newbase 630 special 21 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 21 June 2015 - Issue No. 630 Senior Editor Eng. Khaled Al Awadi

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

Qatar gas reserves to last 138 years on current output rates: QNB Gulf Times + NewBase

Qatar has enough gas reserves to maintain production at current rates for some 138 years and is therefore likely to remain central to global hydrocarbon markets for a number of years to come, QNB has said in a report.

According to QNB, Qatar remains central to the global hydrocarbon sector based on new data for 2014 released in ‘BP’s Statistical Review of World Energy’.

Qatar remains the third largest producer of natural gas in the world after the US and Russia with 5.1% of global production. The country is also the world’s top exporter of liquefied natural gas (LNG) with 31% of total global exports in 2014. This central role is a result of its large endowment of hydrocarbon reserves.

In terms of oil and gas reserves per capita, Qatar remains well ahead of the other major oil and gas producers with 83.6k barrels of oil equivalent (boe) in 2014. Revenue generated from Qatar’s hydrocarbon exports provides a stable source of financing for major infrastructure investments that are driving the growth and diversification of the domestic economy.




The report from BP indicated that reserves of oil and other liquids had risen 2.6% to 25.7bn barrels in 2014. Recent studies and oilfield exploration and development projects are likely to have led to an increase in the level of proven oil reserves.

Meanwhile, gas reserves in Qatar fell 0.6% in 2014 as a result of the extraction of gas and in the absence of exploration and development of new reserves due to the moratorium on further gas development and exploration in the North Field where almost all of Qatar’s gas reserves are situated.

In terms of production, Qatar’s total hydrocarbon output was virtually unchanged in 2014 at 5.2mn barrels of oil equivalent per day — 3.2mn from gas and 2.0mn from oil. This was largely due to the above mentioned moratorium on further gas development projects.

As a result, gas production only crept up in 2014 by 0.4%. The increase in gas production was offset by a decline in oil production in 2014 (-0.8%) as Qatar’s oil fields are maturing. The implementation of large investment projects should help to stabilise oil production, such as the $4bn Bul Hanine plans to update facilities and increase production from 40,000 bpd to 95,000 bpd.

Most of Qatar’s gas production is exported as LNG (58% in 2014). Heavy investment in LNG facilities over the last 20 years and a vast ramp up in production has made Qatar the world’s largest LNG exporter, driving the establishment of a global LNG market.

Gas is a clean and relatively low cost source of energy in comparison to other hydrocarbons, such as coal and oil. The rise of LNG exporters has made it possible to move natural gas around the globe. This has opened up a new source of clean energy for many countries and encouraged them to invest in the necessary infrastructure to import and regasify LNG.

The switch to a cleaner source of energy as well as strong economic growth

have made the Asia Pacific region the largest market for Qatar’s LNG exports, taking 72% of Qatar’s exports in 2014.

But Qatar’s LNG exports are not confined to Asia. Cheaper LNG prices relative to piped-gas prices in Europe have prompted the UK to switch to LNG. As a result, the UK increased its imports of LNG from Qatar by 20.5% in 2014.

Looking forward, Qatar is expected to maintain its dominant role in the global hydrocarbon sector. Global demand for clean energy is expected to continue rising, and Qatar is a leader in the LNG market.




Moreover, domestic energy demand is expected to rise strongly as the population grows rapidly due to the influx of expatriates being called in to work on the country’s large infrastructure programme.

To meet this rising domestic demand, the Barzan project — a $10.3bn North Field gas development to increase production for domestic use — is coming online and is expected to drive growth in the hydrocarbon sector.

The first production from Barzan is expected during the second half of this year, QNB said.

At the same time, the report said oil production is expected to stabilise, leading to an increase in real GDP growth in the hydrocarbon sector to 0.8% in 2015, 1.8% in 2016 and 1.9% in 2017.

“We expect the non-hydrocarbon sector to grow at around 10.8% in 2015-17, driven by investment in major infrastructure projects. This should lead to overall growth of 7% in 2015, 7.5% in 2016 and 7.9% in 2017,” QNB said.




Dewa set to award consultancy contract for latest solar park phase The National + NewBase

Dubai Electricity and Water Authority (Dewa) will next month award a contract for the consultancy stage of the latest phase of its 1,000-megawatt solar park.

