newbase 611 special 25 may 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 25 May 2015 - Issue No. 611 Khaled Al Awadi

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

UAE: Adnoc cuts back on operational spending, but job numbers will not be affected

The National + NewBase

The lower price of oil has reshaped Abu Dhabi National Oil Company’s budget, forcing it to cut back on operational expenditure by 10 to 15 per cent even as it increases spending on research and development.

Yasser Saeed Al Mazrouei, Adnoc’s deputy director of exploration and production, said yesterday that when the oil price slump began, the company requested its operating companies (Opcos) to reduce their spending… The reduction will not affect job numbers, he said…..

Brent crude has recently increased to about US$65 per barrel, but it is nowhere near the highs from last June of $115 per barrel, forcing many companies to slim their budgets. Adnoc has targeted an increase of its oil production capacity to 3.5 million barrels per day in three years from just under 3 million bpd and remains on track despite the operational expenditure cuts. It has earmarked tens of billions of dollars of capital expenditure to reach its production goals. The decision to reduce operational expenditure is normal, said Mohamed Al Shamma, the vice

president of public relations at Adma-Opco, an Adnoc unit. “When there is a drop in oil prices, of course you need to restructure the expenditure – but our projects, nothing has been affected for this year or coming years,” he said. Companies across the industry have been cutting back on expenditure and reducing costs amid the lower oil prices. Shell, which is a partner with Adnoc on its Bab sour gas project, announced last month it had reduced capital expenditure more than expected. Adma-Opco, or Abu Dhabi Marine Operating Company, in which Adnoc has a 60 per cent stake, produces about 650,000 bpd. “Long-term issues are not affected at all by short-term fluctuations in the markets,” said Ahmed Al Hendi, the senior vice president of subsurface technology at Adma-Opco. He said that while the operational budget has tightened, the funding for research and development has increased year-on-year, although he declined to give exact figures.




Mr Al Mazrouei said that it was too early to place limitations on R&D. “We’re still in the early days and we’re still growing,” he said. He pointed to the latest plans for a new R&D facility in collaboration with the Petroleum Institute with a heightened focus on expanding technology for carbonate reservoirs – difficult-to-reach hydrocarbons inside a rock formation. More than 60 per cent of oil and 40 per cent of gas reserves globally are estimated to be held in carbonate reservoirs. The new technology centre, spanning 8,000 square metres, is slated to be up and running by the end of the year. Adnoc’s R&D budget is mostly geared towards its brownfield projects, or fields that are already producing. Mr Al Hendi said that it was about a 70-30 ratio of brownfield to greenfield (new developments) for R&D investment.

Amid lower operational expenditure, projects such as the enhanced oil recovery process, which will help extend the lifespan of producing fields by injecting gas, chemicals or steam into the oil reservoir, become even more critical. Although the global average for recovery stands at about 35 per cent, Adnoc is looking to increase oil recovery rates to 70 per cent at its fields. “Many thought it was unrealistic to increase recovery to 70 per cent, but we believe its unrealistic to leave it at 30 per cent,” said Mr Al Mazrouei. Abu Dhabi wants to be at the forefront of technology, and Mr Al Hendi said that Adnoc’s R&D was strategic and for the long term.




UAE: Solar has become dazzlingly cheap for new plants The National + NewBase

‘I believe solar will be even more economic than fossil fuels,” said the Saudi oil minister Ali Al Naimi at a climate change conference in Paris last week. Recent bids in Jordan confirmed last year’s results from Dubai – solar is now cheaper than gas-fired power in this region, with major implications for energy strategies. ( gas prices in the region 10 U$D/MMBTU) In Manaar Energy’s 2012 report, “Sunrise in the Desert”, published in collaboration with PwC and the Middle East Solar Industry Association, we were optimistic on the future of solar power in the region and saw it as competitive with power generation from oil or from more expensive gas. Costs have halved in just three years, meaning solar can now beat all conventional generation apart from the very cheapest gas.

