new base energy news issue 862 dated 31 may 2016

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NewBase Energy News 31 May 2016 - Issue No. 862 Edited & Produced by: Khaled Al Awadi

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Bahrain: Mubadala and Occidental to exit Bahrain oil field Source: Gulf NewsSource: Gulf NewsSource: Gulf NewsSource: Gulf News

Mubadala Petroleum together with partner Occidental have reached an agreement with the Bahraini authorities to exit Tatweer Petroleum, the joint operating company that has managed Bahraini field operations since 2009.

Confirming the development, a spokesperson for Mubadala said: 'Significant advances have been made in production and efficiency of operations at the field under the leadership of the partners, and the time is now right to transfer full responsibility for the asset into Bahraini hands.

“Arrangements have been made for a smooth transition and we are confident the field will continue to be developed to the benefit of the people of Bahrain by Tatweer.'

Bahrain which is not a member of Organisation of the Petroleum Exporting Countries (OPEC) produced about 48,000 barrels per day of oil in 2013, the least amount of any country in the Gulf region, according to US Energy Information Administration.

Total petroleum production capacity at the Bahrain field is expected to rise to 100,000 barrels per day by 2018. Bahrain like other oil producing countries is struggling due to low oil prices. It is undertaking reforms to cut subsidies and raise fuel prices.




Saudi's SABIC agrees petrochemicals project with China's Shenhua ReutersReutersReutersReuters

Saudi Basic Industries Corp (SABIC), one of the world's largest petrochemicals groups, said on Monday it had signed an agreement with Shenhua Ningxia Coal Industry Group to build a petrochemical complex in China.

SABIC said in a statement the joint project would be a "greenfield petrochemical complex" located in the Ningxia Hui Region of China and would help the Saudi company diversify its feedstock sources.

"The joint venture would benefit from its location in Ningxia and utilize locally available coal feedstocks to be supplied by SNCG," SABIC said. The Chinese company is a unit of Shenhua Group Corporation Limited .

No financial details or time frame for the project were given. SABIC said the companies would now work on getting approvals from Chinese authorities for the complex. SABIC said the plans were part of its ongoing strategy to diversify its operations geographically and to seek investments that would open up the company to new markets.

The China-based complex would also help SABIC get its feedstock from a wider variety of sources, it said. "This protects SABIC against the fluctuations and cyclical movements in feedstock price in the international markets, which helps ensure a profitable growth strategy," SABIC Chairman and Chief Exeutive Yousef al-Benyan said in the statement.

SABIC Vice Chairman & CEO, Yousef Al-Benyan commented on this agreement saying, “This project reflects our enthusiasm to diversify our sources of feedstock, paving the way for further investment opportunities that depend on different and untraditional sources of feedstock. This protects SABIC against the fluctuations and cyclical movements in feedstock price in the international markets, which helps ensure a profitable growth strategy.”




Pakistan: US offers to conduct and finance study on shale reserves Source: The Express TribuneSource: The Express TribuneSource: The Express TribuneSource: The Express Tribune

The United States has offered Pakistan assistance in undertaking and financing another study to assess the hidden and vast shale oil and gas reserves in the country, officials say.

The first study was conducted by the US Agency for International Development (USAID), but it did not cover some areas of Balochistan, Sindh and Khyber-Pakhtunkhwa. Pakistan has accepted the offer for the second study for which the US will bear the entire cost.

Pakistan and the US have held a couple of meetings on forging cooperation in the energy sector over the past few years. The first huddle was held in 2014 which was followed by another meeting in April 2015. The third meeting of the series was held in Washington recently where the US expressed interest in conducting the second study to evaluate shale oil and gas deposits in Pakistan.

In the first assessment, USAID estimates showed that Pakistan had massive deposits of 10,159 trillion cubic feet of shale gas and 2.3 trillion barrels of shale oil – figures that were several times higher than those released by the US Energy Information Administration (EIA).

The USAID further revealed that risked technically recoverable resources were 95

trillion cubic feet of shale gas and 14 billion barrels of shale oil. According to EIA assessment in April 2011, Pakistan had 206 trillion cubic feet of shale gas in the lower Indus Basin, of which 51 trillion cubic feet were recoverable. However, in June 2013, it revised the estimate upwards to 586 trillion cubic feet, of which 105 trillion cubic feet were technically recoverable.

