New base 567 special 24 march 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,

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NewBase 24 March 2015 - Issue No. 567 Khaled Al Awadi

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

Oman: Saudi’s ACWA, Mitsui Win $630m Oman Power Plant Deal

The contract was won along with Dhofar International Development and Investment

Holding Co. By Reuters

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Saudi Arabia’s ACWA Power and Japan’s Mitsui & Co said on Monday they had won a contract from Oman’s government to build and operate a $630 million, 445 megawatt natural gas-fired power plant at the city of Raysut.

The contract was won along with Dhofar International Development and Investment Holding Co, which will take 10 per cent of the project, Mitsui said in a statement. The Saudi and Japanese companies will each take 45 per cent.

The partners will sell electricity to Oman under a 15-year agreement with the new plant to be operational in January 2018. As part of the deal, the consortium will acquire Dhofar Generating Co, which owns and operates an existing 273 MW gas-fired power plant.




Egypt: Foreign firms receive price boost for Egypt natural gas The National + NewBase

Foreign companies will start to receive more money for natural gas as Egypt moves to boost production to meet some US$20 billion of planned power projects. BG Group, the London-based company that is one of the biggest players in Egypt’s gas sector, will receive US$3.95 per million British thermal unit (btu) for natural gas from new developments, up from its previous terms of

$2.65 per million btu, a BG executive said on Monday. “The [government] is basing the [increased price for natural gas] on a number of variables,” he said, adding that it was not “fundamental to change the pricing for everyone”.

Also on Monday, the Egyptian oil ministry announced that it signed an agreement to raise the price it pays Germany-based Dea Egypt (formerly RWE Dea) for natural gas to $3.50 from $2.50. Dea Egypt declined to comment on the pricing, but

did say that it was involved in many projects in Egypt, including the recently renegotiated West Nile Delta project led by BP.

“That alone shows investment opportunities in the country and that the future is strong,” said the Dea spokesman Uwe-Stephan Lagies. The government is increasing what it pays foreign firms for gas in the domestic market to encourage them to raise exploration and production.

The price that Egypt pays each company for natural gas varies based on numerous factors. A government appointed committee looks at company reserves and costs, and the body takes a decision on the price based on information provided by companies such as how much it costs to build infrastructure, to drill and on estimated reserves.

Egypt sits on an estimated 77 trillion cubic feet (Tcf) of proven natural gas reserves, up 30.5 per cent from 2010, according to the US energy information administration. Most of the potentially large gas discoveries are located in deep offshore areas and remain undeveloped because of the complexity and costly technology required.

A lack of infrastructure can prohibit exploration and expansion for onshore gas fields as well. The Western Desert has only two gas pipelines, and required investment to build another pipeline is about $1 million per kilometre, according to one Western Desert operator.

The company said that despite signs of willingness from the government to pay more for the resource, it would still need $6 per million btu of natural gas to consider expanding its exploration and extraction. “It’s similar to having an abscessed tooth versus a gum inflammation. It’s just a matter of pain and these new prices are just a little less painful,” said the operator.




The company is still hoping to get part of the price increase and is in negotiations with the government to receive $4.50, up from its current price at $2.50. Sharjah-based Dana Gas is also waiting to receive word if it will receive more money for its natural gas, with the Egyptian government currently paying the company about $2.65.

The announcement of new gas prices is a welcome development, and it comes at a pivotal time as the North African country is looking to increase its power generation capacity. Natural gas makes up the majority of electricity generation at 68.7 per cent, according to the Egyptian state-owned Information and Decision Support Centre.

Abdel Fattah El Sisi, Egypt’s president, has implemented a fast-track power plan aiming to double the country’s current capacity of about 30,000 megawatts in five years. Germany’s Siemens will funnel more than $10.5 billion in power deals after signing four agreements during the Egypt The Future conference this month, the first major event to be held in the country since 2011.

The US company General Electric announced it would fund $1.9bn of power projects, and Saudi Arabia’s Acwa will provide a $9.4bn investment.