Bids in Jordan’s recent solar auction were just over 6 US cents per kilowatt-hour, slightly above the record 5.84 cents from Acwa Power last November for the 200- megawatt second phase of Dubai’s Mohammed bin Rashid Al Maktoum solar park near Bab Al Shams. Egypt, struggling with a gas and power crisis, is up next with a reported 6,500MW of solar deals.

Solar prices should continue to fall because of improvements in manufacturing and installation, and steady gains in efficiency. There is also the possibility of breakthroughs, such as the recently announced possibility of perovskite crystals replacing silicon, which could be cheaper and capture a broader range of the sun’s light.

What does this mean for Middle East countries’ energy sectors?

There is no need for over-elaborate national renewable energy strategies. Some of these can even be counterproductive if they obstruct progress on building real projects. Petroleum-poor




countries such as Jordan should seize the opportunity now to boost their economic and energy security.

Utilities need to revamp their plans to include a large share of solar power in new generation. Any country burning oil for power – such as Saudi Arabia, Kuwait, Egypt, Jordan, Lebanon, Iraq and Iran – should plan to replace this with solar as much as possible. Although liquefied natural gas prices have dropped sharply, territories using imported LNG – Kuwait again, Dubai, Egypt and in the future Bahrain and Jordan – can also replace some expensive imported fuel.

However, cutting fuel use significantly will require heroic amounts of solar power – saving one-third of Dubai’s gas use could require 14 gigawatts of solar – compared to its 2030 target of 3GW and its total gas-fired generation capacity today of 9.65GW.

The first generation of regional solar power depended on a few heavily subsidised pilot projects. We are now entering the second generation, when solar will often be the cheapest choice on its own merits.

Realising the full benefits of the Middle East’s solar potential requires a third generation that needs to solve two key issues. The first is meeting the need for electricity outside the periods of maximum solar output – particularly the early evening peak demand in summer, when the sun has set but residents come home and turn on air conditioners, lights, televisions and cookers.

Solutions to this issue of intermittency could include grid interconnections to other countries with different demand patterns. Batteries can store electricity, with some exciting – although perhaps over-hyped – recent discoveries that could bring down costs. Better demand management could also help – for example, using appliances in off-peak periods, cooling down buildings before the early evening or freezing stocks of water into ice that would provide cooling as they melt.

The second issue is the region’s demand for desalinated water, traditionally met by cogeneration using the waste heat from gas-burning power plants. Solar electricity could drive reverse osmosis plants, and Masdar is working on desalination using the sun’s heat directly.

More such opportunities to save fossil fuels and reduce climate impact will undoubtedly emerge. For now, the priority is to seize the opportunity of lower solar costs and build real projects.




Oman: Wind energy, pumped storage mooted for Duqm SEZ Oman Obsover + NewBase

A Belgian firm specialising in offshore renewable energy and storage solutions is mooting a combination of wind energy and pumped hydro storage (PHS) to power the Duqm Special Economic Zone (SEZ).

Antwerp-based Rent-A-Port Energy says a study it conducted jointly with Sultan Qaboos University (SQU) has established the feasibility of developing “cost-efficient large-scale energy storage facilities” that will take advantage of the topography of the Duqm shoreline. These Pumped Hydro Storage plants are proposed to be developed in conjunction with large-scale wind farms that will harness Duqm’s abundant wind energy resources.

According to Bruno Reul, Project Manager at Rent-A-Port Energy, seawater storage reservoirs built atop the limestone cliffs and headlands overlooking the sea at Duqm will serve as ‘hydraulic heads’ to generate hydro-electricity via turbines during the day. At night, when electricity demand typically falls, surplus power from the wind farm will be utilized to pump seawater back up into the cliff-level reservoirs.

Presenting at a key forum held in Muscat last week, Reul said renewables and pumped hydro storage were the way forward for meeting the energy needs of a remote location like Duqm. “Currently, Duqm is not integrated with the national grid, and relies fully on diesel-based power supply. In this context, renewable energy sources (RES), and especially wind power, are not only fully competitive, but also cost-advantageous. But due to their intermittency, renewables enjoy limited penetration rates in the current energy mix,” he said.

