New base special 03 september 2014

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NewBase 03 September 2014 Khaled Al Awadi

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

Economic cost of Omani power sector subsidy put at U$D 2.7 billion for 2014 OEPPA Business Development Dept + NeewBase

The economic cost of subsidising Oman’s rapidly expanding power generation and related water desalination sector is projected at RO 973.7 million in 2014, according to the findings of the Authority for Electricity Regulation, Oman (AER). This compares with a total economic cost calculated at RO 871.7 million during 2013, representing an increase of nearly 12 per cent, the

regulator said in its latest Annual Report. The figures underscore the hefty economic cost of financially supporting the Sultanate’s electricity and potable water sector, which has been growing at a phenomenal rate of around 10 per cent annually. Every year, Oman’s Ministry of Finance provides grants to licensed supply and distribution companies in the form of electricity subsidies calculated by the Authority. The subsidy amount is computed on the basis of two calculations: the first estimates the subsidy payable to Muscat Electricity Distribution Company (MEDC), Majan Electricity Company and Mazoon Electricity Company which between themselves account for

all of the electricity supplied within the Main Interconnected System (MIS), serving much of the northern half of the Sultanate. Subsidies payable to the Rural Areas Electricity Company (RAECO), which serves areas not connected to the MIS and the Salalah System, are calculated separately. Likewise, subsidies payable to the Salalah System are calculated on the same basis as that applicable to the MIS distribution companies following the successful restructuring of the Salalah electricity market. Significantly, subsidy calculations for all three systems — MIS, RAECO and Salalah — are based on two different criteria: Financial Subsidy and Economic Subsidy. According to the regulator, the Financial Subsidy is the ‘direct’ subsidy allocated by the Ministry of Finance and reflects the financial cost of natural gas of $1.5 mmBTu and an average diesel fuel cost of 140 baisa/litre.




The Economic Subsidy, on the other hand, reflects both the ‘direct’ and ‘indirect’ subsidy to the electricity sector. “Consumers benefit from ‘indirect’ subsidy as the cost at which fuel is sold to production facilities is below its economic ‘opportunity’ cost. This calculation therefore adjusts fuel costs to reflect their opportunity costs,” the Regulator said.

“The electricity sector benefited from RO 304.6 million in support from the Ministry of Finance in 2013: RO 226.4 million of MIS subsidy, RO 47.7 million of RAEC subsidy and RO 30.5 million financial support for the Salalah System. These subsidy figures reflect the financial cost of fuel used to generate electricity. If gas is costed at $9mmBTu and diesel consistent with an oil price of $105.5 per bbl, the 2013 subsidy increases to RO 871.7 million. The analysis suggests that electricity consumers derive significant benefit from indirect fuel subsides in addition to direct subsidy,” commented Dr Amer bin Saif al Hinai, Chairman, Authority for Electricity Regulation, Oman, in the newly released 2013 Annual Report . For 2014, the Financial Subsidy payable by the government to supply and distribution companies in the Main Interconnected System (MIS) is estimated at RO 224.0 million. However, the corresponding expenditure is estimated to be as high as RO 581.5 million for the year, of which RO 357.5 million (61.5 per cent) is expected to be recovered through customer revenues. The Economic Costs are even higher when calculated against an opportunity cost of gas of $6 mmBTu and $9mmBTu, according to the Regulator. “At a gas cost of $6 mmBTu, 2014 MIS subsidy increases by 158.0 per cent to RO 577.9 million (25.2 baisa/kWh). At $9 mmBTu, subsidy




rises to RO 813.9 million (35.5 baisa/kWh) of which financial subsidy accounts for just 27.5 per cent.” For the Salalah System, the Authority estimates the financial subsidy of RO 27 million for 2014, based on a total expenditure of RO 66.1 million. The subsidy increases to RO 62.7 million based on a gas cost of $6mmBTu, rising to RO 86.5 million based on a gas cost of $9mmBTu, the Regulator added. Serving a total of 859,352 electricity customers, Oman’s power and related water sector has seen its customer base grow by 69,115 accounts, up 8.7 per cent from the previous year’s tally of 790,277 accounts. Residential customers accounted for 70 per cent of the increase in accounts. Since the restructuring of the electricity sector in 2005, the number of electricity accounts has increased by 62 per cent, according to the Regulator.




