Microsoft word new base 658 special 05 august 2015

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NewBase 05 August 2015 - Issue No. 658 Senior Editor Eng. Khaled Al Awadi

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

UAE savings from fuel price reform to swell in coming years, says IMF Reuters + NewBase

The government of the UAE will save only a modest amount of money from reforms to its fuel price system in 2015 but the savings are likely to rise sharply in coming years, an International Monetary Fund official said yesterday.

Last week the government shifted from a system of fixed, subsidised domestic prices for gasoline and diesel to adjusting prices monthly in response to global trends. In the first adjustment, gasoline rose 24% and diesel fell 29%.

It was the first big fuel pricing reform in a rich Gulf Arab oil exporting country for many years, and has aroused speculation that others in the region will follow suit to cut the burden of subsidies on state finances.

Kuwait, Oman and Bahrain are considering subsidy reforms; some analysts believe Saudi Arabia may eventually take action.

Zeine Zeidane, adviser in the IMF’s Middle East and Central Asia Department, estimated the UAE’s reform would save it about $500mn by the end of this year, or a little over 0.1% of gross domestic product.

But annual savings are expected to rise sharply over the medium term to around 0.6% of GDP, Zeidane told a conference call with reporters.

The IMF’s projections assume the UAE’s average crude oil export price will increase gradually from $61.5 a barrel this year to $67.2 next year and $75.0 in 2020.




Under the UAE’s new pricing formula, the government would no longer have to spend growing amounts of money to keep domestic fuel prices down as global oil prices climbed; it could let them rise, increasing the savings to its budget.

The IMF now expects low global oil prices to push the UAE’s consolidated state budget into a deficit of 2.9% of GDP this year, its first deficit since 2009.

Oil prices have dropped steeply in the last few weeks, with Brent crude currently around $50 a barrel, at its lowest levels since January, and Zeidane said this could result in a wider deficit than projected.

The IMF estimates a $10 drop in oil prices cuts the UAE’s fiscal balance by about 2.3 percentage points of GDP. Zeidane said that in addition to gasoline and diesel, there was huge potential for the UAE to save money by reducing natural gas subsidies, which he estimated to be worth about 3% of GDP. He said reform of the domestic natural gas pricing system would be possible in future.




Oman to study use of renewables in desalination Oman Obsorver

The Research Council has approved funding for research projects that aim to harness renewable energy sources for water desalination in the Sultanate — a move designed to alleviate the nation’s overdependence on energy-intensive gas-based desalination to meet soaring domestic water demand.

The initiative, according to a senior official, is a key part of the apex R&D institution’s newly unveiled Renewable Energy Research Strategy Programme. Funded by a grant running into several millions of Omani rials, the programme seeks to unlock the Sultanate’s immense renewable energy potential in support of economic, social and strategic national goals. “The Council’s vision is to encourage high quality scientific, experimental research to seek and propose real solutions for national challenges of renewable energy and energy efficiency,” said Dr Ahmed Said al Busaidi, Programme Manager of the Renewable Energy Research Programme. “Pilot research initiatives planned as part of this programme will enhance capacity building and knowledge transfer, as well as contribute to the comprehensive sustainable development of Oman,” he added. Examples of research proposals that will attract funding support from the Council include the following: (i) solar power member desalination using seawater (ii) solar photovoltaic powered reverse osmosis brackish water desalination, and (iii) solar powered multiple effect distillation using seawater.




Also of interest to the Council are research proposals that aim to enhance the performance of humidification and dehumidification units, and desalination technologies for irrigation, among other themes. The quest for sustainable technologies and cost-effective solutions in tackling surging potable water demand comes amid rising investment in gas-based desalination schemes, according to Dr Al Busaidi. “Over the past ten years, there has been a considerable increase in the number of desalination plants in operation in Oman, all of which are based on conventional energy resources. The higher the demand for water, the higher the demand for the desalination plants, because of the decline in ground water levels and low rainfall in the country,” he noted. “Water shortages are expected to contribute to increased energy problems, and environmental considerations such as global warming will add other significant pressures. Therefore, there is no realistic solution for a sustainable water and energy future without the substantial participation of renewables in general and, in particular, solar,” the scientist stressed. According to Oman Power and Water Procurement Company (OPWP), the sole procurer of all new power generation and related water desalination capacity under the Sector Law, water demand in the northern region (the Interconnected Zone and Sharqiyah Zone) is projected to increase by 6 per cent annually, from 226 million m3 in 2015 to 328 million m3 in 2021. In Dhofar Governorate, water demand to anticipated to grow at the rate of eight per cent annually from 88,000 m3/day in 2015 to 143,000 m3/day in 2021. Supplies from water desalination plants meet roughly 75 per cent of domestic potable water demand, with groundwater accounting for the rest.