“Even with pumped hydro storage, wind energy remains competitive when compared with gas and oil-based alternatives. Our pre-feasibility study shows that very significant cost savings can be achieved by combining wind power with pumped hydro storage (PHS), in comparison with 100 per cent diesel generation,” he added.

Via its specialized sister company Rent-A-Port Energy, Rent-

A-Port is involved in a wide range of renewable energy

projects, including the concession of offshore wind farms and

the storage of energy in offshore storage projects.




Rent-A-Port Energy acts as a project developer, setting up partnerships and dedicated companies that implement innovative energy projects. The company, together with its sister company Rent-A-Port, has access to a very wide network of potential partners and sponsors worldwide. Significantly, Rent-A-Port is a part of Consortium Antwerp Port (CAP), which is a 50 per cent shareholder in Port of Duqm Company.

Rent-A-Port Energy has already developed a portfolio of projects — some operational, other in various stages of implementation —- that are based on the same concept at the heart of the Duqm proposal. It owns stakes in three upcoming offshore wind farms in Belgium of a total capacity 780MW. Besides, it is developing a pumped water storage project, as well as an offshore grid venture in Belgium.

As for Rent-A-Port Energy’s proposal for Duqm, Reul said: “A Pumped Hydro Storage facility of 20 MW, together with a 50MW wind farm, will initially meet 50 per cent of the energy needs of Duqm. This will result in savings of 45 per cent if the alternative was diesel based generation. Without storage, the savings will be a mere 10-15 per cent. The capacity of the wind farm can also be

gradually expanded to 150 MW after 10 years.”

“Longer term, 20MW storage can also help to balance the local grid. Storage and pumped hydro storage, with high flexibility and fast response time, can really be a good tool in maintaining supply of good quality electricity from the grid,” he added




Iraq: WesternZagros announces - updates operations Source: WesternZagros

WesternZagros Resources has announced its operating and financial results for the first quarter

ended March 31, 2015. WesternZagros achieved several key financial and operational milestones

during the first quarter of 2015 and to date, including:

• Production from the Sarqala-1 well in the Garmian Block commenced on February 11, 2015, and for the remainder of the quarter averaged 5,221 barrels of oil per day ('bbl/d').

• Gross sales were 255,807 barrels of oil ('bbl'), of which WesternZagros's net oil sales were 68,997 bbl. Sales revenue to WesternZagros was $2.9 million, reflecting an average realized price of $41.71 per barrel. Field netback was $1.9 million.

• Gross production from Sarqala-1 is anticipated in the range of 5,700 to 6,700 bbl/d for the remainder of 2015.

• Prepared well site and secured long lead equipment for the next development well on the Sarqala oilfield. This well is anticipated to spud pending approval of the Garmian Development Plan by the KRG in accordance with the PSC terms.

• Commissioned the Sarqala production facility upgrades that increased processing capacity from 10,000 to 15,000 bbl/d with the capability to tie in future Sarqala development wells.

• In the process of suspending the Hasira-1 well after conducting an unsuccessful cased-hole testing program in the high pressure Mio-Oligocene oil reservoir.

• Maintained a strong balance sheet with $158.6 million in cash and cash equivalents as at March 31, 2015 and an available $200 million undrawn credit facility. Focusing on capital efficiency and prioritized strict cost reduction efforts including optimizing capital investment, reducing staff, renegotiating contracts with service companies and cutting discretionary expenditures.




Indonesia: PETRONAS achieves first oil from the Bukit Tua Source: PETRONAS PETRONAS reached a significant milestone in its upstream operations in Indonesia with the first oil achieved from theBukit Tua field on 17 May 2015.

PETRONAS’ General Manager and Country Chairman of Indonesia Operations, Hazli Sham Kassim said, 'We are proud that the Bukit Tua field has come on stream today and this is PETRONAS’ biggest upstream project in Indonesia, so far. This upstream project is an integrated development as it also involves the development of other supporting facilities such as Ratu Nusantara Floating Production, Storage and Offloading facility (FPSO), a 110km subsea pipeline and a 4.7ha onshore receiving facility (ORF),' he added.

