New base 543 special 18 february 2015

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NewBase 18 February 2015 - Issue No. 543 Khaled Al Awadi

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

Saudi Aramco’s Sadara Chemical Project Will Start update Bloomberg + NewBase

Saudi Arabian Oil Co. and its partner Dow Chemical Co. plan to start production this year ( 4th Q-2015 ) at their $20 billion Sadara chemicals joint venture as other projects being planned in the region face the obstacle of falling crude prices. Ethylene and polyethylene will be the first products of Sadara Chemical Co., Khalid Al Hamid, manager for engineering and technology, said in Dubai. Full output is set for late 2017.

Saudi Arabia, the world’s largest crude exporter, started the petrochemical project in 2011 when oil averaged $111 a barrel. Prices have since slumped about 45 percent. Qatar Petroleum and Royal Dutch Shell Plc ended plans last month to build a $6.5 billion petrochemical plant, saying it was “commercially unfeasible” in the current energy market.

“Middle East chemicals projects are facing stiff review,” Sanjay Sharma, vice president for Middle East and India at Englewood, Colorado-based IHS Inc., said in an interview in Dubai on Tuesday. “Industry does not need to react to the short-term swing and needs to look long-term for projects as the market will return.”

Middle Eastern petrochemical plants, which use natural gas, are becoming less competitive than plants that use oil after crude prices declined, Sharma said. Chemical prices are also falling because of lower oil prices, he said. Sadara will be the first plant in the Middle East to use naphtha, a refined oil product, Al Hamid said.

Saudi Arabia is boosting capacity to refine oil and produce chemicals to meet domestic fuel demand and make materials used to manufacture consumer goods. The kingdom plans to build refineries and chemical plants to help diversify the economy and reduce dependence on crude exports.




Kuwait on goingwith 4 billion dinar refinery project despite oil price fall The National + NewBase

Kuwait is forging head with a new refinery project costing 4 billion Kuwaiti dinars (Dh49.7bn) despite the oil price slump, Kuwaiti officials said.

The construction of Al Zour refinery is part of plans to boost refining capacity to 1.4 million barrels per day (bpd) by 2019 from 940,000 bpd at present. The state refiner Kuwait National Petroleum Corp (KNPC) is still receiving offers for the five packages for construction.

“We received offers for two packages and the other three [will be received] by March 8,” said Ahmad Al Jemaz, the deputy chief

executive for Mina Abdullah refinery at KNPC, at a refining conference in Dubai. “We are targeting 2019 and hopefully if the tendering process goes as planned, hopefully we can meet that date.”

Kuwait will boost its crude products exports by up to 80 per cent once the refinery starts operation, he added. Apart from Al Zour, Kuwait is ploughing ahead with a clean fuels project to upgrade refining at the existing three refineries. The project is set for completion in the first quarter of 2018.

As part of the project, the country’s oldest refinery, Shuaiba is expected to be closed in April 2017, Mr Al Jemaz added. The new refinery could be integrated with a petrochemical project that is currently under study.

“The new refinery is under feasibility study to integrate the new refinery with the petrochemical plant. There is a consultant working on the pre-feasibility study to select the most economic option,” said Fahhad Al Ajmi, a team leader at KNPC. “We are expected maybe after 10 days, two weeks maximum, to select the best option for the integration of refinery and petrochemical plants. Then we will start the feasibility study.”

The feedstock for the petrochemical plants will be coming from the new refinery, however if there is any shortage for the feedstock it will come from the clean fuels project, Mr Al Ajmi said.




Egypt, Kuwait to invest in petrochem projects SaudiGazette + NewBase

Egypt and Kuwait signed a memorandum of understanding to invest some $6.8 billion in projects in the petrochemical and phosphate fertilizer sectors. The projects include the construction of propylene and formaldehyde production plants, a petrochemical and refinery facility, and a phosphate and compound fertilizer plant, according to an Egyptian Cabinet statement. The companies that signed the agreement include Egyptian Petrochemicals Holding Company (Echem), Egyptian Phosphate Company, Egyptian-Kuwait Holding, Saudi International Petrochemical Company (Sipchem), Bawabet Al-Kuwait Holding Company, and Boubyan Petrochemical Company (BPC).

