New base 817 special 28 march 2016

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NewBase 28 March 2016 - Issue No. 817 Edited & Produced by: Khaled Al Awadi

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Gas prices claims its first victim, $40 Billion LNG Casualty Bloomberg - Naureen Malik

The global LNG boom is turning into a war of attrition amid a glut in the seaborne natural gas market.

The conflict reaching from Australia to Qatar to the U.S. claimed a major casualty this week when Woodside Petroleum Ltd., with partners Royal Dutch Shell Plc and BP Plc, scrapped plans for the $40 billion Browse liquefied natural gas project in Australia amid the market slump.

More cancellations or delays are expected as current supply kills any incentive to invest, according to BMI Research. Regulators this month rejected Veresen Inc.’s request to build a terminal in Oregon partly because it couldn’t prove there was enough demand.

The world’s supply of LNG is set to surge over the next five years as projects already under construction in countries including Australia and the U.S. add to an emerging glut, according to analysts including Energy Aspects Ltd. and Poten & Partners.




That’s pressuring prices already plunging because of the collapse in crude, which serves as a benchmark for some LNG contracts. Browse is only one of the many LNG projects doomed to fall by the wayside because of the market’s slump, according to energy consultancy PIRA.

‘A Bloodbath’

“The current pricing environment is simply killing off the weaker ones and Browse was definitely one of those,” said Madeline Jowdy, senior director of global gas and LNG at PIRA in New York. “It’s going to look like a bloodbath in the 2017 and 2018 timeframe with cutthroat LNG prices.”

The U.S., awash in so much gas that prices there this year touched the lowest levels since the 1990s, sent its first shale exports from Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana in February. This week, the first tanker set sail from Chevron Corp.’s massive Gorgon LNG terminal project off northwest Australia.

Just two years ago, exporting LNG from the U.S. sounded like a lucrative opportunity for shale drillers. Buyers in Northeast Asia were paying up to $20 per million British thermal units more than spot Henry Hub gas prices. That premium has collapsed, this week trading around $2.70.

U.S. gas futures, which are based on the Henry Hub delivery point, were up 0.6 percent on Thursday at $1.804 per million btu at 11:32 a.m. on the New York Mercantile Exchange. Prices had slumped to $1.611 three weeks ago, the lowest intraday price since August 1998.

Managing Losses

“It’s going to be a really difficult period and some companies are not fully prepared for the changes that are coming to the market,” Jason Feer, head of business intelligence at Poten & Partners in Houston, said Wednesday. “There has never been a period where the oversupply is going to be




as big as it is going to be over the next few years. The question for some people won’t be, ‘How do I make money?’ It will be, ‘How do I manage my losses?’"

By 2021, at least 25 percent of global LNG production will be “homeless” because of slack demand from Asia and Europe while supplies surge, which will pressure prices, he said.

Investors have yet to sanction a single LNG export project in Canada. Companies including Shell and Petroliam Nasional Bhd. are among proponents of about two dozen facilities on the country’s Pacific and Atlantic coasts. AltaGas Ltd., which was leading one of the smaller proposals off British Columbia, last month shelved plans after failing to line up customers.

Given the long lead times for LNG projects, a supply squeeze may develop in the first half of the next decade if investment decisions aren’t made in the next several years, said Saul Kavonic, an analyst at energy consulting firm Wood Mackenzie Ltd.

Jera Contract

While the U.S. Federal Energy Regulatory Commission has rejected Veresen’s initial proposal for an Oregon terminal, the company said on Monday that Japan’s Jera Co., one of the world’s largest LNG buyers, had signed a non-binding deal for LNG from the project. The contract would help Jera develop its trading business in Asia because it doesn’t restrict the final destinations of the shipments.

The less restrictive terms mirror those being negotiated by buyers worldwide who are reluctant to sign long-term contracts with prices so low. The slump has increased their bargaining power, and they’re seeking to purchase more spot cargoes.

