New base energy news issue 874 dated 16 june 2016

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NewBase Energy News 16 June 2016 - Issue No. 874 Edited & Produced by: Khaled Al Awadi

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UAE: Irena says renewable energy costs set to tumble as UAE plays major role

The National LeAnne Graves

Producing electricity from the sun and wind is about to get even cheaper around the world with the UAE helping to further drive down costs, according to the International Renewable Energy Agency (Irena).

The Abu Dhabi-based organisation released a report yesterday projecting the cost of renewable energy to drop, in some cases by more than half the price of current averages by 2025.

“Given that solar and wind are already the cheapest source of new generation capacity in many markets around the world, this further cost reduction will broaden that trend and strengthen the compelling business case to switch from fossil fuels to renewables," Irena director general, Adnan Amin, said on the release of its report titled The Power To Change: Solar And Wind Cost Reduction Potential To 2025.

Since 2011, renewable energy power generation technologies have made up for at least half of the total new power generation capacity added worldwide. And last year alone a new record was




set with around 148 gigawatts of renewable energy power added, meaning that many millions of homes are now being powered by solar, wind and hydropower.

The levelised cost of electricity, or a measure of comparison for various power generation methods, for wind could fall by 35 per cent. However, the major winner in terms of lower costs is solar, including photovoltaic (PV) and concentrated solar power (CSP) applications, which could drop by as much as 59 per cent and 43 per cent respectively during the next 10 years.

The cheaper rates for solar applications can be attributed to evolving technology as well as the wide scale rollout. The UAE is leading the charge in the region. Dubai is developing a 5GW solar park using a mix of PV and CSP and has been driving down prices with record low bids submitted for its construction phases for PV.

Michael Taylor, Irena’s renewable costing analyst, said that CSP had more room to drop in pricing as only 5GW was installed worldwide by the end of last year, compared to 220GW of PV.

Irena said that CSP costs could fall to between 8 US cents per kilowatt hour (kWh) and 12 cents per kWh depending on the location and solar resource quality. Regionally, the lowest cost was in Morocco at around 15 cents per kWh.

“Dewa’s recent announcement of a first tender for 200 MW of CSP to be operational in 2021, is another reminder that CSP can offer competitive electricity and generation flexibility in areas with excellent solar resources, strong civil engineering companies and a stable regulatory and financing environment," he said. “Projects with access to lower costs of capital, as might be expected for many Gulf countries, could see electricity costs even lower than this range."

Yet CSP applications have specific obstacles to overcome compared to PV, said Hadi Tahboub, president of the Middle East Solar Industry Association. “Dubai wants to tell the world: ‘Yes, it can be done,’ and this is a good thing because it literally drives [research and development] forward, lowers costs and creates more competition. But CSP is a totally different game of parameters," he said, adding that CSP technology required more land than PV plants by a ratio of roughly 10 to 8.




Bahrain’s Bapco seeks bids for oil refinery expansion

Reuters + gulf news + NewBase

State-run Bahrain Petroleum Company (Bapco) has launched bidding to expand its Sitra oil refinery, industry sources said. It aims to boost processing capacity of the country’s only oil refinery to 360,000 barrels per day (bpd) from its current 267,000 bpd under its BAPCO Modernisation Program (BMP).

The expansion is expected to cost about $5 billion (Dh18.36 billion), according to the sources. Bapco said last year it would make a final decision on whether to expand its Sitra oil refinery in 2016.

Companies that are planning to submit bids and that have formed consortia are: Japan’s JGC Corp and South Korea’s GS; Technip, Tecnicas Reunidas and Samsung Engineering; Fluor, Hyundai Engineering and Construction and Daewoo E & C; and CB & I and Petrofac.

South Korea’s GS E & C, Samsung Engineering, Hyundai E & C and Daewoo E & C said they had received a request to bid and were currently preparing to do so. Samsung Engineering said it plans to bid as a joint venture with Technip and Tecnicas Reunidas.

Hyundai said it was preparing to bid with Daewoo E & C, itself a part of a consortium led by Fluor, Daewoo said. The bidding closing date is on October 5 and the award of the contract is expected to be made in the first quarter or second quarter of 2017, the sources said.

A JGC spokesman said the Japanese company is interested in the project. Tecnicas Reunidas declined to comment. Bapco, CB & I and Petrofac did not respond to requests for comment.




Kurds Ready For New Oil Deal With Baghdad If They Get $1B A Month Reuters|Maher Chmaytelli

Iraq's Kurds are ready to strike an agreement with the central government in Baghdad on a deal to increase oil exports, if it guarantees them a monthly revenue of $1 billion, a spokesman for the Kurdistan Regional Government (KRG) said.

