New base 1001 special 16 february 2017 energy news (1)

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,

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NewBase 16 February 2017 - Issue No. 1001 Senior Editor Eng. Khaled Al Awadi

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

UAE: Abu Dhabi’s New Mubadala Investment of $125 Billion Sovereign Fund Is Taking Shape

Bloomberg - Mahmoud Habboush

Abu Dhabi is close to finalizing the merger of two of its largest sovereign wealth funds -- Mubadala Development Co. PJSC and International Petroleum Investment Co. The combined entity, which will be known as Mubadala Investment Co., will become the fourteenth largest fund globally with about $125 billion of assets, according to the Sovereign Wealth Fund Institute. The emirate, home to about 6 percent of the world’s proven oil reserves, is cutting spending and merging companies after oil prices slumped about 50 percent over the past two years. Consolidation is mainly taking place in the financial services industry, including the megamerger of the emirate’s two largest banks National Bank of Abu Dhabi PJSC and First Gulf Bank PJSC. Although there are few details on how Mubadala Investment will operate, here’s what we do know: 1. Why are Mubadala and IPIC merging?

Cost is likely to be one of the considerations. Abu Dhabi is reining in spending as the decline in oil prices slows economic growth and plans to cut costs by combining the funds with common assets in areas such as energy, financial services and health care.




The emirate also wants to create "an industrial and investment powerhouse that has every intention to keep growing," according to Mubadala Chief Executive Officer Khaldoon Al Mubarak who will also be CEO and managing director of the combined company. The merger will create an entity which can become a "real global player," according to Rachel Pether, an adviser at the SWFI. "Bringing IPIC and Mubadala under common control creates cost savings, efficiencies and will allow the new streamlined entity to aggressively pursue growth opportunities." It also gives the new company more "balance sheet flexibility," she said. 2. Who will run the new company?

Khaldoon Al MubarakSource: Mubadala Development Co. Mubadala CEO Mubarak will lead the new entity, while Mubadala Chairman Abu Dhabi Crown Prince Sheikh Mohamed Bin Zayed Al Nahyan will assume the same role in Mubadala Investment. The fact that the company will take on Mubadala’s name and many of its executives will lead the merged entity, is a sign that Mubadala will be the more dominant force. IPIC Chairman Mansour bin Zayed Al Nahyan will act as vice chairman, while Energy Minister Suhail Al Mazrouei will be a board member of the merged company. 3. What assets will the new company have? The combined entity will have about $125 billion of assets and $37 billion of debt. IPIC has stakes in about 18 companies encompassing oil and gas exploration and production, marketing, petrochemicals and power in places like Kazakhstan, Austria, Pakistan and Portugal. Mubadala’s holdings are more far-reached and include investments in oil and gas, aerospace, semiconductors and real estate in about 20 countries globally. Some of its higher-profile holdings include stakes in semiconductor producer Globalfoundries Inc. and global private equity company Carlyle Group. Energy represents potentially one of the biggest areas of overlap. The deal is set to create a global energy business with total assets greater than ConocoPhillips, combining production operations at Mubadala with IPIC’s focus on refining and distribution. 4. What will be the new entity’s investment strategy?

SWFI’s Pether expects a "radical change in strategy" from the merged company. "The name change to Mubadala Investment Co. suggests the new entity will be more about investing, rather than developing," she said.




The new fund will continue to invest in the core Mubadala areas of energy, metals, technology, real estate, infrastructure, health care and aerospace, while expanding into new ones, according to Mubarak. The fund will also focus on technology acquisitions this year, he said in January.

Mubadala is considering committing $10 billion to $15 billion to partner with SoftBank Group Corp. and Saudi Arabia’s Public Investment Fund in a new vehicle to invest in global technology, people familiar with the matter said last month. 5. Is the merger an opportunity to put the 1MDB scandal to bed?

