new base energy news issue 940 dated 31 october 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

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

NewBase Energy News 31 October 2016 - Issue No. 940 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 Fuel price floating with oil prices with 5% rise in Nov-16 NewBas + the National

The Ministry of Energy announced on Sunday that motorists will pay Dh1.90 a litter for Super 98, up 4.9 per cent from October; Special 95 will cost Dh1.79, up 5.2 per cent, and E Plus will cost Dh1.72, up 5.5 per cent. Diesel will cost Dh1.91, up 8.5 per cent.

For October, Super 98 was priced at Dh1.81 a litter, Special 95 at Dh1.70 and E Plus was Dh1.63. Diesel cost Dh1.76. Brent crude closed last week at $49.71 a barrel, a drop of 4 per cent for the week. That trimmed the commodity’s month-to-date gain to 4.2 per cent and year-to-date gain to 33.3 per cent.

The new fuel prices are announced as global crude oil prices recover due to discussions among member countries of the Organization of the Petroleum Exporting Countries (OPEC) to curb output levels to stabilise oil prices.

International Prices for Fuel $/Ton International Oil Prices $/B




OPEC agreed on September 28 in Algeria to reduce output to a range of 32.5 million to 33 million barrels a day and decide how much each member should cut by its next meeting on November 30 in Vienna.

The agreement helped push oil prices to a fifteenth month high of about $50 a barrel earlier this month although they have subsequently fallen amid doubts the group will follow through in its pledge.

Some countries like Iraq and Iran are insisting that they should be exempted from the deal as they try to ramp up production to increase their revenue. There are also doubts whether Nigeria and Libya will take part in the agreement.

Francisco Quintana, Head of Strategy at Foresight Advisors told Gulf News the negotiation will be fraught with difficulties, even before starting the discussion about limits.

“If Opec wants to give exemptions to Iran, Nigeria and Libya, it seems like Saudi Arabia would have to absorb a substantial reduction, which they would do to avoid a collapse of the agreement and the subsequent collapse in prices.”

“Still, the agreement will be insufficient to bring a structural change to oil prices, which we expect range-bound in the next twelve months.”

Oil prices are currently trading slightly below $50 per barrel with the global benchmark Brent at $49.71 per barrel and the US benchmark West Texas Intermediate (WTI) at $48.70 per barrel.




Iraq Reveals Oilfields Output to Win Over OPEC Ahead of Meeting Bloomberg - Sam Wilkin @MrSamWilkin

Iraq published data showing a rare level of detail for its oil production and exports, a week after inviting energy reporters to Baghdad to make a case that the country is pumping more crude than analysts and OPEC acknowledge.

The country’s state oil marketing agency released a statement on Sunday showing September production figures for each of the 26 fields it controls, plus a single output figure for the semi-autonomous Kurdish region, which manages its crude independently. Previous monthly statements showed just two figures: total production and total exports. The Oil Marketing Co., known as SOMO, also provided detailed data on exports and domestic consumption.

OPEC’s second-largest producer says it pumped more than 4.7 million barrels a day last month, several hundred thousand barrels a day more than oil-industry watchers recognize. The Organization of Petroleum Exporting Countries assesses output for its 14 members based on such secondary sources. Iraq wants the group to accept the ministry’s figures before a Nov. 30 meeting at which OPEC could limit production for its members.

Oil Minister Jabbar al-Luaibi complained about OPEC data at a meeting in September in Algiers. He adopted a milder approach last week, inviting reporters to Baghdad for a tour of the national museum and a detailed discussion of production figures. “We want you to see for yourselves what our production is,” he said on Oct. 23.




Transparency Push

The field-specific data for September sheds light on how SOMO calculates Iraqi production. However, it doesn’t provide a breakdown of Kurdish production, which accounts for much of the difference between the data cited by SOMO and secondary sources.

“It’s an effort of transparency and backing up their numbers, but I’m not quite sure how effective it’s going to be,” Robin Mills, chief executive officer of consultant Qamar Energy, said by phone from Dubai. “The biggest discrepancy is likely to be in the Kurdish fields.”

Production from the Kurdish enclave in northern Iraq averaged 546,000 barrels a day last month, according to SOMO. That figure is an estimate because the central government has not received the latest production data from Kurdish authorities, SOMO Director General Falah Al-Amri said last week. SOMO bases its estimate on what Kurdish production was in 2013 and 2014, he said.

In the north of the country, the Kirkuk and Baba Gurgur fields produced 93,000 barrels a day for the federal North Oil Co., SOMO said. The nearby Bai Hasan and Avana fields pumped 275,000 barrels a day for the NOC.

