New base special 20 may 2014

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NewBase 20 May 2014 Khaled Al Awadi

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Saudi Aramco plans for retail Petrole Station Outlets By Staff writer-Arabian Business

Energy giant Saudi Aramco is reportedly planning to enter the retail market by setting up gas stations fully owned by the company.

The move comes as part of the firm’s strategy to become an integrated energy company that enters into more business ventures, including petrochemicals and the sales of refined products, Saudi daily Arab News reported on Monday. “We had already begun implementing this project by the end of last year,” the paper quoted from the company’s annual report. No exact date was disclosed for when the first Saudi Aramco retail operation will start but the company said it is weighing several strategic options to expand the company’s operations. Aramco has already received approval for establishing a fully owned company for retail services, Arab News added. The new company is licensed to build, operate and maintain service stations in selected areas. The company will not only run gas stations but also supermarkets and other services, the report said. Saudi Aramco has also indicated that it could hand services other than fuel supply to potential partners who could add value to the company and its trademark.

Aramco gas station proposal design Aramco's Gas Station




Fuel subsidies rising in emerging markets BYREUTERS

Fossil fuel subsidies cost governments in emerging markets more than $500 billion every year and

are a major contributor to climate change, according to the International Energy Agency (IEA) and

International Monetary Fund (IMF). The biggest subsidies are concentrated in the Middle East,

North Africa, Asia and parts of Latin America, according to the IEA's Fossil Fuel Subsidy Database.

Moreover energy-exporting countries

accounted for three quarters of all

consumption subsidies in 2012, according

to the IEA and Opec members account for

more than half the world's subsidies.

Subsidies account for 82 per cent of the

cost of electricity and fuel in Venezuela,

80 per cent in Libya, 79 per cent in Saudi

Arabia, 74 per cent in Iran, and 56 per

cent in Iraq and Algeria. By contrast, the average rate of subsidy is just 18 per cent in India and

three per cent in China.

In cash terms the world's biggest subsidies are in Iran, Saudi Arabia and Russia, all of which are

major oil producers. Subsidies cost these three countries a combined total of $180 billion per year

in 2012.

Rational pricing

In September 2009, the leaders of the world's largest economies meeting at the G20 summit in

Pittsburgh committed themselves to phase out inefficient fossil fuel subsidies over the medium

term.

According to the IEA, phasing out subsidies for oil, gas and electricity and aligning prices with

international benchmarks would cut growth in energy demand by five per cent and carbon dioxide

emissions by two billion tonnes a year by 2020 — equivalent to the current combined emissions of

Germany, France and the UK. Raising gasoline, diesel and kerosene tariffs to market levels would

save 4.7 million barrels of oil a day by the end of the decade ("World Energy Outlook 2011").

Cutting subsidies would also dramatically improve government budgets. Of 58 countries which

subsidised gasoline, diesel or kerosene in 2010, 46 were running budget deficits, and in 27 cases

the deficit amounted to more than 3 percent of GDP, the IMF explained in a staff note highly

critical of the burden on taxpayers. Halving subsidies would have reduced the average deficit from

2.1 per cent of GDP to just 0.8 per cent ("Petroleum product subsidies: cost, inequitable and

rising" Feb 2010). Subsidies often crowd out spending on infrastructure, development and social

welfare. Indonesia spends more on fuel subsidies than on education or healthcare.

In cash terms, the world’s

biggest subsidies are in Iran,

Saudi Arabia and Russia, all of

which are major oil

producers.




Venezuela sells gasoline for just six US cents per gallon. The cost in lost export revenues is $30

billion, more than the combined value of all state spending on social programmes, Jim Krane at

Rice University explained in a briefing paper published this month ("Navigating the perils of energy

subsidy reform" May 2014).

Waste and harm

Governments justify subsidies on the grounds that they alleviate poverty and promote economic

development, but neither claim is really true. Most of the benefits accrue to the middle class rather

than poor because middle class families have more electrical appliances and their own cars.

In Indonesia, for example, the top 40 per cent of high-income families absorb 70 per cent of

subsidies, while the bottom 40 per cent of low-income families receive only 15 per cent of the

benefits ("The scope of fossil fuel subsidies in 2009" Nov 2010).

