New base 824 special 06 april 2016

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NewBase 06 April 2016 - Issue No. 824 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: Rosatom of Russia opens office in Dubai for new opportunities in the region

Gulf News

With an eye on the Middle East market, Rosatom, a Russian government-owned nuclear company, has opened an office in Dubai. The new office will serve as the company’s headquarters in the Middle East and North Africa region, the company announced in a statement.

Alexander Merten, President of Rosatom International Network, said Rosatom has a long and successful history of cooperation in the region.

“Starting from cooperation on research reactors projects in the 1960s, today we are conducting projects that include isotopes, natural uranium and enriched uranium supplies, radioactive waste management, as well as such large-scale projects as nuclear power plants construction,” he said. The nuclear company is involved in a number of projects in the region including supplying natural uranium and enriched uranium for the Barakah nuclear power plant in the UAE. Its other projects include construction of nuclear power plants in Egypt, Jordan and Turkey and construction of two new units of the Bushehr power plant in Iran.

According to Emirates Nuclear Energy Corporation, nuclear energy will produce nearly a quarter of the nation’s electricity needs by 2020,

ROSATOM is the Russian Federation national nuclear corporation

bringing together circa 400 nuclear companies and R&D institutions

that operate in the civilian and defense sectors. With 70 years'

expertise in the nuclear field, we are a global leader in technologies and

competencies offering cutting-edge industry solutions. We work on a

global scale to provide comprehensive nuclear services that range from

uranium enrichment to nuclear waste treatment.




Saudi Arabia King to sign $21.5 bln energy, development deals with Egypt during visit -sources Reuters

Saudi Arabia is expected to sign a $20 billion deal to finance Egypt's petroleum needs for the next five years and a $1.5 billion deal to develop its Sinai region, two Egyptian government sources told Reuters on Tuesday.

The agreements are tabled to be signed on Thursday during a visit to Cairo by Saudi Arabia's King Salman, a rare foreign trip.

Saudi Arabia, along with other Gulf oil producers, has pumped billions of dollars into Egypt's flagging economy since the army toppled President Mohamed Mursi of the Muslim Brotherhood in 2013 after mass protests against his rule.

The Gulf Arab countries see the Muslim Brotherhood as a threat. Egypt is struggling to revive an economy which unravelled following an uprising that toppled President Hosni Mubarak in 2011. The development deal for Sinai comes at a time when Cairo is fighting an Islamist militant insurgency there and discontent and poverty among the population there is rife, residents say. The petroleum financing will have an interest rate of 2 percent and a grace period of at least three years, the sources said.

Separately, the deputy head of the Saudi-Egyptian Business Council said on Tuesday that Saudi businessmen will invest a total of $4 billion in projects including the Suez Canal, energy and agriculture, and had already deposited 10 percent of that sum in Egyptian banks.




GCC states to invest $100b in renewable energy proj. in 20 years WAM + Gulf News

Gulf Cooperation Council (GCC) member states plan to pump up to $100 billion (Dh367.3 billion) into renewable energy projects over the coming two decades.

Kuwait News Agency (KUNA) quoted Samira Ahmad Omar, director-general of the Kuwait Institute for Scientific Research (KISR), as saying that such robust funding aims to meet the growing energy consumption in the GCC states, estimated at 3 per cent a year.

In a speech to the opening ceremony of the sixth Middle East and North Africa Renewable Energy Conference (Menarec-6), Omar attributed the increasing demand for energy to economic transformations, including the tendency towards establishing industrial and service bases, and the growth of population.

“The environmental challenges relating to pollution and global warming left us with no choice other than relying heavily on clean and renewable energy, which is the focus of energy research circles worldwide,” she stressed.

“The GCC states, as well as other countries in the Middle East and Africa, have promising opportunities in the field of exploitation of the solar energy, given the fact that they enjoy [an] equatorial climate and [sunlight hours] of [up to] 1,400 to 1,800 hours a year.”

“Kuwait [is one of the first countries] that sought to tap into the renewable energy. In 1978 KISR designed and operated a pilot solar energy station with a generating capacity of 100 kilowatts,” Omar said, noting that the project was backed by Germany.

KISR pursued research into renewables and their utilisation in seawater desalination and electricity generation.

A few years ago, KISR launched the Al Saqaya renewable energy complex, which covers an area of 100 square kilometres, with a compound capacity of 200,000 megawatts, she said, adding that the project will go operational by the end of 2016.




