new base 744 special 09 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

publication. However, no warranty is given to the accuracy of its content.

NewBase 09 December 2015 - Issue No. 744 Edited & Produced by: Khaled Al Awadi

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

Indonesia eyes partnerships with Qatar in oil and gas exploration Gulf Times + NewBase

Indonesia is open to oil and gas explorations through potential partnerships with energy companies in Qatar, ambassador Deddy Saiful Hadi has said.

At the end of 2014, Indonesia’s proven oil reserves stood at 3.7bn barrels, according to the BP Statistical Review of World Energy. This figure reflects a stark contrast to Indonesia’s 5.9bn barrels of proven reserves in 1991.

To tap Indonesia’s energy reserves, Hadi said companies like Qatar Petroleum or RasGas could explore and develop potential oil fields under a production contract sharing scheme.

“There is a lot of opportunities for Qatar to partner with Indonesia, particularly oil and gas explorations and the possible production contract sharing with companies like Qatar Petroleum and RasGas,” Hadi told Gulf Times.




The ambassador’s proposal was an integral part of PT Medco Power Generation Indonesia president director Lukman Mahfoedz’s discussion during yesterday’s “CEO Plenary Session” at the 9th International Petroleum Technology Conference (IPTC) here. According to Mahfoedz, while Indonesia has limited oil reserves, the country has around 103tn cubic feet (tcf) of gas and 574 tcf unconventionals.

“However, the remaining reserves are located in hard-to-reach areas in Indonesia’s eastern side and needs significant investments and technology to recover them,” Mahfoedz said during the session entitled “Technology and Partnerships for a Sustainable Future.”

Another area for partnership, according to Mahfoedz, is geothermal energy. He said Indonesia provides 40% of the world’s geothermal supply.

Hadi said the $1bn Joint Investment Fund (JIF) signed during President Joko Widodo’s visit to Qatar last September will play a significant role in enhancing Indonesia’s liquefied natural gas (LNG) imports.

Citing figures from Indonesia’s Ministry of Trade, Hadi said the country imports $1.5bn worth of oil and gas from Qatar every year. Meanwhile, Mahfoedz said Indonesia’s daily oil imports reach around 800,000 barrels.

Mahfoedz also said the energy demand in Indonesia in the next four years will be 6.1mn bpd of fuel, including coal. “By 2019, Indonesia will be a net importer of energy, including coal,” he said, adding that by 2025, Indonesia’s cap on oil and gas will be around 2.5mn bpd.

He added that the JIF will help fast track the construction of mega infrastructure projects like the 35,000-MW power plant, which is expected to be completed in 2019.

Asked about the impact of the low oil prices, Mahfoedz said the downturn “is, to some degree, beneficial to Indonesia as an energy importer.” Hadi added, “Since we are importing oil and gas for our energy consumption, the low oil prices have a direct benefit to importers such as Indonesia.”




Saudi Arabia shipping more Nov-Dec crude to Asia to meet robust demand Reuters

Saudi Arabia is shipping more crude oil to Asia over the last two months of the year as strong refining margins boost demand, trade sources said, helping the top oil exporter defend its market share amid fierce competition. Cheap Saudi oil - in comparison with prices for other Middle Eastern grades - has drawn several Asian refiners to request a few million barrels above contractual volumes as they ramp up crude run rates to capture robust margins.

The increment in demand will require Saudi Arabia to pump at near record volumes just as a battle over global market share is expected to intensify following the failure of the Organization of the Petroleum Exporting Countries (Opec) to set a production quota, and ahead of higher exports from Iran next year once sanctions over its nuclear programme are lifted. "There is a bigger call for Saudi crude as monthly supply nominations from Asian refiners have gone up," said an industry source familiar with the matter, adding that the kingdom will raise shipments to Asia by a few million barrels over November and December. The trend may continue into early next year as a drop in exports from key light sour producer Abu Dhabi has increased demand for Saudi grades of a similar quality. Nearly half of Saudi's crude production is exported to Asia. Saudi Arabia's major Asian customers received about 4.6 million barrels per day (bpd) of crude in the first 11 months this year, up 12 per cent from the same period a year ago, data from Thomson Reuters Research & Forecasts showed. Saudi Arabia last raised oil exports to Asia over contract volumes in January and February this year to meet peak winter demand in the Northern Hemisphere. The Opec member's offers of extra crude in low-season October, however, failed to attract interest from Asia. Demand for Saudi crude picked up again in November and December as refining margins rebounded. At least four Asian refiners lifted more crude as Saudi Aramco set more competitive official selling prices (OSPs), sources close to the matter said.




