new base energy news issue 857 dated 24 may 2016

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

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NewBase Energy News 24 May 2016 - Issue No. 857 Edited & Produced by: Khaled Al Awadi

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

UAE: DNOC awards Spain’s Grupo ACS Dh968m to build waste plant The Ntional - Michael Fahy

Spanish contractor Grupo ACS has been awarded a €235 million (Dh968m) contract to build a plant capable of handling industrial waste from refineries in Abu Dhabi.

The contract will be carried out by Grupo ACS’s engineering subsidiary, Intecsa Industrial, on behalf of the Abu Dhabi Oil

Refining Company, Takreer, which is a subsidiary of Abu Dhabi National Oil Company (Adnoc).

Intecsa said it will design, procure, construct and commission a plant capable of treating industrial waste from all of Adnoc’s affiliates across Abu Dhabi. The plant will be based at Adnoc’s Ruwais complex, 250 kilometres west of Abu Dhabi City.

Work on the contract is due to start next month and take 39 months to complete, finishing in the second half of 2019. Intecsa Industrial said that it is currently running one other project for Adnoc and recently completed two others — one at a refinery in Abu Dhabi City and the other in Ruwais.

Grupo ACS is the world’s biggest construction company. In 2015, the Madrid-based company more than doubled its net profit to €1.05 billion on revenue of €34.9bn. Alongside its own operations in Spain and South America, the group has held a controlling stake in German construction giant Hochtief since 2011.

In 2014, Hochtief also took over Australian contracting giant Leighton Contractors (now CIMIC), which itself owns a 45 per cent stake in Dubai-based contracting group Habtoor Leighton. It bought the stake in 2007 for Dh3.2bn.




Saudi Aramco US$5bn JV with Pertamina awards first oil refinery contract… The national - Anthony McAuley

Saudi Aramco and Indonesia’s state oil company Pertamina have awarded the first contract in their US$5 billion joint venture to upgrade Indonesia’s largest oil refinery, a strategically important project for both parties.

The British multinational consultancy, engineering and project management company Amec Foster Wheeler has won the engineering and project management services contract to conduct the basic engineering design study for the upgrade of Cilacap refinery in central Java, with the upgrade scheduled to be completed by 2022.

The project has been under negotiation for years and the two parties finally agreed terms in November to raise capacity at Cilacap by about 6 per cent, to 370,000 barrels per day,

and enable it to process more sour crude oil grades and produced a wider slate of products, such as fuels that meet European Union Euro IV standards, some basic petrochemicals and lubricants.

The Pertamina chief executive, Dwi Soetjipto, said on Mondaythat the deal will mean that Aramco will supply 270,000 barrels per day of crude to Cilacap.

The Cilacap project is part of a wider deal with Aramco to potentially upgrade a number of the country’s refineries and is in line with Aramco’s strategy to diversify its downstream business, especially in Asia, as the company transforms toward a more balanced integrated operation in preparation for part privatisation.

“Saudi Aramco takes a long-term view on such investments and partnerships, where we seek projects that will bring mutual benefits to the partners and countries that will last for many decades," Said Al Hadrami, Saudi Aramco’s head of international operations, said in Jakarta.




For Pertamina, the deal is a step toward the $25bn refining development master plan (RDMP) the government set out last year as part of its overhaul of the energy sector, which previously had been beset by corruption and inefficiency.

The Indonesia president Joko Widodo last year made sweeping reforms that included the replacement of the entire board of Pertamina, as well as rejoining Opec after a seven-year hiatus.

Although Indonesia has been a net importer of crude oil since 2004, as its domestic demand outstripped its declining production, the country was allowed to rejoin Opec because its geography means that it still is a significant crude oil exporter as well as an importer.

The Opec membership is aimed partly at cementing supply deals with long-term partners, according to Wiratmaja Puja, the director general of Indonesia’s ministry of energy. Saudi Arabia is the source of about 25 per cent of Indonesia’s current crude imports.

The RDMP aims to double Indonesia’s domestic refining capacity to 1.68 million bpd by 2025, as well as adding significant storage capacity. The plan aims to more than triple petrol output from Indonesia’s refineries to 630,000 bpd, more than double diesel output to 770,000 bpd, and nearly triple jet fuel to 120,000 bpd, as well as well as increase refinery output of polyethylene, propylene, polypropylene, and paraxylene .

