New base special 09 september 2014

Copyright © 2014 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced,

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NewBase 09 September 2014 Khaled Al Awadi

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

Aramco-Sinopec 400,000-bpd refinery starts test runs Reuters + NewBase

Yanbu Aramco Sinopec Refining Co (Yasref) has started trial runs this month at its 400,000-barrel-per-day (bpd) refinery, five industry sources familiar with the matter said. Arab Light crude has been fed into the refinery complex in Yanbu, a joint venture between the world's top crude exporter, Saudi Aramco, and Asia's largest refiner, Sinopec, to start test runs, one source said.

Yasref's chief executive could not be reached for comment while another senior officer declined to comment. The refinery will eventually process Arab Heavy crude from the giant Saudi Manifa oilfield and will produce 90,000 bpd of gasoline and 263,000 bpd of ultra-low sulphur diesel among other products, according to Yasref. Downstream units at Yasref include a hydrocracker, two hydrotreaters, a continuous catalytic reformer and a delayed coker. The test runs were in line with Yasref's schedule on its website for the first commercial shipment of refined products to be exported by November 2014, although this could be brought forward slightly to the second half of October, some trade sources said, depending on how smoothly test runs went off. The refinery will export some naphtha initially as the operator tries to stabilise gasoline-making units, the sources said. Africa and Europe will be its target markets, they said. The start of a second mega refinery in Saudi Arabia in as many years could swell an oil supply glut globally and further depress margins at refiners in Europe and Asia. A 400,000-bpd refinery operated by Saudi Aramco Total Refining and Petrochemical Company's (Satorp) in Jubail, identical to Yasref, started commercial exports in September last year. The joint venture between Saudi Aramco and Total reached full capacity in the middle of 2014. --




Somaliland: DNO granted Somaliland extension Source: DNO

DNO, the Norwegian oil and gas operator, has announced that it has been granted a two-year extension of

the term of its production sharing agreement for Block SL18 in Somaliland. The first exploration period will

now end on 8 November 2017.

Block SL18, in which DNO has a 50 percent stake as operator, is a frontier exploration block. The partners

have completed field survey and environmental assessment studies over the block and will initiate a planned

seismic acquisition program once the Government of Somaliland has put in place a planned Oil Protection

Unit (OPU) to support the international oil companies operating in Somaliland. The OPU is expected to be

operational in 2015.

In the interim, security conditions permitting, DNO will resume a development program focused on drilling

water wells to provide local communities in the areas covered by Block SL18 with potable water.

Block SL-18

Somaliland Block SL-18 is a frontier exploration block.

The government is in the process of implementing an Oil Protection Unit (OPU) to support further seismic acquisitions by DNO and other international oil companies operating in Somaliland. The OPU is expected to be operational in 2015.

The Company has completed field survey and environmental assessment studies over the block. A gravity/ aeromagnetic survey is planned to be acquired during the fall of 2014, while seismic acquisition will be carried out after the OPU has been set up by the government.




Qatar Petroleum signs $1.4bn contracts with Gulf Drilling Int. Press Release, September 08, 2014

Gulf Drilling International Ltd. (GDI), a subsidiary of Gulf International Services (GIS), the largest oilfield service company in Qatar, officially signed four new contracts and four contract extensions with Qatar Petroleum (QP) for the provision of drilling rig services, each having a

term of five years.

The new contracts have been concluded for the provision of two new offshore drilling rigs “Dukhan” and

“Halul” and two new land rigs GDI-7 and GDI-8; while contract extensions allow the continuation of

services performed by four land rigs GDI-1, GDI-2, GDI-3 and GDI-4. The awarding of these contracts was

announced in previous reports.

The contracts were signed by His Excellency Dr. Mohammed Bin Saleh Al-Sada, Minister of Energy and

Industry and the Chairman and Managing Director of Qatar Petroleum, and Ibrahim J. Al-Othman, the Chief

Executive Officer of GDI. It was attended by Saad Sherida Al Kaabi, Director of Oil & Gas Ventures at

Qatar Petroleum.

