newbase 591 special 27 april 2015

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NewBase 27 April 2015 - Issue No. 591 Khaled Al Awadi

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

Saudi-UAE JV to build $272m steel plant United Iron & Steel (UIS), a joint venture between UAE-based Abdul Jalil Group and Safid Group, a leading manufacturer of indoor climate solutions based in Saudi Arabia, has announced plans to build a new galvanised steel production plant in Abu Dhabi, UAE, at an investment of Dh1 billion ($272 million). A leading player in the region, UIS said the new plant will come up on a 126,000-sq-m area in the ICAD (Industrial City Abu Dhabi) 3. The construction work will be completed in two phases, said Al Diyar General Contracting Company of UAE, which has been signed up as the main civil contractor for the project. The civil works will start on April 30.

UIS said it aims to produce up to 250,000 tonnes of galvanised steel per year for customers in the Middle East, Europe and Africa at its new plant by the fourth quarter of 2016. Zamil Steel has been contracted to provide the steel structure for the factory, while Danieli of Italy will supply the majority of the manufacturing equipment to the plant, said the company in a statement. On the new plant, UIS chairman Sheikh Mohammed Al Rahbani said the demand for galvanised steel in the GCC region had grown significantly over the last few years. "Once the production starts at our plant, we expect over 50 per cent of the factory's output to be taken up by customers in the region," he stated. "The rest of production will be taken up by clients in Europe and Africa," he added. According to him, the regional demand growth has been driven by construction and government infrastructure investment, with galvanised steel products being used for a wide range of applications including roofing, cladding and air-conditioning ducting.




Al Rahbani said the Industrial City is a perfect location for the plant, with excellent infrastructure, competitive energy costs and a number of other benefits that come from the industrial cluster model. Souheil Hatoum, the general manager, said the regional demand for rolled and coated

steel products was set to double over the next five years. "Currently over 50 per cent of the GCC's annual demand for galvanised steel products is imported so we see that we are filling a major gap in the regional market. But further afield, global demand will grow annually between two to four per cent so we also expect strong demand from customers in Europe and Africa," he added.- EIN + NewBase The Global demand for the steel on an average is growing at 3.5 % annually and for the UAE and GCC Markets the

annual growth rates are estimated around 4.5-5.0 % as per the World Steel Association. Majority of the requirement for the UAE and GCC Markets are still imported from other parts of the world in spite of taking in to the account of domestic production facilities.

The shortfalls in the flat products are estimated more than 1.0 Million MT in the UAE and the GCC Markets. According to the BMI, the real value annual growth of UAE is 4.5 %. MEED estimates the value of planned projects at USD 549 Billons as on Feb, 2013.

The low energy / fuel cost, Strategic location of UAE and the support by UAE Government towards the industries has made the promoters, ICAD, Abu Dhabi to be their best choice to go for the Manufacturing facilities.

AJ Group of companies, Dubai and SAFID Group, KSA are now pleased to announce their joint venture company “United Iron & Steel Company" in ICAD, Abu Dhabi for the Manufacture of Galvanized Steel Coils with a capacity of 300,000 Tons Per Annum.

The production facilities will have a wide range of specifications to cover various end applications such as Roofing & Claddings, Ducting and other building applications. The company will cater to the markets in UAE, GCC, Middle East, Africa and the European Continent.

The new facilities are a state of art technology from DANIELI, Italy the world leader for the steel Manufacturing Technology. The Automation of the complex will be supplied by Siemens, ABB and EMG, the pioneers in the field.

The United Iron & Steel Company Complex will have production capacity of 300,000 MT/Annum and the commissioning of same is targeted by end of second quarter of year 2016.




Supply chain optimization crucial for Gulf petrochem industry Saudi Gazette + NewBase

With GCC chemical exports reaching $54.6 billion, streamlining supply chain functions will be the key to maintaining a competitive advantage, says the Gulf Petrochemicals and Chemicals Association (GPCA), ahead of the annual GPCA Supply Chain Conference.

"The Arabian Gulf region is ideally placed to capitalize on forecasted growth in Asia and Africa over the next five years, utilizing export-oriented strategies in order to flourish, said Dr. Abdulwahab Al-Sadoun, Secretary-General, GPCA.