Qatar’s crude production goes up: QNB The Peninsula

Qatar’s crude oil production rose to 642,000 barrels per day (b/d) in May 2015 from 635000 b/d in April. The production is expected to stabilise in the coming months. The Brent crude oil prices is also expected to average $56.2 per barrel, close to its average so far this year, QNB’s monthly economic monitor noted yesterday.

According to QNB’s research note, Qatar’s overall balance of payments recorded a small deficit in Q4, 2014 of $0.5bn. The current account surplus narrowed ($10.5bn in Q4, 2014) on lower hydrocarbon exports; the capital and financial account recorded a deficit of $9.5bn in Q4, 2014 . “We expect the current account surplus to shrink to $3.7bn in 2015 (4.6 percent of GDP) due to lower oil prices, before recovering slightly in 2016-17 in line with the recovery in oil prices,” the analysts said. Qatar’s international reserves rose to $42bn in June 2015 from $41.8bn in May. In months of prospective import cover, international reserves were stable at 7.5 months of imports. QNB expects the accumulation of international reserves to continue, reaching $46bn, or 8 months of import cover at end-2015. Bank deposits year-on-year growth accelerated to 8.9 percent in June 2015 from 7.7 percent in May. Public sector deposits contracted by 5.9 percent year-on-year in June; private sector deposits grew by 10.1 percent; non-resident deposits doubled, growing by 104.5 percent. “We expect double-digit deposit growth of 11.3 percent in 2015 reflecting strong population growth,” said. Bank assets growth accelerated to 11.2 percent in June from 7.9 percent in May, driven by strong lending growth. Foreign assets grew by 9.3 percent year-on-year, driven by expansion in credit;




while domestic assets grew by 11.4 percent, driven mainly by the growth in domestic credit (11.6 percent). Bank assets are expected to rise by 10 percent in 2015, increasingly driven by project lending.

The overall loan book rose to 13.4 percent year-on-year in June from 11.6 percent in May. Public sector lending contracted by 7 percent year–on-year while lending to the private and foreign sectors grew strongly by 25.7 percent and 31.7 percent respectively. “We forecast bank lending to grow by 9 percent in 2015, increasingly driven by project lending and the expanding population; as a result the loan to deposit ratio is expected to decline gradually to reach 106.5 percent in 2015,” the analysts said. The share of investment in GDP rose to 32.4 percent in 2014 from 28.6 percent in 2013 on rising capital spending from the government; the share of exports declined with lower oil prices. Nominal GDP grew by 4.1 percent in 2014, down from 6.1 percent in 2013, due to lower oil prices. QNB expects the shares of private consumption and investment to increase on high population growth and strong government investments; lower expected oil prices in 2015 should reduce the share of exports, before bouncing back in 2016. Qatar’s population grew by 10.4 percent year-on-year in July 2015 to reach 2.12 million. Male population rose 11.2 percent year-on-year, reaching 1.7 million in July while the female population increased by 7.6 percent year-on-year over the same period reaching 0.46 million. QNB expects Qatar’s ongoing investment programme to continue to attract expatriates, resulting in overall population growth of 7 percent in 2015. “We expect inflation to pick up as the growing population is projected to push up domestic inflation, offsetting slower foreign inflation. Inflation rose to 1.4 percent in June (0.9 percent in May),” it said. QNB projects interbank rates to rise with the expected hike in the US policy rates, which is likely to take place later this year.




Algeria is reforming its laws to attract foreign investment in hydrocarbons. Source: U.S. Energy Information Administration, International Energy Statistics (Faouzi Aloulou)

Algeria is the third-largest oil producer in Africa, after Nigeria and Angola, and the largest natural gas producer in Africa. However, production of both oil and natural gas has declined over the past decade. This declining production has led the Algerian government to amend its law regarding foreign investment in hydrocarbons in an attempt to attract the investment and technology improvements needed to help stop production declines.

