New base 987 special 15 january 2017 energy news

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NewBase 15 January 2017 - Issue No. 987 Senior Editor Eng. Khaled Al Awadi

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

Abu Dhabi and Irena add to renewables funding for Africa and Pacific region and call for more investment

The national - LeAnne Graves

Four countries in Africa and the Pacific will receive millions from Abu Dhabi to kick-start renewable energy projects, benefiting more than a quarter of a million people.

The Abu Dhabi Fund for Development (ADFD) and the International Renewable Energy Agency (Irena) awarded Dh44.5 million to the Marshall Islands, Niger, Seychelles and the Solomon Islands at the Irena General Assembly on Saturday in Abu Dhabi.

"Over seven funding cycles, our US$350m partnership, Irena/ADFD Project Facility, aims to support and enhance the developing world’s energy needs by tapping into their abundant renewable energy sources," said Mohammed Saif Al Suwaidi, ADFD’s director general.

The concessional loans, at 1 per cent to 2 per cent interest rates for 20 years, will help projects employing solar photovoltaic (PV) solutions and solar home kits to hydropower. They will provide electricity to more than 260,000 people.

So far, the organisations have provided more than $189m for 19 projects.

"The UAE’s commitment to advancing sustainable energy transitions in countries around the world has been unwavering," said Ali Al Shafar, the UAE’s permanent representative to Irena.

"Our renewable energy development aid has been growing significantly to more than $900m."

An important element is that this offers a sort of guarantee for other investors who may perceive these projects and countries as high-risk. The concessional loans range from $5m to $15m per project with a five-year grace period for payment. Other investors have provided $387m in co-financing.




"This facility is also putting in place an innovative process, which supports transformational and replicable projects that can potentially bring sustainable energy to millions of people around the world," said Adnan Amin, Irena’s director general.

Irena calls for more investment

Despite its immense potential, renewable energy will only rise from 18 per cent to 21 per cent of the total global energy mix by 2030, if current plans are implemented without additional measures, according to the Rethinking Energy Report released today.

The newly elected Irena president, the Italian Mario Giro, called for a far more ambitious commitment from its 177 member countries, saying they should increase renewable energy’s share to 36 per cent.

"It is our responsibility to deliver more and to deliver together, to explore energy in all its dimensions, for our people and our climate," he said.

To fully meet the requirements set out at COP21 in Paris in 2015, where countries decided to reduce global warming to less than 2°C by 2050, Mr Giro said more ambitious pledges were necessary.

Dr Thani Al Zeyoudi, Minister of Energy and Climate Change, said: "To meet our goals, and all the work we have done, global collaboration is necessary."

"We’re not stopping our work to push towards goals that aim to reduce climate change. We pushed our target from 24 per cent to 27 per cent renewable energy this year, and now we’ve pledged to have half our energy come from renewable sources in 2050."

Abu Dhabi recently announced plans to cut carbon dioxide emissions by 70 per cent by 2050.

The report calls for an increase in renewable energy investment and implementation as it would save US$1.3 trillion by 2030, create millions of jobs and save millions of lives otherwise lost due to air pollution.

It noted that the opportunity to implement renewable energy plans should be the first choice for the almost one billion people who still lack access to electricity.

Auctions best fit for renewable energy projects, Irena says

Auctions for renewable energy projects have helped to drive down prices but the process runs the risk of delays from over-aggressive bidding, according to a report by the Abu Dhabi-based International Renewable Energy Agency (Irena) released today.

At least 67 countries have opted to tender renewable energy projects under such auction system at the end of last year from only six in 2005, the report said.




Maged Mahmoud, the technical director for the Cairo-based Regional Centre for Renewable Energy and Energy Efficiency, compared auctions to another system that was widely applied for renewables previously, known as a feed-in tariff.

This sort of subsidy has a government-set low price to encourage companies to invest.

"Feed-in tariff prices in the region have been done in an encouraging way to investors, but sometimes at a burden to the government," said Mr Mahmoud.

"The auction system is the best option for the Mena region because it fits the existing legal system and brings an added value to lower prices."