"To meet this growing demand, bold steps must be taken to help drive seamless trade of goods and services throughout the region and to push forward for a GCC customs union. It is only through a coordinated and forward thinking approach that the GCC's ambitious economic development goals for 2020 can be met." The GCC exported approximately 80% of its total product portfolio to more than 80 countries last year, amounting to 66.1 million tons of chemicals, according to GPCA estimates. As the petrochemical industry is forecast to grow by 6% every year by the end of this decade, with the region producing over 190 million tons of petrochemicals by 2020, exports will account for a sizable share for forthcoming capacity, said the GPCA. Increased competition and the need for product differentiation puts new and unique pressure on supply chains in the GCC, said Dr. Sadoun. "Infrastructures in the GCC are undergoing transformational changes, with new networks, facilities and capabilities coming online, to leverage economies of scale and meet growing demand. We must continue to finance the development of 'hard' infrastructure that makes up the backbone of all good supply chains, but also continue to invest in 'soft' infrastructure like training, education and customer service to take the GCC supply chains to the next level." The GPCA Supply Chain Conference, now in its 7th edition, will be held at Dubai's Intercontinental Festival City on May 3- 5, 2015. Held on the theme of 'Strengthening the Supply Chain Backbone - Paving the Way Forward for 2020', the conference gathers top executives from petrochemical companies, ports, consultancies and customs authorities to explore strategies that improve accessibility to and from the GCC that help the region achieve its developmental goals.




Like shale oil, solar power is shaking up global energy Reuters + NewBase

One by one, Japan is turning off the lights at the giant oil-fired power plants that propelled it to the ranks of the world's top industrialized nations. With nuclear power in the doldrums after the Fukushima disaster, it's solar energy that is becoming the alternative.

Solar power is set to become profitable in Japan as early as this quarter, according to the Japan Renewable Energy Foundation (JREF), freeing it from the need for government subsidies and making it the last of the G7 economies where the technology has become economically viable.

Japan is now one of the world's four largest markets for solar panels and a large number of power plants are coming on-stream, including two giant arrays over water in Kato City and a $1.1 billion solar farm being built on a salt field in Okayama, both west of Osaka.

"Solar has come of age in Japan and from now on will be replacing imported imported uranium and fossil fuels," said Tomas Kåberger, executive board chairman of JREF.

"In trying to protect their fossil fuel and nuclear (plants), Japan's electric power companies can only delay developments here," he said, referring to the 10 regional monopolies that have dominated electricity production since the 1950s.

Japan is retiring nearly 2.4 gigawatts of expensive and polluting oil-fired energy plants by March next year and switching to alternative fuels. Japan's 43 nuclear reactors have been closed in the wake of the 2011 meltdown at the Fukushima power plant after an earthquake and a tsunami - since then, renewable energy capacity has tripled to 25 gigawatts, with solar accounting for more than 80 percent of that.

Once Japan reaches cost-revenue parity in solar energy, it will mean the technology is commercially viable in all G7 countries and 14 of the G20 economies, according to data from governments, industry and consumer groups.

A crash in the prices of photovoltaic panels and improved technology that harnesses more power from the sun has placed solar on the cusp of a global boom, analysts say, who compare its rise to shale oil.

"Just as shale extraction reconfigured oil and gas, no other technology is closer to transforming power markets than distributed and utility scale solar," said consultancy Wood Mackenzie, which has a focus on the oil and gas industry.

Oil major Exxon Mobil says that "solar capacity is expected to grow by more than 20 times from 2010 to 2040." Investors are also re-discovering solar, with the global solar index up 40 percent




this year, lifting it out of a slump following the 2008/2009 financial crisis, far outperforming struggling commodities such as iron ore, natural gas, copper or coal.

CHEAPER PANELS

By starting mass-production of solar panels, China is the driving force in bringing down solar manufacturing costs by 80 percent in the last decade, according to Germany's Fraunhofer Institute.

In Japan, residential solar power production costs have more than halved since 2010 to under 30 yen ($0.25) per kilowatt-hour (kWh), making it comparable to average household electricity prices.

Wood Mackenzie expects solar costs to fall more as "efficiencies are nowhere near their theoretical maximums." Solar is already well-entrenched in Europe and North America, but it is the expected boom in Asia that is lifting it out from its niche.