IPIC is caught up in an investigation stretching from Switzerland to Malaysia to the U.S. The probe is looking at whether money might have flowed out of 1Malaysia Development Bhd., known as 1MDB, started by Malaysian Prime Minister Najib Razak, and into personal accounts. 1MDB amassed more than 50 billion ringgit ($10.5 billion) of debt over six years, using some of it to buy energy assets, including joint ventures with companies in Abu Dhabi and Saudi Arabia. IPIC last year denied ownership of a company that received $3.5 billion from 1MDB and said it’s seeking $6.5 billion from the fund and Malaysia’s finance ministry as part of the dispute. Although the merger is unlikely to help close the scandal, it will give the new fund an opportunity to "ring-fence any entity that’s subject to review by the department of justice," Pether said. "The dispute has to play out through the relevant legal channels and secondary effects, such as reputational risk, are likely to endure for a while." 6. Does Abu Dhabi have other sovereign funds?

Yes, the emirate has created an array of sovereign wealth and investment funds -- some with overlapping and similar mandates -- to guard the nation’s wealth and invest for the future. The Abu Dhabi Investment Authority -- the world’s third largest -- is perhaps the best known and




representative of the emirate’s funds. It invests heavily in equities globally and has an active real estate and infrastructure team. Aabar Investments PJSC, which is a subsidiary of IPIC, holds stakes in Italian lender UniCredit SpA, Glencore International Plc and Richard Branson’s Virgin Galactic Ltd. commercial space venture. Government-controlled fund manager Abu Dhabi Investment Council invests in asset classes including private-equity, infrastructure and hedge fund. It has major holdings in some of the emirate’s biggest banks and bought New York’s Chrysler Building in Manhattan in 2008 for an undisclosed price. 7. Are other Abu Dhabi companies expected to merge?

"There are other sectors that are congested," said SWFI’s Pether. "We would expect to see further consolidation from state-owned enterprises over the coming 12 months." Abu Dhabi is considering a plan to merge Abu Dhabi Commercial Bank PJSC and Union National Bank PJSC, and also combine Abu Dhabi Islamic Bank PJSC with Al-Hilal Bank PJSC, once the NBAD and FGB deal is done, people with knowledge of the matter said in November. While stopping short of predicting further mergers in the emirate, Mubadala’s Mubarak said the emirate has blazed a trail of consolidation and that more deals could follow. “The trend is clear,” he said in September. “The more benefits and successes these mergers show, that encourages other companies and sectors to do the same.”




Tesla’s Elon Musk meets Dewa chief as Dubai works on electric vehicles take-up….The National staff

With Dubai set to expand its network of charging stations for electric vehicles, the chief executive of its utility company met Elon Musk to tap into the Tesla founder’s considerable experience in renewable energy, innovation and sustainability.

Saeed Al Tayer, the managing director and chief executive of the Dubai Electricity and Water Authority (Dewa), on Monday discussed future cooperation opportunities with Mr Musk.

Mr Musk said he would share information and "exchange experiences to contribute towards Dubai’s sustainable growth", according to a Dewa statement. Mr Musk is attending the World Government Summit and is expected later on Monday to announce the launch of Tesla in the UAE.

In 2015, Dewa installed 100 charging stations across malls, airports, commercial buildings, residential complexes, and petrol stations in Dubai as it pushes for the increased use of electric and hybrid cars in the emirate. It will install more electric-vehicle charging stations "depending on customer intake, usage, and driving patterns".

Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, met Elon Musk, chief executive of Tesla




Nuclear power ‘a low-emission solution to future energy demands’ The National staff

DUBAI // Nuclear power could be a low-emissions answer to growing demands for energy, the World Government Summit heard on Tuesday.

Speaking during a panel discussion titled The Future of Nuclear Energy, the panellists said factors such as population growth, urbanisation and growing economic development will continue to drive the world’s energy demand to record levels.

Lessons learnt from catastrophes such as Chernobyl, Fukushima and Three Mile Island need to be the key to success, said the panel.

"Nothing is infallible," said Philippe Jamet, former commissioner to the French Nuclear Safety Authority. "Countries that wish to introduce nuclear power into their energy mix need to focus on all safety and security aspects."

Yukiya Amano, director general of the International Atomic Energy Agency, said 30 developing countries are considering introducing nuclear power for civilian use, and needed support so they can use it safely, securely and sustainably.

More than 60 nuclear power plants are under construction globally, four of which are in the UAE, including the Barakah site, which is expected to start operating by May.

Authorities in these countries are working very closely with organisations such as the IAEA to benefit from best practice and knowledge sharing, Mr Amano said.




With the United Nations predicting world population growth from 6.7 billion in 2011 to 8.7 billion by 2035, demand for energy too is set to rise substantially.