“The oil sector is one of the sectors that attract investments from the two sides. These projects are, thus, of great importance even if they will need about five to six years to be completed and start production,” said Mohamed Safaan, Echem President and Chairman. “We are, however, positive about their outcome and the revenue they would add to investments in such a vital sector.”

“The projects will provide great job opportunities which would amount to 28 000 direct and indirect opportunities,” added Hussein Al-Kharafi, Chairman of Kuwait Industries Union. “They will also boost Egypt’s ability in oil production to meet the needs of the local market and open an export market.”




Oman: Steel project in Sur to be ready by early 2018 Times Of Oman + NewBase

A 2.5 million tonne per annum-steel plant is expected to start operation by early 2018 in Sur, saidP T Sivarajan, director of operations at Sun Metals, which is developing the project. "If everythinggoes well, the plant will be operational in the first quarter of 2018," he told Al Shabiba, the sisterArabic daily of Times of Oman

"In the absence of a port to handle a 2.5 million tonnes steel plant in Sur, a proSper logistic studyis to be carried out to make a decision on site location," noted Sivaraj

Favourable site

The company has done a lot of work in Sur and it is the favourable site for the project. However,the company will be forced to move to Duqm if mid-sea discharging is not considered. The plantwill produce TMT bars, which are used in construction industry, and also value added specialquality round bars for engineering and automobile applications

The proposed products include 1.2 million tonnes of commercial grade rebar for catering to Menaregion in general and Oman in particular.In fact, 1.133 million tonnes of specialty steel forautomobile industry in Mena region in particular and in European and global market

The Sur project will be the first special steel and TMT rebar production facility in the entire MiddleEast region, according to the promoters

Lowest capital expenditure

The pre-engineering cost of the project is estimated in the region of $400-450 million and it hasthe lowest capital expenditure per tonne of finished product in the region. The project does nothave to pay taxes and duties in Oman

For this type of volume, a jetty and mid-sea unloading practice has to be adopted, similar to DolviSteel Plant of Jindal. An additional capital expenditure of $20 million will be needed for thecompany, if Public Establishment for Industrial Estates (PEIE) does not set up a jetty at Sur. Thisadditional $20 million will be taken care in contingency provided in the capital expenditure. As far as the present status of the project is concerned, the promoters have already signedcontract with POSCO E&C, Korea, for PEPCOM (planning, engineering, procurement,construction, operation and maintenance) services. Also, another agreement signed with SojitzCorporation, Japan, for support of in-take, off-take and co-development. A feasibility study wasalso completed by the company in house.




Ghana: Sevan Marine's KANFA awarded EPC contract for the FPSO Yinson Production . Source: Sevan Marine

KANFA, a subsidiary of Sevan Marine, has been awarded a LOA for the Engineering,

Procurement and Construction ('EPC') contract for four process modules for the FPSO Yinson

Production. The contract is expected to have a duration of 15 months with a contract value of

approx. USD 50 million.

The FPSO Yinson Production will be deployed at the recently sanctioned Offshore Cape Three Points Block (OCTP), located in the Tano Basin, around 60 km off the coast of Ghana. TheOCTP Block is operated by ENI’s subsidiary ENI Ghana and the joint venture partners; Vitol Upstream Ghana and Ghanaian state-owned Ghana National Petroleum Company. This contract award marks the continued recognition of the KANFA Group as a leading independent process, design and engineering group for the Offshore Oil & Gas Industry.




UK: Britain approves world's largest offshore wind farm Soure: Forewind

Britain's energy ministry has approved the Dogger Bank Creyke Beck offshore wind project,

making it the largest renewable energy development ever to receive planning consent in the UK.

The consent approval is the result of more than four years of comprehensive assessments, stakeholder consultation and planning by the Forewind consortium, owned equally by the four international energy companies – RWE, SSE, Statkraftand Statoil. This work included the most extensive study of an offshore area by a wind energy developer ever undertaken with more than £60 million spent on surveys, the vast majority going to UK-based contractors.

Energy and Climate Change Secretary Ed Davey approved the application for the Dogger Bank Creyke Beck development, which was submitted to the Planning Inspectorate by the Forewind consortium in August last year. He said:

'This is another great boost for Yorkshire and Humberside. This development has the potential to support hundreds of green jobs and power up to 2 million homes. Making the most of Britain’s home grown energy is creating jobs and businesses in the UK, getting the best deal for consumers and reducing our reliance on foreign imports. Wind power is vital to this plan, with £14.5 billion invested since 2010 into an industry which supports 35,400 jobs.'