Perth-based Woodside said the “extremely challenging” market was forcing the company to form a new plan and budget for developing the gas resources off Western Australia. The play is “relatively low cost (especially compared to Australian projects) and offers flexibility, important for Japanese buyers facing uncertainty over their future LNG needs,” said IHS Inc. analyst James Taverner.




Oman Oil Company Seeks $1 bn Funding for Khazzan Tight Gas Project Reuters

Oman Oil Company is looking for a $1 billion loan to fund mainly to fund the second phase of Khazzan tight gas project.

Company’s chief executive Issam al-Zadjali told Reuters on Thursday that Oman Oil is seeking the loan from banks in Oman to finance one of its subsidiaries, Oman Oil Company Exploration and Production (OOCEP), which is a partner in the tight gas project.

The company last month signed an agreement with Britain's BP to develop the second phase of Khazzan, taking the estimated investment in the project to $16 billion. BP is the operator of Block 61 with a 60 percent interest and Oman Oil, through OOCEP, holds the other 40 percent.

The Khazzan reservoirs in Block 61 represent one of the Middle East’s largest unconventional tight gas accumulations, with the potential to be a major new source of gas supply for Oman over many decades. Production from Khazzan will make a significant contribution to ensuring continuing stable and long-term domestic supplies of gas for Oman. According to BP, combined plateau production from Phases 1 and 2 is expected to total approx. 1.5 billion cubic feet of gas a day (bcf/d), equivalent to around 40 percent of Oman’s current total domestic gas production.

In February, BP and Oman Oil signed a heads of agreement with the Omani government committing to amend the Oman Block 61 exploration and production sharing agreement (EPSA), extending the licence area of the block and enabling a further development of the major Khazzan tight gas field. Under the amended EPSA, the extension will add a further over 1000km2 to the south and west of the original 2,700km2 Block 61. The extension will allow a second phase of development, accessing additional resources in the area that have been identified by drilling activity within the original block. Development of this additional resource is subject to final approval of the government of Oman and of BP; both expected in 2017.

Subject to completion of the agreements and final sanction, the new Khazzan Phase 2 project will come on stream from 2020. The estimated cost for developing Phase 1 and the Phase 2 extension is around $16 billion.

According to Reuters, Oman Oil was talking to both local and international banks about the loan, al-Zadjali said. Last week, BP Oman said the project is 65 percent complete.




Oman: New hydrocarbon opportunities under exploration in Block 53 in Oman..Oman Obsever - Conrad Prabhu

Occidental Oman (Oxy), the Sultanate’s largest independent oil and gas producer, says it has embarked on an effort to unearth new hydrocarbon opportunities within its Block 53 license in southcentral Oman. Block 53 holds the Mukhaizna field where Oxy and its partners have invested in the development of one of the world’s largest steamflood projects to produce heavy oil from its sandstone reservoirs.

Production from the Mukhaizna field averaged 122,000 barrels per day (bpd) in 2015, representing roughly half of Oxy’s gross production of around 233,000 barrels of oil per day from its assets in the Sultanate.

According to a high-ranking executive, Oxy Oman is currently engaged in uncovering the block’s wider hydrocarbon potential.

“Recently we have started our exploration programme where we are looking for more opportunities within the block,” Adnan al Lawati, Vice President — Operations, said. “Our major focus is on developing the Gharif reservoir which holds about 2.5 billion barrels of oil in place.”

“There is also a shallower opportunity with an estimated 800 million barrels of oil in place in a place called Kahmah,” he added in a presentation to delegates attending an economic conference held in the city last week.

Covering an area of around 700 sq kilometres, Block 53 passed into the hands of Oxy Oman as operator in 2005 nearly three decades after it was first discovered in 1975. At the time of its takeover, cold production (without the application of steam-injection) averaged around 8,500 bpd. Steam flood based oil recovery technology was introduced in 2007, helping eventually ramp up output to around 122,000 bpd as of

end-2015, said Al Lawati.

