new base 579 special 09 april 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

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NewBase 09 April 2015 - Issue No. 579 Khaled Al Awadi

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

GCC mega-projects to reach $1trn by 2030 Saudi Gazette + NewBase

Supporting technology innovation for the Gulf Cooperation Council (GCC)’s more than $1 trillion worth of construction projects, Tekla on Tuesday launched Tekla Structural Designer software for the Middle East at The Construction Summit – UAE. Demonstrating the demand for advanced project modeling software, the GCC’s construction market will hit a record of $144 billion in 2016, driven by mega-projects for World Expo 2020 in Dubai, 2022 FIFA World Cup Qatar, Smart Cities, and infrastructure, according to the EC Harris report “Middle East Major Construction Programmes”. Mega-projects in the GCC will reach $1 trillion by 2030, according to the report.

The UAE has $90 billion in capital development projects, according to EC Harris, while Qatar is the fastest-growing construction and infrastructure market in the GCC, set to spend $24 billion on infrastructure in 2015, according to BMI Research. “The GCC being one of the world’s fastest-growing construction markets demonstrates the potential for how technology will enable the region’s architects, engineers, and field managers to drive innovation, collaborate, and meet strict code compliance across the design, build, and operation of the country’s projects,” said Paul Wallett, Area Business Director, Tekla Middle East. By fully automating concrete and steel design and analysis with high-quality documentation, Tekla Structural Designer enables engineers to analyze and design multi-material buildings efficiently and profitably. With Tekla Structural Designer, engineering businesses can quickly compare alternative design schemes, manage changes efficiently, and collaborate seamlessly using modeling solutions.




Middle East projects that have used Tekla Building Information Modeling (BIM) technology to deliver precise and complex planning and fabrication include the Abu Dhabi Airport – Midfield Terminal Complex, the King Abdullah Financial District and King Abdulaziz Center for World Culture in the Kingdom of Saudi Arabia, and National Museum of Qatar. Hundreds of construction experts attended The Construction Summit, held at the Burj Al Arab in Dubai and Grand Hyatt Doha, continuing the momentum of Tekla recently opening a dedicated office in Qatar, and its parent company Trimble launching a new GCC office in Dubai. “The Construction Summit was a strong success, and continues our support for the GCC’s construction sector. Our Tekla Structural Designer can help the country’s construction-related professionals enhance planning, costs, and productivity, and meet the needs of a more mobile workforce,” added Wallett. Among the industry speakers in the UAE event was Bill Thomson, Project Delivery Director – Middle East, AECOM, who is supporting the Middle East’s organizations to develop and integrate technology and systems such as BIM, GIS, augmented reality, data visualization, and major project collaboration systems. Anil Kumar Gaddameedi, General Manager, HGG Middle East FZE, spoke on integrating workflow from design data to fabrication, and Vesa Miettinen, Technical Manager, Peikko, on making concrete manufacturing faster, easier, more reliable. Additional speakers included Peter Hedlund, Regional Director – Middle East and India, Trimble; Thiyagarajan Nagarajan, Account Manager, Tekla Middle East; Elina Punkkinen, Technical Consultant, Tekla Middle East; Hany Salah, Technical Business Development Manager, Tekla Middle East; Guarav Shah, Technical Manager, Tekla Middle East; Daniel Smith, EMEA Business Development Manager, Manhattan Software; Aixa Vazquez, Account Manager, Tekla Middle East; and Paul Wallett, Area Director, Tekla Middle East.




Iran to mend fences with China to boost Oil & Gas output Reuters + NewBase

Iran hopes to resolve differences with Chinese energy companies on oil and gas projects in the Islamic republic, as Tehran wants to be ready to raise output quickly after a potential lifting of sanctions this year, Iranian oil officials said yesterday.

The officials are in China this week to discuss Chinese investments in oil and gas developments in Iran, as well as oil sales, just days after world powers and the Opec member reached a framework nuclear deal. The talks come ahead of a visit to Beijing by Iranian Oil Minister Bijan Zanganeh, his first since assuming his post two years ago.

Iran, the world’s fifth-largest oil producer, hopes to nearly double its exports from just over 1mn barrels per day (bpd) in two months once sanctions are lifted, although analysts say it will take longer.

Some of the production is expected to come from projects state companies China National Petroleum Company (CNPC) and Sinopec Group have contracted to develop. But the Chinese companies have stalled or scaled back on developments in Iran since late 2010 as Western sanctions tightened.

