New base 533 special 04 february 2015

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NewBase 04 February 2015 - Issue No. 533 Khaled Al Awadi

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

Exxon milestone as Abu Dhabi offshore engineering works are completed

The National + NewBase

ExxonMobil has passed a milestone in its huge Upper Zakum oilfield project offshore Abu Dhabi with the completion of major engineering works, the US company said. “Civil works are now essentially complete on all islands,” Jeff Woodbury, Exxon’s head of investor relations, told analysts when discussing the company’s fourth quarter earnings on Monday.

“Drilling is ongoing from two of the islands and first production started in November of last year. Facility additions and drilling will continue over the next three years to reach the targeted production plateau” of 750,000 barrels per day.

Upper Zakum is one of the world’s largest oilfields, with an estimated 50 billion barrels in situ.

It is one of Exxon’s most important projects, especially after the Texas-based company chose to concentrate on Upper Zakum and not bid for a share of the new onshore Abu Dhabi concession after it expired at the beginning of last year.

Abu Dhabi National Oil Company (Adnoc) announced last week that France’s Total had been picked as the first partner in Adco, the new operating company for the 15 onshore fields, and as leader for fields covering about two-thirds of its production, which last year was about 1.6 million bpd.




Dropping out of the Adco concession made a dent in Exxon’s production, Mr Woodbury said on Monday. Exxon’s 2014 production of oil and gas was down nearly 5 per cent on the year, with most of the decline owing to the loss of its 9.5 per cent share of the Abu Dhabi onshore concession, or 135,000 bpd.

Exxon’s fourth quarter earnings were hit by a combination of lower year-on-year production and sharply lower oil prices. Earnings of US$6.6 billion were down $1.8bn, or 21 per cent, compared to the year-earlier quarter. But Upper Zakum – the fourth largest oilfield in the world (second largest offshore) – is a significant project for Exxon, which owns a 28 per cent stake in the operating company, Zakum Development Company (Zadco), with partners Adnoc (60 per cent) and Japan Oil Development Company (12 per cent).

Last year, the Zakum concession was extended by 15 years to the end of 2041 and Exxon negotiated better terms, which

included a per-barrel fee of $2.85, according to industry sources.

The $10bn project involves a number of innovative techniques to raise production from 500,000 bpd to 750,000 bpd, including the construction of four artificial “islands” in an oval shape, as well as drilling that goes vertically then horizontally to enable access to reservoirs kilometres from the platform base.

Working together in ZADCO

ExxonMobil, Abu Dhabi National Oil Company (ADNOC) and Japan Oil Development Company

(JODCO), co-venturers inZakum Development Company (ZADCO), are working together to

expand development of one of the world’s largest oil fields.

Upper Zakum

The Upper Zakum field, situated about 50 miles northwest of the city of Abu Dhabi, is currently

producing more than half a million barrels a day. Through the collaboration of their professionals,

and by applying ExxonMobil’s leading-edge technology, the project could boost daily field

production to 750,000 barrels — a sizable contribution toward meeting future growth in global

demand.




UAE Mulls Lower Petrol Prices Gulf Business

Suhail Mohammed Al Mazroui told the Federal National Council that the government has submitted a proposal to the cabinet that will enable consumers to benefit from lower oil prices.

The UAE is looking to regulate petrol prices in order to better reflect the international trend, the country’s oil minister Suhail Mohammed Al Mazrouei said.

The minister was answering a question raised by Federal National Council (FNC) member Hamad Ahmad Al Rahoumi about why oil prices in Emirates

hadn’t dropped despite the fall in the value of international crude. Al Mazrouei told the FNC that the government has submitted a proposal to the cabinet that will enable consumers to benefit from lower oil prices, local daily Gulf News quoted him as saying.

He said that the proposed scheme by the ministry will reexamine energy subsidies and study who can benefit from such price cuts. Al Mazrouei did not elaborate on whether the government is looking to completely revoke fuel subsidies or whether subsidies will apply selectively to certain demographics in the country.

Petrol prices in the UAE are among the highest in the GCC region despite being subsidised by the government. Although prices in the country are capped, the government has previously made occasional changes to reflect the international trend. Al Mazrouei added that the UAE’s current oil price policy has also led to a massive loss for major fuel retailers.

