New base 655 special 29 july 2015

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

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NewBase 29 July 2015 - Issue No. 655 Senior Editor Eng. Khaled Al Awadi

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

Kuwait awards $11.5bn contracts to build Al Zour refinery Reuters/NewBase Kuwait National Petroleum Co (KNPC) awarded 3.48bn dinars ($11.5bn) worth of contracts yesterday to build the Al Zour oil refinery, which would be one of the largest in the Middle East, Kuwaiti state news agency KUNA reported. Construction of the 615,000 barrel per day refinery could be a major boost to Kuwait’s economy, which has slowed in recent years by political tensions and is now grappling with a blow to state finances from low oil prices. The project was originally planned more than a decade ago but has been delayed repeatedly by bureaucratic and political problems, including conflict between Kuwait’s parliament and the cabinet. State-owned KNPC commissioned a consortium including Spain’s Tecnicas Reunidas, China’s Sinopec and South Korea’s Hanwha Engineering and Construction to build the main process units of the refinery, KUNA said. That contract is worth 1.28bn dinars. A consortium including Daewoo Engineering and Construction , Hyundai Heavy Industries and Fluor Corp of the US will build support units and infrastructure services for 1.74bn dinars. Another consortium including Hyundai Engineering and Construction, SK Engineering and Construction and Italy’s Saipem was awarded a 454mn dinar contract to build a marine export terminal, KUNA quoted KNPC spokesman Khalid al-Asousi as saying.

Asousi said he expected the last major contract for the project to be awarded in the next two weeks, while signing of all contracts was to take place in early October. Kuwait’s Supreme Petroleum Council agreed this month to increase Al Zour’s total budget to 4.87bn dinars from about 4bn dinars. Officials have said the refinery is to start up by late 2018 or early 2019, providing low-sulphur fuel to power stations, but it is not clear if that timeframe can still be met. Oil minister Ali Saleh al-Omair told KUNA this month that there were proposals to build a petrochemical complex alongside the refinery. No elaboration




UAE to raise gasoline price by 24pc, diesel down 29pc

Petrol prices across the country were today increased from Dh1.72 per litre of Special 95 to Dh2.14, an increase of 23.6 per cent. The revised price for Super 98 has been set at Dh2.25 and E Plus at Dh2.07.

The price of diesel is set at Dh2.05, a 29 per cent drop from its previous price of Dh2.90.

These prices come into effect on August 1 and will be fixed for the month. A new price will be announced on August 28.

Dr Matar Al Nyadi, Undersecretary for the Ministry of Energy and chair of the Fuel Price Committee, said the new prices were based on average global prices for petrol and diesel during the month of July with the addition of transport, distribution and operating costs — as approved by the Cabinet for distribution companies.

He said the committee would monitor the global prices of petrol and diesel daily and will announce the prices for the following month on the 28th of each month. He said: “The Ministry has coordinated with all relevant entities in the country including the Ministry of Economy and the Supreme

Committee for Consumer Protection to monitor the movement of prices and safeguard the rights of consumers. This will ensure that people across the country benefit from lower diesel prices, which would mean lower operating costs for a wide number of vital sectors such as industry, shipping and cargo.”

He said the changes would promote “rationalised consumption” and would incentivise people to choose the most fuel-efficient cars, while curbing the increase in the number of cars on the country’s roads in the future. The Ministry of Energy announced on Wednesday last week it would deregulate fuel prices across the country.

A committee was then established to set future prices, chaired by the undersecretary of the Ministry of the Energy, Dr Matar Al Nyadi, together with the undersecretary of the Ministry of Finance, the chief executive of Adnoc Distribution, and the chief executive of Emirates National Oil Company (Enoc).

The decision was aimed at supporting the national economy, lowering fuel consumption, protecting the environment and preserving national resources. The Ministry of Energy has assigned a dedicated number and email — 056 546 7942 and [email protected] — for enquiries on the deregulated fuel prices.




UAE fuel price change would cost about $387 per head this year

The government’s move to cut transport fuel subsidies would cost UAE residents an average of US$387 per head this year, although some households would be hit harder than others, according to the debt rating agency Moody’s Investors Service.