The combined value of the new contracts and contract extensions, which were announced earlier by GDI,

total QR5.2 billion. They represent the largest single GDI client commitment since it was established 10

years ago.

In comments at the signing ceremony, H.E. Dr. Mohammed Bin Saleh Al-Sada said: “The new contracts will allow continuing, as well as expanding, the important development work Qatar Petroleum is undertaking. Each of the contracted rigs is being customized to meet the best in class criteria specified by Qatar Petroleum.”

His Excellency praised the high quality of services provided by GDI, and the level of commitment and

dedication it has demonstrated to achieve its challenging goals.

Ibrahim J. Al Othman, Chief Executive Officer of GDI took the opportunity to express gratitude and

appreciation of H.E. Dr. Mohammad Bin Saleh Al Sada, the Minister of Energy and Industry, and the GDI

Board of Directors for their continuous support and guidance.

Ibrahim J. Al Othman said: “GDI fully appreciates the value of the partnership that has been developed with Qatar Petroleum.”




He added: “These contracts will positively impact our revenue growth immediately which will positively reflect on our profitability for this year and the next five years Furthermore, the addition of a new offshore rig for QP “Halul” in 2016 will greatly support our long term revenue growth plans.”

By mid-2016, GDI will have a total of eighteen drilling rigs. In addition to one accommodation jack-up and

two Liftboats. The new offshore drilling rig “Halul” is currently being built to the proven Mod VB Bigfoot

design, similar to the recently delivered jack-up drilling rig “Dukhan.” These rigs are expected to be placed

into service in Q-4 of 2014 and Q2 of 2016, respectively.

These offshore rigs will be the newest rigs in GDI’s fleet. Each rig will come complete with a centrifuge

system for solids control, extra bulk hoppers on deck, 7,500 psi mud pumps, a 15,000 psi choke manifold,

150 man accommodation, 10,000 HP power packages, off-line building stands, and a 75 foot cantilever

outreach.

The two new land rigs are currently under construction in the USA. GDI-7 will be a 1500HP rig while GDI-

8 will be a 3000HP rig, making it the biggest land rig in GDI’s fleet. The bigger rig will provide GDI with

the capability of drilling deeper wells and executing extended reach wells to a much greater depth.

The land rigs will also come with a number of ancillary assets that are required to support a land operation.

Ancillary assets include water well rigs, mobile cranes, trucks and trailers. GDI’s onshore base camp,

workshop, storage yards, warehouses and accommodation facilities are also being expanded to support the

additional work. They are expected to be received and placed into service during the second half of 2015.

The four existing land rigs GDI-1, GDI-2, GDI-3 and GDI-4 are already working under contracts to QP and

GDI will continue to utilize them at the highest operational standard. GDI is also in the process of recruiting

additional personnel and providing the necessary training, certification and orientation so that they can man

and operate these rigs in a safe and efficient manner.




GCC countries still dependent on oil takings despite diversification Saudi Gazette + NewBase

The annual budget spending in GCC countries still continues to be driven almost entirely by income from the export of hydrocarbons although the contribution of non-hydrocarbon GDP to the overall GDP has significantly increased over the past two decades across the region, Alkhabeer Capital, a leading asset management and investment firm based in Saudi Arabia, said in a report

on GCC budget analysis and government spending behaviors. Since the global financial crisis, the GCC economies have consistently outperformed their global peers, growing by about 24 percent during the last 5 year period until 2013, supported by robust oil revenues - which the GCC countries are highly dependent on. Hydrocarbon revenues in Qatar and UAE account for close to 60 percent of the total revenues of the countries, however in Saudi Arabia and Kuwait, the figure is close to 90 percent and 93 percent, respectively. This is in contrast to other resource-rich economies such as Norway, where revenues from oil account for just about 30 percent of government revenues. The low contribution of the non-hydrocarbon sector primarily reflects the policy decision of maintaining a low or zero-tax environment to assist private sector activity. Although there has been speculation of introduction of GCC-wide value added tax, we do not expect such a