Waleed Salman, executive vice president of business development at Dewa, said that eight companies had been shortlisted and Dewa was in the final stages of evaluation. The winner of this stage will help Dewa to decide if it will award all of the remaining 800MW for the Mohammed bin Rashid Al Maktoum solar photovoltaic (PV) park in o ne single phase or separately into sections, such as two 200MW awards and one 300MW contract.

He did not disclose which companies were in the running for the consultancy work. Once the consultancy firm is on board the utility will prepare the next stage including the request for bids, he said.

“We expect the request for bids by the end of the year, and we’ll give companies two to three months,” Mr Salman said. “So expect us to select the companies in the first half of next year.” The plant’s total capacity will be just over 1,000MW upon completion, which is expected by 2030. This is enough electricity, on average, to power more than 1 million homes.

The first phase, awarded to the US firm First Solar, totaling 13MW, came online two years ago. The winner of the second bid round was announced in January, and with it, record-breaking low prices. The Saudi Arabian firm Acwa Power won the award for 200MW at a fixed tariff of 5.84 US cents per kilowatt-hour compared to previous market lows achieved in Brazil at 8 US cents per kWh.

This led to many saying that this was the new PV standard rate, which is at the same price – if not cheaper – than power generation via natural gas. “This solar tender is the new benchmark,” the UAE energy minister Suhail Al Mazrouei said last week.

The Acwa chief executive Paddy Padmanathan said that the market could change, such as from an increase in interest rates or construction costs. “It depends on when the tender comes up and the environment,” he said. “However, if all the conditions are the same [as today], the price will be even better than 5.84 cents.”

Separately, one solar company is looking to throw its hat into the ring for Dubai’s next tender.




“We see [the UAE] as one of the most important areas for solar,” said Andrew de Pass, the chief executive of Conergy, which has offices in Germany, the US and Singapore. The company has projects in Saudi Arabia and Kuwait, and it is also competing for awards in Jordan and Egypt.

Conergy raked in US$500 million in revenue last year and expects 20 to 30 per cent year-on-year growth with the Middle East market, making up 10 to 15 per cent of its revenue over the next three years.

And getting a leg up in the race for the work at the Mohammed bin Rashid Al Maktoum solar park would be helpful. Mr de Pass said he is currently in Dubai for discussions with potential partners for the next major tender.

“The next tender will probably be more disciplined as to what would be a more appropriate long-term return on investment,” said Mr de Pass. “Sometimes in the first tender, you want to build market share and awareness. If I were in [Acwa’s] shoes, I would have done the same thing.




Saudi pumping oil flat out in battle for market share Bloomberg + NewBase

Not content with the blow it’s dealt to US oil drillers, Saudi Arabia is set to escalate the battle for market share by raising production to maximum levels.

The world’s largest oil exporter has already increased output to a 30-year high of 10.3mn bpd in a bid to check growth from nations including the US, Canada and Brazil.

It will add even more to the global glut, according to Goldman Sachs Group. Citigroup predicts the kingdom will push towards its maximum daily capacity, which the bank estimates at about 11mn barrels, in the second half of 2015.

Saudi Arabia steered the Organisation of Petroleum Exporting Countries in November to protect its market share in the face of swelling US crude output, rather than cut supplies to shore up prices as it did in the past. Having abandoned the role of swing supplier — adjusting production in line with demand — the kingdom will maximise sales to increase pressure on producers outside the group, the banks said.

“If you are Saudi Arabia and you’re looking at the new oil order we live in, you would go to full capacity,” Jeff Currie, head of commodities research at Goldman Sachs in New York, said by e-mail on June 15. “The world has come around to the realisation that the US shale barrel is the swing barrel.”

As result of Saudi pressure, US drillers have reduced the number of operating oil rigs for a record 27 weeks to the lowest level in almost five years, according to Baker Hughes, and oil stockpiles have shrunk as well. Brent crude plunged to a six-year low of $45.19 a barrel in January following Opec’s refusal to cut production. The international benchmark has rebounded about 40% since then with the slowdown of hydraulic fracturing in US shale formations.

Opec agreed on June 5 to retain its collective output target of 30mn barrels a day, although it has surpassed that level for 12 months straight, according to data compiled by Bloomberg. Global supply exceeded demand by 1.8mn barrels a day in the first quarter, according to the International Energy Agency.