Aramco has agreed to evaluate three refineries for upgrade, which include the 170,000 bpd Dumai facility in Riau, east Java, and the 125,000 bpd Balongan plant in west Java, as well as Cilacap. Also as part of Indonesia’s RDMP, deals were signed with Sinopec to collaborate in upgrading the 118,000 bpd Plaju refinery in south Sumatra, and with JX Nippon to revamp the 260,000 bpd Balikpapan refinery in East Kalimantan.




Algeria: Petroceltic In. Ain Tsila development drilling update Source: Petroceltic International

AIM-listed Petroceltic International has issued an operational update on development drilling on theAin Tsila gas and condensate field in Algeria.

Development well AT-13, the second well of the Ain Tsila development drilling campaign, is located in the north of the field approx. 1.8 km from the appraisal well AT-8, and 6.1 km from the original discovery well AT-1. AT-13 is the second of up to 24 new development wells on Ain Tsila expected to be required to establish and maintain the currently approved annual average wet gas plateau rate of 355 MMscfpd.

The well began drilling on 20 April 2016 and on 14 May 2016 it reached a total depth of 2020m MD, having penetrated 73m of fully gas and condensate bearing Ordovician formation. Wireline logging results from the well indicate excellent reservoir quality, in line with the pre-drill prognosis, and similar to that encountered at AT-8.

Well test results will be confirmed later in 2016 when planned batch completion, stimulation and testing activities are undertaken. The well was drilled within scheduled time estimates and under budget.

The Sinopec Rig will now move to the AT-11 development well, located in the north of the field approx. 4.2 km from AT-8 and 1.8km from the AT-1. AT-11 is targeting the Ordovician reservoir and will be drilled as a vertical well to a planned total depth of 2050m MD. Petroceltic holds a 38.25% interest, Sonatrach a 43.375% interest, andEnel an 18.375% interest in the Isarene PSC. Petroceltic continues to benefit from a carry of its development costs in respect of Ain Tsila following the completion of the sale of an 18.375% interest to Sonatrach in July 2014.




Iraq's southern oil exports fall so far in May Reuters - Alex Lawler

Oil exports from southern Iraq so far in May have fallen by more than 200,000 barrels per day (bpd) from the previous month's near-record, adding to supply losses caused by unusually high global outages.

The drop, if prolonged, could add to concern about the sustainability of export growth from Iraq, where oil firms have warned the government that projects to boost output will be delayed if Baghdad cuts spending this year.

Iraq's southern exports in the first 23 days of May averaged 3.15 million barrels per day (bpd), according to an industry source and loading data tracked by Reuters . April's 3.36 million bpd was close to the record reached in November.

"It's because of power outages," said the industry source, who declined to be identified. Iraqi oil officials could not immediately be reached for comment. The south pumps most of Iraq's oil. Iraq also exports smaller amounts of crude from the north by pipeline to Turkey.

Northern shipments of crude from fields in the semi-autonomous Kurdistan region have fallen to 430,000 bpd so far in May, according to loading data, from 512,000 bpd in April. The

shipments were running at 600,000 bpd at the start of the year but have slowed due to pipeline sabotage and a decision by the central government in Baghdad to suspend pumping Kirkuk crude into the line.

The decline in Iraq's exports arises as unplanned supply outages have risen this month to the highest in at least five years because of wildfires in Canada and losses in Nigeria, Libya and Venezuela. Iraq was the fastest source of supply growth in the Organization of the Petroleum Exporting Countries last year and boosted production by more than 500,000 bpd, surprising industry observers, despite spending cuts by companies working at the southern fields and conflict with Islamic State militants.

Iraqi officials expect further growth in the country's exports this year, but at a slower rate than 2015. Officials are expected to provide an update on output and export plans at a conference in London this week.




U.K.’s First Chinese-Backed Offshore Wind Farm Gets Go-Ahead Bloomberg - Jessica Shankleman Jess_Shankleman

The U.K.’s first Chinese-backed offshore wind farm took a major step forward after three investors reached financial close on the 2.6 billion pound ($3.8 billion) Beatrice project, in the Moray Firth off the north west coast of Scotland.

The 588-megawatt wind farm is due to be completed in 2019 and is 25 percent owned by China’s SDIC Power Holdings Co.. SSE Plc owns 40 percent and Copenhagen Infrastructure Partners K/S has 35 percent, according to a statement by the developers Monday.

