new base 622 special 09 june 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, 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 in this

publication. However, no warranty is given to the accuracy of its content.

NewBase 09 June 2015 - Issue No. 622 Khaled Al Awadi

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

UAE: Boeing and Tawazun Precision Industries Break Ground on New Aerospace Facility

Reuters + NewBase

Boeing and partner Tawazun Precision Industries (TPI ) broke ground today on a new aerospace surface treatment facility for metallic parts in the United Arab Emirates (UAE). In a ceremonial groundbreaking at the Tawazun Industrial Park in Abu Dhabi, company representatives said this facility introduces a new aerospace manufacturing capability in the Gulf region.

"We are pleased to be part of this unique project which further fosters the UAE's regional leadership in high-technology defense manufacturing," said H.E. Saif Al Hajeri, CEO of Tawazun. "The establishment of this capability is a significant step for the UAE's aerospace industry, as the metallic components manufacturing and metallic sub-assembly will be entirely performed in the UAE."

The project, made possible by the Tawazun Economic Council, was first announced at the Dubai Air Show in 2013, and is scheduled to be operational in 2016. "The collaboration between TPI and Boeing signifies the

vital role the Council plays in adding economic and commercial value to the UAE economy," said Matar Al Romaithi, chief officer, Tawazun Economic Council-Industrial Development Unit.

The project will create high value jobs in the UAE, and enable TPI the opportunity to produce complex metallic assemblies for Boeing , its suppliers and other aerospace OEMs around the world.

"This new complex will be a state-of-the-art facility that will contribute to the growth of the UAE aerospace industry," said Bernie Dunn, president of Boeing Middle East. "The development of key capabilities through partnerships is of mutual benefit to both Boeing and the UAE."

"This project is a significant strategic investment and a key enabler for TPI , which will secure a sustainable titanium and aluminium machining capability, with the potential to become a regional and global Centre of Excellence," said Dr. Phillip Lewis, the CEO of Tawazun Precision




Industries . "It provides the foundation for the development of a significant metallic aero-structures assembly facility to be established in the UAE."

A unit of The Boeing Company , Boeing Defense, Space & Security Is one of the world's largest defense, space and security businesses specializing in innovative and capabilities-driven customer solutions, and the world's largest and most versatile manufacturer of military aircraft. Head quartered in St. Louis, Boeing Defense, Space & Security is a $33 billion business with 58,000 employees worldwide. Follow us on Twitter: @BoeingDefense.

About Tawazun Economic Council

Based in Abu Dhabi, the Tawazun Economic Council was founded in 1992 to fulfill a vision of comprehensive and sustainable economic and social development within the UAE. The Council is responsible for the Tawazun Economic Program, formerly known as the UAE Offset Program, which was established to diversify the UAE's economy and create new ventures in various sectors through partnerships with international defense contractors. To date, the Program has

resulted in the creation of several multi-million dollar joint ventures in various economic and industrial sectors, including ship building, district cooling, aircraft leasing, fish farming, healthcare, agriculture, banking and education.

About Tawazun

Tawazun borne out of the long-established Tawazun Economic Council was created in 2007 to develop ventures through industrial partnerships and strategic investments that add value to the UAE's industrial manufacturing sector across a number of areas: defense & aerospace, automotive, munitions, metals and technology.

Tawazun has established itself as an active industrial investor both locally and internationally by partnering with a hand-picked selection of world-class market leaders to build skills, expertise, products and systems in the UAE. Its investment strategy is designed to drive change within the marketplace, while its aim is to inspire emerging companies by providing strong and consistent support to aid their future expansion.

About Tawazun Precision Industries

Tawazun Precision Industries (TPI ) is a manufacturing facility delivering components to the aerospace, oil and gas and defense industries with export operations worldwide. With a modern facility based in Tawazun Industrial Park, TPI 's state-of-the-art production capabilities and turnkey service offers include machining, surface treatment, heat treatment, advanced coating solutions, plastic injection molding, metals testing, repairing, and servicing. TPI acts as both a manufacturer and a service center to a number of UAE based

operating companies and agents, as well as internationally renowned organizations across the following specialty areas: Manufacturing Engineering, Tooling, Surface and Heat Treatment, Coating, Repairing and Machining.