But the latest project bid trend could face several risks starting with delays or cancellations "attributed to the potential for over-aggressive bidding", according to Irena.

As a result of this type of process, the UAE has recorded some of the lowest prices for solar power. For example, in 2015 the lowest price for Dubai’s 200 megawatt second phase of the Mohammed bin Rashid Al Maktoum solar complex was 5.84 US cents per kilowatt hour. Last year, bids submitted to Abu Dhabi’s Sweihan project were as low as 2.42 cents per kWh.

For companies to even throw their hat in the ring for an auction-type project, upfront fees spanning from feasibility studies to bid bonds may block small or new companies from participating, the report said.

Adnan Amin, Irena’s director general, said that the while sector was predominantly geared towards large businesses, there were still opportunities for smaller firms. "We’re going to see more decentralised solutions and policies come on-stream, including solar rooftop and heating, and we’ll see smaller companies that are able to participate in that," he said.

Despite the risks that come with an auction system, it remains the best option to get a real feel for the market. Mr Amin said: "It’s a market-orientated device and the auction process has helped deliver much lower cost of projects for renewables."




Kuwait to sell its stake in Areva to France in bid for nuclear fix Reuters

France will buy out minority shareholders in Areva and delist the troubled nuclear group, the government said on Wednesday as talks with potential investors in a new nuclear fuel company being spun out of Areva neared a conclusion.

The state, which owns 87 percent of Areva, said it would offer 4.5 euros per Areva SA share to minority investors which include Kuwait's investment fund , French utility EDF and French energy group Total.

In the Middle East and North Africa (MENA), you might not immediately consider the healthcare industry – dominated as it is by the government sector – fertile ground for startups.

Areva's shares have fallen by as much as 90 percent from their 2007 highs as the group chalked up repeated losses. The stock was suspended on Tuesday at 5.2 euros.




European Union antitrust regulators approved the French government's plan to inject 4.5 billion euros ($4.8 billion) into Areva on Tuesday, saying the rescue would not unduly distort competition.

The ruling will allow Areva, whose capital has been wiped out by years of losses, to restart as a smaller firm focused on uranium mining and nuclear fuel production and recycling.

Legacy Areva SA - the firm left over after this split and the sale of Areva's reactor unit to state-controlled EDF - will get a 2 billion euro capital increase and will hold the liabilities related to the troubled Olkiluoto 3 project in Finland, which has been hit by delays.

Areva said negotiations with unspecified investors in the new company were being finalised. It said last month that two investors have made a 500 million euro ($526.40 million) offer for a combined 10 percent stake in the new entity.

A source familiar with the situation said the two investors are Japan's Mitsubishi Heavy Industries (7011.T) and JNFL. Talks are continuing with China's National Nuclear Corporation about also taking a minority stake.

"These talks are continuing and focus on governance issues, and on the issue of the balance between the different third-party investor parties," French Industry Minister Christophe Sirugue told Reuters in an interview.

Sirugue, who said he had discussed the governance issue with Chinese Vice Premier Ma Kai during his visit to France in November, added that the make-up of the board of the new company is another important issue in the talks.




Turkey: Condor's Poyraz West 2 appraisal well discovers a new Pre-Sogucak reservoir… Source: Condor Petroleum

Condor Petroleum has announced drilling results of the Poyraz West 2 appraisal well in Turkey.

Poyraz West 2 is a step-out appraisal well testing the southwest extension of the field. Based on wireline logs, the well encountered 142 meters of net pay which includes 60 meters of a newly discovered Pre-Sogucak reservoir. The new reservoir is stratigraphically older and deeper than the previously evaluated Gazhanedere and Sogucak intervals and consists of interbedded conglomerates and sandstones. Production casing has been set and the well will be completed and tested prior to Poyraz Ridge first gas, which is on schedule to commence in mid-2017.

Don Streu, Condor’s President and CEO noted:

'We are extremely pleased that all four wells from this recent drilling campaign have encountered significant gas columns. The wells have expanded the gas charged reservoirs in the Poyraz Ridge

structure by identifying new and deeper pay zones which should positively impact reserves. The existing 3D seismic indicates that the pre-Sogucak reservoir is extending to the northwest, suggesting it is a new geologic play with lateral extent'.