The BP Plc-operated Rumaila oil field, Iraq’s largest, pumped an average of 1.4 million barrels a day in September, SOMO said. The two fields at West Qurna produced a combined 870,000 barrels a day, while output from Zubair was 390,000; Majnoon, 214,000; and Halfaya, 204,000.




Japan: INPEX concludes exploration drilling offshore Japan Source: INPEX

INPEX announced Friday that the drilling operations on an exploratory well offshore Shimane and Yamaguchi prefectures that began on June 5, 2016 were concluded on October 26, 2016. The operations consisted of drilling to a depth of 2,900m below the sea floor at a location approx. 130km northwest of Shimane Prefecture and approx. 140km north of Yamaguchi Prefecture where the water is approx. 210m deep, as part of a project commissioned by the Agency of Natural Resources and Energy of the Ministry of Economy, Trade and Industry (METI) of Japan for the agency’s 'Heisei 26~28 Domestic Offshore Drilling Program in Japan' and with the understanding and cooperation of the local communities.

The drilling operations resulted in the findings of a thin gas reservoir in a shallow zone as well as some gas indications in deeper zones. INPEX also encountered unexpected, strong gas indications suggesting the presence of a high pressure gas column in the deepest zone. Based on the findings of a gas reservoir in the shallow zone and gas indications in the deeper and deepest zones in this area, which has not been drilled since the 1980s, INPEX will conduct a detailed analysis and evaluation of data obtained through the drilling operations in order to continue the exploration of prospects in this area.




Senegal: ConocoPhillips completes sale of exploration blocks Source: ConocoPhillips

ConocoPhillips announced Friday it has completed a transaction for the sale of its shares in ConocoPhillips Senegal, which holds a 35 percent interest in three exploration blocks offshore Senegal. The total sales price of the transaction, which is between the subsidiaries of ConocoPhillips and Australia’s Woodside Petroleum, was approx. $440 million, including net customary adjustments of approx. $90 million.

'We are pleased to complete this transaction with Woodside,' said Matt Fox, executive vice president, Strategy, Exploration and Technology. 'We experienced a transparent and cooperative relationship with the Senegalese government and appreciated their support throughout a very successful exploration and appraisal campaign. By completing this sale we are progressing our broader exit from deepwater exploration, which will further increase our capital flexibility and reduce the cost of supply of our portfolio.' The three offshore exploration blocks, Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore, had a net carrying value of approx. $285 million as of Sept. 30, 2016. ConocoPhillips expects to recognize a gain on the sale in the fourth quarter of 2016, the amount of which is subject to final adjustments.




Low tanker rates are enabling more long-distance crude oil and petroleum product trade … U.S. EIA, based on Bloomberg and London Tanker Brokers' Panel

Recent expansion of the global crude oil and petroleum product tanker fleet has resulted in falling or lower tanker rates for much of 2016 that have widened the geographic scope for economically attractive trade at a time when inventories of both crude oil and petroleum products are at high levels.

In recent years, growing global oil production and growth in global refining capacity in markets distant from crude sources led to an increase in orders for new vessels in anticipation of an increasing need for tanker transportation. This resulted in several consecutive years of an expanding global tanker fleet, with an estimated net change of 205 ships added in 2015, according to Thomson Reuters.

On a global scale, demand for tankers is influenced by differences in supply and demand conditions across regional markets. Tankers of different sizes and classes have specific characteristics that help determine the markets and shipping routes they serve. For example, so-called dirty tankers, which transport unrefined or less-refined cargos (such as crude oil and




residual fuel oil), tend to be large, with low per-barrel transportation costs. So-called clean tankers, which transport refined products such as gasoline and diesel fuel, are typically smaller vessels.

To date in October, monthly average rates for very large dirty tankers in the carrier (VLCC)-size range traveling between the Arabian Gulf and Singapore, an indicator for the overall dirty tanker market, are down 23% from January.

Rates for smaller average freight rate assessment (AFRA)-size range dirty tankers on the same route are down 49% from January. Rates for dirty VLCC-size range tankers and AFRA-size range tankers through October have each averaged 36% lower, respectively, than the full year 2015 average.

Rates for clean tankers are also lower. The average October rate, to date, for a clean long range 1 (LR1)-size tanker on the Arabian Gulf-to-Japan route is down 38% from January. The monthly average rate for a smaller medium range (MR)-size range tanker on the same route is down 22% from January.

With lower tanker rates, the price spread needed for economically attractive trade between two markets narrows, making it possible for importers to bring in distant supplies at reduced cost. For exporters, lower tanker rates increase the price competiveness of their supplies in more distant markets.