Apart from gas, the EIA also saw the presence of 9.1 billion barrels of shale oil that were technically recoverable out of estimated deposits of 227 billion barrels. In the first study, the USAID collected data of 1,611 wells and undertook shale formation of 1,312 wells through drilling. It used 70% of data to prepare the study and sent samples to the New Tech Laboratory in Houston for assessment.

Though the technology is available in advanced countries for tapping the shale reserves, environmental concerns, requirement of a huge quantity of water and a high cost of drilling are the real challenges. A well requires 3 to 8 million barrels of water. Pakistan has water supplies, but the real issue is its disposal.

Estimates suggest shale gas will cost $10 per million British thermal units, which will come down with the increase in recovery of untapped reserves.

The government will frame a policy for shale deposits after the cost of drilling is determined and the second study is conducted.




MENA:Public-private participation for Mena infrastructure projects The National The National The National The National ---- LeAnne Graves

The participation of private-sector investors in state-backed infrastructure projects is being reimagined in the Middle East and North Africa amid a US$270 billion gap in spending.

Lower revenue because of the lower oil price has pushed regional governments to increase private sector involvement, such as promoting the public-private partnership (PPP) model in areas that have historically been funded exclusively by state money.

Mouayed Makhlouf, the director for the World Bank’s International Finance Corporation’s (IFC) Mena region, said on Sunday in Dubai that the largest growth sector for private participation was the power industry.

“There’s a power gap of 20 per cent and the region needs [investment of] over $100bn annually for the next few years," he said. “There’s a lot of pressure for governments to find solutions to challenges that they’re facing."

One example comes from Dubai as the emirate’s power utility, the Dubai Electricity and Water Authority, announced at the beginning of the year that it would tender renewable energy projects totaling more than Dh27bn with private companies picking up a large chunk of the cost through PPPs.




Tightening liquidity coupled with increasing country risks have limited the appetite of banks to lend for projects on a long-term basis, such as in the power sector. And regionally there is a lack of refinancing mechanisms in place that makes PPPs more difficult to structure.

Villiers Terblanche, the managing partner at Latham & Watkins law firm, pointed to a scale-back in the number of private-sector banks lending since 2010. “Fewer lenders are available and good projects are competing for limited resources," he said, adding that there was not a refinancing culture in the Middle East to overcome this.

“In the West, contracts aren’t as long because of the refinancing option." He said that in places such as the United States and Europe, local lenders offer refinancing structures that have pushed down the duration of PPP contracts from more than 20 years, as seen in the Middle East, to about six years.

While oil prices and technology have always affected the region, Mr Terblanche said that changes coming about were unique, pointing to a need for an evolution to reach other soft markets such as education and even digital payments. This could be a remittance platform funded by a private company that created a substitute for debit cards.

“It’s different this time because demographic fundamentals have shifted past the point of no return," he said. Project bonds could be another option to bridge the funding gap for infrastructure deals, according to the IFC.

“Financing is tight now and the region needs to think about building capital markets, which are shallow at this time," said Muneer Ferozie, the IFC’s regional manager for PPPs. “I think that’s where the markets are going to get another pool of liquidity."




Norway: Battered by Crude Collapse, Faces Risk of Oil Strikes Bloomberg Bloomberg Bloomberg Bloomberg ---- Mikael HolterMikael HolterMikael HolterMikael Holter

Norway’s oil companies and the industry’s biggest union had set aside two days to negotiate over wages for offshore workers. Instead, the talks broke down after less than a minute.

The failure shows the width of the gap that will need to be bridged in state-backed mediation if Norway, western Europe’s biggest producer of oil and gas, is to avoid strikes that would deepen the crisis provoked by the collapse of crude prices since 2014.

The breakdown of wage talks for offshore workers on production platforms, where a strike would have immediate consequences on output, comes after negotiations stranded earlier this month for workers on oil-rigs and onshore supply bases. The risk of several strikes comes as Norway’s economy is already suffering more than during the financial crisis, with offshore investments set to drop for a third consecutive year in 2017 and about 40,000 jobs lost in the oil industry.

“The situation is the most deadlocked in a long time,” Leif Sande, leader of the Industry Energy union, said about the talks that broke down on Monday. “The differences were so obvious so early on that it was just as well to make an appointment with the National Mediator right away rather than sit here for two days.”

Oil producers, represented by the Norwegian Oil and Gas Association, are seizing on the difficult market situation to break down a model of stable wage increases separated from economic fluctuations, Sande said. Neither oil companies or rig owners offered a wage increase, while the unions want to negotiate based on a benchmark accord between employers and workers in export-exposed industries reached earlier this year, he said.