“Losses of the four fuel distribution companies caused by a subsidised petrol price reached Dhs38 billion over the last 10 years with ADNOC alone losing more than Dh6.4 billion in 2014,” he told the FNC.

In line with that, Al Mazrouei said that the government is also planning to launch a new committee to oversee oil pricing. He added that it is important that the government set prices and not oil companies, as it is done currently in the UAE.

The ministry’s statement is in line with fuel retailers, who have maintained that the current pricing policies are not economically viable. In 2011, Dubai-based fuel retailer ENOC said that it faced a loss of Dhs2.7 billion as it was forced to sell petrol at a subsidised rate even as international oil prices soared.

As oil prices fell to their lowest levels since May 2009, Hamad Ahmad Al Rahoumi, a member from Dubai, asked the Energy Minister why the government has not allowed the benefits to pass on to consumers.

“The government hiked prices of petrol and fuel oil in recent years, driven by the worldwide high oil price. Now, with the oil prices falling sharply, it is not passing on the benefits to the consumers. It raises the question of why the government has not reduced petrol pump prices,” Al Rahoumi said.

Al Rahoumi is a member of an ad hoc committee of the House which demanded in 2012 that petrol prices be brought in line with other Gulf

countries — a move that could make prices cheaper by up to 60 per cent.

He said the government did not allow the oil price drop to change retail prices, but the prices of petrol and fuel oil were hiked several times when the oil prices were high. “It seems that the free market forces are working only one way in the UAE — that’s upward. Prices in the UAE always go up but never fall down,” Al Rahmoui argued.




Shell to remove Brent Delta Platform in the North Sea

Royal Dutch Shell has started preparing plans for the decommissioning of the Brent Delta Platform in the UK North sea. The platform is one of four platforms located in the Brent oil and gas field.

According to Shell, the Brent field has produced roughly 10 percent of all UK North Sea oil and gas and generated more than £20bn of tax revenue for the UK since production began in 1976.

The company has said that a thirty day public consultation on plans to start scrapping of the Brent field will begin week starting Monday, February 16. Under the decommissioning program, submitted by Shell for the Brent Delta platform, the 23,500 tonne ’topside’ of the platform would

be removed in one piece by a heavy-lift dedicated vessel that arrived in Rotterdam in January. The vessel, dubbed the world’s largest, is the Pieter Schelte, owned by Allseas.

Heaviest lift ever

Shell says that work is underway to bolster the topside in anticipation of the lift, which will be one of the heaviest the North Sea has ever seen. This single lift technique will substantially reduce the risk, cost and environmental impact of the operation.

If the decommissioning program is formally approved by the Department of Energy and Climate Change (DECC), the topside will be taken to Able UK, a specialized decommissioning company in Teesside, where more than 97% of the material will be reused or recycled.

Alistair Hope, Brent Decommissioning Project Director, Shell, said: “The Brent field has been a prolific national asset for many years, creating and sustaining thousands of jobs and contributing billions of pounds to the UK government. The engineering and planning skills which led to the discovery and subsequent successful production of oil and gas over four decades are essential during decommissioning, which is the natural next stage of the field’s life. We hope many people will play an active part in the consultation.”

Other platforms to follow

A second decommissioning programme for the remaining infrastructure in the Brent field, including Brent Delta’s legs, three other sets of topsides and legs, 140 wells and 28 pipelines, will be submitted when Shell is confident the proposals are safe, technically achievable, environmentally sound and financially responsible, the company has said. It will be subject to a separate consultation.

Brent Delta stopped production in 2011 and Brent Alpha and Bravo ceased in November 2014. Production from the field continues through Brent Charlie.

Stakeholders from over 180 organisations, including NGOs, academic institutions including the University of Aberdeen and independent scientific experts have been engaged in the development of the Decommissioning Programmes since 2007.




Myanmar-China oil pipeline opens, reduces shipping time Gulf Times + NewBase

Myanmar finally opened a new crude oil pipeline last weekend linking its western coast with China’s southern province of Yunnan, cutting shipping time for Middle Eastern and African oil to China by more than a third. It is designed to transmit a capacity of 22mn tonnes of oil per year over 771 kilometres to China.