The Poyraz West 2 discovery also serves to enhance the prospectivity of similar looking structures located within the license area. Planning is underway to drill the Yakamoz 1 exploration prospect this year, which is only 2 km north of Poyraz Ridge and shares many of the same attributes. Additional 3D seismic may also be acquired in the near term. The Company recently established a US$10 million credit facility which should provide sufficient funding to execute these programs and achieve Poyraz Ridge first gas. The receipt of the loan proceeds from the credit facility is subject to certain customary conditions precedent including, but not limited to, the

execution of various security documents. The loan proceeds are expected to be received in January 2017.

Operations have shifted to completion and testing activities for the recently drilled wells and testing of Poyraz 3 has commenced. Prior to ‘cleaning up’ and establishing stabilized flow rates, completion fluid and paraffin (wax) were observed in the surface testing equipment, hindering the ability to accurately test the well. Additional equipment is being installed before continuing to flow Poyraz 3. In the meantime, the completion rig has mobilized to Poyraz 5 and has started completion and testing activities on that well.




US Wholesale power prices in 2016 fell,Due to lower gas prices Source: U.S. Energy Information Administration, based on SNL Energy

Average wholesale electricity prices at major trading hubs across the United States during the first quarter of 2016 were significantly lower than during the same period in 2015, ranging from 24% lower in California to 64% lower in New England. Monthly wholesale prices for the rest of 2016 were slightly below 2015 prices and generally averaged between $20 and $45 per megawatthour (MWh).

The primary driver of the low wholesale electricity prices was the sustained low cost of natural gas, which is the fuel that often determines the marginal generation cost in most power markets. The low cost of natural gas also encouraged increased use of the fuel for U.S. power generation in 2016.

The cost of natural gas delivered to power generators averaged $2.78 per million British thermal unit (Btu) during the first 10 months of 2016 (the latest data available), which was 17% lower than the average price during the same period in 2015.

Milder winter weather in early 2016 also helped keep power prices lower than during the winter of 2014–15 when wholesale prices in the Northeast peaked in response to cold temperatures and constraints on getting fuel into the region.

The average wholesale electricity price in ISO New England in February 2016 averaged $34/MWh, significantly lower than the $138/MWh average during February 2015. Wholesale power prices began slowly increasing in December as colder winter weather set in, which led to increasing natural gas prices.




In addition to keeping wholesale power prices relatively stable in 2016, the low cost of natural gas contributed to a shift towards increased natural gas-fired electricity generation, largely at the expense of coal-fired generation.

The amount of electricity generation fueled by natural gas between January and October 2016 was 6% higher than generation during the same period in 2015. In contrast, coal-fired electricity generation during the first 10 months of 2016 was down 12% compared with the same period in 2015.

Natural gas was the primary source of U.S. electricity generation (when measured on an annual basis) in 2016 for the first time. Monthly natural gas-fired electricity generation first exceeded coal-fired generation as the primary source of electricity in April 2015.

Natural gas was the leading source of electricity for nearly every month of 2016, accounting for an estimated 34% of total annual utility-scale power generation, compared with a 30% share for coal-fired generation.

Electricity generating facilities were scheduled to add about 24 gigawatts (GW) of utility-scale capacity in 2016, more than 90% of which were natural gas, solar, and wind additions.

Coal units accounted for most retirements during 2016, with more than 7 GW of coal-fired capacity retired during the year, equivalent to 2.5% of existing coal capacity in place at the end of 2015.




US:Natural gas prices in 2016 were the lowest in nearly 20 years Source: U.S. Energy Information Administration, based on Natural Gas Intelligence

Natural gas spot prices in 2016 averaged $2.49 per million British thermal units (MMBtu) at the national benchmark Henry Hub, the lowest annual average price since 1999. The monthly average price fell below $2.00/MMBtu from February through May, but later increased, ending the year at an average of $3.58/MMBtu in December.

Warmer-than-normal temperatures for most of the year and changing natural gas demand were the main drivers of natural gas prices in 2016.




