Microsoft word new base 659 special 06 august 2015

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NewBase 06 August 2015 - Issue No. 659 Senior Editor Eng. Khaled Al Awadi

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

Egypt shows off $8bn new ‘gift’ to the world Guilf Times +Bloomberg+ NewBase

The Suez Canal took 10 years to build and cost thousands of workers their lives. When planners suggested three years for a second one, Egypt’s president balked. “Not three years, just one,” he ordered.

Twelve months later, Abdel Fattah al-Sisi is hosting a party to celebrate the biggest expansion of the canal since it first opened in 1869. For the former army chief seeking to bolster his rule, the symbolism is impossible to miss.

Less clear are the economic benefits of what billboards in Cairo and New York’s Times Square dub “Egypt’s gift to the world,” which will raise capacity and shorten the time it takes to sail the 193km (120-mile) link between the Red Sea and the Mediterranean. Today’s ceremony, to be attended by dignitaries from French President Francois Hollande to North Korea’s deputy leader Kim Yong Nam, comes amid sluggish global trade growth to which the canal’s fortunes are linked.

“From a shipping industry point of view, this initiative to expand the Suez Canal was a bit of a surprise,” said Ralph Leszczynski, Singapore-based head of research at Genoese shipbroker Banchero Costa & Co. “There was no pressing need or requests for this as far as I’m aware.”

Suez has yet to fully recover since the global financial crisis caused shipping to plummet in 2009. Though total tonnage has increased, the number of vessels using the canal remains 20% below its 2008 level and just 2% higher than a decade ago, data compiled by Bloomberg show.

Rather than a bottleneck, analysts say those statistics reflect slower global trade growth, which the International Monetary Fund expects to average 3.4% in the period 2007-2016, compared with 7% over the previous decade.




The Baltic Dry Index, which measures rates for shipping iron ore, coal and grain and is viewed as a bellwether for the global economy, slumped to a record low 509 points in February. It remains about 90% below its all-time high of 11,793 reached in 2008.

“At the moment, speed is not a key factor for container shipping, the shipping sector which most utilises the canal,” said Michelle Berman, the head of operational risk at BMI Research, a unit of Fitch Group. A bigger issue is a “surplus of ships” relative to demand, with ever-larger vessels built for the Asia-Europe route compounding the problem, she said.

The government hasn’t made public viability studies to show how it will gain a return on its 64bn Egyptian pound ($8.2bn) investment. The expansion will meet future demand, with traffic expected to double to 97 vessels a day by 2023, said Mohab Mameesh, head of the Suez Canal Authority.

“By creating a second lane of the canal we are able to reduce waiting times, which reduces fuel expenditures and costs, with no increase in our toll fees,” he said in an e-mailed response to questions.

Global trade volume would need to rise by around 9% a year for Suez to reach its traffic goal, Capital Economics said in a report on Monday, describing the target as “unlikely to say the least.”

That hasn’t stopped al-Sisi and his government from talking up the new canal amid political challenges to its rule.

The political turmoil has polarised Egyptians. Al-Sisi supporters say it saved the country from the deadly strife affecting much of the Middle East, while opponents criticise the government’s human rights record and what they regard as brutality used to restore stability.

Today’s party, with an estimated price tag of $30mn, is a chance for the government to send a more positive message by harking back to the events marking the canal’s 1869 completion. French empress Eugenie attended - her husband Napoleon III was deposed a year later - and a performance of Giuseppe Verdi’s ’Rigoletto’ opened Cairo’s new opera house.

The canal has since transformed global trade.




About 8% of the world’s cargo now passes through the canal, according to the Suez Canal Authority. Travelling from Singapore to New York through Suez reduces the distance by 19% compared with the route via the Pacific and the Panama Canal. From the Arabian Gulf to Rotterdam, Suez saves 42% by removing the detour around the Cape of Good Hope.

“Even without any improvements, the canal would always be attractive,” said Neil Atkinson, head of analysis at Lloyd’s List Intelligence.

The second canal - actually a new 35-kilometer channel and 37 kilometres of widening and deepening of the original - allows two-way traffic and reduces transit time to 11 hours from 18, according to the canal operator. The expansion won’t allow larger vessels to use the route.

New ports and logistical services are expected to follow, and the project includes six tunnels under the canal. The authority expects revenue to grow to more than $13bn by 2023, up from $5.5bn in 2014.