Outlining on the characteristics of Block 53, he said: “The development area is about 300 sq kilometres. There are two structures — the North Structure and South Structure. The field holds over 3 billion barrels of oil in place in the ground. This is distributed between sandstone with around 2.5 billion barrels, and carbonate fractures with around 800 million barrels of oil in place.




U.S. petroleum product exports continue to increase Source: U.S. Energy Information Administration, Petroleum Supply Monthly

Total U.S. petroleum product exports continued to increase in 2015, up 467,000 barrels per day (b/d) from 2014 to 4.3 million b/d, driven by increased exports of distillate fuel, motor gasoline, and propane. Mexico and countries in Central and South America continue to be major recipients of U.S. petroleum product exports.

Exports of distillate fuel oil represent the largest component of U.S. petroleum product exports, and averaged 1.19 million b/d in 2015, an increase of 85,000 b/d from 2014. The United States exported distillate fuel to 88 different countries in 2015.




The top destination for U.S. distillate exports was Mexico, averaging 143,000 b/d in 2015, an increase of 15,000 b/d from the previous year. Distillate exports to Central and South America averaged 595,000 b/d in 2015, up 10,000 b/d from the previous year. Chile was the region's largest single importer of U.S. distillate in 2015, averaging 101,000 b/d.

As continued high U.S. refinery runs and a warmer-than-normal heating season combined to push U.S. distillate inventories above the five-year average and combined to push prices lower, exports of distillate to Western Europe also increased.

In the third and fourth quarters of 2015, distillate exports to Western Europe increased year-over-year by 80,000 b/d and 136,000 b/d, respectively. Increased U.S. exports contributed to high distillate inventories in the major refining and petroleum hubs of Amsterdam and Rotterdam in the Netherlands, and Antwerp in Belgium, collectively known as the ARA.

Motor gasoline was the second-largest U.S. petroleum product export in 2015, averaging 618,000 b/d and exported to 102 different countries, up 68,000 b/d from 2014. As with distillate, Mexico is the largest recipient of U.S. motor gasoline exports, averaging 307,000 b/d in 2015.




Central and South America are also a major destination for U.S. motor gasoline exports, receiving 228,000 b/d in 2015, up 29,000 b/d from 2014. U.S. exports of motor gasoline to Africa decreased by 28,000 b/d in 2015 compared with 2014, mostly because of lower exports to Nigeria, one of Africa's largest gasoline importers, as fuel import program reforms took place in that country.

U.S. exports of propane nearly matched those of motor gasoline at 615,000 b/d in 2015, up 193,000 b/d from the previous year. Low U.S. propane prices have encouraged the expansion of propane export capacity since 2013.

Unlike exports of distillate and motor gasoline, U.S. propane exports are destined mainly for Asia, averaging 220,000 b/d in 2015, an increase of 138,000 b/d over 2014. Asia is expected to be the leading source of global propane consumption growth, with an expanding petrochemical sector as the main driver.

Some of the imports from the United States in the region encompassing Central and South America in 2015 reflected supply constraints that are likely to be temporary. For example, Ecuadorian demand for U.S. gasoline increased while PetroEcuador's 110,000 b/d Esmeraldas refinery was closed for most of the year for a major upgrade.

]Colombian demand for U.S. gasoline and distillate supplies increased after a reduction in supply from neighboring Venezuela and after delays in the opening of Ecopetrol's new 165,000 b/d refinery in Cartagena. Supplies from the new and upgraded refineries in Ecuador and Colombia, along with Petrobras's new 230,000 b/d Abreu e Lima refinery in Brazil, have the potential to reduce that country's need for gasoline and distillate imports from the United States.




Scotland ends coal-fired electricity CNBC - David Reid

Scotland will today stop generating electricity from coal for the first time in more than 100 years. The Longannet power station, north of the capital Edinburgh, switches off the last of its four generating units at 3 p.m. local time Thursday.