The pipeline – which runs parallel to a natural gas pipeline that commenced operations in October 2013 and since transported around four billion cubic meters of gas, including from Qatar – will cut short the usual tanker route from the Arabian Gulf to China across the Indian Ocean through the busy Strait of Malacca and across the disputed waters of the South China Sea. Instead, oil tankers – after they have sailed around the southern tips of India and Sri Lanka – will just cross the Gulf of Bengal and discharge their freight at a brand-new deep-sea port with 12 huge storage tanks off the coast of Kyaukpyu district in

Myanmar’s Rakhine state, the starting point of the pipeline. Total construction costs for the two pipelines and the port facility were $2.45bn, fully financed by China, and the works were carried out by a joint venture between China National Petroleum Corp and state-owned Myanmar Oil and Gas Enterprise. In addition, there is a refinery and a petrochemical complex under construction on the Chinese side in Yunnan’s capital Kunming by oil giant PetroChina where the oil is going to be utilised. The huge investment shows the Chinese government’s dedication to create energy security for the country by diversifying its sources of crude supply and receiving fossil fuels from countries to its west much more directly and efficiently, especially since demand for crude oil in China is heading towards new heights due to both growing domestic demand and the current opportunity to stockpile crude cheaply as long as the oil price remains at multi-year lows. China imported 308.36mn tonnes of crude oil in 2014, a 9.5% year-on-year increase and a new record high. According to forecasts by China National Petroleum Corp (CNPC), the nation’s biggest oil and gas company, net crude imports will climb another 5.4% to 325mn tonnes in 2015 and the share of imports needed to meet domestic demand will surpass 60% this year for the first time ever. For Myanmar, the pipeline project is expected to create a veritable source of income, and the government is anticipated to make $54bn from fees and royalties over a period of 30 years. However, the project has come under fire from activists in the past on the grounds of environmental concerns, labour issues, alleged forced village relocations and claims over inadequate compensation for lost land.




US: Increase in gasoline prices ends 17-week streak of declining price Source: U.S. Energy Information Administration, Gasoline and Diesel Fuel Update

EIA conducts a survey of gasoline prices each Monday, and yesterday's survey showed the U.S. average regular retail gasoline price increasing for the first time in 18 weeks. The national price averaged $2.07/gallon on Monday, up 2.4 cents from a week earlier. The steady decline in prices over the previous 17 weeks was the longest consecutive decrease in EIA's weekly survey since prices fell 14 cents per gallon over a 24-week period in 1995. The

decline is the largest percentage decline since a 58% drop in gasoline prices over 15 weeks in late 2008. With oil prices at around $45 per barrel (bbl), petroleum refinery outages in the Midwest and Gulf Coast regions in January pushed wholesale spot gasoline prices, and ultimately retail gasoline prices, up at the end of January. Those increases were large enough to raise the national average gasoline price in yesterday's EIA survey. U.S. gasoline prices tend to follow the price of North Sea Brent crude oil, an international benchmark. The Brent crude price fell from $115/bbl on June 19, 2014, to $45/bbl on January 13, 2015. This decline, which lasted 143 trading days, was the longest price decline in the past 15 years. Only the price drop during the 2008 financial crisis was steeper, when prices fell from $144/bbl to $34/bbl over 122 trading days.




As explained in This Week in Petroleum, high refinery output and seasonally low gasoline demand in December 2014 led to inventories building higher than five-year averages, which pushed spot gasoline prices lower.

In the Midwest and Gulf Coast, refinery utilization in December averaged more than 97% and 96%, respectively. In mid-to-late January, multiple refinery outages (both planned and unplanned) in the Midwest and Gulf Coast regions increased gasoline spot prices, which are reflected in pump prices with a short lag. In last Monday's survey, average retail prices in these regions first turned upward. Yesterday's survey saw the first upturn in national average prices.