Beatrice will be funded with 60 percent debt, Gregor Alexander, finance director for SSE, said on an analyst call May 18. It has a contract from the U.K. government to provide power at 140 pounds a megawatt-hour. Siemens AG will supply 84 of its 7-megawatt turbines, with the blades made at its new factory in Hull, on the east coast of England.

SDIC Power “will be able to take its experience from constructing Beatrice home to China,” said Tom Harries, an analyst for Bloomberg New Energy Finance. Lack of developer experience and proven home-built turbines has slowed the development of offshore wind in China, though this could change with the country expected to install 2 gigawatts to 3 gigawatts a year in the 2020s.“Beatrice is SDIC Power’s first exposure to the European offshore wind market, and we




fully believe it has a promising future,” said Yang Lin, secretary at SDIC Power, according to the statement.

The investment also marks a turnaround for SSE, after it said in 2014 that offshore wind wouldn’t be part of its future portfolio, citing “high costs” and “limited” government incentives for the sector. ‘Only Game’

“A couple of years ago we probably slightly spat the dummy on offshore wind because it looked more tricky,” Alexander at SSE said on May 18. “But clearly at the moment for government, it’s the only game in town for additional capacity.”

Offshore wind is now “definitely back on the agenda” for SSE, he said, adding that it was also looking at its involvement in the Seagreen zone that it’s developing with Fluor Corp. and the Dogger Bank wind farm zone, being developed in the Forewind consortium with RWE Generation UK Plc, Statkraft Vind AS and Statoil ASA.

The commitment to build Beatrice takes the U.K. past the 10-gigawatt mark of offshore wind projects that are either operating, under construction or with a final investment decisions, according to the trade group RenewableUK.

Even though it has some of the world’s best wind resource, Scotland doesn’t yet have any offshore wind farms. Beatrice could become Scotland’s second project, after Statoil’s floating Hywind project, which this month gained a seabed lease from the Crown Estate and is due to start producing power in 2017. It’s also expected to be Scotland’s largest private infrastructure project, according to the statement. Third Development

A third planned Scottish offshore wind farm, Mainstream Renewable Power Ltd.’s 2.8 billion-pound Neart na Goithe, faces an uncertain future. It remains locked in one battle with the Royal Society for the Protection of Birds and another with the U.K. government over whether it’s still eligible for a power purchase contract.

The project required a total investment of 2.69 billion pounds, consisting of:

• 1,678 million in senior debt from commercial banks, EKF the Danish Export Credit Agency and the European Investment Bank for transmission and generation assets

• 70 million pounds in senior debt from Copenhagen Infrastructure II K/S • 376 million pounds of common equity from SSE • 235 million pounds of common equity from SDIC • 164 million pounds of common equity from Copenhagen Infrastructure I K/S • 164 million pounds of common equity from Copenhagen Infrastructure II K/S

The equity has been “back-ended,” which means it will only be injected after the debt has been fully used by the project, according to a spokesman for SSE, who added that its own share of equity is dependent on the final capital expenditure.

The group of 13 commercial banks providing senior debt consists of Lloyds Bank Plc, Societe Generale SA, KfW, Royal Bank of Scotland Group Plc, Commonwealth Bank of Australia, Banco Santander SA, Sumitomo Mitsui Banking Corp, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas SA, Natixis SA, Siemens Bank GHmbH, ING Groep NV, and CaixaBank SA.




UK local government approves Third Energy shale gas fracking Source: Reuters

Officials in northern England approved a shale gas fracking application from Third Energy on Monday in a shift indicating growing support for shale gas that Britain's government hopes can counter the decline in North Sea output.

Britain is estimated to have substantial amounts of shale gas trapped in underground rocks and Prime Minister Cameron has pledged to go all out to extract these reserves.

Councillors at North Yorkshire County Council voted in favour of the application 7 to 4 after two days of hearings. 'This has been a very difficult decision for the Council to make and we know it is a difficult decision for the people of this county,' said Richard Flinton, North Yorkshire's chief executive.

Rasik Valand, Chief Executive of Third Energy said: 'This approval, is not as a victory, but is a huge responsibility. We will have to deliver on our commitment, made to the committee and to the people of Ryedale, to undertake this operation safely and without impacting on the local environment.'

