New base 521 special 19 january 2014

Copyright © 2014 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced,

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NewBase 19 January 2015 - Issue No. 521 Khaled Al Awadi

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

The path towards economic growth is powered by renewables The National + NewBase

Renewable energy last year became the No 1 source of electricity supply in Germany and accounted for 27.3 per cent of our consumption. At the same time, our economy grew by 1.4 per cent, while power consumption in total fell by almost 4 per cent. The use of renewable energy has avoided almost 150 million tonnes of greenhouse gas emissions.

This development shows that we managed to decouple energy consumption from economic growth and that renewable energy is part of the expansion.

This would not have been possible without the fast-pace technological advances and cost savings in recent years – particularly in wind and solar energy. Today we can generate electricity from new wind and large photovoltaic facilities at the same overall cost as newly built hard-coal or gas-fired power plants.

This drop in costs of renewables’ technology opens up major opportunities for all countries that are now investing in renewables. Using world market fuel prices as a reference, electricity from wind and solar power could be considerably cheaper for solar-rich countries such as the Arabian Gulf countries and others in the Middle East.

Another added benefit is the new jobs that are created in the power industry. Over just a few years, Germany created about 370,000 jobs in this field. The UAE and several other countries in the region have recognised the potential of renewables and have set themselves renewables targets. This gives them an opportunity to be at the vanguard of the development in their region.

Increasing the use of renewables has become one of the key pillars of the energy strategies for many countries. Nowhere is this better reflected than in the membership of Irena, the International Renewable Energy Agency based in Abu Dhabi. The organisation ensures its members have




access to best practices that have already been adopted by pioneering states as they reach their renewables targets. Germany and the UAE were among the first supporters of the agency.

There are a number of challenges ahead of us in Germany to transform our energy system. In future, the major portion of power supply will come from wind power and photovoltaics. These two technologies are capable of producing sufficient energy to meet our renewables targets in a cost-effective way.

Complementing sources are hydro power and bioenergy. As electricity fed in from wind and photovoltaic installations fluctuates depending on the weather and time of day, the entire system has to become more flexible. The most important step here is to expand the grid, both in Germany but also across borders within Europe. We also have to adjust our electricity market so that it provides energy security while also ensuring sufficient levels of investment for efficient new power plants based on fossil fuels. In addition, measures for flexibility are also needed on the demand side and include storage facilities.

The transition to renewable energy must not only develop into a success story for the environment, but also in economic terms. This is true for Germany and for other countries that have embraced renewables.

The potential for renewables in the Arab countries is vast, particularly for solar power. Some Arab countries have begun to use renewable energy. With the exception of a few lighthouse and pilot projects, especially in the UAE, there is still an immense untapped potential in the GCC countries.

Recently the groundbreaking result of the bidding processes for a photovoltaic power plant in the emirate of Dubai was applauded. Germany and the UAE are linked by a strategic cooperation and have deepened their economic and political ties. We would like to build on this and share our experience in expanding the use of renewables with all interested partners in the UAE.

Rainer Baake is the German state secretary in the federal ministry of economy and energy, and the head of the German delegation to the World Future Energy Summit, which begins today




UAE beats renewables cost hurdle with world’s cheapest price for solar energy.( 5.98 US cents per kilowatt-hour) The National + NewBase

The UAE has another world record under its belt: the planet’s lowest prices for solar energy. It may not sound as glamorous as the tallest building or the longest gold chain, but it has the potential to be a game changer in more ways than one.

High costs had previously been a major obstacle prohibiting growth for the solar sector. But prices have fallen 75 per cent over the past five years and more projects are being developed, according to the Abu Dhabi-based International Renewable Energy Agency (Irena).

Evolution can happen in a burst, and solar power’s sudden change is simlar to those that technological progress has ignited across the business world. Look at how much technology has evolved in day-to-day living. Reading books on tablets is the new normal – so much so that Suzi LeVine was sworn in as the US ambassador to Switzerland using a Kindle in June.