Abu Dhabi: Siemens Hands Over Shuweihat S3 Power Plant By Mary Sophia + NewBase

German conglomerate Siemens has handed over a combined cycle power plant in Abu Dhabi to begin commercial operations, the company said in a statement. The work on Shuweihat S3 combined cycle power plant was carried out in partnership with its Korean consortium Daewoo.

The Shuweihat S3 plant is owned by Shuweihat Asia Power Company, a consortium comprising of Sumitomo Corporation of Japan, the Korea Electric Power Corporation and local utility Abu Dhabi Water & Electricity Authority (ADWEA).

Situated approximately 260 kilometres west of Abu Dhabi, the power plant has an installed electrical capacity of 1,600 megawatts and will be operated by Shuweihat Asia O&M Company (SAOM), the statement said. Siemens was the consortium leader for the project as it supplied four gas turbines, two steam turbines, six generators and the instrumentation and control system for the plant.

Deawoo was responsible for the site construction, heat recovery steam generators and main transformers along with ancillary and auxiliary system, the statement said. In addition to supporting increasing power demand from Abu Dhabi’s rapidly growing population, the plant will also deliver power to the emirate’s expanding industry including the nearby Ruwais refinery.

Siemens is growing its presence in the GCC and has had several contracts in the emirate. It has previously worked on the Shuweihat S1 and S2 seawater desalination plants and on Al Taweelah A2 and Al Taweelah New B Extension projects. Recently, Siemens won a $253 million contract from the Qatar General Electricity and Water Corporation (Kahramaa) to expand the Gulf state’s power supply system.

The contract includes the construction of nine turnkey substations for phase 11 of Kahramaa’s Qatar Power Transmission System Expansion project. Under the contract, Siemens will provide gas-insulated switchgears (GIS), with voltages including 220kV, 132kV and 66kV, for the first stage of the phase 11 expansion.

The Shuweihat S3 power plant has an installed electrical capacity of 1,600 megawatts,

and will be operated by Shuweihat Asia O&M Company (SAOM).




UAE : National Drilling Company inaugurates 5 new rigs WAM –Emirates News Agency + NeewBase

The National Drilling Company (NDC) has inaugurated five new rigs assigned for the maintenance of oil wells, as part of NDC's fleet expansion plans that cover onshore and offshore operations.

Speaking on the occasion, NDC Chief Executive Officer, Abdalla Saeed Al Suwaidi, said that the company has doubled the number of its owned rigs over the past four years from 28 in 2009 to 58, adding that the company is eager to acquire more rigs and sophisticated equipment in the future to enhance performance and raise the quality of its oil well drilling operations, processing and maintenance.

"Through cooperating with specialised, well-reputed international companies, NDC was able to access high quality drilling equipment, carry out all types of drilling operations, and attract increasing numbers of skilled manpower. This comes as part of the company's development strategy to fulfil the current and future needs of its customers," said Al Suwaidi.




Iran Plans on Reviving Anahita Oil Refinary Construction – Shana News + NewBase

Iran's Petroleum Ministry will pursue building the Anahita Oil Refinery which was approved for

construction in the western province of Kermanshah 8 years ago.

Managing Director of the National Iranian Oil Refining and

Distribution Company (NIORDC), Abbas Kazemi, told reporters in

an interview that basic engineering and designing works for starting

construction of the refinery have been completed.

Kazemi said even though under Article 44 of the Constitution, the

government cannot legally take part in building the refinery but it

plans to pursue building the refinery through holding different

meetings with private investors.

The current Kermanshah oil refinery being outdated, and being located inside the city, with its

negative impact on the environment, as well as the decision to replace crude oil sales with oil

products with higher added value were the reasons behind a decision made eight years ago by

the cabinet to build the 150,000-barrel Anahita oil refinery outside Kermanshah.

Completing Anahita oil refinery not only will pave the way for the creation of direct and indirect

jobs for thousands of local people, but will also prepare the ground for the exporting of its products

to the neighboring countries.