The session also addressed the need for both government-to-government agreements and industry-to-industry arrangements to ensure safety and security, the transfer of technology and human resource development.




Morocco: Gulfsands Petroleum awarded Moulay Bouchta licence extension Source: Gulfsands Petroleum

Gulfsands Petroleum has announced that its subsidiary, Gulfsands Petroleum Morocco Limited ('GPML'), has been awarded an extension to its Moulay Bouchta Petroleum Agreement together with a revised work programmer.

As previously disclosed in the Group's Interim Report, an agreement had been reached with Office National des Hydrocarbures et des Mines ('ONHYM'), subject to the usual government approvals and certain conditions precedent, to extend the duration of the Initial Phase of the Exploration Period of Moulay Bouchta, from two years to three years. On 8 November 2016 the Group reported that all conditions precedent had been satisfied, and it was awaiting formal approval of the extension from

the Moroccan Authorities. The Group confirms that all approvals have now been received, such that the extension has become effective.

As a result, the Initial Phase will now run to 19 June 2017 (previously 19 June 2016) with a revised work programme for the extended Initial Phase consisting of:

• acquisition of 200 km 2D line seismic;

• reprocessing and interpretation of selected legacy 2D seismic data; and

• legacy field study with the aim to identify any potential for re-activation.

Consequently, the estimated cost of the work programme as specified in the amendment to the Petroleum Agreement has been reduced from $3.5million to $2.5million.

GPML will immediately seek to begin the Environmental Impact Study in anticipation of commencing the seismic acquisition. The Company is already in discussions with ONHYM, to secure a further extension to allow additional time to complete the revised work programme.

The work programme focusses on an oil prospective area identified to the east of the depleted Haricha oil field. Based on work performed to date, GPML has identified new lead concepts with gross recoverable Prospective Resources internally estimated at 149 mmbo. This estimate has not been subject to external audit.

The Group continues to be interested in identifying a farm-in partner for the Moulay Bouchta permit and any parties interested are invited to contact the Group directly.




Egypt: Eni and BP complete the sale of 10% of Shorouk to BP Source: Eni

Eni’s CEO, Claudio Descalzi, Bob Dudley, CEO of BP, and the Egyptian Minister of Petroleum, Tarek El Molla signed a deed completing the sale to BP of a 10% stake in the Shorouk concession, offshore Egypt.

The signing took place in Cairo in the presence of the Prime Minister Sherif Ismail. Eni and BP first agreed on the sale of the concession stake, where the super-giant Zohr gas field is located, in November 2016. Eni, through its subsidiary IEOC, now holds a 90% stake in the license, while Rosneft has agreed to acquire a 30% stake, subject to the Egyptian governmental approval.

Additionally, Claudio Descalzi has been received by President Abdel Fattah el-Sisi. The meeting follows the one held in January during which Eni’s CEO confirmed that the development of Zohr is progressing very quickly, having been fast tracked, and that the start of production is confirmed for 2017, just two year after the discovery was made.

Zohr was discovered by Eni in August of 2015 and, with a total potential of 850 billion cubic meters of gas in place, is the largest natural gas field ever discovered in the Mediterranean. The project confirms Eni’s sector leading ability in exploration and fast development of the discoveries.

In Egypt, Eni and BP, are also partners in the Nooros field, discovered in July 2015 in the Nile Delta, that is already producing about 25 MMScm/d only 15 months after the startup of the field, as well as in Baltim SW field, discovered in June 2016. The start-up of Baltim SW is expected in 2019. Eni has been present in Egypt since 1954, operating through its subsidiary IEOC. The company is the main producer in the country with an equity production of approximately 230,000 barrels of oil equivalent per day.




Libya Crude Output Rises as Work Conditions for Big Oil Improve Bloomberg - Salma El Wardany

Libya’s crude production exceeded 700,000 barrels a day and is due to keep rising as working conditions in the conflict-ridden country improve for international companies like Eni SpA and Total SA, an official from the state oil company said.