About Tawazun Industrial Park

Tawazun industrial Park (TIP) is a unique, self-contained world class industrial zone belonging to Tawazun Holding to develop the emirates' industrial capabilities. Playing host to an exclusive sector of the industry, TIP primarily provides a manufacturing base for defense related products while also playing host to industries from selected sectors: Basic Metal Industries, Precision manufacturing, Aerospace, Oil & gas support and service Industry. TIP's core principle is to provide its clients with supportive and nurturing environment. Offering world class infrastructure in an enhanced secure area, TIP is strategically located off the Abu Dhabi-Dubai highway and provides easy accessibility from all emirates, airports and ports.

The product portfolio offered by TIP includes highly specialized manufacturing/assembly, storage and demilitarization facilities for defense related products, industrial land, built-to-lease customized factories/workshops, showrooms. Offices and staff accommodation in a commercial and sustainable community environment. Furthermore, TIP's one-stop-shop supports its clients through all government & regulatory services, procurement & logistics, supply of skilled workforce, training facilities, visitor/delegation management.




Oman Gas to seek pact on new tariff system Oman Observer + NewBase

The Sultanate’s gas transportation flagship, Oman Gas Company, says it plans to hammer out a new agreement with the Omani government on the tariff governing the cost of transporting natural gas to its expanding portfolio of customers across the country.

The move, according to a top official of the state-owned utility, is part of a raft of substantive initiatives lined up for implementation through to 2020. It includes investments in new gas transportation infrastructure, as well as OGC’s first large-scale foray into the midstream energy and downstream petrochemicals sector. “Our outlook over the next five years focuses on reaching an agreement with (Oman’s) government on a new tariff system in 2015, the award of (an Engineering-Procurement-Construction contract) for Al Duqm (pipeline) in 2015, award of Salalah LPG (Engineering-Procurement-Construction) in 2016 and

commissioning of Al Duqm pipeline and Salalah LPG in 2018,” OGC’s Acting CEO Abdulaziz bin Said al Mujaibi (pictured) stated in the company’s newly issued Annual Report for 2014. The revised tariff system sought by OGC comes against a backdrop of soaring demand for natural gas as a fuel resource and industrial feedstock. In 2014, the utility delivered 16.18 billion cubic metres of natural gas to its expanding customer base, comprising a mix of power and water desalination plants, industrial and petrochemical schemes, refineries, steel mills, industrial parks, cement factors and oil companies. Consumption was up 5.5 per cent in comparison with figures for 2013. Gas delivery averaged 44.33 million cubic metres per day, spiking to an all-new record of 53.79 million cubic metres on July 21, 2014, according to the company. OGC delivers gas to its customers via a massive pipeline network extending some 2,500 kilometres across the length and breadth of the Sultanate. Customers tap into the network at 46 take-off points — a figure poised to rise as new consumers join its customer base. Looking back on OGC’s performance during 2014, the Acting CEO said the company had initiated work on a number of key ventures. Notable was the award of a contract for the manufacture of pipes for a gas pipeline that will supply energy to the Duqm Special Economic Zone (SEZ). Another landmark project set to make headway during the course of 2015 is the Salalah LPG Extraction scheme, which is currently in the Front-End Engineering Design (FEED) stage. Plans drawn up by OGC envisage a state-of-the-art facility that will extract the different components of LPG — chiefly propane (C3), butane (C4) and light condensate (C5) — from natural gas flowing