Located in the Ketapang Block approx. 110km offshore East Java, theBukit Tua field is expected to produce 3,700 barrels of oil per day (bopd) and 2 million standard cubic feet of gas per day (mmscfd) in its initial production stage. Upon ramping up the field, the production will increase gradually before reaching its peak production capacity of 20,000 bopd of oil and 50 mmscfd of gas. The gas produced from the field will be transported through a pipeline to the ORF in Gresik, East Java while the oil will be offloaded to carriers for export. Petrogas Jatim Utama, owned by the East Java provincial government, has signed gas sales and purchase agreement with PETRONAS whereby it will purchase the gas produced from the field for electricity generation to meet Indonesia’s energy demand.

The Ketapang Block is operated by Indonesian Subsidiary of PETRONAS, PC Ketapang II Ltd (PCK2L) with an 80% interest in the block. The remaining 20% is held by state-owned Perusahaan Gas Negara through its subsidiary PT Saka Ketapang Perdana.




Every $1bn Mena infrastructure spend can create 26,000 GCC jobs’ Gulf Times

Every $1bn invested in the Mena region on infrastructure could create some 26,000 jobs in the GCC (Gulf Cooperation Council) countries, a top executive has said. Speaking at the World

Economic Forum, which recently concluded in Jordan on Saturday, Majid Jafar (pictured), CEO of Crescent Petroleum said such an investment could create in excess of 110,000 jobs in the oil-importing countries or 49,000 jobs in developing oil exporting countries. Jafar, also a member of the Global Agenda Council on the Middle East and North Africa at the World Economic Forum, highlighted that strategic infrastructure investment plays a

critical role in supporting much-needed growth and development in the region in order to tackle the major challenge of youth unemployment. Speaking alongside former British Prime Minster Gordon Brown and the vice chairman of GE, John Rice on the plenary panel entitled “Infrastructure for Development” on the final day of the Forum’s Mena Summit at the Dead Sea, Jafar described the key drivers of strategic investment into regional infrastructure, with a particular focus on power generation, regulatory challenges, and the role and duty of the region’s private sector companies in partnering with governments in solving the infrastructure challenges of today, and creating the jobs and prosperity for tomorrow. “The key regional social and economic challenges – especially demand for jobs for young people – require new era of public-private partnership in infrastructure to support the over $100bn needed for investment and maintenance each year in the Mena (Middle East and North Africa) region,” Jafar said. Annual spending needs of $106bn include $46bn of new investment and $59bn of maintenance, and by meeting the investment needs, according to the World Bank, the Mena region could generate 2.5mn additional jobs. Seeing infrastructure development as essential to provide the millions of jobs needed in a young and growing region, providing hope, stability and livelihoods, and encouraging entrepreneurship, Jafar stressed the gap in such investments in the Middle East region compared to other developing regions.

“On average across the Mena Region, about 5% of GDP is allocated to infrastructure, whereas the proportion in China is three times higher at 15%. Tackling energy subsidy reform in our region can free up hundreds of billions of

dollars for productive investment that will lead to more jobs, higher standards of living, and stronger economic competitiveness for our region’s future,” Jafar added.




Indian Firms Eye Mexican Oil, Gas Exploration Space The Economics Times + NewBase

Indian companies are willing to participate in the exploration and production activities in Mexico including in deep water and unconventional resources, India’s petroleum Minister Dharmendra Pradhan told Mexican officials during his recent visit to the central American nation.

During the two-day official visit Pradhan held bilateral talks with his counterpart minister of energy of Mexico Pedro Joaquín Caldwell. He also met minister of economy Ildefonso Guajardo Villareal and CEO of national oil company of Mexico PEMEX Emilio Lozoya Austin.

Mexico has recently opened up the energy sector for private and foreign participation. This has offered India opportunity for enhancing and diversifying bilateral energy cooperation, the ministry of petroleum said in a statement.