In 2014, the national oil and gas company Sonatrach offered 33 blocks located in four sedimentary basins with high shale gas and oil potential. This auction resulted in Sonatrach signing five contracts with Repsol, Shell, Statoil, and Dragon Oil-Enel. By law, Sonatrach takes a mandatory majority share (at least 51%) of any resulting projects.

In May 2014, the Algerian Council of Ministers gave formal approval for foreign partners to join Sonatrach in the exploration and development of shale gas resources.

Algeria has large proved crude oil and natural gas reserves and abundant resources that are already connected to world markets through an extensive natural gas pipeline network. In addition, Algeria has a large shipping fleet that sends liquefied natural gas (LNG) from several liquefaction plants to customers in Europe and elsewhere.

Proved crude oil reserves totaled 12.2 billion barrels in 2014, with an additional 9.8 billion barrels of undiscovered oil and natural gas liquids (NGL) resources estimated by the U.S. Geological Survey (USGS), and close to 6 billion barrels of technically recoverable shale oil resources estimated by U.S. Energy Information Administration and Advanced Resources International (EIA/ARI). Proved natural gas reserves totaled 159 trillion cubic feet (Tcf) in 2014, with an additional 49 Tcf of undiscovered natural gas resources estimated by USGS and more than 700 Tcf of technically recoverable shale gas resources estimated by EIA/ARI.

Early this year, Sonatrach announced plans to spend $64 billion, or 70% of its total investment program from 2015 to 2018, in upstream activities to reverse the decline in crude oil and natural gas production in Algeria. Sonatrach set a target to increase gross hydrocarbon output from 1,429




million barrels of oil equivalent (MMBOE) in 2014 to 1,649 MMBOE by 2019 (from 535 to 616 MMBOE of oil and from 894 to 1,034 MMBOE of natural gas).

During the past three years, Sonatrach intensified its exploration activities by drilling 275 oil and natural gas wells and by seismically mapping large areas of the country, with an estimated investment of $30 billion. Sonatrach also conducted its own shale resource assessment and started exploration activities. Sonatrach's first two vertical shale exploratory wells drilled in 2012 confirmed the potential for shale gas. Since 2014, Sonatrach has been engaged in a pilot project in the shale gas-rich Ahnet basin to drill, hydraulically fracture, and analyze three horizontal wells with up to 14 hydraulic fracturing stages.

Although the government seeks to reduce the country's dependence on oil and natural gas revenue, it has also made repeated calls for more investment in the sector. However, civil unrest and some opposition to the government's commercialization of shale resources may present obstacles to attracting foreign investment. Security is also a major concern, particularly following the attacks that took place at the Tigantourine natural gas processing plant in January 2013 in Illizi Province, near Algeria's eastern border with Libya.




Vietnam: High boost in Electricity capacity on all Coal, nuclear, renewables Source: IEA, 2013 Vietnam Country Nuclear Power Profile

Vietnam is poised to significantly transform its electrical power generation mix over the next two decades as it modernizes the country's agrarian economy to become a more industrialized nation. To accommodate greater industrial expansion and to support energy security goals, Vietnam is significantly increasing its

total electricity generating capacity. As part of its capacity expansion, Vietnam plans to add substantial coal-fired capacity and also plans to build the first nuclear reactors in Southeast Asia and the first offshore wind farm in Asia.

Recently, Vietnam's rapid economic growth, industrialization, and export market expansion have been accompanied by increased domestic energy consumption. Vietnam's General Statistics Office estimates that electricity demand will continue to grow at recent annual growth rates of 10%-12%, rising from 169.8 terawatthours (TWh) in 2015 to 615.2 TWh by 2030. In its 2013 Country Nuclear Power Profile, submitted to the International Atomic Energy Agency (IAEA), Vietnam forecast a 2015 generation capacity of a little more than 40 gigawatts (GW), increasing to nearly 140 GW to meet projected demand in 2030.

Vietnam's fuel mix for electricity includes:

• Coal. In 2014, annual coal consumption was 19.1 million tons, a 21% increase over 2013. Coal consumption

has continued to increase in 2015 as unseasonably hot weather contributed to a decline in hydropower

generation. Vietnam is still in the process of developing its coal-mining sector and must import relatively

higher-priced coal. State-owned PetroVietnam (PV) is seeking to purchase 11 million tons of coal per year

starting in 2017 to supply Vietnam's domestic power industry.