Subsidies also promote wasteful consumption. Saudi Arabia's artificially cheap gasoline and

electricity have made the country one of the highest per-capita energy users in the world and

threaten to restrict the amount of oil left for export. Another problem is fuel adulteration. Most

countries subsidise kerosene used in cooking and lighting more heavily than gasoline and diesel

used to fuel vehicles. But the resulting price gap encourages the illegal blending of kerosene into

the diesel supply. Policies aimed at providing cheap cooking fuel for the poor end up helping

middle class families drive motor cars.

And subsidies promote smuggling. Diesel sells for as little as 12 US cents per litre in Iran




compared with $1.20 per litre across the border in Pakistan. As a result the IEA estimates 60,000

barrels of diesel are smuggled out of Iran to Pakistan and Afghanistan every day.

Social compact

The theoretical case for reducing or eliminating subsidies is overwhelming, but in practice

progress has been slow. The fact that subsidies are concentrated in exporting countries and

typically benefit middle-income and lower middle-income groups is no accident. Subsidies have a

political dimension that makes them especially hard to reform.

Cheap electricity and fuel is often an important part of the social compact between governments

and the population. "In major energy-producing countries consumption subsidies that artificially

lower energy prices are seen as a means of sharing the value of indigenous natural resources,"

the IEA explains.

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Indonesian Sumba island hopes to spark green power revolution

Until two years ago, most people in Kamanggih village on the island of Sumba had no power at all. Now 300 homes have access to 24-hour electricity produced by a small hydroelectric generator in the river nearby.

"We have been using the river for water our whole lives, but we never knew it could give us electricity," Adriana Lawa Djati told AFP, as 1980s American pop songs drifted from a cassette player inside. While Indonesia struggles to fuel its fast-growing economy, Sumba is harnessing power from the sun, wind, rivers

and even pig dung in a bid to go 100 percent renewable by 2025.

The ambitious project, called the "Iconic Island", was started by Dutch development organisation Hivos and is now part of the national government's strategy to almost double renewables in its energy mix over the next 10 years. Sumba, in central Indonesia, is an impoverished island of mostly subsistence farmers and fishermen. Access to power has made a huge difference to people like Djati.

"Since we started using electricity, so much has changed. The kids can study at night, I can weave baskets and mats for longer, and sell more at the market" she said. While only around 30 percent of Sumba's 650,000 people have been hooked up to the power grid, more than 50 percent of electricity used now on the island comes from renewable sources, government data show.

As more communities gain access to power for the first time, the Iconic Island project envisages entire communities skipping dirty, fossil fuel-based energy altogether and jumping straight to green sources.

Hivos's field coordinator for Sumba, Adrianus Lagur, said that the NGO hoped the project would be replicated by other islands in the same province of East Nusa Tenggara, one of the country's poorest. "The idea is not to give handouts. We support the building of green energy infrastructure, but it's up to the people to manage this resource and keep it going," Lagur said

National energy crisis

Indonesia is the world's fourth most populous country, with around 250 million people, and is Southeast Asia's biggest economy. Sumbanese grandmother Elisabeth Hadi Rendi attends to her pigs, the manure from which is fed into a mini bio-gas system generating methane - enough to supply her household cooking and lighting needs in Waingapu town on Sumba island

Yet it is one of the region's most poorly electrified, partly because it sprawls over 17,000 islands of which more than 6,000 are inhabited. Spreading infrastructure over such a vast area is no easy task. Despite




enjoying economic growth of around six percent annually in recent years, Indonesia is so short of energy that it rolls out scheduled power cuts that cripple entire cities and sometimes parts of the capital.

To keep up with growth, Indonesia is planning to boost its electricity capacity by 60 Gigawatts (GW) over a 10-year period to 2022. Twenty percent of that is to come from renewable sources. "Indonesia has been a net importer of oil for years, and our oil reserves are limited, so renewables are an important part of our energy security," said Mochamad Sofyan, renewable energy chief of state electricity company PLN.

Hefty electricity and fuel subsidies have also been a serious burden on the state budget and a drain on the economy for years. But small-scale infrastructure, like mini hydroelectric generators—known as "microhydro plants"—and small wind turbines that power Sumba are not enough to close the national energy gap, even if they were built on all Indonesia's islands.

