New base 531 special 02 february 2015

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NewBase 02 February 2015 - Issue No. 531 Khaled Al Awadi

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

Remaining bidders weigh tough terms for stake in Abu Dhabi’s prime oilfields

The National + NewBase

The remaining bidders for a stake in Abu Dhabi’s prime onshore oilfields are weighing whether to stay in the running on tough terms following the award last week of the first and best of the fields on offer to France’s Total.

Last Thursday Abu Dhabi National Oil Company, known as Adnoc, and Total announced that the French company had been the first of 11 bidders chosen by the country’s Supreme Petroleum Council for a hotly contested stake in Adco, the name of the operating company for Abu Dhabi’s 15 onshore oilfields that currently produce about 1.6 million barrels per day, or more than half the emirate’s output.

Total will have a 10 per cent shareholding in the company and will be the “asset leader” – the main operator and developer – of fields which account for two-thirds of Adco’s production,




including Bu Hasa, the biggest single field. The remaining bidders have been left to consider proposals that require them to accept terms similar to Total.

The other bidders include BP and Royal Dutch Shell, which had been shareholders in the old Adco concession which expired at the start of last year, as well as Statoil, Occidental Petroleum, Eni, Rosneft, PetroChina, Korea National Oil Company and Inpex.

A Royal Dutch Shell spokesman in Dubai said: “We have received a proposal from Adnoc which we are currently studying.” The others either did not comment or were not reachable. The terms of Total’s deal for Adco were not disclosed, but the head of one of the bidding companies in Abu Dhabi said: “It is not easy to see how Total will make much margin on it. It is an extremely high price to pay.”

In the old Adco concession, the producers – which included ExxonMobil, which was not a bidder for the new concession – were paid a fee of US$1 per barrel, which is very low by industry standards, even though the oil is relatively easy to access. Some of those involved in the bidding suggested the new margin was not much more than that, but they did not elaborate.

The initial reaction from stock analysts was mostly positive for Total, although they were assuming that the fees for the company were about $2.85 a barrel – in line with what Exxon negotiated for its participation in Abu Dhabi’s Upper Zakum offshore field last year – and that Total has terms that allow it to improve that margin.

In London, Jon Rigby at UBS said the deal increases his forecast for Total’s 2015 production by 7 per cent, or 160,000 bpd (10 per cent of current Adco production). “The new concession agreement also features an enhanced fee structure, with additional fees to Total for being the asset leader” on the fields it was awarded, Mr Rigby’s note to investors said.

Other analysts noted the potential to improve the operating performance at the fields through advanced reservoir management techniques, a major factor in winning the deal for Total and meeting (or beating) targets on the fields can improve Total’s margin.

“This is very easy oil onshore the Middle East, so the cost should be low, although it will require injection wells and enhanced oil recovery techniques,” Mehdi Ennebati, an analyst at Société Générale in Paris, said.

“Historically, Total has paid about $2 a barrel for its resource acquisition – this one should be materially cheaper in light of its location.”




TAQA, Halliburton sign JV on chemical plant in Jubail City Source TAQA + SG + NewBase The Industrialization & Energy Services Company (TAQA) and Halliburton Multi-Chem recently signed a joint venture agreement held in the offices of TAQA in Al-Khobar. The JV will establish an industrial complex to produce specialty chemicals related to the oil and gas and energy sectors. The complex will be located in PlasChem Park in Jubail Industrial City II, which is a

collaborative effort between Sadara Chemical Company and the Royal Commission for Jubail and Yanbu (RCJY). With a new plant to be located in Jubail Industrial City (Jubail 2), the new Joint Venture aims to support exploration and production operations in the Kingdom and offer chemical products needed by the local and Middle East markets. Project construction is expected to begin in 2015 with production starting in the fourth quarter of

