New base energy news issue 840 dated 28 april 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,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

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NewBase Energy News 28 April 2016 - Issue No. 840 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: The Masdar plan 10 years on: a project that kept its promise The National -Nick Leech

How much can be achi eved in a decade? In April 2006, the government of Abu Dhabi announced the launch of a project that was designed to spearhead its transition away from fossil fuels, while simultaneously diversifying its economy and maintaining its position of influence in an energy market that had started to look beyond oil.

“Abu Dhabi is a global leader in the production of energy and the Masdar Initiative is a natural product of that position," announced Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, at the launch event.

The first project of its type in the Middle East, Masdar – Arabic for source – was established with a grant of land for an institute offering postgraduate programmes in renewable energy. It was deemed a special economic zone dedicated to companies looking to invest in sustainable




initiatives and an innovation centre that would support, test and implement renewable energy technologies and products.

To cap it all, Sheikh Mohammed announced US$100 million (Dh368 million) for the creation of a for-profit, clean technology fund that would work with domestic and international partners to invest in clean energy and renewable technologies.

But as Masdar prepares to celebrate its 10th anniversary on Thursday, has the project delivered on its early promises? The answer is a resounding yes, according to the Minister of State and Masdar chairman, Sultan Al Jaber, who has guided the project since its inception.

“Masdar has had a tremendous impact on advancing the leadership’s vision for a diversified and knowledge-based economy," he says.

“With the support of Masdar, Abu Dhabi is now home to a world-class research institution, host of the International Renewable Energy Agency, a major investor in clean energy and a hub for dialogue on how to drive the sustainability agenda forward."

From the outside, however, the wider Masdar initiative is a complex entity that has always proved difficult to comprehend, let alone assess.

Not only does Masdar embrace initiatives as diverse as Masdar Capital, the organisation’s own private equity/venture capital arm, and Masdar Clean Energy, the body responsible for investments in utility-scale renewable energy projects worldwide, it also includes events such as the Zayed Future Energy Prize and the World Future Energy Summit, which have allowed Abu Dhabi to assume a continued position of influence and leadership when it comes to discussing the future of energy on the international stage.

The one element of the wider Masdar initiative that has always been most tangible is Masdar City, which has acted as a useful focal point for the project and a lightning rod for criticism.

When the original Foster + Partners-designed master plan was announced in 2007, the vision it conjured of an urban future that was self-sustaining, zero carbon and zero waste immediately captured the world’s attention, setting standards by which the project continues to be understood and judged (although these standards are no longer relevant).

“The issue has always been that Masdar City is such a visible component of what Masdar is doing that it tends to attract a lot more interest from across the spectrum – from school kids and tourists to architects and researchers and also investors," says Masdar City’s director, Anthony Mallows.

“But what is happening to Masdar as we grow is not just that we are building the tangible city. We are also building a community."

For Mr Mallows, that community includes the students and staff at the Masdar Institute and the employees who work for the project’s anchor tenants, such as GE and Siemens, as well as the airline employees who will soon move into the 500 units of corporate housing that are currently under construction and the tech companies who have decided to make Masdar City their base.

“When I joined, we had about 50 companies, but now, there are over 360 registered in Masdar City, from start-ups with flexi-desks who want to minimise their capital outlay while they grow, to people like Lockheed Martin, and we’re building space as fast as we can to accommodate that growth."




Most importantly for Mr Mallows, Masdar City is approaching a point where it will be transformed from an educational and tech campus to a place people call home that is centered around a “community of innovation".

“That’s beginning to happen in a way that I feel is far more robust than it did when I arrived here three years ago," the urban designer says, describing the latest development plans that include market-rate housing, shops and a school that will finally transform Masdar City from a corporate and institutional campus into a town.

“We’ve reached a critical mass here," Mr Mallows insists.

“In the first five to seven years of Masdar City’s development, when we really started building, we built around 200,000 square metres of stuff that you can see and touch and walk through, but in the next five years, we’re going to build 200,000 metres a year for five years.

“That is not speculation. That calculation is based on deals done, or in negotiation, on third party leases, or that we have self-developed and funded. It takes us from about 200,000 square metres to more than 1.2 million square metres by 2020," he says.

“Not all the buildings will be built, but the deals will be done and whether the land will be developed or not will not be in question."

