New base energy news issue 956 dated 28 november 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 November 2016 - Issue No. 956 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 installs eight solar energy plants in Mauritania

The National staff

The UAE has helped double Mauritania’s clean energy capacity by delivering and installing eight new rural solar energy v plants. The plants, sponsored by Masdar, will supply an additional 16.6 megawatts of electricity, which will power about 39,000 homes and save 27,850 tonnes of carbon emissions per year.

Mohamed Ould Abdel Aziz, president of Mauritania, inaugurated the projects in the city of Atar, one of the sites of the eight photovoltaic power plants, at an event coinciding with Mauritania’s National Day on November 28 and UAE National Day on December 2. Also present was Essa Abdulla Massoud Al Kalbani, the UAE ambassador to the country, and representatives from Masdar.

"The eight projects bring economic and social benefits to Mauritania, providing opportunities for training and knowledge-exchange and creating the foundations for long-term growth and development to the local community," said Dr Sultan Al Jaber, Minister of State and Chairman of Masdar.




"These projects contribute to the government’s energy and economic diversification strategy. Our drive to implement a series of ambitious wind, hydroelectric and solar power projects will contribute significantly to growing the share of renewables in Mauritania’s future energy mix," said Dr Mohamed Abdul Fattah, Minister of Petroleum, Energy and Mines of Mauritania.

Masdar was selected as the preferred partner of Société Mauritanienne d’Electricité, Mauritania’s national energy provider, following the successful delivery of the 15MW Sheikh Zayed Solar Power Plant in the Mauritanian capital Nouakchott in 2013.

Abu Dhabi’s Masdar has completed its second solar power project in Mauritania, doubling the amount of power the UAE provides to the African nation, the clean energy company said on Sunday.

Masdar, working with the national utility provider Societe Mauritanienne d’Electricite (Somelec), will meet up to 30 per cent of the demand for rural communities with eight individual solar photovoltaic (PV) plants.

"The eight projects bring economic and social benefits to Mauritania, providing opportunities for training and knowledge exchange and creating the foundations for long-term growth and development to the local community," said Sultan Al Jaber, the UAE Minister of State and chairman of Masdar, in a statement.

Diversifying the country’s energy mix is important to free up its expensive import bill. The Abu Dhabi-based International Renewable Energy Agency (Irena) said fossil fuel accounted for 66 per cent of the main energy

consumption, which forced Mauritania to spend nearly US$546 million on petroleum product imports in 2008. "Our drive to implement a series of ambitious wind, hydroelectric and solar power projects will contribute significantly to growing the share of renewables in Mauritania’s future energy mix," said Mohamed Abdul Fattah, Mauritania’s energy minister.

Combined with Masdar’s first 15MW solar PV project, these two projects will provide electricity to about 39,000 homes.




Saudi Arabia Mining Expands as Kingdom Chases Growth Beyond Oil Bloomberg - Wael Mahdi

Saudi Arabian Mining Co. plans to double gold production by 2020 and is increasing output of other commodities from aluminum to ammonia as the world’s biggest crude oil exporter seeks to diversify its economy.

Gold output will be 500,000 ounces by 2020 from about 200,000 ounces this year, Chief Executive Officer Khaled Al Mudaifer said Wednesday in an interview in Ras Al-Khair in eastern Saudi Arabia. Aluminum production through a joint venture with Alcoa Corp. in the U.S. has potential to increase to 1 million metric tons from 760,000 tons this year, through the use of recycled metal parts, he said.

Saudi Arabia wants to spur growth in the mining industry as it plans to create more jobs away from oil and increase revenue under the Saudi Vision 2030 program. The government aims for mining to contribute 97 billion riyals ($26 billion) to its economy by 2020 and create 90,000 jobs as a result, according to the Vision 2030 document. Saudi Arabia is rich in aluminum, phosphate, gold, copper and uranium.

“The government seems to be very keen on developing the sector,” Mohamed Ramady, a London-based independent analyst and former professor of economics at King Fahad University for Petroleum and Minerals, said Thursday by phone. “It seems there is a big plan for the company and the sector. They want to bring more private investors and fresh minds to the sector to end the state dominance over it."

Ma’aden, as the company is known, has created 10,000 jobs in the past five years and plans to add another 3,000 for its phosphates complex in Wa’ad Al Shamal in northern Saudi Arabia, Mudaifer said. The Ras Al Khair aluminum project alone employs 12,000 workers, he said.




