New base 575 special 05 april 2015

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NewBase 05 April 2015 - Issue No. 575 Khaled Al Awadi

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

Iran deal bodes well for Oman-India pipeline project Oman Observer + NewBase

The historic breakthrough announced by world powers at the weekend in clinching a framework agreement with Iran over its nuclear programme could have hugely beneficial economic implications for the Sultanate of Oman once international sanctions are eventually lifted, say experts.

A conclusive deal, targeted by the end of June, has the potential to impart strong impetus to bilateral trade and cooperation across an array of economic sectors, notably energy, petrochemicals, heavy industry, mining and shipping and transport, among other spheres. Anticipated to make good headway, however, is the Oman-Iran gas supply agreement that, energy experts believe, has the potential to position the Sultanate as the hub of a so-called ‘corridor’ supplying natural gas to the Indian sub-continent via the Arabian Sea. Under an MoU signed by the two countries in August 2013, Oman has committed to importing annually around 10 billion cubic metres of Iranian gas for a period of 25 years in a deal estimated at $60 billion. Since it was first floated in the late-1990s, a proposal for a deep-sea pipeline from Oman to India’s




west coast had languished largely because of the astronomical costs involved and the unprecedented technical nature of the undertaking. But with deep-sea pipeline technology having since demonstrably proven the viable of such ventures, coupled with the attendant benefits associated with piped gas supply, prospects for a pipeline tapping into gas-rich producers of the Gulf, Middle East and potentially Central Asia as well, have been revived, of late. In a shot in the arm for proponents of the deepwater piped gas option, a well-known New Delhi based energy firm recently unveiled a proposal for a roughly 1,600 km transnational, deepwater pipeline linking Oman with India’s west coast. Fox Petroleum Ltd, part of a $10 billion multinational enterprise with interests spanning oil and gas, power generation, construction and infrastructure, made a pitch for an Oman–India Multi-Purpose Pipeline (OIMPP) venture whose estimated $5.6 billion cost would be funded entirely by foreign investors, it said. According to reports in the Indian media, Fox Petroleum’s proposal centres on a “dual-sized single pipeline” that begins at Ras al Jifan on Oman’s east coast and makes landfall at Gujarat on the Indian coast. From Ras al Jifan, the pipeline is proposed to travel south onshore to Duqm, the site of a mega industrial and maritime hub. From Duqm, it connects with a recompression station proposed to be built on the Qalhat Seamount – also known as Murray Ridge — which lies just 300-400 metres below the ocean surface. Local media quoted the firm’s Chairman and Managing Director, Ajay Kumar, as saying that the proposed OIMPP project would be designed to transport 8 trillion cubic feet of natural gas to India over a period of 20 years. Construction of Phase 1 of the project, covering the 1,300 km distance from Ras al Jifan to India’s Gujarat coast, would take around four years to complete. A further 300 km length would be added to the network to carry the gas from Gujarat onward to Mumbai.Fox Petroleum says it envisages multiple gas pipelines being built by different investors between Oman and India, thereby creating something of a ‘Gas Highway’ between the two countries. Experts say the OIMPP venture is broadly modelled on the lines of ‘The Middle East to India Gas Pipeline’, first floated by the South Asia Gas Enterprise (SAGE) in 1999. Promoted by the New Delhi-based Siddho Mal Group, in joint venture with a UK-based deep-water technology firm, SAGE has been working with a global consortium to create an ‘energy corridor’ that can transport gas from the Middle East to India, bypassing the land route through Pakistan. More recently, in February, the potential for a gas pipeline link between the two countries was among an array of issues that were discussed during the visit of India’s External Affairs Minister Sushma Swaraj to Muscat. Both sides agreed to revisit the long-stalled initiative, according to media reports.




Oman:Frontier Resources International planning to drill in Block 38 Source: Frontier Resources International

AIM-listed Frontier Resources International has provided an operational update on its activities in Block 38 in the Sultanate of Oman. The Company has received approval to exchange the Phase 1 work commitment of a 3D seismic survey for an exploration well with a 2D seismic survey.

During the past two years, Frontier has completed the re-processing of some of the existing 2D seismic data on the Block. This information has been integrated with historic seismic, potential field and well data as part of the comprehensive technical evaluation of the hydrocarbon prospectivity of the Block.