The UAE was widely lauded for its move last week to cut fuel subsidies to promote efficiency, reduce environmental damage and encourage public transportation usage. Moody’s yesterday echoed others in saying that the move would have a positive impact on the public finances of the UAE and Abu Dhabi, as well as their credit ratings.

Among the unanswered questions, however, is how quickly the government will move

transport fuel prices towards market prices, how exactly it will define market prices and how much that will add to the average Emirates resident’s fuel budget every year.

In Moody’s analysis – which relies on IMF data – the annual subsidy rate for transport fuels in the UAE is $730 for each of its 9.6 million residents, based on an estimated average oil price of $58 per barrel this year.

But nearly half of that (47 per cent) is “external” costs, such as the environmental damage, traffic congestion, road wear and tear and forgone taxes which would not be transferred to drivers. The direct subsidy this year would total about $387 per head, according to Moody’s. That compares to a direct subsidy of about $583 per head in 2013, when oil prices averaged more than $90 per barrel.

The actual cost increase that drivers will have to bear will be determined by the new fuel price-setting committee, which today will announce its first monthly petrol and diesel prices for August. “Looking at the August prices, we’ll get an idea how rapidly they’ll want to phase in market prices,” said Mathias Angonin, Moody’s UAE analyst.

The burden of higher prices will not be borne equally, Mr Mathias notes, with multi-car households and fuel-guzzling vehicles paying disproportionately more, and that would increase as oil prices rise.

Moody’s estimates that the price of oil will rebound to $75 per barrel by 2017. But with prices currently low, the subsidy saving this year is estimated at $7 billion (annualised), versus $10bn in 2013. The government’s finances will also be helped by curbing fuel consumption, Moody’s reckons.

“Rising fuel consumption [at an annual rate of more than 8 per cent] has been eating into oil exports and the share of oil consumed domestically has increased to 23.5 per cent in 2014 from less than 20 per cent before 2009,” Moody’s noted. Another question is how committed the government will be to unsubsidised fuel prices if oil prices rise significantly, Mr Mathias said.

“It took nearly 15 years after the 1980s oil price crash for administered energy price changes to take place,” the report noted. “Energy subsidies were in effect cut in 1995 … while electricity tariffs were raised in April 2000 but reversed six months later then modestly raised in 2010 again for industrial users.”




Tunisia: PA Resources Submits Updated Development Plan for Zarat Oil, Gas Field in Tunisia

PA Resources has submitted an updated development plan for Zarat oil and gas field to Tunisian authorities. The Zarat field is a large, shallow-water, gas-condensate and oil field containing estimated recoverable reserves of 147 mmboe. It is Tunisia’s largest undeveloped field and production from Zarat field will be critical in alleviating a forecast future gas supply deficit in Tunisia, the company said. The parties in the field are PA Resources and the state oil company, L’Entreprise Tunisienne d’Activités Pétrolières (ETAP).

ETAP has the option to back-in to the southern tract for up to a 55 percent working interest, in which scenario PA Resources would retain 45 percent, and a decision on this back-in option follows shortly after acceptance of the development plan. The northern tract is held by Joint Oil, which was formed as a joint entity between ETAP (Tunisia) and the National Oil Company (Libya). The proposed development is in two phases, with Phase 1 comprising four production wells and production facilities to process and export 20,000 bbls/d of oil and 100 mmscfg/d of raw gas. Phase 2 comprises a further four development wells, with expanded facilities to increase capacity to 40,000 bbls/d and 200 mmscf/d of raw gas.

The Zarat facilities also have the potential to act as a hub to facilitate development of nearby stranded oil and gas fields in the eastern Gulf of Gabes, such as PA Resources’ Elyssa gas field. Following acceptance of the plan by the Tunisian authorities, the project will enter a front-end engineering design phase with project sanction during 2017, the company stated.




Sri Lanka :Total to Explore for Oil, Gas Offshore Lanka's East Coast Sunday Times + NewBase

Sri Lanka will give France’s Total the rights to explore for oil and gas offshore east coast, local newspaper The Sunday Times reported Sunday. Country’s cabinet has

decided that the French firm will get exclusive rights for scanning, data collection and mapping in the seas off the eastern coast, Power and Energy Ministry Secretary B.M.S. Batagoda said. He said this would be the first time that gas and oil exploration would take place in the eastern seas. For exploration in Mannar basin, bids have been received from Total, Shell and ExxonMobil, The

Sunday Times reported. Earlier this year Cairn India decided to pull out of Mannar basin and not go ahead with further exploration.