Egypt: BP buys 10% interest in Egypt’s super-giant Zohr gas Source: BP

BP announced Friday it has agreed to buy from Eni a 10% interest in the Shorouk concession offshore Egypt, which contains the super-giant Zohr gas field, for $375 million.

On closing, BP will also reimburse Eni for BP’s share of past expenditure. As part of the agreement, BP also has an option before the end of 2017 to buy a further 5% interest in the concession under the same terms.

Bob Dudley, BP group chief executive, said:

'This interest in a truly world-scale asset will complement our existing Egyptian business. We already have a strong partnership with Eni in Egypt and look forward to working closely with them to efficiently bring these important resources to the Egyptian market. BP has now been in Egypt for over 50 years and we continue to see opportunities to further develop our extensive activities here. Beyond Zohr, the first phase of our major West Nile Delta project is on schedule to begin production next year and the fast-tracked development of the Atoll gas field is expected to come on stream in 2018.'

The Zohr field was discovered by Eni in August 2015; six wells have so far been successfully drilled on the field. The field is located in the Mediterranean Sea, approx. 190 kms north of Port Said in waters approx. 1,500m deep. Thought to be the largest gas discovery made in the Mediterranean, Eni has estimated total gas resources in place in Zohr to be approx. 30 trillion cubic feet of gas. The first phase of development of Zohr is now being fast-tracked, with first gas currently expected in late 2017.

Eni is the operator and currently has a 100% interest in the Shorouk concession. The purchase, which is subject to receiving approvals from the relevant Egyptian Government authorities, is currently expected to complete in the second quarter of 2017. Click here for Eni announcement: Eni sells a 10% stake in Shorouk Concession offshore Egypt to BP




Cote d'Ivoire: Total becomes operator of LNG terminal project in Ivory Coast… source=Total

The CI-GNL (Ivory Coast LNG) consortium led by Total has been awarded the rights to build and operate a liquefied natural gas (LNG) re-gasification terminal in Ivory Coast with a capacity of 3 million tons per year.

The decision announced by the Government of the Ivory Coast on October 4th was followed by the signature of the shareholders’ agreement in Abidjan between Total, which will operate the project with a 34% interest, national companies Petro CI (11%) and CI Energies (5%) as well as SOCAR (26%), Shell (13%), Golar (6%) and Endeavor Energy (5%).

Total will use the terminal to supply LNG volumes from its global portfolio in proportion to its participating interest in the project. The re-gasification terminal project is expected to become operational by mid 2018.

'This project illustrates Total's strategy to develop new gas markets by unlocking access to LNG for fast-growing economies. Working closely with our partners enabled us to put together an integrated proposal combining LNG supply and import infrastructure through a floating storage and re-gasification unit,' said Philippe Sauquet, President Gas, Renewable and Power of Total. 'We are very pleased to have been selected by the Ivorian authorities to manage this project, which will meet growing domestic and regional needs for gas and power.'

The project involves the construction of a terminal with a floating storage and re-gasification unit (FSRU) in Vridi, Abidjan area, and a pipeline connecting the FSRU to existing and planned power plants in Abidjan, as well as to regional markets connected to the Ivorian network. This will enable Ivory Coast to become the first regional LNG import Hub in West Africa, and to meet both regional and domestic demand.




UAE:Abu Dhabi’s electricity tariffs need to rise for solar power to be viable The National - LeAnne Graves

Electricity tariffs in Abu Dhabi need to rise by more than two-thirds before investment in solar power becomes economically viable for businesses and homeowners as an alternative source of power to help reduce their bills.

This month, the Abu Dhabi Distribution Company announced new power and water tariffs for the emirate, with bills set to rise at the start of next year by more than 30 per cent for some users. To cut the cost of electricity, other sources of power could be considered.

The UAE has large solar parks in operation or under construction, but smaller installations are still not yet feasible to help reduce the rising cost of electricity in Abu Dhabi. "The [electricity] tariff for commercial and industrial customers, in spite of its recent change, doesn’t allow yet for such a commercial activity to develop," said Laurent Longuet, the director of Siraj Power in Dubai.

Meanwhile, Abu Dhabi’s Regulation and Supervision Bureau (RSB) is working on regulations for small-scale solar, adding the energy source to residential and commercial buildings. The authority said last week it was looking for feedback from parties involved in design, installation, maintenance and operation. "We encourage any interested parties … to communicate their views," the RSB said.