The plant was the largest coal power station in Europe when it came online in 1969, capable of producing 2,400 megawatts. ""Coal has long been the dominant force in Scotland's electricity generation fleet, but the closure of Longannet signals the end of an era.

"For the first time in more than a century no power produced in Scotland will come from burning coal," said Hugh Finlay, Scottish Power's generation director in a statement. Scottish Power said the power station is closing as maintenance and transmission costs have risen.

The firm, owned by Spain's Iberdrola, once ran half a dozen coal-fired power stations but is now dependent on gas and wind farms for generating electricity. The Scottish government has outlined ambitious plans to meet 100 percent of demand for electricity from renewable supplies only by 2020.

The Scottish energy strategy refuses to consider new nuclear energy, putting it at odds with the wider U.K. policy mix. In February, the U.K's Department of Energy and Climate Change (DECC) published energy policy priorities from 2015 to 2020.

The department announced a drive to expand nuclear energy as well as supporting "fracking" – hydraulic fracturing - to supplement gas production from the North Sea. However the U.K. policy has been thrown in to confusion by fresh doubts over whether French firm EDF can carry out a promise to build the Hinkley Point nuclear project in southwest England.

Longannet Power Station in Clackmannan in Scotland.




NewBase 28 March 2016 Khaled Al Awadi

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

Oil prices rise in thin Asian trade after break Reuters + NewBase

Oil prices rose in early Asian trading on Monday after a three-day break, but volumes were tiny as a number of markets remain on holiday for Easter. U.S. crude's front-month contract was up 37 cents at 39.83 a barrel at 0055 GMT.

On Thursday, it settled down 33 cents at $39.46 a barrel, recovering from a session low of $38.33. For the week, it rose 2 cents, finishing up for a sixth straight week. Brent's front-month rose 24 cents to $40.68 a barrel.

It fell 3 cents to $40.44 a barrel, after an earlier drop to $39.22, on Thursday. For the week, it fell 76 cents, or nearly 2 percent, its first decline in five weeks. Oil prices have risen about 50 percent from multi-year lows hit in January on glut worries.

Declining U.S. oil output and strong gasoline demand were responsible for some of that recovery, but the bulk of it was powered by major producers' plans to freeze output at January's highs. Producers are due to meet on April 17 to discuss the plan.

Organization of the Petroleum Exporting Countries (OPEC member) Iraq's oil exports have held steady so far in March, according to loading data and industry sources, halting for now the rapid supply growth from the country. Baghdad has given verbal support to the initiative by OPEC and outside producers to freeze output to try to boost prices.

Oil price special

coverage




Oil Halts Two-Day Slide After U.S. Rig Count Resumes Decline Bloomberg - Stephen Stapczynski

Oil rose for the first time in three sessions after the number of active rigs fell in the U.S., potentially easing a supply glut.

Futures advanced as much as 1.1 percent in New York, paring a 4.8 percent loss in the previous two sessions. Rigs targeting oil in the U.S. fell by 15 to 372, according to Baker Hughes Inc. More than 150 have been parked since the start of the year.

U.S. data last week showed inventories rose by more than three times what was forecast, while imports increased to the highest since June 2013. Trading was closed Friday for the Good Friday holiday.

“The supply-and-demand dynamic has helped out,” Chris Weston, a Melbourne-based chief market strategist at IG Ltd., said by phone. “A lot of people have been saying that they are looking at the rig count because oil prices have obviously moved up quite nicely, and there was a view that we could start seeing it expand above $40.”

Oil has climbed back from a 12-year low earlier this year on speculation the global surplus will ease as U.S. output declines and major producers including Saudi Arabia and Russia proposed an output freeze. Iran and Libya are the only two OPEC members that haven’t pledged to attend production cap talks next month. Short Covering

West Texas Intermediate oil for May delivery gained as much as 44 cents to $39.90 a barrel on the New York Mercantile Exchange and was at $39.76 at 11:03 a.m. Singapore time. Total volume traded was about 48 percent below the 100-day average. Prices dropped 33 cents to settle at $39.46 a barrel on Thursday.

