New base 743 special 08 december 2015

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,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

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NewBase 08 December 2015 - Issue No. 743 Edited & Produced by: Khaled Al Awadi

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

UAE: ADNOC Distribution achieves recognition at World Marketing Congress 2015

(WAM) -- ADNOC Distribution has capped off a successful year with a prestigious international recognition at the World Marketing Congress 2015 that was held in Mumbai, India. Khalid Hadi, Vice President of the Marketing and Corporate Communications Division was named among the ‘100 Most Influential Global Marketing Leaders’ and honoured with the title at a high profile event that drew the participation of industry professionals and experts in the marketing landscape from across the world.

Speaking on the achievement, Abdulla Salem Al Dhaheri, CEO of ADNOC Distribution, said, "ADNOC Distribution is committed to delivering quality services and products to our loyal customers in the UAE that reflect our leading status as a key driver of the national economy. We believe our sustained quality focus has helped the company achieve rich dividends while also contributing to achieving the UAE’s strategic goals as articulated in the UAE Vision 2021."

For his part, Khalid Hadi, Vice President of Marketing and Corporate Communications at

ADNOC Distribution, said, "We are confident that such industry distinctions will help accelerate our efforts in further enhancing day-to-day interactions with our customers and stakeholders. In addition, this recognition validates the effectiveness of our marketing strategy that has been developed to ensure it is on a par with international standards and prioritises core aspects of environment, social and business sustainability."

The World Marketing Congress is a vital international industry platform for some of the world’s most successful and sought after brands and draws the participation of esteemed industry professionals and marketing experts.

Earlier this year, ADNOC Distribution was honoured with three international and local industry titles including ‘Brand of the Year’ distinction at the World Branding Awards 2015 in the National Award category for the service station sector.

In addition, ADNOC Distribution bagged the title of Asia’s ‘Most Influential Chief Marketing Officer’ at the World Brand Congress Awards 2015 hosted in Singapore. ADNOC Distribution also received the UAE Super brand status for 2015, in recognition of its excellence in the distribution and marketing of petroleum products and services within the UAE and overseas.




Qatar: QP projects on track, eyeing expansion to widen its global reach Gulf Times - Santhosh V Perumal

Qatar Petroleum (QP) has said it has not stopped any long term projects and is looking towards expansion to better position it internationally, according to its top official.

Moreover, the country’s oil and gas behemoth, which will soon join the Oil and Gas Climate Initiative (OGCI) for better environment, is seeking a “reasonable” carbon dioxide pricing as part of clean development mechanism (CDM).

“In QP we have not stopped any long-term projects that are on our plans. Actually we are going to be expanding and we are looking for QP to be present internationally in a much bigger way,” QP president and chief executive Saad Sherida al-Kaabi told the 9th International Petroleum Technology Conference (IPTC), which got underway in Doha yesterday.

However, he did not elaborate on the expansion strategy. His statement comes at a time when global oil prices are its multi-year lows and that in June this year; QP had announced the completion of “right-sizing” of its expatriate workforce as part of its reorganisation.

“We are very much determined to look at the long-term goal,” he said, addressing the first CEO Plenary Session of IPTC.

Saudi Aramco chief executive Amin H al-Nasser said although oil prices, which are now 60% lower year-on-year, is affecting the industry; the current demand-supply imbalance is all set to “stabilise and adjust”.




The oil market have seen additional 2.2mn barrels supplies in the past years; but this year the scene is different with no additional supplies forthcoming and hence “the gap will be closing”, which will see “adjustments” to the price going forward, starting by 2016, he said.

On the issue of cleaner environment, al-Kaabi said QP - along with other partners such as Centrica, ENI, E.On Ruhrgas, Gazprom Export, GDF Suez, Royal Dutch Shell and Statoil - had conducted a study which found that switching from coal to gas power could save European nations €450bn in cutting the carbon dioxide emission levels by 80% by 2050.

Highlighting that more support is needed from the global governments; he said carbon dioxide price was “reasonable” and there was value for carbon sequestration when QP applied for CDM for its projects.

The Al Shaheen Oil Field Gas Recovery and Utilisation project was registered on May 29, 2007, which is the first registered CDM project activity within the Gulf Cooperation Council.