The North African country’s crude production is due to reach 1.2 million barrels a day by August and 1.7 million by March 2018 when the nation’s ports and export terminals will be operating at full capacity, Jadalla Alaokali, board member of Libya’s National Oil Corp., said in an interview in Cairo. Output at the El-Feel, or Elephant, oil field is due to resume within one month, pumping 75,000 barrels a day, he said. Eni and Total are working in Libya without difficulty and Schlumberger Ltd. resumed operations in the country about three months ago, he said. Eni is due to start production from an offshore area in five years, he said. “Eni and Total are working there with no problems, so the situation is improving every day in Libya and I’d like to take this opportunity as an introduction for those who have interest to work in Libya,” Alaokali said. “More than 45 percent of the land is still virgin, hasn’t been explored, so we still have large areas that haven’t been discovered, so the opportunity is there.” Libya, with Africa’s largest crude reserves, is trying to revive its oil production and exports in spite of continuing political uncertainty. Additional production may create a challenge for OPEC and other major suppliers that agreed to pump less crude for six month starting Jan. 1 in an effort to end a global glut. Biggest Field

The Organization of Petroleum Exporting Countries exempted Libya from cutting output as the nation works to restore its oil industry. The country pumped 1.6 million barrels a day before a 2011 revolt set off years of fighting between rival governments and militias. Libya’s biggest oil field, Sharara, operated by Repsol SA, re-opened in December. The Eni-run El-Feel deposit was also due to re-open then but guards demanding benefits prevented that, NOC said last month. The two fields in western Libya have a combined capacity of 450,000 barrels a day.




Norway: Wintershall selects development solution for Skarfjell Source: Wintershall

Wintershall and its license partners Capricorn, Bayerngas, Edison and DEA have selected a development solution for the Skarfjell field in the Norwegian North Sea. Under the proposed solution, the reservoir will be connected to the nearby Gjøa platform via a subsea tie-back. Wintershall Norge (operator) has now submitted the development concept to the Ministry of Petroleum and Energy in a 'Decision to Continue' (BOV) report. The license partnership now enters the define phase of the project, refining the technical and economic plan before committing to a final investment decision.

'Moving into the next phase of the plan is a signal that Wintershall is committed to Norway in the long-term. This is our second operated development project on the Norwegian Continental Shelf after Maria, and we are using our experience and resources to fine-tune the concept for Skarfjell. Wintershall is convinced of having selected the most economically robust solution for the field. We will now work closely with our partners in the coming months to design a plan that will take Skarfjell forward,' said Martin Bachmann, Wintershall’s Executive Board Member for Exploration and Production in Europe and Middle East.

Skarfjell is situated in the northeastern North Sea approx. 20 kms southwest of the Engie-operated Gjøa platform and about 130 kms northwest of Bergen. Skarfjell is expected to yield between 60 - 140 million barrels of oil equivalents.

Using existing infrastructure

Based on the proposed plan, hydrocarbons from the Skarfjell reservoir will be developed with two subsea templates tied back to the Gjøa platform for processing and export. Gjøa will also provide lift gas to the field and water injection for pressure support.

'Reaching this stage in the development has required a thorough technical and commercial investigation into various development solutions for Skarfjell. By deciding with our license partners to pursue a tie-back to existing infrastructure as our preferred option, we believe we have found the best way of unlocking the maximum value from the field. In this way Skarfjell could provide substantial returns for Wintershall, our partners and the rest of Norwegian society,' said Bernd Schrimpf, Wintershall Norge Managing Director.

Several studies will now be conducted before the final investment decision and the plan for development and operation (PDO) can be submitted to the Ministry of Petroleum and Energy. About Skarfjell

Skarfjell was discovered in 2012 and is situated in the Quadrant 35 area in the Norwegian North Sea. The majority of the discovery is located in production license PL 418, with a possible extension into PL 378. In PL 418 Wintershall Norge (operator) owns 35 percent, Capricorn Norge (part of Cairn Energy) 20 percent, Bayerngas Norge 20 percent, Edison Norge 15 percent and DEA Norge 10 percent.




NewBase 16 February 2017 Khaled Al Awadi

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

Oil prices steady on OPEC cuts, but record US fuel stocks weigh Reuters + NewBase Oil prices held steady on Thursday, supported by ongoing supply cuts led by producer group OPEC, although rising fuel inventories and crude production in the United States weighed on sentiment.

