from clean energy sources by 2020, increasing to 25 per cent by 2030 and 75 per cent by 2050.

“Our goal is to become the city with the smallest carbon footprint in the world by 2050,” said Sheikh Mohammed bin Rashid at the strategy’s launch. The strategy envisages the creation of a new free zone, the Dubai Green Zone, aimed at attracting research and development centres and emerging companies in clean energy.

In addition to the Green Fund, the new strategy will also see the capacity of Dubai’s Mohammed bin Rashid Al Maktoum Solar Park upgraded to 5,000 megawatts from 3,000MW previously. Under the same programme, the government has said that every roof in the emirate would be equipped with solar panels by 2030.




UAE: More cuts to UAE fuel prices in February News Agencies + NewBase + MOEnergy

Motorists in the UAE will pay less at the pump for a sixth month in a row as crude prices on international markets continue to fall. Prices of Super 98 for February have been reduced by 6.5 per cent compared with January and will cost Dh1.58 per litre, according to an announcement by the Ministry of Energy on Thursday morning.

Transport and logistics providers will benefit the most next month. Diesel prices have been cut by 14.9 per cent to Dh1.37 compared with Dh1.61 for January. Car owners will also save when filling up with Special 95 and E Plus 91, which have fallen by 6.9 per cent and 7.2 per cent respectively.

Brent prices have declined 10 per cent since December 28, when fuel prices in the UAE were last updated. The European benchmark fell more than 1 per cent this morning in Asian trade at $32.75.

August was the only month when fuel prices increased after the Ministry of Energy said it would liberalise fuel prices. Meanwhile, the Energy Minister Suhail Al Mazrouei expects the global oversupply of crude to decline this year, even after Iran adds an expected 500,000 barrels per day (bpd) in oil output.

“Iran’s possible production increase of 500,000 bpd this year won’t be enough to meet the expected demand,” said Mr Al Mazrouei. “It’s difficult to see where the new oil supply is coming from this year to fill the expected annual demand increase of at least 1.3 million barrels a day.”

Jan-2016 Feb-2016 % Chn. Diff.




Oman: One more oil block due for award soon in Oman Oman Observer

Having successfully snagged its first upstream investor of the year late last week, Oman’s Ministry of Oil & Gas expects to shortly award a second oil and gas Block – bucking the trend in subdued Exploration & Production (E&P) investment activity being witnessed regionally and globally in the wake of the oil price downturn.

On Thursday, the Ministry inked an Exploration & Production Sharing Agreement (EPSA) with Hydrocarbon Finder, a wholly Omani firm, for Block 7 onshore Oman’s Wusta Governorate.

And underscoring the investment appeal of Oman’s upstream sector despite the oil price slump, a second hydrocarbon block is up for grabs and due to be awarded soon, according to a senior Ministry official.

“We are in the advanced stages of finalising an EPSA for another Block,” said Dr Saleh al Anboury, Director General of Petroleum Investments. “This is an onshore oil and gas block situated close to Block 7 in Wusta Governorate,” he added in comments to journalists on the sidelines of last week’s EPSA signing event.

“The three existing oilfields in the concession

will be developed as well. This will not only help boost production in the future, but also hopefully add to reserves growth — which is significant given the current challenging economic environment,” said Dr Al Anboury.

Asked about commitments by oil companies to sustain production despite falling oil prices, the official stated: “The work programme agreed by the oil company with the Ministry of Oil & Gas commits them to sustain production. They can cut costs, but cannot jeopardize production.” “Each of the founders of Hydrocarbon Finder has more than 20 years of experience in oil & gas services individually.

We were established in 2014 as a 100 per cent Omani company,” Mohammed al Jahwari, Executive President said. Commenting on the outlook for the newly-acquired concession, Al Jahwari: “Block 7 is as challenging as it can get. There is always excitement in the industry, whether one is in the exploration stage of or not.”