“‘Build it and they will come’ is not enough,” said Simon Kitchen, a strategist with Cairo-Based investment bank EFG- Hermes, adding that companies will require incentives to build factories and other facilities. “The government needs to give ships a reason to sail through the canal,” he said.

Others are more positive. Egypt’s economy grew at over 4% in the nine months to March for the first time since 2010, mainly due to infrastructure spending related to the canal upgrade, according to investment bank Pharos Holding for Financial Investments.

A shorter transit may save up to 4% of journey costs depending on the length, the Napoli-based economic research centre SRM estimates.

The project “was a necessity to maintain the attractiveness of the Suez Canal,” said Michael Storgaard, a spokesman for Maersk Line, the world’s biggest container shipping company. Even so, it’s too early to say whether Maersk will route more vessels through Suez, he said.

Still, any future economic payoff is trumped by the political implications for the government from building confidence in al-Sisi’s leadership, according to Amr Adly, a scholar with the Carnegie Middle East Center in Beirut.




Oman: Wind Atlas maps sites for wind energy projects Oman Observer

The Public Authority for Electricity and Water (PAEW), which is overseeing the formulation of a national strategy for renewable energy development in the Sultanate, has so far identified 15 sites around the country deemed optimal for wind power projects.

The mapping of sites is a key objective of the Oman Wind Atlas Project, an initiative launched by the Authority to help encourage investment in wind-based renewable energy schemes in the Sultanate.

The project, according to a senior official is now at an advanced stage, with the Authority preparing to erect wind masts at key locations to help in the gathering of bankable wind data — an essential prerequisite for the commercial exploitation of this resource.

“The aim is to identify and rank the best sites based not only on modelling and satellite data but also on the ground characteristics. To this end, we will install wind masts at 80 metres above ground at the best sites in order to collect bankable data,” said Khalil al Zidi, Senior Engineer — Renewable Energy, PAEW.

Al Zidi said the Wind Atlas project, part of a string of feasibility study and pilot initiatives launched by PAEW over the last several years, has made significant headway since it was rolled out a couple of years ago.

The initiative by Public Authority for Electricity and Water

identifies 15 locations deemed optimal for wind power




The first stage of the study, focusing on the identification and ranking of the best sites for wind farms, was scheduled for completion by around the middle of this year. The focus has since shifted to stage two of the study: the installation of 80-metre-high wind masts equipped with data measuring equipment, he said.

The official characterised the lack of bankable data as a significant “challenge” for the development of renewable energy resources in the Sultanate.

“To record such data, specialised instrumentation is required. Of course, the Public Authority for Civil Aviation has weather stations, but these are not designed or suitable for gathering bankable data. For example, to study the feasibility of wind power farms, it is necessary to install measuring systems at a height of 80 metres above ground, (which will be addressed when the wind masts are installed),” he explained.

Other barriers to renewable energy development in the Sultanate include the high capital costs of equipment and systems relative to conventional energy; subsidies — direct and indirect — on electricity; and the absence of a policy framework and target for adding renewables to the energy mix in the Sultanate, Al Zidi added.

Oman’s first commercial scale wind power project is currently under development at Thamrait in Dhofar Governorate with an investment of around $125 million.

The 50 megawatt (MW) capacity wind-based renewable energy project is being jointly developed by the Rural Areas Electricity Company (RAECO) of the Sultanate, and Masdar, Abu Dhabi’s renewable energy company. Around 16,000 homes will receive their energy needs from this landmark venture when it comes into operation in 2017.

22/10/2014 Masdar, Abu Dhabi's renewable energy company, on Wednesday signed a joint

development agreement with Oman's Rural Areas Electricity Company, RAECO, to build the

first large-scale wind farm in the Gulf Cooperation Council, GCC. The US$125 million, 50-

megawatt wind farm in the Sultanate of Oman will be constructed in the country's Dhofar

Governorate.




Gulfsands Petroleum announces half-year results - updates operations Source: Gulfsands Petroleum

AIM-listed Gulfsands Petroleum, with activities in Syria, Morocco, Tunisia and Colombia, has announced its results for the six months ended 30 June 2015 and provided an operations update. 2015 Half-Yearly Summary

• Group working interest Proved plus Probable Reserves of 73.5 MMboe.

• Syrian assets remain shut-in and secure during continuation of sanctions.

• Cash available for use by the Group of $1.5 million.

• Restricted cash balances after provisions for recoverability of $6.4 million.

• Drilling and testing of DRC-1 and DOB-1 proved up two further gas discoveries.

• Exploration and evaluation assets were impaired by $22.1 million in the period.