The sun is helping to power more than 200 commercial and industrial buildings in Dubai, which has much higher power prices than Abu Dhabi.

The lowest-usage band of commercial users pay 44 fils per kilowatt hour (kWh) in Dubai, a 62 per cent premium to that of Abu Dhabi’s lowest usage band commercial rate of 27 fils. At the higher summer usage rates in Dubai’s tariffs for the commercial sector are at a 46 per cent premium over Abu Dhabi’s.

Jeremy Crane, the head of Dubai’s Yellow Door Energy, a solar financier and installer, said a return on investment was even further off for homeowners. "Still, in Dubai [with higher prices], very few residential customers are choosing solar for economic reasons," he said.

To break this down, assume that a villa installs 20 solar panels on its roof – with total capacity of 5 kilowatt peak power – with the amount of electricity consumed running at 65,000 kWh per year.

In Dubai, the return on the solar system investment would be eight to nine years. Yet in Abu Dhabi, that payback is 10 to 11 years, which is only one year shorter than with the emirate’s previous tariffs.




"Even though Abu Dhabi’s ‘lower price tier’ increased by about 27 per cent, the ‘high price tier’ decreased by around 4.2 per cent – and this is why the effect isn’t that significant," said Hennie Schoeman, the project manager for Dubai’s Oryx Solar.

"The higher the tariffs go, the better returns will be made on solar systems. A good payback period for residential systems would be around seven years, [for] industrial systems around four or five years."

The light industrial sector could more readily find an economic benefit from an investment in solar. Next year’s electricity rate for industrial consumers up to 1 megawatt is 28.6 fils per kWh – nearly 79 per cent higher than the previous tariff.

This has shortened the return on investment to five to six years, compared to a decade.

Incentives such as feed-in tariffs or even favourable financing from local banks could also cut the return on an investment timeline. Other issues remain for the viability of these smaller systems. "One of the main problems contractors face in the UAE is the time it takes to connect these systems to the grid.

If regulations ease up and the connection process is better defined, contractors will be able to offer residential clients much lower rates," Mr Schoeman said.

Many communities in the UAE restrict solar systems to installations that are not visible, meaning sloped roofs are prohibited. "This means that loads of villas aren’t suitable for solar or that panels need to be installed at less-than-optimal angles to remain hidden from view," he said.




NewBase 20 November 2016 Khaled Al Awadi

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

Oil Price fill to Near $46 WTI & Brent $47.24 Amid Skepticism Reuters + Bloomberg + NewBase

Oil halted declines near $46 amid skepticism over OPEC’s ability to reach an agreement to cut output and as representatives prepare to meet Monday amid last-minute negotiations over the deal the group aims to formalize Wednesday.

Oil prices fell over 1 percent on Monday, extending declines from last Friday as doubts re-emerged over the ability of major producers to cut output at a planned meeting on Wednesday aimed at reining in global oversupply.

Brent crude futures were trading at $46.40 per barrel at 0035 GMT, down 84 cents, or 1.8 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures were down 74 cents, or 1.6 percent, at $45.32 a barrel.

The falls came after prices declined more than 3 percent on Friday over disagreement between members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC exporters like Russia over which states should cut production by how much in order to curb a global production overhang that has more than halved prices since 2014.

"Further doubts about OPEC's production cut agreement saw crude oil prices tumble," ANZ bank said on Monday. OPEC will meet in Vienna on Wednesday to decide on the details of a cut, potentially including non-OPEC members like Russia or Azerbaijan.

A meeting between OPEC and non-OPEC producers that was to be held on Monday was called off after Saudi Arabia declined to attend. Saudi Arabia's energy minister Khalid al-Falih said on Sunday this was because no agreement within OPEC had been reached so far.

Falih said that the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.

Oil price special

coverage




Futures were little changed in New York after earlier falling as much as 2 percent and dropping 4 percent on Friday. Saudi Arabia for the first time on Sunday suggested OPEC doesn’t necessarily need to curb output and pulled out of a scheduled meeting with non-member producers, including Russia. OPEC will hold an internal meeting in Vienna Monday to resolve its differences, and as part of the final push to reach an agreement, oil ministers from Algeria and Venezuela are heading to Moscow to get the group’s biggest rival on board.

