New base 1009 special 08 march 2017 energy news

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NewBase 08 March 2017 - Issue No. 1009 Senior Editor Eng. Khaled Al Awadi

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

ADNOC highlights successes of transformation, role of strategic value-add partnerships in delivering long-term growth plans

(WAM) -- The Abu Dhabi National Oil Company (ADNOC), one of the world’s largest oil and gas companies, is exploring new strategic, value-add partnerships to support its long-term growth plans, as it responds to increasing global energy demand and growing market competition.

Addressing industry peers and policy makers at CERA Week, one of the world’s leading energy conferences, UAE Minister of State and ADNOC Group CEO, Dr. Sultan Ahmed Al Jaber, said the company is pursuing creative partnerships, as it balances the need for operational efficiency and cost optimisation with a smart growth strategy that maximises value across all its businesses.

"We are keen to collaborate with active, value-add, strategic partners who can complement our existing experience with technology, market access and capital," Dr. Al Jaber said.

"We seek those who are willing to invest, commit to long-term partnerships and share the risks and benefits, not just across our upstream business, but across the entire value chain, including our marine and services portfolio."




Dr. Al Jaber pointed to the recent onshore concession agreements, with BP, China National Petroleum Company and CEFC, a Chinese energy investment firm, as examples of how ADNOC is thinking creatively and exploring every possible avenue to establish partnership models that are mutually beneficial and introduce a new dynamic to industry partnerships.

Turning to why ADNOC has embarked on its ambitious transformative journey, Dr. Al Jaber said it was necessary for ADNOC to adapt to a changing energy landscape in order to stay strong and thrive for decades to come, in line with the UAE leadership’s vision to ensure long-term economic growth and a sustainable economy for future generations.

"We have set in motion a transformation that will ensure ADNOC is resilient and remains an important contributor to the economy of the UAE, has a lasting impact on the development of the country and is fit for the future," he said.

Over the course of the last year, ADNOC has consolidated its offshore operating companies, Abu Dhabi Marine Operating Company (ADMA-OPCO) and Zakum Development Company (ZADCO), and integrated its marine and services businesses, Esnaad, Irshad and Abu Dhabi National Tanker Company (ADNATCO).

"We have leveraged significant synergies, streamlined and standardized functions, and drove major operational and cost efficiencies across the ADNOC Group. These efforts have enabled us to achieve substantial reductions in our operating cost per barrel," he highlighted.

He elaborated on the company’s strategic imperatives focused on delivering a more profitable upstream, a more valuable downstream, ensuring sustainable and economic gas supply, and developing world-class talent.

Adnoc and Occidental Petroleum together own the Al Hosn sour gas

project, which began production last on 2015




Dr. Al Jaber explained that at the heart of ADNOC’s evolution into a more commercially focused, performance-led organization are four key pillars: People, Performance, Profitability and Efficiency, underpinned by an unwavering commitment to HSE and asset integrity.

He stressed that People are "the bedrock of ADNOC’s success", adding: "We are investing in developing the capabilities of our people, giving them the tools to succeed. The oil company of the future will need a broader range of skills than today, and we are doing so by taking advantage of the entire talent pool, both women and men alike.

During the one-on-one plenary dialogue with Pulitzer Prize winning energy economist and Vice-Chairman of IHS Markit, Daniel Yergin, Dr. Al Jaber identified three key energy industry trends that are shaping ADNOC’s growth strategy.

"The first is the surge and shift in global energy demand," noted Dr. Al Jaber. "Economic growth will drive energy demand up 30 per cent by 2040. That is the equivalent of adding the energy draw of North America and South America combined.

"Most of that growth will come from non-OECD countries and will require an estimated US $25 trillion in new investment," added Dr. Al Jaber. "That is a level of funding no company can deliver on its own. It’s only possible through new and productive partnerships, within the industry, as well as between the public and private sector."

The second major trend is the technological revolution that is transforming the rate of new discoveries, increasing recovery rates, maximising efficiency and reducing cost around the globe.

"Advanced seismic mapping has enabled further exploitation of reservoirs in North America, offshore Brazil, and transformed the Eastern Mediterranean into a major source of natural gas. Meanwhile, contribution from enhanced oil recovery is anticipated to expand and play a greater role across the industry," Dr. Al Jaber said.