According to Frost & Sullivan, Egypt would need to increase its natural gas supplies either by importing or increasing its production rates to meet the additional expansion. Natural gas and coal will account for 84 per cent of the new capacity, said Anup Barapatre, a power analyst for Frost & Sullivan. This also includes new developments like the West Nile Delta project, which is scheduled to begin producing gas by 2017. At its peak, the project will produce equivalent to about a quarter of Egypt’s current gas production, which is estimated at 4.7 billion cubic feet a day, and it is all for domestic use, said the BP spokesman Robert Wine. Despite the announcement of new gas prices, Egypt has struggled in the past to pay foreign operating companies.

The country began making headway in payments in January, handing out $2.1bn owed to foreign energy firms. Dana Gas received $60m of $212m in overdue payments while BG received $350m, 27 per cent of its outstanding receivables.




Oman BP ensures safety in Khazzan Shale gas project BYTIMES NEWS SERVICE + NewBase The Khazzan Project represents the first phase in the development of one of the Middle East region’s largest unconventional tight gas plays. Photo - Supplied Muscat: BP Oman will take action to sustain the environment, ensure safety, and protect society while operating the Khazzan Project, located in Block 61, says the Khazzan Project Sustainability

Report. The first Khazzan Project

Sustainability Report presented by BP Oman under the patronage of Eng. Salim bin Nasser Al Aufi, the

undersecretary of the Ministry of Oil and Gas, provides details of BP's

overarching commitments and engagements in a transparent manner. In a speech presenting the inaugural Khazzan Sustainability Report, Dave Campbell, the chief operating officer of BP Oman, confirmed that the purpose of publishing this report is to share information about the scope of the Khazzan project with project stakeholders and the wider community. "The report provides an overview of BP's development plans. BP is an international company that strives to be a safety leader in the oil and gas industry, a world-class operator, a good corporate citizen and a preferred employer to earn trust and grow value in Oman," he added. "We plan to develop the Khazzan Project in line with BP's goals: no accidents, no harm to people and no damage to the environment. Safety is at the heart of everything we do and throughout this project we will maintain our focus on a strong safety culture and workforce capability," Campbell said. Sanctioned in December 2013, the Khazzan Project represents the first phase in the development of one of the Middle East region's largest unconventional tight gas plays. Khazzan has the potential to be a major new source of gas supply for Oman for many decades. It will deliver around a third of Oman's daily domestic gas supply, making a significant contribution to ensuring stable supplies from domestic sources. Since BP Oman signed the exploration and production sharing agreement with the Omani government, significant progress has been made towards delivering first gas in 2017. This includes the drilling and completing of four wells as well as inaugurating a state of the art technicians training centre which will help supply Omani human resources for the project.




First Qatari LNG to Reach Pakistan on March 26 Pakistan Observer +NewBase

Pakistan will receive first Qatari LNG on March 26, according to Pakistan Observer newspaper. Sources have told the newspaper that Qatargas is selling the fuel at $8 to $9 per Million British Thermal Units (MMBTU).

After the cargo reaches Pakistan, the LNG will be re-gasified and, on March 31, injected into the Sui Southern Gas Company Ltd (SSGCL) network through Engro’s re-gasification terminal at Port Qasim.

The LNG will initially be provided to four Independent Power Producers (IPPs) in Punjab, including Kot Addu Power Company (Kapco). In the second phase of the operation, fuel will be used for

Compressed Natural Gas (CNG) and in the third, it will be supplied to the fertiliser

sector, Pakistan Observer reported. The need to import LNG is a result of the relatively higher cost of power generation through furnace oil and diesel fuel.




Myanmar: BG, Woodside to Invest Over $1 bn in Four Blocks Reuters + NewBase

BG Group and Woodside Petroleum Ltd plan to invest up to $1.08 billion in four oil and gas blocks offshore Myanmar's western Rakhine state, news agency Reuters reported Sunday citing a senior Energy Ministry official.

The two firms won two shallow water blocks and two deepwater blocks in the country's auction last year. "Operations at the shallow blocks will take $545.5 million at the minimum, while that at deep-sea blocks will cost $535.1 million at the minimum," said the official, Reuters reported.

Both firms signed PSCs on Friday, the official said adding that observation and exploration work at the blocks will take another seven or eight years. Myanmar's proven natural gas reserves totalled 10 trillion cubic feet (tcf) at the end of 2013, according to BP's Statistical Review of World Energy.