Presently, IOC, RIL and ESSAR buy about 6 MMT of crude oil from Mexico. ONGC Videsh has decided to open its office in Mexico City to

pursue opportunities in upstream sector. It has also signed a MoU with PEMEX for cooperation in upstream sector.

Pradhan also offered to help Mexico upgrade its refining sector, saying India has emerged as a modern refining hub with expertise to develop complex refineries in a most cost-effective manner, the statement added.

OVL signed an MoU with PEMEX for cooperation in upstream sector. The Mexican Energy Minister and CEO, PEMEX invited Indian investment in all streams of hydrocarbon sector, the statement said.

"The two sides agreed that it would be

a win-win situation for both countries to intensify energy cooperation. The two ministers agreed to set up a joint working group on hydrocarbon at the official level to identify concrete areas of cooperation in the oil and gas sector," it added.




US: Net imports of natural gas fall to lowest level since 1987 US Energy Information Administration, based on U.S. Department of Energy Office of Fossil Energy

U.S. net imports of natural gas decreased 9% in 2014, continuing an eight-year decline. As U.S. dry natural gas production has reached record highs, lower domestic prices have helped to displace natural gas imports. Net natural gas imports (imports minus exports) totaled 1,171 billion cubic feet (Bcf) in 2014, the lowest level since 1987.

Imports by pipeline from Canada account for nearly 98% of all U.S. natural gas imports, and were the main driver of the decrease in total imports. Net imports from Canada represented 7% of total

U.S. natural gas consumption in 2014, down from 11% in 2009. U.S. natural gas exports also decreased in 2014, but at a slower rate than the decrease in imports, and were still 9% above the previous five-year average. Natural gas exports to Mexico, which account for nearly 50% of U.S. natural gas exports, increased 12% in 2014.

Net imports of liquefied natural gas (LNG) in 2014 totaled 43 Bcf, down 54% from the level in 2013 and continuing a five-year decline. LNG exports increased from 2013 levels, but not enough to offset a nearly 40% decrease in total LNG imports in 2014.




Net imports of natural gas have varied significantly around the country. New production from shale and other tight resources has helped to displace imports in certain regions. EIA's most recent analysis of natural gas imports and exports highlights regional trends in natural gas trade:

• Inflows of natural gas from Canada were equivalent to 50%-80% of New York’s natural gas consumption as late as 2008. In 2014, however, outflows of U.S.-produced natural gas through pipelines that crossed into Canada through New York state exceeded inflows of Canadian gas through pipelines into that state, as increased production from the Marcellus region outpaced regional demand.

• Pipeline outflows of natural gas crossing into Canada through Michigan and Minnesota exceeded inflows of natural gas, but inflows increased and outflows decreased in 2014, likely because of increased demand during the winter months of 2014.

• Natural gas exports to Mexico through pipelines crossing the international border in Texas, California, and Arizona increased to a record 706 Bcf in 2014 to meet increasing demand from new natural gas-fueled power plants in Mexico. Higher production of natural gas from the U.S. Gulf Coast and the Eagle Ford Shale in southern Texas contributed to the increase in exports to Mexico.

The average price difference between natural gas exports and imports (price differential) was 15% lower than the five-year average at $0.21 per thousand cubic feet (Mcf) in 2014. The pipeline import prices were 7% greater than the pipeline export prices in 2014 compared with 2013 prices, resulting in a net decrease of the price differential in 2014.

As of March 2015, Cameron LNG, Carib Energy, Dominion Cove Point LNG, Freeport LNG, Jordan Cove Energy Project, Lake Charles Exports, LNG Development, and Sabine Pass Liquefaction are the only companies that have received approval from the U.S. Department of Energy to export domestic LNG to both Free Trade Agreement and non-Free Trade Agreement countries.

U.S. Department of Energy regulates the imports and exports of the natural gas commodity, for authorization to export domestic LNG to foreign countries. Most of these companies also need approval from the Federal Energy Regulatory

Commission (FERC), which regulates the construction of facilities for imports and exports, to build LNG export facilities. Sabine Pass, Cameron LNG, Freeport LNG, Cove Point, and Corpus Christi LNG have received FERC's approval to construct liquefaction facilities in the Lower 48 states.