Iraq's central government in March stopped oil exports through a Kurdish pipeline to pressure the local authorities to resume talks about an oil revenue sharing agreement. Iraq's state-run North Oil Company normally exported 150,000 barrels a day through the pipeline that comes out at the Mediterranean port of Ceyhan, in Turkey. The pipeline also carries oil produced in the Kurdish region in northern Iraq and sold independently from the central government. KRG spokesman Safeen Dizayee said in

an interview in the Iraqi Kurdish capital Erbil on Tuesday that the Kurdish authorities would be willing to sell the oil through Baghdad if they get a share from the federal budget amounting to a $1 billion a month. "If Baghdad comes and says ok, give me all the oil that you have and I'll give you the 17 percent as per the budget, which equals to one billion, I think, logically it should be the thing to accept," he told Reuters, specifying later that the amount referred to a monthly payment in dollars. "Whether this oil goes to the international market or first to Baghdad and then to the market, it doesn't make any difference," he said. "We are ready to enter dialogue with Baghdad." The KRG stopped delivering crude oil to the central government a year ago, a decision taken when Baghdad's payment fell under $400 million a month, according to Dizayee. The Kurdish region exported an average of 513,041 barrels in May through the pipeline to Turkey, generating about $391 million, of which about $75 million was paid to oil companies that produce the crude, according to KRG official estimates. "The companies have been assured that certain amounts will be made on a monthly basis," said Dizayee, referring to the three foreign oil producers in the KRG region - DNO, Gulf Keystone and Genel. "We have started to pay some of it, at least it has rebuilt that confidence between the government and the IPCs (oil companies)," he said, referring to arrears owed to the companies. The KRG in February said it will be paying international oil companies in 2016 according to the terms of their contracts, after making ad-hoc payments last year. The foreign operators have been reluctant to invest and further develop assets in the region without the promise of regular payment, while the cash-strapped KRG needs production to increase as it struggles to avert an economic collapse.




US:Why Billions in Proven Shale Oil Reserves Suddenly Became Unproven Bloomberg - Asjylyn Loder

Ultra Petroleum Corp. was a shale success story. A former penny stock that made the big leagues, it was worth almost $15 billion at its 2012 peak.

Then came the bust. Almost half of Ultra’s reserves were erased from its books this year. The company filed for bankruptcy on April 29 owing $3.9 billion.

Ultra’s rise and fall isn’t unique. Proven reserves -- gas and oil resources that are among the best measures of a company’s ability to reward its shareholders and repay its debts -- are disappearing across the shale patch.

This year, 59 U.S. oil and gas companies deleted the equivalent of 9.2 billion barrels, more than 20 percent of their inventories, according to data compiled by Bloomberg. It’s by far the largest amount since 2009, when the Securities and Exchange Commission tweaked a rule to make it easier for producers to claim wells that wouldn’t be drilled for years.

Wider Effort

The SEC routinely questions companies about their reserves. Now, agency investigators are also on the hunt for inflated reserves estimates, according to a person familiar with the matter.

“Reserves make up a large share of the value of these companies, so it really matters,” said David Woodcock, a partner at Jones Day in Dallas who served as the SEC regional director in Fort Worth, Texas, from 2011 to 2015. “They’re looking even more closely at how companies are booking reserves, how they’re evaluating the quality of those reserves and what their intentions really are. They’re not accepting pat answers.”

Drillers face pressure to keep reserves growing. For many, the size of their credit line is tied to the measure. Investors want to see that a company can replace the oil and gas that’s been pumped from the ground and sold.

Find More

There are two ways to increase reserves: buy more or find more. Fracking made it easier to do the latter, and the industry lobbied the SEC to count more undeveloped acreage as proved reserves, arguing that shale prospects are predictable across wide expanses.

The SEC agreed, with two key limits. First, the wells must be profitable to drill at a price set by an SEC formula. The companies got a temporary reprieve for 2014 because the SEC number was about $95 a barrel even though crude had plummeted to less than $50 by the time results were reported in early 2015.




That advantage has disappeared. When companies reported their 2015 reserves this year, the SEC price was about $50. Wells that vanished this year may return if prices rise.

The SEC also requires that undeveloped wells be drilled within five years of being added to a company’s books. The five-year plan can’t just be wishful thinking. “The mere intent to develop, without more, does not constitute ‘adoption’ of a development plan,” the SEC explained in 2009.

Despite those limitations, reserves surged 67 percent in the five years after the 2009 rule change, according to 53 companies that have records going back that far. Almost half the gains came from wells that existed only on paper.

