new base energy news issue 945 dated 08 november 2016

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,

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NewBase Energy News 08 November 2016 - Issue No. 945 Edited & Produced by: Khaled Al Awadi

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

Adipec 2016: Opec’s Barkindo says Russia ‘on board’ for output The national - Anthony McAuley and Dania Saadi

Russia will join an output-curbing deal between Opec and non-Opec producers to help speed up the rebalancing of the oil market, the secretary general of the oil group, Mohammed Barkindo, said on Monday.

Opec members and some key oil producers from outside the group, especially Russia, have been in talks since September, when they agreed in principle to limit production to speed a recovery in oil prices, which have shown only a tentative improvement this year.

"I have heard from the highest quarters in Moscow that Russia is on board," said Mr Barkindo, on his way to the opening discussion at this year’s Abu Dhabi International Petroleum Exhibition and Conference (Adipec).

Also present for the opening speeches were Sultan Al Jaber, the Minister of State and head of the Abu Dhabi National Oil Company, who is also chairman of the conference, and the chief executive of ExxonMobil, Rex Tillerson.

Mohammad Barkindo, the Opec Secretary General, makes a speech during the opening ceremony of

Adipec in Abu Dhabi on Monday. Mona Al Marzooqi / The National




The possibility of an output deal is dominating oil industry discussions ahead of a scheduled ministerial meeting at Opec headquarters in Vienna on November 30.

When asked what kind of terms he expected Russia to sign up for, Mr Barkindo said: "I cannot go into those details at the moment. These will be for discussions of the technical committee that is due to reconvene on November 25 and 28 with the Russians."

Russian officials have given mixed signals on whether they will join output cuts since talks emerged in September. Opec may be once bitten twice shy when it comes to Russia, after it reneged on a 2001 agreement to cut production, only to raise exports instead.

"We believe it is vital that both Opec and non-Opec come together and take coordinated and timely action to rebalance this market for the common good for all," Mr Barkindo said at the conference.

Although Mr Barkindo said he did not see any stumbling blocks for a deal, several members of Opec have made it clear that they expect special treatment because of their circumstances. These include Iran, which is still raising production after nuclear-related sanctions were removed this year; Libya, which has had erratic production while it has dealt with a civil war; Iraq, which is also dealing with a war against ISIL militants; Nigeria, which has had production cut by sabotage from activists in its southern states; and Venezuela, whose industry has been in decline for years under the governments of the late Hugo Chavez and Nicolas Maduro.

Against this backdrop, Opec, which is de facto led by Saudi Arabia, has been looking to Gulf producers, including Kuwait, the UAE and Qatar, to provide the bulk of the output curbs, although they are the lowest-cost producers in the world. The talks are focused on stitching together a deal that would at least have the semblance of shared sacrifice.

Meanwhile, different views on where the market is heading were given by speakers at Adipec.

Suhail Al Mazrouei, the Minister of Energy, said the oil glut has disappeared.

"The glut is almost gone from where it was a year ago, and this is a positive thing for us to think about," the minister said. "I think we are at the bottom of the cycle."

Mr Tillerson, however, pointed to the continued presence of the glut, which is exacerbated by an economic slowdown and low energy demand.

"Evidence shows the global oil and gas market supply has exceeded demand by an average of somewhere between 1 and 2 million barrels a day since the beginning of last year," Mr Tillerson said.

Despite this glut, global demand is expected to rise as populations expand and economic growth accelerates over the next few decades.

"According to ExxonMobil’s own outlook for energy, our long-range supply-demand forecast, global economic output will more than double by the year 2040," Mr Tillerson said. "Even after factoring in impressive energy efficiency, we expect global energy demand will grow by around 25 per cent [by 2040]."

Bob Dudley, the chief executive of BP, said he does not expect international oil companies to increase their spending next year as oil prices remain under pressure.

When asked whether he expected capital expenditure to rise next year, he said: "No, I don’t. I think we’re going to be about the same level next year as we have seen it this year. We’re bolting it down and we’ve seen a lot of cost savings coming through and industry deflation."