The approval gives a boost to Britain's shale gas industry nearly a year after local government officials in Lancashire rejected two permits for shale gas firm Cuadrilla that have essentially brought progress to a standstill. Cuadrilla has appealed against the decision and the government has since changed the rules to be able to approve shale gas permits at government level. Cuadrilla said if its permits receive government approval this summer, first shale gas from its wells could hit the British

market in mid-2017.

With permission to carry out fracking, Third Energy will now be able to test how much shale gas it could eventually produce from its site at Kirby Misperton.

'This is an absolute travesty of a decision but the battle is very far from over.' said Simon Bowens, Yorkshire and Humber campaigner for Friends of the Earth.

Third Energy is 97 percent owned by Barclay's Global Natural Resources Investments.




Mozambique's ENH Signs Cooperation Agreement with CNPC Asia Natural Gas

CNPC has signed a cooperation agreement with Mozambique's national oil and gas company ENH. The agreement was signed by CNPC Chairman Wang Yilin and Omar Mitha, Chairman of ENH on May 18 in Beijing in the presence of Chinese President Xi Jinping and Mozambique President Filipe Nyusi.

Under the agreement, the two sides will reinforce cooperation in oil and gas exploration and production, and natural gas processing and marketing. Specifically, CNPC will actively participate in Mozambique's E&P projects, promote cooperation in gas field services, and cultivate technicians and managerial talents for Mozambique's oil industry.

CNPC has a stake in Area 4 gas field offshore Mozambique. Eni is the operator of Area 4 with a 50 percent indirect interest owned through Eni East Africa (EEA), which holds 70 percent stake of

Area 4. The other concessionaires are Galp Energia, KOGAS and Empresa Nacional de Hidrocarbonetos (ENH) with a 10 percent stake each. CNPC owns a 20 percent indirect interest in Area 4 through Eni East Africa. Earlier this year, Eni received Mozambican government’s nod for the Coral FLNG project. The approval relates to the first phase of development of 5 trillion cubic feet of gas in the Coral discovery, located in the Area 4 permit. The giant discovery, made in May 2012 and outlined in 2013,

proved the existence of a high quality field of Eocenic age with excellent productivity. It is estimated to contain around 16 trillion cubic feet (TCF) of gas in place, wholly located in Area 4.




India: GMR Group Proposes to Build 1.75 MTPA LNG Terminal GMR + NewBase

Private sector infrastructure developer GMR Group has proposed to build a 1.75 million tonne per annum (MTPA) LNG terminal in the eastern Indian state of Andhra Pradesh. According to minutes

of the meeting held by Expert Appraisal Committee (EAC) under the Ministry of Environment and Forests, the project would come up at Kakinada Deep Water Port (KDWP). The project envisages a start-up capacity of 1.75 MTPA which comprises of a captive use by GMR Energy Limited to the tune of 0.85 MTPA and the balance would comprise of domestic piped and non-piped domestic users within radius of 450 km.

The proposed LNG facility would consist of equipment for ship berthing and mooring, LNG unloading arms, LNG storage and transportation facility, onshore insulated cryogenic pipeline, LNG regasification facility and pipeline for connectivity to existing gas distribution grid.

While recommending the term of reference for the project, the EAC asked the company to conduct a public hearing, besides laying down other conditions.

Focus on east coast Currently, all of India’s LNG import terminals are located on the west coast. However, companies have shifted focus towards the east coast and many projects have now been proposed. Indian Oil

Corporation, GAIL, Petronet and KEI-RSOS are some of the firms proposing to build LNG terminals on the east coast. All this investment makes sense given the government's focus towards increasing the share of gas in India’s energy mix. In an interview given to news

agency Reuters, Dharmendra Pradhan said India will cut third off its emissions rate by 2030, partly by boosting the use of cleaner burning fuels. Currently, gas

accounts for about 8 percent of India's energy mix, while oil accounts for more than a quarter. According to a research report published by TechSci Research Demand for RLNG in India is forecast to increase at a CAGR of 21.6 percent during 2016-2025, due to increasing LNG terminal projects and cost-effectiveness of the fuel compared to other alternative fuels.