In July 2008, the government of Sri Lanka and Cairn India signed an agreement for exploration licence permitting Cairn India to explore oil and natural gas in Mannar basin. The Block SL 2007-01-001, which is in offshore North West Sri Lanka and covers approximately 3,000 Km2 in water depths of 200 to 1,800m, was awarded to Cairn India through a bid round held in 2008.

Cairn Lanka is the operator with 100 percent participating interest. The contract will expire in October.Cairn found gas in three out of four exploration wells.







US: How Pipelines Saved America’s Biggest Oil Basin From Shale Bust Bloomberg

To understand why U.S. oil production is so resilient, it helps to consider the maze of pipelines running out of Midland, Texas.

New lines have relieved a chokepoint in America’s biggest oil-producing area. A massive supply glut had forced producers to offer discounts of more than $20 a barrel below the U.S. benchmark last year. This month, prices have been at an average premium of 78 cents, the most in records going back to 1991.

Magellan Midstream Partners LP, Plains All American Pipeline LP and Sunoco Logistics Partners LP finished work in the past year that added more than 750,000 barrels a day of capacity, while output grew by only 400,000. With an outlet to Gulf Coast refineries, the Permian has been the only major U.S. shale region to keep growing as prices dropped by more than half to less than $50.

“Putting in those pipelines and connecting the Permian to the Gulf directly allowed that premium to develop,” John Auers, Dallas-based executive vice president at Turner Mason & Co., an energy consulting firm, said by phone on July 27. “When you talk about these price levels, $5 to $10 is the difference between putting rigs back to work or shutting down.”

The Permian is a vast expanse of arid territory in West Texas and New Mexico, stretching over 75,000 square miles, or about the size of South Dakota. It’s been producing energy commercially since the 1920s after ranchers and farmers struck oil while drilling for water.

Production Rebound

After peaking at more than 2 million barrels a day in 1973, basin production slid to less than half that by the turn of the century. That changed in 2010, when companies starting using horizontal




drilling and hydraulic fracturing, the techniques employed elsewhere for shale drilling. Output has doubled since then, back to more than 2 million barrels daily.

But the infrastructure didn’t keep up. There was only about 1.6 million barrels a day of refinery and pipeline capacity last summer. Storage tanks filled and producers had to offer discounts to buyers willing to ship on more expensive trucks and trains. West Texas oil sold at an average discount to crude in Cushing, Oklahoma, of $12.42 a barrel in August 2014 and dipped as low as $21. That’s changed.

“Now there simply isn’t enough crude to supply all of the pipes out of the Permian and to satisfy regional refinery demand,” said Dominic Haywood, an analyst for Energy

Aspects Ltd. in London.

Pipeline Relief

Producers are shipping their crude out of the basin to coastal refineries where prices are higher. Crude inventories in Midland have fallen about 40 percent in the past five weeks to less than 3.5 million barrels as of July 17, according to Genscape Inc., a Louisville, Kentucky-based energy information provider.

Prices in Midland are above those in Cushing, the delivery point for futures on the New York Mercantile Exchange, which gained 59 cents to $47.98 a barrel on July 28. “Had these pipelines not existed, you’d see Midland differentials at an $8-to-$10 discount to WTI,” Andy Lipow, president of Lipow Oil Associates LP in Houston, said by phone.

The new lines came at a good time for Permian drillers such as Concho Resources Inc. and Occidental Petroleum Corp. Prices collapsed in part due to extra supply from West Texas and other U.S. shale areas. Drillers responded by cutting budgets and idling more than half their rigs since December.

Eagle Ford

Production is falling in the other major shale regions. The Eagle Ford in South Texas will drop by 10 percent from March to August, while the Bakken in North Dakota will be down about 5 percent, according to the Energy Information Administration. The Permian has slowed to a growth rate of about 0.2 to 0.4 percent monthly from 2 to 4 percent, but it’s still expanding. Large swaths of the Permian are still profitable with $49 oil, according to Wood Mackenzie Ltd.