China's new anti-pollution policies are making the big difference. Because of these policies, Beijing is seeking alternatives for coal, which makes up almost two-thirds of its energy consumption.

China's 2014 solar capacity was 26.52 gigawatts (GW), less than 2 percent of its total capacity of 1,360 GW. But the government wants to add 17.8 GW of solar power this year and added 5 GW in the first quarter alone, with plans to boost capacity to 100 GW by 2020.

Coal-dominated India, with its plentiful sunlight, could also take to solar in a big way.

Despite this boom, fossil-fuelled power is far from dead.

"Additional generating capacity, such as natural gas-fired plants, must be made available to back up wind and solar during the times when the sun is not shining and the wind is not blowing," Exxon says.




Philippines urges Southeast Asia to rally to halt China reclamation in disputed waters. Reuters + NewBase

The Philippines on Sunday called on neighboring Southeast Asian nations to push for an immediate halt to China's reclamation in the disputed South China Sea ahead of a regional summit.

China claims 90 percent of the South China Sea, which is believed to be rich in oil and gas, with overlapping claims from Brunei, Malaysia, the Philippines, Vietnam and Taiwan.

Recent satellite images suggest China has made rapid progress in building an airstrip suitable for military use in contested territory in the Spratly islands in the South China Sea and may be planning another.

In a speech to foreign ministers of the 10-member Association of Southeast Asian Nations (ASEAN), Philippine Foreign Minister Albert del Rosario did not name China directly, but said its "northern neighbor" was quickly advancing with its massive reclamation.

"Is it not time for ASEAN to say to our northern neighbor that what it is doing is wrong and that the massive reclamations must be immediately stopped?" Rosario asked. The territorial dispute is seen as one of Asia's hot spots; carrying risks that it could result in conflict as countries aggressively stake their claims.

The foreign ministers were meeting ahead of the official opening of the 10-member ASEAN summit in Kuala Lumpur on Monday. The minister said the reclamation would likely be finished before China agrees to a planned Code of Conduct for the South China Sea.

ASEAN Secretary General Le Luong Minh told Reuters in an interview that it has become very urgent for ASEAN and China to conclude the code early.

"In the context of the ever-widening gap between the diplomatic track and the situation at sea, it is very urgent now for ASEAN and China to early conclude the Code of Conduct, which must be a legally binding instrument and must an instrument that can prevent such incidents," he said.

But ASEAN summit host Malaysia is likely to steer clear of criticising China, it biggest trade partner, a draft end-statement seen by Reuters showed.




Ghana Blocked From Drilling New Oil Wells in Disputed Area Bloomberg + NewBase

An international maritime tribunal on Saturday ruled that Ghana can continue developing a $4.9 billion dollar offshore oil project in an area caught up in a border dispute with Ivory Coast but must not start new drilling.

Ghana and Ivory Coast “shall pursue cooperation and refrain from unilateral action that may lead to aggravating the dispute,” the Hamburg-based International Tribunal for the Law of the Sea said in a statement on its website Saturday. The order is provisional pending a final decision.

Ivory Coast challenged sea boundaries with neighboring Ghana and asked the arbitration panel to order Ghana to halt drilling in an area where Tullow operates its Tweneboa-Enyenra-Ntomme project. TEN is set to produce its first oil in mid-2016.

“The TEN project can move ahead and we will now await instructions from the Government of Ghana with regard to implementing those provisional measures that have been ordered” by the tribunal, Tullow spokesman George Cazenove said in an e-mailed response to questions.

A full verdict on the dispute from the panel isn’t expected until late 2017, according to London-based Tullow. The tribunal asked both countries to submit a report by May 25 that describes what measures have been taken after Saturday’s order.




A ruling in Ivory Coast’s favor would probably result in TEN becoming part of a joint development zone between the two countries, which may affect the fiscal regime the asset operates under, James Hosie, an analyst at Barclays Plc, said in a note.

Disputed Area

Ivory Coast will seek to have the disputed area incorporated within its border, Bruno Kone, government spokesman, said by telephone after the decision. Ivory Coast President Alassane Ouattara will continue talks with Ghanaian President John Dramani Mahama, he said.