While most of Opec’s 12 nations are already producing at maximum levels, Saudi Arabia — the biggest member and leader of the group’s market strategy — has for years kept fields in reserve capable of producing millions of barrels a day, to be deployed during times of supply disruption. The incentive to keep holding this spare capacity is waning, according to Citigroup.




Estimates vary on how high Saudi production might go. Oil Minister Ali al-Naimi reiterated in St Petersburg on Thursday that his country has about 1.5mn to 2mn barrels of daily reserve capacity and is ready to increase output if demand rises. The IEA, a Paris-based adviser to industrialised nations, assesses the full capacity at 12.3mn. Saudi Arabia’s decision not to push beyond 10mn during the 2011 crisis in Libya suggests the maximum is closer to 11mn, said Seth Kleinman, head of energy strategy at Citigroup.

“The clear implication of Saudi Arabia’s new oil policy of pressuring high-cost producers is for them to increase production and exports,” Kleinman wrote in an e-mail on June 15. “With an

increasingly compelling picture of lower oil prices over the next 10 to 20 years, it makes sense for Saudi to use it all and use it now.”

The kingdom has told Opec’s Vienna-based secretariat that it

increased output by 697,000 bpd between February and May. This isn’t really a signal that Saudi Arabia intends to batter rival suppliers even harder, according to BNP Paribas. It has been providing oil two new refineries at Yanbu and Jubail, with combined capacity of 800,000 bpd, and needs to accumulate inventories before its summer demand peak, the bank said.

“Any ramp up in Saudi production is to service increased domestic demand, rather than increase exports,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London, said by e-mail. Long-term prices are already low enough to deter investment in high-cost Canadian oil sands or the North Sea, he said.

Citigroup points to other signs that the Middle Eastern country is taking a more aggressive stance, bolstering output because of concerns that, even at lower prices, non-Opec supplies will still expand and global demand is peaking.

The number of rigs drilling for oil in Saudi Arabia rose to a record of 81 in April, an increase of more than a fifth since the start of the year, according to data gathered since 1995 by Baker Hughes.

The lower outlook for prices “turns oil in the ground in Saudi from an appreciating resource into a depreciating resource,” said Citigroup’s Kleinman. “If it’s depreciating, you produce it all as fast as you can.”




Nigeria: Erin Energy commences production from the Oyo-7 well - Oyo field production to double.. Source: Erin Energy + NewBase

Erin Energy has commenced production from the Oyo-7 welllocated in OML 120 offshore Nigeria. Erin Energy is the operator of the Oyo field and has a 100% interest in the block.

Oyo-7 was drilled to a total depth of approx. 8,000 feet (2,438 meters) and was successfully completed horizontally in the Pliocene formation. The well is located in approx. 1,000 feet (300 meters) of water and is producing into the Floating Production Storage and Offloading vessel, Armada Perdana. Oyo-7 is expected to produce approx. 7,000 barrels of oil per day following optimization of choke size.

Segun Omidele, Senior Vice-President of Exploration and Production commented: 'We are pleased that the well is performing in-line with our expectations and we will be working over the next few days to optimize the flow rate. Bringing this well on production will double our current production rate out of the Oyo field and is a significant step in the continued growth of our company.'

Erin Energy drilled the Oyo-7 with two planned objectives. The primary objective was to target the Pliocene formation from which it is now producing; and the secondary objective was to test the deeper Miocene formation for hydrocarbon potential.

The Oyo-7 successfully confirmed hydrocarbon in the Miocene formation, which was previously undrilled on the block. This successful test has de-risked the Miocene in Erin Energy’s offshore Nigeria blocks and has provided valuable data for the Company’s planned Miocene exploration program, which targets recoverable P50 resources of nearly 3 billion barrels of oil equivalent. Drilling of the Company’s first Miocene exploration well is slated for 4Q 2015.

The blocks lie on the northwestern flank of the prolific, offshore Niger Delta approximately 60 km from the coast, in water depths between 100–900 m. Immediately adjacent to the blocks are the giant Erha, Bosi, Bonga & Sonam Fields, all with Oligocene, Miocene & Pliocene reservoirs. OML 120 contains the Oyo Field, which is currently being re-developed by Erin, with oil and gas reserves in Pliocene sands. The Oyo field is not part of the farm-out.