The third trend, Dr. Al Jaber identified, is the exponential expansion of the petrochemical market. For example, global demand for ethylene-based products, he pointed out, will grow 150 per cent by 2040, mostly driven by emerging economies, primarily India and China. "ADNOC’s 2030 growth strategy focuses on tripling our petrochemical production capacity and diversifying our higher value products in line with this market opportunity," he said.

Dr. Al Jaber, responding to a question on the growing role of renewable energy, said, "It’s all about the economics of the energy mix. Renewables and hydrocarbons complement, rather than compete with each other. We have seen the price of solar decline to a point where it is price competitive with any other source, especially in our part of the world.

"Today, combining solar power with traditional energy, namely gas, makes perfect economic sense. The more renewables we use, the more we can redirect hydrocarbons to create higher value products."




UAE: Enoc names former Adnoc chief as head of its Dragon Oil The National

Emirates National Oil Company said yesterday that Ali Al Jarwan will be the new head of its Dragon Oil subsidiary.

Mr Al Jarwan, a long-serving executive at Abu Dhabi National Oil Company (Adnoc), was until last year the chief executive of Abu Dhabi Marine Operating Company (Adma-Opco), which is one of Adnoc’s two main offshore oil concessions.

Enoc, which is owned by the Dubai Government and chaired by Sheikh Hamdan bin Rashid, Deputy Ruler of Dubai and Minister of Finance, bought out minority shareholders in Dragon Oil at the end of 2015 as part of a strategy to create a fully integrated oil company after the liberalisation of the UAE’s fuel market.

Dragon Oil’s main asset is the offshore Cheleken field in Turkmenistan that produces about 100,000 barrels per day. It also has prospects in Iraq and North Africa. Enoc has said it plans to expand and diversify Dragon Oil’s upstream portfolio by acquiring assets that are in their development stage.

Enoc is also expanding its refinery in Dubai and its retail network in the UAE and Saudi Arabia.

Mr Al Jarwan worked in a number of roles at Adnoc since starting as a petroleum engineer in 1979 and had been head of Adma-Opco since 2006. He earned a petroleum engineering degree from the University of Tulsa, Oklahoma, as well as an MBA from the International Institute for Management Development in Lausanne, Switzerland.

Saif Al Falasi, Enoc group chief executive, had been acting chief executive of Dragon Oil since January when Abdul Al Khalifa, a former Saudi Aramco executive, stepped down.

Adnoc last year merged Adma-Opco with Zakum Development Co (Zadco) to form one company under Mr Al Jarwan’s successor, Yasser Al Mazrouei, to oversee the development of its major offshore assets.




Saudi Aramco to Pay Shell $2.2 Billion in Refinery Breakup Bloomberg - Javier Blas , Joe Carroll , and Margot Habiby

Saudi Arabian Oil Co. will pay Royal Dutch Shell Plc $2.2 billion including debt to finalize the breakup of a 19-year refining partnership known as Motiva Enterprises LLC.

Saudi Aramco’s Saudi Refining unit will take full ownership of the Motiva Enterprises name and legal entity, including the largest refinery in the U.S. at Port Arthur in Texas, and 24 distribution terminals, according to a joint statement. Shell will take sole ownership of the Norco and Convent refineries in Louisiana and 11 distribution terminals. Aramco will make a $2.2 billion balancing payment, split between debt and cash and subject to adjustments including working capital, Shell said in a separate statement. Aramco will assume almost all of Motiva’s $3.2 billion of net debt, including $1.5 billion of Shell’s share. A cash payment will cover the balance, Shell said. The arrangement will also take the Anglo-Dutch company closer to its target of selling $30 billion of assets in the three years to 2018.

“Motiva is a strong competitor among U.S. refiners, and we value this important link with the dynamic U.S. energy sector,” said Abdulaziz Al-Judaimi, senior vice president of Aramco’s downstream business. “Our intent is to continue providing Motiva with strong financial support as it transitions into a stand-alone downstream affiliate.” The transaction is subject to regulatory approval and expected to close in the second quarter, the companies said. Shell and Aramco agreed last year to end the Motiva venture, which oversaw the three oil refineries as well as fuel terminals and fuel-branding rights in multiple U.S. states. U.S. Split