2016. The plant will provide specialty chemicals to serve local and international oil and gas, water, and power sectors. Eng. Abdulrahman Bin Zarah, President of TAQA, and Keith Barnard, Vice President of Halliburton Multi-Chem, signed the JV agreement, while Mohammed Y. Rafie, Chairman of TAQA, and Eng. Ziad S. Al-Labban, CEO of Sadara were in attendance. “By signing this agreement with Halliburton, we are increasing TAQA‘s commitment and presence in the oil and gas sector in the Kingdom by adding local manufacturing capabilities and transfer technology in the oil and gas sector in Saudi Arabia,” said Rafie. “This agreement positions us to have a world-class cost position in the heart of the $0.5 billion-plus specialty chemical market of the Middle East. It also demonstrates our commitment to serve Saudi Aramco and other valuable customers in the region. This project should provide a safe supply of raw materials and increase the sales of chemical products both locally and internationally,” said Barnard. “The signing of this joint venture agreement forms a general framework for the construction of the plant that aims to transfer technology and provide specialized technical training and expertise to the Saudi workforce,” said Eng. Bin Zarah. “Furthermore, the large group of chemicals that will be produced in the plant will enhance the role of the chemical industry sector and contribute to the establishment of more downstream investment projects in the Kingdom. Additionally, it will enable TAQA to achieve one of its strategic goals, through extending the foundation of the national economy and supporting the efforts to diversify the Kingdom’s economy, contributing to the creation of direct and indirect jobs created by these technical industries.”




Saudi Aramco Stops Red Sea Deepwater Exploration Work By Reuters + NewBase

State oil giant Saudi Aramco has put on hold its deepwater oil and gas exploration and drilling activities in the Red Sea because of high costs as it economies in an environment of low crude prices, industry sources said on Sunday.

The cost of operations in the Red Sea, a new area for Saudi Aramco, was around $1 million per day, said two sources, who declined to be identified because they were not authorised to speak to media. “It is related to budget cost reduction in the Red Sea offshore,” said one of the sources.Saudi Aramco declined to comment.

The company’s chief executive Khalid al-Falih said last week that Saudi Aramco would renegotiate some contracts and postpone some projects because of the plunge in oil prices over recent months. The firm has suspended plans to build a $2 billion clean fuels plant at its largest oil refinery in Ras Tanura, sources told Reuters last month.

However, Falih also said Saudi Aramco would continue investing in key projects, and had earmarked $7 billion to spend on unconventional gas in coming years after investing $3 billion in the past.

A second source said deepwater exploration in the Red Sea had stopped because of several factors, including environmental issues, costs, and the need for further studies to minimise risks.

“One of the most expensive offshore (areas) happens to be in the Red Sea – the depth is different from the Gulf coast. They did discover a lot of oil and gas but they need to do lots of tests. Now with the current prices, they have put it on hold until further notice to collect more data,” said a third source.

Saudi Aramco said in its 2013 annual review that it was continuing operations in the Red Sea’s deep waters and had made a new oilfield discovery at Al-Haryd.

“It would not be surprising if Saudi Aramco were to suspend exploration in the Red Sea because it is a very complex basin, and no significant discoveries have been announced since the Midyan field complex and the Um Luj condensate discoveries accomplished by the Aramco exploration team of the early 90s,” said Sadad al-Husseini, a former top executive at Saudi Aramco and now an energy consultant.

Deepwater potential of the Red Sea




Algeria: Shale gas "complement" energy mix, says former Sonatrach CEO APS + NewBase

The shale gas in Algeria must have a long-term position as a complementary resource in the national energy mix and should in no way be considered as "source of revenue," export Abdelmajid Attar told APS.

For the former CEO of Sonatrach, any technical and cost effective confirmation of shale gas in the next five years would not allow the exploitation only after ten to fifteen years.

This production must meet the internal needs of the country and not serve to increase revenues," he said, insisting that this gas is considered as" partial alternative and complement to the country's energy security beyond 2030."

Currently, he insists, Algeria is only in the exploration stage, that is to say, the evaluation phase of the recoverable potential if the currently existing techniques allow extraction without risks.