Apple’s iPod was all the rage about seven years ago, enabling a new, smaller way to listen to music on the go. Already it has been replaced with

the all-inclusive services offered by smartphones. As for phones, the first mobile phone, Motorola’s DynaTac 8000X, sold at just under US$4,000 in 1984. Fast-forward three decades, and nearly half of US households have wireless phones exclusively.

Taking a tighter focus, this is exactly what is happening in the solar photovoltaic (PV) sector. And it is happening right here at home. The recent bids submitted to Dubai Electricity and Water Authority (Dewa) for the second phase of the Mohammed bin Rashid Al Maktoum solar park indicate the competitiveness of solar PV technology.

Riyadh-based Acwa Power first bid 5.98 US cents per kilowatt-hour for the 100-megawatt tender, again trumping competing bidders that included Spain’s Fotowatio and Abu Dhabi-based Masdar.

In addition, Acwa went ahead and bid for the remainder of the plant’s planned 1,000MW at a total tariff of 5.4 cents under a 25-year power purchase agreement. The plant is targeted for completion in 2030.

Dewa announced last week that the Saudi-led consortium, which also includes Spain’s TSK, was awarded the contract to build and operate the next phase. While the Saudi company did not obtain the remainder of the solar park, it did win an increased tender of 200MW from the original 100MW.

But what stood out was the final price – the never-before-seen 5.84 cents per kWh.

This means that the solar power generated from this phase will be sold to Dewa at a fixed rate of 5.84 cents over 25 years. The price of natural gas – which generates 99 per cent of the UAE’s




electricity – stands at 9 cents. Solar energy is not only cost-competitive with conventional forms of power generation, but in the UAE it is even cheaper.

This is why Acwa was not awarded the entire solar park. Paddy Padmanathan, the Acwa chief executive, said that he did not expect Dewa to award the rest of the project, simply because solar prices are likely to continue to drop. With every doubling of cumulative installed capacity, solar PV module prices are expected to fall by 18 per cent to 22 per cent, according to a report released by Irena yesterday.

Irena’s director general, Adnan Amin, concurred with Mr Padmanathan that the falling trend for solar prices was an incentive for governments to defer long-term commitments, as opposed to paying now at what is likely to be a higher price.

“At times of fiscal austerity in many governments – well, that’s very unsustainable,” he said.

Mr Amin went on to describe Acwa’s bid as a “remarkable development” that can be attributed to the change in financial structure for the renewables sector.

“The UAE and others, through the auction mechanism, have begun to show a different tier for the future, which is rapid increase of renewable energy based on cost and feasiblity,” Mr Amin said.




Iraq: Iraq oil output hits record 4m barrels per day Reuters + NewBase

Iraq produced a record of around 4 million barrels per day (bpd) of crude oil in December, Oil Minister Adel Abdel Mehdi announced on Sunday. "It is the first time Iraq has achieved this," Abdel Mehdi told a press conference alongside Turkish Energy Minister Taner Yildiz. Abdel Mehdi also revealed plans to export 375,000 bpd for the first three months of 2015 from around the northern city of Kirkuk and the Kurdistan region. He said those fields would increase production to 600,000 bpd as of April. The previous monthly record for Iraqi production was 3.56 million bpd in 1979, according to an official from Iraq's State Oil Marketing Organization. Abdel Mehdi told reporters that Iraq had set the level of exports for Iraq's northern and Kurdish oilfields for the first three months of 2015 after the meeting with Yildiz. "We have agreed to keep the level of exports at 375,000 bpd for the first three months of the year, and as of April, we will increase exports to 600,000 bpd," Abdel Mehdi said. The oil from Iraq's north is exported via a pipeline network from the Kurdistan region to the Turkish Mediterranean port of Ceyhan. The arrangement is the result of an interim deal reached between Baghdad and Iraqi Kurdistan in early December after years of acrimony between the two sides over oil rights. Under the deal, the sides agreed to ship 300,000 bpd of oil from Kirkuk and 250,000 bpd from Kurdistan via the Kurds' pipeline network.

Baghdad and the Kurdish region were prompted to set aside their differences by the jihadist group

Islamic State's seizure of territory across large sections of northern Iraq. Turkish Energy Minister

Taner Yildiz said around 450,000 barrels per day (bpd) of Iraqi oil were currently flowing into his

country's Ceyhan port. "We have agreed with Baghdad to reach 550,000 barrels per day," Yildiz

said in a press conference in Baghdad.