Brent crude futures were trading at $55.73 per barrel at 0209 GMT, down just 2 cents from their last close. U.S. West Texas Intermediate (WTI) crude futures, were down 4 cents at $53.07 per barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia have agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017, and estimates suggest compliance by OPEC is around 90 percent. The production cuts are aimed at reining in a global fuel supply overhang that has dogged markets for over two years. Yet despite action so far, inventories remain bloated and supplies high, especially in the United States. U.S. crude oil and gasoline inventories soared to record highs last week as refineries cut output and gasoline demand softened, the Energy Information Administration said on Wednesday. Crude inventories rose 9.5 million barrels in the week ended Feb. 10, nearly three times more than analysts' expectations, boosting commercial stocks to an all-time record at 518 million barrels. Gasoline stocks rose 2.8 million barrels, compared with analysts' expectations in a Reuters poll for a 752,000-barrel drop. That pushed inventories of the fuel to a record at 259 million barrels.

Oil price special

coverage




OPEC Wins Plaudits for Oil Recovery, Yet Economy Lends a Hand by Grant Smith

While the Organization of Petroleum Exporting Countries did spur a 28 percent recovery late last year by announcing production cuts, supply isn’t the only factor buoying the market: demand repeatedly beat expectations in 2016, and is set to surprise again.

Global oil consumption will surpass average growth rates for a third year in 2017 amid continued economic expansion in China and India, according to data from the International Energy Agency. With all the attention on OPEC, the role of demand in keeping crude prices above $50 a barrel has been overlooked, according to consultants Energy Aspects Ltd.

"With all the focus on OPEC cuts and the response of U.S. shale, very few were paying attention to just how rampant demand growth has been," said Amrita Sen, chief oil analyst at the London-based company. "In fact, demand is roaring ahead."

After plunging crude prices propelled fuel consumption growth to a five-year high in 2015, the Paris-based IEA, which advises most major economies on energy policy, predicted the stimulus of cheap oil would wear off.

Yet after a series of upward revisions, its estimate of demand growth in 2016 now stands a third higher than when it was first introduced, at 1.6 million barrels a day, or 1.7 percent.

That compares with an average of 1 million barrels a day, or 1.1 percent, over the previous 10 years. In its latest report on Feb. 10, the IEA also raised its prediction for 2017 demand growth, forecasting an increase of 1.4 million barrels a day.

“Stronger-than-expected demand is helping to re-balance the market,” said Jason Bordoff, director at the Center on Global Energy Policy at Columbia University. “Colder weather, low prices, also stronger growth projections for emerging economies like China or India” are driving the expansion, he said.




Demand Peak?

The gains in demand “are still fairly small” when considering the amount of surplus oil, and consumption “still faces headwinds in the medium term” as emerging economies become more efficient in their fuel use, Bordoff said. World oil demand could top out in just five years’ time, Royal Dutch Shell Plc’s chief financial officer said in November.

“Oil demand may peak sooner than expected if GDP growth is slower than past trends, fuel efficiency rises more sharply, climate policies become more stringent, or alternative-fuel vehicles take off more quickly,” Bordoff said.

In the meantime though, the recovery is real. There’s a “genuine pickup in manufacturing” in Asia, where the “urban middle class is voraciously consuming packaging, electronics and other non-durable goods,” said Energy Aspects’ Sen.

The effect of those broader economic trends isn’t so instantly clear as oil supply cuts by producing nations, and so the market’s attention will remain locked on OPEC and its partners, said Spencer Welch, director of oil markets and downstream at IHS Markit.

“Demand is an equally important part of the equation,” Welch said. “It is overlooked.”




NewBase Special Coverage

News Agencies News Release 16 Feb. 2017

What Oil Crisis? Arctic Drilling Off Norway Set for Record by Mikael Holter

Explorers look set to drill a record number of wells in Norway’s Arctic waters this year, undeterred by oil prices apparently stuck below $60 a barrel. After making a discovery of as much as 100 million barrels of oil in the Barents Sea, Lundin Petroleum AB said on Monday that it wants to squeeze two more exploration wells into its program this year, even if it means hiring an additional rig. That could push the total number of wells in the area to 16, two more than the record in 2014, according to forecasts from the Norwegian Petroleum Directorate, the industry regulator, and Rystad Energy AS, an Oslo-based consulting firm.