• Natural gas. Increased foreign investment during the past decade resulted in greater natural gas

exploration, significantly increasing Vietnam's proved natural gas reserves. The country currently produces

as much natural gas as the nation consumes, but PV expects a potential supply gap with consumption

outpacing supply. PV Gas, a subsidiary of PV, expects the Thi Vai and Son My liquefied natural gas (LNG)

terminals to be operational in 2017 and 2018, respectively. In 2014, PV Gas signed a sales and purchase




agreement with Russia's Gazprom. Under the agreement, PV Gas will receive 48 billion cubic feet of natural

gas per year through the Thi Vai LNG terminal.

• Nuclear. The first nuclear reactors for power generation in Southeast Asia are planned to be built in

Vietnam. In 2010, Russia agreed to build two 1,000-megawatt (MW) reactors at Nin Thuan 1. Japan followed

in 2011 with an agreement to build Nin Thuan 2. Japan's 2011 Fukushima nuclear accident delayed

construction plans for both projects. Construction for the Nin Thuan 1 project is not expected to start until

2020.

• Wind. Vietnam is building the first offshore wind farm in Asia. Phase I (16 MW) of the Bac Lieu wind farm is

operational, and Phase II (83.2 MW) is expected to be complete in 2016. In March 2015, the United States

Trade and Development Agency awarded a feasibility study grant for a potential Phase III. Another project,

the Tay Nguyen wind farm, broke ground in March 2015. The facility has a design capacity of 120 MW; the

first phase (28 MW) is expected to begin operating in 2016.

The installation of this new generating capacity will require new transmission and distribution (T&D) infrastructure. Electricity Vietnam (EVN), the state-owned utility, is pursuing the dual challenge of modernizing this infrastructure while also installing greater electric generating capacity. Securing international investment in planned generating capacity and infrastructure is also critical. The World Bank Transmission Efficiency Project committed $500 million toward increasing T&D capacity and reliability in Vietnam.




Oil Price Drop Special Coverage

Oil price unlikely to recover as Saudi refining hits market Reuters + NewBase

Oil prices are unlikely to recover soon as Saudi Arabia's drive to boost its refining activities is expected to force refineries elsewhere to slow down their operations, thus creating an even bigger glut of unwanted crude oil.

Two big new refineries in Saudi Arabia are adding to growing supplies of diesel and jet fuel, which could mean other refiners will use less crude as they respond to the oversupply of oil products.

Oil prices currently near $50 a barrel are already under pressure, in part from an oversupply of fuels produced by refiners enjoying healthy margins from cheap crude as a result of the U.S. shale boom and record OPEC output.

A big difference now is that the world's largest oil exporter, Saudi Arabia, whose new refineries have added to a flood of the fuels now swamping global markets.

OPEC's biggest oil producer has long wanted to process more of its own crude. Earlier this year, its 400,000 barrel per day Yasref refinery reached full production. It joined the 400,000 bpd Jubail refinery, which hit full capacity late last year.

"All signals point to weaker margins, which mean lower runs," said Jonathan Leitch, research director with Wood Mackenzie. "You're going to start to get a surplus of crude again." Storage tanks in Asia and Europe are filling up with diesel and jet fuel as growing consumption has failed to keep pace with increased production.




Soaring production of fuels in the United States and Europe has added to the overhang. Refineries there are still running hard to supply drivers, particularly in India and the United States, with the gasoline they are consuming at breakneck pace due in part to the halving of oil prices over the past year.

CHINA SLOWDOWN

But slower economic growth in China has hit diesel demand growth, which relies primarily on industrial activity such as construction. European demand growth has not been nearly enough to absorb the barrels now arriving from the United States, Asia and the Middle East.

"Storage will reach capacity," one European distillates trader said, adding that an extremely cold winter, or heavy schedule of refinery maintenance work, would be the only salvation for diesel's profitability.

Product stocks, including jet fuel and diesel, in independently held storage in the Amsterdam-Rotterdam-Antwerp area hit an all time high last week, while such stocks in Singapore were near a four-year high. At least one Asian storage operator reported a rise in enquiries about leasing new capacity.

That leaves limited hope for the margins of European, American and Asian refineries which produce these fuels; profits for producing them have already fallen to five-year lows in Asia. This has put refineries' demand for crude oil in question.

Margins are unlikely to improve any time soon unless refineries start to make deeper cuts in production, one Singapore-based trader said. "The supply is so much now that even marginal run cuts are not going to help."