Under the agreement, Motiva will have the exclusive right to sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland and Washington, D.C., as well as the eastern half of Texas and most of Florida. Shell’s markets will be Alabama, Mississippi, Tennessee, Louisiana, a portion of the Florida panhandle, and the Northeastern region of the U.S. Motiva, formed in 1998, was a major player in U.S. refining with capacity to process more than 1.1 million barrels of crude a day. But it was plagued by cost overruns and construction delays that eroded profits, Fadel Gheit, an analyst at Oppenheimer & Co., said in March 2016. The 600,000-barrel-a-day Port Arthur refinery suffered leaks and fires that delayed a $10 billion expansion to double the size of the plant. A former partner in Motiva, Chevron Corp., exited the partnership in 2002 as part of a settlement with regulators that allowed it to acquire Texaco Inc. Chevron’s divestment left Shell and the Saudis as 50-50 partners in the venture.




Shell’s divestment plan is aimed at reducing debt that rose following the $54 billion acquisition of BG Group Plc. The company sold $5 billion of assets last year, has announced a further $7.2 billion of sales, including the Motiva split, and is working on an additional $2.8 billion of disposals, according to Shell.

About Motiva

Motiva Enterprises is a leading refiner, distributor and marketer of fuels in the Eastern, Southern, and Gulf Coast regions of the United States.

Refining quality products everyday

Motiva owns and operates three refineries – located within a 120 mile radius of each other - in Convent and Norco, Louisiana, and Port Arthur, Texas. The combined refining capacity of the three sites is approximately 1.1 million barrels per day.

The Port Arthur refining complex also operates a 40,000 barrel per day base oil manufacturing plant, one of the largest in the world.

Strategic distribution network to meet the region’s energy needs

Motiva’s 34 operating refined product storage terminals are strategically located throughout the company’s geographic area and have an aggregate storage capacity of approximately 16.5 million barrels. In these facilities, Motiva stores and distributes gasoline and diesel to Shell-branded retail stations, stores refined products for third-party customers, and sells unbranded motor fuels to third-party resellers, commercial customers and other end users. Motiva is also a leading destination terminal provider for ethanol suppliers along the Atlantic and Gulf coasts.

Marketing superior products to customers

Motiva markets gasoline, diesel and other petroleum products in 26 states and the District of Columbia through a network of more than 8,200 Shell-branded service stations as well as unbranded wholesalers, providing superior products to customers across the region.

Over recent years Motiva has gained significant market share and established the Shell brand as the number one or two brand in 13 of the states in which the company operates. In addition, Motiva has ownership stakes in four wholesale joint ventures with over 500 convenience stores.




Austria: OMV divests wholly owned subsidiary OMV Petrol Ofisi for EUR 1.368 bn to Vitol.. Source: OMV

OMV, the international integrated oil and gas company based in Vienna, has agreed to sell 100% of the shares in its wholly owned subsidiary OMV Petrol Ofisi to VIP Turkey Enerji, a subsidiary of Vitol Investment Partnership.

The overall transaction value amounts to EUR 1.368 bn. Thereof EUR 81 mn relate to net cash proceeds from a prior carve-out of OMV’s Turkish gas entities. The transaction is subject to conditions, including the relevant regulatory approvals and is anticipated to close in Q3/17 at the latest.

Rainer Seele, OMV Chief Executive Officer:

'The original plan of integrating Petrol Ofisi into the value chain of OMV Group could not be realized. Therefore, the decision to sell the company was the right and necessary step in the course of implementing our corporate strategy. In light of the challenging environment, I am pleased that we successfully concluded the negotiations.'

Based on the purchase price, OMV will record a further impairment of EUR 186 mn in its Q4/16 financial accounts. This booking is in addition to the impairment of EUR 148 mn recorded as of December 31, 2016 when OMV reclassified OMV Petrol Ofisi as 'asset held for sale'. Upon closing of the transaction, a negative foreign exchange rate effect of approximately EUR 1.1 bn has to be recorded in OMV Group net income. This stems from the negative development of the Turkish Lira against the Euro since the acquisition of OMV Petrol Ofisi in 2010. This has no impact on OMV Group equity since corresponding foreign exchange translation effects were directly charged to Group equity in prior periods.

OMV Petrol Ofisi is a leading player in the Turkish fuel distribution industry. With 1,709 fuel stations the company operates the largest retail station network in Turkey and is a leading fuels supplier to commercial and industrial customers.