Dogger Bank Creyke Beck, which has a total generating capacity of 2.4GW, comprises two separate 1.2GW offshore wind farms, each with up to 200 turbines installed across an area of around 500km2. The wind farms will be located 131 kms from the UK coast and will connect into the existing Creyke Beck substation near Cottingham, in the East Riding of Yorkshire.

The Dogger Bank Zone is in the North Sea, located between 125 and 290 kms off the east coast of Yorkshire

When constructed, Dogger Bank Creyke Beck is expected to be one of UK’s largest power generators, second only to the 3.9GW Drax coal-fired station in North Yorkshire and is the same size as the 2.4GW Longannet coal-fired station in Fife. In total it will be capable of generating 8 terrawatt hours (TWh) of green energy per annum, equal to the amount used annually by approx. 1.8 million British homes.*

General Manager, Tarald Gjerde said the organisation and its four owners are thrilled that the first consent for the Dogger Bank Zone has been granted, taking the flagship development a step




closer to supplying the UK with such a significant amount of renewable energy, and to realising the many potential economic opportunities, particularly on the east coast.

Dogger Bank Creyke Beck could create up to 4750 new direct and indirect full time equivalent jobs** and generate more than £1.5 billion for the UK economy, with the majority of opportunities in the North East and Yorkshire and the Humber regions. This is particularly due to the regions proximity to the development as well as their historic strengths, existing skills in large-scale production activities and a marine support legacy.

'Achieving consent for what is currently the world’s largest offshore wind project in development is a major achievement for Forewind and will help confirm the UK’s position as the world leader in the industry,' Mr Gjerde said. 'It is testament to the stellar efforts made by the outstanding Forewind team, and to the invaluable support given by a wide range of expert consultants and specialist suppliers.'

Dogger Bank Creyke Beck is part of the Dogger Bank Zone, the largest of the Round 3 zones but one of the shallowest, with high wind speeds and seabed conditions ideally suited to offshore wind development.

The rights for the Dogger Bank Zone were awarded to Forewind by The Crown Estate, manager of the UK seabed. Head of Offshore Wind for The Crown Estate, Huub den Rooijen said that:

'Today’s announcement for Dogger Bank Creyke Beck is the largest planning consent for an offshore wind development globally. The sheer scale of this project creates the potential for it to be built at significantly lower costs, presenting a powerful opportunity for economic growth and jobs. We look forward to working with the Forewind consortium and the wider offshore wind industry to ensure the UK remains the most attractive country to invest into the long term.'

As part of the consent process a final six-week judicial review period is now underway.

A decision on Forewind’s second development consent order application, for Dogger Bank Teesside A&B, in anticipated around August this year.




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Oil Price Drop Special Coverage

Oil climbs higher on Kuwait comments

World oil prices rose on Tuesday on upbeat comments from key producer Kuwait, while investors kept tabs on Greece’s troubled debt talks with its creditors. Brent North Sea crude for April delivery rallied as high as $62.57 — a level last seen on December 22, 2014. It later stood at $61.97 a barrel in London midday trade, up 57 cents from Monday’s close.

US benchmark West Texas Intermediate (WTI) for April delivery rose 33 cents to $53.11 a barrel.

“The Kuwaiti oil minister is optimistic that the gains will hold and prices will drift higher in the second half of the year,” said PVM analyst David Hufton in a note to clients. “There are reasonable grounds to believe that he is right,” he added.

Kuwaiti Oil Minister Ali Al Omair said oil prices have recovered “faster” than expected and recent gains will likely hold. “I think it will last ... It started holding gains now and hopefully, in the second part of 2015, we will see better prices,” Omair told reporters on Monday.

Kuwait, a member of the Organisation of Petroleum Exporting Countries (Opec) cartel, is the world’s 10th largest petroleum producer. Crude has been on a rollercoaster for the past two weeks after prices fell by around 60 per cent between June and January.

Losses accelerated in November after Opec decided to maintain its production at 30 million barrels per day. In recent weeks, market sentiment has been bolstered by cuts in output by North American shale producers that have raised expectations of a reduction in the current supply glut.