“The main issue is the money we owe them. They have worked there but the return has not started yet,” said Amir-Hossein Zamaninia, Iran’s deputy oil minister for commerce and international affairs. Iran also wants Chinese companies to use the latest technology and equipment in any resumption of work to get fields pumping, Zamaninia said. A CNPC spokesman was not available for comment, and Sinopec did not immediately respond to an e-mail about the talks. Iran’s oil exports have been cut by more than half to around 1.1mn bpd from a pre-2012 level of




2.5mn bpd, with the loss of oil income making it difficult to invest in new developments and pay for the equipment and services needed to keep its production operating smoothly. Among oilfields Chinese companies have worked on, the Yadavaran project has progressed relatively well, with 95% of the work completed and the field, operated by Sinopec, ready from about September, Zamaninia said. He said the field, in the southwestern province of Khuzestan, will have a 75,000 bpd capacity in phase one. Sinopec agreed in late 2007 to a $2bn deal to develop the field. CNPC, China’s top energy group and PetroChina’s parent, agreed to take on other projects, including a $2bn contract to turn North Azadegan into a 120,000 bpd field.

Zamaninia said Iran would focus this trip on resolving issues with

current contracts,

adding that the two sides have yet to discuss any new projects. Iranian officials said CNPC, which pulled out of Iran’s giant South Pars natural gas field in 2012, this week

expressed interest in returning to the offshore project. CNPC withdrew from South Pars because of sanctions as they made it difficult to get the equipment needed from US and European companies, said Zamaninia. Mohsen Ghamsari, director of international affairs at the National Iranian Oil Company, said Iran would seek gas liquefaction technology from European firms, while CNPC’s contribution would focus on developing and producing gas. “For LNG we have some contracts with some Europeans that, hopefully after the finalisation of the (nuclear) negotiations, then we can receive technology from that side,” Ghamsari said. The South Pars project is part of a huge formation shared with Qatar that makes up the world’s largest pure natural gas reserve. The Iranian part, divided into 24 phases, could cost more than $40bn to develop. Many analysts say developing LNG assets from scratch or early stages, as Iran’s would need to be, is not commercially viable until Asian spot prices rise substantially, which is not expected in the next two years.

Iran LNG has not moved an inch , due to sanctions




Saudi management of energy consumption a strategic need Saudi Gazette + NewBase Prince Abdulaziz Bin Salman, Deputy Minister of Petroleum and Mineral Resources, Chairman of the Executive Committee of the Saudi Center for Energy Efficiency, and Honorary President of the

Saudi Economic Association, emphasized the importance of managing energy consumption in the Kingdom to curb the growth of consumption at the annual meeting (Economies of Energy) of the Saudi Economic Association in Riyadh. Launching the first session of the eighteenth annual meeting of the association on Wednesday, he warned against further energy consumption growth if the wastage in energy consumption is not seriously curtailed.

During the panel discussion entitled “Energy Efficiency”, he detailed the Kingdom's energy consumption growth. Prince Abdulaziz noted that management of energy consumption is a strategic necessity for the Kingdom. For this purpose, he highlighted the establishment of the Saudi Center for Energy Efficiency and its work. He added that he expects savings of 1.5 million barrels of oil equivalent per day by 2030 on the completion of the implementation of all activities of the Saudi program for energy efficiency. He said the Kingdom’s population has grown and there is economic prosperity and industrial

development. This in turn reflected on the life of the citizens on the one hand and the industrial and economic

development of the Kingdom on the other. This has contributed to the growth of energy consumption and wastage of non-renewable natural resource. The daily energy consumption in the Kingdom has risen from less than one million barrels of oil equivalent per day in 1980 to 4.2 million barrels of oil equivalent at present. This consumption is expected to rise to over 8 million barrels oil equivalent per day in 2030 if “we do not work seriously to

curtail the big wastage in energy consumption.” He said the rise in energy consumption in the Kingdom was accompanied by growth in the density of energy consumption by 50 percent since 1985. The rate of energy consumption in the Kingdom is higher than the growth rate of the GDP. This is opposite to what is occurring in the advanced countries. This necessitates for the Kingdom to manage consumption as it is a strategic necessity. Prince Abdulaziz said energy consumption management in the Kingdom is facing big challenges in the absence of possibilities for curbing the growing consumption of energy. The most prominent challenges include the low prices of energy in the Kingdom, lack of awareness of the consumer on energy efficiency, low standards for energy efficiency or their absence, weakness in compulsory




implementation and weakness of integration between government authorities. Meanwhile, the advanced countries have available means at their disposal to curb the growing energy consumption. Most important among these factors is the rise in prices of energy, awareness of the consumer, the existence of stiff binding penalties for implementation of standards on products and the existence of one authority concerned with all energy affairs. He said the Kingdom started work in curbing the big wastage when the council of ministers decided in 2010 to establish “the Saudi Center for Energy Efficiency”. The aim was to rationalize and upgrade energy consumption efficiency in the Kingdom and unify the efforts of the authorities concerned.