CDM is one of the flexible mechanisms defined in the Kyoto Protocol that provides for emissions reduction projects which generate certified reduction units which may be traded in the emissions market.

The Kyoto Protocol to the UN Framework Convention on Climate Change aims at reducing emissions of greenhouse gases in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. It was adopted on December 11, 1997 in Kyoto, Japan, and entered into force on February 16, 2005.

However, “it is not economical to do (at present)”, he said, adding “I hope that Paris will come up with something that is feasible for people to go and invest in.”

Highlighting that the three interconnected pillars of sustainability is economic growth, social progress and environmental awareness; al-Kaabi said hence partnership is needed with all the stakeholders.

He said QP will very soon join the OGCI, which enables the oil and gas industry to work together to deliver practical solutions to climate risks and better environment for the future.

OGCI has been focusing on three key areas: role of natural gas, carbon reduction instruments and tools, and long term solutions.




Saudi SABIC showcases sustainability initiatives Saudi gazette

SABIC participated in the ‘Big 5’ construction show at the World Trade Center in Dubai recently, showcasing its sustainability contribution in by-product utilization and energy conservation resulting from various stages of steel making and rolling processes.

Visitors to the SABIC booth were also briefed on its new metals range, including two newly developed pre-painted galvanized products – Anti-Bacterial Coils and Cool Chemistry Coils. Explaining the new sustainability initiatives taken by SABIC in its metals business, Abdulaziz Al-Humaid, SABIC executive vice president, metals, said that the company has carried out a detailed Life Cycle Assessment (LCA) of its entire product portfolio to understand the holistic environmental impact of its products. This LCA study has been audited and certified

by a panel of external reviewers for its compliance to ISO framework. Moreover, SABIC’s manufacturing process offers lower carbon and energy footprint for selected flat products, compared to similar products offered by best-in-class producers from alternative and more prevalent production process, he said.

About the newly developed products showcased at the show, Al-Humaid said that the Anti-Bacterial Coils will be used for wall cladding for hygiene sensitive environments such as cold storage facilities and cleanrooms. The Cool Chemistry Coils, on the other hand, contain ceramic infrared reflective pigments. When they are used on metal roofing, the result is a sustainable building material that can help lower air conditioning costs, and reduce peak energy demands. Both products will be commercialized soon.

SABIC was also the sponsor of the Saudi Exports Development Authority (SEDA) stand at the show. In appreciation for this support, Dr. Tawfiq Al-Rabeeah, minister of trade and industry, recognized Mohammed Al-Subayel, SABIC Dubai general manager, and other company representatives inside the SEDA pavilion.

The Big 5 Show displayed more than 35,000 construction products from over 2,800 exhibitors from the region and other parts of the world.

Saudi Basic Industries Corporation (SABIC) ranks as the world’s second largest diversified chemical company. The company is among the world’s market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers. SABIC recorded a net profit of SR23.3 billion ($6.2 billion) in 2014. Sales revenues for 2014 totaled SR188.1 billion ($50.2 billion). Total assets stood at SR340 billion ($90.7 billion) at the end of 2014.

SABIC’s businesses are grouped into Chemicals, Polymers, Fertilizers, Metals and Innovative Plastics. It has significant research resources with innovation hubs in five key geographies – USA, Europe, Middle East, South East Asia and North East Asia. The company operates in more than 50 countries across the world with around 40,000 employees worldwide.




Deal for major waste management project at Sohar Freezone Oman Observer

Sohar Port and Freezone has announced the signing of an agreement with Oman Environmental Services Holding Company (be’ah) for the establishment of modern integrated waste management facilities at the hub. Work will now start on a 240-hectare site that has been earmarked for this key environmental project, close to the recently leased-out first phase of Sohar Freezone.

Chief Executive Officer Tariq Ali al Amri, at Oman Environmental Services Holding Company (be’ah), the Omani utility tasked with restructuring and privatising the solid waste sector, said: “At be’ah, our main objective is to structure the waste sector in a sustainable manner; to eliminate or reduce environmental damage incurred during traditional waste dumping processes; and to support the creation of more in-country value in Oman by developing the waste sector.”

