new base 726 special 11 november 2015

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NewBase 11 November 2015 - Issue No. 726 Edited & Produced by: Khaled Al Awadi

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UAE: BP presents solid bid for AbuDhabi ( ADCO ) concession By Gulf News, Senior Business Reporter

BP presented a substantial bid for Abu Dhabi Company for Onshore Petroleum Operations (Adco) concession, a top company representative said on Tuesday.

“We do want to be here for long term. Our focus is very much on Adco. We did present a substantial bid that was put in,” said Michael Townshend, Regional President, Middle East, BP at a press conference during the Abu Dhabi International Petroleum Exhibition and Conference (Adipec).

He declined to divulge further details on the concession saying the matter is confidential. Abdul Munim Saif Al Kindy, Chief Executive Officer of Adco, told reporters on Monday that talks are still continuing on awarding concessions and there is no rush to select the partners.

Adnoc holds 60 per cent in Adco while 40 per cent is being awarded to international oil companies to develop onshore oilfields for a period of 40 years.




Adnoc earlier this year granted a 10 per cent stake to French oil major Total, 5 per cent to Japan’s Inpex and 3 per cent to South Korea’s GS Energy. It is yet to take a decision on the remaining companies to be part of the new concession.

Meanwhile, BP sees oil price hovering in the $60-a-barrel range for at least the next three years as supply increases and demand slows.

“In terms of supply and demand, you don’t see demand exceeding supply until the back end of next year. When that does happen, you would still need to work off stocks, which could take another couple of years,” he said.

The company continues to invest in the Middle East despite lower oil prices. The two big capital investments are in Oman and Iraq, according to Townshend. “Those continue ahead. There is no change there. This year, the gross budget in Iraq is $2.5 billion, Oman is about $700 million in capital.”

“We are looking to renegotiate with contractors and subcontractors to bring down the costs.” In a separate press conference, Patrick Pouyanne, Chief Executive Officer of Total said that the Adco concession is huge and they are progressing according to the plan.

“There are many opportunities in Adco concession. In 2015, the production is around 1.6 million barrels of oil per day with an objective to increase output to 1.8 million barrels of oil per day by 2017.”

On Iran, he said they will be interested in oil and gas, petrochemicals and marketing sectors but will wait till sanctions are removed. He said they see more opportunities opening up when oil prices are low as they are likely to face less competition from other oil companies who go through tough times financially.

He added that oil majors are well positioned to grow during low oil prices but that they should be patient when it comes to mergers and acquisitions as values have not fallen far enough. Talking about LNG plant in Yemen, he said that they have stopped gas production at the plant due to the conflict.




Qatar accounts for 20% of total GCC chemicals export volume, valued at $10.6bn in 2014

Saudi Arabia and Qatar are the largest chemical exporters in the GCC, together responsible for generating nearly ¾ of the region’s total chemical exports by volume, a shows a new report.

GCC petrochemical companies posted a record 67.2mn tonnes in chemical exports valued at $62bn in 2014, according to the latest industry report by the Gulf Petrochemicals and Chemicals Association (GPCA).

In 2014, Saudi Arabia accounted for 53% of the total regional export measured by volume; or 35.9mn tonnes valued at $36.2bn. Last year, Qatar accounted for 20% of the total GCC chemicals export volume, valued at $10.6bn.

The UAE has doubled its export share since 2010, reaching 10% of the total regional export in 2014. This equals 6.6mn tonnes valued at $6.4bn. Kuwait and Oman are each responsible for 7% of total export volume and Bahrain accounts for 3% of the total.

According to the ‘GCC Petrochemicals and Chemicals Facts and Figures 2014’, export revenues for GCC petrochemicals last year rose from $54.6bn in 2013 and are more than double that of ten years ago.

“Petrochemical producers in the Arabian Gulf manufacture products for diverse sectors and markets around the world, earning GCC economies valuable returns,” said Dr Abdulwahab al-Sadoun, GPCA secretary general. “Chemical producers from the Arabian Gulf region ship their products to approximately 170 countries. Asia, and in particular, China, being the most important export market.”

The GCC chemical industry registered a very solid recovery since 2010 with chemical exports by volume 77% higher in 2014 than before the global economic and financial crisis level of 2008.




