New base 585 special 19 april 2015

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NewBase 19 April 2015 - Issue No. 585 Khaled Al Awadi

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

ADNOC to start monthly oil product deliveries to Egypt Reuters + NewBase

State-run Abu Dhabi National Oil Company (ADNOC ) will start monthly deliveries of $400 million of petroleum products to Egypt from next week until the end of October, a source at the state-owned Egyptian General Petroleum Corporation ( EGPC ) said on Thursday.

"It is expected the first shipments will arrive in a week from now," the source said. He added that Egypt will receive the products on credit and was still negotiating the interest rate for payment. ADNOC is seeking a 3 percent rate, the source said.

The deal to supply the products was agreed last year. Earlier this month traders said ADNOC had issued a tender to buy up to nine cargoes, or 300,000 tonnes, of gasoil for delivery into Egypt in April.

The Egyptian government had said EGPC will buy 65 percent of its oil product import needs from ADNOC in 2015. The agreement covers gasoline, diesel, heavy fuel and liquefied petroleum gas




UAE and Saudi refineries in demand as conflict-hit Iraq and Yemen suffer outages

The National + NewBase

War-related outages at important refineries in Iraq and Yemen are helping to underpin regional demand for petrol and other products from two recently expanded plants in the UAE and Saudi Arabia.

In Yemen, fighting has led to severe shortages of transport fuel. Television reports from various agencies over the weekend showed long queues at petrol stations in Yemeni cities, where prices have quadrupled in recent months as fighting has intensified.

On Thursday, the government-owned Aden Refinery Company, which operates a 130,000 barrels per day plant across the harbour in Little Aden, declared force majeure on its oil imports and exports, Reuters reported.

Fighting in Yemen is scaring off shippers, with at least four oil and natural gas tankers that were headed to Yemen being diverted recently, the news agency said. In Iraq, the country’s largest refinery at Baiji, about 200 kilometres to the north-west of Baghdad, came under renewed attack this week from ISIL militants.

The refinery, which supplies the bulk of petrol and other refined products to the domestic market, has been the scene of intense intermittent fighting for the past year between government forces and extremists, who are trying to control Anbar province, where the plant is located.

The 300,000 bpd plant at Baiji has become a key strategic battleground because of its importance to the domestic market and as the refiner of crude from the nearby Kirkuk oilfield, which also has been the scene of battles for control, said Jaafar Altaie, the managing director at Manaar Energy Consulting in Dubai.

The chronic outages at Baiji and elsewhere in the region have not been covered by capacity increases, according to the International Energy Agency (IEA), the Paris-based energy think tank. The additional regional production is mainly coming from the UAE and Saudi Arabia, with a total of more than 800,000 bpd being added.

The Abu Dhabi National Oil Company (Adnoc) last month began to divert the supply of its main crude grade, Murban, from Asian customers to its expanded plant at Ruwais, which lies about 180km west of the capital. The addition at Ruwais is estimated to be 417,000 bpd. Saudi domestic refinery runs are expected to have increased in March as production ramped up at a 400,000 bpd plant at Yanbu, the Red Sea port city. The plant is a joint venture with the China National Petroleum Company. The IEA said that Saudi demand for refined products is also rising as domestic power plants begin to burn more crude with peak summer demand approaching.




Dubai oil firm to invest $10bn in Philippines http://www.kampacgroup.com/index.html

Kampac Oil, a Dubai-based oil and gas company, plans to double its investments in the Philippines to more than $10 billion, said a report. The bulk of the investments will be for the construction of Kampac Energy City in Sual, Pangasinan, the Philippine Daily Inquirer newspaper reported, citing a company statement.

“The initial cost of the project was estimated at $5 billion. But with current expansion plans, the city is estimated to cost well over $10 billion. Upon completion, the Kampac Energy city will be one of the largest energy projects of its kind,” the company said in a statement. Kampac Oil said it had long been interested in investing in the Philippines. But it was only in 2013

that the group had announced plans to put up an energy complex. The proposed Kampac Energy City will comprise a non-commercial port, a township and a functioning city. It will also house three refineries, a petrochemical plant, a liquefied natural gas regasification facility and a water company. The project is also expected to generate at least 8,000 jobs. Kampac said the project is likely to

take up to 15 years for completion, with the first phase expected to be ready as early as 2018.