He continued: “This new project will develop the infrastructure required to handle any waste and access materials that come out of industries in Sohar in an environmentally sustainable way.” The new integrated facility will be equipped to deal with the large quantities of waste generated annually by the country’s burgeoning industrial sector, much of it from Sohar , now one of the region’s primary industrial hubs.

Jamal Aziz, Sohar Freezone CEO, said: “Excellent road connectivity in Sohar , as well as future rail links with other industrial hubs in the region, were some of the main factors for locating the treatment plant here.”

The integrated industrial waste treatment facility will serve as the cornerstone of industrial waste management infrastructure being developed for Sohar and will include a dedicated waste solidification facility; units for thermal, physical and chemical treatment designed to process different types of industrial waste; as well as landfills.

The facility will treat and process waste with maximum safety in accordance with international standards. The metals cluster in Sohar creates solid waste, or slag and Freezone CEO Jamal Aziz is particularly excited about one spinoff from the new facilities: “Soon we will be able to recycle industrial slag from our iron and steel production, and use it as aggregate for the new roads we’re building in our Freezone — the technology is world-class and although the initial quantities are small, this will be a significant milestone for our environmental management programme in Sohar.”

Sustainable waste management systems aim to reduce the quantity of natural resources consumed and ensure that any resources already taken from nature are reused or recycled many times; the amount of waste produced is kept to a minimum and this leads to a better carbon footprint.

Experts from the Netherlands, embedded in the Sohar Port and Freezone team, work closely with be’ah, Ministry of Environment and Climate Affairs (MECA), and other stakeholders to ensure that Sohar is always at the forefront of international environmental standards.




Morocco sets target for 50 per cent renewable energy by 2030 The National - LeAnne Graves

Morocco, which will host the next climate change conference in November next year, plans to derive more than half of its energy from renewable sources by 2030, the country’s energy minister said. The North African country raised its renewable energy target from 42 per cent by 2020 to 52 per cent by 2030. That 42 per cent will consist of 2 gigawatts each of solar, wind and hydropower.

“Between now and [the next conference], many projects will have come to light and we will prove that we can match our energy demands with renewables,” Abdelkader Amara said at the Re-energise the Future event in Paris on Sunday.

Morocco’s limited hydrocarbon resources has pushed it to be a front-runner in the renewable energy race. The UK-based Oxford Business Group said that the country provided a “relatively stable haven” for private investment but the renewable energy sector’s development will depend on further regulation.

Five years ago, Morocco initiated its renewable energy law, which gave the opportunity for the development of private power production, allowing investors to construct renewable energy projects and sell the electricity directly to customers. The Moroccan Agency for Solar Energy was also established at that time with a mandate to implement the Moroccan Solar Plan that would invest €7.7 billion (Dh30.61bn) in several solar projects.

This has given companies such as Saudi Arabia’s Acwa Power a boost. Acwa is involved in Morocco’s solar sector for three phases of the Noor concentrated solar power (CSP) project totalling 510 megawatts with another 160MW for the Ouarzazate CSP park.

International financial institutions are also climbing on board for Moroccan renewables. Last month, the European Bank for Reconstruction and Development announced it would finance its first private renewables project in the country.

The bank, in collaboration with Banque Marocaine du Commerce Exterieur and the Clean Technology Fund, will provide €126 million for the construction, operation and maintenance of the 120MW Khalladi wind farm near Tangiers.

Mr Amara said that while some countries wanted to take their time incorporating renewable energy, Morocco wanted to accelerate its green economy. “Renewable energy needs to be embedded in our economies and it needs to be regulated within the framework of market economies without the need for subsidies,” he said.

He added that the country’s Ouarzazate solar programme has helped save the country 15 per cent in energy costs within one year. “We need to convince people who are hesitating,” Mr Amara said. “Whether one is for or against, everyone agrees that renewable energy is the future.” Meanwhile, Marrakech, which will host the COP22 summit in November next year, “will be an edition of innovation in adaptation to and mitigation of climate change effects”, said Hakima El Haite, the Moroccan delegate-minister for environment.