decision in the foreseeable future. The UAE, specifically Dubai, has been exemplary in diversifying revenue streams and building on its non-oil growth, which is projected by the IMF to expand by over 4 percent annually over the next few years. With its recent rights for the World Expo 2020, Dubai will be able to transform itself into a hub for retail and wholesale trade and tourism. Abu Dhabi has the highest hydrocarbon reserves and generates more than half of the GDP in the UAE. The government envisages cutting the capital’s reliance on oil to 36 percent of GDP by 2030 under Abu Dhabi’s Economic 2030 Vision. As part of this strategy, Abu Dhabi has increased investments to develop sectors such as petrochemicals, financial services, aviation, renewable energy, and cultural tourism. Comparing budgetary revenue trends, it is clear that the contribution of non-oil public revenue in Saudi and Kuwait is far lower that it is in Qatar and UAE. In terms of overall revenues, Qatar has registered a double digit growth of 19 percent annually over the last five years, far ahead of others, reflecting a strong rise in both hydrocarbon and non-hydrocarbon sectors. Qatar has also outpaced other GCC countries in terms of non-hydrocarbon sector revenue growth, posting an 18 percent CAGR over the last five years. A major part of the non-hydrocarbon revenue comes from investment income, which consists of transfer of profits from public enterprises (including Qatar Petroleum’s subsidiaries), and accounted for around 16.9 percent of




the GDP and almost 44 percent of total revenues in FY 2013-14. The government’s long-term objective is to finance its entire budgetary operations through non-hydrocarbon revenue by 2020 and has allocated significant capital towards development of infrastructure, health and education. Although spending growth has slowed for the current fiscal year across the GCC, budgeted spending for 2014 is at record highs, reflecting that government spending will continue to rise, despite signs of plateauing oil revenues. A large part of the spending continues to be allocated towards the social sectors, mainly education, healthcare, infrastructure and housing. Across the GCC, with growing youth population, local unemployment, rising housing rentals and food inflation pressures, addressing the social challenges forms a key priority for the regional governments. In 2014, Saudi Arabia, has allocated 25 percent of its budgetary expenditure towards education and human resource development, while 21 percent of UAE’s federal budget was allocated for education. Qatar has doubled its educational spending in the last five years. Likewise healthcare is also a key focus area and is expected to continue to see spending increases. However, the majority of government expenditure is geared towards current expenditure versus capital expenditure or investments. A significant portion of the current expenditure is allocated to meet the rising outflow of salaries and wages in the public sector, and other forms of entitlements. Alkhabeer noted that weakness in capital spending could directly impact long term economic growth. Qatar and Saudi Arabia have been on the forefront of capital expenditures compared to their GCC peers in the past few years. Qatar plans to spend close to 40 percent of its budgeted expenses in key infrastructure initiatives and has been ramping up infrastructure spending ahead of FIFA 2022. Capital expenditure growth in the Kingdom has outpaced growth in current expenditure since 2009 and considerable allocation of funds will be required to support upcoming infrastructure initiatives. A recent report has indicated a total of $2.5 trillion spending on mega projects underway in the MENA region, with the GCC region accounting for 87 percent of the total project volume. Meanwhile, in the UAE and Kuwait growth in capital expenditure has been slower than the rise in current expenditure in the recent years. Budgeted capital expenditure in Kuwait, for the 2015 fiscal accounted for about 9 percent of the overall expenditure.

The Alkhabeer report showed that the overall fiscal position of the GCC remains stable but there are several key steps that need to be taken to lower dependence on oil revenues and mitigate long term risks that may arise as a result. With the IMF projecting dramatic change in the fiscal environment by the end of the decade, a close watch must be kept on the fiscal policy stance of the region’s governments, which must be cognizant of the prospect of lower hydrocarbon revenues. A well poised strategy must be put in place to diversify the GCC economies and increase

their non-oil revenues to mitigate long term challenges. Another pressing issue that must not be ignored is the subsidy bills for Gulf governments, with energy subsidy costs in some of the GCC countries as high as 28 percent of government revenues.




