new base 978 special 24 december 2016 energy news

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 24 December 2016 - Issue No. 978 Senior Editor Eng. Khaled Al Awadi

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UAE: Expects Oil Prices to Rise More on Global Production Cuts Bloomberg - Mahmoud Habboush

Oil prices may rise even more once investors see that OPEC and other major producers are fulfilling an agreement to cut production to curb the global glut, United Arab Emirates Oil Minister Suhail Al Mazrouei said. OPEC is committed to the decision to reduce output and it’s too early to talk about any additional steps it may take, Al Mazrouei told reporters in Abu Dhabi. Eleven non-OPEC nations said Dec. 10 they will reduce output by 558,000 barrels a day, adding to a Nov. 30 OPEC pledge to cut 1.2 million starting in January. “When the market sees the agreement is being implemented, and we hope it will be an effective agreement that will be implemented, and when they see the reduced supply in the market, I am sure this will be positive” for prices, Al Mazrouei said. Oil rose 18 percent since Nov. 29. Output cuts that the Organization of Petroleum Exporting Countries and other producers agreed to may reduce swollen inventories as early as the first quarter, bringing down the surplus by about one-third, Ed Morse, head of commodity research at Citigroup Inc., said last week. OPEC has requested all members except those exempted from cuts

to disclose export plans to ensure compliance with the agreement. The U.A.E. and other Gulf Arab nations have told their customers about plans to cut output, and all other OPEC producers who were asked to join the output deal should do the same, Al Mazrouei said. “We call on all OPEC members that promised to cut to follow the steps of

the Gulf states and the U.A.E. and advise the markets and buyers about the percentage of the cuts that they will make,” he said.




Saudi energy firm wins deal to build 300MWsolar project in Mexico Arabian Business

Fotowatio Renewable Ventures (FRV), a developer of large-scale solar power plants and part of Saudi-based Abdul Latif Jameel Energy, has been awarded a 30-year 300MW solar project in Mexico.

With this build-operate-own agreement, FRV said it is extending its global footprint into the Mexican market at a rate of $26.99/MWh for the first 15 years of the project.

The construction of the plant will begin in mid-2018 and will become operational in mid-2019, and will create approximately 250 local jobs as part of the construction phase and a further 20 jobs during operations.

The plant will generate enough green electricity to supply approximately 76,100 homes, while reducing greenhouse gas emissions by approximately 97.7 million tons of CO2, the company said in a statement.

It added that the the agreement was part of a second electricity market auction conducted by the National Energy Control Centre (CENACE).

FRV said the help the Federal Commission of Electricity's plans to generate 35 percent of its electricity from renewable energy sources by 2024.

“Mexico is one of the world’s richest markets in renewable energy sources which presents numerous opportunities for FRV and international investors. FRV’s success in this auction marks a milestone as it further expands the company’s footprint in Latin America and supports its global growth plans,” said Rafael Benjumea, CEO of FRV.

"Our pipeline in the country, in addition to our expertise and competitiveness, places us in a good position to continue participating in future auctions.” FRV was acquired by Abdul Latif Jameel Energy in April 2015.




QP, Exxon Mobil get US nod for gas export Golden Pass LNG plant Gulf Times

Qatar Petroleum International Ltd and Exxon Mobil Corp won approval by federal energy regulators to build a $10bn natural gas export plant in Texas.

The two energy giants were cleared to build and operate the Golden Pass liquefied natural gas export terminal in Sabine Pass, Texas, according to an order issued on Wednesday by the Federal Energy Regulatory Commission. The agency also authorised a pipeline project designed to bring in 2.5bn cubic feet per day of gas to the facility for export.

Clearance of the project marks the end of a nearly three-year application process and comes as LNG prices have slumped amid waning demand and an influx of supply from new export terminals across the globe.

A string of US production plants have been suspended or cancelled as foreign markets have soured. “We will authorise Golden Pass Products’ proposal” to construct and operate the project, the commission said in its ruling on Wednesday.

The Golden Pass project will consist of three liquefaction trains, or plants, with capacity to produce 15.6mn metric tonnes per year of the super-chilled fuel, the order showed.

The developers are awaiting approval from the Energy Department for a permit to export gas to nations that lack a free trade agreement with the US, according to the project website.