DEWA receives 30 EOI for 200MW Concentrated Solar Power Plant at Mohammed bin Rashid Al Maktoum Solar Park

(WAM) -- Dubai Electricity and Water Authority, DEWA, received 30 Expressions of Interest, EOI, by the closing date of 27th October, 2016 for the 200 megawatt Concentrated Solar Power Plant, CSP, constituting Phase IV of the Mohammed bin Rashid Al Maktoum Solar Park.

The park is part of the wise vision of Vice President, Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, to make Dubai a global centre of clean energy and green economy. The Mohammed bin Rashid Al Maktoum Solar Park is the largest single-site strategic solar energy project of its kind in the world, based on the Independent Power Producer, IPP, model.

The 13MW first phase became operational in 2013.

The 200MW second phase of the Solar Park will be operational by 2017. In June 2016, DEWA announced that the Masdar-led consortium was the selected bidder for the 800MW third phase of the Mohammed bin Rashid Al Maktoum Solar Park, to be completed by 2020, based on the IPP model, after getting a Levelised Cost of Electricity, LCOE, of US$ 2.99 cents per kilowatt hour, kw/h.

The total capacity of the Mohammed bin Rashid Al Maktoum Solar Park will reach 1000MW by 2020, and 5000MW by 2030, with total investments of AED 50 billion.




"This 200MW CSP Plant will be operational by April 2021, since we intend to continue generating power using CSP technology to reach 1000MW by 2030. Undoubtedly, this project is another milestone achievement that will put Dubai and the UAE at the forefront in the region in producing renewable and clean energy, and supports the vision of Sheikh Mohammed bin Rashid.

We are determined to continue building and developing a greener economy, to achieve the UAE Vision 2021 of a sustainable environment in terms of air quality, conserving water resources, more reliance on clean energy, and implementing green development in Dubai, as well as Dubai Plan 2021 to establish Dubai as a smart and sustainable city, whose environmental elements are clean, healthy and sustainable.''Saeed Mohammed Al Tayer, MD and CEO of DEWA.

" We also support the long-term ‘Green Economy for Sustainable Development’ initiative to build a green economy in the UAE. We are inspired to achieve these ambitious goals of our wise leadership who support the plan to diversify our energy mix to ensure energy security, and build a sustainable future, for generations to come," he said.




Qatari-patent smart AC system to hit GCC market in 2017 Gulf Times - Joey Aguilar

In a first for the GCC region, the first Qatari-patent smart air conditioning (AC) system, which can save up to 80% electricity, is expected to hit the market in 2017, Gulf Organisation for Research and Development (GORD) founding chairman Dr Yousef Alhorr announced yesterday.

The “GORD@smartcool” is a fully integrated and controlled all-in-one ventilating and AC system that provides “super-efficient, cost-effective, and sustainable cooling for open or enclosed spaces in moderate, hot or humid climates”.

“The ‘GORD@smartcool, entirely developed in Qatar and part of the country’s contribution in advancing human knowledge in this area, is a breakthrough,” the official told reporters at the opening of the three-day Green Expo Forum 2016 in Doha yesterday.

The event highlighted a signing ceremony between GORD and Sharjah Kuwait Manufacturing (SKM), one of the biggest AC manufacturers in the region, for the commercialisation of GORD@smartcool.

Dr Alhorr noted that initial tests of the new technology showed a cut in energy use between 50% and 75% compared to conventional systems. The 15 TR (52 kW) world’s first unit is installed and tested at GORD’s Technohub located at Qatar Science and Technology Park.

The risk-free and chlorofluorocarbon-free energy efficient cooling system can shrink clients’ carbon footprints using cost effective means, he claimed.

Based on the application, GORD@smartcool consists of a single or multi stages that can dehumidify and cool the air to the required comfort level. The system uses recycled water and absorbent materials extracted from rejected desalination brines.

GORD founding chairman Yousef Alhorr (left) and SKM executive director Abdul Karim al-Saleh after signing the

agreement for the commercialisation of GORD’s smart AC cooling system.