India ONGC to invest $176bn despite oil price slump Bloomberg + NewBase

India’s Oil & Natural Gas Corp, grappling with ageing fields, is prepared to sacrifice profits by retaining a plan to pump Rs11tn ($176bn) into a search for reserves despite the slump in crude. The decision sets India’s biggest explorer apart from global producers such as Chevron Corp, which are tightening budgets.

Crude’s drop has already taken a toll: ONGC’s profit fell the most in at least nine years in October through December, and the shares are down 4% in 2015. “We’ve decided not to cut any capital expenditure,” chairman Dinesh Kumar Sarraf said in an interview in New Delhi. “Higher spending in a low oil-price scenario will have an impact on our earnings. But we don’t have a choice.” ONGC by 2030 plans to spend a sum roughly equivalent to the size of Vietnam’s economy to find more oil, as Indian Prime Minister Narendra Modi seeks energy security. While investing as profits drop signals potential stress for the company, longer term ONGC could benefit as its output rises and oil prices recover, according to Emkay Global Financial Services. “We just hope crude prices will recover going ahead,” Sarraf said in the April 13 interview. “Our capex now will come to good use when we are back in days of higher prices.” ONGC shares rose as much as 3.7% to the highest in more than a month before closing up 3.3% at Rs327.65 in Mumbai on Thursday. The S&P BSE Sensex equity index fell 0.5%. The shares are down 22% since crude began sliding June 20. Brent crude has fallen 46% since June 20 to $62 a barrel. The US Energy Information Administration’s Short-Term Energy Outlook expects it to average $59 this year. Lower prices have squeezed margins for New Delhi-based ONGC, whose cost of production is about $40 a barrel. Net income halved to Rs35.7bn in the quarter ended on December 31 from a year earlier. “It’ll be a difficult job to sustain such exploration spending if earnings continue to fall,” said Dhaval Joshi, an analyst at Emkay in Mumbai. “But ONGC will have to explore as much as it can.” The state-run business currently pumps from 350 fields in India. Of those, 15 that account for 70% of




total production have crossed their peak levels of production, said its Exploration Director Ajay Kumar Dwivedi. “We’ll invest about Rs100bn on exploration during 2015-16,” Dwivedi said in an interview in New Delhi last week. “ONGC plans to drill 50 wells, including 10 shale wells, during the year.” The explorer will focus on oil-bearing areas in the southern part of India, including the Cauvery, the Krishna- Godavari, the Cambay and the western offshore basins. Work has started in about 80 new local fields that can help push up production, Dwivedi said.

The slide in crude prices has one silver lining for ONGC: a lower subsidy burden. The company pays a part of the subsidy the government gives to oil refiners to compensate them for selling cooking fuels below market rates. That bill drops along with the decline in the cost of crude. Compared with other explorers around the world, ONGC is “insulated” as a lower subsidy payout can bolster profit margins, said Gagan Dixit, a Mumbai-based analyst with Quant Broking Pvt., adding he’s “very bullish” on the company. ONGC’s crude output for the year ended March 31 rose for the first time in eight years and the company projects another increase thanks to newer fields. “Our exploration efforts will be aimed at improving production to help fill the drop in output from the mature fields,” said Dwivedi. “We are adding new reserves in established basins that can be put to production quickly.”




India nuclear sector trickles down

India’s burgeoning civil nuclear power ambitions are creating more opportunities for domestic and foreign businesses, despite the huge challenges the sector faces. India has made significant progress in its nuclear power programme recently as it strives to meet the growing appetite for power.

Canada on Wednesday announced a C$350 million (Dh1.04 billion) deal to supply uranium to India. Canada’s Cameco, one of the world’s biggest producers of uranium, is set to provide 7.1 million pounds of the fuel to India over the next five years.