Brent for May settlement rose as much as 33 cents, or 0.8 percent, to $40.77 a barrel on the London-based ICE Futures Europe exchange. Prices slipped 1.8 percent last week. The global benchmark crude traded at a 97-cent premium to WTI.

The number of bets on rising oil has barely increased as crude jumped 50 percent since Feb. 11. Meanwhile, the liquidation of short positions during the last seven weeks covered by data from the U.S. Commodity Futures Trading Commission was the largest in records going back a decade. That suggests the upward pressure on prices has come from traders cashing out of bearish wagers.

Rig counts; Iran investment:

• The number of active rigs targeting oil in the U.S. dropped to the lowest since November 2009, resuming declines after rising by one the previous week.

• Iran, committed to boosting output after sanctions were lifted in January, needs $40 billion for oil projects in the year ending next March, according to Oil Minister Bijan Namdar Zanganeh.




Oil Volatility to persist with Opec meeting in focus Gulf News - Siddesh Suresh Mayenkar

Oil prices are likely to remain volatile in the run up to April 17 meeting between the Opec and non-Opec producers.

“We think for time being oil prices would remain volatile, subject to the release of data,” Vaqar Zuberi, Portfolio Manager & Senior Analyst within Mirabaud Asset Management’s Hedge Fund team told Gulf News from Geneva.

On Friday, Brent crude ended a tad lower at $40.44 (Dh148.41) per barrel weighed by expansion of stockpiles in the US. Oil tumbled to a 12-year low last month before rebounding on speculation the global surplus will ease as US production declines and major producers including Saudi Arabia and Russia proposed an output freeze.

Opec and non-Opec producers will be meeting mid next month to decide on the future course of action amid plunging oil prices.

“We believe in the interest of all parties to stabilise the prices of oil and we believe that comments alone won’t have a meaningful impact on prices till we see a clear trend of supply coming down,” Zuberi said.

Constructive

However, Mirabaud is constructive on oil prices in the second half of the year on steady demand, and lesser supplies.

“We believe that the supply demand gap will reverse in the second half of 2016 and early 2017,” Zuberi said, adding “the demand from US is well bid, amid demand from the emerging markets. There is supply destruction going on as large number of producers have become unprofitable.”

The supply demand gap currently stands at 1 million barrels per day.




NewBase Special Coverage

News Agencies News Release 28 March 2016

Subsea injection systems provide economic reward Transparency Market Research + SG

Subsea injection technology offers major advantages over fixed production platforms mainly in remote offshore locations, where strong ocean currents, deep water and harsh weather conditions is expected to occur and installation of pipelines becomes difficult.

According to a new research study by Transparency Market Research, titled “Subsea Injection Systems Market – Global Industry Analysis, Market Size, Share, Growth, Trends and Forecast 2015 – 2023,” the operational, economic, as well as environmental benefits offered by subsea injection systems, are expected to boost the demand for subsea injection systems across the world over the forecast period between 2015 and 2023.

Apart from this, the cost efficiency provided by subsea injection systems in the extraction of oil and gas in deeper water reserves is also expected to fuel demand from the global market for subsea injection systems, states the research study.




In the report, the global market for subsea injection systems has been studied on the basis of the type of injection systems and the regional distribution of this market. Based on the type of injection systems, the study has classified this market into enhanced oil recovery (EOR) systems, saltwater disposal systems, and hydrocarbon storage systems.

The saltwater disposal injection system is utilized to discard the saltwater produced as a byproduct of oil and gas, which continuously needs to be disposed of for the life of the well. An EOR injection system is used to improve the exploration and production as well as extend the life of an oil and gas field with the help of water flooding. A hydrocarbon storage injection system is employed for the underground storage of crude oil and liquid hydrocarbons, notes the research study.