The environment-friendly desiccant has a high affinity for water and capable of absorbing water vapour from their immediate vicinity. It can be fully driven by waste heat and renewables.

GORD will continue its research, focusing on how to scale the system up for bigger applications in the future, and how to downscale it for home use, according to Dr Alhorr.

“The ‘GORD@smartcool is bigger than a split AC unit in size and SKM will introduce a new line for its manufacturing,” he explained.

“The new cooling system will go into production early next year and available commercially,” he added.

Apart from enclosed spaces such as hotels and other big buildings, typical applications also include open spaces such as football stadia, walkways, souqs, and parks, among others.

The system can also be applied to healthy and efficient fresh-air to fresh-air heat exchange where the use of return air heat recovery is prohibited such as hospitals, health centres, and laboratories.

GORD noted that greenhouses for leisure spaces or crop production is another potential application, which can reduce food imports and strengthen national and regional food security.

Making renewable energy viable in the GCC region

GORD has expressed optimism that the new smart air conditioning system will also make renewable energy viable in the GCC region. According to Dr Alhorr, one of the reasons for not fully utilising renewable energy in this part of the world is due to efficiency issues.

“Renewable energy system here is not good enough to power AC compressors as they consume too much electricity,” he noted. “If you reduce this, renewable energy becomes more viable, more feasible to be used.” GORD’s smart cooling system, made up of three separate units, will only be using pumps initially instead of the compressor, depending on weather conditions.

Dr Alhorr said the system is intelligent (smart) enough to detect outside temperatures and conditions, triggering its first part to work, which uses less energy. If it is not enough due to higher humidity or temperatures, the next part will function before triggering the last option – the use of a compressor.

“In one year, the compressor may not be used since other parts of the system are functioning,” he added. “This is a new innovation where we are combining three systems into one package.”

GORD, a member of Qatari Diar Real Estate Investment Company, is a non-profit governmental organization established at Qatar Science and Technology Park. GORD joins the global effort to meet the present needs without compromising the rights of the future generations. We are committed to contribute to the sustainable development of the MENA region. GORD’s Centers of Excellence, GSAS Trust, GORD Institute, and GORD Academy, focus on promoting sustainability best practices through:

• Developing sustainability and green buildings standards (GSAS Trust) • Conducting multi-disciplinary applied research (GORD Institute) • Engaging in education and outreach activities (GORD Academy)




Oman: PDO eyes savings of $3 bn over 5 years Oman Observer - Conrad Prabhu

Petroleum Development Oman (PDO) is targeting savings of around $3 billion over a five-year period through cost optimisation, waste elimination and efficiency-driven initiatives, according to a high-level official of the majority government-owned oil and gas producer.

Haifa al Khaifi, Finance Director, said the savings are being accrued as a result of, among other initiatives, a sweeping programme of Contract Optimisation Reviews that PDO has undertaken in collaboration with its sizable contracting and vendor community.

Haifa made the comments during a panel discussion held as part of a seminar hosted by Oman France Amitie (Oman-French Friendship Association) at the Grand Hyatt Muscat on Sunday. Also sitting on the panel were Dr Mohammed bin Hamed al Rumhi, Minister of Oil & Gas, Dr Mohammed al Barwani, Chairman — MB Holding Group, Musab al Mahruqi, CEO — Orpic, Isam al Zadjali, CEO — Oman Oil Company, and the Country Head of Total Oman.

Giving her perspective on the impact of the oil price slump on PDO’s business, Haifa said the company had embraced LEAN business practices well before the crisis hit in 2014. Since then, it has adopted a far-reaching cost optimisation and waste elimination programme in line with its mantra, ‘Never Waste a Crisis’, she explained.

A key focus area for the company, however, is to improve production in support of majority shareholder the Omani government’s economic objectives, said Haifa, noting that combined output of crude, gas and condensates presently averages 1.3 million barrels of oil equivalent per day (boepd).