If Anthony Mallows has helped to steer Masdar City on a course from architectural vision to hard-nosed business reality, it is a journey that mirrors the one that has been made by Badr Al Lamki, director of Masdar clean energy.

A chemical engineer by training, Mr Al Lamki worked in the conventional oil and gas sector before joining Masdar and entering the world of renewables.

It’s a shift that has led to him piloting some of Masdar’s most ambitious, utility-scale clean energy investments and deployments such as the 650 megawatt London Array offshore wind farm in the Thames estuary, which provides clean energy to 500,000 British homes.

“At first, we had to go through a period of evolution where we built the knowhow internally and then capitalised on what we learnt by recycling those lessons in our new projects," Mr Al Lamki says.

“But I think today, we stand at a point where we can be seen as being credible. When Dudgeon, our second offshore wind farm in the UK comes online next year, we will have have 1.7 gigawatts of renewable energy generation in our portfolio that we will have developed, constructed and, more importantly, that we are operating," he says.

“I think that in this part of the world in particular, that gives us the biggest portfolio with a proven track record that is more than just an aspiration. It’s a reality on the ground that can be felt and that can be touched."

Despite working in very different fields, Mr Mallows and Mr Al Lamki depend on the same resource upon which the credibility of the whole Masdar project succeeds or fails – data.

Without data on the levels of emissions its projects have reduced, water and carbon they have saved, or energy they have generated, Masdar would be unable to justify its existence, and responsibility for generating this vital information falls to Dr Nawal Al Hosany.




“When I started at Masdar in 2008, my role was focused on the performance of the city in both its design and construction phase," Masdar’s director of sustainability explains. “Capturing that knowledge was our priority from day one because we were producing a book of knowledge for something that had never been attempted before.

“But now we capture data from all of our assets – Masdar City, Shams 1 and the London Array – to ensure that we are not only meeting our own efficiency targets but that we are managing to improve."

If anything is hardwired into the DNA of the many confusing facets of the wider Masdar operation, it is the desire for continual improvement that has kept the project on track for the past 10 years.

“This is an ecosystem," Mr Mallows says. “Where all of the elements do their own thing, but where each of us learns from the other. If you think about that, it’s really quite innovative."




Saudi Arabia Follows Post-Oil Vision With Jordan Investment Plan Bloomberg - Donna Abu-Nasr DonnaAN1

Saudi Arabia and Jordan agreed to set up a joint coordination council that will oversee investments by the Saudi Public Investment Fund.

The fund’s investments will be the largest in Jordan in decades and "will unblock billions of dollars" for the Hashemite kingdom, Bassem Awadallah, King Abdullah II’s special envoy to Saudi Arabia, said by phone from Amman. Agreements on nuclear power cooperation and on uranium extraction are also expected to follow, he said.

"We’ve never had an Arab investment fund that has come to commit billions of dollars in investments in leading sectors of the economy in Jordan," Awadallah said. The new council will determine which sectors will be chosen and how much will be invested, and the two countries will also cooperate in Jordan’s Aqaba special economic zone, Awadallah said.

While Saudi Arabia has long used its financial clout to bolster its political influence in the Middle East and beyond, a recent drive to expand regional investments is also part of its plan to reduce its reliance on oil. The Jordan agreement follows a deal between Egypt and Saudi Arabia to build a bridge connecting the two nations, part of an agreed $25 billion of Saudi investment that includes the development of an industrial area near the Suez Canal.

Trade Links

The bridge between Egypt and Saudi Arabia will boost trade and help to link major business hubs in the region, including Jordan and other countries, Saudi Deputy Crown Prince Mohammed bin Salman said in an interview with Al Arabiya television this week.

For Jordan, attracting foreign investment is crucial to strengthen an economy battered by the influx of as many as 1.5 million refugees who have fled the war in Syria. The Jordanian economy will grow about 2.7 percent in 2016, less than the 3.5 percent previously forecast, Finance Minister Omar Malhas said in an April 25 interview.

The joint coordination council will be headed by Prince Mohammed and Jordanian Prime Minister Abdullah Ensour, Awadallah said. The council will meet at least once a month for the next five months to reach an agreement on the investments, he said.

“We need major investments in leading sectors of the economy that will create jobs, that will have multiplier effects, that will increase our exports and that will open up our markets," Awadallah said. "Jordan has major advantages that Saudi Arabia can also take advantage of.




