new base 506 special 28 december 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 28 December 2014 - Issue No. 506 Khaled Al Awadi

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

Iraq crude exports rise in December to hit record Reuters + NewBase

Iraq’s oil exports are rising in December towards a record high, according to loading data and industry sources, as Opec’s second-largest producer pumps more despite oil prices trading near a five-year low.

The increase will add to ample supplies and may worry other members of the Organisation of the Petroleum Exporting Countries unable to expand exports and suffering a drop in oil income after a near 50% drop in prices since June.

Exports from Iraq’s southern terminals have averaged at least 2.60mn bpd, according to shipping data for the first 23 days of December tracked by Reuters. Two industry sources who monitor the exports had similar estimates.

“This is looking very strong - massive volumes,” said an industry source, who saw southern flows rise as high as 2.80mn bpd for part of the month. The southern oilfields produce the bulk of Iraq’s oil and the terminals are its main outlet to world markets. Located far from the parts of the country controlled by Islamic State, they have kept pumping despite the unrest.

In addition, flows of Kirkuk crude out of the Turkish port of Ceyhan have returned in December, after Baghdad reached a deal with the Kurdistan Regional Government. Iraq’s State Oil Marketing Organisation, or SOMO, has been exporting about 180,000 bpd of Kirkuk so far in December, two




industry sources said. The oil is being exported in a Kurdish pipe to Ceyhan as an older line has been repeatedly attacked.

“It is all going through the Kurdish line now,” said a trade source with a company that buys Iraqi crude. “The old Kirkuk pipeline is not usable.” That brings pipeline exports of Iraq’s main crudes to around 2.78mn bpd - close to the 2.80mn bpd record high posted in February, just before flows from Iraq’s Kirkuk fields along a pipeline running to Ceyhan were halted by a bomb attack.

Northern exports may be higher if crude produced in the Kurdistan region and being shipped to Ceyhan is included, the sources said. Exact figures are not available, but one source said total shipments from northern Iraq were now at least 300,000 bpd.

The southern export rate is in line with comments from the head of SOMO, Falah Alamri, who said on December 21 he expected at least 2.60mn bpd. If sustained, December’s southern exports will exceed May’s 2.58mn bpd, which was the highest since at least 2003.

Iraq aims to push exports even higher in 2015. Oil Minister Adel Abdel Mehdi said in November he expected shipments to rise next year to an average of 3.2mn bpd, including Kurdistan. The plan has caused unease for other Opec members and entrenched the reluctance of some to cut their own supply, according to comments from oil ministers and Opec delegates made during Opec’s November 27 meeting.

Iraq, however, has argued it should be exempt from Opec supply restraint as it is recovering from years of sanctions and war. It has been expanding production in the south since Western companies signed service contracts with Baghdad in 2010.

Smooth progress is not guaranteed. Iraq has missed its targets to expand supplies in the past and exports are often disrupted by bad weather and technical problems, as well as by unrest.

Northern exports of Kirkuk crude had been shut since March since the bomb attack, keeping total Iraqi exports below their potential for much of 2014. Still, Kurdistan began independently exporting crude to Ceyhan in May, angering Baghdad which claimed sole authority to ship oil from the country.




Mirfa power and water plant to begin construction in February The National + NewBase

GDF Suez will break ground in February on its billion-dollar Mirfa gas-fired power and water project, expected to provide enough electricity for more than 1 million homes once complete, the French energy firm said.

Mirfa is a key component of Abu Dhabi’s efforts to ramp up power and water output amid a reduction in subsidies to quell growing demand. From January 1, higher energy and water tariffs will be introduced in the emirate, expected to lead to a reduction in consumption.

According to Marie-Ange Debon, the deputy chief executive and head of international activities at the utility unit Suez Environnement, the plant could be finished in 2017, as it “usually takes two years” from the start of construction. The project, located 120 kilometres west of the capital, will cost US$1.5 billion and generate 1,600 megawatts of electricity, with a seawater desalination capacity of 52.5 million gallons per day.

“It took time for the final decision and we were granted the project about six months ago, so now we’re really in the process [of getting construction underway],” she said, adding that the engineering and procurement of the desalination plant had already begun. The emirate is augmenting natural gas-fired plants such as Al Mirfa with four nuclear reactors, built by the Korea Electric Power Corporation, and a renewable energy portfolio.

Official estimates put peak demand for electricity supplied by the Abu Dhabi Water and Electricity Authority (Adwea) at more than 13,000MW last year, rising to about 19,000MW in 2017, when the first reactor comes online. By the end of last year, capacity was about 14,400MW.

The new plant will replace an existing 200MW plant that caters to local demand in Mirfa. Suez said in October that the desalination part of the project, which includes the design and construction of the plant, plus a seven-year operating contract for its Degremont unit, is worth Dh677 million.