Elsewhere on Tuesday, Greece and Europe raced to scrape together a last-minute debt deal for Athens and avoid a catastrophic Greek exit from the Eurozone a day after talks collapsed. Greek borrowing prices soared and the euro sank against the dollar hours after the radical leftist government in Athens refused a demand by Eurozone partners that it apply for an extension to its EU bailout.

Eurogroup head Jeroen Dijsselbloem, who is also Dutch finance minister, on Monday gave an isolated Greece 48 hours to request the extension to the bailout programme that expires at the end of the month, a demand that Athens bitterly refuses.




Platts: Asian spot LNG prices post largest drop

Prices of spot liquefied natural gas for March delivery to northeast Asia saw their largest year-over-year drop on record, plunging 61.7% from March 2014 to average $7.436 per million British thermal units, according to latest Platts Japan/Korea Marker data for month-ahead delivery. This is the largest year-over-year fall since Platts began assessing the JKM in February 2009. The figure reflects the daily Platts JKM assessed between January 16 and February 13, expressed as a monthly average.

In 2014, March JKM daily prices had reached a historic high of $20.20/MMBtu on the assessment date February 14. By comparison, March-delivery JKM prices in 2015 bottomed at $6.80/MMBtu on the assessment date February 5, the lowest since June 2010.

“Moderate temperatures and high buyer inventories continued to cap demand for spot cargoes in northeast Asia, despite the lower prices in March,” said Stephanie Wilson, managing editor of Asia LNG at Platts. “Exacerbating the oversupply were cheaper competing fuels, which many utility power generators opted to burn rather than LNG.”

At $7.436/MMBtu, the monthly average JKM for March delivery had reached levels not seen since 2010, when the July monthly average was $9.639/MMBtu. In the years following the 2011 Fukushima disaster and the subsequent loss of nuclear power in Japan, March JKM monthly averages had been consistently above $10/MMBtu.

The March 2015 monthly average had also dropped 25% from February, as the market shifted into a backwardated structure, reflecting the seasonal reduction in demand going into the northern hemisphere spring. This exerted further downward pressure on prices, as buyers were in no rush to procure cargoes, Platts informs.

The softening market was in stark contrast to Northern Europe, where colder temperatures had resulted in a spike in onshore gas prices for the prompt month. The average spread between the

March JKM and UK NBP had narrowed to a historical low of$0.36/MMBtu during the assessment period, as the arbitrage between the Atlantic and Asia Pacific basins closed.

“Even this closure of the arbitrage was insufficient to support the prices of LNG in Asia, as the number of available cargoes in the Asian Pacific basin alone outstripped the demand,”Wilson explained. “Over the course of the assessment period, NBP became the premium market, ending $1.437/MMBtu above the JKM for March delivery. However, this spread did not enable cargoes of Asia Pacific origin to be sold into the Atlantic basin, largely owing to the shipping costs.”

The widening spread, however, provided opportunities for portfolio sellers who were loading cargoes in the Atlantic with a view to ship the cargoes to their buyers in Asia. Higher onshore European gas prices have enabled them to sell these Atlantic loading cargoes in the same basin at more attractive prices, and procure spot cargoes within Asia to fulfill orders within the region.

This led to a slight rebound in prices towards the end of the trading month, with the JKM gaining $0.10 to close at $6.90/MMBtu on the last day of trading for March delivery. Meanwhile, the price of possible competing fuel thermal coal decreased 13.1% year over year, while fuel oil was down 49.9% over the year during the January 16 to February 13 assessment period.




Russia Pumps Up Sales of Oil to Asia Bloomberg

Middle East oil producers already scrapping for share in Asia must now contend with more supply from Russia.

Russia, the world’s second biggest crude producer, boosted sales to China, Japan and South Korea by 25 percent last year, increasing its portion of shipments to 8.7 percent, from 7.2 percent in 2013, according to government data compiled by Bloomberg. Saudi Arabia accounted for 24 percent, down from 26 percent, while Qatar and Kuwait also ceded market share.

Gulf producers are now offering record discounts for Asian buyers amid a global crude glut. As European demand weakens and shale takes the U.S. closer to energy self-sufficiency than at any time since the 1980s, suppliers are focusing on Asia, which the International Energy Agency forecasts will replace the Americas as the biggest consuming region this year. Rising sales to Asia are helping Russia’s economy weather the conflict in Ukraine, sanctions and collapsing energy prices.