Natural gas prices in U.S. regional markets were volatile in 2016. In the first quarter of the year, much warmer-than-normal winter temperatures and large amounts of natural gas in storage caused prices to decrease. Prices began to gradually increase in late spring, with increased natural gas demand from multiple sectors and decreasing natural gas production, before sharply increasing at the end of the year with the onset of cold temperatures in mid-December.

In the Northeast, where natural gas pipeline capacity is often constrained, cold weather can cause monthly average prices at hubs such as Algonquin Citygate (near Boston) and Transco Zone 6 NY (New York) to spike. Although this happened in 2016, new pipeline capacity and increased natural gas production in the Appalachian Basin, along with warmer-than-usual winter weather, contributed to price spikes that were considerably lower than in previous years.

Because of warm weather, natural gas consumption in the residential and commercial sectors in 2016 declined 7% and 4%, respectively, from the previous year. Warmer winter temperatures also limited natural gas storage withdrawals. As a result, natural gas storage inventories were at or near record levels throughout most of the year and reached a record 4,047 billion cubic feet (Bcf) for the week ending November 11.

Despite the overall decrease in residential and commercial demand in 2016, late-year increases in these sectors and increased demand from other sources contributed to increasing natural gas prices later in the year. In 2016, natural gas surpassed coal as the primary fuel used for power generation in the United States, supplying an estimated 34% of the nation’s electricity, compared with 30% for coal. Electric power generation in 2016 used an average of 27.6 billion cubic feet per day (Bcf/d), exceeding the previous high of 26.3 Bcf/d in 2015.

In November 2016, the United States became a net exporter of natural gas on a monthly basis for the first time since 1957, based on data from PointLogic. This was supported by infrastructure improvements—including natural gas pipelines and facilities for liquefying natural gas for export—that enabled suppliers to meet increasing demand from foreign markets.

U.S. pipeline exports to Mexico continued to grow throughout 2016, making up 87% of all U.S. natural gas exports. In May 2016, the Sabine Pass liquefaction terminal began commercial operations in the Gulf Coast to export liquefied natural gas (LNG). The expansion of the Panama




Canal in July 2016 further aided export ability by reducing time and transportation costs to key markets in Asia and the west coast of South America.

Despite growing demand in the electric power sector and export markets, low demand for space heating and low prices resulted in lower natural gas production in 2016. Based on preliminary data, EIA estimates natural gas marketed production to average 77.5 Bcf/d in 2016, 1.3 Bcf/d less than in 2015 and the first annual decline since 2005.

The number of active natural gas drill rigs continued a multi-year decline, reaching 132 by the end of 2016, down 19% from the year-ago count. However, production has not fallen as sharply as the number of active rigs, as producers have continued to make gains in drilling efficiency.




NewBase 15 January 2017 Khaled Al Awadi

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

Oil falls on China concerns, down 3 percent for the week on OPEC doubts Oil prices fell on Friday and ended the week 3 percent lower on lingering doubts over the extent of OPEC cuts, with sentiment worsened by concerns over the economic health of the world's second-largest oil consumer, China, after it reported the steepest falls in overall exports since 2009. Record Chinese crude imports of 8.6 million barrels per day (bpd) in December helped to buoy prices somewhat, traders said, but they could not hide underlying fears over the overall health of the world's second-biggest economy. Brent crude futures LCOc1 settled 56 cents lower at $55.45 a barrel, ending the week with a loss of about 3 percent. U.S. West Texas Intermediate CLc1 crude futures fell by 64 cents to close at $52.37 also notching a weekly drop of nearly 3 percent.

"China right now seems more interested in keeping capital in the country than focusing on growth overall," Phil Flynn, analyst at Price Futures Group in Chicago said. "We have to watch this situation develop because this is one threat to what is an otherwise wildly bullish scenario for oil in the coming year." On the supply side, there was some market support from top crude exporter Saudi Arabia, which said that its output had fallen below 10 million bpd to levels last seen in February 2015 and that it expects to make even deeper cuts next month.