Saudis Say Efficiency Drive To Save 20% Of Energy Use

Rules introduced in the last few years require homes and businesses to install insulation and tighten standards for air conditioners. Saudi Arabia expects to save a fifth of its energy use by 2030 through an efficiency drive designed to prevent domestic consumption from eating up oil for export, the kingdom’s new deputy oil minister said on Wednesday.

“Energy consumption is 4.2 million boepd (barrels of oil equivalent per day) currently and is expected to rise to more than 8 million boepd by 2030 if we don’t work hard to limit the big waste,” Prince Abdulaziz bin Salman told a conference. The energy efficiency drive will save about 20 per cent of that projected consumption, or roughly 1.5 million boepd, said Prince Abdulaziz, who took the post after his father became king in January.

The world’s largest oil exporter heavily subsidises domestic fuel and utility costs, which encourages its growing population to consume more. This could ultimately interfere with oil supplies available for export. Cutting subsidies and raising domestic fuel prices could deter excessive consumption, but Prince Abdulaziz gave no indication that this politically sensitive reform was likely. “The real challenge is how will we achieve energy efficiency without changing the prices,” Rules introduced in the last few years require homes and businesses to install insulation and tighten standards for air conditioners. A fuel efficiency standard for cars will be binding by January 2016. Standard Chartered wrote in a research note on March 30 that it expected long-term investment in Saudi Arabia’s power system and alternative sources of energy to reduce the need for burning crude oil. In the short term, however, there may be little impact, and high temperatures this summer, which will trigger massive demand for air conditioning, are expected as usual to boost Saudi Arabia’s domestic oil use. “In 2015 we expect the seasonal upswing in Saudi Arabia’s direct burn to perform the role of a market stabiliser, causing Saudi crude oil exports to fall back seasonally from their current high level,” Standard Chartered wrote.

What works in Saudi Arabia in energy saving and environmental protection will work in the whole MENA area.




Indonesia: Cooper Energy to case Bunian-3 development well in

the Sukananti KSO, South Sumatra, for future production

Source: Cooper Energy

Cooper Energy has advised that the second sidetrack of theBunian-3 development well has reached a total depth of 1,598 metres and preparations to run production casing are underway. Wellbore conditions have precluded running open whole wire line logs and the well will be evaluated through casing.

As reported in the previous Update

Announcement of 24 March, potential hydrocarbon bearing zones were identified in the Bunian-3 side-track 1 well. In that near vertical borehole, the primary target TRM-3 sand was intersected approx. 16 metres higher than in the adjacent Bunian-1 oil producing well. The deeper secondary target in the K1 sand was intersected approx. 11 metres higher than in Bunian-1. Side-track 2 was deviated away from the vertical wellbore and confirmed the presence of the target reservoirs up dip of side-track 1. This outcome may yield additional production and reserves increments. There is also potential pay in the TRM-1/2 sands.

Bunian-1 was drilled in 1998 and initially tested at 1,585 barrels of oil per day. Bunian-1 has produced 993,000 barrels of oil and is currently producing at 191 barrels of oil per day. It is intended that Bunian-3 will be completed after casing and logging and that production testing will be conducted once the drilling rig has been released. The production performance of the additional sands will be evaluated as part of the testing programme. On completion of Bunian-3, the rig will move to drill the Tangai-5 development well.




Kenya: Pancontinental withdraws from Block L10B Source: Pancontinental

Pancontinental has advised that it has served a notice of withdrawal on BG Kenya L10B Limited, the only remaining participant and operator of Kenya Licence L10B, from the Joint Operating Agreement with BG and from the PSC governing L10B.