US:Regional refinery trends evolve to accommodate increased

domestic crude oil production. Source: U.S. Energy Information Administration

Recent rapid growth in U.S. production of light tight oil has raised interest in understanding how U.S. refineries, many of which are configured to process heavier crude oil, might accommodate increased volumes of domestic light crude. The U.S. refinery fleet, which is distributed across Petroleum Administration for Defense Districts(PADDs), varies both within and across regions in capacity, quality of crude oil inputs, utilization rates, and sources of crude supply.

What is stream day capacity?

Stream day capacity is the maximum number of barrels of input a distillation facility can process within a

24-hour period when running at full capacity under optimal crude and product slate conditions with no

allowance for downtime. The stream day capacity is typically about 6% higher than the calendar day

capacity, which reflects usual operating conditions including both planned and unplanned maintenance.

More than 50% of the country's refinery capacity and most of the country's heavy crude processing capacity is located in the Gulf Coast (PADD 3). The region's 51 operating refineries with atmospheric crude distillation units (ACDU) have capacity totaling 9.7 million barrels per stream day (bbl/sd), 81% of which is located at facilities with coking capacity. Coking units can upgrade heavy crude oil into higher-valued lighter products, such as distillate and gasoline.

Recent expansions have increased ACDU and coking capacity by 625,000 bbl/sd and 160,000 bbl/sd, respectively, since 2010. Despite the expanded capacity, utilization has remained steady, and the region has recently set records for high levels of gross inputs.

Changes to crude oil supply patterns are most pronounced in the Gulf Coast. Net imports into the region have fallen by 2.3 million bbl/d, and light sweet crude imports have been largely replaced




by domestically produced light, tight oil. In addition, from 2010 to 2014, the average API gravity of crude inputs rose by 1 degree. API gravity is an inverse measure of the density of a petroleum liquid relative to water, meaning that the higher the API gravity, the lower the density of the petroleum liquid compared to water. An increase in API gravity indicates that average crude slates are becoming lighter.

Crude oil production in the Gulf Coast region has increased by 1.9 million barrels per day since 2010. Gulf Coast receipts of crude oil from the Midwest (PADD 2), including both U.S. and Canadian production, also have increased. With more Canadian and domestic barrels moving south from the Midwest to the Gulf Coast region and lower demand for crude shipments from the Gulf Coast to the Midwest, net receipts for the Gulf Coast were positive in October 2014 for the first time since December 1985.

This situation, with shipments and receipts of crude oil to and from other PADDs being roughly equal in the Gulf Coast region, is a change from the region's traditional role. The Gulf Coast has long been a source of crude supply for neighboring PADDs, both through the movement of domestic production and from imported crude oil coming into Gulf Coast ports.

With U.S. crude production in 2015 expected to average 9.3 million bbl/d, 700,000 bbl/d above the 2014 level, domestic refiners will continue to face changing supply and demand conditions, even as continued production growth in the first months of the year transitions to a more static production outlook as the effects of the recent sharp decline in oil prices are reflected in drilling

decisions.

Changes to infrastructure, refinery capacity, crude oil price differentials based on quality, and policy decisions will also affect refinery operations in the coming year. Further discussion of these changing dynamics for each region of the country can be found in the January 7 This Week in

Petroleum.




US: Gasoline dampens US inflation; mid-year rate hike in doubt Reuters+ NewBase

US consumer prices recorded their biggest drop in six years in December and a gauge of underlying inflation was flat, which could make the Federal Reserve more cautious about raising interest rates. The Labour Department said its Consumer Price Index fell 0.4 per cent last month, the largest decline since December 2008, after sliding 0.3 per cent in November. In the 12 months through December, the CPI increased just 0.8 per cent, the weakest reading since October 2009 and a sharp deceleration from November’s 1.3 per cent rise.