Oil price special

coverage




However, hard evidence of export reductions has yet to emerge, two weeks into the month in which the cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, such as Russia, were supposed to start. "Compliance won't be 100 percent; it never is," an OPEC source told Reuters, adding that an overall rate of 50 percent to 60 percent would be good enough, based on past compliance levels. Although, OPEC Secretary-General Mohammed Barkindo told Reuters he was sure countries would follow through on the deal. Libya's oil production increased to 750,000 barrels per day (bpd), the deputy leader of the U.N.-backed government said, a rise of about 50,000 bpd from last week. "I think the bigger issues for oil are less about demand right now and a lot more about the supply condition," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle. Oil held gains after advancing the most in almost six weeks as U.S. refiners processed a record amount of crude, while OPEC and other producing nations trim output to stabilize the market.

Futures were little changed in New York after climbing 2.8 percent on Wednesday following an Energy Information Administration report that U.S. refineries used 17.1 million barrels a day of crude last week, the most in weekly data compiled since 1989. The United Arab Emirates and other Gulf producers have complied with cuts agreed under the OPEC output deal, U.A.E. Energy Minister Suhail Al Mazrouei said.

Oil has been unable to sustain its rally above $55, driven by the deal between the Organization of Petroleum Exporting Countries and 11 other nations to pump less crude, amid concern that rising prices will spur more supply. While Middle East producers including Saudi Arabia have signaled




they’re sticking to the pledged reductions, the U.S. recently raised this year’s output forecast and explorers have added drilling rigs for 10 straight weeks.

“Saudi Arabia and other core members of the Organization of Petroleum Exporting Countries remain most committed to the cut in supplies,” said Carsten Menke, commodities analyst at Julius Baer Group Ltd. in Zurich.

West Texas Intermediate for February delivery was at $52.32 a barrel on the New York Mercantile Exchange, up 7 cents, at 9:32 a.m. in London. Total volume traded was about 15 percent below the 100-day average. The contract gained $1.43 to $52.25 on Wednesday, rising the most since Dec. 1.

U.A.E. Says $50 Oil ‘Isn’t Going to Cut It’ for Producers Mahmoud Habboush

Crude oil at $50 a barrel is too low for most producing countries, according to United Arab Emirates Energy Minister Suhail Al Mazrouei.

Prices have climbed almost 20 percent to above $50 a barrel since the Nov. 30 agreement by the Organization of Petroleum Exporting Countries to cut production for the first time in eight years to curb a global glut. OPEC is reducing output along with 11 other producing nations including Russia after a slump in oil prices the past two years eroded revenue.

Crude at $50 a barrel “isn’t going to cut it” for most producers, Mazrouei told an Abu Dhabi energy conference Wednesday. When asked if that level should be a floor, he said: “I will never quote a

price because I truly believe we should not target a price.”




Brent crude fell 4 cents to $55.06 a barrel at 8:54 a.m. in Dubai, compared with $46.38 a barrel at the close on Nov. 29 before the OPEC agreement. Prices have still dropped by about half since 2014 because of a glut created by OPEC and producers outside the group.

Demand Growth

During those years of oversupply and low prices, global oil demand has grown faster than expected, Mazrouei said, forecasting that expansion should continue. While complying with output cuts, the U.A.E. will also work to boost its production capacity to 3.5 million barrels a day, he said. Its current capacity is 3.15 million barrels a day, according to data compiled by Bloomberg.

Oil producers probably don’t want prices to go much above $50 a barrel because that would encourage new production, Neil Atkinson, head of the oil industry and markets division of the International Energy Agency, said in a speech at the same conference. By limiting the output cuts to six months, OPEC is sending a signal that it doesn’t want those cuts to stay indefinitely, he said.

Most members of the Gulf Cooperation Council, an alliance of Gulf Arab countries, will need oil prices higher than $50 to balance their budgets in 2017, according to International Monetary Fund data released in October.

The U.A.E. will need a price of $60 a barrel, the IMF said. Saudi Arabia and other GCC countries are taking steps to make their economies less dependent on crude oil sales. The only OPEC member in the Middle East and North Africa able to balance its budget with oil below $50 is Kuwait, it said.