Enclosing the site of the refinery with fences, construction of access roads, setting up an electric

post and a cement water pool, and building an office near the site are among the preliminary

works to be done to revive the Anahita oil refinery construction.




UK: Solo Oil announces commencement of drilling at Horse Hill-1, Weald basin Source: Solo Oil + NewBase

Solo Oil has announced that drilling operations on the Horse Hill-1 well have now commenced. The Horse Hill-1 well in the onshore UK Weald Basin is planned to be drilled to a Total Depth of 2,646 metres (8,680 feet) and is designed to test a number of conventional stacked oil targets in the Jurassic in the proven productive Portland sandstone, Corallian sandstone and Great Oolite limestone formations, as well as a deeper conventional gas target in the Triassic.

Solo has a binding agreement in place to own a 10% interest in Horse Hill Development Ltd ('HHDL'), a special purpose company, which owns a 65% participating interest and operatorship of onshore licence PEDL137 in the UK Weald Basin. HHDL is the drilling operator.

The participants in the Horse Hill-1 well are HHDL (Operator) with a 65% working interest and Magellan

Petroleum Corporation with a 35% interest.




UK: Nexen says North Sea Buzzard oilfield may be shut for another week Source: Reuters

The operator of the North Sea Buzzard oilfield said on Tuesday production could be shut for another week as it works to demobilise a drilling rig during a window of good weather. Calgary-based Nexen, which operates the field, said Buzzard could be shut for 'up to 10 consecutive days' starting from Saturday Aug. 30 when output from the oilfield was last stopped. Nexen was bought by China's state-backed CNOOC last year.

'This operation is highly weather dependent and requires calm conditions at sea for up to ten consecutive days,' Nexen said in a statement. 'With fair weather forecast the decision was made to shut down on Saturday 30 August and good progress is being made.'

Industry sources said earlier the firm had been eyeing a possible restart of the field later on Tuesday.

Buzzard is closely watched by oil traders worldwide as it is the biggest contributor to the Forties oil stream, the largest of the four benchmark crudes underpinning the price of international benchmark Brent crude oil futures.




Russia’s Asia focus could open gas markets for Mideast suppliers Anthony McAuley + NewBas

Russian rhetoric in recent days has highlighted its strategic focus on Asia’s energy markets for future growth, which for Middle East natural gas exporters could mean tougher competition there but more opportunity in Europe. Yesterday, Russia’s energy minister, Alexander Novak, used a

closed-door session of energy officials attending the Asia Pacific Economic Cooperation meeting in Beijing to make pointed comments about Asia’s growth prospects, while also warning that the West’s sanctions could risk world energy security.

“Taking into account Europe’s stagnation and demand saturation in the United States, I can state with certainty that the Asia-Pacific role in the world energy industry will be only increasing,” Mr Novak said, according to Russia’s state news agency, Itar-Tass. Mr Novak noted

energy policy in the West was often driven by politics, adding: “Not all are satisfied with Russia’s high status in the world energy industry. Often, in a bid to weaken our positions, these countries act even to the detriment of themselves … The less politicised Asia-Pacific markets are more attractive for us.”

Meanwhile, on Sunday, the head of Russia’s largest oil company, Rosneft, made a similar point. Western countries “want to isolate Russia but it is impossible”, the Rosneft chief executive, Igor Sechin, said in an interview with the German magazine Der Spiegel.

Referring to Germany’s ban on exports of oil equipment following Russia’s annexation of Ukraine’s Crimea region in May, Mr Sechin said if the Germans did not want to supply them to Russia, “we can buy such rigs in South Korea or China”.

Russia has been looking to Asia’s energy growth markets since well before the current crisis, but the rhetoric is seen as underlying its strategic shift. The timing of May’s US$400 billion deal between Russia and China to pipe natural gas from far eastern Russia to China’s rapidly growing market was widely regarded as politically driven – talks on the deal had been going on for years.

The implications for the world’s natural gas markets could be far-reaching. Already, Asia has accounted for an oversized share of liquefied natural gas (LNG), with China and Japan taking half the world’s supply in 2013.

Meanwhile, Qatar is the dominant Middle East supplier of LNG, accounting for a third of world supply, according to the International Energy Agency (IEA). Other regional producers consume most natural gas in their own rapidly growing markets, although Abu Dhabi and Yemen sell small amounts into world markets.