Saudi Aramco sits financing plans for industrial push Gulf Times + NewBase

The world’s biggest energy company Saudi Aramco outlined financing plans yesterday that will support its expansion into new areas under a sweeping economic reform plan released by Riyadh this week.

The reforms envisage Aramco transforming itself from an oil and gas firm into a “global industrial conglomerate” involved in many sectors and services, using its vast financial resources to create jobs and help diversify the Saudi economy beyond oil.

The plans suggest Saudi Arabia’s state oil company, which Deputy Crown Prince Mohammed bin Salman estimated this week was worth over $2tn, aims to move rapidly into its new role.

“We will continue to build on our accelerated transformation and serve as a pillar, role model and champion of transformation in the kingdom,” Aramco’s official magazine, Arabian Sun, quoted chief executive Amin Nasser as saying.

Aramco’s board, which met in Tokyo last week, decided to provide interim financing for a planned shipyard at the town of Ras al-Khair on Saudi Arabia’s east coast, the magazine said without giving details.

In January, Aramco signed a memorandum of understanding to establish the shipbuilding and repair complex with National Shipping Co of Saudi Arabia (Bahri), a subsidiary of Lamprell, a UAE-based engineering firm, and South Korea’s Hyundai Heavy Industries.

The company did not reveal the size of the project, but an oil industry source aware of the scheme said it was expected to cost several billion dollars.




Aramco’s board also decided to set up joint ventures for onshore and offshore drilling rig services, the magazine said without giving details of those ventures.

Traditionally, Aramco has relied heavily on outside contractors to provide it with such services, but it now wants to control more of those businesses to create jobs for Saudis, stimulate local demand and control costs.

The board approved an additional equity contribution for its Sadara petrochemical joint venture with US firm Dow Chemical, Arabian Sun said, without disclosing the size of the capital injection.

Aramco also approved the creation of a programme to issue Islamic bonds (sukuk), the magazine added. It gave no details, but since the capacity of the Saudi banking sector to lend is being squeezed by low oil prices, bankers think Aramco might sell foreign currency debt in the international market.

The reform plan is expected to be accompanied by a big increase in foreign borrowing by the Saudi government and companies as Riyadh juggles the need to pursue development projects with a large state budget deficit caused by cheap oil.

Under the reform plan, a stake of less than 5% of Aramco is to be offered to the public, as well as stakes in some subsidiaries. An initial public offering of Aramco, which will be a complex process given the company’s size and strategic importance, may occur in 2017 or 2018.

Aramco officials quoted in the magazine yesterday did not comment on the IPO beyond saying they welcomed it as a way to participate in the reform programme. Also announced yesterday were several appointments to senior posts in Aramco, including four people to the level of vice president.

Nabeel al-Mansour was appointed general counsel, the first Saudi to hold that post. One goal of the reform programme is to move local citizens into jobs, both senior and junior, for which Saudi Arabia has traditionally relied on foreigners.

Comments by top Aramco officials over the past few months indicate the company sees itself not just as a big investor, but as an agent for moving the economy beyond dependence on oil.

For example the firm, which has about 60,000 employees, plans to use its extensive educational and vocational training programmes to help create the human capital needed for the transformation.

“Saudi Aramco will be a bridge for a transition away from itself,” the company’s chairman Khalid al-Falih told a business conference in January.




Iraq: Turkish oil group in talks to invest in Genel's Kurdistan gas project .. Source: Reuters / energy-pedia A Turkish state-backed energy firm is in talks to invest in Genel Energy's two big gas field developments in Iraqi Kurdistan, which would also include a pipeline to connect them to Turkey, company and industry sources said.

London-listed Genel is one of the main oil producers in Iraqi Kurdistan and last year cut its production forecasts because of low oil prices. In March, it reported its biggest ever annual loss after downgrading its oil reserves.

Genel is hoping that connecting the gas field developments - Bina Bawi and Miran - to Turkey will provide it with a major growth opportunity. Genel is currently in talks with TEC, a joint venture that includes the international arm of state-owned Turkish Petroleum, to invest in the development of the fields, a pipeline into Turkey as well as storage facilities, according to several sources involved in the talks.

'They want to invest in the entire value chain of the project,' one source said.

Genel has made no secret of plans to bring in a partner for the project. The company hopes to complete the negotiations with the partner by the end of the year, Chief Executive Officer Murat Ozgul told reporters at the company's annual general meeting in London on Wednesday. He did not name the partner.