Fix Estimates

By the end of 2014, undeveloped properties accounted for 39 percent of proved oil and gas reserves, up from 33 percent at the end of 2009, an increase of nearly 8 billion barrels.

In its first letter to Ultra, in July 2014, the SEC said it would take about 13 years for the company to drill its backlog. About two months later, Ultra raised $850 million in debt. The SEC letters weren’t yet public. Over the next 19 months, the regulator twice told the company to revise its estimates.

Falling Prices

Ultra responded that its drilling plans changed due to falling prices and the shrinking availability of financing. The company sometimes delayed or canceled certain wells in favor of more profitable locations, the company wrote.

Ultra ultimately agreed to a small revision to its 2011 reserves booking. It was disclosed in a footnote to its 2015 annual report, after the SEC completed its review in February. In the same report, Ultra deleted all of its undeveloped reserves because of uncertainty about financing.




The letters were made public in mid-March. By then, Ultra’s shares had plummeted to 58 cents, and the bonds issued less than two years before were selling for about 8 cents on the dollar. Prices have since rebounded.

Sandi Kraemer, Ultra’s director of investor relations, declined to comment. So did Judith Burns, an SEC spokeswoman.

Other companies have also drawn SEC scrutiny. The agency said in correspondence with Goodrich Petroleum Corp. that the company drilled only 4 percent of its undeveloped reserves each year, a slower pace than necessary to comply with the five-year rule. Linn Energy LLC kept undeveloped reserves on its books at the end of 2014 even after cutting its drilling budget by 61 percent. Both companies have gone bankrupt in recent months owing a combined $8.1 billion. Neither would comment for this story.

For many drillers, “development plans weren’t realistic,” said Julie Hilt Hannink, head of energy research at CFRA, an accounting advisory firm in New York.

Rising Bankruptcies

Penn Virginia Corp., a company in which billionaire George Soros had a stake, booked paper wells in natural gas prospects where it hadn’t drilled in years, according to letters from the SEC.

“Your actual drilling has consistently failed to follow schedules,” the SEC wrote in an April 2015 letter. Penn Virginia responded that it had intended to get to the wells within five years but its plans changed when prices fell.

That’s not what company executives told investors, according to conference call transcripts. H. Baird Whitehead, Penn Virginia’s chief executive officer, said in a November 2012 call that “under almost no scenario” would the company resume gas drilling. Yet, when Penn Virginia filed its report with the SEC three months later, the prospects accounted for more than 40 percent of its reserves.

During an April 2013 call, Whitehead said, “We don’t plan on drilling natural gas wells.” Still, the undeveloped natural gas wells comprised 19 percent of the company’s reserves at the end of that year. Patrick Scanlan, a spokesman for Penn Virginia, declined to comment.

The company intended to follow the SEC’s five-year rule, according to a person familiar with Whitehead’s thinking. Penn Virginia erased most of its undeveloped reserves this year. The company filed for bankruptcy May 12 with $1.2 billion in debt. Records show Soros sold his six million shares in the first quarter.




NewBase 16 June 2016 Khaled Al Awadi

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

Oil futures down on US stockpile report, Brexit concern Reuters + NewBase

Oil prices fell in early Asian trade on Thursday, heading for a sixth day of declines, following a lower than expected draw on U.S. stockpiles and amid worries Britain might leave the European Union.

Front-month U.S. crude futures were down 56 cents, or 1.2 percent, at $47.45 a barrel at 0043 GMT. The contract fell 1 percent the previous session, the fifth straight day of declines.

Brent crude was 44 cents, or 0.9 percent, lower at $48.53 a barrel.

The contract settled down 1.7 percent on Wednesday, a fifth day it has closed lower.

U.S. crude stocks fell last week, the government said on Wednesday, but the decline was much smaller than anticipated, while gasoline stocks decreased sharply. Crude inventories fell by 933,000 barrels in the last week, the U.S. Energy Information Administration reported, less than half the 2.3 million barrel decrease expected by analysts.

The U.S. Federal Reserve signaled on Wednesday that it still plans two U.S. rate hikes this year despite slower growth expectations, also hitting the oil market.

With a week to go before Britain votes on leaving the European Union, oil and other markets also remain in thrall to opinion polls, which are increasingly showing those supporting an exit are in the majority.

Oil price special

coverage




A so-called Brexit will lead to a Europe-wide recession and hit demand for oil, many analysts say.

U.S. Stockpiles

WTI for July delivery fell as much as 66 cents to $47.35 a barrel on the New York Mercantile Exchange and was at $47.56 at 12:03 p.m. Tokyo time. Total volume traded was 6 percent below the 100-day average. The contract slipped 48 cents to settle at $48.01 on Wednesday.