Norway: Atlantic Petroleum announces spud of 6706/12-3 Roald Rygg Source: Atlantic Petroleum

Following the transaction with Statoil announced 23rd February 2015a positive drill decision has been taken on the Roald Rygg Prospect in PL602, and Atlantic Petroleum has announced that drilling of theRoald Rygg well 6706/12-3 commenced 22rd March 2015 with the Transocean Spitsbergen rig. 6706/12-3 is planned to drill to a total depth of around 3420 m TVD and operations are anticipated to take 35 days. The Nise Formation is the main target for the well, while the Kvitnos Formation represents the secondary target. The Roald Rygg Prospect is located immediately next to the Snefrid North discovery (6706/12-2) recently drilled by PL218 where gas (105 m) and oil (4 m) were found in the Nise Formation. In addition to Roald Rygg the PL602 license contains several other prospects and leads with significant follow up potential. The license is located adjacent to the Statoil-operated Aasta Hansteen field development which is due to come on stream in 2017.

Location of Roald Rygg well and Snefrid North discovery (Source: Statoil)

Following the recent transactions the partnership consists of Statoil 42.5%* (operator), Centrica 20%, Petoro 20%, Wintershall 10% and Atlantic Petroleum Norge 7.5%*. Ben Arabo, CEO, stated:

'We are very pleased to see the spud of the Roald Rygg well shortly after completing a deal with Statoil on the licence. With the development of new gas infrastructure in the Aasta Hansteen area, this is an attractive area for gas discoveries. Furthermore, the recent discovery of an oil leg below the gas cap in the neighboring Snefrid North licence has a larger positive impact for Atlantic Petroleum as the company has, over the past years, secured significant acreage in this part of the Norwegian Sea represented by ownership in PL528/B, PL602, PL704, PL705, PL763 and PL802. It has always been our belief that in addition to good gas prospectivity there is oil in the area and the Snefrid North discovery proves this to be correct.'




US: Crude oil storage at Cushing, but not storage capacity utilization

rate, at record level Source: U.S. Energy Information Administration,

After increasing for 15 consecutive weeks, crude oil storage at Cushing, Oklahoma, reached 54.4 million barrels on March 13, according to EIA's Weekly Petroleum Status Report. This volume is the highest on record, but not the highest percent of storage utilization, as working storage capacity at Cushing has also increased over time.

Storage levels at Cushing are significant, because Cushing serves as the delivery point for the United States crude oil benchmark, West Texas Intermediate. Sited in central Oklahoma, Cushing is home to both a network of crude oil pipelines and storage capacity.

The 70.8 million barrels of storage capacity in Cushing represent more than 60% of all crude oil working storage capacity in the Midwest (as defined by Petroleum Administration for Defense District 2) and about 19% of all commercial crude oil storage in the United States.

Although inventory levels at Cushing are at their record high, storage utilization (inventories as a percent of working storage capacity) are not at record levels.

Capacity utilization at Cushing is now 77%, a large increase from a recent low of 27% in October 2014. However, utilization reached 91% in March 2011, soon after EIA began surveying storage capacity twice a year, starting in September 2010.




As explained in a previous article, utilization can be difficult to calculate, because EIA's reported inventory levels also include crude oil that is not in storage tanks. This larger inventory is in

pipelines, and includes lease stocks (oil that has been produced but not yet entered into the supply chain), and crude oil in transit from Alaska (which only applies to inventories in the West Coast region).

At a national level, including these volumes in storage utilization calculations tends to overestimate storage utilization. At a specific site such as Cushing, though, this is less of a concern because there are no volumes in lease stocks and no crude oil in transit from Alaska.

Recently, the ability to ship crude oil in pipelines both to and from Cushing has increased; inventory levels can change more rapidly than in previous years. Using the absolute value of weekly changes, Cushing inventory levels in the previous two months have changed by about 2.2 million barrels (on a net basis). In previous years, the net weekly changes were more often in the range of 0.5 to 1.0 million barrels either in or out of Cushing.




Oil Price Drop Special Coverage

No Comments about oil prices Ups & Downs …..




Saudi urges non-Opec members to cooperate to boost price AFP + NewBase

Oil producers outside Opec must cooperate to boost falling crude prices as the cartel refuses to take responsibility alone, Saudi Arabia’s oil minister has said.

“We refuse to take responsibility alone because (Opec) produces 30 per cent of market output and 70 per cent comes from outside,” Ali Al Naimi said in remarks carried Monday by the Saudi Press Agency (SPA).