Through the utility’s southern grid. At full capacity, the plant is expected to produce 153,000 tonnes per annum (tpa) of propane, 115,000 tpa of butane and 59,000 tpa of condensate. Underlining the LPG project’s potential to spawn further downstream investments in Oman, Al Mujaibi welcomed efforts by Oman Oil Company Group (OGC’s parent organisation) and other private investors in evaluating opportunities that could arise from the LPG product to feedstock other projects — ventures that will contribute to industrial growth and skilled employment opportunities, he noted. “Equally important is ORPIC’s NGL (natural gas liquids) extraction project at Fahud for which OGC is providing its technical support for the FEED work, and planning to continue this support through the project lifecycle,” the Acting CEO stated. Also during the course of 2014, OGC undertook several concept engineering studies that will enable a number of new customers to be added to the utility’s gas supply system. Projects lined up for eventual integration with the OGC network are the Ibri power scheme, Sohar-3 power plant, Salalah-2 power plant, and the Purified Isophthalic Acid (PIA) and PTA/PET projects at Sohar Port.




U.S. Shale Oil Boom Grinds to a Halt as OPEC Keeps Pumping Bloomberg + NewBase

The shale oil boom that turned the U.S. into the world’s largest fuel exporter and brought $3 gasoline back to America’s pumps is grinding to a halt.

Crude output from the prolific tight-rock formations such as North Dakota’s Bakken and Texas’s Eagle Ford shale will shrink 1.3 percent to 5.58 million barrels a day this month, based on Energy Information Administration estimates. It’ll drop further in July to 5.49 million, the lowest level since January, the agency said Monday.

With the Organization of Petroleum Exporting Countries maintaining its own oil production, U.S. shale is coming under pressure to rebalance a global supply glut. EOG Resources Inc., the country’s biggest shale-oil producer, hedge fund manager Andrew J. Hall and banks including Standard Chartered Plc have forecast declines in U.S. output following last year’s plunge in crude prices. The nation was still pumping the most in four decades in March.

“Production has to come down because rigs drilling for oil are down 57 percent this year,” James Williams, president of energy consultancy WTRG Economics, said by phone Monday from London, Arkansas. “Countering that is the fact that the rigs we’re still using are more efficient and drilling in areas where you get higher production. So that has delayed the decline.”

West Texas Intermediate crude for July delivery added 26 cents to $58.40 a barrel in electronic trading on the New York Mercantile Exchange at 11:29 a.m. Singapore time. Futures have rebounded 30 percent since March 18 through Monday amid speculation U.S. oil drillers had laid down enough rigs to curb supply.




Fewer Rigs

Despite the U.S. oil rig count falling for 26 straight weeks, domestic crude production surged 126,000 barrels a day, or 1.3 percent, to 9.53 million in March, the most since 1972, Energy Information Administration data show.

“We do not believe that the direction of U.S. oil output has changed,” Standard Chartered analysts including Nicholas Snowdon said in a research note June 1. “In our view, U.S. oil supply is still falling, and it is likely to carry on falling for the rest of this year.”

Shale oil output will decline by 105,000 barrels a day in July after dropping 86,000 barrels in June, according to the London-based bank. EOG Resources Chief Executive Officer Bill Thomas said at a conference last month that U.S. production would drop through the end of the year.

The EIA’s forecasts for U.S. oil production cover the yield from major plays that together accounted for 95 percent of domestic output growth from 2011 to 2013.




Eagle Ford

Output from the Eagle Ford in Texas, the second-largest oil field in the U.S., will contract by 49,000 barrels a day in July to 1.59 million. Production in the Bakken shale region of North Dakota will slip by 29,000 to 1.24 million, the EIA said.

Yield from the Permian Basin in West Texas and New Mexico, the largest U.S. oil field, will rise by 3,000 barrels a day to 2.06 million.

The EIA’s oil-production forecasts are based on the number of rigs drilling in each play and estimates on how productive they are.

U.S. drillers are retreating from oil fields as OPEC, which accounts for more than a third of the world’s oil, continues to resist calls to curb its own supply. The 12-nation group decided last week to instead maintain a combined daily production target of 30 million barrels. Production from the group has exceeded that level for each of the past 12 months, according to data compiled by Bloomberg.