Under oil contracts, the seller or buyer can adjust loading volumes, depending on demand and shipping logistics, using an operational tolerance that ranges from plus to minus 10 per cent of the contracted volume. "The OSP is not bad and the (refining) margin is wonderful," said a trader with a North Asian refiner that has requested more Saudi crude. Saudi Aramco's Arab Extra Light OSP is about $7 a barrel below Abu Dhabi's Murban, the widest discount since August. Light sour crude supply is expected to tighten early next year as Abu Dhabi National Oil Company has cut Murban and Das crude exports on field maintenance and higher domestic demand. Light crudes typically yield more light products such as naphtha, whose crack to Brent averaged $111.93 a tonne in November, the highest since September 2014.

This helped boost refining margins at a typical complex refinery in Singapore to the highest in eight months in November. Taking the strong refining margins in Asia into greater consideration, Saudi Arabia cut its January OSPs for most of the crude grades it sells to Asia by a smaller extent than expected last week. Asian refiners are now waiting for other Middle Eastern producers to set their prices before deciding on how much Saudi crude to ask for in January, sources said. Now waiting for other Middle Eastern producers to set their prices

before deciding on how much Saudi crude to ask for in January, sources said.




Saudi: Sadara starts up first Solution polyethylene plant in Mideast

Sadara Chemical Company (Sadara), the world’s largest chemical complex ever built in a single phase, has successfully started up its first production plant, moving on schedule from the construction to the operational phase. Sadara’s first product – linear low density polyethylene (LLDPE) – was produced in the company’s polyethylene plant using proprietary technology from The Dow Chemical Company. The plant is the first Solution PE plant in the Middle East and is designed to produce products for specialIty applications such as the manufacture of food grade plastics, industrial and consumer packaging and health and

hygiene films. Ziad Al Labban, chief executive officer of Sadara, thanked all those involved in making the Sadara dream a reality, saying: “We’ve made history! The successful start-up of the first production facility is a major milestone for Sadara, thanks to the great teamwork between Sadara’s employees and with the support from our stakeholders and partners.” The plant is the first to come on stream among the 26 world-scale manufacturing plants that are being built in the Sadara complex in Jubail Industrial City II. “We are continuing with our commissioning and start-up efforts to bring the remaining 25 units on stream safely, efficiently and effectively,” Al Labban added. Sadara has to date achieved more than 60 per cent Saudisation as construction of the Sadara complex reached 97 per cent completion by November 2015. Sadara is a joint venture developed by the Saudi Arabian Oil Company (Saudi Aramco) and The Dow Chemical Company. With a total investment of about $20 billion, Sadara is building a world-scale chemical complex in Jubail Industrial City II in Saudi Arabia’s Eastern Province. Comprising 26 world-scale manufacturing units, the Sadara complex is the world’s largest to be built in a single phase and will be the first in the Middle East to use refinery liquids, such as naphtha, as feedstock. By using best-in-class technologies to crack refinery liquid feedstock, Sadara will enable many industries that either currently do not exist in Saudi Arabia or only exist through imports of raw materials. The adjacent PlasChem Park, a unique collaboration between Sadara and the Royal Commission for Jubail and Yanbu, will create more value downstream, generating unprecedented investment, innovation, economic growth and thousands of jobs. -- Trade Arabia News Service




Mexico Receives Record $6.3B From Oil Hedge Program by Reuters

Mexico's Finance Ministry on Tuesday said it received a record $6.284 billion from its oil hedge program to help the government offset a drop in income from crude oil sales by state-run Pemex.

Mexico was paid on Monday for put options it bought last year with an average price of $76.40 per barrel, the ministry said in a statement.

For more than a decade, Mexico's government has paid for a hedge every year in what is considered the biggest sovereign oil derivatives trade in the world.