Pancontinental holds a 25% interest in L10B, while BG holds 75%. Licence area L10B lies immediately to the south of area L10A, in which a joint venture also operated by BG Group (50%) drilled the Sunbird-1 oil discovery well in 2014. Pancontinental holds 18.75% in this licence and PTTEP of Thailand holds 31.25%. Pancontinental believes that it has sufficient exposure to the prospectively of the area through its 18.75% interest in the adjoining Block L10A. The Blocks have similar geological features that in some cases straddle the permit boundary, while exploration in L10A is more advanced. The Company considers that the withdrawal is in the interest of prudent financial management, whilst maintaining a manageable and prospective exploration portfolio.




Thailand: Mubadala completes production drilling at Manora field Source: Tap Oil

JV partner Tap Oil has provided an update on Manora production and development drilling at the Mubadala-operated Manora Oil Development in the Northern Gulf of Thailand (TAP 30% interest). All eleven Manora development wells have been successfully completed and the drilling rig has now moved off location. Manora is now producing from six wells: MNA-01, MNA-02, MNA-03, MNA-05, MNA-07 and MNA-08 with MNA-11 expected to commence production this week. Manora has been producing above 15,000 bopd (gross), and on occasion above 16,000 bopd (gross) since the six wells have been in production.

MNA-01 and MNA-02 started production on 11 November 2014, with MNA-03 following a day later. MNA-05 started production on 23 November 2014. All of these wells have been completed with ESP pumps, exhibited high productivity as expected, and are producing free of water and sand. Production from the above wells occurs in the Central Fault Block 600 sand reservoirs.

MNA-04, MNA-09ST1 and MNA-10 are currently injecting

water to support production from 600 reservoir sands in the Central Fault Block. Pressure response due to water injection has already been observed in the Central Fault Block. MNA-07, the first producer well from the East Fault Block, was put on production in early January with a tested rate of 1,332 barrels oil per day (gross) with 40% watercut which has increased to 64% watercut at present. MNA-08 producer well from the East Fault Block started production on 21 February 2015. MNA-08 is currently producing oil at the rate of 2,377 barrels oil per day (gross) with 14% watercut.

The last two wells, MNA-11 producer from the Central Fault Block and MNA-13 water injector in the East Fault Block have been successfully drilled to final Total Depth. MNA-11 intersected highest net oil pay count (98m) in 600 reservoir sands of any of the wells. This confirms the Operator’s geological model of thicker sands in the centre of the Central Fault Block. MNA-11 is expected to commence production this week and MNA-13 has been completed and is currently injecting water to support production from the East Fault Block.

Following a review of the results from the development drilling programme, the Manora joint venture agreed that two wells (one producer and one injector) are no longer required and also to defer two producer wells. The development plan had previously forecast up to 15 development wells (10 producers and 5 injectors). The Operator (Mubadala Petroleum) has confirmed that peak production of 15,000 barrels per day (gross) has now been achieved and can be maintained with only 7 producer wells (instead of the original 10 producer wells).




Shell Buy BG Group for $70 Billion in Cash and Shares Bloomberg + NewBase

Royal Dutch Shell Plc agreed to buy BG Group Plc for about 47 billion pounds ($70 billion) in cash and shares, the oil and gas industry’s biggest deal in at least a decade. The acquisition is the most significant response yet to the slump in oil prices and could set in motion a series of mergers as the largest energy companies’ look to cut costs and restore profits.

Shell will pay 383 pence in cash and 0.4454 of Shell’s B shares for each BG share, BG said in a statement today. That’s equal to about 1,367 pence a share and gives BG a market value of about 47 billion pounds. It’s a premium of about 50 percent on BG’s closing share price yesterday.

The merged company, led by Shell Chief Executive Officer Ben van Beurden, will boast a market value twice the size of BP Plc and surpass Chevron Corp. Shell, struggling to rebound from its worst production performance in 17 years, will swell its oil and natural gas reserves by 28 percent with the combination and inherit a management team that carved out a unique niche in liquefied natural gas, or LNG.

Shell, which helped pioneer the process of liquefying gas for shipment aboard tankers decades ago, and rivals such as Chevron are betting LNG will play an increasing role in emerging economies seeking alternatives to dirtier energy sources such as coal.

The new company will be the largest producer of LNG among international oil companies and gas is a “very important” component of the deal, Van Beurden said on a conference call.

Merger Activity

Shell’s pursuit of BG disrupts the prevailing view among analysts and bankers who expected merger activity in the industry to remain quiescent until later this year or even 2016. The talks could presage a repetition of the wave of deals a decade-and-a-half ago that rocked the oil patch and created today’s so-called super majors.