Total sales volume in 2016 amounted to 10.68 mn tons. In addition, OMV Petrol Ofisi owns the largest fuel storage and logistics business in Turkey with a total storage capacity in excess of 1 mn cubic meters. The company is also the largest distributor of lubricants in Turkey.




U.K. Oil, Gas Output Set for Longest Expansion in Two Decades by Angelina Rascouet

U.K. oil and gas production will continue to grow through 2018, putting it on course for the longest expansion in almost two decades, amid project startups and productivity gains, an industry lobby said. “Production has now been rising since 2015, bucking a 15-year trend of decline, and should continue to rise over the next two years,” Oil & Gas U.K. said in a statement on Tuesday. Output in the U.K. Continental Shelf rose to 1.73 million barrels of oil equivalent a day last year and will peak at between 1.8 million and 1.9 million barrels in 2018, the group said. New developments as well as productivity gains are behind the increase after output in the basin peaked about 15 years ago, the lobby said. The slump in oil prices has forced the industry to become leaner, with average operating costs falling by almost half to about $15.30 a barrel in the

past two years. EnQuest Plc’s Kraken project is among the project start-ups in the U.K. North Sea, with first oil due in the second quarter, the company said last month. Oil & Gas U.K. expects investment to continue to drop in the basin, with spending forecast to fall 3 percent to 17 billion pounds ($20.84 billion) this year from 2016. Still, there are signs of renewed mergers and acquisitions activity in the

North Sea, the group said. In January, Royal Dutch Shell Plc sold North Sea assets to Chrysaor Holdings Ltd., a private-equity backed exploration and production company, for up to $3.8 billion. Confidence Returning

“Confidence is slowly returning to the basin,” Deirdre Michie, Oil & Gas U.K. chief executive officer, said in a statement. “The bottom of the cycle may have been reached.” Separately on Monday, the International Energy Agency said the U.K.’s oil production is set to decrease by 50,000 barrels a day to 965,000 barrels a day this year, the first annual drop since 2015. Production will rebound from next year amid the start up of a number of “large projects” including BP Plc’s Clair Ridge, the IEA said. “If we see further cutbacks in investments at already producing fields and an increase in decline rates, there is a risk that output towards the end of the forecast period could be slightly lower,” the IEA said, referring to 2022 as the end of its forecast period. The IEA expects oil production in the U.K. to average 980,000 barrels a day then.




Cyprus: Eni acquires 50% interest in Total's Block 11 offshore Cyprus Source: Eni

Eni has finalised a farm-in agreement with Total to acquire 50% Participating Interest of Block 11, offshore Cyprus.

The agreement, by which Total remains the Operator of the Block, has been approved by the Council of Ministers of the Republic of Cyprus. With this transaction Eni further reinforces its own position in the Country, acquiring the right of exploring an area of 2,215 sq kms, nearby the 'super giant' Zohr discovery in the Egyptian offshore.

The rights on Block 11 were assigned by the Republic of Cyprus to Total back in 2013 at the conclusion of the second international bid round held by the Country. The exploration well is expected to be drilled in the Block within 2017.

This agreement is part of Eni’s strategy aimed at increasing its own exploration portfolio in the strategic area of Eastern Mediterranean Sea.

Block 11 lies adjacent to and north of Eni's 'super giant' Zohr gas discovery in the Egyptian offshore

Eni has been present in Cyprus since 2013 through its subsidiary Eni Cyprus and holds exploration rights on Blocks 9, 3, 2 (Eni 80% Op., Kogas 20%) awarded in the second round. Eni has also been chosen, in the third competitive bid round, as selected bidder for Block 6 (Eni 50% Op.,Total 50%) and Block 8 (Eni 100% Op.).




Senegal: Cairn Energy reports results of successful appraisal well SNE-5, offshore Senegal …Source: Cairn Energy

Cairn Energy has announced the results of the SNE-5 appraisal well offshore Senegal where operations have been safely and successfully completed ahead of schedule and under budget following drilling, logging, drill stem testing and the setting of pressure gauges.