According to information on the Genel Energy web site:

The development of the world-class Miran and Bina Bawi fields is set to unlock significant value for both Genel and the KRG, assisting the Kurdistan Regional Government in satisfying domestic gas demand and its obligations under the KRG-Turkey Gas Sales Agreement.

In September 2015, Genel completed the acquisition of OMV’s 36% operated stake in the Bina Bawi field, consolidating the ownership structure across both Miran and Bina Bawi, streamlining project management and providing flexibility in meeting development goals.

The development of the fields is a unique opportunity, and promises to deliver significant value for shareholders. The fields are 300 km from Turkey, one of the world’s fastest growing major gas markets with expected demand growth of 3% per year until 2020 at least.

Turkish gas demand makes the KRI’s gas reserves of far greater strategic importance than oil, and they provide Turkey with the opportunity of materially reducing their gas import costs.




Iraq:Taqa Atrush project to be commissioned in the 2nd Q-2016 Guf News - Fareed Rahman, Abu Dhabi National Energy Company (Taqa)’s Atrush project in Kurdistan region of Iraq will be commissioned in the second quarter of this year, Chief Operating Officer of Taqa said at the company’s annual general meeting in Abu Dhabi on Wednesday.

“The project is 80 per cent complete and will be ready for commissioning in the second quarter. It will initially produce 30,000 barrels of oil per day with further development,” said Edward LaFehr, Chief Operating Officer of Taqa.

“We are excited about the project. It’s been three years in the making. Despite political issues in the region, the commercial environment is improving. Since September last year, international oil companies have been receiving regular payments.”

LaFehr said they have achieved a considerable amount in the last twelve months and are well positioned for 2016 and beyond with strong liquidity and lower cost base.

The Abu Dhabi government owned company narrowed its loss to Dh1.8 billion in 2015 from Dh3 billion a year earlier. And revenue dropped to Dh19.3 billion in the year compared to Dh27.3 billion revenue it reaped in the previous year.

It plans to slash capital expenditure by Dh1.8 billion in 2016 as lower oil prices hit the revenues of the state-owned company.

“The low oil price and market volatility in 2015 is a reminder of just how vigilant management must be to ensure safe and reliable operations while striving for the lowest possible cost structure.”

Atrush project will produce 30,000 barrels of oil per day with further development




Thailand: Mubadala completes Manora development drilling Source: Tap Oil

JV partner Tap Oil has provided an update on the Manora Oil Development in the Northern Gulf of Thailand (Tap 30% interest). Mubadala Petroleum, Operator of the Manora Oil Development joint venture, has advised that drilling of the MNA-15 and MNA-16 development wells has now been completed.

The MNA-15 and MNA-16 wells have been drilled to final total depths of 2,566m and 2,998m (measured depth) respectively and completed with electric submersible pumps (ESPs). Drilling and completion of the two wells was completed in 38 days.

Both development wells were targeted to the east fault block of the Manora oilfield. The MNA-15 well found 44 m of oil pay in three separate reservoirs. It will be completed as a four zone selective completion produced by an ESP installed on a Y-block. The MNA-16 well found 37 m oil pay in four separate reservoirs.

It will be completed as a six zone selective completion produced by an ESP installed on a Y-block. MNA-15 is expected to commence production in the last week in April when the rig leaves the platform. MNA-16 is expected to commence production during the first week in May once it is connected to the production system.

Production from the two wells is expected to re turn Manora to its plateau rate of 15,000 bopd gross (4,500 bopd net to TAP). The Atwood Orca rig has now moved off location. The Atwood Orca is expected to commence drilling of the Sri Trang-1 exploration well in the Reservation Area of the G1/48 Concession in mid May 2016.

Tap has 2P reserves of 4 mmbbls (13.2 mmbbls gross) as at 31 December 2015 booked for Manora (see annual report ASX release 22 April 2016). Tap will review these reserves and contingent resources following development drilling and production performance.




NewBase 28 April 2016 Khaled Al Awadi

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

Crude oil prices take a breather after hitting 2016 highs Reuters + NewBase

Crude futures pulled back from 2016 highs early on Thursday as traders locked in profits after April's sharp rally, but analysts said falling U.S. production and strong investor appetite could push prices higher.

