New base 484 special 23 november 2014

Copyright © 2014 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced,

redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained

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NewBase 23 November 2014 - Issue No. 484 Khaled Al Awadi

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

Oman inks concession pact with Medco Arabia, Intaj Times of Oman + NewBase

Oman's Ministry of Oil and Gas has signed a concession agreement with Medco Arabia and Intajfor exploring and developing block 56, which has crude oil and natural gas deposits.

As per the production sharing pact, these companieswill explore for oil and natural gas in block 56, which isspread in an area of 5,808 square kilometres in AlWusta Governorate, said a press statement issued bythe ministry.

The agreement was signed in Muscat on Thursday onbehalf of the Government of the Sultanate by Dr

Mohammed bin Hamad Al Rumhy, minister of oil and gas and Lukman Mahfoed, director of Medco Arabia and Said Al Adawi, chief executive officer of Intaj

The commitments of the companies under this agreement are to perform geological and geophysical studies and drill several wells during the exploration period Oman government will not bear any financial commitments during exploration period.




DNV GL, Qatar's N-KOM to Promote LNG as Fuel (Source: DNV GL)

DNV GL and Qatar's shipyard Nakilat-Keppel Offshore & Marine (N-KOM) on Thursday signed a memorandum of understanding (MOU) to promote LNG as fuel within the maritime and offshore industry.

N-KOM will capitalize on DNV GL’s deep competence and long-standing experience in LNG, working with shipyards, ship owners and other key stakeholders on a global basis to develop synergies related to the promotion of LNG as fuel within the maritime and offshore industry, DNV said.

“Qatar is the single largest producer and exporter of liquefied natural gas in the world and has become a leading cluster for gas related activities. Therefore, we look forward to establishing a valuable partnership with N-KOM which further cements our strong market position on LNG as fuel in this region and benefits the environment by making the shipping industry greener,” said Henrik Madsen, DNV GL’s Group President and Chief Executive Officer.

As part of the agreement DNV GL and N-KOM will cooperate, amongst others, on the development and new building of bunker barges, of coolant barges for temporary gas storage as

well as to promote the use of LNG as fuel in the offshore sector. Moreover, a training program is to be conducted in the N-KOM facility on LNG carrier or LNG-fuelled vessel repairs. Finally, both partners will offer project

management support for conversion projects to third party yards.

N-KOM’s CEO Chandru Rajwani and Dr Henrik O. Madsen, DNV GL’s Group President

and Chief Executive Officer (Source: DNV GL)




Oman: Tethys suspends LE-1 exploration well in Oman onshore Block 4 for further study

Source: Tethys Oil

Tethys Oil has reported that the exploration well LE-1 in the eastern part of Block 4 onshore the

Sultanate of Oman has been suspended to allow for further studies in the future. An oil sample

has been recovered from the well,

indicating the presence of medium light oil,

which suggests that a petroleum system

may be active also in the eastern region of

Block 4.

With no previous well data in this area, LE-1 has given important new data of the area’s lithology which will necessitate a reinterpretation of the seismic data previously collected. The well has been suspended to allow for further study in the future. Once the seismic reinterpretation is completed the work programme for the area will be assessed also for other well locations.

Tethys Oil, through its wholly owned subsidiary Tethys Oil Block 3 and 4 Ltd, has a 30 per cent interest in Blocks 3 and 4. Partners are Mitsui E&P Middle East B.V. with 20 per cent and the operator CC Energy Development S.A.L. (Oman branch) holding the remaining 50 per cent.




Iraq : US PV welcomes oil deal between Iraqi Kurdistan and Baghdad Reuters + NewBase

US Vice President Joe Biden ( while in Energy Summit ) welcomed an agreement between Iraq’s central government and its northern Kurdistan region over the management of oil exports, a step forward in a feud that has threatened the unity of Iraq.

In a speech in Istanbul yesterday that touched on energy issues from Russia to Cyprus, Biden said he was encouraged to see a recent interim agreement between Baghdad and Arbil on managing exports and revenue

sharing.