• Continued significant reduction in the ongoing office expenses across the Group.

• Initiated farm-out process for Moroccan and Colombian assets.

• The Company is preparing to raise approximately $22 million via an open offer to all shareholders.

Executive Chairman's Statement In the 2014 Annual Report I referred to several challenges for 2015, including restructuring of our portfolio, and refinancing of our business; I believe we are making progress on both of these.

The Group holds interests in several projects in Morocco, all at different stages in the exploration, development and production cycle; what is common to all our interests is that each has significant outstanding work commitments that need to be completed within the coming months. We have invested heavily in these assets, both in the acquisition of the interests and also in the field activities undertaken over the last two years. This

investment has led to a better understanding of the sub-surface structures which in turn culminated in the three discoveries at LTU-1, DOB-1 and DRC-1. However, we have decided that our financial exposure to these Moroccan assets should be reduced and we are actively




working with several parties who have expressed an interest in partnering Gulfsands, particularly in the Rharb Centre gas development area.

Gulfsands holds a 100% interest in the Chorbane contract in Tunisia. The current exploration period under the contract originally ran to mid-July 2015 and Gulfsands has submitted an application for a two year extension to this period, during which the work obligation of acquiring 200 km of 2D seismic and drilling one exploration well must be completed. If the application is successful the

Group will look to farm-down its 100% interest in exchange for a carried work programme; if the application is unsuccessful, the contract will terminate. The Group holds 100% interests in two Colombian exploration blocks. Under the contracts for Llanos Block 50 and Putumayo Block 14, the Group has a minimum work obligation of acquiring approximately 100 km of 2D seismic and drilling one exploration well on each block before November 2016 for Llanos Block 50 and November 2017 for Putumayo Block 14. The Group is actively seeking farm-in candidates to share the cost of the exploration programme on these blocks. In addition Gulfsands is the operator of the Block 26 Production Sharing Contract ('PSC') in Syria and holds a 50% working interest. The PSC is currently in force majeure as a result of the EU sanctions against Syria.




Indonesia: Pan Orient Energy reports on its Anggun Prospect Source: Pan Orient Energy

Pan Orient Energy Corp has announced the results of a recently completed third party engineer NI-51-101 compliant Prospective Resource Report for the Anggun Prospect, East Jabung Production Sharing

Contract ('PSC'), Indonesia effective June 30, 2015 and conducted by Gaffney Cline & Associates ('GCA').

Highlight

• Mean estimated ultimate recoverable ('EUR') oil Prospective Resources of 44, 28 and 51 million barrels net to Pan Orient's 49% working interest in three respective potential reservoir horizons at the Anggun Prospect.

Pan Orient President and CEO Jeff Chisholm commented: 'We are very pleased to disclose to shareholders the third party engineer estimates for a prospect of a size that is typically found only in deepwater or very remote areas of the world.

The Anggun prospect is a relatively shallow, onshore, high impact target adjacent to existing infrastructure and possesses some of the best fiscal terms in Indonesia. Success at Anggun would have the potential to materially transform Pan Orient within a framework of manageable appraisal and development costs and in the context of Pan Orient's available financial resources. Lastly, we are

pleased to be partnered with the operator Talisman Energy, one of the most experienced operators in South Sumatera, Indonesia.'




Egypt: Hibiscus Petroleum and Pacific Oil awarded South East Ras El Ush concession (Block 2) . Source: Hibiscus Petroleum

Hibiscus Petroleum has announced that its wholly-owned subsidiary, Gulf Hibiscus, has been awarded the South East Ras El Ush concession ('Block 2') in Egypt by the Ganoub El-Wadi Petroleum Holding

Company ('Ganope'), an entity of the Ministry of Petroleum, Arab Republic of Egypt.

The award was made pursuant to the successful submission of a bid by Gulf Hibiscus, together with its partner, Pacific Oil, for a joint equal ownership of the concession. Pacific Oil will be the operator of the concession, to leverage on its management team’s experience in Egypt.

Block 2 is an offshore exploration block located in the southern Gulf of Suez, the most prolific petroleum province in Egypt. The block covers an area of 68 sq kms with water depth of up to 75 metres, and is surrounded by development leases.

Block 2 also contains the discovered West Ashrafi field, which is included in the above Award of Concession, and may be developed with a production tie-in to the nearby existing onshore infrastructures. Two wells previously drilled in the West Ashrafi field had tested commercial oil and gas.