The hedge helps the government offset a shortfall in income from oil sales after Congress had approved the 2015 budget with an estimated price of $79 per barrel before global oil prices sank late last year.

Mexico's crude mix has averaged just above $43 per barrel this year, according to Reuters data.

Mexico cut spending this year and dialed back its budget plans for 2016 after the slump in oil prices.

Mexico's hedging agreement for next year, completed in August, guaranteed a price of $49 per barrel for 2016.

Global oil prices have fallen to their lowest since 2009 this week on concerns of a supply glut. The Mexican crude mix traded at $32.60 per dollar on Tuesday, its lowest since the start of 2009.




NewBase 09 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 amid ongoing commodity downturn Reuters + NewBase

Crude prices found at least temporary support early on Wednesday after the dollar weakened and China's commodity imports came out surprisingly strong, but oversupply means prices are expected to remain low for some time.

U.S. crude futures were at $38.11 per barrel at 0048 GMT, up 60 cents from their last settlement.

Traders said the recovery on Wednesday was largely a result of short covering, a dip in the dollar which makes oil more expensive for importers using other currencies domestically, and strong Chinese oil imports as the government takes advantage of cheap oil to build up its strategic reserves.

Analysts said there was a plethora of factors, including the strong dollar, weakening global demand, soaring supplies as well as the unwinding of the quantitative easing (QE) premium with the U.S. Federal Reserve expected to hike rates soon.

"Whatever the case, a CRB index hovering around 13-year lows and oil prices close to seven year troughs suggest that commodity producers in general are doing it tough," ANZ bank said, referring to the Thomson Reuters Core Commodity CRB Index falling below 178 points for the first time since 2003.

Oil price special

coverage




In oil, a ballooning glut is seen between 0.5-2 million barrels of crude a day in excess of demand, prices are down by almost two-thirds since 2014, and most analysts say they do not see prices rising much until late 2016 at the earliest.

"Low oil prices will continue to weigh on the sovereign credit profiles of major exporters in 2016," rating agency Fitch said. Fitch forecasts Brent to average $55 per barrel next year and $65 per barrel in 2017.

"Price falls represent a windfall to consumers and downstream users. The close to 30 percent fall in oil prices since the start of the year presents a major deflationary impulse," ANZ said.




Oil's prices plunge hammers U.S. funds, humbles savviest investors REUTERS - TIM MCLAUGHLIN

The plunging price of crude oil is causing pain at every kind of U.S. mutual fund this year,

humbling even the industry's best portfolio managers as their mistimed bets in the energy sector

continue to cause losses for investors.

The sector's bottom has been more of a trap door for many fund managers. On Tuesday, for example, U.S. crude futures fell below $37 a barrel for the first time since early 2009. The oil price recovery that many predicted for 2015 is now being forecast for 2016, though investment bank Goldman Sachs has said prices could drop as low as $20 a barrel.

Last week, a policy meeting at the Organization of the Petroleum Exporting Countries resulted in no decision to cut output, fanning fears of a growing global crude oil glut.

The $11 billion Energy Select Sector SPDR ETF , used by mutual funds and hedge funds alike, is off 10 percent in the past month. Even when fund managers point to optimistic signs in the oil market their message sounds somewhat pessimistic.

"Nothing fixes low oil prices like low oil prices," says John Dowd, who runs Fidelity's $2 billion Select Energy Portfolio, describing how the industry is usually self correcting with lower production and rising demand.

Dowd's total return this year is minus 17.77 percent, but that's better than most of his energy fund peers who average a nearly 20 percent negative return.

Bond giant Pimco is adding energy-related securities to some of its portfolios as the Newport Beach, Calif- firm expects an

increase in oil prices over the next 12 months, Dan Ivascyn, group chief investment officer, said in an interview on Tuesday.

"We are becoming constructive in this sector because we expect oil higher in price over the next 12 months or so," Ivascyn added . Earlier this year, RiverFront Investment Group LLC sold off positions tied to pipelines and other companies it felt were dependent on higher-priced oil.

But the firm, which specializes in picking exchange-traded funds, kept the Market Vectors Oil Services ETF , which has fallen 10 percent over the past week, as of afternoon trading on Tuesday. That ETF is the sixth-largest holding in the RiverFront Moderate Growth & Income Fund , according to Morningstar Inc.