After years of friction, the two sides last week struck a deal in which Kurds will give half of their overall oil shipments to the federal government and Baghdad will pay overdue civil servants’ salaries in the region. Oil has been at the heart of a feud between the government in Baghdad and the Kurdish-run northern enclave, with disputes over oilfields, territory and crude revenues shared between the two regions.

The Kurdish autonomous region and the Baghdad government are both important actors in the fight against Islamic State militants who have captured broad regions of Iraq and Syria. Biden, who was speaking at an Atlantic Council summit, also said that Washington supported the development of an oil pipeline from southern Iraq’s Basra oilfields to Turkey’s Mediterranean port of Ceyhan, a project which Turkey has long advocated despite reluctance in Baghdad.

Addressing tensions in Ukraine, Biden warned that Moscow should not use its energy resources as a political weapon, and said that Europe should look for alternative energy solutions. “I have no doubt Russia will and should remain a major source of energy supply for Europe and the world. This is about energy security. To achieve it, Europe needs to make sure it diversifies its resources, its routes and its suppliers.”

Russia and Ukraine reached a temporary pricing deal last month after Moscow switched off the gas supply to its ex-Soviet neighbour, amidst worsening relations over Russian support for rebels in eastern Ukraine. Biden also touched on the exploitation of Cypriot gas reserves, a source of tension between Cyprus and Turkey, which does not recognise the EU member country. Biden said the reserves could be a force for stability and prosperity in the region if Cyprus developed them in co-operation with all its neighbours.

Talks between Cyprus and its politically and ethnically separate Turkish Cypriot north have broken down in recent weeks. Speaking shortly after Biden, Turkish Prime Minister Ahmet Davutoglu warned that any unilateral exploitation of gas near Cyprus would be met with a similar response by northern Cyprus. “That’s why parties should return to the negotiating table as soon as possible,” Davutoglu said.




India: Cheap electricity for poor squeezing out solar Bloomberg + NewBas

The villagers of Dharnai in northern India had been living without electricity for more than 30 years when Greenpeace installed a microgrid to supply reliable, low-cost solar power.

Then, within weeks of the lights flickering on in Dharnai’s mud huts, the government utility hooked up the grid – flooding the community with cheap power that undercut the fledgling solar network. While Greenpeace had come to Dharnai at Bihar’s invitation, the unannounced arrival of the state’s utility threatened to put it out of business.

“We wanted to set this up as a business model,” said Abhishek Pratap, a Greenpeace campaigner overseeing the

project. “Now we’re in course correction.” It’s a scenario playing out at dozens of ventures across India’s hinterlands. Competition from state utilities, with their erratic yet unbeatably cheap subsidised power, is scuppering efforts to supply clean, modern energy in a country where more people die from inhaling soot produced by indoor fires than from smoking.

About as many people in India are without electricity as there are residents of the US, and the number is growing by a Mumbai every year. Prime Minister Narendra Modi wants to bring electricity to every home by 2019 by leapfrogging the nation’s ailing power-distribution infrastructure with solar-powered local networks – the same way mobile-phones have enabled people in poor, remote places to bypass landlines.

“We are facing the searing impact of climate change and we spend more than 6% of our gross domestic product in adapting to its consequences,” Modi told Fiji’s parliament, saying technologies such as wind and solar mean “we don’t have to seek old pathways to prosperity.” Modi’s vision is also championed by the World Bank, General Electric, and BlackRock Inc-backed SunEdison Inc, which say switching from old-style centralised networks to microgrids is a cheaper, faster solution to bringing 1.3bn people, mostly in India and Africa, out of the dark.

India’s state utilities risk crushing that model before it gets off the ground as they continue a policy of supplying farmers and the poor with cheap power. While the utilities incur huge losses stemming from subsidies, changing the system is a political minefield. Bihar, for instance, has the second-largest number of people below the poverty line among India’s 29 states: almost 44mn living on 75 cents a day or less.