Indonesia: KrisEnergy Starts Drilling Gas Well Offshore KrisEnergy + NewBase

KrisEnergy has commenced drilling of the Mustika-1 exploration well in Sakti PSC, close to the Lengo gas development offshore Indonesia.

Mustika-1, which is targeting the Kujung I formation, is planned to reach a total measured depth at 3,100 feet (945 metres), or 3,000 feet total vertical depth subsea. The location of the well is based on the interpretation of the 1,202 km 2D and 401 sq. km 3D seismic data acquired by the company in 2014.

KrisEnergy is also the operator of the Bulu PSC, which is adjacent to the Sakti PSC and contains the Lengo gas discovery for which the company received approval for its plan of development in December 2014.

Chris Gibson-Robinson, Director Exploration & Production, said: “The decision to drill Mustika-1 at this time comes as we are finalising project details for the Lengo development. This prospect is 10 km west of Lengo and, if successful, we would look at producing Sakti gas through the Lengo facilities.” Front-end engineering design for the Lengo development was completed in the third quarter of 2015. Gas sales negotiations are ongoing and preparations are underway to tender the contract for engineering, procurement, construction and installation.

KrisEnergy was awarded as the operator a 95 percent working interest in the Sakti PSC in February 2014. The block covers 4,974 sq. km in the East Java Sea over the western margin of the East Java Basin, Bawean Arch and the Muriah Trough. Golden Heaven Jaya holds the remaining 5 percent working interest.




India: Oilex provides update on Cambay field workover campaign Source: Oilex

• Cambay-77H gas is being sold at a peak rate exceeding 110 boepd, via Cambay-73 facilities

• Cambay-19z oil production ~12 bopd plus associated gas

• Cambay-20 Hydraulic Lift Pump (HLP) installed

Oilex has provided an update on the workover campaign at its Cambay field.

Production from the Cambay field is now ~75 boepd and may increase in line with demand from the local low pressure gas market now that Cambay-77H is online.

Cambay-77H

The Cambay-77H workover is complete and, based upon cumulative production since restarting the well, is now averaging ~51boepd via the flowline connection to Cambay-73 facilities. The well is producing through a 1/64 inch choke and the tubing head pressure is ~2,600 psig and steady. Production from Cambay-77H is meeting the demand from the local low pressure gas market, including a peak demand rate of ~0.500MMscfd for ~1 hour period that occurs twice daily. At peak demand, gas is being sold from Cambay-77H at greater than 110boepd using the average condensate to gas ratio (CGR) of ~55bbls/MMscf since restarting the well.

The well performance is being closely monitored subsequent to recommencing production and a fuller understanding of its deliverability potential will be gained from ongoing production. Although demand for local gas fluctuates according to peak demand times as noted above, it is anticipated that overall gas demand from the local low pressure gas market may gradually increase now that Cambay-77H is online. An increase in the market overall will be dependent on successful marketing efforts in India. This marketing is underway.

As anticipated, the newly installed production tubing has improved the flow performance of the well compared to flowback and testing operations during 2014. The workover rig installed the production tubing without having to kill the well,




this is believed to be the first time this activity has been successfully accomplished in a horizontal multi-stage frac'd well in India.

Cambay-19z

Cambay-19z is now producing oil at ~12 bopd plus associated gas from the Eocene (EP IV) formation, and is within expectations. The associated gas is used at site to power the pump. The operation to reposition the downhole pump has been successful. The well has also been fitted with a chemical injection system to improve flow performance. Cambay-19z is located approximately 1.4 km to the west of Cambay-77H.

Cambay-20

Installation of the HLP unit and downhole pump is complete and pumping out of the brine has commenced. Gas has been detected at surface in a similar manner to Cambay-19z. Cambay-20 has previously been an intermittent oil and gas producer without using a downhole pump. It is located approx. 200 metres from Cambay-77H and associated gas not used to power the pump is transmitted to the Cambay-73 gas treatment facilities.

Other potential workover candidates

The future possible workover list has ~ 6 new candidates for consideration. As previously announced, subject to ongoing discussions with our Joint Venture Partner regarding cashcall payments, a decision will be made in relation to further workovers after the Cambay-60 workover is complete.