Industry Energy, which covers more than half of Norway’s 7,500 union-affiliated offshore-platform workers, was followed Monday in breaking off talks by two smaller unions, SAFE and the Norwegian Organisation of Managers and Executives.




The employers’ group, which represents companies like Statoil ASA, BP Plc and ConocoPhillips, said there was no room for increases in a situation where producers were trying to reduce costs even before prices started falling.

“We’re in a very challenging situation,” Kolbjoern Andreassen, a spokesman, said in phone interview. “It will get worse before it gets better.”

No date has been set for the state-backed mediation, a last-ditch effort led by the National Mediator to reach an agreement and avoid a strike. The mediation in the rig-worker negotiations will take place June 20 and 21. Energy Industry has said 190 of its workers would strike if a deal isn’t reached, while the SAFE union has said as many as 2,456 members could walk out. It wasn’t immediately clear which drilling rigs or production ships would be affected.

A rig strike would deepen the worst market downturn in a generation in offshore drilling, Jakob Korsgaard, the lead negotiator for the Norwegian Shipowners’ Association said in an interview last week. It could also “over time” have consequences for production, he said.

The last strike to affect output in Norway was a 16-day stoppage by oil-company workers in 2012. Actions that would have affected production have been avoided on several occasions through mediation in recent years.

While Korsgaard was “worried” rig owners and unions would still fail to see eye to eye during the mediation, the Norwegian Oil and Gas Association’s Andreassen said there was “always room to find solutions.”

“It will surely be a very challenging mediation,” he said. But “it’s usually easier to split money than to split principles.”




TANZANIAN GAS MARKET POST-2018 UNCHARTED Tanzania's government earlier this May said that it intends to build a pipeline that will flow gas from Tanzania to Uganda but declined to elaborate on when the planned pipe would be built and how large it would be. Its statement of intent followed a definitive decision by the Ugandan government to build a pipeline that will flow oil in the opposite direction: from Uganda to the northern Tanzanian coast.

NGA asked Wentworth Resources' managing director Geoff Bury, during the company's 1Q 2016 analysts call on May 12, if he had insights into the planned Tanzania-to-Uganda gas pipeline and how he sees the landscape for independent gas producers in Tanzania after 2018.

"We have no more clarity on the Uganda gas pipeline than you do, than what has been disclosed into the market," he replied: "It’s our understanding that it is only at the planning stage. So we don’t know when a final investment decision [FID] will be achieved on that."

Tanzania has three main onshore producers – Canada's Orca Exploration; Maurel & Prom with Wentworth Resources; and Aminex – while Dubai-based Dodsal has announced a large gas find. But their reserves are dwarfed by the roughly 39 trillion ft3 (1.1 trn m3) offshore gas resources held by Shell/Ophir and Statoil/Exxon, representing over two-thirds of the US Energy Administration's gross gas estimate for Tanzania of over 57 trillion ft3.

So NGA sought Bury's on-the-ground viewpoint of whether gas developments in Tanzania would be phased, according to demand from existing and prospective power plants in Tanzania and Uganda – and if smaller onshore producers risked getting swamped in volume and price terms by a potential overspill into the domestic market of gas from the Shell and Statoil LNG projects. If they take FID, production may start in the first half of the 2020s.

"With respect to the offshore gas that you alluded to, the LNG projects – to the best of our knowledge – have not reached FID yet," replied Bury: "So it’s a number of years out before we would anticipate seeing any of that gas coming into the domestic market."

Unclear, but upbeat about future demand

"As far as demand goes, beyond 2018 there are plans in place to continue to expand the power generation and distribution system in Tanzania. Only a small portion of the population currently




has power generation available to them. So we see the market continue to grow substantially beyond 2018. And we expect to continue to be one of the suppliers of that market," Bury added.

"The final point was, you referred to the Dodsal discovery," noted Bury: "We don’t have any clarity on that, on the timing of when that may come into the domestic market. This is just an evolving situation. The demand is growing and the supply, of course, will also grow over time."

Bury was also asked by equity analyst Colin Smith of UK firm Panmure Gordon how sure Wentworth could be of how the Tanzanian government will allocate the market through to 2018, particularly between the Mnazi Bay field – producing since August 2015, in which Maurel & Prom and Wentworth are partners – and the rival Aminex-operated Kiliwani North field that started up in April 2016.