“Asian customers want to diversify supplies and Russia has the crude so it’s a win-win situation,” Victor Shum, a Singapore-based vice president at IHS Inc., said by phone Tuesday. “The alternative for Russia is shipping crude to the west, to Europe, but Europe is not a region with growing demand. Asia is the place.”

Russia sold about 51 million metric tons of crude to China, Japan and South Korea last year, from 41 million in 2013, the data show. The countries, three of the region’s four largest oil consumers, imported a total of 592 million tons. Comparable data for India, the fourth, are not available.

Saudi Share

Saudi Arabia sold 142 million tons, down from 146 million. Qatar’s shipments slid 7.4 percent to about 30 million tons. Kuwait’s sales remained at about 41 million tons, cutting its market share to 7 percent from 7.2 percent.

The Saudis widened discounts on crude supplies to Asia 10 times in the past 15 months, setting its benchmark Arab Light at a record discount of $2.30 a barrel in March. Other Middle East suppliers including Iran and Kuwait typically follow the Saudi pricing. The country led a decision by the Organization of Petroleum Exporting Countries in November to maintain output in an attempt to curb higher cost supply from outside the group and reduce the glut.




Asia will account for two-thirds of the growth in global oil demand this year, according to the Paris-based IEA. Daily consumption of 31.2 million barrels will take the region above the Americas at 31.1 million barrels. Europe’s use is forecast to shrink to 14 million barrels.

Chinese Refiners

While Saudi Arabia’s hold on the Chinese market, the biggest after the U.S., slid to 16 percent in 2014 from 19 percent the year before, it’s unlikely to lose its place as the top supplier, according to Amy Sun, a Guangzhou-based analyst at ICIS China. The nation boosted its market share in Japan, the world’s third-biggest consumer, to 32 percent from 30 percent.

“Chinese refiners still love Saudi crude because supplies are stable and refining units are suitably configured,” Sun said by phone Feb. 6. “If prices stay attractive, Saudi market dominance may well be intact over the next five years.”

Asian refiners are limited in their options because plants are built to process only certain types of crude. Alternatives such as Venezuela’s heavy, high-sulfur cargoes aren’t viable for Japanese companies, according to Takayuki Nogami, a senior economist at Japan Oil, Gas and Metals National Corp. Russia’s East Siberia-Pacific Ocean crude, or ESPO, is a similar quality to Murban oil from Abu Dhabi and favored by Japanese and South Korean refiners.

‘Deeper Discounts’

Deeper discounts also may help Middle East producers defend their sales in Asia. Iran set its Light crude at a record discount on Feb. 10, based on a formula linked to Saudi prices. Qatar and Kuwait may become “more aggressive in offering generous discounts,” Nogami said by phone on Jan. 28.

Brent crude slid to the lowest level in almost six years on Jan. 13 amid the highest U.S. production in three decades. While futures have rebounded 38 percent from this year’s low of $45.19 a barrel amid signs U.S. drilling is slowing, they’re still 46 percent below the 2014 peak. The contract for April closed at $62.53 on the ICE Futures Europe exchange in London on Tuesday.

The collapse in oil combined with western sanctions against its annexation of Crimea has taken Russia to the brink of recession, prompting the ruble to lose almost half its value against the dollar in the last year. The economy is reliant on oil and gas for about 70 percent of exports and half its budget.

ESPO Crude

Russia built the ESPO pipeline from the Siberian town of Taishet to Kozmino on its east coast in an effort to supply more crude to Asia. The port loaded its first cargo in 2009 and the pipe’s second phase was completed in 2012. Tanker shipments scheduled from Kozmino rose to a record of 2.6 million tons in March, according to loading programs obtained by Bloomberg. They averaged about 2 million tons a month in 2014.

OAO Rosneft, the biggest publicly traded oil producer by output, signed a long-term contract with China National Petroleum Corp. in 2009, supplying 15 million tons in 2013. That year, it agreed a new contract with CNPC for 325 million tons over 25 years, according to its website.

Rosneft plans to boost shipments to the east by 30 percent to 32 million tons this year, it said Feb. 4. Exports to China are forecast to increase 27 percent to 29 million.




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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 18 February 2015 K. Al Awadi




Economy & Finance

New base 543 special 18 february 2015