Canada had previously banned uranium exports to India after it used Canadian technology to develop a nuclear bomb in the 1950s. India is also close to reaching a civil nuclear agreement with Australia over uranium fuel supply.

A few days earlier, the Nuclear Power Corporation of India (NPCIL) signed an agreement with Areva, a French firm, related to the Jaitapur nuclear power plant in Maharashtra, which has suffered setbacks

over issues including pricing of the project and liability laws. This is a significant step in allowing the project to move forward. Areva also signed a deal with the Indian engineering company Larsen & Toubro (L&T), which would lead to some of the key nuclear equipment for the plant being manufactured locally.

“This partnership will add new dimensions to the capabilities of India’s manufacturing sector in the nuclear business,” said MV Kotwal, the director and president of heavy engineering at L&T. In January, the Indian prime minister Narendra Modi reached a breakthrough deal with the US president Barack Obama to pave the way for more investment into nuclear energy.

These developments come despite strong opposition among many to the development of India’s nuclear power capabilities, largely because of concerns over safety.

India’s demand for energy is rapidly rising amid a growing economy and urbanisation, meaning it needs to boost production capabilities to improve its energy security. There is already a shortage of power. Many parts of the county suffer frequent blackouts and about 300 million people do not have access to electricity, according to the World Bank.




Coal is the country’s biggest source of power, accounting for about two-thirds of its electricity production. Despite expansive natural reserves of coal, the country is heavily dependent on costly imports of the fuel.

The need for energy is only expected to surge over the coming years, and nuclear power is considered by authorities to be part of the solution to the problems. To this end, Mr. Modi has urged the department of atomic energy to triple nuclear power capacity by 2024 from 5,780 megawatts. India is aiming for nuclear power to produce 25 per cent of its electricity by 2050.

“India’s dependence on imported energy resources and the inconsistent reform of the energy sector are challenges to satisfying rising demand,” says the World Nuclear Association. “India’s fuel situation, with a shortage of fossil fuels, is driving the nuclear investment for electricity.”

But it adds that the nuclear targets would require “substantial uranium imports”.

Trade bans have held back the industry, restricting imports of uranium. This has led to a “largely indigenous” development of the industry.

“India’s nuclear energy self-sufficiency extended from uranium exploration and mining through fuel fabrication, heavy water production, reactor design and construction, to reprocessing and waste management,” the World Nuclear Association says.

“Because of earlier trade bans and the lack of indigenous uranium, India has uniquely been developing a nuclear fuel cycle to exploit its reserves of thorium. Since 2010, a fundamental incompatibility between India’s civil liability law and international conventions limits foreign technology provision. India has a vision of becoming a world leader in nuclear technology because of its expertise in fast reactors and thorium fuel cycle.”




Oil Price Drop Special Coverage

Oil supplies on 2015 peaks, Price jumps 9.6pc on the week Reuters + NewBase

Crude futures fell from 2015 peaks in choppy trading on Friday, but Brent's 9.6 per cent weekly gain was its biggest in more than five years as Middle East turmoil and signs of lower US production lifted prices. US crude also retreated from its 2015 high, but registered a fifth straight weekly gain, which at 7.9 per cent was the biggest since it jumped 13.5 per cent in the week to Feb. 25 2011. Brent June crude fell 53 cents to settle at $63.45 a barrel, having swung from $62.95 to $64.50 after hitting $64.95, its 2015 high, on Thursday. Brent's second straight weekly gain, the fourth in five weeks, was its biggest since a 9.9 per cent rally in the week to Oct. 16, 2009. US May crude, expiring on Tuesday, fell 97 cents to settle at $55.74. It reached a 2015 peak of $57.42 on Thursday. Yemen's escalating conflict sparked Thursday's rally and on Friday military units protecting the Masila oilfields withdrew. While Yemen is not a major oil producer, the conflict raises concern about risks to supply from the region's major exporters, especially Saudi Arabia. Oil rallied Wednesday on data showing the smallest weekly US inventory build since Jan. 2. That followed reports of US production beginning to pull back as the price retreat since June weighs on producers. Oil initially pared losses after Baker Hughes data showed US oil drilling rigs fell for a record 19th straight week, although this week's 26-rig drop was lower than the loss of 42 last week.