“The issue isn’t whether people can pay for power,” said Vivek Gupta, co-founder and director of Saran Renewable Energy Pvt., which suffered unannounced grid arrivals when building microgrids in Bihar. “They don’t want to pay because they know the government gives it for free if the grid comes.”

Bina Devi, 55, who squats on her heels in a dirty beige sari, says she’s grateful to Greenpeace for bringing the kind of modern energy needed to light schools, run health clinics and refrigerate food.




“It changed everything,” she said. Yet given the option for virtually free state power, she’s not inclined to pay for an alternative. “We hardly have enough money for food. It’s difficult to pay an electricity bill.” Husk Power Systems Pvt., which has built microgrids to supply about 200,000 people with power from rice husks, has had “huge problems” with disconnections when the grid appears, said Chief Executive Officer Manoj Sinha. In Tanzania, by contrast, the state utility promised to stay away for a decade from the area where First Solar Inc-backed Husk planned a microgrid. “India is preventing innovation,” Sinha said.

The number of Indians without access to modern energy is increasing as population growth outpaces electrification - rising 13mn last year to 306mn, according to the International Energy Agency. That’s more than triple the next- biggest unelectrified populace: Nigeria with 85mn.

Delivering electricity the traditional way means building more transformers, substations and transmission lines, as well as more fossil-fuel plants. India can’t serve existing customers, with shortages of as much as 11% at peak hours, and its distributors are saddled with more than $32bn in debt incurred from subsidies as well as losses from theft, a leaky network, and slack billing.

Efforts to expand the grid have fallen short since at least 2010, when the government set a goal to have every village electrified. As of September, 13% of villages were still pending, according to the government. On the ground, many villages technically may be connected to the grid but get little or no power for years because of broken infrastructure. Others may have one government building tethered to a transformer and little else.

The unreliability of grid power, which in some places only works when people are sleeping, makes alternatives attractive. Renewable-based options also offer clean, bright light in a nation where indoor air pollution is the second-biggest killer after high blood pressure, according to the Centre for Science and Environment.

Solar power can also work out cheaper in the countryside than using kerosene, diesel and candles - yet subsidies distort the market. Mera Gao Power, which has built minigrids for 20,000 households in Uttar Pradesh state, is planning projects in Haiti and Nepal, where its model will compete against market-priced kerosene, unlike India, where the fuel is subsidised.




China Prepares for Third Shale Auction Round WantChina Times + NewBase

China's Ministry of Land and Resources has begun preparations for a third round of bidding for shale gas exploration, according to local media reports.

Second round of bidding was completed last year. The ministry has so far issued 54 licenses covering an area of 170,000 square kilometers, chiefly around Sichuan and neighboring areas, according to WantChina Times.

Some 80% of China's shale gas resources are controlled by four petrochemical giants led by CNPC and Sinopec, who have so far mostly conducted only test exploration on a small scale.

The government in its 2011-2015 shale gas development plan aimed to turn out more than 60 billion cubic meters of shale gas by 2020, but the goal was later cut by half to 30 billion cubic meters. The ministry said in September that it may increase the production target from the revised 30 billion cubic meters if smoother progress is achieved, reported WantChina Times




China: Primeline signs project finance for LS36-1 gas field development Source: Primeline Energy Holdings

Primeline Energy Holdings has announced that the binding documentation for the project finance facility for the financing of its share of the costs to complete theLS36-1 gas field development has now been finalized and was signed by Primeline and the financing banks on 17th November 2014.

As announced on 7th November, Primeline, and its affiliate company Primeline Petroleum Corp. ('PPC') secured a project finance facility from a syndicate jointly led by China Development Bank ('CDB') and China Export and Import Bank ('EXIM') with Shanghai Pudong Development Bank ('SPDB') as participant and agent bank.