While booming demand from gasoline spurred refineries to consume ever more crude oil, traders and analysts said this incentive will subside when drivers' demand for gasoline falls in the autumn and winter.

And if U.S. and European refiners cannot count on distillates to help them make money, their appetite for crude oil could slow, as has already happened to their Asian counterparts. "I think the runs have probably hit their peak for the year," Leitch said.

Distillate stocks in the United States also rose faster than expected last week.




Gulf may suffer after Brent oil plunges below $50 Source: Reuters + NewBase

Brent oil's sharp drop below $50 per barrel for the first time since January may worry Gulf equity investors on Tuesday and put pressure on markets in the region. Oil tumbled 5 percent on Monday as OPEC's output reached the highest monthly level in recent history, production in the U.S. was also near records and China's economy showed further signs of slowing. Although prices have edged up in Asian trade on Tuesday, analysts said more falls were expected.

Gulf stock markets have become less sensitive to minor oil price moves over the last few months, but have still reacted to bigger shifts. Oil is the main source of revenue for local governments whose spending is a key driver of economic growth.

Saudi Arabia, the most expensive market in the Gulf in terms of price-to-earnings ratios and the one with the biggest share of petrochemicals, may be particularly vulnerable to oil-driven selling. The main Saudi index trades at 16 times projected 2015 earnings, compared with multiples of 13 for Dubai and Qatar and 11 for Abu Dhabi and Oman, according to Thomson Reuters data. The Saudi stock index, which last closed at 8,821 points, has no technical support left above the April low of 8,502 points.

Aldar Properties may support Abu Dhabi's bourse after it reported an 18 percent rise in second-quarter net profit on Tuesday, citing higher recurring revenues, better margins and lower finance costs. The state-linked developer made a profit of 601 million dirhams ($163.6 million) in the three months to June 30, while SICO Bahrain had forecast 515 million dirhams.

Doha bourse heavyweight Industries Qatar reported a 20 percent increase in second-quarter profit on Tuesday to 1.5 billion riyals ($412 million) against analysts' average estimate of 1.21 billion riyals. But the company's petrochemicals business is sensitive to oil prices and concern over those may dampen the effect of the positive earnings surprise.

Egyptian property developer Emaar Misr, which last closed at 3.35 Egyptian pounds, may fall; its shareholders submitted a total of 487.3 million shares to be bought back by the company on Monday, more than five times the 90 million shares which Emaar Misr agreed to repurchase at the IPO price of 3.80 pounds.




Fat chance of floating oil products storage, despite glut Reuters Oversupply in oil products, in tandem with a crude glut, has brought back memories of the 2008-2009 crisis, but traders say the climate is not right now for a repeat of large scale fuel storage at sea. Then, crashing oil consumption and low shipping rates drove nearly 100 million barrels of crude oil and about 85 million barrels of middle distillates into floating storage.

When market oversupply is extreme, immediate prices can collapse so severely that the stronger future prices enable traders to make money by storing them – even on ships at sea - thus creating some demand. The price structure is termed contango. But despite the glut now, and the brimming tanks of jet fuel and diesel it has created, the contango needed to store oil products at sea is far away, traders said. The six-month forward curve on ICE gasoil futures, for example, is around $20 per tonne, a third of where it stood in 2009. "Even if the storage on land filled up, it doesn't mean people are going to lose money on floating storage," one products trader said, adding that lower refinery runs are more likely. Freight costs for long-range clean product tankers are also currently at five-year highs – driven by the glut itself, which created need for vessels to ferry oil products around the world and to store fuel oil and crude oil. "Rates were really low back then," Erik Nikolai Stavseth, shipping analyst with Arctic Securities, said of the supercontango period in 2009. "This time around...you have a lot more oil, and this is sucking up tonnage." As a result, traders and analysts say there is little chance floating storge will emerge, despite record high oil products stocks in Europe's Amsterdam-Rotterdam-Antwerp hub and close to four-year highs for middle distillates stocks in Singapore. If traders lack incentive to store products, and consumers are not using more, the picture is dim for oil refineries and crude sellers. "The economics are punishing," said Robert Campbell, oil analyst with Energy Aspects said of floating storage. "The disincentive to produce would be very strong," he said, adding the overhang is "going to get worse before it gets better."




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

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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 August 2015 K. Al Awadi







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Microsoft word new base 658 special 05 august 2015