Saudi Arabia’s petchem exports growing at 15pc Saudi Arabia’s petrochemical exports have been seeing a CAGR of 15 per cent and are estimated to reach 100 million tonnes in 2016, said the organisers of the upcoming ArabPlast, a major industrial show in Dubai, UAE. “Saudi Arabia’s petrochemical sector is largest non-oil sector, with investment estimated at $63.5–150 billion expected in 2020 alone,” added Satish Khanna, general manager, Al Fajer Information and Services, co-organisers of ArabPlast, citing the Saudi Arabia industrial overview report published by Jeddah Chamber.

“With proven track record success, ArabPlast has become a biennial tradition for the plastics and petrochemical industrials in GCC countries. The 2017 edition is believed to showcase higher contributions in term of innovation, new products, latest technologies and knowledge exchange.




And I am proud to get one of the leading companies in the kingdom of Saudi Arabia to support this event and enhance its visibility within the Saudi market,” Khanna explained. Tasnee, a leading industrial company in Saudi Arabia, is the platinum sponsor of ArabPlast Show to be held from January 8 to 10 at the Dubai Exhibition and convention Centre Co-organised by Al Fajer Information and Services and German exhibition organiser Messe Dusseldorf, ArabPlast is expected to bring together key players in the plastics, petrochemicals and rubber industry with exhibitors and visitors coming from different countries around the Middle East region and the world. Established in 1985, Tasnee operates several companies which core activities are related to petrochemicals, chemicals, plastics, metals manufacturing, industrial services and environmental technologies. These industries play a major role in developing and sustaining the regional economies. Hence the importance of ArabPlast as an opportunity for international experts and professionals to meet and share practises, success stories, solutions and even concerns regarding these sectors.

Tasnee was one of the early Saudi companies investing in the petrochemical sector. The company always aimed at reaching a leading position and we are now one of the largest producers of petrochemical products in the kingdom. Attendees to ArabPlast 2017 will get the occasion to discover a wide range of products that provide functionalities in injection moulding, blow molding, wrapping and packaging or pre and post plastic processing techniques as well as raw materials, such as masterbatches, additives and polymers. Some of the machinery and new technologies to be displayed include plastic machinery, plastic/rubber processing technology, pre and post-processing systems, plastic packaging technology, injection moulding, blow moulding, wrapping technology, extrusions, chemicals and additives, semi finished goods, engineering plastics and plastic products.




Egypt Shell reported to be offering Rosetta concession offshore for sale Source: Daily News Egypt

Daily News Egypt reports that Shell has offered the Rosetta concession, offshore Egypt, for sale. Daily News Egypt said a source close to the company told it that Shell decided not to carry out any development operations in Rosetta. 'Development will be expensive with almost no economic feasibility, considering the price of gas produced there,' he explained.

He said the Rosetta field currently produces 40 million cubic feet of gas per day and will stop producing by July as the natural decay of productivity is not offset by development.

He pointed out that BP acquired the Rosetta gas treatment plant in Rashid from Shell for $128m. BP received the plant in April and began preparations to link it to the Fayoum and Giza fields.

The source said that the maximum capacity of the Rosetta gas treatment plant is 425 million cubic feet of gas per day, of which 420 million cubic feet will come from the Fayoum and Giza fields by 2019.

He added that Royal Dutch The source explained that Shell has reduced its investments for the current fiscal year in Borollos and Rashid concession areas to cover only operation and maintenance costs. He added that in the fiscal year (FY) 2016/2017 Shell plans on investing $158.9m, down from $222m in FY 2015/2016.

Shell moved the current supply extracted at the Rosetta field to the Borollos gas treatment plant after selling the Rosetta gas treatment plant to BP.

He said the company allocated about $96.7m to operate the Borollos field and $38m for periodical maintenance. He added that Shell allocated $22.7m for operational costs of the Rosetta field and $1.4m for field maintenance without new developments.

He noted that production of Borollos and Rashid fields naturally declines by 10m cubic feet of gas per day. Daily News Egypt had previously revealed that the Ministry of Petroleum owes Shell $1.3bn, for their share of the gas produced from the Rashid and Borollos fields.

The government collects roughly $50m a month in dues owed to Shell for the Borollos and Rashid fields, however; they have been unable to pay the company due to the ongoing foreign currency shortage.