This can help to explain some of the motor gasoline imports to the U.S. East Coast in 2016 from relatively distant countries such as South Korea, Malaysia, Taiwan, and Japan.

Low tanker rates also aid the competitiveness of U.S. crude oil exports. Currently, no U.S. port is capable of loading the larger vessels typically used to transport crude oil, so U.S. crude exporters must use more expensive smaller vessels.

However, with lower tanker rates, exporters may be able to load smaller ships at U.S. ports and transfer the cargoes onto larger vessels offshore for transport to final destinations at an attractive per-barrel cost. This may explain U.S. Customs data showing some crude oil exports to places like the Marshall Islands, a nation where many vessels are registered but are most likely not taking deliveries.

Going forward, tanker rates should recover as the global market slowly returns to balance. EIA's most recent Short-Term Energy Outlook (STEO) forecasts a global quarterly draw in crude oil stocks in the third quarter of 2017, the first since 2013.




NewBase 31 October 2016 Khaled Al Awadi

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

Oil falls as non-OPEC yet to pledge concrete output steps Reuters + NewBase

Oil prices extended declines on Monday after non-OPEC producers made no specific commitment to join OPEC in limiting oil output levels to prop up prices, suggesting they wanted the oil producing group to solve its differences first.

Officials and experts from OPEC countries and non-OPEC nations including Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and Russia met for consultations in Vienna on Saturday and only agreed to meet again in November before a scheduled regular OPEC meeting on Nov. 30, they said in a statement.

London Brent crude for December delivery LCOc1 was down 29 cents, or 0.6 percent, at $49.42 a barrel by 0229 GMT after settling down 76 cents on Friday. NYMEX crude for December delivery CLc1 was trading down 23 cents, or 0.5 percent, at $48.47 a barrel, after closing down $1.02 on Friday.

"There was a lot of talk and nobody managed to agree on anything. That has been pushing the market down," said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

The potential tightening of the U.S. presidential race after news of a renewed FBI probe of Democratic candidate Hilary Clinton was also affecting sentiment and putting

investors off riskier assets, Halley said. OPEC and non-OPEC said in a joint statement that Saturday's meeting was a "positive development" towards reaching a global output limiting deal on Nov. 30.

Russia expects to increase its oil output by 0.7 percent next year and a further 0.9 percent in 2018, the draft federal budget showed.

Crude production is seen at a record-high 548 million tonnes in 2017 and 553 million tonnes in both 2018 and 2019, up from an estimated 544 million tonnes this year, the document showed.

The cabinet of the United Arab Emirates approved a 48.7 billion dirham ($13.3 billion) federal budget for 2017, almost steady from 2016, suggesting UAE authorities remain cautious about spending as low oil prices pressure state finances.

Money managers cut their net long U.S. crude futures and options positions for the first time in five weeks in the week ended Oct. 25, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Oil price special

coverage




Non-OPEC yet to pledge concrete oil output steps after meeting OPEC Reuters - By Alex Lawler | VIENNA

Non-OPEC producers made no specific commitment on Saturday to join the Organisation of the Petroleum Exporting Countries in limiting oil output levels to prop up prices - a stance that suggested they wanted OPEC to solve its differences first.

Officials and experts from OPEC countries and non-OPEC nations including Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and Russia met for consultations in Vienna on Saturday and only agreed to meet again in November before a scheduled regular OPEC meeting on Nov. 30, they said in a statement.

A day earlier, OPEC members themselves were unable to agreed on how to implement a global deal to limit output after hours of talks amid objections by Iran which has been reluctant to even freeze its output levels, sources said.

"We have to agree on the real numbers," non-OPEC Kazakhstan's vice-minister of energy, Magsum Mirzagaliev, told reporters after seven hours of talks on Saturday.

"It is important that we meet once again with detailed numbers. We agreed that we have to meet in 3-4 weeks with numbers, because every country has his own opinion," he said.

OPEC and non-OPEC said in a joint statement the meeting on Saturday was a "positive development" towards reaching a global output limiting deal on Nov. 30.

Oil LCOc1 is trading closer to $50 a barrel, less than half its price of mid-2014, weighed down by persistent oversupply and squeezing the incomes of exporting nations.

Last month, OPEC agreed at a meeting in Algeria very modest production cuts, its first since 2008, in an effort to help prop up prices. But the cuts have yet to be finalised.

The meeting of OPEC experts, known as OPEC's High Committee, does not decide policy but will make recommendations to the next OPEC ministerial meeting on Nov. 30.

The meeting on Friday exposed old faultlines among OPEC members, especially the organization's de facto leader Saudi Arabia and its arch-rival Iran.