The award is subject to the execution of a definitive agreement. Gulf Hibiscus’ financial exposure to undertake the minimum work commitment is estimated to be approx. USD8 million over the first 4 years (first exploration phase).




Nigeria Backs Quick Cleanup of Half Century of Oil Spills Bloomberg - Sarah McGregor

Nigerian President Muhammadu Buhari said he’s accelerating plans for one of the world’s largest oil cleanups following 50 years of spillage at operations in the Ogoniland region of the Niger Delta.

Buhari on Wednesday approved the composition of a governing council and board of trustees to oversee the restoration plan. A group of “stakeholders” will release as much as $10 million within 30 days of formally creating a trust fund to manage financial contributions, according to an e-mailed statement from the office of the presidency.

The West African nation has been criticized for failing to act on a 2011 report by the United Nations Environment Programme that linked oil spills in Ogoniland to groundwater contamination, including cancer-causing substances, and polluted ecosystems, posing threats to the health of humans and wildlife. The UN said the recovery would be the world’s “most wide-ranging and long-term oil cleanup” lasting three decades and it would take an initial capital injection of $1 billion.

Royal Dutch Shell Plc agreed this year to pay 55 million pounds ($86 million) to compensate more than 15,000 residents, mostly fishermen, of the Bodo community in Ogoniland for two oil spills in 2008. The settlement ended a three-year legal tussle in a London court. More Transparency

Hundreds of spills occur every year in Nigeria, Africa’s top oil producer and largest economy, damaging the environment and destroying the livelihood of fishing and farming communities in the Niger Delta region. Pipeline ruptures can be caused by corrosion, poor maintenance and equipment failure, as well as by thieves and saboteurs.

Buhari pledged to resolve Nigeria’s deepest problems after taking office in May, in the country’s first peaceful transfer of power from a ruling party to the opposition. His commitments included boosting transparency in the oil industry, which provides the bulk of government revenue and has been hit by a plunge in prices. West Texas Intermediate rose 0.1 percent to $45.18 a barrel, paring the drop over 12 months to 53 percent.

The two organizations that will oversee the oil clean up will have representatives from the petroleum and environment ministries, the United Nations and the state-run oil company, according to the statement from Buhari’s office




Tanzania: Swala Energy receives ministerial consent to farm out Kilosa-Kilombero and Pangani licences to Tata. Source: Swala Energy

Swala Energy has received a no objection notice from the Tanzanian Ministry of Energy and Mines to the farm-out of 50% of its interests in the Kilosa-Kilombero and Pangani licences to Tata Petrodyne. With the receipt of consents from the Tanzanian Petroleum Development Corporation, the Tanzanian Revenue Authority and now from the Ministry of Energy and Mines, the Company is awaiting only the consent of the Fair Competition Commission ('FCC'). The Company shall update the market once this final consent is received.

Dr. David Mestres Ridge, Swala CEO, said: 'The rapid approval by the Tanzanian regulators to the farm-out of the Swala Energy licences illustrates their desire to encourage activity in this important economic sector. We are confident that the FCC consent shall be received soon, which shall allow Tata to join the licence joint venture ahead of the planned drilling campaign.'




Oil Price Drop Special Coverage

With crude at $50, oil firms fear deeper crisis than in 1980s Reuters + NewBase

After slashing spending by $180 billion to deal with one of the worst industry downturns in decades, oil companies are still bleeding cash and slipping further into debt to maintain dividends to shareholders.

Depressed crude prices - at below $50 a barrel Brent crude is half what it was a year ago - mean even more cuts are needed at new projects and existing operations. Companies trying to dispose of oilfields to raise cash could be forced to sell quickly and for less than they hoped.

There is little sign that the oil price will come to the rescue as the Organization of the Petroleum Exporting Countries (OPEC) continues to pump hard into an oversupplied crude market in response to explosive growth in U.S. shale oil.

Brent is expected to average $60.60 in 2015 and $69 in 2017, according to a Reuters poll of analysts. The International Energy Agency said in February it saw it recovering to $73 in 2020 as the supply glut slowly eases.

Analysts at investment bank Jefferies say international oil companies lowered their break-even points by $10 a barrel after the latest round of spending cuts, but will still need a price of $82 a barrel in 2016 to cover spending and dividends, which have been the main investment attraction for the sector for decades.

"In order to cover the shortfall, the sector will increase its borrowing. While leverage remains manageable within the sector, this is not a practice that can continue in perpetuity,” Jefferies said in a note on Wednesday.