The facility is made available to Primeline and PPC on a joint borrower basis and secured on their respective interests in the Development. The principal amount of the facility is US$ 274 million (of which the Company's share is US$ 205.5 million) which will be repayable over 9 years at an all-in interest rate of 6 month LIBOR+4.7%. Following the signing of the documentation, the security arrangements and accounts set up will be implemented with first drawdown expected around the end of November. China National Offshore Oil Corp (CNOOC) is the 51% owner and operator of the Development. Under agreements signed by CNOOC, Primeline and PPC in 2010, CNOOC has advanced all development costs to date. The loan facility has been put in place in order to finance the obligation of Primeline and PPC to repay their share of the development costs (collectively 49%) to CNOOC.

Development trial production, which started in July 2014, has progressed extremely well and has averaged 23.3mmcfpd since early September. Once the loan has been drawdown and CNOOC repaid, Primeline and PPC expect to receive a significant amount of income for their shares of the sales revenue which has been generated during the trial production period and which has been held by CNOOC for the account of Primeline and PPC pending repayment. A further announcement will be made when the initial drawdown has been completed.




US: Solar photovoltaic output depends on orientation, tilt, and tracking Source: EIA, based on National Renewable Energy Laboratory's PVWatts,

Financial incentives, renewable portfolio standards, cost declines, and system performance improvements have led to more customer-sited solar photovoltaic (PV) installations, especially in states such as California. Because PV panels are able to capture more solar energy when they are pointed directly at the sun, installers may configure systems to optimize output by adjusting the orientation and tilt of a system, or by using mechanisms that track the sun as it traverses the sky.

Installers will generally determine the tilt of a system—or the angle between the module and the horizontal—to optimize overall or seasonal performance. Assuming that a system has tilted modules, installers will generally set the orientation—or direction—of that tilt to optimize overall or time-of-day performance. In the Northern Hemisphere, the simplest way to maximize total annual system output of a fixed-tilt system is to tilt the panels south. The tilt angle may increase with latitude: the farther away from the equator, the higher the tilt.

However, while solar radiation peaks around noon, electricity demand often peaks in the afternoon or early evening. In these last few hours of daylight, west-facing PV panels have an advantage over south-facing panels, as they're tilted towards the setting sun.

Higher PV output at this time of day is often beneficial to grid operators working to increase electric supply to balance high levels of demand, but customers generally will not see this benefit unless they are on time-of-use electric rates. For example, under net-metering arrangements, the financial benefit of these PV systems is based on the quantity of kilowatthours generated, regardless of the time of day.

As part of California's Solar Initiative (CSI), the characteristics of each distributed (nonutility) solar PV system are cataloged in their California Solar Statistics database. Based on this California data, about two-thirds of the fixed-tilt systems that were installed so far in 2014 are tilted between 11 and 30 degrees. Residential and small commercial systems generally have higher tilt angles, likely matching the pitch of the roofs these systems are often installed on.

Tilt angles may reflect factors other than generator performance. Some installation sites may not be conducive to tilted arrays or specific orientations. In the case of pitched (sloped) roofs, an installation with an orientation or tilt that differs from that of the roof can be more costly, and can affect the visual impact of the system.




Tilted arrangements can require more surface area to deal with shading issues, may be subject to increased wind damage, and require more costly mounting structures. Some installers have tried different installation approaches to alleviate the shading issue while also capturing more sunlight early and late in the day compared to south-facing arrangements.

Customers with higher electricity consumption (such as commercial, industrial, and institutional customers) are more likely to be on time-of-use rates, providing them with the financial incentive to consider both the amount and the timing of generating electricity. For this reason, these larger installations are more likely to use yet another option: tracking systems. Single-axis tracking systems are installed on tilted arrays, but they rotate the panels to follow the sun as it moves east to west, improving output in the early and late hours of daylight. Dual-axis tracking systems do this, too, while also modifying the tilt angle as the sun is lower or higher in the sky.

In addition to increasing total annual output, tracking systems also help reduce seasonality in solar output. However, tracking systems are still relatively rare. For systems greater than 10 kilowatts (kW) installed in California so far this year eligible for support from the CSI, 30% of the capacity was installed using single-axis tracking systems and 4% either used dual-axis tracking or a mix of tracking and fixed mounts, but the majority of the capacity (66%) was on fixed mounts. Virtually all (more than 99.9%) of the capacity under 10 kW installed in California this year have fixed mounting without any tracking.