States remains largest producer of oil & gas in the world Source: U.S. Energy Information Administration

The United States remained the world's top producer of petroleum and natural gas hydrocarbons in 2015, according to U.S. Energy Information Administration estimates. U.S. petroleum and natural gas production first surpassed Russia in 2012, and the United States has been the world's top producer of natural gas since 2011 and the world's top producer of petroleum hydrocarbons since 2013.

For the United States and Russia, total petroleum and natural gas hydrocarbon production, in energy content terms, is almost evenly split between petroleum and natural gas. Saudi Arabia's production, on the other hand, heavily favors petroleum.

Total petroleum production is made up of several different types of liquid fuels, including crude oil and lease condensate, tight oil, extra-heavy oil, and bitumen. In addition, various processes produce natural gas plant liquids (NGPL), biofuels, and refinery processing gain, among other possible liquid fuels.

In the United States, crude oil and lease condensate accounted for roughly 60% of the total petroleum hydrocarbon production in 2015. An additional 20% of the U.S. production was natural gas plant liquids. Biofuels and refinery processing gain make up most of the remaining U.S. petroleum and other liquids production volumes.

Throughout 2015, U.S. crude oil prices remained relatively low, with the spot price of West Texas Intermediate crude oil declining from $47 per barrel in January to $37 per barrel in December.

Despite low crude oil prices and a 60% drop in the number of operating oil and natural gas rigs, U.S. petroleum supply still increased by 1.0 million barrels per day in 2015. U.S. natural gas production increased by 3.7 billion cubic feet per day, with nearly all of the increase occurring in the eastern United States.




Increases in U.S. petroleum and natural gas production over the past several years are directly attributed to production from tight oil and shale gas formations.

Several factors kept hydrocarbon production increases in Russia smaller than increases in the United States in 2015. Although Russian petroleum production continued to increase, natural gas production declined because of poor economic conditions and a mild winter, which resulted in lower domestic demand for natural gas. Russia's total combined production of petroleum and natural gas increased by just 0.1 quadrillion Btu in 2015.

In contrast to past actions to raise or lower oil production levels to balance global oil markets, Saudi Arabia did not reduce petroleum production in late 2014 or 2015, even as oil prices fell and global inventories of oil rose. As a result, Saudi Arabia's total petroleum and natural gas hydrocarbon production rose by 3% in 2015. Still, the United States produced more than twice the petroleum and natural gas hydrocarbons as Saudi Arabia produced in 2015.

In the May Short-Term Energy Outlook (STEO), U.S. petroleum and other liquid fuels production is expected to decline from 15.0 million barrels per day (b/d) in 2015 to about 14.5 million b/d in both 2016 and 2017. In contrast, STEO forecasts Russian liquid fuels production to remain at about 11.0 million barrels per day through 2017.

STEO publishes a production forecast for Middle Eastern members of the Organization of the Petroleum Exporting Countries (OPEC) as a whole rather than for individual countries in the region. However, there is currently no indication now Saudi Arabia plans to reduce its current level of petroleum production.




NewBase 24 May 2016 Khaled Al Awadi

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

Oil prices fall as dollar gains, but possible stock drawdown supports Reuters + NewBase

Oil prices fell in thin trade on Tuesday as the U.S. dollar strengthened, but losses were curbed by a likely drawdown in U.S. crude and gasoline stockpiles.

Brent futures had declined 24 cents to $48.11 a barrel by 0447 GMT, after closing down 37 cents in the previous session. U.S. crude futures dropped 20 cents to $47.88 a barrel, having settled down 33 cents the day before.

The dollar index rose against a basket of currencies on Tuesday, as investors continued to factor in an increased chance of a near-term U.S. interest rate rise. A stronger greenback makes dollar-priced commodities more expensive for holders of other currencies.

"There's a face-off between investors and traders," said Mike McCarthy, chief market strategist at Sydney's CMC Markets. "Investors see value in the market. They are met by traders who see the market at the top of the trading range."

That led to volatile plays in the previous session with oil falling by around $1 before retracing much of the day's losses. "That intra-day volatility has led to a quieter day today," he said, describing trading as "anemic".

Oil price special

coverage




U.S. commercial crude oil stocks likely fell by around 2.5 million barrels to 538.8 million in the week ended May 20, a preliminary Reuters analysts' poll taken ahead of weekly industry and official inventory data showed on Monday.

Gasoline stocks probably dropped 1.3 million barrels last week, while distillate inventories, which include heating oil and diesel fuel, likely decreased by a million barrels, the poll showed. The United States is gearing up for its summer driving season.