GCC petchem industry should fortify operational efficiency to enhance profitability up to 30%: Boston Consulting Gulf Times - Santhosh V Perumal

The Gulf Cooperation Council (GCC) petrochemical industry, which risks losing its competitive advantage amid massive market disruptions, should fortify the operational efficiency as profitability can be enhanced by 10% to 30%, according to the Boston Consulting Group (BCG).

Moreover, the GCC petrochemicals could also save 3% to 10% of the product value if they invest in building robust marketing and supply chain capabilities, BCG said in a report.

“The fact is, today, external political and economic factors paint a less rosy picture of the future of the GCC’s petrochemical industry. And while there is still time to reverse the damage done and even turn these setbacks into moments of growth, GCC petrochemical producers must do so fast — or risk losing their long-held competitive streak,” Marcin Jedrzejewski, Principal at the Boston Consulting Group Middle East said.

Although the GCC’s ethane-based producers are still the most competitive in the world, the North American producers are, without a doubt, trailing closely behind, it said.

Finding that the US’ much-talked about shale oil renaissance has flooded the US market with abundant supplies of cheap feedstock (ethane) arming the US petrochemical producers with a hefty cost advantage over their European and Asian rivals; it said this advantage has been eroded by the current drop in the oil prices, but in the long run, the US is still positioned to strongly benefit from the abundance of low-cost ethane.

“North American petrochemical producers will therefore be increasingly better placed to go head-to-head with GCC exporters when it comes to exporting to regions such as North-Western Europe and Asia,” Jedrzejewski said.




Stressing that the oil price drop is “undeniably” a major contributor to the current weak trends in the GCC petrochemical industry, BCG said Brent oil prices have fallen from a high of more than $110 in June 2014 to below $30 early this year. Subsequently, the price of naphtha has fallen steeply and, in parallel, the price differential with gas has narrowed, it added.

“A high oil-gas spread favours ethane-based GCC crackers as the price is typically set by marginal producers in Northeast Asia and Europe who use naphtha as feedstock,” it said.

Finding that the GCC’s petrochemical sector is riddled with several challenges; BCG said the regional producers should focus on commercial excellence and operational excellence as well as product specialisation.

Highlighting that several GCC producers face low operating rates due to unplanned shutdowns or inferior feedstock conversion rates; it said “but in actuality, operational excellence activities such as energy efficiency, raw material usage efficiency, and asset maintenance management can add up to 10%-30% to the bottom line.”

In commercial excellence, historically, the GCC producers have invested very little in sales, marketing and supply chain. In lieu, they greatly rely on off-takers and traders to carry and sell their products in core markets. “This arrangement basically means that producers can lose anywhere between 3-10% of their product value to a ‘middle man’, it said.

Moving forward, the GCC producers should invest in building robust marketing and supply chain capabilities — so they can win back this ‘lost value’ from off-takers.

Stressing that product specialisation is another pivotal point to address; BCG said the GCC producers sell basic chemical products (immediate derivatives from crackers) that are commodities. However, the profits derived from these products are inherently determined by external market conditions – such as feedstock prices and the local supply-demand.

“By going further downstream and increasing the specialisation of their products, the GCC producers can reap more stable and higher earnings,” it said.




Algeria: Petroceltic International drills successful first Ain Tsila Source: Petroceltic International

AIM-listed Petroceltic International, the oil and gas exploration, development and production company focused on North Africa, the Mediterranean and Black Sea regions, has issued an operational update on development drilling on the Ain Tsila gas and condensate field in Algeria.

Development well AT-10, the first well of the Ain Tsila development drilling campaign, is located in the north of the field approx. 3.4 km from the field discovery well AT-1, and 2.0 km from the appraisal well AT-8. AT-10 is the first of up to 24 new development wells on Ain Tsila expected to be required to establish and maintain the currently approved annual average wet gas plateau rate of 355 MMscfpd.

The well began drilling on 21 February 2016 and on 31 March 2016 it reached a total depth of 2005m MD, with a planned 61m penetration of a fully gas and condensate bearing Ordovician formation. Wireline logging results from the well indicate that reservoir quality is in line with the pre-drill prognosis, with an expected initial off-take rate comparable to AT-1 and AT-8 wells, each of which delivered flow rates in excess of 30 MMscfpd on test. Well test results will be confirmed later in 2016 when planned batch completion, stimulation and testing activities are undertaken.