Cyprus:Eni awarded two out of three exploration blocks offshore Cyprus Source: Eni

The awarded areas have geological affinities with those successfully explored by Eni in the neighboring areas in the Egyptian offshore, with the discovery of the Zohr super-giant gas field.

Eni has been awarded two exploration blocks offshore Cyprus, following the competitive international bid round '3rd Licensing Round'. The announcement was made yesterday by the Ministry of Energy, Commerce, Industry and Tourism of Cyprus, following the decision of the Council of Ministers of the Republic of Cyprus.

Eni will be Operator of Block 6 with a 50% stake in partnership with Total (with the remaining 50%) and will acquire a 100% stake in Block 8.

These areas have geological affinities with those successfully explored by Eni in the neighboring areas in the Egyptian offshore, with the discovery of the Zohr super-giant gas field. With these new assignments, Eni strengthens its strategic positioning in an area where, in addition to the Blocks 9, 3 and 2 assigned following the 2nd international bid round in 2012, the company also holds three exploration blocks on the Egyptian side: Shorouk (where the Zohr field is located), Karawan (where Eni has a 50% stake) and North Leil (Eni 100%). The company will leverage synergies with assets already in its portfolio, facilitating time to market and reducing costs.

These assignments – Eni’s CEO Claudio Descalzi said – confirm the effectiveness of Eni’s exploration strategy, which keeps acquiring significant shares and uses the knowledge base resulting from the intense activity related to Zohr field. It is another step towards a possible future definition of a powerful hub for natural gas in the Eastern Mediterranean, which could play an important role in the future energy security of the area, as well as potentially in Europe’s energy security.'Eni has been operating in Cyprus since 2013, where it holds and operates the offshore exploration Blocks 2, 3 and 9.




MENA: Brighter outlook for power consumption in Mena,says BMI Gulf Times

A brighter outlook for power consumption will mean the Middle East and North African region (Mena) region will outperform Sub-Saharan African (SSA) in the form of investment opportunities, as the latter continues to battle with supply shortages, a new report has shown.

East Africa’s focus on power market integration, and Southern Africa’s focus on boosting coal power, highlight the resulting concerns over energy security, BMI has said.

In Mena, diversification away from oil-fired power, and a push to boost solar power, highlights a strategy of power mix diversification. There are significant distinctions that differentiate the regional markets within BMI’s Mena power sector coverage.

Mena, on the one hand, is a more mature regional power market, where the level of economic development and the availability of fossil fuel feedstock feed into progress in developing new power generation capacity.

In comparison, SSA power market is relatively underdeveloped, with governments struggling to field the investment necessary to boost electricity generation, in part due to the widespread issue of a failure to implement cost-reflective electricity tariffs.

“This has mostly led governments to focus on boosting cheap hydropower output, which in turn has rendered numerous countries vulnerable to hydrological fluctuations,” BMI said.

BMI expects power consumption in the Mena region to outpace that of SSA over the next decade despite the significant differences in population (SSA’s current population stands at 1bn, whereas the Mena region has 363mn).

SSA power consumption will grow by an annual average of 3.6% between 2017 and 2026, compared to 4.1% in Mena over the same timeframe, BMI said.

Given that Mena’s growth will be from a higher base, net additions to regional consumption from end-2016 will be about 483TWh higher than what will be the case in SSA over our 10-year forecast period. This in turn leads to diverging prospects for investment into power generation infrastructure to support the power demand in each region.




First new U.S. nuclear reactor in almost two decades set to begin operating..Source: Republished with permission from the Tennessee Valley Authority

The Tennessee Valley Authority's (TVA) Watts Bar Unit 2 was connected to the power grid on June 3, becoming the first nuclear power plant to come online since 1996, when Watts Bar Unit 1 started operations.

Watts Bar Unit 2 is undergoing final testing, producing electricity at incremental levels of power, as TVA prepares to start commercial operation later this summer. The new reactor is designed to add 1,150 megawatts (MW) of electricity generating capacity to southeastern Tennessee.

Watts Bar Unit 2 is the first nuclear plant in the United States to meet new regulations from the U.S. Nuclear Regulatory Commission (NRC) that were established after the 2011 earthquake and tsunami that damaged the Fukushima Daiichi Nuclear Plant in Japan.