“Qatar has been playing a smart game of optimising LNG sales between Asia and Europe,” said Laszlo Varro, the head of gas analysis at the IEA. Most supplies have been going to Asia in the




past few years as China’s economic growth and anti-pollution policies, and Japan’s needs following the Fukushima nuclear disaster, have driven prices there. But it has maintained sales to Europe and could refocus there if the market dynamics were to change.




In the short term, this looks unlikely, despite the crisis, according to Katya Zaplentnyk, a European gas analyst at ICIS. “It is a completely different situation than it was in 2008-09 when Russia completely cut off gas supplies to Europe for two weeks,” she said.

The disruption in 2008 and 2009 was because of a long-standing payment dispute with Ukraine, but the negative impact for Russia – which included a renewed push to find alternative gas supplies for many European countries – has meant it is highly reluctant to repeat the exercise, whatever the rhetoric. “There is no desire by Russia to stop the gas flows this time,” Ms Zaplentnyk said.

The European market is far less vulnerable to disruption than it was six years ago after a rapid buildup of gas import infrastructure, including many LNG intake terminals that currently are operating well below capacity. Also, the economics of the market – with the US supplies of gas depressing prices there, which in turn pushed cheap coal on to the world markets – has meant Europe is amply supplied with inexpensive fuel, including cheap Russian gas.

Qatar is the pivotal LNG supplier, both in the short and longer term, said Mr Varro. “Anything which relieves tightness on world markets is good news for Europe and in the event of a disruption you could see the Qataris readjusting and some spot LNG cargoes from Yemen and other Middle East suppliers,” he said. Sustained higher prices in Europe in the absence of Russian gas would probably result in a strategic refocus by Qatar and others, but the short-term readjustment would take time, as evidenced by the time it took for Qatar to supply gas to Egypt after the recent turmoil there.




Russia’s oil production rises to 10.52mbd Reuters + NewBase

Russian oil output rose 1 percent in August to 10.52 million barrels per day (bpd), supported by an increase in condensate production at Gazprom and projects with foreign companies, Russian Energy Ministry data showed. Production in Russia, which includes crude oil and gas condensate, was still the world’s highest in August.

Western nations have imposed sanctions on Moscow over its annexation of Crimea in March and its stance over the war in eastern Ukraine, warning of further measures if Russia does not help to stop the conflict escalating. The ministry data showed production at state-controlled Gazprom jumped by 36 percent month-on-month to 306,000 bpd. Output at projects under production-sharing agreements (PSA) rose 12 percent to 241,000 bpd. There are three PSAs in Russia - the Total-led Kharyaga project, ExxonMobil -led Sakhalin-1 and Gazprom-controlled Sakhalin-2. Alexander Kornilov, an analyst with Alfa Bank, said that Gazprom was just returning to usual condensate production levels after a drop in July following maintenance works. Gazprom’s Surgut plant was out of operation for most of July. Valery Nesterov, an analyst with Sberbank CIB, said that monthly production at PSA projects is volatile because of maintenance issues, including at some offshore production platforms. In June, it was 303,000 bpd. Rosneft and Exxon plan to start production at another Sakhalin-1 project, Arkutun-Dagi, by the end of this year, which will add 90,000 bpd within three years to Russia’s total output. In tons, Russian oil output reached 44.472 million in August versus 43.949 million in July. Gas production was 42.74 billion cubic meters (bcm) last month, or 1.38 bcm a day, versus 42.68 bcm in July. State-controlled gas producer Gazprom produced 26.28 bcm, or 848 mcm per day, in August, down from 26.72 bcm a month earlier.




US: Residential electricity prices are rising Source: U.S. Energy Information Administration,

U.S. retail residential electricity prices for the first half of 2014 averaged 12.3 cents per kilowatthour, an increase of 3.2% from the same period last year. This is the highest year-over-year growth in residential prices for the first half of the year since 2009. Average prices rose in all areas of the country except for the Pacific Census Division (excluding Alaska and Hawaii).