International Brent crude futures were trading at $47.02 per barrel at 0045 GMT, down 16 cents from their last settlement, and U.S. West Texas Intermediate (WTI) futures were down 12 cents at $45.21 a barrel.

The price dip came after both crude benchmarks hit 2016 highs the previous day in what has been one of the steepest price rises in recent years. Both Brent and WTI have rallied more than 70 percent since their respective 2016 lows in January and February.

Analysts said falling output in the United States and a weak dollar were pushing prices up and attracting investors.

"The recent trend of rising crude oil prices received another boost after U.S. output was shown to have fallen again last week," ANZ bank said, following a release by the U.S. Energy Information Administration (EIA) showing that crude oil production fell to 8.94 million barrels per day (bpd) last week, down almost half a million bpd from this time last year.

The output fall outweighed bearish data showing that U.S. crude stocks climbed 2 million barrels last week to an all-time peak of 540.6 million barrels, traders said. However, the record crude

Oil price special

coverage




storage figures may have spurred some traders to take take profits in Thursday morning trade by closing long positions, they added.

ANZ said that further bullish momentum could emerge due to ongoing weakness in the dollar, which is down over 5 percent this year against a basket of other leading currencies, as a weaker greenback makes dollar-traded crude cheaper to buy for countries using other currencies at home.

"Investors should take comfort from a relatively market neutral FOMC (U.S. Federal Open Market Committee) statement. With fundamentals continuing to improve, this should see them to add to their already bullish positions in coming days," ANZ said.

The Federal Reserve said on Thursday that it would leave U.S. interest rates unchanged and that it was in no rush to hike rates soon.

Oil's Profit Surprise Has Analysts Wondering How it Did Bloomberg

The Big Oil earnings season has started with such a surprise that some analysts already say their estimates for the other companies may be too low.

BP Plc and Statoil ASA both reported a first-quarter profit this week after analysts predicted losses, while Total SA beat earnings estimates by 31 percent. The results, reflecting sweeping cost cuts as well as resilient refining, trading and petrochemical operations, suggest Exxon Mobil Corp. and others may also trump expectations.

“It seems the cost reduction has been implemented better than expected by the companies,” said Alexandre Andlauer, an analyst at AlphaValue SAS in Paris. “It’s now more than probable the others will beat estimates too.”

Oil majors are weathering the crude-market rout by lowering capital expenditure, renegotiating drilling contracts, slashing thousands of jobs and deferring big projects. The pace of such measures is sometimes so steep it isn’t reflected in quarterly earnings forecasts, according to Andlauer.




Belt-tightening at BP includes a delay to approving the Mad Dog Phase 2 project in the Gulf of Mexico as it renegotiates costs to half of the original $20 billion estimate. Capital expenditure may fall to about $17 billion this year from an earlier projection of as much as $19 billion, and could sink to as little as $15 billion next year if oil stays low, the company said Tuesday.

Total also announced a reduction in projected capital spending for this year, while Norway’s Statoil cut operating costs per barrel by a fifth. Total’s shares rose 2.8 percent in Paris, Statoil gained 6.1 percent in Oslo and BP added 1.7 percent in London Tuesday -- all of them advancing to the highest level in more than four months.

Besides cost reductions, the companies’ oil refining, trading and petrochemical businesses surprised analysts. BP and Total are running crude-processing plants hard to maximize revenue while feedstock remains cheap. BP doesn’t plan to cut its run-rate in the near future, according to Chief Financial Officer Brian Gilvary, who also said strong trading boosted downstream profit.

It’s not always easy for analysts to estimate the majors’ trading profits because they don’t disclose those results, said Ahmed Ben Salem, an analyst at Oddo & Cie in Paris. Petrochemical earnings are also a “challenge” to forecast, according to Jason Kenney, an Edinburgh-based analyst at Banco Santander SA.

Downstream Focus

“It is rare to have petchem modeled in any particular detail, product-by-product or region-by-region,” Kenney said by e-mail. “The focus of integrated oil modeling is usually upstream, which normally provides the bulk of earnings.”

Yet with majors such as Total and BP posting losses from exploration and production, or E&P, last year, downstream divisions have come to the fore. Exxon and Royal Dutch Shell Plc could report stronger-than-expected petrochemical earnings, and “that could drive a beat versus current estimates, if the read-through from Total and BP is anything to go by,” Kenney said.