Cairn’s analysis and integration of the dataset collected is continuing with initial results in line with expectations and as follows:

• SNE-5 targeted a location in the Upper Reservoirs where two principal units are located within the oil leg

• Main reservoir units, pressure data and fluid contacts match previous SNE wells as expected

• Multiple samples of oil and gas were recovered during wireline logging and drill stem tests; analysis indicates oil of similar quality to previous wells

• Two drill stem tests were conducted within the Upper Reservoir units over gross intervals of 18m and 8.5m and were in line with expectations:

o DST 1a flowed from an 18m interval at a maximum rate of ~4,500 barrels of oil per day (bopd) on a 60/64” choke. Two main flows of 24 hours each were performed; the first at ~2,500 bopd on a 40/64” choke, followed by a second at ~3,000 bopd on 56/64” choke

o For DST 1b an additional 8.5m zone was added and the well flowed at a maximum rate of 4,200 bopd and for 24 hours at an average rate of ~3,900 bopd on 64/64”choke

The SNE-5 well has been plugged and abandoned and the Stena DrillMAX drill ship is moving location to commence operations shortly on the Vega-Regulus (VR-1) well, ~5 km to the west of the SNE-1 discovery. VR-1 has two objectives; an Aptian exploration target and an appraisal objective in the SNE field.

The well will target the Vega-Regulus exploration prospect in the Aptian Carbonates underlying the SNE field which has potential gross mean consolidated prospective resource of more than 100 mmbbls.

In addition, the well will further appraise the SNE field targeting potential incremental resources. The results will help narrow the range of SNE field volumes and also allow the JV time to fully integrate the results of SNE-5 prior to moving to appraisal well SNE-6 to complete the planned interference test.




NewBase 08 February 2017 Khaled Al Awadi

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

Crude prices fall on likely US stocks build Reuters Oil futures fell in Asian trade on Wednesday after industry data pointed to a potential ninth straight week of inventory builds, renewing concerns about an oversupply of oil despite output curbs by OPEC and non-OPEC members. Brent futures fell 29 cents, or 0.5 percent, to $55.63 as of 0504 GMT after settling down 0.2 percent in the previous session. U.S. West Texas Intermediate (WTI) crude fell 34 cents, or 0.6 percent, to $52.80 a barrel, after ending the previous session down 0.1 percent.

"Oil is range-bound. If prices dip below $50 a barrel OPEC will cut more; if it goes above $55 the U.S. will produce more," said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney. U.S. crude stocks rose by 11.6 million barrels last week, more than five times analysts' estimates, according to industry group, the American Petroleum Institute. If the figures are confirmed later on Wednesday by official data from the U.S. Department of Energy's Energy Information Administration (EIA) it would be the ninth straight week of inventory builds.

Oil price special

coverage




Analysts have forecast a 1.7 million barrel inventory build. "All eyes are on the EIA numbers," said Jeffrey Halley, senior market strategist at Oanda in Singapore. "A big washout of that will see oil test technical support levels." Oil prices are facing headwinds from a likely U.S. Fed interest rate hike next week, a strong dollar, increasing inventory builds to record levels and rising U.S. shale oil production, he said. "The planets seem to be aligning for a bit of a washout of long positions. I think it's getting time for a bit of a correction in oil prices," Halley said. The API stocks data came as the EIA on Tuesday cut its 2017 world oil demand growth forecast by 110,000 barrels per day to 1.51 million bpd. At the same time, members of an OPEC-led production agreement said on Tuesday total output reductions are more than 1.5 million barrels per day and are meeting their expectations. China demand remains strong, with crude oil imports hitting the second-highest level on record in February on a daily basis at about 8.286 million barrels per day, up 3.5 percent on a year ago, customs data showed on Wednesday.




Surprise Oil Price Cut Shows Saudis Are Trying to Fend Off U.S. Sweet Crude … Blommberg - Serene Cheong and Sharon Cho

The oil is light, sweet and tempting, with a lot of it made in the U.S. Saudi Arabia’s trying to keep it away from the biggest crude buyers. The Middle East producer cut the pricing for some of its April oil sales to Asia, surprising customers who were expecting an increase that was signaled by the structure of the market. That shows it’s trying to lure buyers toward its lighter and less sulfurous crude varieties at a time when similar-quality grades are rushing to the region from the Americas, Europe and Africa.