Oil Price Drop Special Coverage

Oil up first time in 8 weeks on China rate cut NEW YORK, 22 hours, 2 minutes ago

Oil prices rose on Friday for their first weekly gain in two months with benchmark Brent crude returning to above $80 a barrel after a rally triggered by China's interest rate cut and speculation

of an Opec output cut. Brent rose $1.03 to settle at $80.36 a barrel. It had risen as much as $2.28 earlier to a session high of $81.61. US crude finished up 66 cents at $76.51, after an intraday peak at $77.83. Oil's rise for a second straight day gave Brent a 95-cent, or 1.2 percent, gain on the week. It was

also the market's first positive week after a record drop of eight weeks in a row. US crude rose 69 cents, or 1 percent, on the week, after consecutive losses for seven weeks. Since June, oil has lost about 30 percent of its value, with Brent plunging from a high above $115 and US crude falling from above $107. "This market has been sold out so much that any kind of fresh bullish news is going to cause a price pop," said Thomas Saal, analyst at INTL FC Stone in Miami, Florida. China's central bank cut benchmark interest rates for the first time in more than two years to reduce borrowing costs and ward off the slowest growth in 24 years. China is the largest net importer of petroleum and metals, and the rate cut sent most commodity prices surging. Expectations of a production cut from the Organization of the Petroleum Exporting Countries at its November 27 meeting also fed the rally, although profit-taking emerged later, along with selling by those expecting another tumble next week. "We continue to see a bear market for crude, and we've used any opportunity at all in the market's strength to sell into it, in any small way we could," said Tariq Zahir, managing member of Tyche Capital Advisors in Laurel Hollow, New York. Market bets on the outcome of the Opec meeting vary, although optimism of an output cut has grown lately. Opec heavyweight Saudi Arabia has not committed to lower production. But Russia said on Friday that Riyadh had expressed "a willingness to cooperate on issues related to energy and oil markets." Venezuela has also said it will curb its own output if Opec agreed to do so.




Much at stake for OPEC envoys as oil prices dip

A new era could be on the horizon! The energy world is entering into a momentous week. While it eagerly awaits the outcome of the ongoing deliberations between the P5+1 and Iran on Tehran’s purported nuclear program, eyes are also focused on the upcoming OPEC ministerial this week. The OPEC moot in Vienna this Thursday, is being dubbed by many as one of the most important and crucial in its recent history. All this is taking place in the midst of what is being described by some as the ‘Great Oil Crash.’ And the trend is not expected to go off - any time soon. “It is increasingly clear that we have begun a new chapter in the history of the oil markets,” the IEA stated in its November oil market report, observing that the world’s oil supply is outstripping projected oil demand. We are very much in the midst of a glut, with little possibility of any rally in near term. Oil producers are scurrying to hold on to their market share in China and elsewhere in the emerging markets. In the meantime, the Alaskan North Slope crude oil is now being exported to South Korea on a regular basis. Adding to the glut has been the return of Libya’s oil production, despite a raging civil war with two competing governments asserting governance over the country. And despite the ongoing war against IS, exports from Baghdad continue to rise to a record post- Iraq war levels. The Kurds are in the meantime, also flexing their crude muscles with a deal with Baghdad allowing them to increase their oil exports from Northern Iraq in the coming months. And to top it all, North Sea production is also set to rise over 11 percent in December. Overflow is imminent. Prices are to go down - unless - taps are tightened! As the OPEC ministers are preparing to sit down in Vienna next Thursday, fireworks seem imminent. Oil market watchers appear divided. All sort of projections - from a large OPEC production cut to a small cut to none at all - are being made. Eyes but, remain focused on Riyadh. What would be the stance of Saudi Arabia on a possible cut in output? Is Riyadh in a battle for market share or is it a part of a well-thought-of policy to let the prices melt, not only to hamper the growing shale business in the United States but also to make life for Moscow and Tehran more miserable? “Is it just my imagination or is there a global oil war underway pitting the United States and Saudi Arabia on one side against Russia and Iran on the other?” New York Times columnist Thomas Friedman, wrote last month. Already in Russia, the idea of a Saudi-US plot against Moscow is a common currency as its economy struggles under the effects of low oil prices and Western sanctions imposed over its annexation of Crimea and support for rebels in eastern Ukraine. Riyadh has been composed to all this speculation. However, with the OPEC ministerial just round the corner, it is making it clear - Saudi Arabia is for stable markets. “Saudi oil policy... have been subject of a great deal of wild and inaccurate conjectures in recent weeks. We do not seek to politicize oil ... For us it’s a question of supply and demand, it’s purely business,” Minister Ali Al-Naimi was quoted as saying a couple of weeks back.