Indonesia grants gas stake to Total, Inpex Oman Observer + NewBase

Indonesia announced on Friday it will grant a 30 per cent stake of the Mahakam gas block to be shared between French Total and Japanese Inpex, while giving the majority stake to state-owned oil firm Pertamina in 2018.

Oil giant Total, along with Inpex, has been running Mahakam, a huge natural gas block offshore of East Kalimantan province, since 1967. Total has expressed it wanted to continue operating the block when the contract expires at the end of 2017. However, President Joko Widodo’s government wanted Pertamina to take over the block despite doubts over Pertamina’s technical and financial capacity. “The consideration for the stake allocation is that Pertamina should really play the role of an operator which controlled the majority of interest, and we also want to give appreciation to the (current) operators which have given the investment,” energy minister Sudirman Said told reporters. Pertamina will have to share some of its 70 per cent stake with a local East Kalimantan

company, Said added.




U.S. Proposes 24% Increase in Fuel Economy of Trucks by 2027 Bloomberg + NewBase

Asking the trucking industry to do more to cut the emissions that add to climate change, the Obama administration on Friday proposed a 24 percent increase in fuel-economy requirements for tractor-trailers over a decade.

The Environmental Protection Agency and National Highway Traffic Safety Administration proposal fell short of a steeper increase and shorter time frame sought by environmentalists. Truckmakers must be in full compliance by 2027.

“We will be pushing the administration to require compliance sooner, in order to deliver these benefits more quickly,” Rhea Suh, president of the Natural Resources Defense Council, said in a statement.

The EPA sided with engine-maker Cummins Inc. and transmission manufacturer Eaton Corp. and proposed a separate standard and testing procedure for truck engines. Truckmakers had pushed for elimination of engine targets and only testing the whole vehicle the way automobiles are assessed. That way, fuel consumption targets could be met with less expensive changes, such as improved aerodynamics.

“These standards provide important incentives to help deploy the next generation of fuel-efficient technologies,” said Alexander M. Cutler, Eaton chairman and chief executive officer.

Economic Benefits

It is the second time U.S. regulators set efficiency goals for the more than 7 million tractor trailers and other heavy-duty trucks that haul most of the nation’s goods. Regulators predicted environmental and economic benefits from the truck rules. Reduced shipping costs would eventually be passed onto consumers through lower prices, they said.

Following earlier rules to boost the mileage of cars and cut use of coal to make electricity, the truck-efficiency rule is a step to reach President Barack Obama’s pledge to cut overall U.S. climate emissions by 26 percent by 2025.

“Once upon a time, to be pro-environment you had to be anti-big-vehicles,” U.S. Transportation Secretary Anthony Foxx said in a statement. “This rule will change that. In fact, these efficiency standards are good for the environment –- and the economy.”

Unlike standards set in 2011 -- lasting through 2018 -- these rules force truckmakers to employ new, untested technology. Vehicles built using new technologies developed to meet the regulatory targets would end up cutting 1 billion metric tons of greenhouse-gas emissions by 2027, saving about 1.8 billion barrels of oil, according to the EPA.




Emission Cuts

Therese Langer, transportation program director at the American Council for an Energy-Efficient Economy, said the proposal will cut truck greenhouse-gas emissions by 35 percent to 36 percent, from 2010 levels, an outcome she called “disappointing, especially given the longer time frame.”

The Owner-Operator Independent Drivers Association, whose members typically own one or two trucks, has expressed concern that costs could rise and whether untested technology will be reliable enough.

Regulators estimated the proposal would add $10,000 to $12,000 to the cost of a big rig. Truck owners’ savings at the pump will let them recover the added vehicle costs in two years, they said.

EPA and NHTSA calculated the overall costs to industry as about $25 billion. The economic benefits were more than 10 times higher, or $230 billion, the regulators said.

Trash Compactors

Besides the tractors that pull freight trailers on U.S. highways, there are separate targets for so-called vocational vehicles, like trash compactors, utility trucks and passenger buses. There’s another standard for medium- and heavy-duty pickups. Freight trailers will have their own requirements for the first time.

Fuel is the single largest cost of owning and operating heavy-duty trucks, averaging about $73,000 a year for a tractor-trailer. U.S. households pay about $1,100 a year in diesel charges that are built into retail prices, according to the Consumer Federation of America.

“Americans understand that big truck fuel costs are passed on to them, which means they understand that raising big truck fuel economy standards will save them money,” said Jack Gillis, a spokesman for the Washington-based watchdog group.