A direct consequence of this evaluation has been the identification of two potential structural leads not identified by previous operators. In addition, there is sufficient technical support to demonstrate the extension of the South Oman Salt Basin (SOSB), which is already producing oil, into the south eastern part of Block 38. The few historic wells drilled in this very large block did not penetrate any of the geologic formations considered to comprise each of the new independent leads.

As a result it has been concluded that the next exploration phase should be the drilling of a well into the most advanced of the structural leads. Frontier will soon start discussions with the tender board to begin the process to select suitable contractors to complete this work program.

Commentating on today's update, Jack Keyes, Frontier's CEO said 'This modification to the work program will enable the Company to gain a comprehensive understanding of the deeper stratigraphy in this lightly explored part of Oman, while at the same time testing the hydrocarbon potential of a very large lead.'




Pakistan: Chinese oil companies eye Pakistani Oil, Gas Sector

Chinese energy firms have expressed interest in investing in Pakistani oil and gas sector, Pakistan’s oil ministry said in a statement.

The topic was discussed by the representatives from private and public sector oil and gas companies of China who participated in the workshop on Pakistan-China cooperation in the field of oil and gas sector held in Islamabad on Wednesday. This was the first workshop between the two countries on oil and gas sector wherein both sides agreed to foster bi-lateral cooperation in the petroleum sector, the ministry said. The workshop was informed that Pakistan is endowed with an estimated 160 trillion cubic feet (TCF) of natural gas reserves including 105 TCF of shale gas reserves.

It was reported earlier this year that China Petroleum Pipeline Bureau (CPP) will soon begin laying 700 km Gwadar-Nawabshah gas pipeline in Pakistan on government to government basis. CPP would bring the required capital of $1.5 billion and will also construct the LNG terminal in Gwadar, costing $800 million. The terminal, which is likely to be offshore, will have a capacity of 500 mmcfd of LNG.




Iran moves closer to restoring oil exports on nuclear deal BYBLOOMBERG NEWS + NewBase Iran's accord with world powers brings the Opec member a step closer to restoring oil production that was cut by sanctions while leaving unresolved when it will happen.

The preliminary agreement outlined on Thursday signals the country may be able to resume exports within months of a final deal, which negotiators aim to conclude by June 30, UBS Group and Commerzbank said. Iran's shipments abroad have been curbed 50 percent by measures imposed in mid-2012. The return of Iran's oil to a global market oversupplied by surging US shale output threatens the price recovery fellow producers are expecting later this year. Minutes after the deal was announced, Brent crude, the global benchmark, fell as much as 5.4 per cent. Under the accord, the US and European Union would lift the economic sanctions if inspectors from the International Atomic Energy Agency (IAEA) verify Iran's compliance with curbs on its nuclear programme. "In essence, there will be more Iranian oil soon," Giovanni Staunovo, an analyst at UBS, said by e-mail from Zurich. "For the time being, the announcement is bearish. Sanctions will be lifted following the OK from the IAEA. For me, that's likely to come in the second half of the year." Brent has fallen by more than half from a 12-month high in June because of the global supply glut. Futures for May settlement extended losses on Thursday after the agreement was announced in Lausanne, Switzerland, and finished down $2.15 to $54.95 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May delivery declined 1.9 per cent to $49.14 a barrel on the New York Mercantile Exchange on Thursday. Further price losses may be limited as there's no guarantee a full deal will be reached by the June deadline, BNP Paribas said. "It's widely considered Iran's crude production will not increase in the short run," said Takayuki Nogami, a senior economist at Japan Oil, Gas and Metals National in Tokyo. "The agreement has been already factored into oil prices."