The Sinopec Rig is now moving to the AT-13 development well, located in the north of the field approx. 1.8 km from the appraisal well AT-8, and 6.1 km from the appraisal well AT-1. AT-13 is targeting the Ordovician reservoir and will be drilled as a vertical well to a planned total depth of 2004m MD.

Petroceltic holds a 38.25% interest, Sonatrach a 43.375% interest, and Enel an 18.375% interest in the Isarene PSC. Petroceltic continues to benefit from a carry of its development costs in respect of Ain Tsila following the completion of the sale of an 18.375% interest to Sonatrach in July 2014.




Qatar $7.5b Doha port to cement Qatar’s position globally Saudi Gazette + NewBase

Set for completion by 2020, the new Doha port will propel the shipping sector forward, double GDP, and consolidate Qatar’s emergence as the world’s largest producer of liquefied natural gas.

Strategically located at the center of the thriving Gulf Cooperation Council (GCC) countries, Qatar’s maritime shipping industry has undergone tremendous transformational changes and has begun to take off. Back in 2010, the government launched an ambitious six-stage plan to develop a completely new and modern port on the coast near the capital of Doha.

With a combined population of over 47 million and annual economic output topping $1.6 trillion (£1 trillion), the six GCC countries Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, comprise a powerful block of open and integrated economies at a vital crossroads of the global economy, between Asia, Europe, Africa and the Americas.

In terms of global trade, in particular maritime shipping, the Middle East offers lucrative opportunities for companies that are able to take advantage of the region’s emergence as a global logistics hub. In 2014, Qatar, UAE, Oman, Jordan, Saudi Arabia and Kuwait ranked highest out of 45 emerging markets countries in the key category of “market compatibility,” highlighted by an ease of doing business.

As the region has emerged as an increasingly vital point in global shipping and trade, Doha has set itself apart from other logistical hubs such as Dubai by investing heavily in efficient modern

Originally targeted for completion in 2030, organizers have sped up the

timeline and provided the resources to cut 10 years off of the construction

timeline, completing all six phases of the project within the next five years.




infrastructure. Qatar’s maritime ports are undergoing significant expansion. National project spending is expected to top $100 billion across infrastructure, real estate and other energy and non-energy sectors over the next decade, according to research from the Investment Bank of Qatar.

The new port project alone accounts for $7.5 billion of that spending. Originally targeted for completion in 2030, organizers have sped up the timeline and provided the resources to cut 10 years off of the construction timeline, completing all six phases of the project within the next five years.

“By 2016 a state-of-the-art world class port will be completed,” said Sheikh Ali bin Jassim Al Thani, Chairman of Milaha Qatar Navigation, one of the region’s largest maritime and shipping logistics companies. “Qatar is offering what other GCC nations cannot provide simply because they lack the resources to do so.

The new port will provide clients with readily available gas and electricity, customizable warehouses and distribution centers, multi-purpose warehouses, third party logistics (3PL), a modern and high-tech data center, an enormous container yard, and a transport service shop. Furthermore, they will also have refrigeration services, chilled services and dry areas for those products needing to avoid humidity.”

With the initial phase completed in 2016, the New Port will comprise three terminals with an eventual combined annual capacity in excess of six million containers. The project will not only cater to the expected growth in container traffic, but also accommodate general cargo traffic, vehicle imports, livestock imports, bulk grain imports, offshore support vessels, coast guard vessels, and a marine support unit.

Follow-up projects include high-value and sophisticated manufacturing facilities for the fabrication and maintenance of offshore and land-based petrochemical structures, as well as for the construction, repair and maintenance of high-value small, medium and large ships. The port plan envisages a hub for repair, conversion and construction of all types of crafts, including tugs and workboats, military vessels and high-value small ships such as yachts, up to the largest vessels in the world.

All of this comes in addition to the state-of-the-art shipyard that has already been built by Nakilat – Qatar’s state owned shipping company which operates and manages vessels as well as provides shipping and marine-related services. The Erhama Bin Jaber Al Jalahma Shipyard in the Port of Ras Laffan was inaugurated in 2010, marking a milestone not just for Nakilat, but for the whole maritime industry in the country.