The Organization of Petroleum Exporting Countries is heading into the final stretch before its November 30 meeting to adopt a deal first floated in September to collectively reduce output. Saudi Arabia, the group’s de facto leader, is seeking to reverse the pump-at-will policy it supported in 2014 and is now pushing members to agree how they will individually shoulder the first production cuts in eight years. Saudi oil minister Khalid Al-Falih said the oil market will recover in 2017 even without cuts.

“The market is currently quite pressured by the uncertainties raised from various reports, including Saudi Arabia pulling out of Monday’s talks with non-OPEC nations,” Seo Sang-young, a Seoul-based market strategist at Kiwoom Securities Co., said by phone. “It’s also highly suspicious whether OPEC will keep its promises even if it achieves an accord because the members are constantly raising production.”

West Texas Intermediate for January delivery was at $46.08 a barrel on the New York Mercantile Exchange, up 2 cents at 12:33 p.m. in Seoul. Prices lost $1.90 to $46.06 a barrel on Friday. Total volume traded was more than double the 100-day average.

Output Accord

Brent for January settlement was at $47.25 a barrel on the London-based ICE Futures Europe exchange, up 1 cent. The contract dropped $1.76, or 3.6 percent, to $47.24 a barrel on Friday. The global benchmark traded at a $1.16 premium to WTI.

Global crude demand will recover next year and then prices will stabilize, even without production cuts from OPEC, Al-Falih said in Dhahran, eastern Saudi Arabia, on Sunday, according to the




Saudi newspaper Asharq al-Awsat. The oil-producer group doesn’t have a single path to cut output and it can also depend on recovery in consumption, especially from the U.S., the oil minister said, according to the newspaper.

OPEC needs to reach an internal consensus on output curbs before Russia can join a pact, the country’s energy ministry said in a statement, citing Minister Alexander Novak. The country has so far resisted OPEC’s request that it joins the cut, offering instead to freeze production at its current level.

Algeria’s Energy Minister Noureddine Boutarfa, architect of the group’s preliminary agreement reached in Algiers, will travel Monday to Moscow with his Venezuelan counterpart before meeting Iraq’s oil minister Tuesday in Vienna, according to two OPEC delegates with knowledge of the plan. He presented a proposal Saturday to Iranian Oil Minister Bijan Namdar Zanganeh for an output cut of 1.1 million barrels a day for OPEC and 600,000 barrels a day for non-member countries.

For OPEC’s Rivals, Success Lies in Oil Market Far, Far Away Bloomberg - Serene Cheong

Rivals of OPEC seeking to reach its most-prized oil customers are finding that the long way around is better than any shortcut to success.

As the group seeks to implement a deal to limit output, the glut that was exacerbated by its prior strategy of keeping taps open has spawned a market structure that’s benefiting competitors in sales to Asia. Cargoes from Europe’s North Sea will reach South Korea in coming months, while U.S. Eagle Ford shale crude as well as Mexican oil arrived at Yeosu port in November. Japanese and Thai refiners have bought West Texas Intermediate from BP Plc.

Shipments to Asia from locations farther than the Middle East are turning more attractive because of a deepening market structure known as contango, where near-term supplies are cheaper than those for future months. Sellers benefit from this because the value of a cargo rises as it makes the longer journey to its destination. For buyers, abundant output across the Atlantic Basin has made North American and European oil cheaper relative to crude from OPEC nations such as the U.A.E and Qatar.




“The wider contango has given OPEC’s rivals a shot at loading up a vessel and sending oil from all corners of the globe to Asia, even if it sails for up to two months,” said Nevyn Nah, a Singapore-based analyst at industry consultant Energy Aspects Ltd. “OPEC’s fight for market share amid rebounding output from members such as Nigeria and Libya, as well as increased production from places like Russia and former Soviet Union regions, has exacerbated the market oversupply.”

The premium of later supplies of Brent, the benchmark for more than half the world’s oil, over near-term cargoes is currently at about $5 a barrel versus a contango of $2 at the end of April. That’s in contrast to more than two years earlier, when later shipments were at a discount, or backwardation, of more than $7. Crude was then trading at more than $100 a barrel before a global glut dragged down prices by more than 50 percent.

Long-Haul Voyages

Two million barrels of oil on a Very Large Crude Carrier will take about 55 days to traverse the 15,000 nautical miles from the U.S. Gulf Coast across the Atlantic to South Korea, a month more than supplies from the Middle East. The value of crude can rise by as much as a dollar per barrel during the time difference because of the contango, data compiled by Bloomberg show. That would also help compensate for higher shipping costs from the longer voyage.