Edison Confirms Renegotiations with Eni for Libyan Gas Reuters + NewBase

Italian utility Edison confirmed that the second round of renegotiations for its contract with Italy's

Eni to import some 4 Bcm/y of Libyan gas to the Italian market is still ongoing. Edison said last

week it had successfully renegotiated the price of its gas import contract with Promgas,

Gazprom's subsidiary in Italy. It said this would have an estimated positive impact on its 2014

EBITDA of 80 million euros.

Edison's press office said Thursday that both sets of discussions are part of a second round of renegotiations of its supply contracts related to 2014 and "previous years", without giving further details on the period under renegotiation. An initial renegotiation of Edison's contract with Eni for Libyan gas supplies was concluded in 2012. The press office said it didn't want to comment on whether price, volumes or both aspects are subject to the current renegotiations. Edison's press office added that a second round of renegotiations of its supply contracts with Qatar's Rasgas and Algeria's Sonatrach had successfully been concluded this year, without giving further details on the contracts. It said that, meanwhile, its supply contract with Eni for importing Norwegian gas has expired.




EU puts top Russian oil companies on sanctions list - diplomat Source: Reuters via Yahoo! News

The European Union put Russia's top oil producers and pipeline operators Rosneft, Transneft and

Gazprom Neft on its list of Russian state-owned firms that will not be allowed to raise capital or borrow on

European markets, an EU diplomat said. EU sanctions, however, do not encompass the gas sector and in

particular state-owned Gazprom, the world's biggest gas producer which is also the biggest gas supplier to

Europe.

In general, the EU sanctions on raising money in the European Union for Russian companies will apply to

firms that have turnover of more than 1 trillion roubles (£16.69 billion) and half of that is generated from the

sale or transport of oil, the diplomat said. The sanctions will be agreed unless by 1300 GMT one of the EU

governments objects to the deal, that was reached by ambassadors of the 28 EU countries already on Friday

night.

They will enter into force after being published in the official journal of the European Union, which could

happen at midnight.




Shell announces second major 2014 start up in deep-water Gulf of Mexico with

Cardamom development first oil. Source : Shell

Production is now underway from the Cardamom development, the second major deep-water

facility Shell has brought online in the U.S. Gulf of Mexico this year, following the start-up of Mars

B in February. Oil from the Cardamom subsea development (100% Shell) is piped through Shell's

Auger platform. When at full production

of 50,000 barrels of oil equivalent a day

(boe/d), Auger's total production capacity

will increase to 130,000 boe/d.

'Cardamom is a high-value addition to

Shell's production at the Auger platform

and is another example of our excellence

in deep-water project delivery,' said

Marvin Odum, Shell Upstream Americas

Director. 'The work to extend the

production life of our first deep-water

tension-leg platform is impressive and

involved advanced exploration and

development technology. Our future

opportunities in deep water mean that this

will remain an important, high-return

growth area for Shell.'

Since its first production in 1994, the

facility has received several upgrades to

process additional production from new

discoveries. Cardamom is Auger's seventh

subsea development.

The Cardamom reservoir sits beneath thick

layers of salt in rock more than four miles

(6.4 kms) below the sea floor and went

undetected by conventional seismic

surveys. Shell used the latest

advancements in seismic technology to discover Cardamom in 2010. The Cardamom field is 225

miles (362 kms) south-west of New Orleans, Louisiana, in water more than 2,700 feet (820 metres)

deep.

Other deep-water Gulf of Mexico growth for Shell includes the Mars B (Shell 71.5%)

development, which continues to ramp up production; the ultra-deep-water Stones (Shell 100%,

50,000 boe/d) project, which is under construction; front-end engineering and design is progressing

for the Appomattox (Shell 80%) project; and, in a recent exploration success, Shell announced a

major discovery at its Rydberg (Shell 57.2%) well in the Norphlet play. Shell also discovered oil at

its Kaikias (Shell 100%) well in the Mars basin, which will require further appraisal in 2015.