Pyrrhic Victory

The EIA expects production from the shale plays to drop in July by 93,000 barrels a day, the largest drop since the boom began. The steepening decline provides some validation to OPEC members who decided to preserve their market share and let falling prices force others to cut back, said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion.

It may be a Pyrrhic victory for some OPEC members, such as Venezuela, whose budgets have been hampered by oil prices that fell more than 50 percent from last summer. The declines in U.S. production might not be piling up fast enough to boost crude revenues for them, O’Grady said.

“You’re seeing production go down, but is it going down fast enough?” O’Grady said by phone Monday. “If you’re a country like Venezuela, is it happening fast enough for you to basically be saved? That’s really the rub.”




New data series show more detail for crude oil stocks, storage by region Source: U.S. Energy Information Administration, Report

In an effort to better present crude oil storage capacity and use across the United States, EIA has prepared new tables as part of the semiannual Working and Net Available Shell Storage Capacity Report. The new series show crude oil stocks held at refineries crude oil in tanks and underground storage in each Petroleum Administration for Defense District (PADD). Previously, this information was only available at the national level.

Crude oil stocks in tanks and underground storage are used to calculate storage capacity utilization rates and to derive the quantity of crude oil held in pipelines and in transit by rail and water. Refinery stocks and storage capacity data by PADD have both been available since 2011, but the new table brings together these two sets of data to simplify the task of calculating utilization rates by PADD.

EIA updates storage capacity data twice each year, reflecting capacities as of the end of March and September. EIA has crude oil inventory data back to 1981, but storage capacity data were first reported by EIA for the end of March 2011.

EIA reports crude oil inventories held in four types of locations:

• At refineries

• In pipelines and tank farms, which are further classified as:

• In tanks and underground storage

• In pipelines, and other forms of transit (by rail, by water)

• On producing leases (storage on production sites)

All four of these categories are considered when calculating inventories, but only two categories are relevant to calculating capacity utilization: crude oil held at refineries and in tanks and underground storage.

Note: PADD is Petroleum Administration for Defense District.




Some of the stocks reported as being held at refineries are actually in transit (on their way to the refinery), but these volumes are assumed to be minimal relative to stocks in refinery tanks and refinery storage capacity.

Some of the more significant changes in crude oil storage have occurred in the Midwest, where 26% of the nation's working storage capacity, including storage at Cushing, Oklahoma, is located.

Storage utilization at Midwest refineries (as defined by PADD 2) in March 2015 reached 80%, the highest storage utilization rate observed for any month since EIA started collecting storage capacity data. Again, the refinery storage utilization rate may be somewhat overstated, as the refinery stock data include volumes of crude oil in transit by rail and water being transported to refineries.

In the case of crude oil stocks held in tank farms and pipelines, crude oil in transit by pipeline, water, and rail can be separately tabulated. These volumes are not measured directly but rather are derived by subtracting the stocks in tanks and underground storage from the combined pipeline and tank farm quantity.

In the Midwest, stocks in pipelines and in transit by rail and water increased from 25.3 million barrels in March 2011 to 35.0 million barrels in March 2015. This increase occurred primarily because of pipeline expansions and increased quantities of crude oil being transported by rail and water. Because pipelines must be full in order to operate, stocks held in pipelines (known as pipeline fill) are not considered in the storage utilization calculation.




Utilization of working capacity of tanks and underground storage was 73% in March 2015, nearly equal to the rate in March 2011, as Midwest crude oil stocks and storage capacities increased at similar rates.

Utilization of combined storage capacity at Midwest refineries and tank farms was 74% at the end of March 2015, the highest PADD 2 storage capacity utilization rate recorded in the five years EIA has been collecting data.

In absolute amounts, the crude oil stored at Midwest refineries and tank farms in March 2015 was 103.7 million barrels, slightly lower than the total Midwest working storage capacity four years before. Because storage capacity has increased, however, the March 2015 utilization rate is only about 2 percentage points above the previous high of 72% at the end of March 2011.