In this regard, he believes that it is a "compulsory phase" before considering any exploitation that requires an authorization from the Council of Ministers in accordance with Article 23a of the Hydrocarbons Law.

Countries such as China, Argentina, the United Kingdom, Spain, South Africa and even Saudi Arabia are also in the exploration phase of their shale gas reserves, he said, arguing that it is crucial for the energy security of each of these countries in the short to medium term.

"In ten years, concern will grow over the problem of energy security in Algeria, given the growth in domestic consumption," he stressed, noting that the government is facing a "big challenge" which is setting up an energy model including priority investment in renewable energy, boosting an energy saving program and preservation of a minimum revenue to fund a new wealth-generating economy

About the opportunity for Algeria to go towards possible shale exploitation, the president of Strategy and Energy Policies said that each country has to make its own decisions on this issue, noting that many countries are developing or will develop unconventional resources such as Saudi Arabia, Poland, Ukraine, China, Australia, Argentina and the United Kingdom.

Asked about the profitability of the costly shale exploitation in context of falling gas prices, Perrin says that only the exploration drilling can refine the estimates in terms of costs.




US:Oil workers begin first large-scale strike since 1980 Bloomberg + NewBase

The United Steelworkers union, which represents employees at more than 200 US oil refineries, terminals, pipelines and chemical plants, began a strike at nine sites yesterday, the biggest walkout called since 1980.

The USW started the work stoppage after failing to reach agreement on a labour contract that expired yesterday, saying in a statement that it “had no choice.” The union rejected five contract offers made by Royal Dutch Shell on behalf of oil companies since negotiations began on January 21.

The United Steelworkers union hasn’t called a strike nationally since 1980, when a stoppage lasted three months. A full walkout of USW workers would threaten to disrupt as much as 64% of US fuel production. Shell and union representatives began negotiations amid the biggest collapse in US oil prices since 2008. “Shell refused to provide us with a counteroffer and left the bargaining table,” USW International President Leo Gerard said in a statement early yesterday. “We had no choice but to give notice of a work stoppage.” Ray Fisher, a spokesman for The Hague, Netherlands-based Shell, said by e-mail on Saturday that the company remained “committed to resolving our differences with USW at the negotiating table and hope to resume negotiations as early as possible.”




The USW asked employers, which include Exxon Mobil Corp and Chevron Corp, for “substantial” pay increases, stronger rules to prevent fatigue and measures to keep union workers rather than contract employees on the job, Gary Beevers, the USW international vice president who manages the union’s oil sector, said in an interview in Pittsburgh in October. The refineries called on to strike span the US, from Tesoro Corp’s plants in Martinez, California, Carson, California, and Anacortes, Washington, to Marathon Petroleum Corp’s Catlettsburg complex in Kentucky to three sites in Texas, according to the USW’s statement. The sites in Texas are Shell’s Deer Park complex, Marathon’s Galveston Bay plant and LyondellBasell Industries’ Houston facility, the statement shows. The walkout also includes Marathon’s Houston Green cogeneration plant in Texas and Shell’s Deer Park chemical plant. More refineries are standing by to join the sites on strike, according to two people familiar with the plan who asked not to be identified because the information isn’t public. The remaining USW-represented sites are operating under rolling, 24-hour contract extensions, the USW said. Shell activated a “contingency plan” to continue operations at the Deer Park refinery, Fisher said on Saturday. Beevers said in October that he was expecting “the most difficult negotiations that I’ve seen” as workers fought for better pay and benefits. Local USW units established funds to help compensate workers during a strike for the first time in at least 20 years. Refiners’ shares on the Standard & Poor’s 500 have more than doubled since the beginning of 2012, when the steelworkers last negotiated an agreement. Marathon and Tesoro Corp went on that year to take their place among the 10 best performers in the S&P 500 Index. US fuel producers have been cashing in on the biggest-ever domestic oil boom, driven largely by volumes extracted from shale formations using hydraulic fracturing and horizontal drilling. The surge in output has lowered US oil prices by 55% since June 20 and contributed to a global supply glut that has also sent international prices tumbling. During the last bargaining year, United Steelworkers and Shell took about a month to reach a national agreement. The USW rejected at least four offers that year before agreeing to a contract that called for pay increases of 2.5% in the first year and 3% in the second and third years. The national agreement, which addresses wages, benefits and health and safety, serves as the pattern that companies use to negotiate local contracts. Individual USW units may still decide to strike if the terms they’re offered locally don’t mirror those in the national agreement.