The U.A.E. and other GCC members have carried out the output cuts they agreed to, Mazrouei said. Bahrain and Oman are among the non-OPEC countries joining the cuts, and the other four GCC countries are OPEC members.

Opec members cutting oil production, who are they Iraq has cut oil production by 170,000 barrels per day and is expected to cut it further in the coming days in line with the agreement reached between Opec and non-Opec members in Vienna last month.

“We already cut by 170,000 barrels per day and we are going to knock down another 40,000 barrels per day by the end of the month to take the total reduction by 210,000 barrels per day,” said Iraq oil minister Jabbar Al Luaibi, speaking to reporters at the inaugural Atlantic Council Global Energy Forum in Abu Dhabi on Thursday.

He said they are satisfied with the current oil price but would like to see oil price go up to $65 per barrel.

The Organisation of Petroleum Exporting Countries and 11 other producers including Russia agreed on December 10 to jointly cut output by about 1.8 million barrels a day in an effort to end a three-year oil surplus, which sent prices spiraling and battered the economies of producing nations around the world.

Energy ministers from Saudi Arabia, UAE, Qatar, Iraq and Kuwait are participating in the two day global energy forum which began on Thursday.

KPC said in a statement it had notified its clients of the production cuts from the start of January, saying they will be in effect for the whole of the first quarter of 2017.




Under the agreement reached in Vienna on Nov. 30 to cut output by 1.2 million barrels per day, Kuwait would cut its production by more than 131,000 bpd.

Libyan oil production, which has been steadily rising in the last two months, could pose a risk to the production cut deal reached between Opec and non-Opec member countries least year, analysts said.

From 300,000 barrels a day in August, Libya’s oil put has gone up to about 700,000 barrels a day currently..




Crude oil prices expected to increase slightly through 2017 and 2018 Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2017

The U.S. Energy Information Administration’s January Short-Term Energy Outlook (STEO) forecasts benchmark North Sea Brent and West Texas Intermediate (WTI) crude oil prices to average $53 per barrel (b) and $52/b, respectively, in 2017, close to their levels during the last three weeks of 2016. These prices are expected to rise to $56/b and $55/b, respectively, in 2018.

EIA’s price forecasts have wide uncertainty bands that are consistent with contract values for future delivery. For example, contracts traded during the five-day period ending January 5 suggest that the market expects WTI prices could range from $35/b to $93/b (at the 95% confidence interval) in December 2017.

Strong demand and the recent agreement among members of the Organization of the Petroleum Exporting Countries (OPEC)—along with some key non-OPEC oil producers—are putting upward pressure on crude oil prices. However, forecast increases in global production should provide downward pressure on prices and mitigate the potential for significant crude oil price increases through 2018. Despite the recent OPEC agreement, EIA expects global petroleum and other liquid inventory builds to continue, but at a slowing rate, in 2017 and 2018.

Despite increases in global oil inventories and U.S. oil rig productivity, market reactions to the November OPEC agreement to cut production by 1.2 million barrels per day (b/d) starting in January 2017 contributed to rising oil prices in December, when average Brent prices were $9/b




above their November levels. In response to the price movement, in the January STEO, EIA increased its crude oil price forecast for both Brent and WTI by $2/b from the December STEO forecast for 2017. The slight price discount of WTI to Brent in the forecast is based on the assumption of competition between the two crude oils in the U.S. Gulf Coast refinery market.

Brent crude oil spot prices are expected to remain fairly flat over 2017 in part as a result of the responsiveness of U.S. tight oil production to rising oil prices in late 2016. EIA forecasts Brent prices will slowly increase in 2018, beginning the year at $54/b in January and ending the year at $59/b in December. During this time, inventory builds will slow, putting modest upward pressure on prices. This rise in oil prices encourages production increases, particularly in the Lower 48 onshore. However, any production increases realized while the global markets are building inventories will moderate price increases, which will in turn limit additional production increases.

Total U.S. crude oil production is estimated to have averaged 8.9 million b/d in 2016, down 0.5 million b/d from 2015, with all of the production decline in the Lower 48 onshore. EIA forecasts U.S. crude oil production will increase to an average of 9.0 million b/d in 2017 and 9.3 million b/d in 2018. Forecast production in 2017 is 0.2 million b/d higher than in the previous forecasts, reflecting higher drilling activity, drilling efficiency, and well-level productivity than in previously assumed.