The American Petroleum Institute (API) is due to release inventory data on Tuesday, while figures from the U.S. Department of Energy's Energy Information Administration (EIA) will come on Wednesday.

Just 2.8 billion barrels of oil was discovered outside North America in 2015, the lowest since 1952, following a sharp fall in exploration and appraisal drilling, consultant IHS said in a report on Tuesday.

Including the United States, that figure rose to 12.1 billion, where the rapid expansion of the onshore shale industry unlocked major resources over the past decade, but was still the lowest since 1952, Morgan Stanley said in a separate report on Monday.

Meanwhile, crude exports from Iraq's southern oil fields have fallen by more than 200,000 barrels per day (bpd) to around 3.15 million barrels so far in May, according to an industry source and loading data.

Oil prices slid on Monday as Iran vowed to ramp up output, though crude futures pared losses on data showing a stockpile drawdown at a major U.S. delivery hub.

Oil fell as much as $1 a barrel or more in early trade, the day after the Mehr news reported that Iran's Deputy Oil Minister Rokneddin Javadi said the country's crude exports, excluding gas condensates, would reach 2.2 million barrels per day (bpd) by the middle of summer from 2 million bpd now.

His comments further dampened hopes for a coordinated decision to freeze OPEC oil production at a meeting of the exporter group in Vienna on June 2.

Oil futures got some support from a report that showed a stockpile drawdown at the Cushing, Oklahoma delivery hub for U.S. West Texas Intermediate (WTI) futures. Market intelligence firm Genscape reported an inventory drop of 978,862 barrels in Cushing during the week to May 20, traders who saw the data said.

"Upward price momentum appears to be slowing as we feel that this late winter/spring bull move is in a very advanced stage with only about $3 to $4 a barrel remaining on the upside in referencing either WTI or Brent futures," said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates.

Reduced U.S. production and supply outages from Venezuela to Libya and Canada have lifted oil prices about 80 percent from 12-year lows hit this winter of around $27 for Brent and $26 for WTI. Still, prices remain less than half the levels reached in mid 2014, when crude traded above $100.

The bearish comments from Tehran outweighed concerns about unplanned oil outages globally hitting a five-year high mainly due to wildfires in Canada that have affected oil-sands production and losses in Nigeria and Libya.




LNG Buyer Pays Least Since 2005 For Fuel as Prices Slump Bloomberg - Tsuyoshi Inajima

• Japan average LNG import price falls to $6.32/mmBtu in April • LNG linked to oil prices set to rebound, Clavis Energy says

Share on Faceboo kShare on Twitter Japan, the world’s biggest buyer of LNG, paid the lowest price in about 11 years for the fuel last month amid a global oversupply.

The average price of LNG shipments into the country was about $6.32 per million British thermal units in April, the least since August 2005, according to Bloomberg calculations based on preliminary data from the Ministry of Finance. Prices are expected to rebound in coming months as crude values have surged, according to Junzo Tamamizu, managing partner at Clavis Energy Partners LLC.

LNG under long-term contracts imported into Asian countries are typically linked to oil prices with a time lag of several months. Brent which sank near $27 a barrel in January, the lowest level since 2003, has rallied more than 70 percent since then and traded at $48.51 at 2:06 p.m. Tokyo time on ICE Futures Europe exchange.

“With crude prices bottoming between January and February, LNG prices are set to rebound,” Tamamizu said by phone Monday. As Asian spot LNG prices are cheaper, “buyers would likely work harder to renegotiate with suppliers” to lower prices and get more flexibility, Tamamizu said.

Asia spot LNG fell 10 cents to $4.35/mmBtu from a week earlier, New York-based Energy Intelligence said on the website of its World Gas Intelligence publication on May 18. SLInG weekly spot price gained 1.5 percent to $4.36/mmBtu, according to an assessment by Singapore Exchange Ltd. on May 16.




NewBase Special Coverage

News Agencies News Release 24 May 2016

Saudi Arabia’s Economic Plan Shows It’s Just Not That Into OPEC Bloomberg - Wael Mahdi

The world’s biggest crude exporter has already undermined OPEC’s traditional role of managing supply, instead choosing to boost output to snatch market share from higher-cost producers, particularly U.S. shale drillers, and crashing prices in the process.