Bahrain:JGC Awarded EPC Contract for a Gas Processing Plant Press Rease by: JGCPress Rease by: JGCPress Rease by: JGCPress Rease by: JGC JGC Corporation announced today that it has received a contract to build the Gas Processing facilities in Bahrain. The Gas Processing Project, located in the Bahrain oil field area south of Awali, near Jebel Al-Dukhan, the Kingdom of Bahrain 20 kilometers south of Manama and operated by the Bahrain National Gas Expansion Company (B.S.C.)., calls for engineering, procurement, and construction (EPC) services for the Gas Processing Plant with a daily throughput capacity of 350 MMSCFD. The project is schedul ed for completion in September, 2018.

The value of the lump-sum turnkey basis contract is 40 billion yen . This project is intended to construct a plant for recovering high-value-added petroleum constituents (LPG, and naphtha) contained in petroleum-entrained gas which have not been recovered in the past. It is expected that, by exporting recovered petroleum constituents as commercial products, this plant will contribute to the development of the oil and gas industry in Bahrain.

For this project, the client adopted a front end engineering design(FEED) Design Competition in which bidders carried out the FEED, and then prepared EPC proposals based on their FEED. This required that the contractor should have a high level of ability to offer technical solutions in all processes ranging from front end engineering to construction.

Starting with the construction of two new gas Processing plants in the 1970’s and 80’s, JGC’s involvement in the country’s development has continued as we have also carried out a substantial number of plant expansion and revamping projects for the same country. JGC’s success in being awarded this contract is seen as being a result of its superior ability to offer technical solutions and its cost competitiveness together with the high level of trust from the client it enjoys as a consequence of its performance in the numerous projects it has successfully completed in the past. JGC fully intends to apply to the maximum its knowledge of the technologies necessary for the treatment of natural gas and its understanding of the in-country conditions to achieve the successful completion of the project and to further deepen our relationship with the client.

JGC has a history of successfully completing numerous projects in the Middle East, which is our most important market, and Bahrain is planning a number of refinery projects. We look forward to playing a continuing role in the industrial and infrastructure growth of the region.




Malaysia: Lundin Petroleum commences Maligan exploration well, offshore Malaysia.. Source: Lundin Petroleum

Lundin Petroleum has announced that its wholly owned subsidiary Lundin Malaysia has commenced drilling of theMaligan exploration well in Block SB307/SB308, offshore East Malaysia. The Maligan Prospect is in shallow water and lies to the north of a major producing field in offshore East Malaysia. The well will target hydrocarbons in Miocene aged sands.

Maligan will be drilled with the West Prospero jack-up rig to a total depth of approx. 1,700 metres below mean sea level. The drilling of the well is expected to take approx. 30 days. Lundin Malaysia holds 85 percent working interest in SB307/SB308. Partner isPETRONAS Carigali with 15 percent working interest. Lundin Malaysia operates six Blocks in Malaysia, namely PM307, PM319, PM308A, PM328, SB307/308 and SB303.




Turkey Remains Very Important for Europe's Energy Security, Says EU Natural Gas Asia

Turkey remains an important country for Europe’s energy security, EU Commissioner for Climate Action and Energy, Miguel Arias Cañete and Turkish Minister for Energy and Natural Resources, Berat Albayrak, said in a joint statement.

Cañete and Albayrak held their Turkey-EU High Level Energy Dialogue in Istanbul on 28 January. Both sides agreed to continue to further cooperate on securing and diversifying energy supply sources as well as ensuring that supply meets demand under the competitive market conditions. In the meeting, issues that are important for Turkey and the EU were discussed including gas, nuclear safety, energy efficiency and renewable energy sources.

“Both sides underlined the importance of Turkey as a key country for EU’s energy security and as a regional energy hub, and they re-affirmed their joint commitment to the successful implementation of the Southern Gas Corridor. Its timely completion is critical so as to allow gas flowing to Europe by 2020,” the joint statement read.

The two parties discussed the availability of natural gas resources in the Caspian region and stressed the importance for continued discussions in order to ensure additional Caspian gas capacity into the Southern Gas Corridor.