“It is a $2.8 billion state-of-the-art facility for ship building and repair, and the international community has given it a strong appraisal in terms of innovation and quality,” explained Nakilat’s managing director, Abdullah Al Sulaiti. “Now we have the capability in Qatar to build a wide range of vessels, either industrial or commercial, and when I say ‘commercial’ I mean high end luxury yachts. In fact, we are currently constructing two 72 meter luxury yachts; the first one will be delivered at the end of next year. It is a big moment for Qatar’s very young ship building industry and to see such capability available in the country in such a short period of time makes me very proud of what is being achieved.”




With the world-class shipyard already operational at the Port of Ras Laffan combined with the planned developments in Doha, Al Thani says that when all projects are completed, other regional shipping and logistics players won’t be able to contend with Qatar.

“Dubai, for instance, will not be able to compete with this level of service in providing such a facility. Qatar is rising up that marine shipping pipeline. We will continue to be a strong player and in the long term we will surpass them [regional competitors].”

The Doha port project comes at a time of heavy investment and a major push for progress in Qatar. “In the next five years, it is estimated that Qatar could spend over $200 billion on infrastructure projects alone,” said Al Thani. “The billions of dollars that are to be invested will in fact benefit Milaha’s overall operations. From Saudi to Oman to the UAE we will have a faster movement of goods for our clients. For instance, it takes two weeks to ship a product from Doha to Jeddah however with rail that will only take 24 hours. That is quite substantial and we will be able to move much more product in a lot less time.”

Al Sulaiti agrees that the wider infrastructure investment, such as Hamad International Airport and the new rail and metro projects will also significantly strengthen Nakilat’s position as a shipping company and contribute to the overall goal of making Qatar a regional logistics hub. Not only that, investment projects are also forecast to have a significant impact on Qatar’s bottom line. “Our GDP is expected to double by 2025,” Mr Al Thani explains.

“Additionally, many British German and French companies are operating in Qatar because of our policies towards taxation and they are looking to avoid paying the large taxes imposed by their governments. They come to Qatar to enjoy this preferred business environment. In the future I do believe there will be pressure from their governments to minimize this but in the meantime Qatar will continue to be a haven for many investors around the world.”

Hoping to attract yet further foreign investment, the government has planned a special economic zone adjacent to the new port in Doha. The Qatar Economic Zone 3 (QEZ3), will be a self-contained development with industrial and residential facilities and forming a critical link in the country’s strategic economic objectives. The QEZ3 will also serve as a shipping and trade gateway into Qatar and provide an economic hub around the Port for manufacturing, logistics and trade across a number of industrial sectors, creating import as well as export synergy.

What’s more, the Doha port project dovetails with Qatar’s emergence as the world’s largest producer of liquefied natural gas (LNG). In less than 20 years, Qatar has transformed itself into the world’s leading supplier of LNG, supplying about a third of all global trade, while Nakilat has become the world’s largest LNG shipping company.

With the world’s largest fleet of LNG container ships, and the world’s most advanced LNG facilities, with the ability to produce and process larger quantities of gas than any competitors, Qatar enjoys a massive competitive advantage in the sector. IHS estimates that it costs about $2 per million British thermal units, a standard natural gas measure, to produce and liquefy gas in Qatar. That compares with $8 to $12 for planned projects in the United States, East Africa and Australia. The low cost structure allows Qatar to be more nimble and make money even in the current weak environment, when prices are low, according to a report last year in The New York Times. Qatargas and RasGas, Qatar’s two LNG exporting companies, have 14 advanced facilities in the country.




Qatar: working to Bring LNG Q-Fleet Vessels to Use LNG as Fuel Gulf Times

Qatar is studying ways of converting more vessels that are part of the Q-Fleet to use LNG as fuel, a Nakilat official said Tuesday. Nakilat fleet management director Samir Bailouni said international shipping community is facing a challenge to find alternative fuel, Gulf Times reported. Currently, Q-Max vessel ‘Rasheeda’ is the only ship in the Qatari Q-Fleet to use LNG as fuel after it was retrofitted in 2015 with the gas-burning M-Type Electronically Controlled – Gas Injection (ME-GI) systems, which have now been successfully commissioned.

“At the moment there are no plans to convert more vessels but there is a study, which is in cooperation and total coordination with our charters: Qatargas and RasGas. It is not our sole decision, but it is also a decision by our charters,” Gulf Times quoted Bailouni as saying.

Earlier this year, Qatargas, the Maersk Group and Shell signed a Memorandum of Understanding (MoU) to explore the development of LNG as a marine fuel in the Middle East region.Through the joint relationship the partners plan to explore the development of new markets for LNG to be used as propulsion fuel for merchant vessels.