However, one thing is being made apparent: Riyadh was not willing to solely shoulder the burden of stabilizing the markets. In his meeting with Venezuelan Foreign Minister Rafael Ramirez earlier this month, Minister Naimi reportedly said: Saudi Arabia won’t cut output on its own. Mr. Naimi is expected to repeat the message to delegates at the Vienna ministerial, the WSJ said. It has made known to its fellow OPEC member that all the members need to bear joint responsibility for the global oil market and that they should not expect Saudi Arabia to be the only country within OPEC to cut its supplies, former oil ministry official Mohamed Al-Sabban was recently quoted as saying. Unless agreement is reached on this fundamental issue, Saudi Arabia will continue defending its market share, he insisted. Concern is but spreading. Energy diplomatic flurry could be witnessed all around - preceding the crucial Vienna meeting. Kuwait’s cabinet and the country’s Supreme Petroleum Council held an “extraordinary” joint meeting last week to consider measures to stop the slide in prices. According to KUNA, the meeting “discussed steps that have to be taken on all levels…including having consultations with fellow OPEC member states for maintaining interests of all parties”. This was despite the earlier Kuwait statement expressing confidence on market situation. Only last week Kuwait’s oil minister had stressed that he did not believe there would be a reduction in output by OPEC when its 12 members gather in Vienna. Iran too has been badly hit by the falling oil prices. In a statement last week, Iran’s oil minister criticized (some) countries of “trying to justify keeping oil production at the current level – which were set before countries such as Iran were allowed to return to selling oil in the global marketplace,” he emphasized. Iran is already tapping its sovereign wealth fund to mitigate the impact of the oil price slump. In the backdrop, Iranian Petroleum Minister Bijan Namdar Zanganeh has been undertaking visits to Gulf Arab states Qatar, Kuwait and the United Arab Emirates. Zanganeh also held talks in Tehran with Rafael Ramirez of Venezuela. In a press talk, Zanganeh also indicated that he would talk with Saudi Arabia about market share when OPEC meets next week in Vienna. Venezuela, Ecuador and Libya have all been contributing to the debate by saying that a cut was appropriate. Rafael Ramirez, who was Venezuela’s energy minister until two months ago, has also been visiting Algeria, Iran, Qatar and Russia in recent weeks. As market players sit down to evaluate their priorities, Russia has said it’s willing to cooperate with Saudi Arabia on the oil market, while avoiding a commitment to limit output to reverse plunging prices. In a joint statement issued after a meeting between the Russian Foreign Minister Sergei Lavrov and his Saudi couterpart Prince Saud Al-Faisal in Moscow on Friday, the two agreed to coordinate on “issues” affecting the energy and oil markets. Saudi Arabia and Russia, which together produce 25 percent of global oil, agreed the market “must be free of attempts to influence it for political and geopolitical reasons,” Lavrov added. Where supply and demand are “artificially distorted,” oil exporters “have a right to take measures to correct these non-objective factors.” And to follow up, Rosneft Chief Executive Igor Sechin was reportedly flying in to Vienna on Nov. 25 for an energy market conference, just two days before the OPEC meeting. The surprise




announcement raised speculation that Sechin, a close ally of Russian President Vladimir Putin and a former deputy prime minister, would use the meeting as a cover to meet OPEC ministers, exploring common ground. Much is definitely at stake!