The Mirfa desalination plant will use reverse osmosis, which removes salt and algae from seawater by using membranes and is cheaper than the other two main types of desalination used in the region – multi-stage flash and multi-effect distillation.

Suez is one of the largest desalination plant operators in the world. It built and operates the reverse osmosis plant at the Fujairah 1 independent water and power plant – the largest of its type in the region. Fujairah 1 deploys a hybrid of reverse osmosis and multi-stage flash distillation. As




the Mirfa deal shows, the reverse osmosis technology continues to gain ground against other desalination systems and now accounts for the bulk of new projects in the Arabian Gulf region.

GDF Suez, the largest shareholder in Suez Environnement, signed a 25-year power and water purchase agreement with Adwea in July and reached financial close in October. Adwea holds an 80 per cent stake in the scheme, with the remainder held by the French company.

“[The Mirfa project] is an important addition to the sector and once completed will play a key role in delivering power and water competitively to meet Abu Dhabi’s growing electricity and water demand,” Faris Al Dhaheri, the Adwea director general, said in October.

The UAE is looking to tackle its growing water and power demand with rates expected to double by 2020. The country has one of the highest per capita consumption rates in the world for both water and electricity. According to the UAE State of Energy Report 2015, residents use about 550 litres of water and 20-30 kilowatt-hours of electricity a day compared to the international average of 170-300 litres and 15 kWh per day.

The need for water and electricity continues to grow across the region. Suez Environment believes the GCC is a growth area for the company in the upcoming year, amounting to 5 per cent of its project portfolio. Ms Debon added it would all depend on the visibility on the outlook of the economy. “The economy today is not as good as it was, but I still believe that the fundamentals are very strong.”

The price of Brent crude has fallen almost 50 per cent since peaks in June, and there are concerns that investment in the energy sector will follow suit. However, Suez Environnement remains bullish and said the drop in prices has helped business.

The company uses oil in various operations. “Oil companies need companies like us to treat the water that is extracted from wells and reservoirs. Even if oil prices are weak, the need for treatments of produced water will remain very high,” Ms Debron said.

Most recently the company was awarded an Dh814.9m contract for the expansion of the Doha West wastewater treatment and recycling plant. The executive added that there were still several projects, mostly revolving around water activities, that were on the books.

“The only way to meet the demand is to work,” she said. “We remain at a good level of growth in the region.”




US:Rail deliveries of U.S. oil continue to increase in 2014 Source: U.S. Energy Information Administration, based on Association of American Railroads

The amount of crude oil and refined petroleum products moved by U.S. railroads increased 9% during the first seven months of this year compared with the same period in 2013. In July, monthly average carloadings of oil and petroleum products were near 16,000 carloads per week, according to the Association of American Railroads (AAR).

The increase in oil volumes transported by rail reflects rising U.S. crude oil production, which reached an estimated 8.5 million barrels per day in June for the first time since July 1986. AAR estimates that more than half of the nearly 460,000 carloads tracked in its petroleum and petroleum products category from January through July consisted of crude oil, up from around 3% in 2009. With the average rail tank car holding around 700 barrels of crude oil, about 759,000 barrels of crude oil per day were moved by rail during the first seven months of 2014, equal to 8% of U.S. oil production.

The Bakken Shale, primarily in North Dakota, has provided a significant share of the total increase in U.S. oil production over the past three years. North Dakota, now the second-largest oil producing state, provides nearly one out of every eight barrels of oil produced in the United States. Between 60% and 70% of the more than 1 million barrels per day of oil produced in the state has been transported to refineries by rail each month in the first half of 2014, according to the North Dakota Pipeline Authority.




In the future, proposed rules published in August by the U.S. Department of Transportation to improve the safety of tank cars will affect how crude oil is moved by rail, particularly trains that carry 20 or more carloads of oil. The proposed rules would require new oil tank cars constructed after October 2015 to have thicker steel and require retrofitting of existing tank cars. Voluntary actions by railroads in anticipation of the new rules have resulted in reduced speeds and increased inspections.

Oil companies are turning to rail deliveries as North American oil production overwhelms existing pipeline capacity. Provided the U.S. government approves Keystone XL, it will be at least two more years before 1,000,000 barrels of oil per day in extra pipeline capacity comes on stream for U.S. refiners.

In Canada, opposition to the Northern Gateway pipeline from the provincial government in British Columbia means an uncertain future for the 525,000 bpd project planned by Enbridge.




Oil Price Drop Special Coverage

Oil Caps Fifth Weekly Loss on Global Supply Glut Concern Bloomberg + NewBase

Oil fell, capping a fifth weekly loss on concern that OPEC’s refusal to cut production will worsen a global supply glut.