The memorandum envisages LNG supplies for this initiative to be made available from Qatargas 4, a joint venture between Qatar Petroleum and Shell Gas

B.V., with Maersk Line potentially using the fuel for its merchant vessels.




Iraq: Huge oil tanker traffic jam builds at Iraq's Basra port Reuters - Keith Wallis

A traffic jam of nearly 30 large oil tankers has built up outside the Iraqi port of Basra due to loading delays, with some waiting up to three weeks and costing ship operators around $75,000 a day per vessel. Shippers and port sources said more delays are expected throughout April as the city's facilities struggle to cope with Iraq's soaring crude output.

The problems at Basra, coupled with continuing storage tank shortages in China, have pushed supertanker rates from the Middle East to Asia to unseasonal highs as the delays disrupt future sailing schedules and charterers cover future tonnage requirements. "The VLCC (very large crude carrier) market is being sustained by a whole pattern of delays and congestion, affecting ports in Basra," said Ralph Leszczynski, head of research at ship broker Banchero Costa in Singapore, adding that there were further delays in China and South Korea. There are 27 VLCCs and suexmax tankers with a combined capacity of 43 million barrels, waiting off Basra, shipping data on the Reuters Eikon terminal showed, about twice the norm. The delays are likely to continue throughout April and could only ease in May, said Omar Al Jarah, a surveyor at maritime consultancy Alwan Marine in Sharjah, as the port struggles with the country's rising crude output. Iraq exported an average of 3.26 barrels of oil per day (bpd) through its southern terminals in March, up from 3.22 million bpd the previous month and just 2.5 million bpd in 2010. Port officials were not immediately available for comment. EIGHT KILOMETRE QUEUE

Some of the tankers, which would stretch more than 8 kms (5 miles) if placed end-to-end, have been waiting three weeks to load crude from Basra Oil Terminal, according to ship tracking data and port agents. Sources said the current waiting time to load Basra heavy crude is 18-19 days, compared with an average time of 5-10 days. Basra Oil Terminal has seven loading berths but only a single point mooring facility, SPM No. 3, is being used to load Iraqi heavy crude, port agents and brokers said. Three of the terminal's berths are closed for maintenance, a Singapore-based tanker broker said. Rough weather is making it difficult for pilot boats to operate which is adding to the delays, Al Jarah said.

As the delays bind tankers outside Basra, rates for very large crude carriers (VLCCs) jumped from around 50 on the Worldscale measure on March 1 to around 90 on April 1, doubling in cost from $37,250 to $74,700 per day, shipping data showed. The captain of one ship that has been waiting for two weeks told Reuters by phone he had been given no information when the ship would be allowed to moor and load cargo. "We've been

given no details," he said, declining to be identified as he was not authorised to speak to media.




Iraq: GPK completes testing of the Shewashan-2 development well Source: New Age Gas Plus Khalakan (GPK) shareholder New Age reports that GPK has now completed testing of the Shewashan-2 development well under Phase 1 of the approved Field Development Plan (FDP) for theShewashan oil field in the Kurdistan Region of Iraq.

The deviated Shewashan-2 well was spudded on 1st October 2015 and drilled to a TD of 2768 m MD in the Cretaceous Qamchuga reservoir at a cost of $19.5m. On open hole test from 2439m to 2768m, the well flowed with very low drawdown at a maximum rate of 4,400 barrels of oil per day (bopd) and with a BS&W of less than 1%. This flow was from the Cretaceous fractured carbonate reservoirs (Shiranish, Kometan and Qamchuga). The oil is very high quality at 47° API. The well has now been completed ready for production and will contribute to the Phase 1 production target of 10,000 barrels of oil per day (bopd) by the end of 2016. Estimated annual production for 2016 is 1.9 million barrels. GPK will immediately

proceed with the recompletion of the Shewashan-1 well as a deviated producing well. Phase 1 production will be processed through a 10,000 bopd Early Production Facility (EPF) with total storage capacity of 30,000 bbls and water handling of up to 3,000 bwpd. The total Phase 1 capital investment budget is $77m gross. Steve Lowden, CEO of New Age, said: 'GPK is delighted with the progress of the Shewashan development and with the continued support from the KRG and the improving conditions in Kurdistan.'