Michael Jones, chief investment officer at RiverFront, said companies in the oil-services sector have already priced in "an unbelievably distressed market" and he doesn't expect prices to move lower. He said oil declines over the last week will help the company's stock ETF positions in Japan and Europe, regions that can profit from low oil prices.

Overall, U.S. mutual funds have slashed their exposure to the energy sector by nearly 40 percent over the past three years, according to Lipper Inc. The average allocation has dropped to 5.11 percent from 8.36 percent among those funds with an energy allocation during that three-year span.

A number of funds, for example, have bet on a

recovery at Chesapeake Energy Corp , only to see the natural gas producer's stock drop even more. Among the many managers burned by that bet is Bill Nygren who runs the $6 billion Oakmark Select Fund

Nygren, considered a top stock picker in the mutual fund industry, increased his share count in Chesapeake by nearly 40 percent to 25.7 million shares during the six-month period that ended Sept. 30. Since then, Chesapeake's stock has dropped about 41 percent.

Chesapeake is a big reason why Nygren's fund has a total return of minus 2.48 percent this year, lagging 86 percent of peers, according to Morningstar Inc. He was not available for comment.

Kathleen Gaffney, who runs the $1 billion Eaton Vance Bond Fund, said she's betting on Chesapeake debt, 1 percent of the fund's assets, because the company has valuable assets and enough liquidity to make it through this turbulent cycle in the energy market.

But she has noticed the dramatic pricing gaps among junk-rated energy bonds, reminiscent of the 2008 financial crisis.

Energy junk bond spreads surged Monday by the most in 3-1/2 months and to their widest since March 2009 at 1169 basis points, according to BAML fixed income indexes. It made for a total return on the day of negative 1.63 percent.

That is a dramatic move in the world of bonds, as the magnitude of the move is more than 5 standard deviations from the norm and the index has seen only four worse days than yesterday since the height of the credit crisis.

"It's not a vicious unwind like 2008," Gaffney said. "It's the shock of the price moves that reminds me of that time."




NewBase Special Coverage

News Agencies News Release 09 Dec.. 2015

Global E&P Spending to Continue to Fall; Possible Recovery Seen Late 2016 Rigzone - Karen Boman

Global exploration and production (E&P) spending – which declined by 20 percent in 2015 – will

fall another 11 percent in 2016, marking the first consecutive annual decline since the mid-1980s,

according to Evercore ISI’s “Global 2016 E&P Spending Outlook: An Industry Mired in Recession.”

The downturn dominated the industry in 2015 as depressed commodity prices forced an impromptu overhaul of the entire business, resulting in significant declines to upstream spending and a profoundly deleterious impact to oilfield services, equipment and drilling companies, said Evercore ISI Senior Managing Director and Partner James C. West in a Dec. 8 webinar.

However, Evercore ISI believes that the oil and gas industry will resume growth in late 2016, with 12 percent growth expected in 2017 and 18 percent in 2018. Evercore ISI expects North America to rebound first with the strongest recovery, following by international markets, and then finally, offshore.

“We continue to believe current spending levels as well as oil prices are unsustainable and the longer spending remains subdued, the stronger and longer the coming upcycle will be,” West said. “It’s a cycle like the others, and it always looks the worst at the bottom of the CAPEX [capital expenditures] cycle which we are approaching; once we have visibility on this capital spending bottom, the recovery comes into view.”

Not surprisingly, low oil prices was the primary determining factor for 2016 budgeting decisions among the 300 oil and gas companies surveyed. Seventy-four percent of surveyed companies said oil prices were the key determinant for 2016 budgets. Fifty-nine percent of survey respondents cited cash flow as the key to determining 2016 budgets, and 54 percent of survey respondents cited natural gas prices as the primary factor in determining 2016 spending plans.

Only 35 percent of respondents cited capital availability as the main driver in determining 2016 budgets, down from 60 percent in 2015. This is likely a byproduct of a less draconian fall redetermination cycle than expected and a more disciplined approach to spending.