Crude prices slumped by about 60 per cent between June and February, weighed down by a glut of global supplies and concerns about stalling demand.

The slide was exacerbated in November when the Organisation of the Petroleum Exporting Countries (Opec) refused to cut production to rescue falling prices, saying it wanted to maintain its market share.

The 12-member group, led by top producer Saudi Arabia, pumps around a third of the world’s oil but other major producers, such as Russia, are not tied by its decisions. Asked whether Opec would be willing to work with non-members, Al Naimi pointed to the crash of 1998 when the cartel cooperated with other producers to cut output and support oil prices.

“Today, the situation is difficult. We tried, met with them but did not succeed because they insisted that Opec should take the responsibility alone,” said Al Naimi, in reference to talks with non-Opec producers ahead of the cartel’s meeting in November.




“All must contribute if we want to improve prices because it is in the interest of all,” the Saudi minister said. Al Naimi said the kingdom had the capacity to supply any new client with crude. Saudi Arabia had no objection to new oil producers joining Opec, he said, adding that several countries have in the past turned down invitations to become members of the cartel.

The Saudi minister also defended the oil policy of gulf states, saying they were taking measures to stabilise the market. “We are not against anyone. We are with all to support stability in the market and to support a balance between supply and demand,” Al Naimi said.

Saudi Arabia and its Gulf partners have been criticised for allegedly using oil as a political weapon against countries within and outside Opec. Oil prices fell in Asian trade Monday with US benchmark West Texas Intermediate for May delivery down 65 cents at $45.92 and Brent tumbling 58 cents to $54.74.

Bloomberg News quoted Al Naimi as saying on Sunday that his country is producing almost 10 million barrels of crude a day. Saudi Arabia pumped 9.85 million barrels a day in February, according to Bloomberg.




Hedge funds get short of US oil as new drillings drop Reuters + NewBase

Hedge funds have turned super-bearish about US oil prices as concerns about running out of storage trump the drop in the number of rigs drilling new wells. Money managers had amassed a record number of short positions in futures and options contracts linked to WTI (West Texas Intermediate) by the end of March 17, equivalent to 209mn barrels of oil, according to the US Commodity Futures Trading Commission’s (CFTC) latest commitments of traders report published

on Friday. Money managers still have long positions equivalent to 381mn barrels, so overall the sector is still running a net long position. Hedge fund managers have a natural bullish bias. Not once have hedge funds as a whole been net short of WTI futures and options in the last nine years. But the ratio of long to short positions last week, at 1.8:1, was the lowest in four-and-a-half years, and among the lowest recorded since hedge fund positions have been reported separately. It was as close as the hedge fund community gets to being bearish.

On March 17, money managers had 90 separately identified short positions in WTI-related futures and options contracts, compared with 75 long positions, according to an analysis of CFTC data. It has been rare for short positions to outnumber long ones since oil prices crashed in 2008. The build-up of short positions comes as no surprise, though the speed at which funds have turned bearish was unexpected. Total short positions rose by 36.5mn barrels over the seven days to March 17 and have risen by 75% over the last four weeks. Fund managers have focused on the immediate risk of storage space running out in the next few weeks rather than the drop in drilling activity and the implied downturn in oil production later in the year. Stocks of crude in commercial storage at tank farms, refineries and in pipelines across the US have risen by 73mn barrels, 19%, since the end of last year, and stand at the highest level since the 1930s. At the same time, the number of rigs drilling for fresh oil has halved since early October 2014, to the lowest level in four years, according to Baker Hughes, the oilfield services company. The number of rigs drilling in North Dakota’s Bakken has dropped from 190 in October to 107 by the end of last week, according to the state Department of Mineral Resources. Bearish hedge fund managers are betting the US will run out of storage space before lower drilling rates start to cut production and rebalance supply and demand. But with so many hot-money shorts in WTI-related futures and options, the uptick in futures prices between March 18 and March 20 should not surprise anyone. The market had got itself very short and was ripe for a near-term reversal.