US: Growing HC gas liquides( HGL) production spurs petrochemical industry investment

Source: U.S. Energy Information Administration

Between 2014 and 2018, U.S. petrochemical capacity expansion projects are projected to increase domestic demand for ethane by nearly 600,000 barrels per day (bbl/d) and propane by nearly 200,000 bbl/d. This growing demand is in response to growing domestic hydrocarbon gas liquids (HGL) supply and favorable petrochemical feedstock prices in the United States relative to the international market.

The petrochemical industry uses hydrocarbon feedstocks such as ethane and propane to create plastics, fibers, resins, and a wide range of other consumer and industrial materials. Ethylene-cracking plants most commonly process either ethane or naphtha to produce ethylene, an important compound used in the manufacture of plastics and other industrial materials.




Although naphtha, a hydrocarbon that contains mostly molecules with 5–12 carbon atoms, is one of the lighter components produced by refining crude oil, it is a much heavier feedstock than ethane or propane, which respectively consist of hydrocarbon molecules with 2 or 3 carbon atoms. All ethylene projects currently planned for the United States are designed to consume light feed, predominantly ethane, for the production of ethylene.

Most announcements of capacity expansions, feedstock changes, or new plant construction were made between early 2011 and mid-2013, when strong growth in natural gas production from shale provided the United States with a significant increase in the availability of ethane. Decreasing ethane prices during this period increased the cracking spread (the margin received from processing ethane into ethylene), spurring the rise in new investment. More recently, ethylene-naphtha cracking spreads have also risen in response to decreased naphtha prices.

The recent rise in U.S. natural gas production has also increased the supply of propane, which in turn decreased U.S. propane prices and increased propylene-propane price spreads in the United States. As with ethylene cracking, this has led to plans to increase the capacity for processing propane into propylene at propane dehydrogenation (PDH) plants.

Ethylene crackers are expensive and complex projects that take many years to develop. Most of the ethylene cracker projects currently being developed will not come online until 2017 or 2018, including six large-scale projects announced in 2011 and 2012. Four projects (from Dow, ExxonMobil, Chevron Philips, and OxyChem/Mexichem) are already under construction, and two projects (from Formosa and Sasol) have received permitting approval and commitments from investors. Together with capacity expansions at existing facilities, these six new facilities are expected to increase U.S. ethylene production by 40%, to a total of more than 37 million metric tons (mt), more than one-fifth of current global ethylene production capacity (approximately 150 million mt).

Currently, only one PDH plant is in operation in the United States: the PetroLogistics plant in Houston, Texas. This plant is estimated to consume 30,000 bbl/d of propane. However, there are




six new PDH projects at various stages of development that, if completed, could increase U.S. petrochemical sector propane demand by an additional 190,000 bbl/d by the end of 2018.




Oil Price Drop Special Coverage

Chevron to stop Poland shale gas exploration Reuters + NewBase

US energy major Chevron Corp said it will stop exploring for shale gas in Poland, a sector that has failed to live up to its early promise of transforming eastern Europe’s energy supplies.

Chevron’s Polish unit “has decided to discontinue shale gas operations in Poland as the opportunities here no longer

compete favourably with

other opportunities in Chevron’s global portfolio”, the company said in a statement.

Exxon Mobil, Total and Marathon Oil have also stopped shale gas exploration in Poland over the past three years.