Managing Director of Oilex, Ron Miller, said:

'The Cambay workover campaign continues to deliver positive results with oil production from Cambay-19z meeting expectations and the deliverability of Cambay-77H gas production enhanced with successful installation of the production tubing. Overall, in relation to the Cambay field, Oilex is now focussing on its objective of achieving a production rate target of ~150 boepd.'




NewBase 08 December - 2015 Khaled Al Awadi

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

Oil prices edge up from near seven-year lows as China oil imports surprise Reuters + NewBase

Crude prices edged away from nearly 7-year lows on Tuesday as China reported strong commodity imports despite economic weakness, but overall the market remained weak due to global oversupply compounded by OPEC's decision to keep output high.

Internationally traded Brent futures LCOc1 were up 31 cents at $41.04 a barrel at 0805 GMT. U.S. crude CLc1 was trading at $37.82 a barrel, up just 17 cents from its last settlement and close to the 2015 and 7-year lows of the previous session.

"The decision by OPEC members to keep oil production output at record high levels ... suggested that the organization was

effectively abandoning its long-term strategy of limiting production and acting as a cartel, leading to more downward pressures on oil prices in the short term," said Sanjiv Shah, Chief Investment Officer of Sun Global Investments.

"OPEC countries will continue to pump as much as possible for now," consultancy Energy Aspects said.

On the demand side, China's appetite for cheap oil was helping to support prices as the government looks to build up its strategic reserves.

"There is no doubt that weak commodity prices have induced some opportunistic buying. This should be mildly supportive for commodity markets," ANZ bank said.

But it added that given the country's slowing economy, "we still don't expect to see Chinese consumers start to aggressively restock with the outlook remaining weak."

China's crude oil imports for the first 11 months of the year rose 8.7 percent to 6.61 million barrels per day while its November crude imports grew 7.6 percent from the same month a year ago, according to preliminary customs data released Tuesday.

China's November new vehicle sales also jumped 17.6 percent over the same period.

With crude prices near record lows, China is seen as likely to double its strategic crude oil purchases in 2016, adding some 70-90 million barrels to its strategic petroleum reserves (SPR).

Oil price special

coverage




Opec bid to kill off US shale sends oil price down to 2009 low TheGurdian - Larry Elliott

Oil falls by $2 a barrel with energy shares as Opec refusal to stop flooding the market with cheap oil and likely US rate hike sends Brent crude tumbling

Oil prices have slumped by 5% after the latest attempt by Saudi Arabia to kill off the threat from the US shale industry sent crude to its lowest level since the depths of the global recession almost seven years ago.

Signs of disarray in the Opec oil cartel prompted fears of a global glut of oil, wiping $2 off the price of a barrel of crude on Monday and leading to speculation that energy costs could continue tumbling over the coming weeks.

Shares in energy companies lost ground as the impact of the drop in oil prices rippled through European stock markets. Prices of other commodities also weakened following disappointment among traders that Opec had decided late last week to keep flooding the global market with cheap oil.

Iron ore continued its steady fall and is now priced at $38.90, squeezing profit margins to the bone at even large producers such as Rio Tinto and BHP Billiton, whose shares fell sharply in opening trade on Tuesday in Australia.

A barrel of benchmark Brent crude was changing hands for less than $41 a barrel in New York on Monday night after Opec – heavily influenced by Saudi Arabia – did nothing about a market already seen as saturated.

US light crude, which tends to trade at slightly lower levels than Brent, recorded similar falls, dropping from just over $40 a barrel to less than $38 a barrel.




Both Brent and US light crude were at levels not seen since early 2009, when the collapse of US investment bank Lehman Brothers triggered the most severe recession since the 1930s.

As recently as August 2014, Brent stood at $115 a barrel, but in 16 months its price has been more than halved in response to a slowdown in China and other emerging market economies, and the end of oil sanctions against Iran.

Global supply of oil is currently thought to be up to 2m barrels per day higher than demand, with traders fearing that Opec’s refusal to cut production despite the financial pain it is causing its members’ economies will lead to a still greater glut of crude. Venezuela, in particular, is thought to be suffering badly as a result of the drop in oil prices.