According to the joint statement, Turkey is ready to fulfil its responsibilities in terms of contributing to EU’s security of supply through various pipeline and interconnection projects. The idea was discussed to work together more closely in order to optimize natural gas supply to Turkey and through Turkey to the EU and improve storage and LNG capacity that will contribute to Turkey’s position as a regional gas hub in the medium and long term.It was decided that these topics will be further explored in the near future with a view to reinforcing the energy security of both the EU and Turkey.




UK: Petrofac and GE support Galloper Offshore Wind Farm to bring clean energy to United Kingdom.. Source: Petrofac Petrofac and GE have announced a contract worth over £110 million to engineer, construct and install a turnkey power system to efficiently connect up to 336 megawatts of clean energy from the Galloper Offshore Wind Farm off the coast of Suffolk, U.K., to the British grid. The contract was awarded by Galloper Wind Farm Ltd with the goal of helping meet the UK’s ambitious goal of generating 15 percent of the country’s electricity from renewable sources by 2020.

'Petrofac is delighted to help Britain’s goal for a clean energy future,' said Yves Inbona, managing director for Petrofac’s Offshore Capital Projects. 'Our collaboration with GE bolsters our efforts to help customers succeed in harnessing the power of the wind to provide communities with renewable energy.'

In support of this project, Petrofac will provide topside and jacket foundation designs, fabrication, transport and installation of the offshore substation and offshore logistics to support hook up and commissioning while GE will provide overall electrical system design in addition to:

• Onshore and offshore substation equipment and all related power transformers and gas insulated switchgear at 132kV and 33kV

• Two Static Var Compensators, each connected to the grid by its own power transformer, which will provide dynamic voltage support to ensure grid code compliance, a stabilized power supply and strengthened transmission grid to ensure efficient connection of the new wind farm to the British transmission system

• Protection and control for the safe operation of the wind farm including the telecommunications needed between the onshore and offshore substations and the wider network

• All ancillary and supporting electrical equipment such as auxiliary and earthing transformers, battery systems, back-up generators and low voltage systems

'We are proud to be a part of such a significant project – helping Britain to include more renewable power in its energy mix,' said Neil Beardsmore, North Europe Commercial Solution Leader at GE’s Grid Solutions, a division of GE Energy Connections. 'The ability to effectively transmit and integrate Galloper’s energy to the British grid is essential to bringing efficient and reliable clean energy to UK households.'

The project is now fully underway. Construction will continue through 2016 with the offshore substation scheduled to be installed in 2017. The wind farm will commence operations in March 2018.




Large Cretaceous Structure Confirmed Offshore Ireland by Rigzone Staff|Friday Irish explorer Providence Resources reported Friday that the operator, Capricorn Ireland, of the FEL 1/14 license offshore Ireland has confirmed the presence of a large-base Cretaceous structural closure. After completing the initial interpretation of the key Base Cretaceous reflection within FEL 1/14 – located in the Porcupine Basin off the west coast of Ireland – using pre-stack time migrated 3D seismic data, Providence said the "significant" north-south orientated Ruadhan Prospect covers a 14-square mile area. The new 3D seismic data also provides a significant improvement in the detailed imaging of the pre-Cretaceous structure and stratigraphy.

Providence also said that the data also confirms that the previous 1977 Shell-operated 35/13-1x well, which targeted the Ruadhan Propsect, failed to reach it – being terminated in the overlying Lower Cretaceous section due to operational issues. The data shows that the Ruadhan Prospect lies on-trend and is around 13 miles south of the Upper-Jurassic Spanish Point gas condensate field, which was discovered in 1981 and where Capricorn now plans to begin operations for drilling during 2017. Providence Technical Director John O'Sullivan commented in a company statement: "These new 3D data have confirmed the presence of a significant pre-Cretaceous structural closure in close proximity to the proven Upper Jurassic Spanish Point gas condensate field. When taken in tandem with the previous studies carried out on our adjacent acreage, this latest interpretation supports the potential existence of an extensive and material Upper Jurassic gas condensate structural play fairway across the northeastern flank of the Porcupine Basin." Capricorn holds a 38-percent interest in the FEL 1/14 license, while Providence's stake will fall to 43 percent after it sells a 15-percent interest to Chrysaor Holdings soon.