Oil Price Drop Special Coverage

Gulf oil export losses to hit $300bn in 2015, says IMF

Oil export losses in 2015 are expected to reach $300bn or 21 percentage points of gross domestic product (GDP) in the Gulf, leading to a fiscal deficit, while the proposed hike in the US rates is likely to tighten financial conditions in the GCC (Gulf Cooperation Council), according to the International Monetary Fund (IMF).

As a result, current account surpluses are projected to decline this year to 1.6% of GDP (gross domestic product) in the GCC, said the IMF article ‘Learning to Live with Cheaper Oil amid Weaker Demand’. Lower oil prices have weakened the external and fiscal balances of oil exporters, including members of the GCC. Large buffers and available financing should allow most oil exporters to avoid sharp cuts in government spending, limiting the impact on near-term growth and financial stability. Oil exporters should prudently treat the oil price decline as largely permanent and adjust their medium-term fiscal consolidation plans so as to prevent major erosion of their buffers and to ensure intergenerational equity, the IMF said.




Most oil exporters need oil prices to be considerably above the $57 projected for 2015 to cover government spending, which has increased in recent years in response to rising social pressures and infrastructure development goals, it said, adding as a result, the oil price decline is expected to significantly erode fiscal positions across the region. The GCC’s fiscal surplus (4.6% of GDP in 2014) is now projected to turn into a deficit of 6.3% of GDP in 2015. Qatar, the UAE, Saudi Arabia, Bahrain and Oman are expected to witness fiscal deficit of 1.5%, 3.7% 10.1%, 12.1% and 16.4% of GDP respectively this year, the IMF said. The report said global interest rate and exchange rate developments, which are largely driven by the expected normalisation of the US monetary policy, also have a bearing on the regional outlook, albeit to a lesser extent than declines in commodity prices and external demand. “The expected increase in the US interest rates is likely to tighten financial conditions, particularly in the GCC because of their exchange rate pegs, and to dampen the growth of private credit,” it said, adding these interest rate spillovers are likely to occur with a delay because of slow pass-through. So far, long-term yields in the MENAP (Middle East North Africa, Afghanistan and Pakistan) oil importers and the GCC have not been affected much by concerns about tightening US monetary policy, it found. Stressing that the impact of lower oil prices on oil exporters’ banking systems is likely to be muted in the near term, but downside risks are likely to increase over time; the report said GCC banking systems will be affected by the decline in oil prices, given the strong correlation between non-oil growth and government spending, but they should remain resilient owing to their high capital buffers, low nonperforming loans and generally high liquidity.

Exxon Could Be the Big Winner of the Oil Crash Bloomberg




The company had a bad quarter, but its competitors are way worse off

These are tough times for oil companies. Crude

prices have fallen 60 percent since last June,

demand remains relatively weak, and the world is

still producing more oil than it needs. Not to

mention that with crude getting harder to find and

costlier to extract, oil companies are spending

more money for every barrel they produce—hardly

a recipe for steady profits.

Yet ExxonMobil, the largest oil company in the U.S., just reported that it made $6.5 billion in profit during the final three months of 2014. That's well below the $8.3 billion it made during the same period a year ago, but all things considered, it could've been a lot worse. The price of crude averaged $73 a barrel last quarter, compared with $97 a year earlier.

So while Exxon's profit fell 21 percent, the price of oil was down 25 percent. As of Monday afternoon, shares of Exxon were trading around $88—roughly where they were a year ago, even though oil is about 50 percent cheaper now than it was last February.

Shares of Exxon have held up in the face of falling oil prices

Exxon's competitors are having a much harder time making money. Chevron's profits last quarter were off

30 percent, and ConocoPhillips actually lost money last quarter (the first time that's happened since 2008).

BP will report its latest earnings tomorrow, but considering the company's ongoing trouble over the 2010

Deep Horizon spill, it seems unlikely to post a killer quarter.

Given BP's mounting liabilities in the Gulf, and what looks to be a sustained period of low prices, there are

even rumblings that the company could be ripe for a takeover later this year. One of its presumed

suitors? Exxon, of course.




It's premature to start talking about a potential BP-Exxon merger, but the current crash in oil prices could usher in an era of megamergers similar to those in the late 1990s and early 2000s. And it's all part of a normal business cycle: A decade of high oil prices spurred unprecedented amounts of investment, as oil companies went for growth and market share.