Massive hydropower and geothermal projects, which use renewable energy extracted from underground pockets of heat, are needed to really tackle the nationwide problem, Sofyan said. "Indonesia has enormous hydropower potential because it rains six months of the year in most parts. So that will be a big part of the answer to the energy shortage," Sofyan said.

Indonesia, one of the world's most seismically active countries, also has the biggest reserves of geothermal, often near its many volcanoes and tectonic plate boundaries. It is considered one of the

cleanest forms of energy available. But geothermal is largely untapped as legislation to open up exploration moves slowly and the industry is bound in red tape.

A Sumbanese resident checks a mini hydroelectric generator built beside a river dam in Kamanggih village in Sumba

island, Indonesia, which provides electricity to the local community, March 19, 2014

Sumbanese women weave baskets

uder a lamp powered by electricity

from mini hydroelectric

generators—known as "microhydro

plants" built beside a river dam in

Kamanggih village in Sumba island,

Indonesia, March 19, 2014




Iraq: Oryx Petroleum announces update for Demir Dagh in Kurdistan

Source: Oryx Petroleum

Oryx Petroleum Corp has announced the test results for the Demir Dagh-3 well ('DD-3') and Demir Dagh-

5 well ('DD-5') appraisal in the Hawler license area in the Kurdistan Region of Iraq. Oryx Petroleum is the operator and has a 65% participating and working interest in the Hawler license area.

Highlights:

DD-3

• All four tests successfully flowed oil with the highest achieved sustained rate exceeding 4,000 bbl/d

• First successful test of Butmah formation in the Lower Jurassic at Demir Dagh

• Second successful test of the Adaiyah formation in the Lower Jurassic at Demir Dagh

• Third successful test of the Cretaceous reservoir at Demir Dagh

• Crude characteristics and porosities similar to other wells drilled at Demir Dagh

DD-5

• Logging data and drilling fluid losses experienced during drilling indicated the presence of

hydrocarbons and a permeable fracture network with matrix porosity similar to other Demir Dagh

wells

• Only small quantities of oil flowed to surface during testing due to the inability to re-connect to the

permeable fracture network indicated by logging data and losses




2014 Demir Dagh Appraisal and Development

• First production on target for this quarter and full year 2014 production guidance unchanged

• Demir Dagh-6 well (“DD-6”) recently spudded and expected to reach total depth in early Q3 2014

• DD-6 and four additional development wells to be drilled in 2014 as deviated wells to Lower Cretaceous

• 3D seismic campaign to commence in June 2014

Commenting today, Henry Legarre, Oryx Petroleum’s Chief Operating Officer, stated:

'We are very pleased with the results of DD-3. We successfully flowed oil from the well´s primary targets in the Cretaceous and Lower Jurassic reservoirs. The results confirmed the presence of similar crude qualities for all reservoirs tested as experienced at other wells drilled at Demir Dagh. DD-3 is being completed as a Cretaceous producer together with DD-2 and DD-4 and first production will be achieved soon. Our production guidance for 2014 remains unchanged.

At DD-5 there was evidence of a permeable fracture network, hydrocarbons and matrix porosity similar to observed in the Cretaceous at other Demir Dagh wells. However, the well tested only small quantities of oil as it was unable to re-connect to the permeable fracture network. DD-5 and DD-3 results will be considered together with results and data obtained from other Demir Dagh appraisal activities in the Corporation´s year end reserves and resources update.

We have now spudded DD-6 and expect to drill four additional development wells at Demir Dagh this year in order to increase production capacity and continue delineating the field. DD-6 will be the first deviated well in Demir Dagh which is generally dominated by vertically oriented fractures. We anticipate DD-6 will provide greater information regarding the fracture network’s characteristics while also allowing us to better access the fracture network for future production.'




Norway: Tullow Oil receives consent to drill Lupus exploration well Source: Petroleum Safety Authority Norway

Tullow Oil Norge has received consent for exploration drilling using the Borgland Dolphin mobile drilling

facility to drill the Lupus exploration well 31/10-1 in production licence PL507. The well is located in the

northern part of the North Sea, around 110 km west of Sotra and 36 km south of Oseberg Sør. Water depth

at the site is 121 metres. The facility’s position during drilling will be: 60° 05' 10.414" N 03° 00' 04.012" E.

Partners in the well are Tullow Oil (Operator 70%), Explora

(20%) and Ithaca Energy (10%).