The framework accord reached by Iran and six world powers — the US, UK, France, Germany, Russia and China — sets a schedule for Iran's enrichment of uranium, limits it to a single site and allows international monitoring over the next quarter- century. It will extend the "break-out" period that Iran would need to obtain nuclear weapons to more than a year. The sanctions that have crippled the Islamic Republic's economy would be removed in phases as inspectors verify its compliance. While Opec Secretary-General Abdalla El-Badri predicted on March 8 that global oil markets will rebalance in the second half, Commerzbank expects Iranian output could almost double the current surplus and push Brent oil back toward a 5 1/2-year low. Gradual process

"If Iran does come back, we may not get any price uplift at all in the second half," Mike Wittner, head of oil market research at Societe Generale in New York, said by e-mail. "It could be a very gradual process to lift or suspend the sanctions. Obviously, it's bearish as and when they start producing again." Iran could increase output by 800,000 barrels a day to its full capacity of 3.6 million within three months of sanctions ending, the International Energy Agency, a Paris-based adviser to 29 nations, said on February 10. It holds the world's fourth-largest crude reserves, according to BP. Sanctions cut Iran's oil exports by about 50 per cent to 1 million barrels a day in 2013, according to the IEA and US Congressional Research Service. Oil prices may have fallen excessively as the path to a comprehensive resolution is "still perilous," Helima Croft, chief commodities strategist at RBC Capital in New York, said by e-mail.

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Gas Sector to Drive Tanzania's Growth Rate to Over 15% Daily News Tanzania + NewBase

Tanzania’s economic growth is expected to see a sharp acceleration in coming years, driven primarily by the natural gas sector, Governor of the Bank of Tanzania (BoT), Prof Benno Ndulu, said on Thursday.

The Governor stated that the economy is projected to start accelerating at the rate of 15.3 percent annually within the next 12 years, reported Daily News Tanzania. Ndulu said the country's current proven reserves stood at 55 trillion cubic feet (tcf), while construction of a liquefied natural gas (LNG) plant was scheduled to be undertaken between 2017 and 2022. "Based on current estimates and under favourable global prices, gas production might add to

government coffers about 3-4 billion US dollars (nearly 5.5 - 7.4tri/-) per annum," the governor said in his presentation at the launch of Breakfast Series Meetings on "Preparing for Gas Economy," organised by Ms Rex Attorneys.

He further said that the natural gas available was sufficient to satisfy domestic demand and exports to some neighbouring and Asian countries, Daily News reported.




Mozanbique: Eni Coral FLNG FID expected by 2015 end Offshore Energy Today Staff

Italian oil and gas company Eni has said today it expects to reach a Final Investment Decision for its Coral FLNG development in the second half of 2015. The Coral project, located offshore Mozambique, comprises construction of a Floating LNG (FLNG) unit fed by subsea wells.

The development plan for the gas discovery located in Mozambique’s Rovuma basin was formally submitted to the local authorities at the end of 2014.

An FLNG unit is able to process and convert natural gas to liquefied natural gas (LNG) on site and ready for export. This method of LNG production is cheaper as there is no need for construction of subsea pipelines and onshore processing plants. Another in favor of FLNG versus onshore plants is that FLNG it can be remobilised if necessary. The FLNG option is useful when natural gas field are far away from coast, and in ultra-deep waters where pipe laying is pricy and difficult.

In its report today Eni has said: “In Mozambique, where Eni has made the greatest discovery in its exploration history with a mineral potential of about 2,500 billion cubic meters of gas in place, we plan to finalize gas contracts and obtain the necessary production licences, in order to make a final investment decision for the project Coral floating LNG in the second half of 2015.”

The company has said that the award of the relevant engineering, procurement, construction, installation and commissioning (EPCIC) contracts for the construction, installation and commissioning of the floating unit is expected by the end of 2015. According to a press release issued by KBR last year, three consortia will be competing for the contract to build the Coral FLNG.

Production start-up is expected for the end of 2019.

Douglas-Westwood (DW), an energy intelligence group, in its “World FLNG Market Forecast 2014-2020″ said it expected total expenditure of $64.4bn from 2014-2020 in the FLNG market. Two-thirds of this spend are attributed to liquefaction infrastructure, while the remaining is from import and regasification facilities.

Asia will be the first continent to have an operational FLNG unit, with Petronas’ PFLNG1 unit expected to start production later this year, off the coast of Sarawak, Malaysia. The PFLNG1 is currently under construction in South Korea; scheduled for completion for the end of 2015.




Russia oil output touches new high in March Reuters + NewBase

Russian oil production hit the latest in a line of post-Soviet highs in March, feeding higher exports that added to a global glut keeping crude prices low and hurting its economy. The big Gulf producers of Opec have opted for holding on to market share, saying they will only cut output to raise oil prices if others - like Russia - do so too.