‘Sweet’ crudes with less sulfur are typically costlier than dirtier ‘sour’ oils because they can be more easily processed into valuable products such as gasoline. With its latest pricing, the premium of one of Saudi Arabia’s lightest grades to its heaviest has shrunk to the smallest since July 2015. This is the producer’s latest effort to defend sales in Asia -- a region that’s already largely spared from its output curbs -- as Middle East prices strengthen and make supply from elsewhere relatively cheaper. “This came as a complete surprise to the market,” said Tushar Tarun Bansal, director at industry consultant Ivy Global Energy in Singapore, referring to the Saudi pricing cut. “This is a signal from the Saudis that they are serious about market share and pricing crude competitively, and would even be open to changing the methodology if the need arises.” The world’s biggest crude exporter cut the official selling price for its Arab Light crude to Asia by 30 cents to 15 cents a barrel below the regional benchmark for April. Refiners and traders had expected state-run Saudi Arabian Oil Co. to set pricing at 30 cents more than the marker. It was the first time in at least a year that the grade was set at a discount when buyers were predicting a premium, data compiled by Bloomberg show.




The company known as Saudi Aramco also cut April pricing for Asia from a month earlier for Extra Light crude by 75 cents and Super Light by 50 cents a barrel. The Medium grade was reduced by 30 cents while Arab Heavy was left unchanged. In other regions, Heavy crude for the Mediterranean was the only grade for which pricing was increased.

The bigger reductions for lighter varieties don’t mean the company isn’t facing competition in sales of heavier grades. Some sour supplies that have rarely or never-before come to Asia have recently been flowing to the region, but are still relatively sporadic. Light, sweet crude, like that which is produced in American shale fields and Europe’s North Sea, pose the bigger threat. While Saudi Arabia leads output cuts as part of a deal between OPEC and other nations to erode a global glut, supplies are ramping up in regions such as the U.S. where producers aren’t part of the agreement. That’s boosted Middle East benchmark Dubai crude relative to other markers such as U.S. West Texas Intermediate and Brent. “The tightness in the crude market now is clearly in medium and heavy sour grades, not in lights,” said Amrita Sen, chief oil analyst at Energy Aspects in London. “Part of that is clearly to do with the U.S., and rising U.S. exports, much of which is headed to Asia in February.” The U.S. exported 746,000 barrels a day in January, highest level since Washington ended its limits on overseas shipments at the end of 2015, according to U.S. Census Bureau data released Tuesday. Asian countries including China, Hong Kong, Japan and Singapore imported a total of 5.85 million barrels, while Australia purchased 223,000 barrels. U.S. WTI crude was 72 cents a barrel below the Dubai benchmark on Tuesday after flipping to a discount in December for the first time since at least May. Brent, the benchmark for more than half




the world’s oil including North Sea and West African supply, was $1.56 a barrel above the Middle East marker, after the premium shrunk last month to the smallest in more than a year. West African producers last month were expected to send the most crude to Asia in at least five years while unprecedented flows of North Sea oil were bound east earlier this year. Eagle Ford shale and West Texas Intermediate are among U.S. oils that have recently made their way to Asia. The flow of cargoes from the west meant there “were competitive pressures,” Ivy Global’s Bansal said. “However, this has been a case in the past but Saudis have always stuck to their pricing methodology.” While the latest cut doesn’t mean the Middle East producer has completely moved away from its traditional pricing method, “a change happening will not be seen as impossible now,” he said. Apart from its pricing strategy, Saudi Arabia has also sought to defend market share via output tactics. In January, people with knowledge of the matter said it’s continuing to pump lighter oil while fulfilling its promise to cut output by focusing curbs on medium and heavy varieties. The Saudis are “facing more competition at the light barrels side,” said Peter Lee, an analyst at BMI Research. “Because they’re already cutting production from the medium to heavy barrels side, the Saudis would hate to lose further market share in the light side of things.”




NewBase Special Coverage

News Agencies News Release 02 Feb. 2017

With Shale Oil Production Like This, Who Needs Trump? By Julian Lee

The second coming of shale could be even more powerful than the first. OPEC seems to be getting caught unawares.

The current boom in U.S. oil production is even stronger now than the run from July 2011 to April 2015. And this is with oil prices at half their previous level and before President Donald Trump has done anything to meet his pledge to "lift the restrictions on American energy and allow this wealth to pour into our communities." Output growth could accelerate if prices rise, or costs fall further.