“The odds of a rate hike in June are fading fast,” said Michelle Girard, chief economist at RBS in Stamford, Connecticut.”The recent data cannot leave the Fed feeling more confident that inflation will move higher.” While Fed officials have viewed the energy-driven drop in inflation as transitory, a strong dollar is taming underlying price pressures, which could cause them some discomfort. The so-called core CPI, wa\hich strips out food and energy costs, was unchanged in December. It was only the second time since 2010 that it did not increase. In the 12 months through December, the core CPI rose 1.6 per cent, the smallest gain since February. Other data on Friday, however, suggested the economy was growing solidly despite the soft inflation readings, with factory output rising last month and consumer sentiment hitting its highest level in 11 years in January. BULLISH SIGNALS: Fed officials will need to navigate these conflicting signals as they near a decision on when to raise benchmark borrowing costs from near zero, where they have been pegged since December 2008.




“Maybe the data would push us a little bit further one way or the other,” San Francisco Federal Reserve Bank President John Williams told a group of business people in San Francisco. “But I think the good news here is that the economy has improved a lot. .and in fact we are able to start adjusting policy, tightening policy in a way because of that strength.” Despite a strengthening labour market and economy, inflation does not look like it will reach the US central bank’s 2 per cent target anytime soon. Indeed, some economists think it could dip into negative territory this year before rebounding. The softness in core inflation, however, along with darkening prospects for the global economy, is likely more troubling for the Fed. The 11-year high in consumer sentiment in January reported by the University of Michigan reflected gains in both employment and income, and the boost to spending power from sharply falling gasoline prices. A separate report from the Fed showed factory output rose 0.3 per cent last month, a fourth straight monthly gain. Mining output jumped 2.2 per cent on increased oil and gas extraction.




Oil Price Drop Special Coverage

Lower oil prices to fuel GCC-Asia ties Saudi Gazette + NewBase Over the past 25 years, the Gulf cooperation council (GCC), led by Saudi Arabia, has been the main energy-exporting region in the world. According to the US Energy Information Administration (EIA), Saudi Arabia exported 8.9 million barrels of crude oil per day in 2012, the most by any country. The United Arab Emirates and Kuwait were the third and fourth largest exporters, with 2.5 and 2.3 million barrels per day respectively.

But, while the GCC's role in supplying crude oil to markets worldwide hasn't changed throughout the period, the composition of the demand has changed substantially, Asiya Investments said in its latest report. Only 25 years ago, the US, EU and Japan (G3) were buying around half of all GCC exports, while Asia excluding Japan made up only about 15 percent. it noted.

Asiya said that today, the situation almost reversed: the G3 buys only a quarter of the region’s exports, while emerging Asia nearly tripled its share of GCC shipments.

This shift is the result of multiple factors. Energy demand rose very rapidly in Asia. Global manufacturing production moved to the East, and investment in infrastructures expanded, increasing the level of consumption. The rise of the middle-income class increased demand for energy intensive goods such as motor vehicles, air transport, air conditioning and lighting.

Energy consumption remained high in developed economies, but growth was substantially weaker than elsewhere. In parallel, the richest economies followed a policy of diversification, increasing imports from Africa and shifting gradually to renewable energies. More recently, the increased reliance in domestic oil supplies in the US, due to a surge in the extraction of shale energies, has reinforced the trend further reducing ties between developed countries and the GCC. Emerging Asia is now the main driver of oil demand and the Gulf’s most important trade partner.




The price of oil, which fell sharply in the last six months due to the oil supply glut and the slowdown in global demand, is not expected to recover any time soon. Supply rose in 2014, often coming from very unstable sources, such as Libya – which collapsed recently – or Iraq, which increased its production by 300,000 barrels per day in spite of the complicated security situation. The greater impact however came from the surge in US shale production. The growth is expected to continue to maintain its trend in the short term in spite of low prices, as investors need to minimize losses for investments already made even if prices are below their breakeven price. Demand also adds pressure, Asiya further pointed out. The European economy is still weak, growing under 1 percent last year while facing deflationary pressure. Euro zone sovereign risks, as the upcoming Greek elections have shown, may also further deteriorate the bloc’s outlook. Additionally, strong monetary loosening expectations have pushed the euro to lows which will hurt the bloc's opportunity to benefit from cheaper oil imports. Japan is in a similar position of stagnation and currency depreciation. The rest of Asia however has not suffered as much, in terms of both economic growth and currency depreciation, placing it in a better position to take advantage of cheaper oil imports, while also implementing much needed energy sector reforms. Asia will play an even greater role in GCC's trade in 2015 .