While early monetisation of new discoveries is one notable strategy that is helping PDO mitigate the effects of the downturn, another focuses on enhanced well and reservoir management, the Finance Director pointed out.

The efficacy of this programme is evident from the dramatic improvement in arresting the rate of decline to 4.8 per cent presently, down from a high of 12 per cent in 2012. This compares with a global average of 15 per cent, she said.

Notwithstanding the downturn, PDO is also making a stronger commitment to technology in driving its business, said Haifa. Of the 50 – 70 technologies that are tested at PDO at any given time, two types of technologies are set to make further headway: solar-based renewables for steam injection, and reed bed techniques for disposal of produced water.

Under a partnership with German technology firm Bauer, PDO’s Reed Bed project in Nimr is helping tackle some of the colossal volumes of oil-contaminated water that is being generated alongside crude production. For every barrel of oil, PDO produces around 8 – 9 barrels of water – volumes that cost PDO sizable amounts if they are to be disposed of in deep wells. Nimr’s reed beds however handle some 750,000 – 800,000 bpd of produced water, yielding around 2,000 bpd of oil that adds to the company’s bottomline, she said.

Likewise, PDO’s Miraah solar project will produce 5.6 trillion BTU of steam for its heavy oil fields in Amal, offsetting the need for valuable natural gas which gas be used for value-enhancing ventures, she said.

Going forward, PDO is also keen to secure financial independent and alleviate its dependence on the government for its funding requirements, said the Finance Director. Citing its success in raising $4 billion in funding from international institutions last July, PDO has the wherewithal to raise finance for its future investment requirements, she added.




Somalia: Prospect of offshore oil offers mixed blessing By Ed Stoddard | CAPE TOWN

Somalia looks more likely to strike oil than gas in its long pursuit of offshore riches, making it easier for the African state to exploit any windfall but also potentially upsetting the fragile recovery led by its Western-backed government.

The waters off Somalia, best known for years of piracy, may harbor hydrocarbons at a depth where crude is usually found, seismic services company Spectrum said last week its research showed. This is unlike the seas further south along the African coastline where gas is abundant.

That would be good news for Somalia, which would likely find pumping out oil onto tankers easier than securing the multi-billion dollar investment needed to liquefy gas for export.

Oil revenues could transform Somalia's economy, where many people rely on subsistence livestock farming. However, it could prove a challenge for a government trying to rebuild a nation battered by clan rivalries and Islamist insurgents after it descended into war in 1991.

"Disagreements between the member states and the federal government could fuel violence and corruption in a country that is still very much trying to build and extend governance," said Ahmed Soliman, an expert at British think-tank Chatham House.

Some fear oil rigs could also become a new target for pirates, who were the scourge of commercial shipping on nearby trade routes until naval protection and costly security on ships drove them away. The last major hijacking was reported in 2012.




"Somalia is still extremely fragile and hence the risk of the piracy resurfacing is a concern," said Cyrus Mody, assistant director in the ICC International Maritime Bureau.

SEAS OF BLACK GOLD

Onshore exploration in Somalia took place in the 1950s but the collapse of the government and ensuing conflict 25 years ago kept oil firms away. Much of the geophysical data that had been gathered by the state was lost or destroyed.

But explorers have been spurred on by finds of offshore gas in Tanzania and Mozambique and onshore oil in Kenya and Uganda, although exploiting those reserves has been hamstrung by the slide in oil prices and retrenchment by oil firms.

"It is very prospective," Neil Hodgson, vice president for geoscience at Spectrum, told Reuters, adding that Somalia's source rock was similar to that found in Mozambique and Tanzania but the deposits were not as deep, suggesting oil over gas.

Spectrum has acquired 20,000 km of 2D data from the government and shot 20,000 km itself as part of its research. The so-called "gas window" for gas reserves occurs at depths of three to six kms and extremely high temperatures. Oil is usually found at lower temperatures, between two and four kms.