The value of Brent crude loading in three months is about $1 per barrel higher versus cargoes for two months ahead. The expense to time-charter a vessel for 30 days is lower at 80 to 85 cents per barrel, according to Bloomberg calculations based on data from ship broker Howe Robinson Partners.

Oil is trading more than 50 percent below its 2014 highs, amid speculation over whether the Organization of Petroleum Exporting Countries will be able to implement a plan to cut output and stabilize markets reeling from a glut. A decision is expected next week after a Vienna meeting between ministers from group nations including biggest member Saudi Arabia as well as non-OPEC producers such as Russia.

Crude Varieties

“OPEC’s potential production cut could tighten the market in Asia. And, if you can’t get enough medium and heavy sour crude, then the best would be to look for alternatives in the Atlantic Basin,” said Ehsan Ul-Haq, an analyst at industry consultant KBC Energy Economics. If the Saudi-led plan to curb supplies goes through, the Middle Eastern Dubai oil benchmark could turn costlier relative to Brent, which “in turn facilitates the flow of Atlantic Basin crude to Asia,” he said.

Brent futures for January settlement traded at $48.90 a barrel on the London-based ICE Futures Europe exchange by 11:40 a.m. Singapore time.

Vessels that bring oil to the U.S. Gulf Coast from the Middle East can in turn be used to haul back North American and Latin American crude, or a combination of both, to Asia. The supertanker Izki arrived at South Korea’s Yeosu port earlier this month with U.S. Eagle Ford crude co-loaded with Mexico’s Maya and Isthmus oil grades. The cargo was for refiner GS Caltex Corp., which has joined other Asian processors in buying supply from the U.S. mainland after a 40-year ban on American oil exports was overturned.

Buyers in Asia-Pacific also benefit from this strategy because they can receive a blend of heavy crudes from Latin America and lighter varieties from the U.S. in a single shipment. The region will use 32.88 million barrels a day of oil this year, accounting for more than a third of global




consumption, according to data from the International Energy Agency. Daily demand is forecast to expand to 33.7 million barrels in 2017.

“There has traditionally been a regular flow of vessels moving oil from the Arabian Gulf to the U.S., as producers such as Saudi Arabia and Kuwait have term contracts to supply refineries along the U.S. Gulf coast,” said Den Syahril, a Singapore-based analyst at industry consultant FGE. “This makes a ready pool of vessels available when exporting U.S crude either on its own or along with Latin American grades to Asia, while serving as a viable back-haul option for ship-owners.”

Three days from a crucial meeting, OPEC’s deal to curb oil production and end years of global oversupply hangs in the balance. But even if ministers hash out a meaningful accord on Wednesday, there are dangers for the oil-exporter club.

For two years, OPEC tried to bury a growing army of upstart producers by flooding the markets with crude. Reversing course might hand a lifeline to the battered survivors like Premier Oil Plc who are rushing to reap the rewards.

The London-listed company, whose 60,000 barrels a day of output amounts to a rounding error for OPEC, expects to use hedges to lock in 2017 prices of at least $50 a barrel, a level Brent has only touched briefly this year. That means Premier Oil has adapted well enough to the assault to at least break even at half the price it received on the futures market in 2015.

Across the industry, from rural America to the Siberian tundra, producers are hoping the Organization of Petroleum Exporting Countries will trigger a rally that would allow them to secure funds to boost drilling. Without a deal, prices, now at $47, could test the $30 level breached in January, as OPEC and non-member Russia ramped up output to defend market share, analysts say.




The oil club wants to create a “Goldilocks” zone of between $50 and $60, “high enough to increase revenue for beleaguered oil producers but not too high to trigger a wave of new output from the U.S. shale patch,” said Walid Khadduri, an OPEC watcher at the Arab Gulf States Institute in Washington.

It’s a delicate balancing act.

In November 2014, the Organization for Petroleum Exporting Countries adopted a pump-at-will policy that triggered a price collapse. The group, which supplies roughly 40 percent of the world’s crude, decided to fight for market share through ultra-low prices, targeting rivals such as U.S. shale producers.

Oil tumbled from $110 to a 10-year low of less than $30 this year, forcing producers the world over to slash costs and shelve projects. OPEC, many of whose 14 members are struggling to meet spending commitments, has been debating how to implement a plan announced in September to lift prices by dialing back supply.