NewBase 06 April 2016 Khaled Al Awadi

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

Oil futures jump on output freeze hopes; glut hurts physical prices Reuters + NewBase

Crude futures jumped on Wednesday as hopes for an agreement among exporters to freeze output underpinned the market, although a persistent global oversupply and Iran's plans to boost production pressured physical oil prices.

Oil futures recovered from one-month lows to end up in the previous session after the Kuwaiti governor for the Organization of the Petroleum Exporting Countries (OPEC), Nawal Al-Fuzaia, said there were "positive indications an agreement will be reached" on output during a producer meeting scheduled for April 17 in Qatar.

U.S. crude futures jumped around a dollar, or 2.8 percent, to $36.87 per barrel at 0419 GMT. International Brent futures rose 1.8 percent at $38.55 a barrel.

"Oil (futures) gained some momentum. The comment by the Kuwait OPEC governor provided some support to prices," ANZ bank said, but warned that investors would likely remain cautious ahead of the April 17 meeting.

An initial output freeze agreed in February has helped oil prices rise to almost $38 a barrel from a 12-year low close to $27 plumbed earlier this year.

However, prices have fallen in recent days on doubts that a wider deal will be reached, largely because Iran has so far said it has no intention of slowing its production after crippling sanctions against it were lifted in January.

Oil price special

coverage




Iranian Oil Minister Bijan Namdar Zanganeh said the country's crude output would reach 4 million barrels per day (bpd) by March 2017, state television reported on Wednesday, with plans to export 2.25 million bpd of those supplies.

That would be up from a little over 1 million bpd under the sanctions and only slightly below pre-sanctions peaks of 2.5 million bpd.

With Iran's exports rising and other producers pledging to freeze production near record-high levels, an agreement would do little to address a global supply overhang that sees at least a million barrels of crude produced every day in excess of demand.

The ample supplies were reflected in physical markets, with Abu Dhabi cutting its March retroactive official selling price (OSP) premium over benchmark Dubai crudes by 64 cents to $3.06 per barrel.

This followed top exporter Saudi Arabia lowering its May Arab Light crude OSP by 10 cents per barrel to a discount of $0.85 per barrel to the Dubai average.

"We do not rule out additional (oil price) weakness in Q216 before renewed gains later in the year, as a rapid shift in bullish speculative sentiment has outpaced fundamental tightening of the physical market," BMI Research said.

Signs suggest that a meeting of OPEC and non-OPEC oil producing countries in Doha on April 17 will produce an initial agreement to freeze output, Kuwait's OPEC governor Nawal Al-Fuzaia said on Tuesday.

Fuzaia, giving a speech at the oil ministry, also said she expected the oil market to achieve a balance between supply and demand in the second half of this year.

The Brent crude oil price, now at $38.6 a barrel, is expected to average between $45 and $60 in the second half of this year and until 2018, she added.

Fuzaia did not elaborate on what signs pointed to an agreement in Doha, but said producers might agree to freeze their output at February levels, or at an average of January and February levels. The original proposal by Saudi Arabia, Qatar, Russia and Venezuela was for a freeze at January levels.

On Iran's plans to raise oil output, which Tehran has said it will not abandon, Fuzaia said rising Iranian production was not in itself a problem, but there was a problem with Iran's ability to sell this additional quantity into a saturated market amid weak demand.




NewBase Special Coverage

News Agencies News Release 06 April 2016

Oil glut up close: How Cushing copes with full crude tanks REUTERS - JESSICA RESNICK-AULT

From the air above this small Oklahoma town, the 300 steel oil storage tanks that dot the landscape appear filled to the brim, their floating lids bobbing atop more than 65 millions of barrels of oil.

There may be no better place to witness what a world awash in crude looks like, and the 9 square-mile (23.3 square km)complex seems to bear out oil traders' fears that the industry is running out of space to contain a historic supply glut that has hammered prices.

Such worries make weekly estimates of Cushing stockpiles from the Energy Information Administration one of the hottest market indicators. These inventories peaked in mid-March and have edged lower since then. Some traders reckon they are unlikely to exceed those records for years as refiners rumble back from seasonal maintenance and demand rises. Others warn the stockpile could rise again.

Up close, from a 24-hour bunker that controls a quarter of tank space here, the ‘pipeline crossroads of the world’, reveals its secret - there is some spare room left.




On March 24, the day after U.S. government data showed Cushing’s tanks held a near-record 66.23 million barrels of crude, Mike Moeller, manager at Enbridge, explained how the largest Cushing operator uses every last inch of usable space.