Drilling is planned to begin in May/June 2014, with a duration of around 39 days, depending on whether a discovery is made.

Borgland Dolphin is a semi-submersible drilling facility of the Aker H-3 type. It was built at Harland & Wolff in Belfast, Northern Ireland in 1977 and underwent an

extensive upgrade in 1999. The facility is owned by Borgland Dolphin Pte Ltd and operated by Dolphin Drilling A/S. It received Acknowledgement of Compliance (AoC) in September 2004.

Borgland Dolphin




Statoil recommends power from land for Utsira High development Source: Statoil

A majority in the Norwegian Energy and Environmental Committee on Friday presented a proposal to the Storting (Norwegian Parliament) which involves the supply of power from land to the entire Utsira High. Power from land to all of Utsira is one of three options in the concept study for Johan Sverdrup. Statoil and partners are recommending a two-phase solution from an industrial, financial and environmental standpoint.

The committee spokesman, who represents the Labour Party, communicates an intention of not creating a situation that will delay Johan Sverdrup. It is important for Statoil that the scheduled progress in developing the Johan Sverdrup field is maintained. One year’s delay on Sverdrup will entail a pre-tax loss, in present value, of NOK 20 billion.

Together with its partners, Statoil will consider whether

the consequences of this proposal could lead to delay. It is unclear how the requirement to lay cables between the installations from the Sverdrup start-up phase will impact on the concept chosen and the project’s progress.




Lamprell delivers jack-up rig to NDC Press Release - Lamprell

Lamprell, a UAE-based provider of diversified engineering and contracting services to the

onshore and offshore energy industry, announces the completion of construction on a further

jackup drilling rig, and its delivery to Abu Dhabi’s National Drilling Company (NDC), on time

and on budget.

The contract for this latest NDC rig was signed in October 2011 and this is the fourth rig in a series of six identical rigs being built and delivered by Lamprell to NDC. All six rigs have been or will be designed according to the Cameron LeTourneau Super 116E (Enhanced) Class design. The new rig has been delivered to the client following the delivery of the third drilling unit, “Qarnin”, in February of this year. The remaining two rigs for NDC are all proceeding on schedule and will be delivered as planned in late 2014/early 2015.

This new rig for NDC is the ninth Super 116E jack-up drilling unit that Lamprell has completed for various clients during the last six years. The jack-up rig will be officially named, and completion will be marked, at a ceremony at Lamprell’s Hamriyah facility in the UAE towards the end of May, before departing for operations at its drilling location in Abu Dhabi.

NDC Chief Executive Officer Abdalla Saeed Al Suwaidi said: “NDC is committed to continuous

improvement and sustainable growth. Significant achievements have been made during the expansion of our

company fleet and the development and quality of our services. These improvements were made to meet the

increased demand for drilling services and to strengthen our capability to perform all types of drilling

operations with complete efficiency and competency.

“This new rig, similar to the previous three rigs already delivered by Lamprell, is a significant addition to

NDC’s offshore rig fleet and will support our efforts in meeting our clients’ needs and expectations, now

and in the future, by providing superior, competitive and quality services.”

“I would like to express my appreciation to Lamprell for their efforts and commitment to HSE and Quality.”

Commenting on the delivery, Jim Moffat, Chief Executive Officer, Lamprell, said: “Lamprell continues to

execute well in its core markets, building on the successes in 2013, and in the key new build jack-up rig

market. I am pleased to announce the completion and delivery of this fourth jack-up rig to our largest client,

NDC. This is the third major project completion of 2014 where we have delivered on time and within

budget, and we look forward to working closely with NDC management and the project team to ensure

timely delivery of the remaining two rigs.”




WorleyParsons nets TANAP job Press Release, May 19, 2014

TANAP has awarded WorleyParsons a significant five year contract for the supply of Engineering, Procurement and Construction Management (EPCM) services for the 1,841km Trans Anatolian Natural Gas Pipeline Project which has an estimated total project cost of USD 11.7 billion.

TANAP is designed to transport Caspian natural gas from the Georgian-Turkish border to Turkey’s western border with Greece. Initially, it will carry production from Azerbaijan’s Shah Deniz Stage 2 project.