"Futures markets are always forward-looking and as a result, the market has seen a focus shift away from rising stock levels ... and toward production leveling where significant uncertainties lie ahead," Jim Ritterbusch, president of Ritterbusch & Associates, said in a note. Prices also drew support from traders closing out short positions, encouraged by strong technical factors, said Rob Montefusco, senior oil trader at Sucden Financial. "Technically, Brent is looking in better shape at the moment," he said. Brent and US crude pushed above their 100-day moving averages this week. Brent's 50-day average of $58.18 moved above its 100-day of $57.90 on Friday, a bullish move called a "golden cross" by chart watchers. That puts the 100-day average as a major new support level. Speculators raised their net long US crude futures and options positions in the week to April 14, the US Commodity Futures Trading Commission said.

U.S. Oil-Rig count Extends to 19th Week With Drop of 26 BloomBerg + NewBase

U.S. crude explorers idled rigs for an unprecedented 19th straight week, bringing drilling in America’s oil fields to the lowest level since November 2010.

Rigs targeting oil in the U.S. fell by 26 to 734, the Houston-based field services company Baker Hughes Inc. said Friday. Producers idled nine in the Mississippian of Oklahoma and Kansas, the steepest decline of all major oil plays. The Permian Basin of Texas and New Mexico, the nation’s biggest oil field, dropped five.

The six-month retreat in oil drilling is bringing the U.S. shale boom to a halt, with crude production falling twice in three weeks and the government projecting a

decline in output from tight-rock formations next month. The country has lost more than half of its oil rigs since October as drillers cut spending and let go of thousands of workers following the worst collapse in prices since 2009.




The spending curbs “are starting to impact supply in both North America and internationally, and supply is expected to tighten further in the second half of the year,” Schlumberger Ltd. Chairman and Chief Executive Officer Paal Kibsgaard said in a statement on Thursday. “A recovery in activity will fall well short of reaching previous levels.”

The U.S. benchmark West Texas Intermediate oil for May delivery declined 97 cents to settle at $55.74 a barrel on the New York Mercantile Exchange, down 48 percent from the 52-week high of $107.73 reached June 20.

Production Slips

U.S. oil production fell 20,000 barrels a day to 9.38 million in the week ended April 10, erasing an 18,000-barrel gain in the seven days prior, Energy Information Administration data show. The agency said in an April 13 report that output from tight-rock formations such as North Dakota’s Bakken shale will decline 57,000 barrels a day in May.

“If that pace is maintained for a year, U.S. oil production would fall by over a million barrels a day in 12 months,” James Williams, president of energy consulting company WTRG Economics, said in an e-mailed report on Thursday. “The bottom line is that the Saudi policy is working.”

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of the world’s oil, has resisted calls to curb production since deciding in November to maintain output levels. Saudi Arabia pumped close to a record amount of crude oil in March, leading the biggest surge in OPEC output in almost four years, the International Energy Agency said.




Decline Forecast

Shale producers including ConocoPhillips and EOG Resources Inc. have predicted U.S. production will start declining before the end of the year. Goldman Sachs Group Inc. said last week that U.S. production is showing signs of peaking, and Standard Chartered Plc said April 13 that shale output is already falling and that declines will exceed 70,000 barrels a day in June.

Schlumberger reported a 19 percent revenue drop in the first quarter because of what Kibsgaard described as “the severe decline” in North America land drilling that occurred more abruptly than the company anticipated. The company is eliminating 11,000 more positions, bringing its total job cuts to 20,000.

U.S. rigs drilling for natural gas fell by eight this week to 217. The total U.S. count, which includes three miscellaneous rigs, fell by 34 to 954, the fewest since 2009.