Oil Price Drop Special Coverage

Oil prices edge up on firm Asian, U.S. demand Reuters + NewBase

Crude oil futures edged up on Monday, buoyed by healthy Asian appetite and demand from the U.S. driving season. Front-month Brent crude prices had gained 2 cents to $65.39 per barrel by 0312 GMT. U.S. crude prices were up 14 cents at $59.86 a barrel.

"Global oil demand continues to surprise to the upside, with April data showing no signs of slowdown despite a pick-up in prices," Energy Aspects said.

Japan's customs-cleared crude oil imports rose 9.1 percent to 3.62 million barrels per day (17.28 million kilolitres) in April from the same month a year earlier, the Ministry of Finance said on Monday.

In China, crude imports hit a record 7.4 million barrels per day in April despite a slowing economy, driven largely by healthy car sales.

"We expect Chinese imports to be high in H2 15, potentially averaging 7.5 million barrels per day. This is due to the start-up of 39 mb (million barrels) of commercial storage, five SPR (strategic petroleum reserve) sites and linefill for Kunming refinery-buying for which is ongoing we believe, even though the refinery won't start up till early 2016," Energy Aspects said.

In the United States, the peak summer driving season officially starts with Memorial Day on Monday, and the American Automobile Association said road travel was expected to reach a 10-year high over the Memorial Day weekend, suggesting strong fuel consumption over the next three days.

In oil exporting Libya, warplanes from the official government attacked an oil tanker docked outside the city of Sirte on Sunday, wounding three people and setting the ship on fire, officials said.




It was the third confirmed strike by the internationally recognised government on oil tankers, part of a conflict between competing administrations and parliaments allied to armed factions fighting for control of the country four years after the ousting of Muammar Gaddafi.

Analysts said that steeper increases in oil prices were prevented by weak overall fundamentals. "The overall fundamentals still point to a well-supplied market, a fact that should continue to put a ceiling on prices," Barclays said.

Singapore-based Phillip Futures said that it expected WTI and Brent July 2015 contracts to remain above $58.49 and $64.35 respectively, provided oil fundamentals do not change.

Rig Count

Brent for July settlement was 2 cents lower at $65.35 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $5.51 to WTI.

The U.S. drill rig count has decreased by 58 percent since Dec. 5, data from Baker Hughes, an oilfield-service company, showed on its website. Crude stockpiles were at 482.2 million barrels through May 15, more than 100 million above the five-year average for this time of year, according to the EIA, the Energy Department’s statistical arm.

The Chicago Board Options Exchange Crude Oil Volatility Index closed at 31.29 on Friday, advancing for the first week since March. The gauge of hedging costs on the U.S. Oil Fund, the

largest exchange-traded fund tracking crude futures, slumped 32 percent last month.

OPEC Supply

The world economy needs stable oil prices, Venezuela’s Maduro said in a national address broadcast on radio and television Sunday. The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s crude, is scheduled to meet June 5 in Vienna to discuss its production policy.

OPEC at a November gathering resisted calls to cut output to support prices, maintaining its collective quota at 30 million barrels a day. The 12-member group pumped 31.3 million a day in April, exceeding its target for an 11th consecutive month, a Bloomberg survey of companies and analysts showed.

In Libya, warplanes deployed by the internationally recognized governmentbombed a tanker carrying fuel from Greece at a port controlled by Islamist leaders, the regional coastguard commander said. Conflict has split the nation that holds Africa’s biggest oil reserves, reducing its production to about 400,000 barrels a day, according to state-run National Oil Corp.




Gulf producers are seen resisting production cuts at Opec meeting

Gulf oil producers, led by Saudi Arabia, will resist attempts to cut output at an Opec meeting next

month as preserving market share remains their top priority, industry analysts said. A decision by

the 12-member Organisation of Petroleum Exporting Countries not to cut production in November

sent prices crashing 60% before a partial recovery in recent weeks.