Tehran argues it wants to regain its oil market share it had lost during years of sanctions, which were eased earlier this year as part of a nuclear deal with the West.

Riyadh, which is fighting several proxy wars with Iran, including in Syria and Yemen, is reluctant to make concessions to Tehran.

WAITING FOR OPEC

OPEC members have not agreed between themselves on a single set of production figures from which to make the agreed cutbacks, and members including Iraq, Iran, Libya and Nigeria - whose output has been held back by sanctions or conflict - have asked for special treatment in curbing output.

The last time OPEC persuaded non-OPEC nations to make joint cuts was as long ago as the start of the millennium.

Azerbaijan's energy minister Natig Aliyev told reporters before the start of the meeting he believed the global deal was still possible.




"Just one week ago we met with the president of Venezuela," he said, in reference to the south American OPEC member which has been pushing for measures to support prices.

"Venezuela and Azerbaijan agree that some measures will be taken to stabilize the market. We agreed the price of oil can be around $60 per barrel."

Brazil's representative said his country was attending only as an observer. "Brazilian production will increase in the next few years," said Brazilian official Marcio Felix.

Russia, one of the world's top producers, which has been supporting joint actions with OPEC, also attended the meeting in

Vienna but made no public comment.

Two OPEC sources said Russian energy officials told the gathering that Moscow was still willing to freeze its output levels if OPEC agreed to cap its production.

"Russia is ready but they want to see in detail figures agreed for yesterday," one of the sources said. Another source said Russia would freeze if OPEC agreed to reduce output.

U.S. offshore rig count stays firm zoom

The U.S. offshore rig count remained unchanged for the second week in a row, the oilfield services provider Baker Hughes informed on Friday in its Weekly Rig Count report.

BHI Rig Count: U.S. +14 to 553 rigs.

U.S. Rig Count is up 14 rigs from last week to 553, with oil rigs up 11 to 443, gas rigs up 3 to 108, and miscellaneous rigs unchanged at 2.

U.S. Rig Count is down 234 rigs from last year’s count of 787, with oil rigs down 151, gas rigs down 85, and miscellaneous rigs up 2.

The U.S. Offshore Rig Count is 23, unchanged from last week, and down 12 rigs year over year. Last week’s count was also 23 active units in the U.S. waters.

BHI Rig Count: Canada -22 to 143 rigs

Canadian Rig Count is down 22 from last week to 143, with oil rigs down 21 to 69, and gas rigs down 1 to 74.

Canadian Rig Count is down 47 rigs from last year’s count of 190, with oil rigs down 15, and gas rigs down 32.




NewBase Special Coverage

News Agencies News Release 31 October 2016

Big Oil’s Shrinking Act Has More to Go in China Boolmberg - Aibing Guo

China’s oil output slump shows no signs of abating as the country’s state-run energy giants hold back spending to cope with the crash in prices.

China’s Big Three producers, led by PetroChina Co., have spent about half of their 2016 capital-expenditure targets in the first nine months of the year, according to operational data released last week by the companies. Their domestic crude output has slumped 6 percent over that period amid the cutbacks, Bloomberg calculations show. China Petroleum & Chemical Corp., known as Sinopec, has seen the largest production declines and spent the least so far this year.

“Low crude prices led to lower spending, and lower spending caused the lower output,” said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd. “The only thing that can change the game is a substantial rebound in crude prices.”

While output drops, crude imports have surged to all-time highs as the country’s refineries are on track to process a record amount of crude this year and the government takes advantage of the slump in prices to fill emergency stockpiles. China edged past the U.S. last month as the world’s biggest importer and the country has relied on overseas supplies for 65 percent of its needs this year, a record ratio, according to analysts at consultant ICIS China.

“The Chinese government has no problem with reduced domestic crude production as long as crude imports can be guaranteed,” Tian said. “The national duty of the Big Three in a low-crude environment is more about securing imports than producing at a loss.”




PetroChina shares in Hong Kong dropped 1.3 percent to HK$5.31 as of 9:34 a.m local time Monday, while Sinopec gained 0.4 percent and Cnooc Ltd., the country’s biggest offshore oil explorer, shed 1.3 percent. Hong Kong’s benchmark Hang Seng Index fell 0.7 percent.

PetroChina on Friday said net income during the first nine months of the year fell 94 percent to 1.73 billion yuan. Full-year results are expected to “decrease substantially” from 2015, it said in a statement.

Sinopec said Thursday profit rose 11 percent over the period as the world’s biggest oil refiner benefited from lower crude costs for its fuel-making business. Cnooc, which doesn’t release quarterly net income, reported Wednesday a 15 percent fall in third-quarter sales.