Operators and technicians make it possible by moving a half-million barrels per day in internal pipelines that link the major pipelines and tanks of its 20 million barrel terminal.

Enbridge's capacity has risen about a third over the past five years, but the volume of oil coursing through the jungle of pipes, valves and tanks that connects suppliers from as far away as Alberta’s oil sands to the Gulf of Mexico refiners has quadrupled.

“We are fuller than we have ever been,” Moeller told Reuters. Customers tell Enbridge every month how much crude is coming, but Moeller and his team leave some space at the top of each tank that might be needed in an emergency.

Every day, up to 6 million barrels of oil flows through Cushing's 13 major pipelines in or out of steel tanks – some the size of a football field - towering above the prairie otherwise studded with ranches and nondescript residential neighborhoods.

The U.S. government estimates their operational limits at around 83 percent of their ‘shell,’ or design, capacity.

In reality, the limit may be somewhat higher. Moeller says Enbridge can fill its storage space up to 85 percent capacity thanks to maneuvers orchestrated from its control room.

"CONDOS" AND VALVES

One is shifting crude into and out of "condos" - tanks where capacity is leased out to multiple companies and crude mixed together, leaving the operator to track the exact volumes each has on hand.

While all storage space is rented out, its actual use can vary in a 12-hour period, Moeller explains.

Enbridge has also increased the number of connections to the other 13 Cushing terminals, circumventing valves that can curtail how much crude can be moved to large pipelines.

With oil-flow acrobatics getting exceedingly complex, workers can ill-afford any lapse in concentration.

The lights in the control room building get dimmer or brighter as the day or night progresses to keep workers alert through their shifts. An exercise bike is on hand if their energy starts to wane.

Moeller, an Enbridge veteran of more than 15 years, arrived in Cushing in 2012 when the shale drilling and pipeline boom opened the latest chapter in its history as an oil town.

It started in 1912 when an oilman named Tom Slick discovered the area's first crude. While production ceased in 1920s, the town, halfway between Tulsa and Oklahoma City, has served as a storage location and in 1983 was picked as the settlement point for the West Texas Intermediate futures contract.




The shale boom and the rapid rise of the Canadian oil sands industry transformed Cushing from a way station for imported crude headed to refineries in the north into a blending hub for light and heavy oil moving south.

"People joke that our crop is pipelines," said Sam Withiam, a local lawyer and landowner, whose 1200-acre (485.62 hectare) elk ranch comes up to the fence line of one of the oil storage terminals.

Pipeline right of ways cross his land, and even more are on the way in, he said. As a lawyer, he has guided businesses trying to expand in this town of 7,826 that happens to be at the center of the oil world.

HELICOPTER VIEW

Cushing's terminals operated by Enbridge, Plains All American , Magellan Midstream Partners, Rose Rock Midstream LP have hundreds of employees and contractors on the ground, according to the town's chamber of commerce.

Market estimates of current storage rates suggest the tanks can bring over $500 million in annual revenue.

To get timely estimates of Cushing's storage levels, energy information provider Genscape flies twice a week a helicopter over the tanks with an infrared camera onboard.

It has registered some decreases in recent weeks, but Brian Busch, Genscape's director of oil markets and former oil trader, calls it an operational variance.

"There's no reason to unwind a hedge yet," said Busch, adding the observations do not support yet some traders' view that crude prices should start recovering soon.

One cannot see the vast tanks from Cushing's Main Street, a typical thoroughfare with auto parts stores, diners, fast food stops, a Walmart Super Center and Best Western Plus hotel.

Yet there is ample evidence that the fortunes of the town and the global oil industry are closely connected.

The Lazy-L motel, which rents rooms for $39 a night, did a brisk business peaking in 2013 when oil fetched over $100 a barrel and new pipeline construction was under way, bringing in contractors from Texas and Louisiana. Now, a single room is rented to a local security worker. House rents have fallen too from $1,000 a month just over a year ago to about $600 today.

"It's always boom or bust - Cushing is strictly an oil town," said Kay Koble, a realtor who has lived in town for 60 years.




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Khaled Malallah Al Awadi, Energy Consultant MS & BS Mechanical Engineering (HON), USA Emarat member since 1990 ASME member since 1995 Hawk Energy member 2010

Mobile: +97150-4822502 [email protected] [email protected]

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

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

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

NewBase 04 April 2016 K. Al Awadi