Gulf and other Opec members said they wanted to safeguard their share of a market that has faced a supply glut as a result of sharp increases in the production of shale and sand crudes. “Preserving market share still remains a top priority for Gulf states,” Saudi economist Abdulwahab Abu-Dahesh said. “This time they are even encouraged by signs their November strategy is working after a drop in US shale oil production and in the number of rigs,” Abu-Dahesh told AFP. In the face of the sharp drop in their earnings, some Opec members, led by Iran and Venezuela, have publicly called for the group to cut production to support prices. “I don’t thing that any change will happen at Opec’s meeting,” a former member of Kuwait’s Supreme Petroleum Council, Musa Maarafi, said. “Gulf states will continue to defend their market share and it is their right to do so,” Maarafi told AFP. “They will not accept to cut output at their own expense unless an agreement is reached with non-Opec producers.” The burden of any cut in Opec output would likely fall on the group’s Gulf members — Saudi Arabia, Kuwait, the UAE and Qatar — whose production has risen by around 3.5mn bpd since 2011. Currently, they pump 16.8mn bpd, or 55% of Opec’s total, with Saudi Arabia accounting for 10.3mn bpd. They export around 12.5mn, almost two-thirds of the group’s total. Head of marketing




at national oil conglomerate Kuwait Petroleum Corp (KPC) Jamal al-Loughani told a symposium last week that a change in the global energy map has made market share a highly sensitive issue. He said the sharp rise in US production to 9.4mn bpd had allowed Washington to stop light crude imports from Africa. It also cut imports of heavy oil from Latin America, substituting it with Canadian sand oil. “That led African and Latin American exporters to seek new markets in the east,” said Loughani, adding that more than 3.0mn bpd of additional high good quality crudes are being pumped into these markets in competition with Gulf exports. “That places additional pressure on Opec members, especially Gulf exporters, to cooperate to maintain market share and even ensure new takers for additional quantities in the future,” he said. A relative rebound in prices and a drop in US shale oil output are likely to convince Opec to continue with its strategy. Data from the US Department of Energy showed US crude production dropping 112,000 bpd to 9.26mn bpd in early May. “Prices are improving, growth in supplies from outside Opec — especially shale oil — is lower than before and demand is recovering,” Kuwait’s governor at Opec Nawal al-Fuzai told reporters last week. Over the past few weeks, oil prices have climbed about 40% but remain well below their levels of more than $100 a barrel in June last year. Al-Fuzai said crude oversupply dropped from around 2mn bpd late last year to between 1mn and 1.2mn now. But Commerzbank warned in early May that “the oil market will continue to be oversupplied until Opec significantly cuts its output.” And the International Energy Agency reported that Opec’s output hit 31.21mn bpd in April, the highest level since September 2012. “It would thus be premature to suggest that Opec has won the battle for market share,” the IEA said. “The battle, rather, has just started.”




US drivers yield ‘swing’ oil demand crown to Saudis

Reuters + NewBase + Oman Observer

As the United States raced over the past five years towards becoming a global petroleum powerhouse, the world’s biggest oil exporter Saudi Arabia quietly seized a market milestone from America: the largest source of peak summer demand.

From June through August, when temperatures in Riyadh routinely rise above 100 degrees Fahrenheit (38 degrees Celsius), Saudi Arabia diverts as much as a tenth of its crude output to fuel power plants that run full tilt to meet surging demand from air- conditioners.

The result is that Saudi Arabia’s winter-to-summer “swing” in oil consumption has eclipsed that of the United States, where gasoline consumption jumps by as much as 10 per cent every summer as millions of families take advantage of school holidays and warm weather to embark on the classic American road trip.

This May 23-25 Memorial Day weekend, however, that trend may begin to reverse as the most Americans in a decade will fill up their gas tanks and rev up their engines for highway holidays, taking advantage of lower gasoline prices and a growing economy.

The American Automobile Association predicts a 5.3 per cent rise in Memorial Day car travel to the highest level in 10 years. The boost at the pumps will add to already strong demand for gasoline after years of diminishing use because of a switch to more fuel-efficient cars.