India's Overseas Oil Resource Target Stymied by Crude Collapse Bloomberg - Debjit Chakraborty

The chance to gobble up cheap assets after oil’s collapse to the lowest in 12 years is slipping out

of reach for India’s biggest overseas producer.

Oil’s rout has erased earnings at ONGC Videsh Ltd., the state-backed energy explorer, threatening the company’s aim to more than double output by 2018. Production rose 6 percent in the year ended March 2015 to 8.87 million tons of oil equivalent, the company reported on its website.

Oil’s collapse has wiped out the company’s buying power and has complicated Prime Minister Narendra Modi’s efforts to secure supply for a nation that imports most of its oil and natural gas. The company in September agreed to pay $1.27 billion for a 15 percent stake in OAO Rosneft’s Vankor field, one of Russia’s largest projects. That gives it an annual production boost of about 3 million tons.

“When oil prices are low, we get stronger bargaining power,” Narendra Kumar Verma, managing director of ONGC Videsh, said in an interview. “But if we are struggling to manage our own balance sheet, then this opportunity can’t be capitalized.”

ONGC Videsh, the overseas investment unit of India’s state-run Oil and Natural Gas Corp., reported a loss of 1.84 billion rupees ($27 million) in the first six months of the year ending March 31, according to its website. The company produced 5.53 million tons of crude and condensate and 3.34 billion cubic meters of gas in the previous full fiscal year.

The company has invested $23.8 billion in oil and natural gas assets outside India since its creation in 1965 until last year. It plans to increase output to 20 million tons of oil equivalent by March 2018 and 60

million tons by 2030, according to its annual report last year.

“It doesn’t have the appetite for another big ticket acquisition anytime soon, unless the government forces it to do so,” said Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd. “There is a lot of pressure on output and margins are low.”

Last week, Moody’s Investors Service put the credit ratings of ONGC Videsh and its parent on review for downgrade along with several other energy companies around the world after the slump in oil prices.

The ratings agency expects the slower recovery in prices will lead to lower cash flows for oil producing companies such as ONGC, leading to financial stress.




NewBase 31 January 2016 Khaled Al Awadi

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

Oil rises, pares losses in January on hopes for production deal Reuters + NewBase

Oil prices rose on Friday, rebounding more than 25 percent from 12-year lows hit last week and cutting losses for the month, on prospects of a deal between major exporters to cut production and curb one of the biggest supply gluts in history.

Oil also drew support from weak U.S. GDP data that raised hopes the Federal Reserve may slow any planned interest rate hikes.

The oil market rallied for four straight sessions this week after the Organization of the Petroleum Exporting Countries renewed calls for rival producers to cut supply alongside its members that triggered a volley of comments from Russia on a deal with OPEC, something it had been refusing to do for 15 years.

Brent futures for March, which expired on Friday, closed at $34.74 a barrel, 85 cents or 2.5 percent higher. On Jan. 20, it hit $27.10, its lowest since November 2003. U.S. crude settled up 40 cents or 1.2 percent, at $33.62 per barrel, having hit a high of $34.40 in the session.

Oil price special

coverage




For the week, Brent was 7.9 percent higher and U.S. crude 4.4 percent higher, paring their monthly losses to 6.8 percent and 9.3 percent respectively. Baker Hughes reported its weekly count of oil rigs in U.S. fields fell by 12 to a total of 498. At this time last year, drillers were operating 1,223 rigs in U.S. oil fields.

Also on Friday, monthly data from the U.S. government's Energy Information Administration showed American oil production ticked down slightly in November. U.S. output stood at 9.318 million barrels per day in November, versus 9.370 million bpd in October.