However, though the GCC chemical trade quickly recovered from effects of the global crisis, it has grown modestly since 2012.

The slower than usual growth can be attributed to weaker global demand and the decline in commodity prices. The effect has partly been offset by growth in chemical production, which demonstrated a 4% annual growth during the same period.

The GPCA’s ‘Facts and Figures’ report is an annual publication will be released at the GPCA’s Annual Forum, which will be held in Madinat Jumeriah on November 17.

Currently in its fourth edition, the report provides information on wide-ranging subjects for the region’s chemicals industry including product capacity, employment and trade.

Now in its 10th edition, the Annual Forum will kick off with a keynote from Suhail al-Mazrouei, UAE Minister of Energy.

Abdullatif A. al-Othman, Governor and chairman of the Board of Directors, Saudi Arabian General Investment Authority (SAGIA) will deliver this year’s opening address.

Other notable industry leaders that are among the confirmed speakers include: Rashed Saud al-Shamsi, chairman GPCA and Petrochemicals Director, ADNOC; Yousef al-Benyan, vice-chairman, CEO, SABIC; Nizar M al-Adsani, CEO, Kuwait Petroleum Corporation, Neil Chapman, president, ExxonMobil Chemical; Osamu Ishitobi, chairman, Sumitomo Chemical; Thierry Le Henaff, chairman ARKEMA Group and Bob Patel, CEO, Lyondell Basel.




OPEC Challenges Shale Afresh as Iraq Crude Floods Gulf of Mexico Bloomberg - Naomi Christie NChristie

OPEC’s latest challenge to U.S. shale oil producers would be about two miles long, lined end to end, and weigh almost 3 million metric tons. It’s due to reach American ports this month.

Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures.

The cargoes show how competition for sales among members of the Organization of Petroleum Exporting Countries is spilling out into global markets, intensifying competition with U.S. producers whose own output has retreated since summer. For tanker owners, it means rates for their ships are headed for the best quarter in seven years, fueled partly by the surge in one of the industry’s longest trade routes. November crude imports from Iraq will be highest in over three years

“In the longer term, we expect the U.S. to have to increase imports next year by some 500,000 barrels to 800,000 barrels a day year on year,” Steve Sawyer, the head of refining at FGE, a consultant in London. “Given our projections for Iraqi output, it could well come from here.” Hunting for Buyers Iraq, pumping the most since at least 1962 amid competition among OPEC nations to find buyers, is discounting prices to woo customers. The U.S. may increasingly become one of them after its own output dropped by as much as 500,000 barrels a day since June. An increase in trade between the two would boost tanker owners. Deliveries take at least 57 percent longer than for those to Asia, the most popular destination. The tanker industry’s biggest ships earned an average of almost $76,500 a day so far in the fourth quarter, which would be the highest since mid-2008 if maintained through year-end, according to data from Clarkson Plc, the world’s biggest shipbroker.




Shipowners have already seen the benefit of higher rates thanks in part to the longer-distance cargoes. Shares of Oslo-listed Frontline Ltd., led by billionaire John Fredriksen, rose 61 percent to $28.60 from the 2015 low in August. Euronav NV is up 25 percent from the year’s low in February. Gulf of Mexico

The ships bringing the 19 million barrels include vessels that left Iraq’s Basra Oil Terminal and are currently signaling U.S. ports as their destination. There is also one vessel that went through Egypt’s Suez Canal and identified by shipbrokers as going to the U.S. All except one are very large crude carriers, the industry’s biggest vessels, sailing to terminals in the Gulf of Mexico.

The U.S. is pumping 450,000 barrels a day less crude than during the peak in June. If all that oil were replaced by supplies from Iraq, it would require about seven supertankers each month.

Iraq is among the least expensive places in the world to extract crude. Capital costs are about seven times cheaper than for light, tight oil suppliers in the U.S. when measured by fields’ daily plateau capacity, according to the International Energy Agency in Paris. West Texas Intermediate, the U.S. benchmark, fell 43 cents to $43.78 a barrel on the New York Mercantile Exchange at 12:12 p.m. Singapore time Wednesday. Brent, the global marker, lost 19 cents to $47.25.