Electricity customers in New England experienced the largest price increases, averaging 11.8%. Beyond taxes, fees, and other charges, there are two main components of electricity bills: the generation component, which reflects the costs of generating the electricity, and the delivery portion, which reflects the costs of transmitting and distributing that electricity. All New England states, with the exception of Vermont, have restructured the industry so that residential customers have the option of choosing an alternative retail electricity supplier for the generation (energy) component of their electricity bill. More than one-quarter of all residential customers in New England pay a retail supplier other than the regulated utility for the generation of their electricity. Customers of both full-service utilities and restructured retail suppliers have experienced similar rate increases of just under 12% so far this year.




The primary driver of the recent increase in New England retail rates was the sharp rise in

wholesale power prices. For the first six months of 2014, the day-ahead wholesale power price in

the ISO-New England control area averaged $93 per megawatthour, 45% higher than the average

wholesale price during the same period last year. The increased cost of producing electricity in

New England is evident in the 21% increase in the energy-only component of restructured retail

suppliers' rates. In contrast, the delivery-only component of restructured retail customers' bills has

risen only 2% this year. This component of electricity prices has been rising in part because

utilities have been spending more on the transmission infrastructure necessary for delivering

electricity to customers.

The 2.5% year-to-date decline in Pacific residential electricity prices is distorted by a temporary dip in revenues for California utilities during the month of April. This drop was a result of a credit averaging about $35 to the electric bills of most customers of the state's investor-owned utilities. The California Climate Credit is a refund of money that the state receives from the sale of allowances for greenhouse gas emissions through their cap-and-trade system. Excluding the month of April when the refund was issued, prices paid by residential customers in the Pacific region rose 0.9% above the same period last year. In California alone, prices (excluding April) were 1% higher.

How does EIA calculate retail electricity prices?

Electricity prices can be difficult to determine, as they depend on the customer's rate structure, which can differ greatly from company to company. EIA does not directly collect retail electricity rates or utility tariffs. However, using data collected on revenues and kilowatthours sold to each customer group (residential, commercial, and industrial), EIA calculates average retail revenue per kilowatthour as a proxy for retail electricity prices. The Utility Rate Database, sponsored in part by the U.S. Department of Energy, is one useful source of rate structure information.





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Khaled Malallah Al Awadi, MSc. & BSc. Mechanical Engineering (HON), USA ASME member since 1995 Emarat member since 1990

Energy Services & Consultants Mobile : +97150-4822502

[email protected] [email protected]

Khaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 years of experience in theof experience in theof experience in theof experience in the Oil & Gas sector. Oil & Gas sector. Oil & Gas sector. Oil & Gas sector.

CurrenCurrenCurrenCurrently working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with tly working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with tly working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with tly 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 external voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Most external voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Most 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 Opeof the experience were spent as the Gas Opeof the experience were spent as the Gas Opeof the experience were spent as the Gas Operations Manager in Emarat , responsible for Emarat Gas Pipeline rations Manager in Emarat , responsible for Emarat Gas Pipeline rations Manager in Emarat , responsible for Emarat Gas Pipeline rations Manager in Emarat , responsible for Emarat Gas Pipeline

Network Facility & gas compressor stations . Through the years , he has developed great experiences in the Network Facility & gas compressor stations . Through the years , he has developed great experiences in the Network Facility & gas compressor stations . Through the years , he has developed great experiences in the Network Facility & gas compressor stations . Through the years , he has developed great experiences in the

designing & constructingdesigning & constructingdesigning & constructingdesigning & constructing of gas pipelines, gas metering & regulating stations and of gas pipelines, gas metering & regulating stations and of gas pipelines, gas metering & regulating stations and of gas pipelines, gas metering & regulating stations and in the engineering of supply in the engineering of supply in the engineering of supply in the engineering of supply

routes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreements routes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreements routes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreements 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 along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences

held iheld iheld iheld in the UAE andn the UAE andn the UAE andn the UAE and Energy program broadcasted internationally , via GCC leading satellite Channels . Energy program broadcasted internationally , via GCC leading satellite Channels . Energy program broadcasted internationally , via GCC leading satellite Channels . 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 03 September 2014 K. Al Awadi




Economy & Finance

New base special 03 september 2014