The agency said that most of the gains can be accomplished with existing technology, including more efficient tires, and that the extra costs imposed on vehicles could be recouped by owners within two years by lower fuel bills.

Aerodynamic Design

The proposed tractor standards could be met through improvements in the engine, transmission, aerodynamic design and extended idle reduction, EPA said in a fact sheet.

Environmental groups such as the Union of Concerned Scientists, the NRDC and the American Council for an Energy-Efficient Economy pushed for an overall 40 percent reduction from a 2010 baseline for all trucking segments by 2025. The EPA proposal appeared to fall short, both in the energy to be saved and the extended out compliance time.

“The implementation timeline can and should be accelerated,” Luke Tonachel, the NRDC’s vehicles director, said in a blog post. “The technology is known and can be deployed earlier.”

For heavy-duty pickup trucks, the agencies predicted that some makers would use engine-stop and hybridization in some segments of the market.




Oil Price Drop Special Coverage

Oil prices , held down by demand outlook, shale output forecast… Reuters+NewBase

Oil prices were little changed in thin trade on Friday, with a forecast of higher output by U.S. shale oil producers this year adding to worries over demand and preventing the market from extending the previous session's gains.

U.S. August crude dropped to had lost 14 cents to $59.74 a barrel and Brent crude for August closed at 62.81. "Without much change in fundamentals as well as changes to dollar strength, crude oil prices continue to move sideways. We believe that this would likely continue for today as we do not expect much change," Daniel Ang at Phillip Futures said.

He added that oil prices were showing little sign of moving far from $60 and $64 for WTI and Brent respectively. U.S. shale oil producers have projected a rise in output for the year even though they have scaled back drilling to cope with a slump of nearly 45 percent in crude prices. The potential for increased imports to the United States could put pressure on U.S. oil prices.

"The narrowing of the Brent/WTI spread is improving the economics of imports rather than domestic purchases," ANZ said on Friday. It noted U.S. rail volumes of crude oil and petroleum dropped 12 percent year-on-year last week as higher imports slowed purchases from regions such as North Dakota.

Saudi Arabian Oil Minister Ali al-Naimi said he was optimistic about the coming months, given increased global demand. Naimi noted a reduction in the level of commercial stocks and an improvement in prices. Russia, the second-biggest oil supplier to global markets, and Saudi Arabia, the world's biggest oil exporter, plan to discuss broad cooperation at an economic forum in St Petersburg.

Chinese Vice Finance Minister Zhu Guangyao said he hoped China and the United States would coordinate their macroeconomic policies better, adding that countries with the scope to expand their fiscal policy should do so actively. The Bank of Japan kept monetary policy steady and maintained its upbeat assessment of the economy on Friday.




Photovoltaic demand seen to triple by 2020 worldwide Saudi Gazette + NewBase

The cumulative global market for solar PV is expected to triple by 2020 to almost 700 gigawatts, with

annual demand eclipsing 100 gigawatts in 2019, the “Global PV Demand Outlook 2015-2020: Exploring

Risk in Downstream Solar Markets” report revealed.

Solar demand will likely be almost entirely market-based in 2020; a dramatic shift from 2012 when almost

all demand was premised on direct incentives. One implication of an increasingly unsubsidized market is

that management and governance of the electric grid will change dramatically, creating both new

opportunities and challenges for solar companies. This transformation is already underway with the

implementation of market-based mechanisms for PV procurement and solar companies exploring

innovations in business model design.

The report explores the high-level trends, drivers, and risks shaping global PV demand out to 2020. It

includes forecasts and risk assessments for major markets, analysis of regional and emerging markets,

alternative scenarios for global demand, and distillation of key themes such as unsubsidized market

development, business model and financial innovation, and the regulatory transformations for the electric

grid.

In the Low Scenario, the global market could remain between 35 and 39 GW annually in the five coming

years. The combination of declining European markets and the difficulty of establishing durable new

markets in emerging countries could cause this market stagnation.




While the decline of PV system prices in most markets paused in 2013, the installations that were triggered

before that pause compensated for the EU decline. Most important markets outside Europe grew in 2013

and without these lost GW in Europe, the global PV market growth would have been even more impressive

and reached well above 40 GW.