Oil Price Drop Special Coverage

Oil prices rise on hopes for China stimulus Reuters + NewBase

Oil prices edged up on Tuesday on hopes of more economic stimulus in China after disappointing data from the world's No.2 economy. China's consumer inflation weakened more than expected, to 1.2 percent year-on-year in May, raising concerns about growing deflationary pressures as the economy cools. Its producer prices fell for the 38th straight month.

"The weak data continues to point out the sluggish demand in the real economy. The government should roll out more easing measures to lower the real financing costs to boost growth," said Yu Yafang, macro strategist at Huachuang Securities in Beijing.

Front month U.S. crude CLc1 climbed 27 cents to $58.41 a barrel by 0430 GMT (1230 ET), after ending the previous session down 99 cents. Brent for June delivery LCOc1 rose 23 cents to $62.92 a barrel, having settled down 62 cents in the previous session.

Chinese oil imports fell about 11 percent in May from a year ago in the steepest drop since November 2013.

"The weak import numbers were a result of a significant increase in refinery maintenance in May ... At the same time, the strong level of imports in recent months has put pressure on storage facilities at ports in China," Australia and New Zealand Banking Group Ltd (ANZ) said in a research note on Tuesday.

"This should be alleviated later this year as the construction of new storage facilities is completed."

EYES ON SUPPLY FROM IRAQ, IRAN

Investors have also been concentrating on supply, with OPEC on Friday agreeing to continue unconstrained output and Iran and Iraq potentially boosting production.




"Iran in particular has the potential to flood the market with the most crude oil if sanctions are lifted later this month," ANZ said.

In Iraq, government forces backed by U.S.-led coalition air strikes have opened supply lines into Baiji town and its nearby oil refinery, making progress against Islamic State rebels in a seesaw battle that has gone on for months, the Pentagon said on Monday.

An official in Iran - OPEC's fifth-largest crude producer - said on Monday that eight western European companies are keen to invest in the country's $2.8 billion Siraf oil refinery project, as it ramps up capacity to reduce its dependence on imports.

Elsewhere, oil production declines from the largest U.S. shale plays are forecast to deepen for a third consecutive month in July even as rig productivity remains high, data from the U.S. Energy Information Administration showed.

OPEC adjusts to new oil market reality Reuters + NewBase

OPEC has never really been a "cartel" in the conventional sense of an organisation that agrees to restrict output to maximise revenues. So its decision on Friday not to cut production was entirely predictable and the only practical option open to its members.

The strategy of maintaining production even as prices fall, led by the Saudis but now more or less embraced by most of the organisation's membership is really the only sensible course. Most traders sense this: the price of Brent for delivery in December 2015 has been virtually unchanged since February and barely moved on Friday.

If the organisation was confronted by a temporary shortfall in demand it might make sense to cut output to secure more revenue.

But faced with a permanent shock from the supply side, such as the shale revolution, and the permanent loss of demand from substitution and conservation, the organisation's only sustainable response is to continue pumping and allow the market to adjust.

Attempts to buck the market always end in failure, a lesson top Saudi officials and others in OPEC have learned the hard way over the last 50 years.

OPEC OBJECTIVES

According to its founding statute, the Organization of the Petroleum Exporting Countries, to use its full name, was established in 1960 to coordinate and unify the petroleum policies of its members (Article 2(A)).

The organisation also seeks "ways and means of ensuring the stabilization of prices ... with a view to eliminating harmful and unnecessary fluctuations" (Art. 2(B)) as well as a "steady income" for producing countries and a "fair return" on capital for investors in the oil industry (Art. 2(C)).

OPEC ministers confer regularly and typically announce their decision in the form of a collective production target and sometimes allocations (colloquially termed "quotas") for individual member countries.

This has given rise to the myth that OPEC is a cartel that has successfully raised prices by restricting the amount of oil that its members produce. "OPEC has ... achieved a reputation that embraces extremes of response," Ian Skeet, a former Shell executive, wrote almost 30 years ago. "It has been commended, reviled, supported, and opposed."