Gulf economy and oil prices — the talk of the town Written by Lo’ai Batainah + Oman Observer Business

WHEREVER you go and whomever economists you meet, the talk will always touch on the Gulf economy and the aftermath of the southward movement of oil prices Many believe that this slump will create great negative economic and political effects; some of which have already loomed in the horizon. There has been mounting fears that the slump will result in strict limitation on the governmental expenditure due to fear of eroding the financial and monetary reserves which have been

accumulated over the past year due to oil price hike. There is a common agreement among analysts that oil price hike and its associated welfare have reflected positively on the lives of Gulf citizens and expatriates and many have enjoyed the fruits of economic boom. We are all aware that the great decline in oil prices, its alternatives and types led to great pressures on the oil producing countries in general and Gulf countries in particular.This

has been manifested in the remarkable decline of state revenues. It is thus expected that many countries’ balance sheets with witness deficit, which some estimate to be over $200 billion for these countries. As a response to the situation, some countries may tend to increase production to offset their losses and generate resources to finance the government expenditure and make the due payments for the oil extracting companies which have achieved record levels over the past few years. Official statistics show that Saudi Arabia has increased its production in January 2015 to record levels since April 2014. The crude oil quantities used by refineries remained high as well. The figures released by the Common Data Set Initiative pointed out that Saudi Arabia has issued 7.474 million barrel per day last January , compared to 6,934 million in December 2013. The production levels have increased to 9.680 million barrel per day two months ago compared to 9.630 million barrel per day in December 2014. The Qatar Central Bank Governor said that the slump in oil price had negative impact on the global economy and led to a decline in growth rates and an increase in unemployment levels in most economies. He pointed out that this also caused fluctuation in financial markets, with rising dollar and falling oil prices, a matter, which led to a decrease in inflation rates. He added that “The GCC countries are undergoing an exceptional period that requires us to take the necessary actions and measures to meet the potential repercussions,” he said, stressing on the need to coordinate monetary policies and unify efforts to ensure financial and banking stability. Although GCC economies are still functioning well at the different levels, still there is some sort of hesitancy and delay in taking the proper investment and financial decisions due to fears that oil




prices might not go northward again as expected by many analysts over the past few months. A large number of governments are calling for better coordination between oil producers inside and outside OPEC to reduce the production in a bid to bolster prices. No doubt that the great slump in oil prices will lead many oil producing countries to take a number of political, financial , economic, tax and political measures to correct the market. The public and private financial and investment vehicles in the Gulf are thus required to remain poised to seize the investment opportunities that will be generated. They are also required to maximise their contribution to the economic programmes in the Gulf region which is in bad need for diversifying sources of income and financial resources to increase production and reduce its reliance in oil. Most economists believe that the private sector should always be a strategic partner for the public sector at all times. The Gulf private sector has the stamina that enable it to make many achievements in the non-oil sectors. The Gulf governments’ investment in infrastructure , the major transport, power and water projects as well as the privatisation programmes pursued by many of them will create considerable business opportunities which are not less attractive than the business opportunities in advanced countries such as USA and UK. The Arab Gulf countries are thus required to continue t their investment programmes in upgrading their infrastructure as this will enable the private and public sectors to play an important role in the growth of the national economy. Many believe that success in attracting foreign investment is the corner stone for achieving the economic vision, diversifying the sources of national economy, ensuring economic and financial stability especially most Gulf countries have done well over the past twenty five year in terms of completing their high quality infrastructure. Attracting foreign investments will enhance the competitiveness of the Gulf economies and will create job opportunities for talented youths who have received high quality education. It will also contribute to improving the standard of living of citizens and expatriate as well. We should do our best to benefit from the packages of incentives provided by the Gulf countries to attract local and foreign investments. It is a truth universally acknowledged that financial markets are mirrors for their respective economies. The Gulf stock markets have been negatively affected over the past year by the sale waves from the individual and institutional foreign investors. While we are confident that the financial markets in the region have many promising investment

opportunities, still the investment decision should be based on clear vision and specific aims within specific aims.

([email protected])




5th Global Pipeline Integrity & Technology Summit on 20th

- 22nd

April in Abu Dhabi http://www.fleminggulf.com

Focusing on the theme "Technology that integrates Excellence", the 5th Annual Global Pipeline Integrity & Technology Summit will feature insightful discussions regarding current market needs in order to face the challenges and issues concerning the global oil & gas pipeline industry.




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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 24 March 2015 K. Al Awadi




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Economy & Finance

New base 567 special 24 march 2015