Trading was volatile, with both contracts briefly turning negative after the Wall Street Journal cited an Iranian oil official as saying the country would not join an immediate OPEC production cut. The paper said Iran wants to boost crude exports by 1.5 million barrels per day.

Russian Deputy Prime Minister Arkady Dvorkovich said on Friday the country would not intervene to balance the market. His comments fed growing doubts about a possible deal mentioned by Energy Minister Alexander Novak the previous day.

But a few hours later, Russia's foreign ministry said veteran minister Sergei Lavrov, who almost never comments on oil policies, would visit the UAE and Oman to discuss oil markets. "The market has rewarded these statements about the possibility of a deal, even though I think it's ridiculous," said John Kilduff, partner at Again Capital LLC in New York.

He noted that Iran and Iraq were determined to boost production, and were unlikely to come together with Saudi Arabia to cut OPEC output. The Saudis have made no official statement on a deal.

"This is a rally on false hopes, unfortunately"

Other analysts said oil prices may have found a bottom and could rally as high as $45 by year-end as non-OPEC supply is reduced and global demand improves. U.S. oil production fell in November for the second straight month, the Energy Information Administration said.

U.S. shale producers, who have helped add to the glut, have slashed 2016 capital spending plans more than expected, with one saying prices would need to rise more than 20 percent to turn a profit.

Meanwhile the U.S. oil drilling rig count fell for the sixth straight week with more cuts seen, oil services company Baker Hughes Inc said. "With more energy companies announcing cuts and OPEC contemplating a cut, it looks like oil is forming a bottom," said Phil Flynn, an analyst at Price Futures Group in Chicago.

"Now the question becomes how high can they go. The charts look like a test near $40 is on the cards."




Baker Hughes: U.S. Oil Drillers Cut Rigs for Sixth Straight Week Reuters

U.S. energy firms cut oil rigs for the sixth straight week, data showed on Friday, and were expected to shed more with major U.S. shale oil companies slashing spending plans after crude prices hit 12-year lows. Drillers removed 12 oil rigs in the week ended Jan. 29, bringing the rig count down to 498, the least since March 2010, oil services company Baker Hughes Inc said.

That compares with 1,223 rigs in same week a year ago. In 2015, drillers cut on average 18 rigs per week for a total of 963 oil rigs for the year, the biggest annual decline since at least 1988. U.S. crude futures were around $33 a barrel on Friday and heading for a weekly gain with the front-month contract up about 25 percent over the 12-year low plumbed last week, on prospects that a deal between major exporters to cut production could help reduce one of the worst gluts in history.




Analysts forecast production will suffer as energy firms reduce capital spending plans for 2016 and cut the number of rigs drilling for oil due to the collapse in crude prices. Three major U.S. shale oil companies this week slashed their 2016 capital spending plans more than expected in a bid to survive $30 a barrel oil prices, with Continental Resources saying prices would need to rise to $37 just to turn a profit. Looking forward, U.S. futures were fetching $38 on average for the rest of 2016 and nearly $43 for 2017. Capex cuts by Hess Corp, Continental and Noble Energy ranged from 40 to 66 percent, marking the second straight year of pullbacks by the trio normally seen as among the most resilient shale oil producers. In the Permian, the nation's biggest shale oil basin located in west Texas and eastern New Mexico, Baker Hughes said drillers cut 16 rigs, the most rigs cut in a week since April 2015, to 179, the lowest number of rigs in the formation since at least 2011. The number of active rigs in the Bakken in North Dakota also fell to its lowest level since at least 2011 with just 44 active rigs. Baker Hughes forecast worldwide rig activity could fall by as much 30 percent in 2016 as customers continue to reduce spending in the current weak price environment. Meanwhile, its North American revenues declined 17 percent from the prior quarter as the price collapse reduced customer demand for its rigs, among other things. Analysts at Goldman Sachs said production in 2016 would decline by about 345,000 barrels per day (bpd) at the current rig count assuming no well deferrals, which is a bigger cut than its estimate last week for a decline of 330,000 bpd. U.S. crude oil production averaged about 9.4 million bpd in 2015 and was forecast to average 8.7 million bpd in 2016 and 8.5 million bpd in 2017, according to the latest U.S. Energy Information Administration's Short-Term Energy Outlook.