“I don’t think we’re going to hit bottom until next month,” Williams said. “And it may be late next month before we do.”

Canada’s oil sands determined to weather price plunge Oman Observer AFP + NewBase

Falling oil prices have slowed the phenomenal expansion of Canada’s oil sands extraction trade but the industry remains optimistic it is only a temporary setback. The price of oil fell $60 from June 2014 to January 2015, resulting in a massive budget deficit for the Canadian province of Alberta which will receive C$7 billion ($5.7 billion) less in energy royalties this year, forcing the local government to hike taxes and cut services for the first time in a generation.

It has been a tremendous shock for this oil-rich region after a decade-long boom that saw home prices soar, a new car in every driveway and jobs for everyone. “The downturn has been brutal,” said Brad Herald, vice-president of the Canadian Association of Petroleum Producers (CAPP).




Oil company executives initially expected the global energy slump to be temporary and oil prices to soon bounce back, but they now admit a return to prosperity could take longer than imagined, commented Robert Schulz, a professor of petroleum land management at the University of Calgary.

Herald acknowledged the initial forecasts were wrong. However, he added: “We’ve seen ups and downs. If you look back at the past 30 years, we had five or six dips in the market, they all happened because of slightly different reasons but the fundamentals of supply and demand usually get restored.” In the meantime, the industry has been slimming its liabilities, laying off workers and putting new mega-projects on hold. Over the past six months, Canadian firm Suncor shed 1,000 jobs in the Alberta oil sands. American firm ConocoPhilips and its partner Paris-based Total cut 200; China’s Nexen slashed 350; and Anglo-Dutch group Shell announced 300 layoffs. From September to February, a total of 20,000 jobs in the oil sands were lost, according to the Canadian government statistical agency. “When companies are taking decisions on personnel, (firing people) is the last thing they want to do,” Herald commented. Total, meanwhile, has suspended development of two out of four oil sands bitumen deposits. Chief executive Laurent Maurel said the two on the chopping block were simply “not financially viable” at current oil prices. In his Calgary office, surrounded by maps and geological surveys of the oil sands, however, he insisted that foreign interest in Canadian oil remains strong. Each year, global oil reverses diminish “by 4.5 billion barrels per day, and new deposits must be mined or extracted to meet growing consumption,” Maurel explained.




“The 2015 price of oil is irrelevant. What matters is what happens in the long-term,” he said. Despite recent setbacks, he noted, Total remains committed to extracting 130,000 barrels of oil per day from the oil sands by 2018, representing five per cent of the company’s global output. The petroleum industry has forecast new investment in the oil sands to fall this year by one-third, to C$46 billion. Long-term forecasts unveiled in February, however, point to a doubling of oil sands output to about six billion barrels per day by 2035. This year and next, the industry will likely see small increases of 150,000 barrels of oil per day, before it picks up. The double whammy of low oil prices and a lengthy delay in obtaining US permits to build the Keystone XL pipeline connecting the oil sands to refineries in the US Gulf Coast, and other proposed pipelines to Atlantic and Pacific ports in order to reach foreign markets, are widely seen as minor obstacles that cannot hold back a nation hellbent on exploiting its natural resource wealth. “When we announced Keystone in 2008, oil prices were below $40 per barrel. They rose to $100 and came down again, so we’re less influenced by short terms spikes,” said Mark Cooper, a spokesman for pipeline builder TransCanada. “Our shippers will remain committed to Keystone.” Even as the sector struggles in landlocked Alberta, it is eyeing another potential new energy source offshore and further north. The US Geological Survey thinks the Arctic seabed could hold 13 per cent of the world’s undiscovered oil and up to 30 per cent of its hidden natural gas reserves. Several Arctic oil exploration expeditions were recently suspended. But Herald said: “The sector will remain interested in (the Arctic) for decades to come given the sheer size of the potential deposits.”




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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 April 2015 K. Al Awadi







Economy & Finance

New base 585 special 19 april 2015