In the previous forecast, EIA generally expected Lower 48 onshore production to decline through the end of 2017. However, the new forecast reflects crude oil prices near or above $50/b, which have led to increased investment by some U.S. production companies, particularly in the Permian Basin. EIA expects that declines in Lower 48 production have largely ended and forecasts relatively flat production in the first quarter of 2017 at 6.7 million b/d, which will then increase to an annual average of 7.0 million b/d in 2018. Even modest increases in crude oil prices could contribute to supply growth in other U.S. tight oil regions.

EIA estimates global petroleum and other liquids production will increase through the forecast. Annual estimated and forecast production levels for 2016, 2017, and 2018 were revised up to 96.4 million b/d, 97.5 million b/d, and 98.9 million b/d, respectively. More information about crude oil prices and production is available in EIA’s latest This Week in Petroleum.




NewBase Special Coverage

News Agencies News Release 15 Jan. 2017

Will Putin and Trump Bond Over Oil? by Matthew Philips

In the early 2000s, the Russian and U.S. presidents, Vladimir Putin and George W. Bush, decided it was time their two countries had a closer relationship. The obvious place to start was the oil industry. The U.S. was importing almost twice as much crude as it produced and wanted to diversify away from Middle Eastern suppliers. Russia’s vast, untapped reserves of oil needed two things U.S. companies had plenty of: money and technology. In October 2002 the inaugural U.S.-Russia Commercial Energy Summit convened in Houston. Over two days, members of both governments and executives from 70 oil and gas companies mingled and talked business. Eleven months later, a second summit was held in St. Petersburg, where the focus was on improving the climate for energy investment in Russia. A closer relationship seemed to be developing, but there would be no third summit.

By 2004 the Kremlin had begun nationalizing portions of Russia’s private energy sector, most notably seizing the assets of Yukos, the largest oil company. At home, U.S. drilling companies were developing fracking technology to unlock oil and gas from shale formations, and they were reluctant to share their knowledge with the Russians. “The U.S. became quite cautious, and so the basis for establishing this harmonized relationship was destabilized,” says Igor Yusufov, Russia’s energy minister from 2001 to 2004 and a key participant in the energy summits.




Yusufov, who now runs an energy investment fund, is hoping that incoming U.S. President Donald Trump will restart the high-level meetings. Trump has vowed to improve relations with Russia and has tapped former ExxonMobil Chief Executive Officer Rex Tillerson to serve as secretary of state. Tillerson arguably has more Russia experience than any other U.S. executive, having negotiated a $500 billion joint venture with Kremlin-controlled Rosneft in 2011. The potential for a new era of constructive relations between the U.S. and Russia will likely be a topic of discussion in the hallways of Davos, where the attendee list reads like a who’s who of the oil industry. A lot has changed since Yusufov was clinking glasses with then-Energy Secretary Spencer Abraham. The U.S. is poised to become a net energy exporter in the next decade, according to the U.S. Energy Information Administration. In time, American oil and gas could compete with Russian supplies, exerting pressure on global prices. Cheap energy isn’t exactly good for the Kremlin, which has been starved of revenue since the crash in oil prices. A first step in any rapprochement would be to lift the sanctions that the Obama administration put in place in retaliation for Russia’s incursions into Crimea and Ukraine. “If he wants a better relationship with Russia, Trump can start by dropping the sanctions,” says Steven Pifer, who served as deputy assistant secretary of state in the Bureau of European and Eurasian Affairs with responsibilities for Russia and Ukraine from 2001 to 2004. The question is what does the U.S. get in return. “If you take the sanctions off, you have no leverage,” Pifer says. Speaking at his Jan. 11 confirmation hearing, Tillerson called sanctions a “powerful tool” but said that poorly designed sanctions can be worse than having none at all. Carlos Pascual, who led the Department of State’s Bureau of Energy Resources from 2011 to 2014, says any reevaluation of the relationship with Russia will have to include the issue of cyber attacks, the situation in Syria, and Russia’s role in the Mideast. There’s also the question of whether a Tillerson-led State Department would work in concert with U.S. companies trying to exploit opportunities in Russia. Richard Morningstar says that when he was U.S. ambassador to the Republic of Azerbaijan from 2012 to 2014, “the State Department people and the Exxon people were like two ships passing in the night,” even though both camps were deepening their engagement on energy issues in Russia and the surrounding area. Morningstar, who now runs the Global Energy Center at the Atlantic Council in Washington, wonders if a Trump administration will prioritize closer ties with Russia over geopolitical issues. “Will he care what role Russia plays as a primary supplier of gas to Europe?” he asks. “There is also the question of how a potential reset with Russia flies in the face of a desire in the U.S. to sell more to Europe.” Yusufov brushes aside talk of competition and instead emphasizes how the two countries could cooperate to stabilize a volatile oil market. “We could combine our efforts to establish prices that would be of benefit to both countries,” he says. A range of $60 to $80 a barrel would be high enough for the Kremlin to plug its budget hole and for U.S. frackers to start investing in new projects—though not so high that drivers in the U.S. would feel too much pain. “This could be the essence of the discussion of a Russian-American energy summit as it was 15 years ago,” Yusufov says. The bottom line: U.S. and Russia may struggle to carve out room for energy cooperation now that America is also a big oil and gas producer