After the NRC issued an operating license for the unit in October 2015, 193 new fuel assemblies were loaded into the reactor vessel the following month. TVA announced at the end of May that the reactor achieved its first sustained nuclear fission reaction.

Construction on Watts Bar Unit 2 originally began in 1973, but construction was halted in 1985 after the NRC identified weaknesses in TVA's nuclear program. In August 2007, the TVA board of directors authorized the completion of Watts Bar Unit 2, and construction started in October 2007.

At that time, a study found Unit 2 to be effectively 60% complete with $1.7 billion invested. The study said the plant could be finished in five years at an additional cost of $2.5 billion. However, both the timeline and cost estimate developed in 2007 proved to be overly optimistic, as construction was not completed until 2015, and costs ultimately totaled $4.7 billion.




Source: U.S. Energy Information Administration, based on the International Atomic Energy Agency's Power Reactor Information System.

Although Watts Bar 2 is the first new U.S. nuclear generator to come online in 20 years, four other reactors are currently under construction and are expected to join the nuclear fleet within the next four years. Vogtle Electric Generating Plant Units 3 and 4 in Georgia and Virgil C. Summer Nuclear Generating Station Units 2 and 3 in South Carolina are scheduled to become operational in 2019–20, adding 4,540 MW of generation capacity.




US:Fracturing accounts for 50% of current crude oil production Source: U.S. Energy Information Administration, IHS Global Insight, and DrillingInfo

Even though hydraulic fracturing has been in use for more than six decades, it has only recently been used to produce a significant portion of crude oil in the United States. This technique, often used in combination with horizontal drilling, has allowed the United States to increase its oil production faster than at any time in its history.

Based on the most recent available data from states, EIA estimates that oil production from hydraulically fractured wells now makes up about half of total U.S. crude oil production.

Hydraulic fracturing involves forcing a liquid (primarily water) under high pressure from a wellbore against a rock formation until it fractures. The fracture lengthens as the high-pressure liquid in the wellbore flows into the formation.

This injected liquid contains a proppant, or small, solid particles (usually sand or a manmade granular solid of similar size) that fills the expanding fracture. When the injection is stopped and the high pressure is reduced, the formation attempts to settle back into its original configuration, but the proppant keeps the fracture open.

This allows hydrocarbons such as crude oil and natural gas to flow from the rock formation back to the wellbore and then to the surface.




Using well completion and production data from DrillingInfo and IHS Global Insight, EIA created a profile of oil production in the United States. In 2000, approximately 23,000 hydraulically fractured wells produced 102,000 barrels per day (b/d) of oil in the United States, making up less than 2% of the national total.

By 2015, the number of hydraulically fractured wells grew to an estimated 300,000, and production from those wells had grown to more than 4.3 million b/d, making up about 50% of the total oil output of the United States. These results may vary from other sources because of the types of wells included in the analysis and update schedules of source databases.

This new oil production has primarily come from shale and other tight rocks in the Eagle Ford formation and Permian Basin of Texas, and the Bakken and Three Forks formation of Montana and North Dakota.

Source: U.S. Energy Information Administration, IHS Global Insight, and DrillingInfo

The use of hydraulic fracturing is not limited to certain oil-containing formations such as shales or source rocks, nor is its use limited to only horizontal wells. Hydraulic fracturing has been successfully used in directional and vertical wells, both natural gas and oil wells, in tight formations and reservoirs, and in offshore crude oil production.




NewBase 24 December - 2016 Khaled Al Awadi

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

Oil Prices settles at WTI $53.02 & Brent $55.16 as Libyan output pressures oil prices

.

Oil were little changed on Friday ahead of the Christmas and New Year holiday week as the market waited to see how OPEC would manage its planned output cuts with Libya expecting to boost production.

Crude is still trading around its highest since mid-2015, supported by a deal by the Organization of the Petroleum Exporting Countries and non-members to lower output by almost 1.8 million barrels per day from Jan. 1.

Brent crude was up 11 cents at $55.16 a barrel as of 2:10 p.m. ET (1910 GMT), after rising 1.1 percent on Thursday. U.S. crude settled up 7 cents to $53.02.

For the week, the U.S. contract rose for a second week in a row, gaining 2.2 percent during that time, while Brent looked like it would slip lower for a second week in three.