Brent and West Texas Intermediate extended their annual declines of more than 40 percent, the biggest since 2008, as the Organization ofPetroleum Exporting Countries resisted supply cuts to defend market share while the highest U.S. production in three decades exacerbated a global glut. Trading volume headed for the lowest this year.

“The market is still reeling from oversupply,” saidPhil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s really hard to muster a substantial rally until we figure out how we are going to use all this oil.”

Related: Saudi Arabia Seen by Former Adviser Assuming $80 Oil

Brent for February settlement slipped 79 cents, or 1.3 percent, to $59.45 a barrel on the London-based ICE Futures Europe exchange, down 3.1 percent this week. The volume of all futures was 84 percent below the 100-day average as of 3:10 p.m., with much of Europe on holiday after Christmas.

West Texas Intermediate crude for February delivery fell $1.11, or 2 percent, to $54.73 on the New York Mercantile Exchange with volume 68 percent below average. Prices were down 3.2 percent this week. Trading reached 174,562 contracts at 2:49 p.m. The previous lowest volume this year was 244,240 on Aug. 25. Brent traded at a premium of $4.72 to WTI on the ICE.

Crude Stockpiles

Both grades gained more than 1 percent earlier on fighting in Libya and on a report that Saudi Arabiaexpects prices to rise. The state-run National Oil Corp. said today that several tanks were on fire at the Es Sider terminal as Islamist militias attacked Libya’s largest petroleum port. Saudi Arabia, OPEC’s biggest producer, is assuming an oil price of $80 a barrel for 2015, said John Sfakianakis, a former economic adviser to the country’s government.

U.S. crude stockpiles climbed 7.27 million barrels in the week ended Dec. 19, the most in two months, the Energy Information Administration said Dec. 24.

The gain left U.S. crude stockpiles at 387.2 million barrels, the highest level since June, according to data from the EIA, the Energy Department’s statistical arm.




OPEC, whose 12 members supply about 40 percent of the world’s oil, decided at a Nov. 27 meeting to maintain its production target at 30 million barrels a day. The group pumped 30.56 million barrels a day in November, exceeding its target for a sixth straight month, a Bloomberg survey of companies, producers and analysts shows.

Getting Worse

“We are still in a state of oversupply,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The disruption in Libya may contribute to Brent’s stabilization in the near term.”

The fighting in Libya caused crude output to decline to 352,000 barrels a day, Mohamed Elharari, the company’s spokesman, said yesterday. That compares with daily production of almost 1.6 million in 2011.

Libya's Breakdown

“Disruption to Libya’s oil production helps Brent to stay up and helps WTI to stay up too,” said Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan. “We are seeing a little bounce back. The only thing we need to fear is profit-taking when prices go up.”

Retail prices for regular gasoline at the pump were below $2 a gallon at about 20,000 stations in the U.S. today, according to AAA. The most common price was $1.999. Retail gasoline averaged $2.324 nationwide yesterday, a five-year low, AAA said.

Oil prices fell Friday, tumbling as the dollar strengthened and as a supply glut in top consumer, the United States, trumped worries about falling production from Libya.

The market had come under pressure from Wednesday's Energy Department report, which showed a 7.3 million-barrel rise in crude inventories to their highest December level on record. Analysts had expected a seasonal decline.

The slide was exacerbated as oil prices reacted to a strengthening dollar index.

"There's still significant weakness in confidence, and that means that we're going to have occasional retests to the downside," said Richard Hastings of Global Hunter Securities. The strengthening dollar index triggered the slide on Friday, he said.




Additionally, the market continued to reel from bearish storage data just before the Christmas holiday.

"The numbers on Wednesday were really bearish, and it's possible the market is still trying to digest them," said Andrew Lebow, a Senior Vice President of Jefferies in New York. "Maybe the path of least resistance is down here, given that we've been in a long down trend."

Crude imports by Japan, the world's fourth-biggest oil buyer, dropped 17.3 percent in November from a year earlier to 14.68 million kilolitres (3.08 million bpd), government data showed on Thursday.

Brent crude settled down 79 cents at $59.45, while U.S. crude fell $1.11 to $54.73 in thin trade as many countries were still on holiday.

"We tried to rally off of the Libyan situation, but I think that the market is still reeling from larger-than-expected inventory data," said Phil Flynn of Price Futures Group in Chicago.

Fighting in Libya has cut output there to 352,000 barrels a day, or about half November's average, state oil company spokesman said on Thursday. This countered the US Department of Energy's (DOE) report showing a big stockbuild.





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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 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 28 December 2014 K. Al Awadi

new base 506 special 28 december 2014

Economy & Finance