The fall, if sustained, will lead to lower inflation in oil-consuming nations through the knock-on effects on petrol, diesel, domestic energy prices and the cost of running businesses.

Lower crude prices may also delay or limit increases in interest rates. The Bank of England has already accepted that inflation – which stands at -0.1% – has stayed lower for longer this year than it anticipated.

Analysts believe the slide in oil prices has come too late to persuade the US Federal Reserve, America’s central bank, to delay an increase in the cost of borrowing later this month, adding that the prospect of the first tightening of policy from the Fed since 2006 was an added factor in crude’s decline.

The prospect of higher US interest rates has led to the value of the US dollar rising on foreign exchanges; since oil is priced in dollars that has led to a fall in the cost of crude.

Markets had been expecting Opec to announce a new ceiling on production after last Friday’s meeting, but analysts at Barclays said the lack of any curbs in its announcement was a sign of discord.

“Past communiques have at least included statements to adhere, strictly adhere, or maintain output in line with the production target. This one glaringly did not,” they said.

Saudi Arabia needs oil prices of $100 a barrel to balance its budget, but as the world’s biggest exporter of crude it is gambling that the low price will knock out the threat posed by so-called unconventional supplies, such as shale.

The chief executive of Saudi Aramco, Amin Nasser, said at a conference in Doha on Monday that he hoped to see oil prices adjust at the beginning of next year as unconventional oil supplies start to decline.

In a sign that US production could dip, Baker Hughes’ November data showed US rig count numbers down month-by-month by 31 to 760 rigs.

The fall in oil prices helped wipe almost 1% off share prices in New York. Wall Street’s Dow Jones industrial average was down more than 160 points in early trading, with Chevron and Exxon both losing around 3% of their value.

In London, Shell’s share price was down 4.5% while BP lost 3.4% of its value as early gains in the FTSE 100 were wiped out. The Index closed 15 points lower at 6223.




Total chief executive sees no recovery for oil price in 2016 Reuters Total chief executive Patrick Pouyanne said on Monday that he does not expect pressure on oil prices after Opec’s decision on Friday not to impose a ceiling on crude output and keep production at high levels.

“Opec’s decision was expected by the market,” he told reporters in Qatar. Opec failed to agree on a new output quota on Friday, allowing member countries to continue pumping more than 31 million barrels per day of oil, further swelling a glut that has lowered prices. “We don’t anticipate a recovery in 2016 (for oil prices) because in 2016 the growth in capacity will be larger than the growth in demand... I am not very optimistic for 2016,” he added. However, he said there should be a reduction in supply from non-Opec producers in 2016. “Non-Opec supply will contract... by mid-2016 we should see contraction in US production according to what we understand,” he said. Mr Pouyanne said Total was one of the companies invited by Qatar to bid for its Al Shaheen oil field.




NewBase Special Coverage

News Agencies News Release 08 Dec.. 2015

OPEC Takes Down Oil Majors as Lower-for-Even-Longer Kicks In Bloomberg - Rakteem Katakey rakteem

For months, many executives at the world’s largest oil producers have been talking about prices staying lower for longer. After OPEC’s decision to keep pumping full pelt that could become lower for even longer.

Even before Friday, the prolonged slump in crude had forced analysts to cut their earnings-per-share estimates for the world’s 10 largest integrated oil companies in recent weeks. With oil dropping to the lowest in more than six years after the Organization of Petroleum Exporting Countries meeting on Friday, further downgrades are probably on the way.

“A potential OPEC cut was the last source of hope for the bulls near term,” Aneek Haq, a London-based analyst with Exane BNP Paribas said Dec. 4. “The oil majors have already started to underperform the market over the past few weeks, but this now coupled with earnings downgrades and valuations that imply $70 a barrel should put further pressure on share prices.”

Mean adjusted 2016 EPS estimates for Exxon Mobil Corp. and Royal Dutch Shell Plc have been cut by more than 8 cents over the past month, according to data compiled by Bloomberg. EPS projections for Total SA, Europe’s second-biggest oil company, and Repsol SA are lower for 2016 than those for this year.