Russian officials say it is hard to significantly adjust output up or down due to the problems of mothballing wells in a harsh climate. The twin state energy giants Gazprom and Rosneft brought Russia’s oil output to a post-Soviet era record of 10.71mn barrels per day (bpd) in March, Energy Ministry data showed.

That topped December’s high of 10.67mn bpd. The data includes output for crude oil and gas condensate which reached 45.275mn tonnes in March, versus 40.696mn the month before. Total oil exports via pipeline monopoly Transneft - which includes some transit supplies from neighboring countries - rose 2% to 4.37mn barrels per day, or 18.476mn tonnes.

Russian crude oil exports through Transneft rose by 2% to 3.91mn bpd, the ministry said. Russia’s energy minister told Reuters last month that crude oil exports are expected to rise this year and beyond as volumes are diverted away from domestic refineries which are cutting capacity as part of a modernisation drive.

Crude oil exports are seen rising by up to 3mn tonnes in 2015 and to 280mn tonnes per year by 2035 from 224mn tonnes in 2014. Oil and gas condensate production at Gazprom, the world’s top natural gas producer, jumped by 14% in March from February.




Rosneft, the world’s largest listed oil producer by output, increased its crude oil production by 0.2% to 3.81mn bpd thanks to higher output from its Vankor field in eastern Siberia. Gas production was at 55.52bn cubic metres (bcm) last month, or 1.79 bcm a day, versus 53.86 bcm in February, a decrease of 7% month on month.

State-controlled gas company Gazprom produced 36.11 bcm, or 1.165 bcm per day, in March, down 10.2% from February. Analysts expected the company to increase gas exports to Europe this year, though revenues from the sales will decline due to a fall in gas prices, which tracking oil.




Oil Price Drop Special Coverage

Crude sinks, AFP + NewBase

World oil prices sank last week as traders eyed a possible Iran nuclear energy deal that could ease sanctions on the crude producer and potentially add to global oversupply.In late Thursday afternoon deals, Brent crude tumbled more than $2, as global powers battling to seal a deal with Iran over its nuclear programme called a press event, raising hopes for a breakthrough. Elsewhere, other global commodity markets diverged in a holiday-shortened week with many traders away for an extended Easter holiday break. OIL: Crude futures fell heavily amid ongoing Iran nuclear talks, with the market also weighed down by plentiful petroleum supplies. “The oil market continues to wait for the outcome of the nuclear negotiations with Iran,” said Commerzbank analyst Carsten Fritsch. “An agreement in the nuclear dispute would doubtless put further pressure on prices in the short term even though sanctions will probably be eased only gradually.” The aim is to turn the framework they want to leave Lausanne with into a comprehensive accord backed by specific technical commitments by June 30 when an interim deal struck in November 2013 expires. With the world’s fourth biggest oil and second biggest gas reserves, the energy industry is the cornerstone of Iran’s economy, but it has been hit hard by the American and European embargo imposed since 2012. The P5+1 - comprising Britain, China, France, Russia and the US, plus Germany—are seeking to hammer out a deal which they hope will put an atomic bomb out of Tehran’s reach. Iran maintains that its nuclear energy programme is purely for civilian and peaceful purposes. “Any agreement would see more oil being poured into an already flooded market,” agreed Oanda analyst Craig Erlam. “That additional supply is likely to weigh further on prices, if an agreement is reached.”




World’s major market player may undergo ‘real’ transformation Syed Rashid Husain + NewBase

The Iran nuclear deal, finally on the horizon, is adding to the somber mood in the sector. Oil markets came under fresh pressure after the deal, as it raised the prospect of additional Iranian crude exports. Traders had been watching closely the talks and a positive outcome was sure to impact the markets adversely for various reasons. Iran has reportedly a backlog of unsold oil ready to hit global markets and is thought to have about 30 million barrels held in a fleet of super tankers anchored off its coast, a Guardian report said. Markets thus reacted to the deal news, with prices losing additional floor. And not only the US just released job data also did not point to a vibrant scenario, the ongoing shale revolution in the US also continues to unfold - impacting the markets. This ongoing revolution has altered global energy landscape. Stocks are brimming. Demand outlook too remains weak. This is now forcing many to assert that the global crude markets would remain soft over the long term. Some are even talking of the current bearish outlook to persist for years, even decades. One could see the anxiety within the fraternity, over the Saudi crude strategy. Questions continued to revolve around the Saudi strategy and its dynamics. The curiosity factor was palpably present. In the context of the shifting sands, Saudi Arabia’s role in global energy markets is changing, a paper from Rice University’s Baker Institute for Public Policy is now asserting. “A Refined Approach: Saudi Arabia Moves beyond Crude” examines the growth of Saudi refining, the country’s increased domestic demand for crude oil and the geopolitical effects of this development. The paper was published in Energy Policy by Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute.