Iran To Hold Market Share Talks With Saudi At OPEC – IRNA By Reuters + NewBase

Iran’s oil minister said he will talk with top oil exporter Saudi Arabia about market share when OPEC meets next week in Vienna, as Tehran plans for the possible end of sanctions and

unfettered crude exports.

Zanganeh said Iran’s oil exports would increase by two fold within two months of lifting the sanctions, although analysts say it may take longer. Iran exports around 1.3 barrels of oil per day.

“The countries in the south of the Persian Gulf are interested in keeping their market share and a decrease in market share will be

difficult,” Iran Oil Minister Bijan Zanganeh was cited as saying by the official news agency IRNA on Thursday.

“Under no circumstance, will we reduce our global market share, even by one barrel.”

The Vienna OPEC meeting on Nov. 27 is shaping up to be one of the most important in years. Some in the producing group have called to cut supplies to support oil prices which have fallen by over 25 percent since July.

Iran is in talks with six major powers on curbing its nuclear programme in exchange for an end to Western sanctions. But it a comprehensive deal by a Nov. 24 deadline appears unlikely, a U.S. official has said.

In the past two weeks, Zanganeh has visited Gulf Arab states Qatar, Kuwait and the United Arab Emirates in a bid to win support for action to stabilise oil markets. He also held talks in Tehran with Venezuela. Both OPEC members need a higher oil price to balance their budget than Gulf Arab oil producers.

On Sunday, Zanganeh accused some countries of making up excuses to justify their refusal to stabilise prices by cutting output, a possible reference to Saudi Arabia. Saudi Oil Minister Ali al-Naimi has reaffirmed the kingdom’s longstanding policy of seeking stable global markets and dismissed talk of a “price war”.

Mohammad Al Sabban, a former senior advisor to Naimi said he expects OPEC will keep its output ceiling of 30 million bpd unchanged. “Saudi Arabia has re-instated repeatedly, that OPEC, as a whole should swing and not only them. The Saudis are ready to do their part in defending the market,” he told Reuters.

“Therefore, given the short time to coordinate not only within OPEC but also with non-OPEC, a rollover is going to be the best compromise.”




Russia plans oil output cut: Energy minis Reuters + NewBase

Russia may cut oil production to shore up flagging prices, but its ability to change output is limited and no decision has been made yet, its energy minister said, underlining Moscow’s desire for a higher oil price.

Before Opec meets next week, Russia has already spoken to members Venezuela and Saudi Arabia about the need to support the oil market, and Moscow expects to send a high-ranking delegation to Vienna before the meeting to press the message on prices. Russia’s already weak economy has been hit by the falling price of oil, which together with natural gas generates half of state revenue. A price of at least $100 a barrel is needed to balance the government budget, and some experts say Russia may need oil prices to be as high as $115, because the budget has to cover increased social and military spending and compensate for sanctions over Ukraine that have cut Moscow off from Western financial markets. Asked whether Russia is ready to cut production, Energy Minister Alexander Novak told reporters yesterday: “This issue requires careful consideration ... But on the whole, this question is being discussed, but there are no final decisions on it.” The minister said a production cut would be difficult for Russia, because the budget relies on revenues from oil exports, and the country lacks what he described as the “technology” to act quickly to alter supply. Analysts say Russia can do little to shore up the oil price, which had fallen by a third since June to under $80 a barrel, because it lacks storage facilities and may be unable to stop pumping at wells for fear they will freeze over.




Prudence should be Opec’s watchword

The recently released World Oil Outlook 2014 discusses Opec’s forecasts for the oil market all the way up to 2040. The study, which runs close to 400 pages, couldn’t have come at a worse time for it and the oil markets. The price of Opec’s basket of crude oils has fallen from close to $120 (Dh440) a barrel in April to just below $74 on November 17, and there is the potential for further decline.