ROUND ONE BEGINS

Somalia is pressing on with its exploration plans. Last week, officials announced its first offshore hydrocarbon licensing round at a conference in Cape Town. The initial round will cover areas off central and southern Somalia and will exclude shallow water block concessions signed in 1988 with Shell and Exxon Mobil.

Abdulkadir Hussein, technical director-general in Somalia's Petroleum Ministry, said a new majority-state owned national oil company and regulatory body should be operational next year. Initially, the state oil firm would get a free 10 percent stake in all hydrocarbon ventures.

"Later, when the company becomes established it will participate with its own money, up to a limit of 30 percent," he told Reuters. Jamal Mursal, the Somali Oil Ministry's permanent secretary, said Somalia was working to build capacity to handle the new industry. "We have more to do but are getting there," he said.

But investors will also need more reassurance about doing business with a government that has had to fend off past criticism from donors about corruption and poor management. The country also needs to put in place legislation.

"There’s still uncertainty about the exact implementation of the petroleum law at all levels of government," said Ed Hobey, an analyst with Africa Risk Consulting.




UK: Chevron announces first gas at the Alder field in the UK Source: Chevron

Chevron North Sea on Monday announced it has started production at Alder, a high-pressure, high-temperature (HPHT) gas condensate field in Block 15/29a in the Central North Sea.

'First gas at Alder represents a significant milestone for Chevron and highlights our commitment to investing and developing resources in the U.K.,' said Greta Lydecker, managing director, Chevron Upstream Europe. 'The safe and successful completion of this project was underpinned by strong

collaboration between Chevron and Alder co-venturer ConocoPhillips. Alder supports our goal of helping maximize the economic recovery of the U.K., adds significant production to our portfolio, and helps extend the field life of Britannia, an important asset to Chevron in the North Sea.'

Andy Samuel, chief executive at The Oil and Gas Authority, said: 'We are very pleased to see the safe flow of first gas from the Alder Field. Chevron’s application of innovative subsea technologies and use of the U.K.’s experienced supply chain is closely aligned to the Maximising Economic Recovery Strategy, adding reserves and extending the life of an existing asset.'

Alder is a single subsea well tied back, via a 28 kilometer pipeline, to the existing ConocoPhillips-operated Britannia Platform, in which Chevron holds a 32.38 percent non-operated working interest. The project has a planned design capacity of 110 million cubic feet of natural gas and 14,000 barrels of condensate per day. Production from the HPHT Alder Field is expected to ramp up over the coming months.

More than 70 percent of the Alder development work was executed by U.K. based companies, providing significant investment to the U.K. supply chain. The contracts supported several hundred jobs across a range of U.K. locations including Aberdeen, Invergordon, Leeds and Newcastle.

Discovered in 1975, the development has been enabled through the application of innovative subsea technologies designed to meet the temperature and pressure challenges of Alder. Key technologies have included a number of firsts for Chevron in the North Sea, including a vertical mono-bore subsea tree system; a subsea high integrity pressure protection system (HIPPS); and a specially designed corrosion monitoring system to measure the real-time condition of the production pipeline.




Alder field

The Alder Field was discovered in 1975.

Alder is a high-pressure; high-temperature (HPHT) gas condensate field located around 100 miles (160 km) from the Scottish coastline in the Central North Sea, in water depths of approximately 492 feet (150 m).

Alder is a single subsea well tied back to the existing Britannia Bridge Linked Platform (BLP) via a 17.4 mile (28 km) production flowline.

Alder produced fluids are processed at a dedicated module attached to the Britannia BLP. Alder condensate will be exported via the Forties Pipeline System to Grangemouth terminal and gas exported to the Scottish Area Gas Evacuation terminal at St Fergus, near Peterhead, Scotland.

The project has a design capacity of 14,000 barrels of condensate and 110 million cubic feet of natural gas per day.

Alder brings a new stream of production to Chevron and the U.K. while helping to extend the field life of Britannia.

More than 70 percent of Alder’s key contracts were placed with U.K. companies.

Technology and innovation have been key to unlocking the potential of the Alder Field.