“Even at $50 oil, a lot of development in the Permian looks pretty tight,” Christopher Kopczynski, a senior research analyst for Wood Mackenzie in Houston, said by phone. “If you imagine an extra $10 discount for crude, things start to look pretty ugly pretty quickly.”




Oil Price Drop Special Coverage

Oil prices fall on oversupply concerns, weaker dollar support REUTERS + NEWBASE

Oil prices fell in Asian trade on Wednesday as concerns over global oversupply outweighed the impact of a likely larger than expected draw in U.S. crude stocks and a weakening dollar.

Asian investors focused on OPEC production figures that showed members of the Organization of the Petroleum Exporting Countries produced around 3 million barrels of oil per day more than daily demand in the second quarter, a Reuters survey showed.

"Glut is the word," said Ric Spooner, chief market analyst at Sydney's CMC Markets. OPEC members pumped 31.25 million barrels per day (bpd) in the second quarter against demand of 28.26 million bpd, the Reuters data showed.

Both Brent and U.S. crude came off session lows on Tuesday after data from industry group the American Petroleum Institute showed U.S. commercial crude stocks fell by 1.9 million barrels last week to 462 million, against analysts' expectations of a 184,000 barrel draw.

"It was the first time since July 14 the market has seen any sign of a bit of a bounce, albeit temporary," Spooner said. The Department of Energy's Energy Information Administration will release official U.S. oil inventory data later on Wednesday.

Brent futures for September delivery LCOc1 was down 22 cents to $53.08 as of 0649 GMT after falling 17 cents in the previous session when it hit an intra-day low of $52.28, its lowest since Feb. 2, on concerns over China's stock market plunge.

U.S. crude for September delivery CLc1 dropped 20 cents to $47.78 a barrel, after ending the previous session up 59 cents. "Prices seem to have found the bottom of this rout as prices rebounded off a support of $46.92 and $52.68 for West Texas Intermediate and Brent," Phillip Futures said in a note on Wednesday.




But it cautioned that oil prices could face headwinds if the dollar gains against other currencies following a U.S. Federal Reserve meeting that ends later on Wednesday that may confirm an interest rate rise as early as September.

A stronger dollar makes dollar-denominated commodities, including oil, more expensive for buyers using other currencies.

Brent will find support on Wednesday at $52.68, while U.S. crude will be supported at $46.92, the Phillip Futures note added. Resistance should be at $53.92 for Brent and $48.29 for U.S. crude.

Spooner expected the Fed to confirm market expectations of an increase in interest rates this year, although the hike will be very modest.

"My view is the dollar is positioned for a bit of a decline," because any hike had already been priced into currency markets, Spooner said.




BP falls into Q2 loss on oil spill charge, price slump

BP+Gulf News+NewBase BP said yesterday it sank into the red in the second quarter, after taking a vast $10.8bn (€9.8bn) hit on costs linked to the deadly 2010 Gulf of Mexico oil spill. The British energy giant’s performance also took a heavy knock from slumping global oil prices.

Losses after taxation stood at $5.82bn (€5.26bn) between April and June, BP said in a results statement. That contrasted with net profit of $3.37bn in the second quarter of 2014. “In the quarter BP took a charge of $10.8bn in total related to the Gulf of Mexico oil spill—including $9.8bn associated with the government settlements as well as charges for further business economic loss claims and other ongoing costs,” BP said in the earnings release.




BP had already announced on July 2 that it would pay a record $18.7bn to compensate the US government and five states for damages stemming from the oil spill. The British company’s total pre-tax charge for the incident now stands at $54.6bn.

The spill was sparked by a blast on the Deepwater Horizon rig which killed 11 men and sent millions of barrels of oil flowing into Gulf waters, in one of the worst environmental disasters to strike the US. BP added yesterday that underlying replacement cost profit—a measure of earnings adjusted for one-time items and inventory charges—tumbled 64% to $1.3bn as oil prices collapsed. That missed market expectations of $1.7bn, according to analysts polled by Bloomberg News, and compared with $3.6bn a year earlier. Brent North Sea crude, a benchmark for more than half the world’s oil, has dived by about 50% in value over the last year, slashing profitability across the sector and forcing energy majors to slash investment.




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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

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New base 655 special 29 july 2015