The contract is for the provision of project management, co-ordination, planning, design, engineering, construction management, contracting, procurement, project controls and other services for construction of the new pipeline and pipeline facilities including compressor stations. Typically EPCM fees for pipeline projects are significantly lower than those for complex process projects.

TANAP General Manager, H. Saltuk DÜZYOL, said: “This contract is critical to the success of this major

link in the Southern Gas Corridor which is regionally significant to meet future gas demand in both Turkey

and the European Union. WorleyParsons is well qualified to perform the required services, and has

demonstrated their commitment to working collaboratively with all project stakeholders to achieve the

project objectives.”

WorleyParsons’ Chief Executive Officer, Andrew Wood, said: “WorleyParsons is delighted with the award

of this strategically important project. We look forward to supporting TANAP in the successful delivery of

this project.”




Saudi APC to join SK Gas in $900 million South-Korea Ulsan Propylene

The downstream industrial group Advanced Petrochemical Company (APC) from Saudi Arabia and the midstream company SK Gas Corporation Ltd (SK Gas) from South-Korea signed a memorandum of understanding (MOU) to build a propane dehydrogenation (PDH) plant in Ulsan on the southwest coast of South Korea.

Headquartered in Damman, Saudi Arabia, with main operations in Al-Jubail Industrial City, APC is a petrochemical company focusing in the production of polypropylene.

After licencing CB&I Lummus Catofin PDH technology, APC is producing 450,000 tonnes per year of polypropylene, one of the most commonly used building block of the petrochemical industry.

Based in Seoul, South Korea, SK Gas belongs to the Chaebol SK Group to focus on the storage and distribution of liquid petroleum gas (LPG) such as butane and propane.

Very active in Asia, SK Gas is operating LPG import terminals and distribution networks in China, Japan, Malaysia, Singapore and South Korea.

Despite the fast growing market in Asia for LPG, the added value on storing and distributing remains rather limited while the gas prices continue to decline in this region on the upstream side and the demand for petrochemical products evolves steadily on the downstream side.

In this context, SK Gas is willing to expand its added value in integrating the much more rewarding and stable activities of petrochemical transformation.

CB&I Lummus completed APC-SK Gas Ulsan PDH

As the first step in that direction, SK Gas selected CB&I Lummus in March 2013 to provide engineering services for a greenfield propane dehydrogenation project:

- Catofin PDH technology licence

- Front end engineering and design (FEED)

For its first production unit to be built, SK Gas selected Ulsan in South Korea.

Designed to produce 600,000 t/y of propylene, SK Gas Ulsan PDH unit should be the largest ever built in South Korea.




From the costs estimates provided by CB&I Lummus from the FEED, this world-scale Ulsan PDH projects should require $900 million capital expenditure.

Then SK Gas second step to move downstream into the petrochemical production was to find a partner to provide the South Korean company with the expertise to build, own and operate such large scale facility.

In that respect, the Saudi company APC appeared as a perfect partner with a similar size and the experience to work with South Korean companies since its own polypropylene plant had been executed by Samsung Engineering.

According to the MOU signed between SK Gas and APC , should take a minimum of 25%

stake in the Ulsan PDH joint venture. As a third step, SK Gas and APC are expecting to enter full biding agreement in the next twelve months and start the engineering, procurement and construction (EPC) of the Ulsan PDH project in expecting the first production of polypropylene in 2016.




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Your partner in Energy Services

Khaled Malallah Al Awadi, MSc. & BSc. Mechanical Engineering (HON), USA ASME member since 1995 Emarat member since 1990

Energy Services & Consultants Mobile : +97150-4822502

[email protected] [email protected]

Khaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 years of experience in theof experience in theof experience in theof experience in the Oil & Gas sector. CurrentOil & Gas sector. CurrentOil & Gas sector. CurrentOil & Gas sector. Currently working as ly working as ly working as ly working as

Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for

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the local authorities. He has become a reference for many of the Oil & Gas Conferences held inthe local authorities. He has become a reference for many of the Oil & Gas Conferences held inthe local authorities. He has become a reference for many of the Oil & Gas Conferences held inthe local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE andthe UAE andthe UAE andthe UAE and Energy program broadcasted Energy program broadcasted Energy program broadcasted Energy program broadcasted

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NewBase 20 May 2014 K. Al Awadi

Economy & Finance

New base special 20 may 2014