‘Significantly Underspend’

Sinopec has spent about 25 billion yuan in the first nine months of the year, down a third from same period last year and a quarter of its 100.4 billion yuan target. Domestic crude output during that period is down 14 percent. The company may consider buying overseas assets or stakes in other projects, Chairman Wang Yupu said after the half-year results were released in August.

“The company is likely to significantly underspend the full-year budget,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, said in a research note after the company released quarterly earnings last week.

PetroChina has spent 114 billion yuan in the first nine months of the year, down 23 percent from the same period a year ago. The company said in March that it was targeting a 5 percent decline in capital spending to 192 billion yuan.

Cnooc has reached slightly more than half its full year target in the first three quarters. The offshore explorer intends to keep its 60 billion yuan spending cap this year, Chief Financial Officer Zhong Hua said in a conference call after the sales figures were released Wednesday. Having




spent just 33.7 billion yuan in the first nine months, Cnooc will try to spend more in the last three months on improving output and preparing for new projects, he said.

China’s total crude output fell 6.1 percent in the first nine months of the year. Production can stabilize with prices around $50 a barrel and may not rebound until they are above $60, Bernstein’s Beveridge said earlier this month. Production from the Big Three in the third quarter slipped by 9 percent from the same period last year, according to Bloomberg calculations.

GE-Baker Hughes deal could be announced Monday, WSJ reports CNBC.com staff

General Electric could announce a $30 billion deal with Baker Hughesas early as Monday, according to the Wall Street Journal (WSJ).

GE is seeking to combine its own oil and gas business with the oilfield services provider, creating a new entity that would be controlled by GE, the WSJ reported on Sunday, citing anonymous sources.

In a statement last week, GE confirmed that it was discussing potential partnerships with Baker Hughes but ruled out an "outright purchase."

The new entity could yield more than $25 billion in revenue and allow GE to gain from an anticipated oil market recovery without paying for a full acquisition, the WSJ

said.

Shares of both companies have so far cheered news of such a deal, with GE ending 2.1 percent higher on Friday, while Baker Hughes rallied 8.4 percent.




Offshore oil production in deepwater and ultra deepwater is increasing Source: EIA

The EIA reports that, global offshore oil production (including lease condensate and hydrocarbon gas liquids) from deep water projects reached 9.3 million barrels per day (b/d) in 2015. Deepwater production, or production in water of depths greater than 125 meters, has increased 25% from nearly 7 million b/d a decade ago.

Shallow water has been relatively less expensive and less technically challenging for operators to explore and drill, but changing economics and the exhaustion of some shallow offshore resources has helped to push producers to deepwater or, in some areas, ultra deepwater (at depths of 1,500 meters or more) resources. The share of offshore production from shallow water in 2015 was 64%, the lowest on record.

Globally, offshore oil production accounted for about 30% of total oil production over the past decade. In 2015, offshore production was 29% of total global production, a moderate decrease from 32% in 2005.

Advancements in drilling technology, dynamic positioning equipment, and floating production and drilling units have made prospects viable that were previously unreachable.

Although technological advancements have made new areas accessible, deepwater projects require more investment and time compared to shallow waters or onshore developments. As a result, most nations with offshore assets operate only in shallow water.

In areas with deepwater operations, production has grown significantly, and in many cases overtaken shallow-water production.




The majority of deepwater or ultra deepwater production occurs in four countries: Brazil, the United States, Angola, and Norway. Each of these countries has realized an increasing share of

crude oil production from deepwater or ultra deepwater projects over the previous decade. The United States and Brazil together account for more than 90% of global ultra deepwater production, with ultra deepwater production expected to increase in 2016 and 2017 in both countries.

Brazil leads the world in the development of deepwater and ultra deepwater projects. Brazil has increased deep and or ultra deepwater production from 1.3 million b/d in 2005 to 2.2 million b/d in 2015. An increasing amount of Brazil’s production comes from presalt resources found under thick layers of salt at extreme depths.

The coast of Angola shares similar geologic features with the coast of Brazil because of the separation of the African and South American tectonic plates during the Early Cretaceous period, around 150 million years ago. These geological

similarities have led producers in Angola to target several major basins for presalt exploration.




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

Your partner in Energy Services

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

sponsored by Hawk Energy Service – Dubai, UAE.

For additional free subscription emails please contact Hawk Energy

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

ASME member since 1995 Hawk Energy member 2010

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

Khaled Al Awadi is a UAE National with a total of 26 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 October 2016 K. Al Awadi

new base energy news issue 940 dated 31 october 2016

Business