Oil majors such as Royal Dutch Shell (RDSa.L), Chevron (CVX.N) and Total (TOTF.PA) are helped by profitable refining operations. Most are increasing oil and gas output, squeezing as much revenue as they can from past investments but exacerbating the oversupply.

Spending next year is expected to decline by a further 5 to 15 percent depending on the oil price, according to Oslo-based consultancy Rystad Energy. The world's top oil companies used second-quarter results to show they were ready for deeper, more painful measures.

"The tone has changed. Maybe we didn't quite create the right impression of urgency back in January," said Shell Chief Executive Officer Ben van Beurden.

BP Chief Executive Bob Dudley said "oil prices will be lower for longer".

Part of the problem for the oil majors is that large national oil companies and shale producers have increased their share of global production gradually for years, leaving the majors victims of forces largely beyond their control.

Their heavy investment cuts are expected to lower global production capacity by 2 million barrels per day by 2020, according to Rystad Energy. But OPEC producers will only move in to make up the shortfall.

"This has been really a tough time for the industry from Aberdeen to Angola to Houston ... It does feel like 1986," BP (BP.L) CEO Dudley said last week after a near two-thirds drop in quarterly profit.

In late 1985, oil prices slumped to $10 from around $30 over eight months as OPEC raised output to regain market share following an increase in non-OPEC production. The industry responded by cutting spending by nearly a quarter and slashing its workforce by a third, according to Morgan Stanley. Prices gradually recovered over the next decade as global demand rose.

But today's supply overhang could last much longer. "If oil prices follow the path suggested by the forward curve ... this downturn would be more severe than that in 1986," Morgan Stanley said in a note.

The $180 billion of cuts this year represent roughly a 20 percent drop from 2014, according to Rystad. Oil companies have deferred up to $200 billion worth of projects including complex, expensive ventures that hold huge resources, such as Canadian oil sands and deepwater projects in Africa, Southeast Asia and the Arctic.

Production lags investments by a minimum of six months for onshore drilling, but up to ten years for complex deepwater fields, liquefied natural gas projects or Canadian oil sands mega projects.

Some observers say the industry needed an efficiency drive with or without the oil price slump, after operating costs tripled over the past five years.

BP found it easier to adapt to the halving of oil prices because it had already sold $45 billion of assets and lowered costs to cover the huge clean-up and fines from the 2010 Gulf of Mexico spill.

"BP is probably the most advanced among these companies in actually achieving the cost savings," said Jefferies analyst Jason Gammel, who holds a "buy" rating on BP and Chevron.




For now, the oil majors can cover the shortfall by higher borrowing, which currently averages around 15 percent of their market value - still relatively low compared with other industries.

Smaller exploration and production companies that lack big refining operations such as Premier Oil (PMO.L) and Tullow Oil (TLW.L) have been forced to abandon dividends this year.

Tullow executives said the company had "reset the business" to be competitive at an oil price around $50. Like its peers, the Africa-focused company has slashed spending on new projects and shifted away from complex wells to focus on onshore and simpler offshore plays.

Tullow arranged financing before the oil price drop and that means it can weather the downturn for now, say analysts at Morningstar. But they said Tullow's cash flow burn means it must eventually sell assets which, with oil where it is today, would probably fetch a depressed price.

Tullow's interests in major oil discoveries being developed "will require far more capital than any company of its size can possibly generate from its operations," Morningstar said




Oil bulls’ hope dimmed as crude prices seen under $70 by 2020 Reuters + NewBase

As oil prices entered a second steep slide a few weeks ago, bullish traders and analysts had hoped for a repeat of the sharp but short dip that occurred early in the year - a speculative slide below $50 a barrel followed by a quick recovery. Some are now reconsidering that view, as long-term oil prices take the lead in the market's latest dive, swaying sentiment toward a lengthier slump that would mean prolonged pain for big producers, from

ExxonMobil to Saudi Arabia. While immediate delivery benchmark global Brent crude oil futures at $50 a barrel are still about $4 higher than they were at their lowest point in January, prices for delivery in December 2020 are nearly $8 lower than the start of this year, trading at a contract low of less than $67. A year ago the contract hovered at around $100 a barrel. The reason for the deterioration of the forward curve and decline in "long-dated" futures is a subject of debate.