Estimates for Exxon, due to report April 29, suggest it’ll post its lowest earnings in more than two decades, while Shell is expected to report the smallest profit in at least 10 years on May 4.

Chevron Corp. and Italy’s Eni

SpA will also release quarterly

results on April 29, while

Spain’s Repsol SA will report

May 5. They’ve all cut billions of

dollars of investments,

contributing to the $250 billion

reduction in global E&P

spending last year, consultants

Rystad Energy said in

December.

“The majors are doing the job to adjust to lower oil prices,” Oddo’s Ben Salem said. “The

question is: if oil goes deeper, is there more room?”




NewBase Special Coverage

News Agencies News Release 28 April 2016

Statoil Posts Surprise Profit as Lower Costs Offset Oil Drop Bloomberg + NewBase

• Operational expenses were 20% lower than a year earlier

• Production of 2.05 million barrels a day beat forecasts Share on Faceboo kShare on Twitter Statoil ASA, Norway’s biggest oil company, unexpectedly posted a profit in the first quarter as cost cutting helped offset the lowest crude prices in almost 12 years.

Adjusted earnings after tax fell to $122 million, from $902 million ayear earlier, the Stavanger-based producer said in a statement Wednesday. The average forecast of 12 analysts surveyed by Bloomberg was for a $125 million loss.

Statoil joined BP Plc and Total SA in reporting better-than-expected first-quarter results as the company 67 percent owned by the Norwegian government cut operational costs per barrel by a fifth. Following the collapse in crude prices, oil majors have cut spending, delayed projects and eliminated jobs to protect cash flow and pay dividends.

“Operating costs and capex are falling faster than expected,” Trond Omdal, an analyst at Pareto Securities AS, said in a note to clients.

Statoil rose as much as 3.9 percent in Oslo trading and traded 3.7 percent higher at 141.5 kroner as of 10:32 a.m., the highest level since Nov. 5.

Statoil in February deepened cuts to capital expenditure to about $13 billion in 2016, a target it reiterated Wednesday. Operational

and administrative expenses per barrel fell the most in Norway, with a 25 percent drop, the company said in presentation material.

Resetting Costs

“We delivered strong operational performance across all business areas, high production efficiency and results in line with expectations from liquids trading and refining,” Chief Executive Officer Eldar Saetre said in the statement. “We have a firm plan to improve efficiency and make faster and deeper cost reductions. We are radically improving our project break evens and we are on track to re-set costs and thereby impact the parameters that we can control.”

The company will pay a dividend of 22 cents for the first quarter, in line with the board’s intention to keep payouts unchanged for the first three quarters. Statoil introduced a scrip dividend program in February, letting shareholders opt for new shares at a discount instead of cash.




Statoil’s adjusted net-debt-to-capital-employed ratio rose to 28.1 percent at the end of the first quarter from 26.8 percent at the end of 2015. With oil prices around $40, we will cross the 30 percent boundary this year, said Chief Financial Officer Jakob Hegge.

“We’re comfortable with a level in the mid-30s,” Hegge said in an interview. “We’ve been there before. We will then have a plan to get back within” a 15 percent to 30 percent range, he said. Production Target

The company produced 2.05 million barrels of oil equivalent in the first quarter, little changed from 2.06 million barrels a year earlier and beating a 2.03 million barrel estimate in a survey of 26 analysts conducted by Statoil. It reiterated a production-growth target of about 1 percent a year from 2014 to 2017, adjusted for asset sales.

Higher production than expected in Norway, especially gas, helped profit beat expectations, according to a note from Jefferies Group LLC.

Adjusted net earnings were crimped as the loss from Statoil’s international operations widened to $647 million, while profit at its Norwegian unit fell to $463 million from $730 million a year earlier. The trading and refining business posted an adjusted profit of $355 million, down from $628 million. Market Volatility

Total reported first-quarter profit of $1.64 billion on Wednesday, beating the average analyst estimate of $1.25 billion, as the French company cut costs, boosted production and benefited from resilient refining earnings. BP posted a surprise profit on Tuesday as a stronger-than-expected refining and trading performance offset the lowest crude prices in more than a decade.

While Statoil expects “volatility” in the oil market to continue, it sees signs of a gradual rebalancing, CEO Saetre said in an interview with Bloomberg TV.

“There’s still too much physical capacity out there compared to the demand side, so it’s a market that is not balanced -- there’s still a downward pressure on the oil price,” he said. “But there’s more support, seemingly, than we’ve seen before.”