Bury's reply, detailed in NGA on May 12, was that Mnazi Bay contracted volumes are up to 80mn ft3/d at present, stepping up to 130mn ft3/d over time: "So we would fully expect that the first 130mn ft3/d of demand

we will be supplying. We don’t have any visibility on what demand the other potential suppliers in the country will be supplying. But we do have a contract in place for up to 130mn ft3/d."

Asked again if the government could use its discretion to take from Kiliwani North, rather mainly from Mnazi Bay, Bury replied: "The take-or-pay provisions become fully in place once COD [commercial delivery] has occurred, which we will expect that will happen in the coming months. So it’s immediate from that point in time.

That’s just a legal condition. The practical considerations are that we [Mnazi Bay] are the only one supplying gas through that [new] pipeline at present, and we have indications from the government that they will be taking all of our gas up to 130mn ft3/d. We’re not concerned about this." He also reminded analysts that the Mnazi Bay supply contract and pricing extends out to October 2031.




NewBase 31 May 2016 Khaled Al Awadi

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

US oil prices rise on start of summer driving Reuters + NewBaseReuters + NewBaseReuters + NewBaseReuters + NewBase

U.S. oil prices were lifted early on Tuesday by the start of the peak demand summer driving season, although international fuel markets were weighed down by rising output in the Middle East, which mostly serves Asian customers.

U.S. West Texas Intermediate (WTI) crude oil futures were trading at $49.50 per barrel at 0042 GMT, up 17 cents from their last settlement.

Demand in North America is set to pick up along with the official start of the U.S. summer driving season this week, triggering a cut in the amount of open short crude positions that would profit from falling prices.

"Investor positioning points to further support for commodity prices as bearish bets continue to be reduced," ANZ bank said on Tuesday. The amount of outstanding managed short crude positions of U.S. WTI crude futures fell to its lowest level this year last week.

International oil markets, however, were hit by a rise in Middle Eastern crude exports, most of which go to Asia. Brent crude oil futures were trading at $49.65 a barrel, down 11 cents from their last close.

Iraq will supply 5 million barrels of extra crude to its partners in June, industry sources familiar with the issue said, joining other Middle East producers by lifting market share ahead of an OPEC meeting this week.

Oil price special

coverage




Iraq, which is the second-largest producer in the Organization of Petroleum Exporting Countries, had already been targeting record crude export volumes from southern terminals next month of 3.47 million barrels per day.

Saudi Arabia, the world's top crude exporter, as well as fellow OPEC producers Kuwait, Iran and the United Arab Emirates, also plan to raise supplies in the third quarter in an ongoing race for market share in the world's biggest consumer region, Asia.

Nigerian Supplies

Oil is set for the longest run of monthly gains in five years as output disruptions from Nigeria to Canada reduce supply before OPEC meets Thursday in Vienna to discuss production policy.

Futures were little changed in New York from the Friday close, set for a fourth monthly advance. Militant attacks have cut Nigerian supply to the lowest level in more than two decades while Canadian output fell amid wildfires. Producers are starting to resume operations after the blaze eased. Libya’s Petroleum Facilities Guard captured a town near the Es Sider and Ras Lanuf oil-loading terminals after fierce clashes with Islamic State militants.

Oil has surged more than 85 percent since slumping to a 12-year low in February on signs the worldwide surplus is easing amid declining production from the U.S. to Nigeria. The Organization of Petroleum Exporting Countries is unlikely to reach any agreement to limit output when it meets June 2 as the group sticks with Saudi Arabia’s strategy of squeezing out rivals, according to analysts surveyed by Bloomberg.

“It’s difficult to see Saudi giving much in terms of the supply situation and clearly Iran’s not going to step back,” Robert Rennie, the global head of currency and commodity strategy at Westpac Banking Corp. in Sydney, said in a Bloomberg Television interview. “Beyond $50, I think crude starts to struggle. It looks like the Canadian production should start to pick up.”




West Texas Intermediate for July delivery was at $49.48 a barrel on the New York Mercantile Exchange, up 15 cents, at 9:10 a.m. Hong Kong time. There was no settlement Monday because of the U.S. Memorial Day holiday. Trades will be booked Tuesday for settlement purposes. Prices are up 7.8 percent this month for the longest run of monthly gains since April 2011.