Alder is operated by Chevron North Sea (73.7 percent); ConocoPhillips (U.K.) holds a 26.3 percent interest in the field.

The high-pressure, high temperature gas field will produce first gas in 2016 after Chevron and partners ConocoPhillips approved final plans for the development.

“The Alder Field development is an important milestone in support of our strategic plan to profitably grow production,” said Chevron vice chairman George Kirkland.

The project, estimated to cost around $2.4billion (£1.5billion), with Chevron having awarded contracts with OneSubsea and Technip among other companies last year.

The field, around 100 miles of the Scottish coast, was initially discovered in 1975 but its difficult nature meant that proper development has only now been enabled through improvements to technology.




Vietnam: SOCO announces start of the 2016 development drilling programme on the Te Giac Trang ('TGT') field SOCO International

SOCO has announced that the 2016 development drilling programme has commenced on the Te Giac Trang ('TGT') field of Block 16-1, offshore southern Vietnam. The infill wells, the TGT-27P and TGT-28P, will be 'batch drilled' with the first well spudded on 6 November 2016 by the PetroVietnam Drilling PVD-6 jack-up rig on the H4- Well Head Platform ('WHP') in the central area of the TGT field. The TGT partners are reviewing adding a further two infill wells on the southern H5-WHP following the completion of these wells.

SOCO's production guidance range for 2016 has been 10-11,500 BOEPD. Due to the lack of drilling during the year, additional downtime associated with pressure-testing on the Ca Ngu Vang Field, along with the recent stoppage for rig positioning and well intervention work beyond that originally planned, production rates for the full year are expected to be at the lower end of this guidance.

The TGT Full Field Development Plan ('FFDP') partner discussions are in the final stages ahead of formal submission to the relevant authorities. The FFDP includes additional wells and facilities options to increase total fluid-handling capacity. Final submission to the Vietnamese Government is expected after the upcoming Management Committee meetings next week.

Te Giac Trang (TGT)

The Te Giac Trang ('TGT') field is situated in Block 16-1, offshore Vietnam and approx. 80 kms from Vung Tau. Block 16-1 is operated by the Hoang Long Joint Operating Company. SOCO holds a 30.5% interest.

The TGT field was first discovered in 2005 and was the first commercial discovery on Block 16-1. Production began in 2011. More than 30 wells have been drilled and the field is currently producing from three platforms, which have a total of 26 producing wells and one injector well, and is located in the north eastern part of Block 16-1 offshore Vietnam.

Oil from TGT is transported by a subsea pipeline to a nearby FPSO vessel where it is processed and then exported by tanker to regional oil refineries. Gas from TGT is processed at nearby facilities and transported by pipeline to shore to supply the Vietnamese domestic market.




U.S. crude oil production in 2015 was the highest since 1972, but has since declined…Source: U.S. Energy Information Administration, Petroleum Supply Annual

U.S. field production of crude oil increased in 2015 for the seventh consecutive year, reaching 9.42 million barrels per day (b/d). This was the highest crude oil production level since 1972, based on final production numbers in EIA’s Petroleum Supply Annual.

In 2015, production gains were highest in Texas, the Gulf of Mexico, and North Dakota, as these three regions accounted for 77% of the U.S. total increase. Although annual production for 2015 grew, monthly U.S. crude oil production has declined since April 2015. Lower oil prices led to slower development activity, and production fell to 8.74 million b/d in August 2016, the latest month for which survey data is available.




States or areas with the highest volumes of production also saw the largest gains in 2015. Texas is by far the largest crude oil-producing state, providing 3.46 million b/d in 2015, the highest level since at least 1981, when EIA’s state-level production series begin.

Production in Texas grew by 289,000 b/d in 2015, the largest increase of any state. The Federal offshore region of the Gulf of Mexico was second in both absolute level and 2015 increase, growing by 118,000 b/d to reach 1.52 million b/d, the highest production in that area since 2010.

Production in North Dakota was third in both absolute level and 2015 increase, growing by 96,000 b/d to reach 1.18 million b/d, the highest on record for the state.