The International Energy Agency, formed after the Arab oil embargo in the 1970s, expects global output to surge if crude exceeds OPEC’s price corridor.

"If oil prices rise above $60 a barrel we will see significant production coming," IEA Executive Director Fatih Birol said in an interview this month.

If so, that would be tantamount to OPEC throwing a lifeline to U.S. shale firms and the other independent producers it tried to bankrupt with low prices.

Saudi Arabia’s new oil chief, Khalid Al-Falih, is trying to walk the fine line of cutting supply just enough to raise prices without triggering a major production push by competitors.

For a Gadfly column on prospects for next week’s meeting, click here.

But even at the lower end of the price range, $50 a barrel, cash-battered companies like London-listed Premier have shown they can survive.

Cost reductions and advances in technology have cut the average price a U.S. oil company needs to break even by a third since 2014, to $53 a barrel, Esther George, the president of the U.S. Federal Reserve Bank of Kansas City, said at an energy conference in Houston last week.

U.S. shale drillers have already benefited from OPEC efforts to lift prices. After the group outlined its plan to cut output in Algiers in late September, crude rallied to a one-year high of almost $55 a barrel, triggering a wave of hedging.

That short-lived spike allowed companies including Pioneer Natural Resources Co., Oasis Petroleum Inc. and Whiting Petroleum Corp. to lock in enough 2017 revenue to expand drilling. Some hedge funds are betting that U.S. shale output will return to month-on-month growth as early as April.

And then there’s Big Oil.

For the past two years, Exxon Mobil Corp., Royal Dutch Shell Plc and most other global giants have been busy cutting costs and scaling back long-term projects. But if prices rise enough, multibillion-dollar, long-life developments may finally get green-lit, said Martijn Rats, an analyst at Morgan Stanley in London.

“There’s a big inventory of delayed projects,” Rats said. “Break-evens have fallen significantly and nobody wants to miss the opportunity.”




BP Plc has already said the final sign-off for Mad Dog 2, a project in the Gulf of Mexico with a budget of about $10 billion, is imminent.

Even so, OPEC can still claim some successes in its campaign to hamstringing rivals big and small. The price collapse derailed the U.S. shale boom, at least temporarily, and forced companies to postpone about $1 trillion of new projects around the world, creating a possible supply hole in the next decade.

But OPEC’s policies now are misguided, according to Ali Al-Naimi, the former Saudi oil minister who masterminded the pump-at-will policy the group adopted two years ago. Trying to drive prices up will only lead to loss of market share, so OPEC should just get out of the way and let capitalism run its course, Al-Naimi said in “Out of the Desert,” his new memoir.

OPEC's Oil Deal Is No Sure Thing By Julian Lee

OPEC oil ministers will meet on Nov 30 to agree their first output cut since the 2008 financial crisis. The deal will be "a total success," according to Venezuela's president. His oil minister had already called it "a historic agreement, one that's never been seen before."

Stirring stuff to be sure, but can they deliver? The balance of expectations favors an agreement. OPEC has invested too much credibility to fail. That may be so, but a similar investment didn't save the deal to freeze output that collapsed at the last minute earlier this year.

More Than You Say

Most members say OPEC's secondary source estimates of their production are too low




NOTE: Official production figures minus secondary source estimates published by OPEC NOTE: OPEC did not report official production numbers for Gabon, Indonesia or Libya for October

The positions of Iran and Iraq will probably be critical. Iraq's prime minister has said the country will cut output, but the argument over what level of production it would accept as a starting point for any reduction seems to rumble on.

Iran is said to have been offered the option of freezing output at the current official output level of 3.92 million barrels a day. But, as I pointed out last week, that would force it to tacitly endorse the 2 million barrel a day increase in Saudi output since 2011, something it could find extremely difficult. OPEC officials meeting in Vienna last week failed to resolve either issue, deciding to leave them for ministers to wrestle with on the 30th.

Different Fortunes

Saudi Arabia's oil output has risen by 2 million barrels a day since January 2011, Iran's is unchanged

NOTE: Difference in production versus January 2011, as assessed by OPEC secondary sources

Then there's the question of support from non-OPEC producers.

OPEC does have history of coordinating cuts with non-member countries. In November 2001 the group agreed to reduce supply by 1.5 million barrels a day, but only if non-OPEC producers contributed another 500,000 barrels of cuts. They got enough commitments to go ahead, although




there was much discussion afterwards about how much of the promised reduction actually happened.