Meanwhile, oil prices rallied on Friday following the sharpest weekly drop in US oil rig count in nearly 30 years, while the dollar index ended January with its longest run of gains since the greenback was floated in 1971. In a rally that may spur speculation that a seven-month price collapse has ended, US crude futures jumped 8.3 percent to settle at $48.24 a barrel and Brent crude shot up 7.9 percent to settle at $52.99, its biggest one-day gain since 2009. Sparking the rally was data that showed drillers were cutting back on shale activity.

A worker stands near a drilling rig at Grabowiec 6

near the village of Lesniowice,




U.S. Oil Drillers Idle 94 Rigs in Biggest Retreat Yet Bloomberg + NewBase U.S. drillers pulled 94 oil rigs out of fields in a single week, the biggest retreat to date, as crude prices capped the longest stretch of monthly declines since 2009.

The oil rig count dropped to a three-year low of 1,223, Baker Hughes Inc. said on its website Friday. It was the biggest weekly decline since the Houston-based oil-field services company began collecting the data in 1987. The Permian Basin of Texas and New Mexico, the country’s biggest oil field, was hit hardest, losing 25 rigs.

Drillers are parking rigs as a global collapse in oil prices prompts producers to curb spending, service contractors to fire thousands and at least one oil-rich county in California to declare a fiscal emergency. Banks including Societe Generale SA have said prices may fall below $40 a barrel as global supplies surge and OPEC resists calls to curb output.

“The risk is that we go into a $30- to $40-a-barrel range if the market is too impatient and doesn’t want to wait for lower rig counts and lower well completions,” Mike Wittner, head of oil research at Societe Generale, said by telephone from New York on Friday. “Then you start getting below operating costs.”

West Texas Intermediate for March delivery rose $3.71 on Friday to $48.24 a barrel on the New York Mercantile Exchange. Even with the gain the futures capped a seventh straight month of declines, dropping 9.4 percent in January.

‘Decisive Actions’

“There’s a lot of debate right now about the duration of the current low oil prices,” Ryan Lance, ConocoPhillips’ chief executive officer, said in a conference call Jan. 29. “We’re assuming that they’ll stay low for 2015, and we’re taking decisive actions.”




ConocoPhillips, the third-largest U.S. energy producer, said on Jan. 29 that it was cutting its rig count in North Dakota’s prolific Bakken shale formation to three this year. On Friday, Chevron Corp. cut its drilling budget by the most in 12 years, suspended share buybacks and laid off workers. Drilling contractor Helmerich & Payne Inc. said it may cut 2,000 jobs after receiving 22 notices from clients terminating rig contracts early.

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of the world’s oil supplies, has meanwhile held its ground after agreeing in November to maintain output targets. Saudi Arabia, the group’s biggest producer, won’t “singlehandedly balance the market in a downturn,” Khalid Al-Falih, Saudi Arabian Oil Co.’s chief executive officer, said at a conference in Riyadh.

Record Production

U.S. oil production has continued to climb, reaching 9.21 million barrels a day in the week ended Jan. 23, the most in weekly data since at least 1983, Energy Information Administration data show.

Continental Resources Inc., the largest leaseholder in North Dakota’s Bakken shale formation, can weather low oil prices “forever,” the company’s chief executive officer, Harold Hamm, said in an interview at the Argus Americas Crude Summit in Houston on Jan. 28. Prices will recover as early as the first half of this year as producers cut back, he said.

In Kern County, home to three-fourths of California’s oil production, leaders declared a fiscal emergency. The collapse in oil prices may cut the government’s property-tax collections by almost 15 percent in the year beginning July 1, according to Nancy Lawson, the assistant county administrative officer.

“We were looking quite positive before this happened,” Lawson said.

Natural gas rigs increased by three to 319 and one miscellaneous rig was added, bringing the total count down 90 to 1,543. Gas futures for March delivery fell 2.8 cents Friday to $2.691 per million British thermal units on the Nymex, the lowest settlement since September 2012.