NewBase Special Coverage

News Agencies News Release 31 January 2016

Why Opec needs to cut its production levels The Nationa + Steven Kopits

What are the prospects for a rumoured Opec oil production cut? Would it make sense?

At a time of oversupply, the key may be which producers have the lowest cost of decreasing production. As a practical matter, Opec is best positioned to enact a supply cut.

In the two years to April 2015, the US oil supply increased by a whopping 3.1 million barrels per day – enough by itself to more than cover global demand growth for that period. In the past year, however, US production has fallen by 400,000 bpd. The United States is no longer driving the global supply glut.

On the other hand, once a base of shale production is brought on line, maintaining it can be achieved with much lower investment and vastly fewer rigs. US oil production has fallen only 100,00 bpd in the past six months, despite oil rigs off by two-thirds from the cycle peak. If shale production is not going up, it is not coming down much either.

In aggregate, the US Energy Information Administration predicts that US onshore production will decline by 400,000 bpd this year, far too little to balance markets. True, some analysts expect a bigger drop, as much as 1.1 million bpd this year.

But even that might not be enough. The EIA estimates that supply currently exceeds demand by 1.5 million bpd. If demand growth is modest and other supply comes on line, then US production declines may prove insufficient.

But if US production is falling, where is the imbalance originating? Who is adding all that supply? The culprit, it turns out, is Opec itself. Since November 2014, Opec crude and refined product exports are up about 1 million bpd, split about equally between Saudi Arabia and Iraq. Moreover, growth is forecast to continue.

The EIA predicts that Opec production will rise 1.6 million bpd over the next two years, of which half is anticipated to come from Iran. Thus, since early last year, US shales have not been the cause of depressed oil prices. Opec is. By implication, Opec should act to restore market balance.

If the supply surplus were eliminated or materially reduced, oil prices could rebound quite quickly, conceivably returning to the US$50 per barrel range. At this price, US shale operators would still lack much incentive to ramp up production, allowing Opec to both enjoy much higher oil prices and keep shale on the sidelines.

But it has to be a joint effort. The surplus is too large for Saudi Arabia to tackle alone. A reduction today also requires contributions from Iraq and Iran. Together they can stabilise the market. For example, Saudi Arabia could cut production by 500,000 bpd; the Iraqis could reduce by 250,000 bpd; and the Iranians could agree to limit production gains to 250,000 bpd this year. This would be




likely to increase oil prices by $10 to $20 per barrel, representing a four-fold to eight-fold gain on foregone production.

The call for Iraq to cut supply is novel. Iraq has generally been treated as exempt from production cuts as it seeks to regain earlier production levels and approach the scale of Saudi Arabia as an exporter. This is all fine and good, but Iraqi exports have increased by 600,000 bpd over 2014 levels. The Joint Organisations Data Initiative reports that Iraqi November exports were up nearly 900,000 bpd over the same month a year earlier. This kind of export surge crushes oil prices. Iraq has to acknowledge that it is materially contributing to price weakness and bears shared responsibility to balance markets.

In comparison, Iranian oil exports are modest. However, as a result of the nuclear deal agreed with the major powers, Iranian production is slated to rise dramatically over the next two years. No cut from Iran should be reasonably expected.

However, moderated supply growth is essential, as uncertainty about Iran’s production potential is also depressing oil prices. Will the country increase output by only 250,000 bpd, as some analysts think? Or can it reach for the entire 1 million bpd that Tehran itself has mooted? A smaller increment released with greater certainty would do much to shore up prices. Limiting Iran’s production growth below 250,000 bpd this year would be very helpful.

Can a deal be achieved? Given the frictions between Saudi Arabia and Iran, bringing negotiators to the table could prove daunting. But it would make sense, even for Saudi Arabia. Because the kingdom is such a large oil exporter, and large compared to either Iraq or Iran, any oil price recovery would help Saudi Arabia far more in absolute terms.