Ghanaian Energy Minister Emmanuel Armah-Kofi Buah didn’t immediately return calls and text messages to his mobile phone after hours Saturday.

Crude is Ghana’s biggest export by value after gold, and the nation produces about 100,000 barrels daily from its Jubilee oil field that’s operated by Tullow. The country was the largest contributor to the producer’s sales revenue in 2014 at $1.3 billion, or 58 percent.

Barclays values the company’s stake in the TEN project at 157 pence a share, and its tangible net asset value of 527 pence a share assumes the boundary is upheld with no suspension of activity.

It also accepted Ghana's contention that the environmental impact of the project was adequately monitored and to suspend operations would, in fact, harm the environment by allowing wells and other equipment to fall into disrepair. The ruling said. It directed all parties to take the necessary steps and to cooperate to prevent harm to the marine environment in the disputed area. Revenue from TEN is important for the government as it seeks to rebalance an economy whose GDP growth is expected to slow to 3.9 percent in 2015. For years, the economy grew strongly through exports of gold, oil and cocoa but a fall in commodity prices and problems including a stubborn budget deficit have curbed its development




Oil Price Drop Special Coverage

Oil holds near 4-1/2 month high on Yemen concerns Reuters + NewBase Brent crude prices held near a 4-1/2 month high above $65 a barrel on Monday, supported by concerns about fighting in Yemen disrupting Middle East supplies and signs that US shale output may have started to decline.

The number of active US rigs drilling for oil has fallen for a record 20 weeks in a row to the lowest since 2010, according to Baker Hughes data. "Support for oil actually came from a lot of positive speculation that oil supply from the US is actually going to drop," said Shunling Yap, a senior oil analyst at BMI Research. The US Energy Information Administration's forecast of a drop in oil output in May from April, the first monthly decline in four years, also supported bullish bets, she added. Brent edged up 1 cent to $65.29 a barrel by 0200 GMT after posting its third weekly gain last week and touching a Dec. 10 high of $65.80. US crude fell 3 cents to $57.12 a barrel after rising for the sixth consecutive week, its longest stretch of gains since the first quarter of 2014. Fighting in Yemen raged on as Saudi Arabia continued its air strikes against Houthi militia forces in Aden, but there were no fresh moves towards dialogue.




Oil Bears Routed by Spring Thaw in Prices as Drill Rigs Sit Idle BloomBerg + NewBase

Speculators pulled bearish oil bets at the fastest pace on record as Saudi Arabia renewed strikes on Yemen and U.S. output slowed.

Hedge funds reduced their short position in West Texas Intermediate crude by 32 percent in the seven days ended April 21, driving the net-long position to the highest since July, U.S. Commodity Futures Trading Commission data show.

A record drop in rigs drilling for crude reduced production even as demand rose, boosting speculation that WTI has found a floor after the biggest rout since 2008. A 32 percent rally since March was also stoked by concern that the conflict in Yemen may disrupt traffic through the

world’s fourth-busiest channel for shipping oil.

“The falling rig count and the reduction we’re starting to see in output shows that the bottom has in fact been installed,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone April 24. “A lot of people are throwing in the towel.”

WTI futures rose $1.97 to $55.26 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. Prices settled at $57.15 on April 24, capping a sixth weekly gain.

Drilling Decline

U.S. drillers have idled 56 percent of oil rigs since October, according to Baker Hughes Inc.

That helped bring down crude production, which dropped to 9.37 million barrels a day in the seven days ended April 17, the lowest level in six weeks, according to preliminary data from the Energy Information Administration.

In the same week, U.S. refineries used 16 million barrels a day of crude, the highest seasonal level in weekly data going back to 1989. Plants have increased crude demand by an average of 915,000 barrels a day in May through July over the past five years. The higher rates will help meet growing fuel demand. The EIA this month increased its estimate for 2015 gasoline




consumption by 70,000 barrels a day.

The higher demand from refiners is easing concern that U.S. crude supplies will fill up storage tanks. Stockpiles rose by 5.32 million barrels to 489 million, the highest since 1930.

High Inventories

The reduction in short bets could leave the market in an overbought position, given the high inventory levels, Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by

phone April 24. “It may have been the bears running for cover last week, but that leaves the longs more vulnerable.”