Last month, Shell also started oil production from its Bonga North West (Shell 55%, 40,000 boe/d)

deep water development off the coast of Nigeria and recently announced a natural gas discovery at

its Marjoram-1 (Shell 85%) deep-water well in Malaysia, where the Gumusut-Kakap (Shell 33%)

deep-water platform is also on track for production this year.

Cardamom field

• The Cardamom field is located in Garden Banks Block 427, approx. 225 miles (362 kms) southwest

of New Orleans, Louisiana, in water more than 2,720 feet (800 metres) deep.

• Shell drilled the Cardamom discovery well in 2,720 feet (830 meters) of water from the Auger

tension leg platform.

• Modifications to the Auger platform include additional subsea receiving equipment, upgrade of an

existing process train, and weight mitigation which increases the liquid handling, cooling and

production capacity of the host facility.

• The completed subsea system includes five well expandable manifolds, a dual 8-inch (20-

centimetre) flowline, and eight well umbilicals.




CAMAC gets $100M loan for offshore developments in Nigeria Source : CAMAC CAMAC Energy Inc. announced today that its wholly owned subsidiary, CAMAC Petroleum Limited, has entered into a credit facility with Zenith Bank Plc for a five-year senior secured term loan providing initial borrowing capacity of up to $100 million.

U.S. dollar borrowings under the term loan facility will bear interest at the rate of LIBOR plus 7.5%, subject

to a floor of 9.5%.

The security package for the term loan facility includes a legal charge over OMLs 120 and 121 and an

assignment of proceeds from oil sales. Proceeds from the term loan facility will be used for the further

expansion and development of OMLs 120 and 121 offshore Nigeria, including the Oyo Field.

“This new credit facility provides CAMAC Energy flexible funding at a reasonable cost to continue development of the Oyo Field,” said Earl W. McNiel, Senior Vice President and Chief Financial Officer of

CAMAC Energy.

“The dramatic increases in production and cash flow we expect to achieve at Oyo will drive near-term growth and enable us to pursue our high-impact exploration program.”




Oil price drops below $100 a barrel as GCC producers are close to curbing supply

Oil prices on Monday dipped below the US$100-a-barrel mark, threatening to pinch oil-dependent states’ budgets and getting closer to the level where Arabian Gulf swing producers feel pressured to curb supply.

The European benchmark Brent fell below the psychological barrier for the first time in 14 months.

Already last Friday, the Opec crude oil basket price was at US$98.36 a barrel. While prices are still comfortably above the break-even point for the budgets of most Gulf countries,

Oil prices have now fallen by more than 15 per cent from their summer peak in June, when conflict in Syria, Iraq and Libya worried the world market that supply might be threatened. But since then, the lack of any serious disruption and weaker than expected consumption in Europe and Asia have caused oil prices to drift lower.

But if prices were to get below $90 a barrel, the market would expect action because “$80 is a pretty hot floor” for the swing producers, owing to national budget considerations.

As BoA Merrill Lynch pointed out in a report last month, the old Opec quota system was essentially abandoned in 2011, so that now “in effect, key swing producers were handed a 5 [million barrels per day] band to help balance the 93 million bpd global oil market”.

The swing producers have not changed their method of signalling to the market, however, so it depends on reports of third parties – such as the International Energy Agency, or various specialised news publications – to make best guesses as to when the swing producers have curbed production. If oil prices continue their descent, this will likely be the case in the coming weeks.




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

Your partner in Energy Services

Khaled Malallah Al Awadi, Energy Consultant

MSc. & BSc. Mechanical Engineering (HON), USA ASME member since 1995 Emarat member since 1990

Mobile : +97150-4822502 [email protected] [email protected] Khaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 years of experience in theof experience in theof experience in theof experience in the Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates

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NewBase 09 September 2014 K. Al Awadi

New base special 09 september 2014

Economy & Finance

Transcript of New base special 09 september 2014