For example, the deal presented above would increase Iran’s income by $12 billion but Saudi Arabia’s by $60bn.

Such an agreement would also create a platform for the Saudis, Iraqis and Iranians to discuss shared interests. Although the conservative US press has decried any normalisation of relations with Iran, for the first time in 35 years the Iranians and the Americans have been able to make progress, however imperfect.

Of course, Iran’s opening to the international community may prove abortive. But the country has shown at least limited willingness to interact with the US. Perhaps this provides an opening for a broader dialogue, including an opportunity for regional discussion and cooperation on oil market initiatives.

This may matter even more given the uncertainty in China. Will the Chinese economy hit the wall? If it does, the production cuts required to balance the market would far exceed Saudi Arabia’s individual capacity. The establishment of a coordinated decision-making system among the Saudis, Iraqis and Iranians could prove invaluable in such an event.

US shales may have tanked oil prices through last spring, but recent and prospective oversupply stems from three countries – Saudi Arabia, Iraq and Iran. If these countries want their oil revenue to go up, they need to sit down at a table and work out a deal.

Steven Kopits is the president of Princeton Energy Advisors in New Jersey.




Oil market set for more volatility after turbulent week AFP + Gulf News

World oil prices swung between sharp gains and losses this week as possible efforts to finally tackle a supply glut were offset by lingering concerns over weak global economic growth. “This week’s big story [for commodities] has, of course, been the rebound in oil prices on unconfirmed reports that Russia and Opec may finally be willing to agree coordinated cuts in output,” Capital Economics analyst Caroline Bain said on Friday.

“We are skeptical that anything tangible will come of this, but it is encouraging that oil has held on to its gains even though officials have cast doubt on the speculation.” On Friday, US benchmark West Texas Intermediate for delivery in March was down 17 cents at $33.05 a barrel.

Brent North Sea for March rose 30 cents to $34.19 a barrel compared with Thursday’s close. But over the week, Brent rose around 6.0 per cent and WTI gained almost 3.0 per cent in value. Commerzbank pointed to continued volatility, with analyst Carsten Fritsch saying that while “prices will rise in the long term”, it is

necessary to “warn against short-term price falls”.

He added in a note to clients: “After all, Iran and Iraq will soon be opening up new sources of supply which will pump additional oil onto the market.” After striking 12-year low points the previous week, crude futures rallied also on hopes of fresh stimulus from the Bank of Japan and the European Central Bank.

Indeed the BoJ delivered Friday by unexpectedly slashing interest rates into negative territory for the first time.

Concerns over the poor state of the global economy linger and oil prices tanked in volatile trading this week also on official US data pointing to weak spots in the world’s biggest economy and consumer of oil.

The US Department of Energy on Wednesday reported that the country’s commercial crude inventories last week jumped 8.4 million barrels to 494.9 million — the highest amount on record.

Prices have crashed by about three quarters since mid-2014 owing to a supply glut and weaker demand growth for crude, as well as a strong dollar that makes commodities priced in the US currency more expensive for holders of weaker units.

Crude futures surged Thursday however after Russian reports that Energy Minister Alexander Novak had said Moscow was ready to take part in talks with Opec to establish possible “coordination”.

The minister alleged that Opec heavyweight Saudi Arabia had proposed that oil-producing countries, including non-OPEC Russia, cut production by up to five per cent, a prospect he said




would be discussed at an upcoming meeting. Novak’s statement led to the highest jump in oil prices in three weeks to at almost $36 a barrel.

Phillip Futures analyst Daniel Ang said the price rally had been owing also to a fall in the dollar after US data showed a steep 5.1-per cent fall in new orders for manufactured goods in December.

That was far worse that analysts expected and underlined the weakness in the manufacturing sector of the world’s biggest economy and top oil consumer. Ang meanwhile stressed that nothing “concrete has been struck yet” regarding possible cuts to output.