PV remains a policy-driven business, where political decisions considerably influence potential market take-

off or decline. The highest probability scenario assumes a low market in Europe and a growing market in

most emerging regions.

In the High Scenario, the European market would first grow around 13 GW in 2014 before increasing

slowly again to around 17 GW five years from now, a decline from EPIA expectations last year. In that

case, the global market could top more than 68.6 GW in 2018.

The global PV market progressed in 2013: after two years of around 30 GW of installations annually, the

market reached more than 38 GW in 2013, establishing a new world record. But the most important fact

from 2013 is a rapid development of PV in Asia combined with a sharp drop of installations in Europe. This

record could have been even higher. In fact almost 40 GW have been installed in 2013 if we consider the 1.1

GW more installed by China.

China became the top PV market in the world in 2013 and achieved the world’s largest PV installation

figure in one year with 11.8 GW connected to the grid, after Italy installed 9.3 GW in 2011 and Germany

installed between 7.4 GW and 7.6 GW from 2010 to 2012. Japan scored 6.9 GW and took the second place

in 2013, while the USA installed 4.8 GW.

Europe’s market had progressed rapidly over the past decade: from an annual market of less than 1 GW in

2006 to a market of over 13.7 GW in 2010 and 22.3 GW in 2011 - even in the face of difficult economic

circumstances and varying levels of opposition to PV in some countries. But the record performance of

2011, driven by the fast expansion of PV in Italy and a continued high level of installations in Germany,

was not repeatable and the market went down to 17.7 GW in 2012 and almost 11 GW in 2013, the lowest

market level since 2009.

After holding the world’s top PV market position seven times in the last 14 years, Germany was only fourth

in 2013 with 3.3 GW, and yet still by far the largest European market.

The UK was the second European market with 1.5 GW. Italy, which was the second European market in

2012, installed more than 1.4 GW in 2013, down from 3.6 GW the year before and 9.3 GW in 2011.

Other European countries that installed more than 1 GW are Romania (around 1.1 GW) and Greece (1.04

GW).

Together, China, Japan, the USA, Germany and the UK accounted for nearly 28.3 GW, or three-quarters of

the global market over the last year. This is even higher than in 2012 when together the top-five global

markets represented around 65%.

Regionally, the Asia-Pacific (APAC) region, which in addition to China and Japan includes Korea,

Australia, Taiwan and Thailand, scored first place in 2013 with close to 56% of the global PV market.

Europe came second with almost 11 GW out of 38.4 GW or 29%.

The third leading region is North America, with Canada developing steadily alongside the USA.




Elsewhere, the Middle East and North Africa (MENA) region represents untapped potential for the medium

term. PV also shows great potential in South America and Africa, where electricity demand will grow

significantly in the coming years and numerous projects that have started will lead to installations in 2014

and after.

Germany saw steady growth for nearly a decade and clearly represents the most developed PV market,

despite the 2013 market downturn.

Countries which got a later start – the Czech Republic, Italy, Greece and Belgium – quickly reached high

levels, and decreased rapidly afterwards. Next to these leaders, Spain now appears quite low since its market

has been constrained. The results for France and the UK still reveal untapped potential in both countries, but

with different trajectories.

While the French market significantly decreased in 2013, the UK unexpectedly almost doubled its annual

installed capacity during that year. Indeed, in 2013, the UK installed more than Italy, becoming together

with Germany the main drivers of the European market.