California production has generally declined since 1985—when it was 1.08 million b/d—and averaged 0.55 million b/d in 2015. Alaska’s crude oil production, almost all of which is in the North Slope, fell for the thirteenth consecutive year, declining to 0.48 million b/d in 2015.




NewBase 08 November 2016 Khaled Al Awadi

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

oil prices steady ahead of election, but oversupply still weighs Reuters + NewBase

Oil prices were stable early on Tuesday after posting strong gains the previous day, with investors piling money into financial markets in expectation that Democrat Hillary Clinton would win the U.S. presidential election.

U.S. West Texas Intermediate (WTI) crude futures were down 1 cent at $44.88 per barrel at 0038 GMT. The contract had gained almost 1.9 percent the previous session on polls putting Clinton ahead of her Republican competitor Donald Trump for Tuesday's election.

"Oil appears to have coat-tailed most other commodities higher, as part of a Clinton-led, broad based, risk asset rally," said Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore.

"Crude oil prices bounced off key support levels as investors piled back into the energy sector," ANZ bank said on Tuesday.

In physical oil markets, U.S. pipeline companies with operations at the heart of the country's commercial oil industry at Cushing, Oklahoma, restarted on Monday after a 5.0-magnitude earthquake late on Sunday triggered safety shutdowns.

However, traders said that financial crude markets were capped by lingering doubts over the ability of oil producers to agree on a planned output cut in order to prop up a market which has been dogged by two years of oversupply.

The chief executive of U.S. oil giant Exxon Mobil, Rex Tillerson said on Monday that global oil supplies have exceeded demand by 1 to 1 million barrels per day since the start of 2015.

Oil price special

coverage




NewBase Special Coverage

News Agencies News Release 08 November 2016

OPEC Needs Friends and a Miracle By Julian Lee

If this is what an OPEC agreement looks like, it's no wonder investors are losing faith.

The oil producer group's job of engineering a short-term balance of supply and demand is getting harder and harder. Its own members and the non-OPEC "friends" it's counting on to achieve production cuts are not doing the group any favors as its make-or-break Vienna meeting draws near. Without a credible deal on Nov. 30, market sentiment will turn even more bearish.

As I noted shortly before OPEC unexpectedly agreed in September to cut output, achieving that goal was never going to be straightforward. The group's big-4 Gulf Arab producers were all producing near record levels, as was key non-OPEC participant, Russia.

Since then, things have got even worse. At this point, it's going to take a minor miracle for the group to achieve the promise of a deal that's barely a month old.

OPEC's Vanishing Goal

The cuts OPEC needs to make to reach its output target are just getting bigger and bigger

When OPEC reached its accord in Algiers, it needed to cut between 850,000 and 1.35 million barrels a day to get output down to its target range of 32.5 million to 33 million, based on Bloomberg supply estimates for September.




With October output estimates now in, the required cut has increased by another 150,000 barrels. That may not seem a lot, but Angola's output was down 230,000 barrels due to maintenance and should come back this month. So, by the time OPEC meets it will probably need to cut an additional 400,000 barrels a day.

And that's without any further growth in production from Libya or Nigeria, which isn't looking likely -- Nigeria exceeded 2 million barrels by the end of last month, while Libya added 180,000 barrels to its daily production and is aiming for more as it works to repair its main export terminal.

It's not only an internal problem, as some key non-OPEC producers are nowhere near restricting supply.

Russian output hit another post-Soviet record of 11.2 million barrels a day last month. With new fields ramping up production and more due to start producing before year-end, that should climb further. Kazakhstan is seeing its first oil from the much-delayed Kashagan field, which could add as much as 370,000 barrels a day by the end of next year, or even sooner, according to field partner ENI SpA.

Brazil's Pre-Salt Surge

Rising production from big offshore fields boosts output to new heights

Brazil's output is soaring. Official data show it reached 2.61 million barrels a day in August, on gains from huge deposits lying beneath the sea and thick layers of salt. That's up by 260,000 barrels since January, and more is on the way.