Libyan Battle

Brent for July settlement, which expires Tuesday, lost 11 cents to $49.65 a barrel on the London-based ICE Futures Europe exchange after rising 0.9 percent Monday. Prices are set for a fourth monthly increase, also the longest streak since 2011. The more-active August contract slipped 16 cents to $50.20. The global benchmark traded at a premium of 15 cents to WTI for July.

For a column on what to expect from the OPEC meeting, click here.

Libyan forces took control of the town of Bin Jawad after clashes during which five petroleum guards were killed and 16 others wounded, PFG spokesman Ali al-Hasy said by phone. The nation is the smallest OPEC producer, pumping about 310,000 barrels a day.




NewBase Special Coverage

News Agencies News Release 31 May 2016

OPEC Meeting Will Provide Heated Debate but No Freeze Like an ageing incandescent lightbulb, OPEC's meeting on Thursday will produce a lot of heat and shed little light. At least it won't freeze.

Saudi Arabia will see little reason to change direction from the policy introduced in Nov. 2014. The kingdom set the group on a path of protecting market share in the face of rapidly rising U.S. shale oil production by refusing to agree to a lowering of its output target, and now the market is correcting itself through dwindling non-OPEC supply.

But the squeeze on some producers is starting to strangle -- low oil prices have lasted much longer than anybody expected and calls from within the group for action to be taken to push them higher have become louder and the battle-lines are getting deeper.

The divisions within the group seem to be worsening. Prospects of an output freeze that looked to many like a sure bet just a month ago have evaporated completely as prices have risen and both Iran and Saudi Arabia have hardened their positions, while there's little chance of the group reinstating an output target that it abandoned it at its previous meeting.

On one side are the nations of the Arabian Peninsula, with their small populations and low production costs, on the other are the rest.




Chief among these is Venezuela, which has now burnt through more than a third of its gold reserves to raise the cash it needs now that oil prices have sunk. Algeria hasn't been able to revive production and is now running its first current-account deficit in a decade.

Selling the Family Gold

Venezuela has sold more than a third of its gold reserves since the start of 2015

Calls from these quarters for action to boost prices will fall on deaf ears. Saudi Arabia's position on the best course of action for OPEC has not changed. With oil prices back near $50 a barrel it has even less reason than at previous meetings to consider changing a policy that seems to be successfully reigning in higher-cost rivals.




The Saudi view survived a change in oil minister, and the kingdom isn't the only member presenting a new face at the table. That will feed into the tone of discussions.

Personnel moves at the top of several delegations may mean that ministers will carry less historical baggage into this meeting, making it easier to bridge the chasm between them.

But what's more likely is that the large number of new oil ministers, with little experience of working together and few personal bonds, will find it more difficult to reach common ground. There are now just 4 out of the 13 ministers who were involved in the 2014 discussions that led to the adoption of the current strategy.

OPEC's decisions are reached by consensus, so it is always easier to keep the current policy than to change it. Inertia, therefore, is likely to reign this time around at the Vienna meeting.

There's another agenda item, that's already proving to be just as divisive. Members need to select a new Secretary General to replace Abdallah al-Badri, who is due to step down in July after several extensions to his term of office. It is a role that requires real diplomatic skill. A good secretary general can help to facilitate dialogue between the different factions without being seen to take sides.

Ministers have been unable to agree on a successor -- they apparently debated this issue for three hours at their last meeting without reaching a consensus.

Support seems to be gathering behind Nigeria's Mohammed Barkindo, who was Acting Secretary General in 2006 and is backed by both Saudi Arabia and Iran, but it is not yet unanimous. Indonesia is fielding its own candidate, Mahendra Siregar, while Venezuela is said to have proposed Ali Rodriguez, who held the post from 2001 to 2002.

We can only hope that the emergence of three new candidates will allow them finally to make a choice. Just don't expect it to be easy. C R E D I T : R E Z A / C O N T R I B U T O R




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Khaled Malallah Al Awadi, Energy Consultant MS & BS Mechanical Engineering (HON), USA Emarat member since 1990 ASME member since 1995 Hawk Energy member 2010

Mobile: +97150-4822502 [email protected] [email protected]

Khaled Al Awadi is a UAE National with a total of 25 years of experience in the Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operations Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years, he has developed great

experiences in the designing & constructing of gas pipelines, gas metering & regulating stations and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation, operation & maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcasted internationally, via GCC leading satellite Channels. NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE

NewBase 31 May 2016 K. Al Awadi

new base energy news issue 862 dated 31 may 2016

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