Oil slump to erode EU energy firms’ earnings Dow Jones+ NewBase

The collapse in oil prices is casting a long shadow both now and into the future for European energy companies, but it could . provide a timely boost for other sectors as the fourth quarter earnings season approaches. Overall earnings on the continent-spanning Stoxx Europe 600 Index are expected to have risen during the most recent quarter, led by banks, auto companies and makers of consumer durables. But profits at energy and utilities firms are forecast to decline sharply, the first meaningful evidence of the damage plunging oil prices is wreaking on major Corps. Fourth quarter earnings at big integrated oil companies, such as BP, Royal Dutch Shell and Total, are expected to fall an average of 24% in US dollar terms, according to Barclays. In the UK, where there are a higher proportion of energy-sector earnings than the rest of Europe, the slump in oil prices could take an average of 4% off fourth quarter earnings across FTSE 100 companies, UBS said. Executives and analysts say that might be only the start of a long period of bad news. “Lower-for-longer oil pricing adds another layer of pain with near-term earnings,” said Nomura analysts in a recent note. The pain is likely to be even sharper for smaller oil companies. Explorers with fewer assets are




more exposed to falling oil prices than majors like BP and Shell because they can’t rely on making money from other parts of their business when times are tough.

UK-listed Tullow Oil said on Thursday it was making its largest-ever write-off, of $2.7bn before tax. Tullow in part blamed unsuccessful drilling and lower oil prices for a $600mn write-down across all its assets, as well as $1.2bn related to ventures that now have no prospect of commercialization. Tullow’s move follows Premier Oil’s $300mn write-down on the value of its assets. The company also is likely to postpone an investment decision on its $2bn Sea Lion development in the Falkland Islands to next year. “Everyone in the industry is looking for cost savings,” said Tony Durrant, Premier’s chief executive. While energy companies are the clear losers, the fall in oil prices is proving a boon for some sectors. Analysts say auto makers, packaged-food companies and airlines – all of which count oil as a high proportion of input costs – are first in line to benefit. Unilever, the world’s No. 2 consumer-goods company after Procter & Gamble, spends around €7bn ($8.23bn) a year on oil-based products, according to UBS analysis. Germany’s Henkel estimates that around €4.9bn of its annual costs have high or moderate dependence on oil prices. Consumer-discretionary companies listed on the MSCI Europe Index, which is made up of the biggest companies from the 15 largest economies in Europe, are expected to report a 16.5% increase in fourth quarter earnings compared with a year earlier, according to FactSet. For many companies, the benefits of a long-term decline in oil prices might be just beginning. Most are hedged on oil prices for between three and six months, and some for more than a year, meaning the reduction in costs would show through only toward the middle of 2015. The shipping sector already is making gains from lower oil prices. The cost of bunker fuel – which powers ships and makes up around 30% of




costs for shipping operators – has halved to below $300 a tonne from $600 in September. Denmark’s Maersk Line, the world’s largest container-shipping company estimates that a fall of $100 a tonne in bunker fuel adds $100mn to annual savings. It is a similar story for airlines, for which fuel also represents about 30% of costs. Airlines globally are set to spend 5.6% less on fuel this year compared with their $204bn combined fuel bill in 2014, even as they flymore and consume more oil, the International Air Transport Association projects. The benefit for airline earnings in Europe is more muted, though, with the strong dollar in which carriers pay for fuel offsetting some of the oil-price slump. Hedging has a significant effect as well: Many European airlines lock in fuel contracts early to have certainty over costs, which negates the immediate financial benefit. Ryanair Holdings, the region’s biggest budget airline, said it already has hedged 90% of fuel consumption for the financial year starting in April at prices above current spot rates.





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

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

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

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

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

NewBase 19 January 2015 K. Al Awadi







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New base 521 special 19 january 2014