The Middle East country sells its crude at premiums or discounts to global benchmarks, competing for buyers with suppliers such as Saudi Arabia, the world’s biggest exporter. Iraq sold its Heavy grade at a discount of $5.85 a barrel to the appropriate benchmark for November, the biggest discount since it split the grade from Iraqi Light in May. Saudi Arabia sold at $1.25 below benchmark for November, cutting by a further 20 cents in December.

“It’s being priced much more aggressively,” said Dominic Haywood, an oil analyst at Energy Aspects Ltd. in London. “It’s being discounted so U.S. Gulf Coast refiners are more incentivized to take it.”




OPEC Said to Consider New Output Ceiling as Indonesia Rejoins Bloomberg - Wael Mahdi

The Organization of Petroleum Exporting Countries is considering raising its official production target at its next meeting on Dec. 4 to take into account new member Indonesia, according to two OPEC delegates.

The production ceiling may be raised by 1 million barrels a day to 31 million barrels, the delegates said, asking not to be identified because the discussions are private. A change doesn’t imply higher production because OPEC itself said it pumped 31.57 million barrels a day in September.

The Southeast Asian nation re-entry after a break of almost seven years comes at a time when OPEC has abandoned its traditional role in supporting prices as it seeks to defend market share against supplies from U.S. shale drillers and other rivals. OPEC will now have 13 members, led by Saudi Arabia, the world’s largest crude exporter.

Indonesia’s suspended its membership in 2009 after becoming a net oil importer. It pumped 852,000 barrels a day in 2014 and consumed almost twice as much, according to BP Plc. Indonesian Energy Minister Sudirman Said confirmed in an interview in Doha on Monday that OPEC has accepted his country’s return to the group. OPEC Secretary General Abdalla El-Badri said in Doha on Monday the decision will be formally announced at the Dec. 4 meeting.

Indonesia will become a net importer of crude by 2020 as the country plans to add new refinery capacity, according to a BMI Research report in October. The country’s energy minister went to Riyadh Monday as Saudi Arabia and Indonesia neared an agreement to build their first jointly owned refinery in the Pacific country.

The refinery is tentatively planned to have capacity of 300,000 barrels a day, with the contract signing expected by the end of this year, Said said Monday.




U.S. Lowers 2016 Crude Output Forecast as Drillers Idle Rigs Bloomberg - Mark Shenk

The Energy Information Administration cut its U.S. crude production outlook for next year as declining prices are prompting shale drillers to put rigs aside. Cheaper gasoline is expected to stoke demand for the motor fuel.

The agency decreased its 2016 forecast by 1 percent to 8.77 million barrels a day, according to its monthly Short-Term Energy Outlook. It boosted its estimate for this year to 9.29 million barrels a day from the 9.25 million predicted last month.

America’s oil drillers have sidelined more than half the country’s rigs since October as prices have tumbled. The number of active oil rigs in the U.S. has fallen by 103 in the past 11 weeks to 572, the least in five years, according to data compiled by Baker Hughes Inc.

"Total oil production from non-OPEC countries is expected to decline next year for the first time since 2008, because of lower oil output in the United States," EIA Administrator Adam Sieminski said in an e-mailed statement. WTI Projection

West Texas Intermediate, the grade traded on the New York Mercantile Exchange, will average $51.31 a barrel in 2016 versus the October projection of $53.57, according to the report. WTI will average $49.88 this year, up from last month’s projection of $49.53.

Brent crude, the benchmark for more than half the world’s oil, is projected to average $56.24 next year, down from the prior estimate of $58.57. Gasoline at U.S. pumps will average $2.43 a gallon in 2015, up from last month’s estimate of $2.42. Retail prices are projected to drop to $2.33 next year, down from last month’s projection of $2.46.

Low prices that curb drilling are also bolstering U.S. fuel demand, according to the report. American gasoline use is projected to climb 2.1 percent to 9.11 million barrels a day this year. Consumption is projected to rise an additional 0.1 percent in 2016.

"U.S. gasoline demand this year is on track to be the highest since record levels were set in 2007, due in large part to low pump prices and more people working," Sieminski said.