Oil fell amid speculation that the biggest strike at U.S. refineries since 1980 will curtail crude processing in the world’s leading consumer nation and worsen a global supply glut.

Futures dropped as much as 3.3 percent in New York. The United Steelworkers union, which represents employees at more than 200 U.S. refineries, terminals, pipelines and chemical plants, stopped work on Sunday at nine sites after failing to agree on a labor contract. China’s Purchasing Managers’ Index slid to 49.8 last month from 50.1 in December, below a reading of 50 that separates expansion from contraction.




Rising U.S. supply has contributed to a global surplus that drove oil prices almost 50 percent lower last year. The Organization of Petroleum Exporting Countries, which has resisted calls to cut output, boosted production in January as Iraq pumped at a record pace, according to a Bloomberg survey of oil companies, producers and analysts.

“If the strike escalates, that would be detrimental to the oil price,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. “It will put high U.S. production out on the market and there’s nowhere for it to go. Also, the PMI number would indicate some slowing.”

West Texas Intermediate for March delivery lost as much as $1.57 to $46.67 a barrel in electronic trading on the New York Mercantile Exchange and was at $46.94 at 12:10 p.m. Singapore time. The contract gained 8.3 percent on Jan. 30, the most since June 2012. Total volume was about 69 percent above the 100-day average. Prices have decreased 12 percent this year.

Refinery Strike

Brent for March settlement declined as much as $1.58, or 3 percent, to $51.41 a barrel on the London-based ICE Futures Europe exchange. It climbed $3.86 to $52.99 on Jan. 30. The European benchmark crude traded at a premium of $4.64 to WTI.

The steelworkers’ union that went on strike said in a statement that it “had no choice.” It rejected five contract offers made by Royal Dutch Shell Plc on behalf of oil companies including Exxon Mobil Corp. and Chevron Corp. since talks began on Jan. 21.

The union hasn’t called a national stoppage since 1980, when a halt lasted three months. The refineries on strike can produce 1.82 million barrels a day of fuel, about 10 percent of total U.S. capacity, data compiled by Bloomberg show.

“If the strike does get to the stage of really affecting production levels, the likely impact will be smaller product inventories,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone.

Gasoline Profits

Gasoline in New York was at a premium of $14.219 a barrel to crude at Cushing, Oklahoma, the delivery point for WTI contracts. That’s the highest profit from making the motor fuel since September.

“There will be a knee-jerk reaction in gasoline and diesel prices because we don’t know how long this is going to be or how extended it might be,” Carl Larry, a Houston-based director for oil and gas at Frost & Sullivan, said by phone on Sunday. “It’ll be bearish for crude, but we’ve already accounted for a lot of the fact that refineries are in maintenance.”

U.S. drillers idled 94 oil rigs last week, the most since Baker Hughes Inc. began collecting data in 1987. The number of active machines shrank to a three-year low, according to the Houston-based oilfield services company.




Chinese Economy

The Chinese government’s PMI released Feb. 1 was below the median projection of 50.2 in a Bloomberg News survey of 22 economists. A separate gauge Feb. 2 from HSBC and Markit Economics was at 49.7, also missing estimates.

The Asian nation, the world’s second-largest oil consumer, will account for about 11 percent of global demand this year, forecasts from the International Energy Agency in Paris show.

OPEC, which supplies about 40 percent of the world’s oil, pumped 30.91 million barrels a day in January, according to the Bloomberg survey. The 12-member group agreed at a Nov. 27 meeting to maintain its production target at 30 million. Iraqi output increased by 200,000 barrels a day to 3.9 million, the biggest gain after Saudi Arabia.

Money managers reduced their net-long positions on WTI for a second week through Jan. 27, raised short bets to the highest level since 2010, the U.S. Commodity Futures Trading Commission said in a report.





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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 01 February 2015 K. Al Awadi




New base 531 special 02 february 2015

Economy & Finance