"It has been variously envied and derided for the transfer to itself of hundreds of billions of dollars, and for having been, or not been, a successful cartel," Skeet explained ("OPEC, twenty-five years of prices and politics" 1988).

The reality, however, has been very different. OPEC has only intermittently and with limited success behaved like a cartel. Its power over the oil market has been vastly exaggerated. During its first decade, OPEC was almost exclusively concerned with raising its share of oil revenues by taking ownership of the oilfields and increasing taxation on operating companies.

Most OPEC members raced to increase their output as quickly as possible.

In the 1970s, members turned their attention to coordinating prices and discounts but were still free to pump as much as possible. It was not until March 1982 that OPEC began to announce a collective production target and allocations for individual member countries ("OPEC Annual Statistical Bulletin" 2014).

For the last 33 years, the organisation has announced a collective target but has not always been able to agree on individual allocations and the target has sometimes excluded certain member countries such as Iraq.

There have been only three periods when members agreed to restrict production significantly to remove supply from the market and achieve higher prices: 1984-1986, 1998-2002 and 2008-2010.

Even in these periods, the cuts for most members were notional, with widespread cheating and non-compliance. Real cuts fell almost entirely on Saudi Arabia, Kuwait and the United Arab Emirates.

Other members such as Iran and Iraq have consistently rejected production restraints because they need to maintain government income and pay for defense-related expenditures. At its most powerful during the oil shock of 1973/74, OPEC accounted for half of global oil production. But its share since the 1980s has generally been no more than around 40 percent.

If OPEC has ever really behaved like a cartel, it has been a very incomplete one.

"Unless it controlled the world's entire production, it could not possibly maintain the new status quo forever. Sooner or later other producers would challenge it," historian Stephen Howarth wrote about the organisation's problems with rival producers in the 1980s ("A century in oil" 1997).

EXTERNAL SHOCKS

The big shocks in oil prices over the last 50 years have all originated outside the organisation. In 1973, it was the exhaustion of spare capacity in the United States after two decades of very low prices which set the stage for the oil shock.

In the 1980s and 1990s production from newly developed fields in the North Sea, Alaska, the Soviet Union, China and the Gulf of Mexico which depressed prices for around 15 years. In 1997-98, the Asian financial crisis depressed demand sending prices below $10 per barrel. In 2004-2008, it was booming demand in Asia, and especially China, that sent prices soaring above $140.

Most recently, the global financial crisis and now the shale revolution in North America have sent oil prices plunging. In all these instances, OPEC and its members have been forced to adapt to market conditions rather than driven them.

The organisation has been most successful when it accommodated itself to changing supply and demand conditions rather than tried to fight them. Efforts to change prices by restraining supply




have generally failed and left member countries with both lower prices and lower market share (1982-85) or succeeded only in the short term (1998-2000 and 2008-2009).

Faced with the shale revolution in the United States, which has unleashed a wave of mid-priced crude onto the market, Saudi Arabia and the rest of OPEC have taken the only sensible course open to them: do nothing.

The oil market will gradually rebalance. There are signs that the process is already well underway. Demand will grow much faster than when prices were over $100 per barrel while new investment in supply will be curbed.

The major producers around the Middle East Gulf will continue to increase their production though they will see sharply reduced revenues. Shale producers, too, will survive, though the industry will be forced to become more efficient and some of the highest cost and most speculative projects will be abandoned.

The real burden of adjustment will fall on the highest cost and most risky projects which are caught in the cross-fire. The North Sea, the Arctic and OPEC's own weaker members in Africa and Latin America will all struggle to attract investment and maintain let alone grow output in a low-price environment.




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

Your partner in Energy Services

NewBase energy news is produced daily (Sunday to Thursday) and

sponsored by Hawk Energy Service – Dubai, UAE.

For additional free subscription emails please contact Hawk Energy

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 08 June 2015 K. Al Awadi

new base 622 special 09 june 2015

Business

uae uae

uae aerospace industry

uae economy

ceo of tawazun precision

khaled al awadi newbase

aerospace oems

tawazun industrial park

uaes aerospace industry