Futures held their losses after oilfield services firm Baker Hughes reported its weekly count of oil rigs operating in U.S. fields rose for an eighth straight week. The rig count rose by 13 to 523, compared to 538 rigs operating at this time last year.

"The complex has begun the pre-holiday trade under moderate downside pressures that are erasing yesterday's gains," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

Oil price special

coverage




"This week's trade has offered no significant surprises as price consolidation continues with the market adopting a wait and see attitude regarding OPEC's execution of planned production curtailments," Ritterbusch said.

While major OPEC producers including Saudi Arabia and Iraq have told customers that supply will be cut in line with the OPEC deal, Libya and Nigeria are exempt because conflict has already curbed their output.

Libya's National Oil Corp hopes to add 270,000 bpd to national production over the next three months after announcing on Tuesday the reopening of pipelines leading from two major fields, Sharara and El Feel.

Nonetheless, efforts to restore Libyan output since the North African country's 2011 uprising have been repeatedly stymied and political splits still present a risk that the plan may not go smoothly.

The dollar index steadied on Friday not far below a 14-year peak of 103.65 reached earlier this week. A firmer dollar makes dollar-denominated commodities including oil more expensive for holders of other currencies.

Also weighing on oil was a surprise increase in U.S. crude stocks reported on Wednesday in the government's weekly supply report — and the prospect of sales beginning in January of crude from the U.S. Strategic Petroleum Reserve (SPR).

"Crude failed to maintain gains this week following the unexpected build in U.S. crude stockpiles, which revived the oversupply concerns," said Lukman Otunuga, a research analyst with FXTM.

"With some anxieties still lingering over the compliance side of the unexpected cut agreement, oil could end up extremely volatile with losses expected if production fails to decline."

The volume of extra oil reaching the market from the SPR could be sizeable. Consultancy Poten & Partners said on Thursday the reserve could be drawn down by some 190 million barrels between 2017 and 2025 if all planned sales went ahead.




Drillers Extend Revival as Oil Trades Near 17-Month High

Oil explorers added rigs for the eighth straight week, extending a ramp-up of activity in the U.S. shale patch as prices hover near $53 a barrel.

Rigs targeting crude in the U.S. rose by 13 to 523 this week, Baker Hughes Inc. said Friday. Drillers have added 207 rigs since the count hit a seven-year low on May 27.

Most of the recovery in drilling has been in the prolific Permian Basin, which has been a hotbed for acquisitions this year. Rig gains will continue to be primarily in that region until oil prices are "substantially higher," said Robert Christensen, an analyst at Drexel Hamilton LLC in New York. But don’t expect a surge.

"It’s the only place you really can make any money," he said. "It’s going to be a very rational progression."

West Texas Intermediate crude touched $54.51 on Dec. 12 and has hovered near $53 after the Organization of Petroleum Exporting Countries and other major exporters agreed to cut supplies to ease a global glut. The deal may make room for more U.S. shale growth, IHS Markit’s Daniel Yergin said earlier this month.

Drillers added four oil rigs in the Permian, raising the count to 262.

The U.S. could add 300,000 to 500,000 barrels a day by the end of 2017 with oil prices around $50 to $55, according to Yergin. But mega-projects will be much slower to come back.




Saudi Arabia’s Energy Minister, Oil Recovering on OPEC Cuts Bloomberg - Mahmoud Habboush

Oil prices are set to recover next year as OPEC fulfills its agreement to cut output, halting the slump that battered the global oil industry, Saudi Arabia’s energy minister said.

The kingdom sees no need for additional production cuts on top of the curbs pledged in recent weeks by OPEC and 11 other oil-producing countries, Khalid Al-Falih said at a ceremony to announce the annual budget in Riyadh. The intervention is intended only to “nudge along” the re-balancing of an oversupplied global oil market, he said in a Bloomberg interview.

“I’m very optimistic that next year will see economic recovery and a recovery of oil markets,” Al-Falih said. Prices, unsustainable at current levels, will also need to rise to encourage investment in the new supplies needed in coming years, he said. Crude will balance somewhere between $50 and $100 a barrel, he said.