On the regional front, the study segments the global subsea injection systems market into Latin America, North America, Europe, Asia Pacific, and the Middle East and Africa. Analysts project North America as one of the leading regional markets for subsea injection systems.

Asia Pacific is also expected to contribute significantly to the demand for subsea injection systems over the forecast period owing to the increase in the exploration and production activities in the offshore areas of Australia, China, and Indonesia.

The Europe subsea injection systems market is anticipated to exhibit steady growth and the UK is expected to lead this regional market in the coming years, states the research study.

The report also studies in detail the competitive landscape prevalent in the worldwide subsea injection systems market by evaluating the company profiles of the key market participants.

Some of the major international manufacturers of subsea injection systems mentioned in the market report are BP Plc, Saudi Aramco, Statoil ASA, CNR International Ltd., Chevron Corp., Brunei Shell Petroleum, Exxon Mobil Corp., ConocoPhillips Co., and Talisman Energy Inc.




Oil Recovery Hits Saudi Devaluation Bet Bloomberg - Samuel Potter

Oil’s rebound to about $40 a barrel means some investors are nursing losses after betting that Saudi Arabia would abandon its three-decade-old currency peg.

Contracts used to speculate on the kingdom’s exchange rate in the next 12 months have fallen to about the lowest since November. A $1 million wager on the contracts at their peak in January would have lost 68,900 riyals ($18,370), or about 1.8 percent, according to Bloomberg calculations. Several U.S.-based hedge funds were said in February to be among investors that have bet Saudi Arabia would devalue the riyal.

The decreased speculation that Gulf nations will abandon their dollar pegs underscores how crude prices have recovered this year. Oil, Saudi Arabia’s main source of revenue, is headed for a second straight monthly gain. The Saudi riyal has been trading at a rate of 3.75 per dollar since 1986, and the kingdom has taken steps to make speculating against the currency harder.

“We have argued that those positioning for a devaluation were going to be disappointed,” said Simon Williams, the London-based chief economist for central and eastern Europe, the Middle East and North Africa at HSBC Holdings Plc. “The pegs have been in place for 30 years in times of high oil prices and low oil prices. I have no sense” that recent losses in crude are “going to change policy makers’ minds or force their hand,” he said. Gulf Peers

The percentage loss on the riyal forwards may actually be greater than 1.8 percent because derivatives trades tend to be leveraged, meaning that more is at stake than is actually wagered.




Still, the cost of a bet on any devaluation is small relative to the windfall investors would stand to receive should it happen.

Twelve-month currency forward agreements have declined for other members of the Gulf Cooperation Council. Contracts for the United Arab Emirates’ dirham have dropped 65 percent since hitting a seven-year high in January, while those for the Omani rial have almost halved from a recent peak. Bahraini dinar and Qatari riyal forwards have also tumbled.

Saudi Arabia has dipped into its reserves and sold debt as oil revenue dropped. Foreign-currency

holdings have tumbled every month but one since August 2014 to less than $600 billion in January, from about $737 billion.

The reserves of GCC members provide ample room to maintain pegged exchange rates for several years, even in an adverse scenario

for oil prices, Moody’s Investors Service senior analyst Mathias Angonin said in Dubai last week. Changes to the current exchange-rate systems are unlikely because the costs associated with one-off devaluations would outweigh the benefits, he said.

The Federal Reserve has also relieved the pressure on Gulf currencies’ dollar pegs.

The U.S. central bank held off from raising interest rates this month and lowered forecasts for how much they’ll rise this year, citing the potential impact from weaker global growth and financial-market turmoil on the economy. That’s helped drive the dollar the lower, buoying commodity prices.

“When you have a scenario where the Fed has scaled back the pace of their tightening, a lot of the reasons for getting off the peg have gone,” Kiran Kowshik, a currency strategist at UniCredit Bank AG in London, said by phone. “If you had the Fed very hawkish and starting a succession of hikes, that would be a different story.”




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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 28 March 2016 K. Al Awadi







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New base 817 special 28 march 2016