Yet, the Opec Secretariat is upbeat about the long run by ignoring the current market conditions on the hope that these should not impair the vision well down the line to 2040. The price of oil is assumed to remain close to $100 a barrel in 2013-dollar terms throughout the period.

The assumption is driven by the marginal cost of producing a barrel in the high cost regions of deep seas, oil sands and even for tight oil in the US. The relative stability of oil prices in the last few years — of between $110 and $100 a barrel — does mean something for investors.

While marginal costs may be less than that, oil companies also want their profits to enable them to invest more. Here one has to remember that capital and operating costs have more than doubled since 2004 and further increases cannot be ruled out.

Other assumptions relate to the economic growth of 3.5 per cent a year on average, a world population growth from 7.1 to 9 billion of whom 60 per cent would be city dwellers. As for energy policies, the study takes into account those already in place including the Chinese National Plan on Air Pollution and local car sales control; Japan’s reconsideration of the nuclear option; and efficiency targets on land and shipping.

Based on these assumptions, the study recognises two periods where, in the first, oil demand would grow annually by one million barrels a day (mbd) up to 2019 to reach 96mbd. At the same time non-Opec liquids’ supply increases by 6.4mbd due essentially to US shale and Canada oil sands increases. Therefore, the prospect for Opec crude oil production is rather negative as the required production from it is expected to fall from about 30mbd in 2013 to 28.7mbd in 2019. Regulations

In the second period, things would be more optimistic as oil demand is forecast to reach 111mbd by 2040. This would be the result of oil use in the petrochemical sector in China and India while




“the rate of penetration of new technologies has led to downward pressures on oil demand”. Also “oil demand for marine bunkers sees a downward adjustment reflecting the IMO’s regulations on efficiency and emissions, and the possible longer term impacts of moves to LNG use in the sector”.

Gasoline and diesel will continue to dominate the transportation sector with their share of car fuels only falling from 97 to 92 per cent in 2013 and 2040 respectively. Oil demand in the OECD is expected to fall while developing Asia is to account for 71 per cent of the growth.

Non-Opec supplies would still increase but at a slower rate and therefore Opec is forecast to produce 39.7mbd of crude oil by 2040. But there are many uncertainties with respect to world economic growth and non-Opec supplies.

On economic growth, the study assumes “asymmetric uncertainty, with downside risks greater than upside potential”. Therefore if economic growth falls from 3.5 to 3.1 per cent a year or a higher economic growth of 3.9 per cent a year transpires, then “in the low economic growth scenario, oil demand by 2040 is 6.9mbd lower. In the high growth scenario, demand is 4.7mbd higher”.

Accordingly “the amount of crude required from Opec ranges from 33—44mbd by 2040.” Downside

On the supply side, there is further potential for tight crude oil and oil sands if development picks up further in the US, Canada and Russia to the tune of further 3mbd by 2040. Additional 2mbd could come from increases in Brazil, Russia and biofuels.

But the downside relates to tight oil where “known constraints and challenges such as steep decline rates, the initial development of ‘sweet spots’, concerns over environmental impacts, and the possibility of rising costs” have been well identified. Also, “biofuels targets have been overly optimistic, (while) oil sands projections have repeatedly been brought down”.

This downside supply scenario forecasts non-Opec liquids supply at close to 5mbd lower by 2040.

The “upstream investment requirements for additional capacity amount to $7.3 trillion, in 2013 dollars. Most of this investment will be made in non-Opec countries” where high cost and higher decline rates prevail. And “Opec would need to invest an average of close to $40 billion annually in the remaining years of this decade, and over $60 billion annually in the longer term”.

These uncertainties have great implications for Opec and other oil producers and prudence will be advisable.





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

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 23 November 2014 K. Al Awadi

New base 484 special 23 november 2014

Economy & Finance

Transcript of New base 484 special 23 november 2014