But even some who disagree with the fundamental logic of lower long-dated prices are coming round to the scenario that prices will be lower for longer. "The back of the market has led prices lower as speculators are no longer convinced higher oil prices are required to balance future oil supply and demand," consultants PIRA Energy Group, which called last year's price slide but has also predicted a sharp rebound, wrote in a note this week. The firm does not make its specific forecasts public. "PIRA disagrees with this view, but a 'show me' mindset regarding tightening balances will keep prices lower than forecast earlier." Some believe the recent selloff was fueled by speculators fleeing the market amid collapsing confidence after China's stock market crash, and exacerbated by a lack of liquidity and resumption of hedging by producers including Mexico, which sell futures to guard against lower prices. "The decline in calendar year 2016 prices has been overstated, in our view," analysts at Barclays wrote this week. "Fundamental tightening, demand and stock revisions, and current positioning are likely to raise prices in the months ahead." Others say it stems from more deeply rooted fundamental factors, such as falling production costs in the US shale patch and expectations of rising exports from Iran next year following a landmark nuclear agreement - and if so, far forward prices may be flashing warning lights for the future. The retreat in long-term oil prices commenced in the latter part of last year, when Saudi Arabia made clear it would no longer cut production in order to tighten up sloppy markets. Absent the kingdom's implicit promise to defend prices, the value of Brent crude oil for five years in the future slid from nearly $90 a barrel in late November to around $72 almost two months later.




Over the past month, however, it has dived anew, reaching nearly $66 a barrel on Tuesday, its lowest since 2009. Last week, analysts at ABN Amro cut its 2016 oil price forecasts by $10 a barrel on a mix of factors including falling production costs, disappointing demand, a stronger US dollar and deteriorating market sentiment.

"What we see is that the U-shape recovery which we still expect for oil prices will take longer to materialize," senior energy economist Hans van Cleef told the Reuters Global Oil Forum last week. The question for oil executives, traders and analysts is whether this represents a new equilibrium for the market - a price high enough to encourage just enough new production in the future to meet demand, which continues to grow. Standard Chartered's Paul Horsnell, one of the most bullish forecasters in Reuters monthly poll with a projection for $93 Brent in 2017 Oilpoll, says no - long-dated prices are too low, although the latest slide may signal a deferred recovery. "Is this a market transitioning from a view of an inevitable bounce in 2016 to adding another year onto the rebound? We just don't know yet," said Horsnell. And while some big companies such as BP and Royal Dutch Shell are preparing investors for a more extended downturn, some are still signaling cautious optimism. US-focused Anadarko Petroleum, for instance, is opting not to pursue an "aggressive" approach to completing shale wells that have been drilled but not yet hydraulically fractured. Completing wells more quickly is "an option we might choose to pursue if we thought the current environment was going to be protracted and we were somehow in a new normal, $50-esque oil environment," chief financial officer Bob Gwin told analysts last week. "We don't believe that's true over the intermediate to longer term."




Oil price unlikely to recover as Saudi refining hits market Reuters

Oil prices are unlikely to recover soon as Saudi Arabia's drive to boost its refining activities is expected to force refineries elsewhere to slow down their operations, thus creating an even bigger glut of unwanted crude oil.

Two big new refineries in Saudi Arabia are adding to growing supplies of diesel and jet fuel, which could mean other refiners will use less crude as they respond to the oversupply of oil products. Oil prices currently near $50 a barrel are already under pressure, in part from an oversupply of fuels produced by refiners enjoying healthy margins from cheap crude as a result of the U.S. shale boom and record OPEC output. A big difference now is that the world's largest oil exporter, Saudi Arabia, whose new refineries have added to a flood of the fuels now swamping global markets. OPEC's biggest oil producer has long wanted to process more of its own crude. Earlier this year, its 400,000 barrel per day Yasref refinery reached full production. It joined the 400,000 bpd Jubail refinery, which hit full capacity late last year. "All signals point to weaker margins, which mean lower runs," said Jonathan Leitch, research director with Wood Mackenzie. "You're going to start to get a surplus of crude again." Storage tanks in Asia and Europe are filling up with diesel and jet fuel as growing consumption has failed to keep pace with increased production. Soaring production of fuels in the United States and Europe has added to the overhang. Refineries there are still running hard to supply drivers, particularly in India and the United States, with the gasoline they are consuming at breakneck pace due in part to the halving of oil prices over the past year.