Shale oil profitable at today’s price, top US energy official says Amos Hochstein

US shale production is expected to go up as oil prices increase due to Opec agreement, a top energy official from the US Department of State told Gulf News in an exclusive interview.

“As a result of Opec action, prices rose by a few dollars and as a result you’ve seen shale oil production going up again in the United States. We had hit a low of 8.4 million barrels a day of the total production, we are now back up to 8.7 million barrels a day,” said Amos Hochstein, special envoy and coordinator, international energy affairs, US department of state.

He expected US oil production to reach 9.5 million barrels a day next year, similar to production levels two years ago.

“As long as prices are $50 or above, we will see an increase in production in the United States. In 2014, when oil prices collapsed, shale oil was considered expensive. We are seeing that the cost of shale oil has reduced very significantly and therefore it is already profitable at today’s prices.”

Oil prices have gone up by more than 20 per cent since the 13 Opec member countries and 11 oil producers from outside the group reached an agreement to cut production by about 1.8 million barrels a day last month.

The historic deal, the first in 15 years, came into effect from January 1 with oil producers promising to slash output to comply with the deal to rebalance oil markets.




Hochstein, who was in Abu Dhabi as part of Atlantic Council Global Energy Forum, also said he doesn’t expect any changes in the energy policy of the United States under the new administration of Donald Trump.

“I personally don’t expect that any changes could come or actually have an impact on the energy markets any time soon. Much of the changes are already in place, the trajectory of the market is there and I think that’s where we are going.”

When asked whether Trump will encourage shale oil production, he said it will continue to rise or fall based on global price of oil and has nothing to do with the US government.

“Right now, the US is an important swing producer for global energy market that is entirely in the control of the market and prices. The US government, Trump administration or others will have very little impact on it.”

Speaking on the renewable energy sector in the US, he said the sector will continue to increase in the coming days and over $50 billion worth of investments were made in the renewable energy industry last year.

“The US last year has put in place a five years of tax credits for renewable energy so we have another four and half years of extended tax credits which will encourage continued investment.”

Praising the UAE energy plan 2050 announced by the government last week, he said the leadership by the government is remarkable and is looking into the future of what the energy world looks like.

“Today the leading country is the UAE. No one is looking into the future as aggressively and as proactively as the UAE.” The UAE energy plan has a target of 44 per cent clean energy, 38 per cent gas, 12 per cent clean coal and 6 per cent nuclear by 2050.

The strategy will aim to invest Dh600 billion to meet demands for energy and ensuring the sustainability of growth in the UAE’s economy, and will also result in savings of Dh700 billion.




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Khaled Malallah Al Awadi, Energy Consultant

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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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New base 987 special 15 january 2017 energy news