BP kicked things off in 1998 when it announced plans to take over Amoco at a time when crude hovered below $12 a barrel. Exxon followed suit with the mega-buyout of Mobil Corp. the following year; other combinations of the era included Chevron’s merger with Texaco Inc. and Total SA’s purchases of PetroFina and Elf Aquitaine.

“Any and all combinations are now on the table and this will absolutely be a trigger event, both for strategic companies and private equity,” Dennis Cassidy, co-leader of the oil and natural gas practice for consulting firm AlixPartners, said in an interview before the deal was announced.




Shell and BG both have assets in Egypt where they, in common with other international companies operating in the country, have had major difficulties during the political turmoil of the past few years, with hundreds of millions of dollars of overdue payments still owed by the government. Shell operates a number of concessions, including the Assil and Karam fields in the Alam El Shawish West concession in the Western Desert, which began producing last November.

BG has holdings of 35.5 per cent and 38 per cent, respectively, in LNG plants at El Beheira Natural Gas Liquefaction Company and Idku Natural Gas Liquefaction Company. The company declared force majeure on the LNG business last year after the government forced diversion of gas to the domestic market rather than for export.

Asked about the future of the combined group in Egypt, Mr. van Beurden said: “In valuation of things we haven’t given it a lot of value in our assessment of the combined company going forward.”

He also said he did not expect Iran to open up to investment any time soon, despite the framework deal reached last week that might lead to easing sanctions, assuming a final deal on Iran’s nuclear programme can be reached this summer.

Shell’s takeover deal was engineered by Mr. van Beurden and the BG chairman Andrew Gould during discussions started on March 15, only three weeks after BG’s chief executive, the former Statoil chief Helge Lund, joined the company.

Balance Sheet

The Shell-BG merger, which envisions combining Europe’s largest oil explorer by market value with the No. 3 U.K.-based energy producer, will be the industry’s biggest in at least a decade, according to data compiled by Bloomberg.

BG, for its part, has been a victim of both its own success and $50-a-barrel oil. The Reading, England-based company’s balance sheet has been stretched as the relatively cheap task of finding new fields evolved into the costly business of developing those fields into active sources of crude and gas.

Shell, which invented the oil tanker in the 1890s to haul Caspian Sea crude to European markets, saw its worldwide production drop to the equivalent of 3.08 million barrels a day in 2014, the lowest in at least 17 years. Reserves, a metric that investors watch to assess future growth prospects, have declined in two of the past three years.




In contrast, BG boosted reserves in six of the past seven years. Its reserves were 78 percent gas as of Dec. 31, compared with 47 percent for Shell.

Former Monopoly

BG was forged from the exploration arm of the U.K.’s former state-owned gas monopoly, British Gas that was privatized by Margaret Thatcher in the 1980s.

The company was led for more than a decade by Frank Chapman, who built a global LNG business and drilled wells from Kazakhstan to Brazil. The company’s market value rose more than fivefold during his tenure, outperforming larger rivals including Shell and BP.

Chapman retired at the end of 2012 and his successor Chris Finlayson lasted little more than a year, resigning in early 2014 after profit warnings and disagreements with the board over strategy. He was replaced by Helge Lund, poached from Norway’s state oil producer Statoil ASA, who BG made the most highly paid oil executive in Europe to win his services. He now seems set to negotiate the sale just two months after taking the helm.




Oil Price Drop Special Coverage

Oil prices edge back from 6 pct fall, but outlook weak Reuters + NewBase

Oil prices rose in early trading on Thursday, clawing back a part of the 6 percent slump in the previous session after a shock jump in U.S. crude inventories and record Saudi output, although analysts said sentiment remained bearish. A 10.95 million barrel surge in U.S. crude stockpiles to 482.4 million, the biggest gain in 14 years, and Saudi oil production of 10.3 million barrels a day in March had battered crude futures on Wednesday. The falls were pared on Thursday in an extension of the recent high market volatility that has seen frequent price reversals. Brent May crude was up 61 cents from its last settlement, trading at $56.16 a barrel by 0035 GMT, while U.S. May crude rose 59 cents to $51.01 a barrel. Close-to-close price volatility for Brent prices is at levels last seen during the height of the global financial crisis of 2008/2009, Reuters data shows. Overall sentiment remains bearish due to high production and modest demand. "We are seeing little sign of economic acceleration... and anticipate a meaningful decline in oil production is still a couple of months away," U.S. Bank Wealth Management said in a research note. Because of slowing demand growth and soaring production, oil prices have dropped around 50 percent since June last year, when prices began to fall.