CHINA SLOWDOWN

But slower economic growth in China has hit diesel demand growth, which relies primarily on industrial activity such as construction. European demand growth has not been nearly enough to absorb the barrels now arriving from the United States, Asia and the Middle East. "Storage will reach capacity," one European distillates trader said, adding that an extremely cold winter, or heavy schedule of refinery maintenance work, would be the only salvation for diesel's profitability. Product stocks, including jet fuel and diesel, in independently held storage in the Amsterdam-Rotterdam-Antwerp area hit an all time high last week, while such stocks in Singapore were near a four-year high. At least one Asian storage operator reported a rise in enquiries about leasing new capacity. That leaves limited hope for the margins of European, American and Asian refineries which produce these fuels; profits for producing them have already fallen to five-year lows in Asia. This has put refineries' demand for crude oil in question. Margins are unlikely to improve any time soon unless refineries start to make deeper cuts in production, one Singapore-based trader said. "The supply is so much now that even marginal run cuts are not going to help." Distillate stocks in the United States also rose faster than expected last week. While booming demand from gasoline spurred refineries to consume ever more crude oil, traders and analysts said this incentive will subside when drivers' demand for gasoline falls in the autumn and winter. And if U.S. and European refiners cannot count on distillates to help them make money, their appetite for crude oil could slow, as has already happened to their Asian counterparts. "I think the runs have probably hit their peak for the year," Leitch said.




Iran Faces Technical, Investment Hurdles Velda Addison, Hart Energy

Iran’s ability to successfully use gas injection to boost pressure in mature fields and quickly push forward development of newer fields will determine how quickly the country is able to ramp up output after sanctions.

That is according to a report released by Deloitte Energy Services, which estimates that Iran’s crude oil production could jump from about 2.8 million barrels per day (bbl/d) in 2015 to between 3 and 3.7 MMbbl/d in 2016.

However, “in the longer term, Iran must continue its field development through a combination of ongoing investment by the National [Iranian] Oil Company and new capital from foreign oil companies,” the report said. “Such investment programs will take longer to bring new production to market and will likely result in a gradual increase in production through at least 2020.”




About half of Iran’s production comes from oil fields that are more than 70 years old—including the Ahwaz-Asmari, Marun and Gachsaran fields—according to the International Energy Agency. The NIOC has been using various EOR techniques, including gas injection, to increase oil recovery rates at its mature fields. However, oil sector development also hinges on Iran’s ability to lure capital and technology from foreign companies, according to the report.

The oil sector is keenly watching Iran, which holds the world’s fourth-largest proved crude oil reserves and second-largest natural gas reserves based on data from the U.S. Energy Information Administration (EIA), after diplomats reached a deal July 14 that restricts Iran’s nuclear ability. In exchange for following through on terms reached in the deal, sanctions that have prevented Iran from fully capitalizing on its hydrocarbon assets will be lifted. The deal still must be approved by individual countries and could face opposition in the U.S.

“Once sanctions are effectively lifted, we expect Iran to increase exports fairly rapidly,” Deloitte said. “Within several months, it should be able to increase exports by several hundred thousand barrels per day. Because the Iranian domestic market is already adequately supplied with crude oil, most of the incremental barrels will flow to the world market.”

The report pointed out that Iran’s oil minister, Bijan Zanganeh, said he expects to initially export 500,000 bbl/d, increasing to up to 1 MMbbl/d in six months.

The dramatic increase is not expected on the production side, and exports will not depend on higher production—at least not initially, according to Deloitte.

“The country has also amassed a stockpile of between 30 and 40 million barrels that could supplement additional production. If Iran released this oil, it would boost exports by almost 100,000 b/d over 12 months or 200,000 b/d over six months,” the report said.

But if Iran wants to attract foreign investors, Deloitte said the country must offer better terms. Deloitte referred to Iran’s buy-back development contracts in the 1990s as an example. The contracts were not in place long enough due to new sanctions being applied. Calling the terms onerous, Deloitte said companies could not book reserves and they were not compensated for cost overruns.

“Competition for capital has increased with the emergence of unconventional plays globally, the rise of new deepwater basins in places such as Brazil and West Africa, offshore plays in East Africa, and the opening of Mexico,” Deloitte said. “Iran must offer attractive, prospective fields, including both new projects and secondary and enhanced recovery opportunities in more mature fields. It also must offer competitive return rates and, crucially, the right to book reserves.”




What Global CEOs Will Encounter as They Seek to Profit in Iran Bloomberg + NewBase

The Iranian nuclear pact will gradually reopen an economy bigger than Thailand’s and with oil reserves rivaling those of Canada. Here’s what investors will encounter.

How big is Iran’s economy?

Iran’s $415 billion economy is the second-largest in the Middle East after Saudi Arabia.