Brent for August settlement declined as much as 49 cents to $48.48 a barrel on the London-based ICE Futures Europe exchange. Prices on Wednesday dropped 86 cents, or 1.7 percent, to $48.97. The global benchmark crude traded at a 56-cent premium to WTI for August delivery.

U.S. stockpiles declined 933,000 barrels last week, EIA data showed. The drop was smaller than the 2.33 million barrel slide forecast in a Bloomberg survey. Crude inventories at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, rose to 66.5 million barrels.




NewBase Special Coverage

News Agencies News Release 16 June 2016

OPEC Turmoil Could Turn IEA’s Balanced Market Into Shortfall Bloomberg - Javier Blas

The world’s most prominent oil forecaster, the International Energy Agency, anticipates near-equilibrium between supply and demand in global crude markets next year. If OPEC members can’t resolve some massive output disruptions, that will turn into a significant shortfall.

World oil production in 2017 will very nearly match consumption, ending several years of oversupply, the Paris-based IEA forecast on June 14. For that to happen, the Organization of Petroleum Exporting Countries would have to pump an extra 650,000 barrels a day over the year, according to Bloomberg calculations based on IEA data. That would require solutions to militant attacks in Nigeria, deep political divisions in Libya or an economic crisis in Venezuela.




"The IEA is highly optimistic in its assumption of elevated OPEC supplies next year," said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London. "Even though many view outages in Libya and Nigeria as unplanned, we would argue they are partly symptomatic of low oil prices and unlikely to be resolved any time soon."

The supply and demand forecasts from the IEA, which advises 29 nations on energy policy, are important because they shape trading. The oil price has been on a roller coaster since 2014, with a global surplus driving prices down 75 percent to a 12-year low of about $28 a barrel in January, only to rebound to almost $50 amid supply disruptions and unprecedented investment cuts.

Million Barrels

By the end of next year, OPEC will need to pump nearly 1 million barrels above last month’s production level to keep the market in balance, according to Bloomberg calculations based on IEA data. The agency doesn’t publish the OPEC production level it assumes to calculate its balances and its press office declined to provide the figures or comment on the basis for its assumptions.

Fulfilling the IEA’s forecast would require OPEC to overcome some major hurdles. In Nigeria, oil production has slumped to a 28-year low of 1.37 million barrels a day -- about 480,000 below its full capacity, IEA data show. A militant group calling itself the Niger Delta Avengers has been targeting pipelines and other infrastructure in the African nation for several months.

Libyan output remains just a fraction of the 1.6 million barrels a day pumped before the toppling of Moammar Qaddafi in 2011. The nation pumped 270,000 barrels a day in May, a decrease of 80,000 from the previous month as a dispute between rival governments in the west and east halted tanker loading at the port of Hariga for several weeks. Many of the country’s oil fields and export terminals are in the hands of armed groups with competing interests.

State of Crisis

In Venezuela, a severe economic crisis brought about by the slump in oil prices is making it difficult for the state oil company to pay its contractors for work necessary to sustain output, the IEA said. Output last month was 2.29 million barrels a day, the lowest since 2009, and the Latin American nation is on track for a drop of 100,000 barrels a day this year, it said.




Some additional output could be provided by Iran, which is restoring exports after nuclear-related sanctions were lifted in January. The Persian Gulf nation will boost output to more than 3.7 million barrels a day next year, having pumped at a five-year high of 3.6 million in May, according to the IEA. Saudi Arabia, the world’s biggest exporter, could also increase output during the summer months to cover an increase in domestic demand, it said.

After two years of oversupply, the world’s most industrialized countries have more than 3 billion barrels of oil in storage. This “enormous inventory overhang” dampens the prospects of “a significant increase in prices,” according to the IEA.

The agency estimates that inventories will decline very slightly in 2017, by an average of 100,000 barrels a day over the year. That narrow shortfall assumes OPEC will pump 33.3 million barrels of crude a day, compared with the organization’s May output of 32.6 million a day.

If OPEC output falls short of IEA estimates, those stockpiles would start shrink rapidly, according to Bloomberg calculations.

“Without the return of Libya, it will be difficult for OPEC to meet the call for 2017,” said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland. “That should lead to more structural stock draws in 2017.”

C R E D I T : R E Z A / C O N T R I B U T O R




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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 16 June 2016 K. Al Awadi

New base energy news issue 874 dated 16 june 2016

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Transcript of New base energy news issue 874 dated 16 june 2016