C R E D I T : R E Z A / C O N T R I B U T O R




Not So Rich Anymore, GCC Enter World of Cuts and Str Bloomberg - Zainab Fattah

A cushy government job, cheap fuel, a mortgage-free home and a bit of five-star travel and luxury shopping were never too much to expect in the Gulf.

Yet what previously was taken for granted in the oil-rich region is being replaced by something more familiar to the western world: spending cuts, taxation, a scarcity of jobs and even strikes. There’s discontentment among young populations rarely seen before as the countries come to terms with the collapse in energy prices blowing holes in budgets.

Kuwait had its first walkout by oil workers in two decades last week as 13,000 employees protested cuts to pay and benefits. Disgruntled Saudis, presented on Monday with a royal blueprint for life after oil, are complaining about the cost of water. Even in Qatar, the world’s richest country, locals were told on Tuesday their gasoline subsidies were being scrapped. “There’s a period of austerity necessary for long-term economic stability,” said Ghanem Nuseibeh, founder of London-based consulting firm Cornerstone Global Associates. “The challenge is to balance the rate of change while convincing the population that any pain will be part of a better future.” Reality Dawns People aged under 30 make up more than half of the 44 million population living in the six Gulf monarchies. While wealth has barely been dented in Qatar or the United Arab Emirates, more of them elsewhere are having to get used to a future with less abundance than that of their forebears.

In Oman, marketing graduate Tumadher Allawati, 22, has completed two unpaid internships, applied for two-dozen jobs and even went for interviews at nurseries and schools. After applying for posts in several government ministries, she was told not to bother because there’s a hiring freeze this year.

Muscat, Oman. “Everything is getting more costly and no one is willing to give you a chance.” “I’m not optimistic at all,” she said. “I applied in so many places I’ve lost count and the fact no one in my graduating class has secured a permanent job is scaring me even more.”

Allawati, whose husband earns 800 Omani rials ($2,078) a month, said that after paying the rent and bills, the newlyweds are left with around $210 of disposable income. “Everything is getting more costly and no one is willing to give you a chance,” she said. More Fragile




There is an unwritten agreement in the Gulf where populations agreed to delegate the running of the state to ruling families so long as there was no tax and they shared the spoils, United Arab Emirates commentator Sultan Al Qassemi wrote in February.

That’s now under threat, he said. “The traditional Gulf social contract has never been more fragile,” he said.

Saudi Deputy Crown Prince, Mohammed bin Salman: "The time has come for a complete overhaul of the economic model."

At the same time, falling oil prices have made more room to cut fuel subsidies while Saudi Deputy Crown Prince Mohammed bin Salman said in a recent interview with Bloomberg that the time has come for a complete overhaul of the economic model, including the creation of the largest sovereign wealth fund in the world.

Oil’s slump could be “a blessing in disguise” to drive social change, said Kuwaiti business owner Lubna Saif Abbas, 52. It will push more Kuwaitis to become productive, ambitious and hardworking as they experience “real jobs,” she said. “Many in government jobs are just clocking in and out and not really doing jobs that are needed by the economy,” she said. “It’s just a way for the government to pay them.”

Draining Budgets Even talking about austerity would have seemed incredible as recently as a few years ago as Gulf sheikhdoms used their vast oil wealth to remake their region. They have built man-made islands, financial centers, airports and ports that turned the Arabian desert into a banking and travel hub and the host of soccer’s showpiece World Cup in 2022.




Money was also deployed to ward off social unrest that spread through the Middle East during the Arab Spring uprisings, some of which were funded by the Gulf.

The International Monetary Fund forecasts a budget deficit of 12.3 percent of economic output this year for the six members of the Gulf Cooperation Council, which is led by Saudi Arabia. Before last year, when oil prices sank 35 percent, you have to go back to the 1990s to find anything other than a surplus.

Economic growth is also slowing, and based on the latest IMF projections, governments and private businesses in Middle East oil exporting countries would be able to create 7 million jobs, about 3 million short of the expected number of labor market entrants. Restless Youth

Responses vary between countries, but all the monarchies are aware of the dangers of discontented youth. An ASDA’A Burson-Marsteller survey of 3,500 young people in 16 Arab countries published on April 12 found that a majority wants subsidies to continue, while nearly half thought that any higher prices should apply only to expatriates.