Unveiling his nation’s economic plan for the next five years, Supreme Leader Ayatollah Ali Khamenei said last month that Iran must aspire to average annual growth of 8 percent. The economy may grow 4 percent this Iranian financial year, double the pace expected before the nuclear deal, according to the deputy governor of Iran’s central bank. As global sanctions were tightened in 2012, the economy dipped into recession for two years. It is 15-to-20 percent smaller than it would have been without the international curbs enacted after 2010, according to a Congressional report published in January.

Who are Iran’s main trade partners?

Iran’s largest trade partner in the first quarter of the current Iranian year was China, which imported more than $1.9 billion in goods. Iraq followed with $1.5 billion and the United Arab Emirates was No. 3 at about $1.3 billion. In the same period, Iran imported more than $2.6 billion in goods from China.

How much of Iran’s economy is state-controlled?

As much as 80 percent was state owned until July 2006, when Khamenei decreed a privatization program. The government says its footprint has shrunk to 20 percent, though its oversight of institutions such as pension funds gives it greater power than that number implies.




The privatization drive was carried out at a time when the private sector was small. Banks weren’t providing credit for private companies to buy state holdings and foreign investors were non-existent, said Ramin Rabii, managing director of Turquoise Partners, a Tehran-based investment firm. As a result, he estimates, the government still controls about 70 percent of the economy.

How oil-dependent is Iran’s economy?

An OPEC member, Iran holds 10 percent of the world’s oil reserves. Crude exports dropped to an average 1.6 million barrels a day in 2014, from 2.6 million barrels in 2011, before sanctions were enforced on Iran’s energy exports, according to the U.S. Energy Information Administration. Revenue from crude sales represents just 15 percent of Iran’s GDP, Turquoise Partners said, citing central bank data.

Faced with sanctions and declining oil prices, Khamenei urged officials in October 2014 to reduce dependency on oil and focus on expanding domestic manufacturing.

What’s of interest for foreign investors?

Investors may prefer the car industry, manufacturing, energy and agriculture, according to Renaissance Capital’s chief economist Charles Robertson. Renaissance estimates $1 billion in foreign money -- equal to 5 percent of all money in frontier markets -- may be directed to Iran’s stock market in 2016 following an opening this year.

Relatively cheap labor costs -- in some sectors lower than in China -- can make Iran’s manufacturers attractive to foreign investors, according to analysts and fund managers who visited Tehran in May.

Low energy costs would benefit cement and steel companies, and mobile-phone penetration of 105 percent makes the telecommunications industry a potentially profitable area, according to Turquoise Partners.

How big is Iran’s stock market?

The Tehran Stock Exchange (TSE) is the country’s main equities market. In the 12 months to Aug. 3, its main board of shares declined 11 percent. Market capitalization is about $95 billion. From the start of the final round of nuclear talks on June 26, the market has climbed 3 percent.

Since Hassan Rouhani became president in June 2013, after vowing to improve the economy and reach out to the West, the index has risen 32 percent. Declining oil prices and missed nuclear talks deadlines have weighed, some analysts said. Daily increases are capped at 5 percent, according to the exchange.

Petroleum, petrochemicals and telecommunications companies are the market heavyweights. Banks and steel and cement manufacturers follow.

How can foreigners invest in Iran?

Foreigners must apply for a license to invest in Iran. Officials say obtaining a permit takes at most 10 days.




Under 2002 legislation, foreign and Iranian investors must be treated equally, with the same protections. Foreigners cannot own land and their stake in any economic sector is capped at 25 percent unless producing non-oil goods for export. Investors have to give three months’ notice before repatriating capital.

What about Iran’s banking sector?

Iran’s Islamic banking assets are worth an estimated $482 billion, according to Dubai government data from 2014, more than the sharia-compliant banking assets in Saudi Arabia, the U.A.E. and Malaysia combined. Burdening the industry is a relatively large ratio of non-performing loans -- 15.4 percent, according to the IMF, more than Libya and Yemen. Bad loans total $32 billion, the finance ministry and central bank calculate. Authorities are investigating the bad loans.

Sanctions have isolated Iran’s banks from global financial markets and cut off their access to foreign funding.

How is Iran’s currency doing?

According to the IMF, the Iranian rial lost about 80 percent of its value in the year to late 2012, as a result of sanctions. Since Rouhani took office, the central bank has tightened credit and stabilized the rial. It has announced plans to unify two exchange rates -- an open market rate and a more depreciated “export rate” -- within six months of a nuclear deal.




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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

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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.

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

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