Price Assumptions

Those estimates assume a much higher price than the $41.06 a barrel that Brent traded at as of 8:19 a.m. in London on Tuesday. Oswald Clint, a London-based analyst with Sanford C. Bernstein




has based his EPS estimates for oil majors at a Brent price of $60 a barrel, he said by phone Dec. 7. Alexandre Andlauer, a Paris-based oil sector analyst with AlphaValue SAS, has assumed a price of $63. “The re-rating of the oil companies downwards will accelerate now,” Andlauer said Dec. 7 by phone from Paris. “Valuations will have to drop.”

Shell’s B shares, the most actively traded, dropped 4.6 percent on Monday, the most in more than three months. BP dropped 3.4 percent, while the benchmark FTSE 100 Index declined 0.2 percent.

“The lower-for-longer scenario that oil companies are predicting is going to become lower-for-even-longer,” said Philipp Chladek, a London-based oil sector analyst with Bloomberg Intelligence. “We will see some revisions in EPS forecasts in the near future because most forecasts are assuming an oil price recovery during 2016. Many will be taking that out now.”

Market Oversupply

BP has “reset” its business to generate surplus cash flow with oil at about $60 a barrel by 2017. Total said in September investment cutbacks and project delays will enable it to fund dividend payouts at a similar price without the need to borrow. The companies may now need to rework the math as the break-even could be pushed further back, said Andlauer of AlphaValue.

There’s as much as 2 million barrels of oversupply in the market, and OPEC’s meeting on Friday means “everyone does what they want,” Iran’s Oil Minister Bijan Namdar Zanganeh said in Vienna on Dec. 4. Russia is also producing at near record levels.

Brent crude, the global benchmark, has slumped the lowest since February 2009 while West Texas Intermediate has dropped below $40 a barrel. Refinery maintenance in the first quarter of 2016 will probably slow the growth in demand and coupled with the continued oversupply oil could drop to as low as $30 a barrel, according to Eugene Lindell, oil market analyst at JBC Energy GmbH.

Margin Squeeze

“OPEC confirmed the bearish sentiments last week,” he said Dec. 7 by phone from Vienna. “This will push prices even lower.”




Global margins from refining, a business that helped oil majors offset lower profit from crude production, are also being squeezed, dropping to an average $13.6 a barrel in the fourth quarter from $20 in the preceding three months, according to BP data.

Crude’s slump has been brutal for the oil companies, forcing them to slash spending, cancel projects and dismiss employees. Shell reported its biggest net loss in at least 16 years in the third quarter, while also lowering its oil-price expectations, resulting in a charge of almost $8 billion. Exxon’s adjusted net income dropped to the lowest since 2009 and ConocoPhillips reported its biggest loss since 2008.

Dividend Prospects

Many investors put money in the biggest oil companies because they want a share of the dividends. Shell hasn’t cut it’s payout since at least the Second World War and plans to maintain it next year as well. Chevron said in August it’ll keep increasing the annual dividend, as it’s done for the past 27 years.

Yet, some are skeptical the companies can continue to do so if low oil prices persist. Eni SpA become the first major oil company to cut its dividend this year, reducing the payout for the first time since 2009. U.S. pipeline-operator Kinder Morgan Inc. will be reviewing its dividend policy in the coming days, the company said last week.

“So far, they’ve managed to invest and pay dividends, but this is not sustainable,” Chladek said. “Something has to give.”




How Cheap oil raises political risks in Saudi Arabia CNBC - Tom DiChristopher

Saudi Arabia's rulers have long maintained stability with the help of welfare spending and subsidies. But as the oil dependent country's crude revenues sink, the world is watching for political troubles.

Social unrest in Saudi Arabia is unlikely to ratchet up significantly in the next few years, analysts tell CNBC. But if crude prices remain low, and Saudi finances continue to deteriorate, King Salman bin Abdulaziz may find it more difficult to tackle civil unrest in the future.

Falling revenue could exacerbate dissatisfaction among religious minorities, the upper class, or royals, analysts said.

Saudi Arabia is the chief architect of OPEC's policy of maintaining crude output at roughly 31 million barrels per day, a level that has forced producers of higher-cost hydrocarbons — including the United States and Russia — to balance an oversupplied market through production cuts.