Twenty-two percent of companies expect to spend above cash flow in 2016, compared with 45 percent in 2015 and 47 percent in 2014. While 55 percent of respondents spent in line with cash flows in 2015, 78 percent expect to be cash neutral in 2016.




North America is expected to again lead the spending decline next year, falling nearly 20 percent versus an 8 percent decline expected internationally, West said. North American capital spending fell by 34 percent in 2015.

“Following a severe 43 percent decline, Canada could test recent troughs established during the 2008/2009 financial crisis,” said West. “Spending in the United States held up marginally better, but is set to fall another 20 percent to less than $100 billion.”

E&P Liquidity ‘Not As Bad As Initially Feared’ West noted that E&P liquidity was not as bad as initially feared. Some forecasts expected the fall redetermination season could see facilities cut by 35 percent to 40 percent, but the average reduction was closer to the mid-teens. Relative to fourth quarter 2014, Evercore ISI found liquidity for 73 E&P companies – including North American independents, international oil companies and international E&Ps – has only fallen by a “surprisingly low” 5 percent, likely a function of a busy year of asset sales and capital raises within the industry.

With banks using their own price decks – which never got revised up at the peak and are unlikely to fully reflect the trough, Evercore ISI has seen credit facilities decline by only 6 percent, based on 44 U.S., Canadian, and international E&Ps. Half of the companies also saw their borrowing bases either reconfirmed or raised, with borrowing bases down by 16 percent on aggregate for the remaining 22 companies who did see their facilities downsize.

“Looking out to spring 2016, we believe redeterminations will be less impactful than they were in the fall as pricing decks already reflect lower commodity assumptions,” West noted.

Evercore partially attributed the resiliency of North America shale production to the effect of hedges, but this trend will subside substantially next year as hedges roll off with only 24 percent of production is hedged compared to 41 percent this year, said West.

Exploration activity also will continue to be sharply curtailed, with only 14 percent of survey respondents planning to increase their exploration spending. Forty-six percent of companies surveyed scaled back exploration in 2015, and 52 percent will do so in 2016. The decline in exploration activity will continue to pressure seismic companies, West noted.

“The good news, or at least less bad news, is that further oil service price concessions are not




reflected in most budgets,” said West.

The survey found that 57 percent of E&Ps aren’t budgeting further service price deflation. Additionally, 15 percent expect further concessions of less than 15 percent, and 28 percent expect concessions of less than 15 percent.

“We estimate overall service pricing has fallen by 20 to 50 percent from 2014 peak levels, dependent on product lines, geography, service provider and a host of other variables.”

Further concessions aren’t incorporated into budgets, they are generally expected to decline further; 53 percent of E&Ps expect further decreases and 47 percent expect prices to remain stable. Labor, tubulars and equipment are expected to decline the most, and completions and transportation are expected to remain the most stable, said West.

With oil prices below Evercore ISI’s assumptions of $47.50/barrel for West Texas Intermediate and $51/barrel for Brent, Evercore ISI anticipates near-term capital expenditures announcements to disappoint over the next few weeks. However, upward revisions could be ahead if prices climb higher throughout the year as we expect, West noted.

The survey came out of discussions with companies or analysis of financial and strategic documents to assess the industry’s health and outlook. The number of companies surveyed is smaller than in recent years, with several smaller E&Ps and private companies having already been acquired in the current downturn. Evercore ISI expects more companies to disappear as the downturn persists.

One risk to increased spending is consolidation among oil and gas majors. Faced with depleting reserves and the vast majority of known reserves controlled by national oil companies, these companies must either replace reserves organically or pursue mergers and acquisitions. Evercore ISI Integrated Oil Analyst Doug Terreson sees elevated pressure on management teams in the space to create value as the shareholder response to underperforming, legacy strategies become more punitive.

“Generally speaking, one budget plus a second budget does not equal two in consolidations; the combined budget is usually smaller. However, this would put capital in more disciplined hands, which is ultimately good for the oil price.”




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

Your partner in Energy Services

NewBase energy news is produced daily (Sunday to Thursday) and

sponsored by Hawk Energy Service – Dubai, UAE.

For additional free subscription emails please contact Hawk Energy

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 09 December 2015 K. Al Awadi

new base 744 special 09 december 2015

Data & Analytics