Now, under the economic plan known as Vision 2030 promoted by the king’s powerful son, Deputy Crown Prince Mohammed bin Salman, the government is signaling it wants to wean the kingdom’s economy off oil revenue, lessening the need to manage prices.

Moreover, the planned privatization of Saudi Arabian Oil Co. will make the nation the only member of the Organization of Petroleum Exporting Countries without full ownership of its national oil company.

“The main take-away from Saudi Vision 2030 is that there’s just no role for OPEC,” Seth Kleinman, head of European energy research at Citigroup Inc. in London, said by phone on May 16. “Or, you can have an OPEC without Saudi Arabia, which just isn’t much of an OPEC.”




The first change of oil ministers in more than 20 years may also recast the country’s relationship with OPEC. The group’s 13 members, which contribute about 40 percent of the world’s supply, gather in Vienna on June 2.

Prince’s Ally

King Salman on May 7 replaced Ali al-Naimi, the most influential voice in OPEC and the architect of current Saudi oil policy. While there’s likely to be considerable continuity, his replacement, Khalid Al-Falih, is an ally of Prince Mohammed, who scuppered a plan al-Naimi had supported for capping production. When producers considered freezing output to curb a global glut in April, the young royal’s view that no deal was possible without Iran prevailed, and talks collapsed.

“We don’t care about oil prices,” Prince Mohammed said in an April 25 interview in Riyadh. “$30 or $70, they are all the same to us. We have our own programs that don’t need high oil prices.”

Keeping Control

If the prince follows through on his ambitions, it’ll be a tectonic shift. Since OPEC’s foundation in 1960 to coordinate the policies of the world’s biggest oil exporters, Saudi Arabia has set the pace as the group’s biggest voice in policy making and the leader of adjustments in production to manage global prices.

The government plans to transfer as much as 5 percent of the company into private hands by 2018. The IPO will make it look more like the giant oil companies OPEC was created to counteract, with a mandate to maximize profit and develop refining operations around the world.

Instead of following orders from the government, Aramco will set production policy in line with the wishes of a board of directors elected by a general assembly, which will take over from the state-appointed supreme council, according to Prince Mohammed, who currently heads the council.

‘Impossible Task’

“The strategic shifts in Saudi policies mean that Saudis do not need OPEC any more, but OPEC is nothing without Saudi Arabia,” said Anas al-Hajji, an independent analyst and former chief economist at NGP Energy Capital Management LLC in Houston. Yet a lack of detail, plus possible resistance to change within Aramco and elsewhere in Saudi Arabia, could undo the strategy.

“The prince is trying to do an almost impossible task,” said London-based analyst, Abdulsamad al-Awadhi, who served as Kuwait’s representative to OPEC from 1980 to 2001. Prince Mohammed wants to isolate Aramco’s production policy from the government, but the government will still own 95 percent or more of the company and will participate in appointing the board, al-Awadhi said.

Internal Tensions

Opening the company to private investment could lead to internal tensions over production policy, said Miswin Mahesh, a London-based analyst at Barclays Plc. Aramco maintains a production capacity of 12 million barrels a day, or about 1.7 million more than it pumps today, to cushion against possible price surges. “If you are an investor, you don’t want to see a lot of your capacity idle and not being utilized to make money,’’ Mahesh said.

OPEC, founded by Saudi Arabia and four other oil-rich developing nations, gained members and geopolitical clout as more producers nationalized their energy resources and created state-run




companies to exploit them. By setting production quotas for individual countries the group tried avoid prolonged periods of oversupply.

But over the past three years, under al-Naimi’s leadership, Saudi Arabia resolved that OPEC wouldn’t cut output and instead pump as much as they wanted to defend sales against higher-cost crude.

The kingdom raised production to a record in July, exacerbating the glut and leading prices to plunge by more than half. The strategy now seems to be working -- prices have rallied about 80 percent from a 12-year low in January -- giving Saudi Arabia little reason to change course .

“The death of OPEC has been long foretold, but it looks like the Saudi 2030 Vision is really the obituary notice,” said Citigroup’s Kleinman. “The Saudi Aramco IPO, and the presumption that there’s going to be a much higher degree of autonomy within Saudi Arabia -- there’s no real role for OPEC.”

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 24 May 2016 K. Al Awadi

new base energy news issue 857 dated 24 may 2016

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