But as U.S. and Russian drillers prove more resilient that most industry watchers had expected, oil prices have stagnated, putting pressure on Saudi finances.

On Friday, the Organization of the Petroleum Exporting Countries agreed to continue its current policy, sending crude futures lower. On Monday, internationally traded Brent crude fell below $41, to its lowest price since February 2009.

Last year, Saudi Arabia announced a $229 billion budget for 2015, its largest ever. As a result, the International Monetary Fund projects a 19.5 percent deficit for the kingdom this year.

To cover the gap, the nation has burned through about $91.5 billion of its reserve assets, reducing total foreign reserves from a peak of $746 billion last August to a still-healthy $654.5 billion in September, according to the IMF.




In August, the Financial Times reported that Saudi Arabia was seeking to sell about $5.3 billion in sovereign bonds per month through the end of the year. The Saudis' borrowing ability is considerable, but they could find themselves mired in debt, just as they did in the 1990s and early 2000s, said Matthew Bey, energy and technology strategist at Stratfor.

"From a social perspective, one thing to keep in mind is that the perception of Saudi Arabia as a wealthy country is false. You have an increasing number of poorer Saudis in the country who feel disenfranchised in an environment in which the politics of the country are changing." -Hani Sabra, head of Middle East and North Africa practice, Eurasia Group

If low oil prices and high spending persist, the Saudis will be forced to reduce spending on social programs, energy subsidies and education, Bey said. The challenge for the royal leadership will be making reductions in areas that will not elicit social backlash, he added.

Saudi Arabia "is still a security state. It will rely on its social apparatus to manage unrest going forward," he said.

A reduction in subsidies would have domestic political consequences, and may affect the royal family's tacit social compact with the country's elite, said Simon Henderson, director of the Washington Institute's Gulf and energy policy program.

Henderson asserted that most Saudis are conservative and do not desire social change. "They look at the chaos in the rest of the Arab world with horror," he told CNBC in an email.

While Saudi Arabia is by no means on the verge of collapse, risks are currently under-appreciated, said Hani Sabra, head of Eurasia Group's Middle East and North Africa practice.

"If you look at the Achilles heel of a lot of countries in the Arab world, they have had a pact with people. You get cheap gasoline and energy, you live in a welfare state, and you don't open your mouth," Sabra said.

Like almost every predominantly Arab country, Saudi Arabia has a Sunni Muslim majority. But it faces ongoing protests from members of its Shiite minority and long-simmering dissatisfaction among Muslims who do not subscribe to the strict, conservative brand of Sunni Wahhabism embraced by the monarchy.

Earlier this year, the BBC documented three years of continuous demonstrations in an eastern, largely Shiite region that sometimes turned violent. Activists frequently cited poor economic prospects for residents in an area that is home to the Ghawar oil field, the largest conventional field on earth.

"From a social perspective, one thing to keep in mind is that the perception of Saudi Arabia as a wealthy country is false," Sabra said. "You have an increasing number of poorer Saudis in the country who feel disenfranchised in an environment in which the politics of the country are changing."

The fractured nature of opposition groups works in the royal family's favor, Sabra said, but the current political climate is also breeding dissatisfaction at the top.

Following his ascension to the throne this year, King Salman named his son, Mohammed bin Salman, deputy crown prince — making him second in line in the Saudi succession — after earlier appointing him defense minister and chairman of the country's economic council.




That consolidation stands to exacerbate a structural problem with the growing Saudi royal family, Sabra said. Hundreds of royals are clamoring for a piece of the pie, and with low oil prices and power increasingly concentrated in bin Salman, the pie is shrinking.

If those royals are frozen out, many of their wealthy constituents who once had access to the halls of power could create unrest in the upper class, Sabra said. Within the royal family, the chances of a significant rift remain unlikely in the short- to medium-term, but the outcome has increased from very low to credible, Sabra said.

"I am sure there are divisions in the royal family, but the question is whether groups of princes are prepared to do anything about it. I suspect it may be too late," Henderson said.




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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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NewBase 08 December 2015 K. Al Awadi

New base 743 special 08 december 2015

Business

Transcript of New base 743 special 08 december 2015