Market forces to prevail in medium to long term Syed Rashid Husain

Despite higher output in recent months, courtesy of the weak market conditions, OPEC revenues slumped below $1 trillion in 2014 - for first time since 2010 - Bloomberg reported. OPEC’s '12 members earned $993.3 billion in 2014, a decrease of 11 percent from a year earlier,' the report said, adding that the group's combined current account balance too went down by a whopping 35 percent to $273.6 billion, as drop in exports was also accompanied by an increase in imports. The International Monetary Fund (IMF) had earlier projected that GCC earnings from oil and gas exports are likely to drop by about $300 billion due to soft oil market conditions. “It is expected that Kuwait, Qatar and UAE will have a fiscal surplus, albeit smaller than the previous years. The lower realization from oil and gas exports alone is estimated at around $300 billion in 2015 for the GCC region," the IMF had projected. The World Bank in the meantime has also slashed this year’s growth forecasts for the developing economies. In its latest Global Economic Prospects released earlier the month, the World Bank forecasts a flat growth of 2.2 percent in 2015 in the Middle East and North African region. 'The plunge in oil prices is a particular challenge for oil-exporting countries, most of which also have severe security challenges (Iraq, Libya and Yemen) or limited economic cushion (Iran and Iraq).' “The oil price drop would imply a large shift in the GCC’s aggregated fiscal balance from a surplus of 11 per cent in 2013 amounting to $401 billion to a deficit of about 2 percent in 2015 amounting to $69 billion," the Institute of International Finance too reported. Gulf Cooperation Council members countries stand to lose $240 billion in hard-earned assets in 2015 if oil prices stay at low levels, on or around the average at $55 per barrel, for the rest of the year, Alp Eke, director and senior economist at the National Bank of Abu Dhabi’s (NBAD) was quoted in the regional press as saying. If prices stay at this level, Saudi Arabia could lose around $160 billion in assets, while the UAE might also lose around $55 billion. Oman and Bahrain too were likely to face difficulty, with both expected to sustain fiscal deficits of -13 per cent and -13.5, respectively. They are also forecasted to register current account deficits of -17 percent and -10 percent, respectively. Saudi Arabia Monetary Agency (SAMA) reports too confirm the trend. As of April 2015, Saudi reserves at $686 billion, were almost $60 billion down from August 2014 levels ($746 billion). Government deposits, due lower crude oil revenues, have also started slowing down. "If we assume the oil price were to remain at say $55 for the rest of the year, and no change in planned government spending, GCC nations could experience over $200 billion of depletion in the collective net foreign assets in 2015 alone,” the National Bank of Abu Dhabi report said. Most producers' are faced with major financial issues - none can argue. Yet, it has other dimensions. It carries long-term consequences too. Project delays and spending cutbacks being witnessed all around are posing a risk to future supplies. Speaking at the conclusion of OPEC moot in Vienna, earlier the month, the Qatari Energy Minister Mohammed Saleh Al-Sada was quoted by The Telegraph as underlining that the impact of cost cutting across the industry needed to be assessed to ensure that enough new production would come on stream to replace natural declines.




As per OPEC estimates, the world will need to find and produce at least another 20 million barrels per day (bpd) of crude by 2040 when global demand is expected to reach 111m bpd. The scenario is definitely not rosy. “The degree of investment cuts is substantial due to the oil price of today,” Sada warned. Countries in OPEC, that pump a third of the world’s oil, needed to invest heavily to replace an average 5pc-6pc natural decline in oil production from existing wells, he emphasized. Secretary General Abdalla Salem El-Badri, too underlined: “If we don’t have investment now, we will have problems in the future.” None can argue that! Situation on that front is not encouraging - to say the least. In Europe and the UK around £55bn-worth of oil and gas developments are under threat , Wood MacKenzie estimates. Already a number of deepwater oil projects and complex gas facilities worth around $200 billion have been cancelled or put on hold worldwide in recent months due to the sharp drop in oil prices over the past year, a Ernst and Young (E&Y) report asserted last week. Further project cuts and delays are likely, as the industry braces for an extended period of lower oil prices as a result of a supply glut, the report pointed out. "The mind set in the industry at the moment is that prices are unlikely to be bouncing up materially in the near term," Reuters said quoting the consultancy's Andy Brogan as emphasizing. "There is an expectation that volatility is with us for a reasonable period of time to come and companies need to cope with that." The delays in multi-billion dollar projects that can take up to 10 years to develop, and needed to support rising global demand for energy, could create a (crude) shortage in the future, the report underlined. International companies have responded rapidly to the near halving of oil prices since last June, slashing tens of billions of dollars in capital spending in order to boost their balance sheets and

maintain dividend payouts to investors, the report added. "Portfolios reviews are happening more frequently and probably with more rigor," Brogan told the World National Oil Companies Congress. "There isn't anywhere for projects to hide. "The main 24 mega-projects that have been put on ice or scrapped are spread across the globe, the report clarified. The long-term outlook of the market is beginning to appear hazy. Indeed there are ifs and buts. A lot of variables would have a bearing on the ultimate scenario, none can deny. Yet with other variables staying constant, and demand growing over the next 5-10 years as projected, markets could be in for a crude awakening.




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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 21 June 2015 K. Al Awadi

newbase 630 special 21 june 2015

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