A Russian deputy prime minister said Friday that oil companies — and not the state — should decide whether to cut production in the face of low oil prices due in part to a supply glut.

“If prices remain at non-profitable levels for an extended period, investments will have to be corrected and this will lead to lower production, but this will not be in the interest of the state,” Russian news agencies quoted deputy prime minister Arkady Dvorkovich as saying.

Low oil prices have weighed heavily on Russia’s recession-hit economy, which shrank by 3.7 per cent in 2015 and is set to continue suffering this year.

Russian oil output cuts: Where there’s a will there’s a way

Russia’s oil industry has argued for years that it cannot cut output to support falling global prices for purely technical reasons; in reality it can — as long as it has the political will. The days that oligarchs decided production levels according to their own private interests are long gone. Today the state directly controls roughly half of output, with most of the rest in the hands of business figures who are loyal to President Vladimir Putin, or at least will not oppose his wishes.

Moscow has long ruled out an output cut coordinated with other producers, even during the collapse in crude prices since the middle of 2014. However, Energy Minister Alexander Novak said last week Saudi Arabia had proposed that all exporters should reduce their production by up to 5 per cent, adding that Russia was ready to discuss the idea.

Russia’s oil industry has a chequered record on carrying out requests to cut production.

On previous occasions when the Kremlin said it would consider cooperating with Opec, exports kept flowing or even increased. In some cases oil companies shifted their cargoes from the pipeline system to the railways or tankers where there was less state oversight.

The only time Russia implemented a brief cut was in early 2002 when Moscow reacted to Brent crude prices that were below $20 per barrel — about $15/bbl below Thursday’s level.

Since then the picture has changed. The Kremlin has consolidated its control over of Russian oil production since the demise of the giant Yukos energy company following the arrest of its head, Mikhail Khodorkovsky, in 2003.

An industry source noted this consolidation and the increased power of Putin, who oversees all major energy deals in Russia, saying that oil companies are now much more likely to fall into line with a production cut if needed.




Novak floated the idea at a meeting with energy company executives on Wednesday evening at his ministry. A source briefed on the meeting said those present did not oppose it. “Yesterday’s meeting has shown that the oilmen share the same views,” the source said.

NATURAL REDUCTION: Russia has a large number of oil wells where productivity is low or declining. Production there can be sustained only by sinking new wells or pumping in water to increase the pressure, measures which are costly.

Such wells are barely profitable with prices so low, so the companies who operate them could actually save money by falling into line with any production cut ordered by the Kremlin.

“The longer the oil price remains in the $25-35/bbl range, the greater the likelihood of a production decline, making preemptive voluntary cuts more acceptable to oil producers,” Uralsib brokerage said in a research note.

In this way, Russia could present lower production as its contribution to coordinated international action to ease the global glut, when output might have dropped off naturally without any state intervention.

CONVENTIONAL WISDOM: Conventional wisdom among Russian oil industry veterans has it that turning off a well in the Siberian taiga, where most of the oil is found, is far harder than in Saudi Arabia or Texas. They cite permafrost, even though the soil is frozen all year round only in some production areas.

In particular, they argue that if a well is turned off, the reduction in pressure will allow rocks to deform. To restart production could then require drilling costly new wells to restore access to the reservoir. Scientists and a new generation of industry specialists are challenging this consensus.

“Russia is able to cut oil production without any damage to the layers of soil,” said Alexander Shpilman, the director of analytical centre on subsoil usage in Khanty-Mansiisk, the heartland of Russian oil production.

“Depleted wells have already been shut, there is nothing catastrophic about that,” said Shpilman, the son of a celebrated Soviet oil scientist, in whose honour a Western Siberian oil field has been named.

That Russian oil companies can regulate their output is also clear from a seasonal pattern: they lower production in the winter due to the cold weather, and increase it in the summer.

A government source said Russia has the technical capability to mothball some of its crude production.




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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 &

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NewBase 31 January 2016 K. Al Awadi




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New base 776 special 31 january 2016