US shale companies protected by the Oil Industry's $26 Billion Life Raft Bloomberg + NewBase

For U.S. shale drillers, the crash in oil prices came with a $26 billion safety net. That’s how much they stand to get paid on insurance they bought to protect themselves against a bear market -- as long as prices stay low.

The flipside is that those who sold the price hedges now have to make good. At the top of the list are the same Wall Street banks that financed the biggest energy boom in U.S. history, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co.

While it’s standard practice for them to sell some of that risk to third parties, it’s nearly impossible to identify who exactly is on the hook because there are no rules requiring disclosure of all transactions. The buyers come from groups like hedge funds, airlines, refiners and utilities.

“The folks who were willing to sell it were left holding the bag when prices moved,” said John Kilduff, partner at Again Capital LLC, an energy hedge fund in New York.

The swift decline in U.S. oil prices -- $107.26 on June 20, $46.39 seven months later -- caught market participants by surprise. Harold Hamm, the billionaire founder of Continental Resources Inc., cashed out his company’s protection in October, betting on a rebound. Instead, crude kept falling.

Counterparty Names

Other companies purchased insurance. The fair value of hedges held by 57 U.S. companies in the Bloomberg Intelligence North America Independent Explorers and Producers index rose to $26 billion as of Dec. 31, a fivefold increase from the end of September, according to data compiled by Bloomberg.

Though it’s difficult to determine who will ultimately lose money on the trades and how much, a handful of drillers do reveal the names of their counterparties, offering a glimpse of how the risk of falling oil prices moved through the financial system. More than a dozen energy companies say they buy hedges from their lenders, including JPMorgan, Wells Fargo, Citigroup and Bank of America.

Danielle Romero-Apsilos, a Citigroup spokeswoman, said the bank actively hedges and manages its risk. Representatives of JPMorgan, Wells Fargo and Bank of America declined to comment.

At the end of 2014, JPMorgan had about $671.5 million worth of derivatives exposure to five energy companies, including Pioneer Natural Resources Co., Concho Resources Inc., PDC Energy Inc. and Antero Resources Corp., according to company records. That’s the amount JPMorgan would have owed if the contracts were settled Dec. 31, not including any offsetting trades the bank made.

It’s a similar story for Wells Fargo, which was on the hook for $460.9 million worth of oil and natural gas derivatives for companies including Carrizo Oil & Gas Inc., Pioneer, Antero, Concho and PDC, according to regulatory filings.




Energy Trading

These aren’t, of course, the kind of figures that would trigger any sort of systemic-risk concerns. Commodities are generally smaller parts of banks’ businesses compared with lending and underwriting, and banks hedge their oil-price risk.

New York-based JPMorgan had $2.57 trillion in assets at the end of last year compared with net liabilities for commodity derivatives of $2.3 billion, not including cash from settled trades and physical commodity assets, according to regulatory filings. San Francisco-based Wells Fargo had $1.69 trillion in total assets compared with net commodity liabilities of $241 million.

Still, $26 billion is $26 billion.

U.S. oil companies already netted at least $2.4 billion in the fourth quarter of 2014 on their hedges, according to data compiled on 57 U.S. companies in the Bloomberg Intelligence index.

Oil companies would rather be losing money on the trades and making money selling crude at higher prices, Kilduff said.

“It’s like homeowners’ insurance,” he said. “You don’t buy it hoping the house burns down.”

Offset Risk

The $26 billion of protection won’t last forever. Most hedging contracts expire this year, according to company reports. Buying new insurance today means locking in prices below $60 a barrel. The alternative is following Hamm’s example and having no cushion if crude keeps falling.

Financial institutions act as a go-between, selling oil derivatives to one company and buying from another while pocketing fees and profiting on the spread, said Charles Peabody, an analyst at Portales Partners LLC in New York. The question is whether the banks were able to adequately offset their risk when the market took a nosedive, he said.

“The banks always tell us that they try to lay off the risk,” Peabody said. “I know from history and practice that it’s great in concept, but it’s hard to do in reality.”




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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 09 April 2015 K. Al Awadi

new base 579 special 09 april 2015

Economy & Finance

middle east projects

worth of construction

tekla middle east

uae gcc megaprojects

countrys projects

gccs construction market

construction summit

khaled al awadi newbase