Investment in the world’s oil industry has fallen for three consecutive years amid a slump in prices, leading to the lowest level of discoveries in five decades, according to the International Energy Agency. The Organization of Petroleum Exporting Countries, working in concert with other producers such as Russia, has resolved to reduce output to clear a persisting oil glut and revive prices.

“Markets worldwide are leaving a contraction period and a period of low oil prices and reduced investment in the sector,” Al-Falih said. The minister anticipates that crude prices will increase “tangibly” in 2017, he said in an interview with Al Arabiya television.

Oil Revenue

The kingdom expects its oil revenue to climb by 46 percent to 480 billion riyals ($128 billion) next year, the Finance Ministry said in a budget statement. Benchmark Brent crude traded at about $55 a barrel in London on Thursday. Saudi Arabia is assuming that prices stay at $55 next year and advance to $61 in 2018, according to Al Arabiya.

Al-Falih’s outlook echoed comments made by his counterpart from the United Arab Emirates, Energy Minister Suhail Al Mazrouei, who also predicted Thursday from Abu Dhabi that OPEC’s intervention will result in higher prices in 2017.

While U.S. shale output grew excessively when prices exceeded $100 a barrel, burgeoning demand in coming years means supplies will be needed from a number of sources to keep markets in balance, Al-Falih said.

Trump Policies




As for the policies of U.S. President-Elect Donald Trump, who selected Exxon Mobil Corp. Chief Executive Officer Rex Tillerson as his secretary of state, Al-Falih told Bloomberg they are “friendly to oil.”

OPEC agreed to reduce its supplies by 1.2 million barrels a day, while 11 non-members including Russia and Kazakhstan pledged to curb output by almost 600,000 a day. Al-Falih expressed confidence that OPEC members will show a high level of compliance with the group’s announced production cutbacks.

“All producers were convinced, inside and outside of OPEC, of the importance of accelerating balance” in the oil market, and “this conviction cements my confidence that all countries will highly adhere” to their obligations, Al-Falih said on Al Arabiya.

“There is a high degree of transparency now in terms of production levels, export and tankers movements, there are also many parties that monitor oil,” which will make tracking compliance easier, he added.

OPEC and its partners have established a monitoring committee to ensure that producers abide by their pledges. The committee will hold its first meeting in January, at a location yet to be decided, Kuwaiti Oil Minister Essam Al-Marzouk said Thursday at an industry gathering in Cairo.

Saudi Arabia See Oil Revenue Rising 46% in 2017 as Prices Climb Saudi Arabia expects oil revenue to jump by 46 percent next year after a deal between the kingdom and other producers to curb output drove up global prices. The world’s top oil exporter expects to collect 480 billion riyals ($128 billion) from oil sales in 2017, compared with 329 billion this year, the Finance Ministry said in a budget statement Thursday. Non-oil revenue will climb 6.5 percent next year to 212 billion riyals, it said. Oil prices have rallied since the Organization of Petroleum Exporting Countries, of which Saudi Arabia is the largest member, reached a deal with other producers to curb output next year. The budget is based on the assumption that global producers cut output as promised, Saudi Energy Minister Khalid Al-Falih said. Benchmark Brent crude traded above $55 a barrel on Thursday, almost double its low in January. “The oil-revenue increase is in line with the expectations by the authorities that the market is re-balancing higher, and is clearly a sign that oil prices are expected to average $60 per barrel next year,” said John Sfakianakis, director of economic research at the Gulf Research Center. The Saudi government relies heavily on oil sales for revenue, and its finances have taken a blow since prices started tumbling in 2014. Total projected revenue this year, at 528 billion riyals, is less than half what it collected in 2013, when oil was trading above $100 and made up 90 percent of revenue. The kingdom has implemented austerity measures this year to weather the downturn. In April, Deputy Crown Prince Mohammed bin Salman rolled out the Saudi Vision 2030, an economic plan to end the country’s “addiction” to oil. The government intends to spend 42 billion riyals on the program in 2017, up from 9 billion this year, the Finance Ministry said.




NewBase Special Coverage

News Agencies News Release 24 Dec. 2016

Imperial Oil, BP in Limbo After Canada Freezes Arctic Drilling by Josh Wingrove and Robert Tuttle Energy firms including Imperial Oil Ltd. and BP Plc will get a year of consultations to hash out the fate of their rights in Canada’s Arctic after Prime Minister Justin Trudeau’s drilling freeze set the stage for a dispute over license extensions.