“This is the type of change we expect to see as a state moves to a more advanced stage of development,” Krane says. “There are plenty of upsides from investing in refining, including reducing the kingdom’s reliance on fuel imports and capturing margins now lost to the competition. Refining also allows the Saudis to export their heavy crude oil to a wider array of customers, beyond the select few importers who have invested in configurations that can handle heavy crudes.” However, there are also downsides, starting with an




erosion of Saudi Arabia’s traditional role as the global “swing supplier” of crude oil, the paper asserts. With more oil production diverted into refining, the kingdom will have reduced flexibility to “swing” oil production alongside fluctuations in global price and demand. It will be less able to influence prices and balance global oil markets, which has provided some protection against volatility. And perhaps it was in this perspective that, a study by the US National Petroleum Council, formed at the request of Energy Secretary Ernest Moniz, is now projecting that since the current shale boom cannot last long, the energy sector should begin looking for the next frontiers. The US should immediately begin a push to exploit its enormous trove of oil in the Arctic waters off Alaska, or risk a renewed reliance on imported oil in the future, the study added. In order for the US to keep domestic production high and imports low, companies should start probing the Arctic now, the study said, underlining it takes decades of preparation and drilling to bring oil to market. The Arctic is among the biggest such sources in the world and in the US. It holds about a quarter of the world’s undiscovered conventional oil and gas deposits, geologists estimate. While the Russian Arctic has the biggest share of oil and gas together, the US and Russia are thought to

have about the same amount of crude oil — 35 billion barrels. That’s about 5 years’ worth of US consumption and 15 years of US imports. “There will come a time when all the resources that are supplying the world’s economies today are going to go in decline,” said Rex Tillerson, CEO of Exxon Mobil and chairman of the study’s committee, in an interview with the Associated Press. “This is will be what’s needed next. If we start today it’ll take 20, 30, 40 years for those to come on.” The push to make the Arctic waters off of Alaska more accessible to drillers comes just as Royal Dutch

Shell is poised to restart its troubled drilling program there. The company has little to show after spending years and more than $5 billion preparing for work, waiting for regulatory approval, and early-stage drilling. The council’s study acknowledges a host of special challenges to drilling in the Arctic, including




the sensitive environment, the need to respect the customs and traditions of indigenous peoples living there, harsh weather and sea ice. The council, which is made up of energy company executives, government officials, analysis firms and non-profit organizations, also pointed out that technology and techniques required to operate in the region are available now, and that the industry can safely operate there. Improved equipment and procedures to prevent a spill and clean up quickly, if one occur, are now available. The council also made a number of suggestions designed to make US Arctic development more feasible to companies such as Exxon, which is working in the Russian Arctic but has shied away from the US Arctic so far because of cost. Tillerson said because of regulations and other factors, it is more attractive to drill in other Arctic nations, despite the enormous potential in the US. “The US is not moving at a pace that others are moving at,” he said. “Today we find it very difficult to work in the US Arctic.” The study suggests holding regular sales of drilling rights, extending the amount of time drillers are allowed to work each year, and doing more scientific studies of the wildlife in the region to ensure it is disturbed as little as possible. There is no dearth of resources. Oil from the Arctic, Mexico, Canada, Iran, Iraq, and Saudi Arabia - just to name a few - would continue to add to the global asset base in the years and decades to come. Oil will still be available - and in plenty - when the shale boon is finally over! With shale now rivaling OPEC almost as the new swing producer and the global energy kaleidoscope undergoing major structural changes, why shouldn’t the role of the world’s major and long-term market player to undergo some real transition?




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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 05 April 2015 K. Al Awadi







Economy & Finance

New base 575 special 05 april 2015