NewBase 11 November - 2015 Khaled Al Awadi

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

Oil prices drop on rising stockpiles, Japan recession fears Reuters + NewBase

U.S. crude oil prices fell in Asian trading on Wednesday 11/11/2015 after industry data showed an increase in U.S. stockpiles, while fears that Japan's economy may have fallen into recession added to demand woes.

Benchmark U.S. crude futures slipped to a two-week low at $43.55 a barrel in early trading before edging back up to $43.73 a barrel at 0233 GMT, still down almost half a dollar from their last lose. Internationally traded Brent crude futures were down 28 cents at $47.16 a barrel.

U.S. crude stocks jumped by 6.3 million barrels in the week to Nov. 6 to 486.1 million, data from industry group the American Petroleum Institute showed late on Tuesday, compared with analyst expectations for an increase of 1 million barrels.

On the demand side, confidence among Japanese manufacturers fell in November for a third straight month to levels unseen in more than two years, a Reuters poll showed on Wednesday, reflecting fears that a China-led slowdown in overseas demand may have pushed Asia's second-biggest economy into recession.

"The weakness of global manufacturing activity is ... putting pressure on energy demand," JBC Energy said, adding that it expected a significant drop in oil demand growth in 2016. The oil market is also looking for any indicators from the Organization of the Petroleum Exporting Countries (OPEC) over its production policy.

Oil price special

coverage




Oil prices to stay low till 2020 Reuters + Saudi Gaszette

Oil prices are likely to remain low over the next five years because of plentiful supply and falling demand in developed countries, the International Energy Agency (IEA) said Tuesday in its annual forecast.

The Paris-based body, which advises developed countries on energy policy, said it expects oil prices to return to $80 per barrel in 2020, with further increases after that.

In its World Energy Outlook, the IEA said it anticipates demand growth under its central scenario will rise annually by some 900,000 barrels per day to 2020, gradually reaching demand of 103.5 million bpd by 2040.

The drop in oil to around $50 a barrel this year has triggered steep cutbacks in production of US shale oil, one of the major contributors to the oversupply that has stripped 50 percent off the price in the last 12 months. “Our expectation is to see prices gradually rising to $80 around 2020,” Fatih Birol, the executive director of the IEA, told Reuters ahead of the release of the report.

“We estimate this year investments in oil will decline more than 20 percent. But, perhaps even more importantly, this decline will continue next year as well.” On the demand side, the IEA




expects total energy consumption in China, the world’s largest commodity consumer, to be double that of the United States by 2040.

But greater efficiency and a shift away from heavy industry for economic growth will mean China will need 85 percent less energy to generate each unit of future economic growth than it did in the past 25 years.

India will be the chief driver of rising demand, where the IEA expects consumption to increase more than anywhere else, hitting 10 million bpd by 2040.

Birol said that while the agency’s base-case scenario was not one in which the oil price languished around $50 a barrel for the next decade, it could not rule out a sustained period of low oil prices.

Low near-term global economic growth and a lasting switch by OPEC to a policy of pumping oil at record rates to increase its market share and more resilient non-OPEC supply could conspire to keep the oil price lower for longer.

“The oil price in this scenario remains close to $50 a barrel until the end of this decade, before rising gradually back to $85 a barrel in 2040,” the IEA said in its report.




NewBase Special Coverage

News Agencies News Release 11 Nov.. 2015

LNG construction sector hits its peak and faces steep fall leading to heightened competitive tension amongst contractors

Wood Mackenzie + ( images by NewBase )

The LNG construction industry has enjoyed a sustained boom thanks to healthy order books of new LNG projects, especially in the US and Australia, which will see it reach peak capacity in 2015. However as the global LNG market faces another supply glut, and with few pre-FID LNG projects on the horizon likely to materialise, a new analysis by Wood Mackenzie warns that the LNG Engineering, Procurement and Construction (EPC) sector which has generated over $200 billion of revenue in the last decade, will be facing its steepest decline in decades, leading to heightened competition and downsizing.

Mr Saul Kavonic a research analyst for Wood Mackenzie explains: "2015, will be recalled by the LNG EPC sector as the year in which their workload peaked. Worldwide, there are presently 31 trains concurrently under construction, 138 million tonnes per annum (mtpa) of nominal LNG production capacity, but this looks set to rapidly reduce.