The Norwegian Barents may contain as much as half the country’s unexplored resources, according to the NPD. Yet with crude still trading at half the highs it reached in 2014, the record drilling campaign sounds counter-intuitive. Elsewhere in the Arctic companies such as Royal Dutch Shell Plc are scrapping projects, and in Norway as a whole, the NPD forecasts an 11-year low in exploration activity.

A number of factors are converging to explain the surge in Barents exploration, according to Rystad project manager Simon Sjothun and Adam Wilson, an analyst at Edinburgh-based consultant Wood Mackenzie Ltd.:

• Explorers are following up on recent successes by companies such as Statoil ASA, Lundin

and OMV AG to add resources and build critical mass for developments. This, according to

both WoodMac and Rystad, is the most important factor




• The government awarded licenses in completely unexplored acreage for the first time in 20

years, near the Russian maritime border, stoking hopes of huge discoveries

• The first oil field in the Barents Sea, Eni SpA’s Goliat, started production last year; for all its

delays and problems, the platform offers the infrastructure to process future discoveries

nearby

• Efficiency gains and lower supplier prices resulting from the market downturn have made

both exploration drilling and field developments cheaper

• Norway has a refund system for exploration expenses which makes high-risk prospects

more attractive

In addition, the remote area off the country’s northern tip enjoys the benefits of the Gulf Stream, meaning that unlike the rest of the Arctic, it’s largely ice-free. The prospect industry observers will be watching most closely this year is Statoil’s Korpfjell well near the Russian border. Rystad estimates that Korpfjell could contain as much as 10 billion barrels of oil and gas. Statoil, which will drill its first exploration wells in the Barents since a disappointing campaign in 2014, has sought to downplay the estimates. Lundin, a partner in the project, has said it can hold “several billion barrels.” Giant Find

“Korpfjell in itself could be a game changer, for Norway and for the southern Barents Sea,” Lundin’s Chief Executive Officer Alex Schneiter said during the company’s capital markets day on Monday. The cost of developing fields in the Barents Sea has been inflated by the lack of infrastructure in the remote area. Statoil has delayed its Johan Castberg project several times, but now says it´s reduced the price it needs to break even to $35 a barrel from $80 just a few years ago. It plans a final investment decision on the project at the end of the year. That’s encouraging news for the entire industry at a time where new discoveries are needed to fill a production void from the middle of the next decade, said Petroleum and Energy Minister Terje Soviknes. “We see a mix of players on the Norwegian shelf that are very aggressive,” he said in a phone interview on Tuesday. “They see that the Barents Sea can be profitable for future discoveries.” Suing Norway

Greenpeace, a long-time critic of Arctic drilling, said costs have been cut globally during the downturn, erasing any competitive gains for Norwegian crude. “All exploration in the Barents Sea is a bet against reaching responsible climate targets,” said Truls Gulowsen, head of Greenpeace’s Norwegian unit. “It will be among the most expensive oil in the world.” Greenpeace and another environmental group sued the Norwegian government over the award of new licenses in the Barents Sea last year, saying it was unconstitutional. The case will start Nov. 13 in Oslo District Court, it said late Tuesday.




Russia's Largest Oilfield May Be About to Gush Cash Once Again by Stephen Bierman

Russia’s largest oil field, so far past its prime that it now pumps almost 20 times more water than crude, could be on the verge of gushing profits again for Rosneft PJSC. Samotlor, the 25 billion-barrel giant that bankrolled the Soviet Union for decades, would be the biggest beneficiary of proposals to encourage investment in some of Russia’s oldest and largest reservoirs, where output is plunging. One idea being debated -- cutting the extraction tax in half for fields producing a lot of water with the oil -- could add as much as 90 billion rubles ($1.57 billion) a year to Rosneft’s earnings, said Alexander Kornilov, an analyst at Aton LLC in Moscow.

“It is a super giant field even today after almost 50 years of production, the elephant of elephant fields,” said Ildar Davletshin, an analyst at Renaissance Capital. “There is still a lot of oil left,” but production is costly because it takes 95 barrels of water to get 5 barrels of crude out of the ground, he said. Samotlor changed the course of the Russian oil industry when it started production in 1969, moving its center of gravity to the swampy West Siberian plain from the Volga-Urals region. The field will never return to the glory days when it pumped a quarter of Soviet crude and funded foreign campaigns like the war in Afghanistan, but it still contains billions of barrels of oil. Tax support for this and other aging reservoirs could help maintain near-record output from Russia -- the world’s second-largest oil producer. It would also further cement the dominance of state-run giant Rosneft over the oil and gas industry, which provides about 40 percent of government revenue.