Net-long positions in WTI rose by 36,058 to 267,614 futures and options in the week ended April 21, the highest level since July 29. Long positions rose 0.2 percent to 342,276 and short holdings dropped by 35,311, the most in data going back to 2010, to 74,662 contracts.

In other markets, net bullish bets on gasoline jumped 43 percent to 23,493. Futures rose 2.8 percent to $1.8881 a gallon on Nymex in the reporting period.

The U.S. average retail price of regular gasoline gained 0.8 cent to $2.532 a gallon April 25, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.

Net bearish wagers on U.S. ultra low sulfur diesel decreased 15 percent to 19,441 contracts. The fuel rose 2.9 percent to $1.8532 a gallon.

Net-short wagers on U.S. natural gas rose 3.6 percent to 101,506. The measure includes an index of four contracts adjusted to futures equivalents. Nymex natural gas climbed 1.8 percent to $2.575 per million British thermal units during the report week.

Yemen Conflict

Aircraft from a Saudi-led coalition attacked Houthi rebel militia and troops allied with former President Ali Abdullah Saleh north of Aden, a southern port city in Yemen, the Saudi-owned Al Arabiya television channel reported April 23.

Traffic in the Bab el-Mandeb strait off the coast of Yemen trails only the Strait of Hormuz, the Strait of Malacca and the Suez Canal, according to the EIA.

“There’s concern that the violence in Yemen could spill across into Saudi Arabia,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone April 23. “A decline in supply and the upward projection in demand would get the oil market in balance faster than expected.”




Oil firms face further cuts as low prices linger Reuters + NewBase Oil majors may need deeper cuts to oil and gas exploration and production spending as they grapple with an extended period of low crude prices. The industry is expected to reveal another set of grim earnings for the first quarter when benchmark Brent prices averaged $55 a barrel, almost half the level of a year ago.

ExxonMobil, Royal Dutch Shell, BP and France's Total have already responded by cutting 2015 capital spending by 10 to 15 per cent, delaying and scrapping projects and cutting operating costs. And despite a sense among some industry executives that oil prices may have hit their 2015 lows following a decline in US. shale production, more cuts may be needed. Exxon, the world's biggest listed oil company, has reduced 2015 capital spending by 12 per cent to $34 billion. "We'll see throughout the year whether we stay there (capex) or not, we're seeing a lot of cost efficiencies," chief executive Rex Tillerson said at the IHS CERAWeek conference. Analysts at HSBC singled out BP, Chevron, Statoil and Total for having "management aggressively looking to exploit this period to improve long-term returns." "Some of the companies now view the current environment not as a threat, but as the best opportunity for a re-set of project economics in well over 10 years," HSBC said in a note. "As a result, we think the capex reductions we are seeing this year are likely to be only the start." The savings announced in recent months are already improving balance sheets. According to analysts at Jefferies, oil majors today require an average oil price of $78 a barrel in order to cover investments and dividends from organic cash flows, down from $90 a barrel in early 2015. Oil companies are not expected to cover dividends through organic cashflow (excluding acquisitions) until 2017, according to Jefferies.




DIVIDENDS SAFE The seven oil global majors are forecast to report a year-on-year decline in income of around 57 per cent, while earnings per share are set to decline by about 27 per cent, according to Jefferies Despite the expected drop in revenues, analysts expect most oil majors are likely to maintain dividend payouts to investors after increasing borrowing to a record $31 billion of debt in early 2015. Eni is the only oil major to have cut dividends. BP, Total and Shell have vowed to maintain their annual payouts, while BP and Total are also offering scrip dividends, which allow investors to buy shares at a reduced price instead of receiving the dividend. The lower average oil price during the quarter looks set to be offset, like in the previous two quarters, by a stellar rise in profits from refining as global demand for oil products such as gasoline and diesel surged as a result of lower prices. Morgan Stanley's top picks in the sector are Total and Statoil due to big pipeline of project startups and their ability to implement further spending cuts. Several analysts downgraded Shell's valuation following the Anglo-Dutch firm's move to buy smaller rival BG Group for around $70 billion.




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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 27 April 2015 K. Al Awadi

newbase 591 special 27 april 2015

Economy & Finance