This is not how it was meant to be. OPEC launched a strategy to protect market share in 2014 with a specific aim to knock out high-cost oil production such as shale. After the group succumbed to internal financial pressures and agreed in November to cut output by around 1.2 million barrels a day, Saudi oil minister Khalid Al-Falih said he didn't expect a big supply response from American shale producers in 2017.

Turbocharged

U.S. oil production is growing faster now than it did during the first shale boom

It turns out the response was already well under way, and Al-Falih may not like the numbers. Data from the Department of Energy show U.S. oil production bottomed out in September. Since then




oil companies have added an average of 125,000 barrels a day of production each month, taking output back above 9 million barrels a day for the first time since April.

What should really trouble OPEC, though, is that this rate of growth is even faster than the first shale boom. Over that earlier period, U.S. oil production rose at an average monthly rate of 93,000 barrels a day.

Market anticipation of the agreement between OPEC and its friends in November last year, and the actual deal, lifted WTI from a low reached in early 2016 of around $26. This time, shale producers aren't waiting around -- their output started picking up with WTI crude selling for around $45. During the last boom, WTI traded in a range at about double or triple that.

Okay, so part of the growth is coming from the Gulf of Mexico, where BP Plc's Thunder Horse South and Royal Dutch Shell Plc's Stones projects have both started producing in recent months. But that region also made a positive contribution to the earlier boom, as did Alaska. Most of the current growth is coming from the onshore, lower 48 states -- home of the shale industry.

Increasing production from the U.S. is rapidly undermining the output cuts that OPEC is making and, unless those cuts get deeper in the coming months -- which looks unlikely, given that compliance is already above 90 percent -- things can only get worse for the producer group. Far from bringing the market back into balance, they run the risk that they have seriously underestimated the ability of U.S. domestic producers to adapt to lower prices. And what's worse is that they may be able to raise production even faster if OPEC succeeds in pushing the price up.

Cutting the Oil Cuts

Partial implementation by OPEC and rising output elsewhere have halved pledged reductions

What OPEC has failed to understand is that the shale revolution owes it success more to a new business philosophy to deal with a new type of resource, than it does to new technology. As Thomas Reed, chief executive of JKX Oil & Gas Plc, pointed out at last week's International Petroleum Week conference in London, horizontal drilling and hydraulic fracturing have both been in use in the oil industry for around 50 years. What is really new is not just combining the two




techniques in a single well but, more importantly, the industrialization of the process of drilling and completing wells.

The long lead-times, complex development plans and huge up-front capital requirements associated with conventional oil fields simply don't apply in the shale sector. Yes, costs will eventually rise as shale output grows. The industry's retrenchment has left it employing only the best rigs and crews and focused on the best of the resource. But it is able now to extract so much more with so much less drilling that it is almost certain to keep growing. OPEC has put itself back on the path of cutting output to support competing producers. It just doesn't seem to have realized it yet.Oil pared declines after an industry report was said to show that U.S. crude inventories shrank.

Stockpiles fell 884,000 barrels last week according to an American Petroleum Institute report Wednesday, people familiar with the data said. That contrasted with analysts surveyed by Bloomberg who said supplies probably rose by 3.25 million barrels ahead of Energy Information Administration data Thursday. OPEC must prolong output curbs beyond six months to have a significant impact on bloated world stockpiles, said Total SA Chief Executive Officer Patrick Pouyanne.

A surge in U.S. crude stockpiles to the highest level in more than three decades has kept oil futures in a tight range above $50 a barrel this year, offsetting supply cuts by OPEC and 11 other nations. It’s too early to say whether the production agreement could be extended beyond its initial six-month term, OPEC Secretary General Mohammad Barkindo said. "The fundamentals actually do matter sometimes," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. "The focus is returning to the reality that fundamentally we’re oversupplied."




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Khaled Malallah Al Awadi, Energy Consultant MS & BS Mechanical Engineering (HON), USA Emarat member since 1990 ASME member since 1995 Hawk Energy member 2010

Mobile: +97150-4822502 [email protected] [email protected]

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

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

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

NewBase March 2017 K. Al Awadi




Hilton hotel 1B AZADLIG AVENUE, BAKU, AZ1000, AZERBAIJAN

Please send your request by email at [email protected], or call +994 55 5993345

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.

Social Networking Contact

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

• Contact Us: +994 55 599 33 45

• Email: [email protected]

The Oil and Gas Summit

New base 1009 special 08 march 2017 energy news

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