The Canadian leader and U.S. President Barack Obama said this week they would designate most of North American Arctic waters off-limits to new activity, including all future oil and gas licensing in Canadian waters. Trudeau’s government said existing licenses wouldn’t be affected, but initially offered scant detail.

Five companies -- Imperial, BP, ConocoPhillips, Chevron Corp. and Franklin Petroleum Canada Ltd. -- hold active exploration licenses in Canada’s share of the Beaufort Sea, where there currently isn’t any oil production. Many of those licenses expire within the next five years, when Trudeau has pledged to review his moratorium. Companies remain eligible to upgrade their existing licenses, and some may seek extensions, which will be a central issue in talks between government and the industry over the next year. “It’s their intention to have discussions with each of the active license holders,” said Paul Barnes, Atlantic Canada and Arctic manager for the Canadian Association of Petroleum Producers, the main oil-industry lobby group. “I suspect most companies would still want to maintain an active license there” or seek an extension “until such time as the government has another review.” Walking Away

The exploration licenses due to expire over the next five years were issued in 2012 when crude hovered around $100 a barrel, nearly double its current price. “Companies have been walking away from their leases in the North American market, or seeking extensions of those leases




because they can’t justify any expenditure on those leases at current pricing,” said Michael Byers, a University of British Columbia professor who studies Arctic issues. All five companies have exploration licenses in the Beaufort Sea that expire between 2019 and 2023. Of those, only closely held Franklin has permits that extend past the five-year window. Barnes said exploration has been quiet of late, with no drilling since 2012.

All but Franklin also hold additional permits known as significant discovery licenses in the Beaufort issued as far back as the 1980s. Those types of permits, which don’t expire and are a precursor to production licenses, are also held across northern Canada by Suncor Energy Inc., Paramount Resources Ltd., Devon Energy Corp., Nytis Exploration Company Canada Ltd. and others, government records show. There are no current offshore production licenses

in Canada’s Arctic waters. In its joint statement this week, Trudeau’s government ruled out “future offshore Arctic oil and gas licensing” and later said existing permits won’t be affected. It didn’t specify what happens next for license holders. Next Steps “Current licenses are not impacted,” said Sabrina Williams, a spokeswoman for Indigenous and Northern Affairs Minister Carolyn Bennett, Trudeau’s lead minister for Arctic development. Williams said the government “will determine next steps after consultation with industry and other interested stakeholders.” The consultations will be conducted over one year by Bennett and Natural Resources Minister Jim Carr. In the meantime, companies with exploration licenses can still “accede to Significant Discovery within their existing permit timelines,” Williams said, meaning offshore oil development can still potentially continue in the Arctic after the Trudeau and Obama announcement. The terms of Obama’s ban, which applies to most of the U.S. share of the Beaufort Sea, is also unclear as he prepares to leave office. The path for a legal challenge from the incoming administration of President-elect Donald Trump is murky. ‘Turned Back’ Northwest Territories Premier Bob McLeod has objected to his northern region, the shores of which are nearest to much of the existing licensed exploration areas, being shut out of talks that




led to the Arctic offshore freeze. He said he expects companies that already hold permits will be rejected if they apply for extensions. “I’d be very surprised if they’re not turned back,” McLeod said in an interview Tuesday, shortly after he spoke with Trudeau about the new measures. “If oil and gas is shut down, then we need to look at diversifying our economies. And we need to have sustainable development in the North.” Imperial has previously called for extending the terms of exploration licenses “to ensure future oil and gas activities are conducted in an appropriately paced, safe and environmentally responsible manner,” spokeswoman Killeen Kelly said in a statement this week, acknowledging uncertainty around the measures so far. “With respect to existing licenses we will work to understand the implications to our business, if any.” Chevron referred questions to CAPP, the lobby group. ConocoPhillips declined to comment; BP and Franklin didn’t immediately respond to queries. Some existing license holders may seek extensions, Barnes said, but Arctic offshore development has always been a long-term proposition. “They aren’t short-term. They are potentially medium-term but likely longer-term,” CAPP President Tim McMillan said. “Each ecosystem is unique and needs to be looked at specifically.”




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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

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