Now, as prices fall and demand stalls, the game is to consolidate and buy up rivals. This is when the strong get stronger, and right now, no oil company is in a better position than Exxon. Fadel Gheit, an oil analyst at Oppenheimer, thinks Exxon is on the prowl and could make a "massive acquisition" at some point before prices go back up. "This is the time to go big," said Gheit. "And this is the company that can afford to do it."

Exxon is sitting on nearly $5 billion in cash and equivalents, and while there aren't many holes in the company's portfolio, there is room to upgrade. The company could try to expand its footprint in the deepwater Gulf of Mexico or take a bigger position in the liquified natural gas market. But perhaps the most obvious place is the area that's driven so much of the change in the global oil sector: U.S. shale.

One of the knocks on Exxon, as on most other major oil companies, is that it missed the fracking boom in the U.S. when it pulled investments in the late 1990s and focused on Arctic and deep-water plays. But as oil prices have crashed, that decision is looking smarter by the day and gives Exxon a great chance to get into the fracking game on the cheap. The U.S. oil patch is littered with struggling companies: Many of the small and midsize independent wildcatters that drove the shale boom, helping boost U.S. oil production to its highest levels since the early 1980s, are now drowning in debt and low on cash. "This is an excellent time for Exxon to swoop down on some of these smaller shale players," said Steven Kopits, president of Princeton Energy Advisors.

The question is whether to buy assets or just swallow up companies whole. In 2009, Exxon pulled off a $41 billion deal to buy XTO Energy. The deal expanded Exxon's reach into the U.S. shale gas market but was widely seen as a bad move because the price was high and Exxon had trouble integrating XTO.

Brad Heffern, an oil analyst at RBC Capital Markets, thinks that will give Exxon pause if it considers swallowing up a fracking company. "I do think they'll be looking to make shale investments, but I'd be surprised if they did a big corporate deal. XTO wasn't fun for them." Heffern thinks Exxon would be much better off simply buying up oil wells from small fracking companies that are looking to raise cash.

As for BP, the company actually has a fairly big footprint in U.S. shale. Last spring, itannounced plans to form a separate company to manage its oil and gas operations in the lower 48 states. Could Exxon be a potential buyer? Depends on how hungry it is.

Total's major African projects safe from oil collapse cuts Source: Reuters + NewBase

Total's major oil and gas projects in Africa will not be stopped by the sudden fall in crude oil prices

and will help the French company meet its long-term production targets, a top executive said on

Tuesday.

Total has bet on a string of African projects such as Egina in Nigeria, Kaombo in Angola and Moho in the Republic of Congo to help it boost production to a target of 2.8 million barrels of oil equivalent per day in 2017. These are west African projects in deep and ultra-deep water -- an area where Total is a self-proclaimed specialist but that require costly technologies.




'These projects have been engaged and we certainly won't stop them, which means thousands of jobs will be preserved for projects up to a 2017-2018 horizon,' Guy Maurice, the head of Total's exploration and production branch in Africa told reporters on the sidelines of a conference. 'All the big projects are in the pipeline today. This will allow us to meet our production targets for 2017-2018 as planned,' he said.

He said the recent drop in oil prices - which has seen Brent crude oil plunging by more than half since June - will prompt the group to review certain projects in Africa, country by country, but that no major project was at a stage that required a final investment decision. 'What could come up tomorrow, in 2025 or something, is not at a pre-sanction stage, it's still very early in the study phase, we're not in a phase when we

have to arbitrate between doing it or not,' he said.

He said Total would work with partners - subcontractors and producing countries - to help bring the cost of projects down, on the model of what was achieved with the Kaombo project in Angola, which was launched after a $4 billion reduction in costs last year. 'Half of the reduction came from us, we changed our requirements, a quarter from our suppliers, and a quarter from the Angolan government, which has accepted a lower level of local content,' he said, referring to producing countries' increasing demands for the use of often more costly local suppliers and untrained staff for oil projects.




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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 533 special 04 february 2015

Economy & Finance

Transcript of New base 533 special 04 february 2015