“The fall in prices is trumping the efficiency gains for the summer,” says Amrita Sen, chief oil analyst at Energy Aspects. Saudi Arabia is likely to maintain or even extend its use of domestic crude and fuel in power plants this summer, according to Sen and other analysts.




Yet the country appears to be making some progress towards slowing its dependence on one of the most costly forms of electricity. There is growing debate in Saudi Arabia over higher power tariffs that might curb wasteful use, and a younger generation of Saudis are coming of age in an era of conservation, says Professor Paul Stevens, a Senior Research Fellow for Energy at Chatham House who co-authored a 2011 report on the issue.

Saudi use of oil for power will be “continually growing, but not at the sort of growth rates of the past 10 years,” Stevens said. The surge in summer demand this year will have an even greater significance for global oil prices than usual, as bullish traders are counting on it to help drain inventories that swelled at a rate of more than 1.5 million barrels per day in the first half of this year.

In the United States, gasoline demand is expected to grow by about 524,000 bpd between the first quarter and the June-August period, according to the US Energy Information Administration, although some analysts expect more.

Saudi Arabia’s peak crude oil burn rate is likely to top 900,000 bpd this summer, analysts say, up from around 350,000 bpd in winter, according to the Joint Oil Data Initiative. But consumption of refined fuels such as diesel, some of which is also used in power plants, also surges in summer, taking the total seasonal swing to around 1.2 million bpd, a 50 per cent jump in domestic demand.

Saudi Arabia’s power challenge began a decade ago as high hopes for a booming domestic natural gas industry began to fizzle just as rising oil prices fuelled an economic upturn, both from wealthier citizens and a small but growing industrial base. In the 10 years to 2012, total power generation more than doubled, with two-thirds of the growth met by burning oil.

To meet the surge at the peak of summer, Saudi Arabia, home to approximately 16 per cent of all crude oil reserves, has simply pumped additional crude to use at home. That may be more of a problem this year.

The Kingdom had already ramped up production to a record 10.3 million bpd in March, nearing its maximum 12.5 million bpd capacity, and is turning down requests from Chinese buyers for extra supplies, senior Chinese oil traders said. Beyond this year’s strain, however, there may be hope.

And Saudi Aramco hopes to start up its vast Wasit Gas Plant, increasing the country’s processing capacity by 40 per cent and feeding a new 750 megawatt cogeneration plant. The plant, however, is not expected to run at full until 2016.

In the United States, the swing in highway travel has been around about as long as the automobile. Last year, Americans drove more than 1 billion more miles a day in the peak summer months than in winter, a swing of some 14 per cent, according to Department of Transportation mileage data. Highway activity is also likely to be substantial this year because fuel prices are $1 lower than a year ago (although about 70 cents higher than in January) and employment levels are the highest since 2008.

The response is already apparent in first quarter data, with miles-driven jumping 3.9 per cent to the highest on record, government data show. More than one in four Americans will travel longer on holiday this summer, with 86 per cent of those going by car, according to a National Association of Convenience Stores (NACS) survey.

Road trips are not the only factor, said energy economist Philip Verleger. He argues the period should be known as the “construction season” because the increase in building activity accounts for a larger share of the rise in demand.




US new housing starts jumped 20 per cent to their highest level in nearly 7 1/2 years in April. In the long term, the relevance of the US driving season seems likely to fade, with lower airfare rates attracting more travellers and stricter fuel efficiency standards curbing use. Demographics are also playing a role.

In 2012, barely half a per cent of all 16- to 19-year-olds had drivers licenses, the lowest share in records going back 50 years, according to a NACS report.

Getting a license “used to be the primary right of passage for a teenager — now that’s more like a Facebook account,” said Jeff Lenard, a vice president at NACS. ‘‘They can still hang out with friends without leaving the house.”




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

experiences in the designing & constructing of gas pipelines, gas metering & regulating stations and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation, operation & maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcasted internationally, via GCC leading satellite Channels.

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