Helping Hand

Russian ministries are still considering the viability of a proposal to reduce the tax on deposits that hold more than 150 million tons of resources, but the oil they produce has a water content of more than 90 percent, according to a government official who asked not to be identified because the information isn’t public. Right now, all the fields that meet these criteria belong to Rosneft, said another person. Rosneft’s press service declined to comment on the potential tax change. Aliya Samigullina, the aide of deputy prime-minister Arkady Dvorkovich, who is in charge of oil and gas sector regulation, also declined to comment. Russian Prime Minister Dmitry Medvedev said in a Dec. 15 television interview that tax changes could be used to help out Rosneft. At the time, the government was in the process of selling an almost 20 percent stake in the company to commodities giant Glencore Plc and Qatar’s sovereign wealth fund. The deal was seen as a major vote of confidence in the Russian economy. “If the proposed tax breaks are meant to benefit mainly Samotlor, then it is yet another sign that policies are designed to favor politically-connected companies” such as Rosneft, said Edward Chow, a senior fellow at the Washington-based Center for Strategic and International Studies. Swiss Cheese

While the Kremlin may be going out of its way to assist Rosneft today, the state’s relationship with Samotlor decades ago created many of the problems it faces today. As oil prices plunged in the 1980s, Soviet engineers pushed the field above 3 million barrels a day, said James Henderson, an oil analyst at the Oxford Institute for Energy Studies. Today that would beat the United Arab Emirates, the fourth-largest producer in OPEC. “At its peak, the field was a vital revenue producer for the Soviet Union,” Henderson said.




Samotlor’s importance led to its eventual downfall. Injections of water to boost recovery exceeded the pressure the reservoir could withstand and blasted cracks into the Swiss-cheese-like rock, according to “Oil of Russia,” a 2011 book written by Vagit Alekperov, the billionaire chief executive officer of Lukoil PJSC, the country’s second-largest producer. Instead of sweeping oil through porous traps in the rock, the fluids injected into the reservoir migrated into those channels. Samotlor was pumping water in circles and there was no way to fix the problem. The collapse of the Soviet Union in 1992 accelerated the decline and production crashed to about 300,000 barrels a day by 1996, according to Rosneft’s website. Renaissance Era

As the Soviet system gave way to a chaotic market economy, the field passed into the hands of a tough set of new Russian entrepreneurs -- Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik. They formed a partnership with BP Plc that applied contemporary methods to enhance recovery of crude and the field experienced a renaissance. Production rose as high as 600,000 barrels a day in 2009, according to Henderson. Rosneft bought the entrepreneurs’ joint venture, TNK-BP, for about $55 billion in 2013. BP increased its holding in Rosneft to nearly 20 percent as part of that deal. That deal transformed Rosneft into the world’s biggest listed oil producer. Igor Sechin, CEO and close ally of President Vladimir Putin, further cemented the company’s position last year by taking over Bashneft PJSC, a regional oil producer. The company now pumps about 4.2 million barrels a day of oil, beating Samotlor’s peak. Samotlor’s output fell 4.7 percent in 2015 to about 425,000 barrels a day, according to Rosneft’s website. It declined by another 4.1 percent over the first nine months of 2016, compared with the same period a year earlier. Cutting the extraction tax in half would give Rosneft a greater incentive to boost Samotlor’s output. If a lower rate had been applied last month, the company would have retained $28 for each barrel pumped compared with about $18 under the existing regime, according to calculations by Aton. “Investment to manage the decline rate could be boosted with government support via tax cuts,” said Henderson of Oxford Energy. “The field will remain a key part of Russia’s West Siberian production for many more years.”




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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.

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About Summit

Azerbaijan Oil and Gas Summit will host by FA Events. Summit will cover main oil and gas topics and latest trends. The Summit will gather main market key players and experts around globe.

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• Address: Jafar Jabbarli str., 44. Caspian Plaza. Baku, Azerbaijan. AZ1065 Baku Azerbaijan

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