This time around there's also ample evidence that OPEC is looking for external support, although this has yet to go as far as specifically linking OPEC cuts to non-OPEC action. Russia's energy minister says OPEC has asked for 500,00 barrels a day of non-OPEC cuts, his Azerbaijani counterpart put the figure at 880,000 barrels. If Saudi Arabia is really determined not to resume its role as the world's swing producer -- and there's nothing to suggest otherwise -- this may be an attractive mechanism to share the burden. But it carries risks.

Russia has said it will only consider its own contribution after OPEC has presented it with an internal agreement to cut supply. Moscow prefers freezing output at its current post-Soviet record level of about 11.2 million barrels a day, claiming this represents a cut of 200,000 to 300,000 barrels a day from planned output in 2017.

RUSSIAN RECORD

In the end, it'll come down to one question: how much does Saudi Arabia want, or need, a deal? If it's willing to abandon the policy to protect its market share that it set in motion two years ago, a deal can be done with relative ease. If not, the situation is far less certain.




NewBase Special Coverage

News Agencies News Release 28 November 2016

Eni presents the 15th edition of the World Oil and Gas Review Eni presents the 15th edition of the World Oil and Gas Review, the annual statistics report on world reserves, production and consumption of oil and gas. A special focus is on crude oil quality

and on the refinery sector.

Year 2015 proved a slight increase in oil reserves against a decline in gas reserves.

Oil production set another yearly record growth (+2.9%) driven by the Middle East and North America. Among the top ten producers, Iraq showed the biggest rise and the USA, the largest producer, kept on growing for the seventh year in a row. Geopolitics still affect the production of Libya, Syria and Yemen.

In the crude quality analysis emerged a significant increase of the “heavy sour” category (+12%) due to the new Iraq stream of Basrah heavy that has been commercialized since June 2015, together with “ultra light” crudes (+6%), directly related to shale oil condensate production, and “heavy sweet” crudes (+8%).

World oil demand grew by 1.8 Mb/d (+2.0%), one of the biggest increases in the recent years stimulated to a large extent by the rapid fall in oil prices that began in the second half of 2014 gaining momentum in 2015. The OECD countries have interrupted their structural decline trend (+0.4 Mb/d; +1.0%) while non-OECD countries’ growth slowed down (+1.4 Mb/d; +3.0%) mainly due to the main oil producing countries consumption reduction (Latin America and Russia).

In the last five years world refining capacity has grown by over 4 Mb/d where Asia, in particular China, has been the main contributor followed by North America and Middle East. The fall in the domestic demand together with the increasing foreign competition have pushed Europe to curb refining capacity.




In 2015, world gas production increased by 1.6%, driven by USA and Iran (+5% each). In Europe, Norway had a strong production increase (+8%), whereas European Union output continued to

decline (-8.5%). In Russia, which is the world’s second gas producer, after the previous year’s decline, output grew by 1.3%.

Gas demand started to rise again in 2015 (+1.7% against -0.2% in 2014) with a strong increase in some emerging markets (MENA +4.8%) but also in mature areas like North America (+2.2%) and Europe (2.2%). Asia stopped its continuous growth as a consequence of a slowdown in China (+3.1% vs +9.4% in 2015) and a strong decline in Japan and South Korea (-6.0% and -8.8% respectively), due to the restart of nuclear plants and an increasing role for coal and renewables in power.

•

•

• In 2015, oil reserves showed an increase while gas reserves recorded a decline.

• Oil production set another yearly record growth driven by the Middle East and North America.

• The crude quality analysis showed a significant increase of the 'heavy sour' crude category, after the commercialization of the new Iraqi crude Basrah heavy.

• Oil consumption grew by 2%, one of the biggest increase recorded in recent years.

• In the last five years world refining capacity has grown by more than 4 Mb/d: in this frame Asia, mainly China, played a key role.

• Gas production, driven by USA and Iran, increased by 1.6%.

• Gas consumption started to grow again (+1.7%) with a strong increase in some emerging markets but also in mature areas like North America and Europe. Asia stopped its continuous growth.

The publication is available online at the World Oil and Gas Review website.

https://www.eni.com/docs/en_IT/enicom/company/fuel-cafe/WOGR-2016.pdf







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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 26 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 November 2016 K. Al Awadi




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New base energy news issue 956 dated 28 november 2016