We forecast a drop in LNG construction of a greater magnitude and duration than the sector has witnessed for decades, beginning outside North America in 2015, and extending to within North America from 2019, with only 10 to 15 trains per year under construction globally between 2019 to 2021." Mr Noel Tomnay, Head of Global Gas research for Wood Mackenzie explains how the gas market outlook impacts future LNG construction: "The drop in demand for LNG construction is a result of the LNG market entering a period of oversupply, as LNG operators revaluate and postpone pre-FID projects in the light of lower demand." Faced with an imminent drop in workflow, the challenge for the sector isn't just about spare capacity, it's an increased number of competitors. Mr Kavonic expands: "Historically, the market has been dominated by five incumbent players: Chiyoda, Bechtel, KBR, JGC and Technip.

While technical and political barriers to entry have been high – with unsuccessful attempts over the years by new players to establish a foothold – more recently, the scale and risk profile of upcoming LNG projects in the US have enabled new entrants to the sector. Ample spare EPC capacity and a greater number of contractors will be competing in a drastically diminished market." As a result, Wood Mackenzie says that akin to the pressures the upstream service sector is facing, there will be significant competitive pressure on contractors to accept reduced margins and more onerous terms, and downsize their LNG teams. Mr Kavonic adds; "These impacts have already begun to be felt with highly competitive tenders being placed for the limited number of upcoming pre-FID projects. Contractors' bottom lines will be increasingly affected as EPC demand declines over the rest of the decade. Some contractors will fare better than others, based upon the success of their tendering, particularly for projects in North America, which accounts for over half of future LNG workflow. Other contractors are looking to differentiate themselves in new LNG niches, such as FLNG." Wood Mackenzie concludes that the heightened competition in the EPC sector will provide an opportunity for LNG operators, who do proceed with new LNG projects, to achieve lower costs and better contracting terms.




OMV CEO, Ex-German Chancellor in Call for Better Russia/EU Relations by Jon Mainwaring

Austrian oil and gas firm OMV is banking on better relations between Europe and Russia after

making several deals in recent months designed to strengthen its partnership with Gazprom – the

owner of the world's biggest natural gas reserves.

After signing a deal with Gazprom relating to the Nord Stream pipeline, agreeing to participate in Siberia's Achimov 4 and 5 gas projects and inking a memorandum of understanding

on planned oil supplies, OMV this week hosted former Chancellor of Germany Gerhard Schröder at a conference to discuss current geopolitical challenges and the future of Europe's energy markets. Monday saw both Schröder and OMV CEO Rainer Seele underline the importance of good relations between Europe and Russia in front of 350 guests at Vienna's Hofburg Palace.

"Russia plays a central role in the question of how we Europeans can secure our energy supply. Norway and Russia are the most secure and reliable energy partners for Europe", Schröder was quoted as saying in an OMV statement published late Monday. Seele explained that his firm was "striving" to contribute to stability in Europe and Russia.

"We stand for security of supply of oil and gas. Security of supply means finding partners, achieving broad diversification and overcoming barriers. Security of supply also means investments such as those in the Nord Stream II pipeline project." Schröder, who has served as chairman of the European-Russian Nord Stream consortium since 2006, said that he supports OMV's strategy.

"I believe OMV's strategy of engaging in Russia is correct – both in terms of the planned construction of the Nord Stream II pipeline as well as gas exploration in Siberia. This engagement is completely in the spirit of longstanding close Austro-Russian cooperation in the energy sector.As Europeans we need to establish deeper economic and political ties with Russia," Schröder said.

OMV signed a multi-party shareholder agreement with Gazprom for Nord Stream II in Septemberand also agreed to participate in the development of Areas IV and V of the Achimov formation of the Urengoy oil, gas and condensate field in Russia. Nord Stream is a twin pipeline system that has the capacity to transport up to 1.9 trillion cubic feet of natural gas from Russia to Europe via the Baltic Sea.

OMV CEO Gerhard Roiss (L) and Gazprom CEO

Alexei Miller sign the final deal




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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

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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.

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NewBase 11 November 2015 K. Al Awadi