The Saudis, who recorded a budget deficit of nearly $100 billion last year, are planning a “restructuring of subsidies” while also developing a mechanism to provide cash to low- and middle-income Saudis who rely on them, the deputy crown prince told Bloomberg. King Salman fired the minister in charge of water after a bungled subsidy reduction led to astronomical bills.

A Kuwaiti oil worker from the state oil company shows a badge reading in Arabic: "the strike will not compromise."

“We don’t want to change the life of the average Saudi,” the prince said. “We want to exert pressure on wealthy people, those who use resources extensively.”

In Kuwait, parliament voted to raise utility costs for foreigners and businesses for the first time in half a century. The homes of Kuwaitis would be exempted as more people feel the squeeze, at least compared with what they were used to.

Mohamad Al Kharsan has worked for the Kuwaiti state for about seven years. Aged 32, he still lives with his parents because moving into his own home would shrink his monthly disposable income to just over 200 dinars ($663).

For many of his generation, it’s tough “making ends meet on a government job salary,” he said. “The golden years when we used to spend the summers in Europe and most people owned two homes instead of one are long gone.”




Wood Mackenzie: Global oil supply shortfall of 4.5 million b/d by 2035 if exploration results don't improve .. Source: Wood Mackenzie

A new study by Wood Mackenzie warns the global oil market could face a supply shortfall of 4.5 million b/d by 2035, if exploration success doesn't improve. Wood Mackenzie says discoveries in recent years have been disappointing, with the volume of liquids discovered per annum more than halving over the period 2008 to 2015. The oil price environment has caused exploration budgets to be slashed and Wood Mackenzie forecasts that in 2016 the industry will invest half of the levels seen in previous years. Wood Mackenzie says that although significant discoveries made during the 2000s are key in securing medium term oil supply, unless exploration results improve continued supply growth in the longer term will become unsustainable.

Patrick Gibson, Director of Global Oil Supply Research at Wood Mackenzie says:

'We have conducted a comprehensive study of the impact of exploration rates on global oil supply using our proprietary database and analysing all conventional fields discovered since 2000. Over 7000 conventional fields have been discovered in the last 15 years and although these developments will play a critical role in securing future oil supply in the medium term, modelling a continuation of poor exploration results shows that the market could see a 4.5 million b/d shortfall by 2035.'

Dr Andrew Latham, Vice President of exploration research at Wood Mackenzie explains:

'In the last four years the industry has seen disappointing - largely gas prone - exploration results, with the volume of liquids discovered annually falling from around 19 billion barrels between 2008-2011 to 8 billion barrels between 2012-2015. The price downturn has resulted in large reductions in exploration spend and activity levels have been significantly impacted - just 2.9 billion barrels of liquids were discovered globally in 2015. We currently expect the industry to invest US$40 billion per year in exploration and appraisal over 2016 to 2018 - less than half its investment during 2012 to 2014.'

'A number of sizable discoveries were made during the 2000s, when budgets and exploration activity peaked. Substantial volumes of oil from these finds are still to be produced - around 90% of the liquids discovered – which should ensure supply growth in the medium term. Conventional exploration success during the 2000s could add 18 million b/d by 2025, in addition to increasing tight oil recovery. However, the shift in the industry's focus towards exploring smaller near field opportunities with lower cost bases and shorter lead times, now means that fewer large, high risk frontier finds are likely to be made in the near term,' Dr Latham adds.

Wood Mackenzie estimates that over 10% of global liquids supply by 2035 will be sourced from conventional volumes that are yet to be discovered - Africa, Latin America and North America will account for around 60% of those volumes.

Mr Gibson summarises: 'Existing discoveries do of course have a key role to play in future global oil supply, but unless exploration results start to improve significantly, continued supply growth will become unsustainable. We forecast that by 2030, production from fields discovered since 2000 will be in decline, and we could see a shortfall of 4.5 million b/d by 2035, if the current annual average (8 billion barrels) of discovered liquids continues. This is why the size and nature of the next tranche of discoveries is crucial for maintaining long term global oil supply growth.'




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

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

experiences in the designing & constructing of gas pipelines, gas metering & regulating stations and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation, operation & maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcasted internationally, via GCC leading satellite Channels. NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE

NewBase 28 April 2016 K. Al Awadi




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New base energy news issue 840 dated 28 april 2016