All three countries, along with Azerbaijan, Mexico and Oman, met OPEC in Vienna at the end of October, but no firm pledges were forthcoming. Russia has said it may cut output, but prefers to freeze it, and in any event will only consider its position once OPEC has reached an internal




agreement. Without its participation, success is unlikely, as Gadfly has noted. Azerbaijan is ready to pledge it won't raise output, an easy call to make as it continues to battle against falling production.

Even the high-cost North Sea is poised to ship the most crude in more than four years in December. Neither the U.K. nor Norway, the two main North Sea producers, attended the Vienna meeting.

The euphoria that followed the gathering in Algiers is evaporating. Oil prices are almost back where they were before that meeting, with Brent briefly dipping below $46 a barrel on Friday.

BURST BUBBLE

OPEC warned in its latest monthly bulletin that industry observers "should not be too quick to judge or criticize the Organization or its Member Countries. Over the years, we have seen how wildly inaccurate their predictions have been."

It's almost inconceivable that OPEC will fail to reach some form of agreement this month. Whether it will be enough to convince the market that it will make a difference is another matter entirely. Without an agreement to make real, substantial cuts, OPEC's credibility will be in tatters and oil bears will run riot.




Shipping fuel change to upend refining - and threaten OPEC crudes By Libby George | LONDON

A switch to cleaner fuels in the world's ships in 2020 could double the profits of the world's most advanced oil refineries – but threatens to put older ones out of business and punish those countries, including prominent OPEC members, that produce the wrong kind of crude.

In less than four years, ships worldwide will have to cut their sulfur emissions to 0.5 percent from 3.5 percent now.

Many had expected a five-year extension, but the now on-target deadline has floored some ship owners and refiners, and left a scramble to determine what to use in vessel engines – and what to do with the some 3 million barrels per day (bpd) of sulfur-laden fuel oil that powers most ships today.

It is effectively a windfall for advanced refineries, which produce larger amounts of the low sulfur fuel that many ships will use, but is an ominous signal for others, including countries such as Saudi Arabia, Iraq, Venezuela, Mexico and Brazil that produce oil with high amounts of sulfur.

"That is going to increase the advantage that we have over time," Thomas Nimbley, chief executive of PBF, which owns five refineries in the United States, said of the change.

Ship owners have several choices in order to comply with the new rules, but the easiest is to burn middle distillates, which are lower in sulfur, but far more expensive. FGE analysts estimate that in 2020, the new rules could shift 700,000 barrels per day of demand from fuel oil to distillates, though the International Energy Agency has put it as high as 2 million bpd.




Refineries like PBF's produce very little fuel oil, and brand new complexes such as Saudi Aramco's Jubail or Reliance's Jamnagar in India produce virtually none. That is because they have equipment that transforms high-sulfur products into asphalt for roads, or enable them to simply make less fuel oil and more of the more valuable fuels such as diesel and gasoline.

Wood Mackenzie estimates that by 2020, middle distillate margins could average as much as $25 per barrel, nearly triple this year's average of just over $9 per barrel. But this will come mostly at the expense of fuel oil profits, which will slide dramatically as the barrels seek a new outlet.

"You'll see a huge uplift for those refineries," said Alan Gelder, head of refining and marketing for consulting firm Wood Mackenzie, adding they will see "all the uplift and no downside."

Fuel oil used today by the marine sector currently accounts for almost 4 percent of global refined product demand, according to UBS. At older, less complex units, mostly in the Mediterranean, Asia and the developing world, fuel oil can account for as much as 40 percent of output.

"If you are making fuel oil today ... you better have a plan to figure out how to deal with that," Nimbey said.

Investing in upgrades is not an easy fix. Adding a residual hydrocracker, which could strip fuel of sulfur, costs close to $1 billion, according to Wood Mackenzie, and the entire process can take as long as a decade. Added to the problem is that if ships move to cleaner fuels such as liquefied natural gas, or add "scrubbers" – pieces of equipment that enable them to burn fuel oil and capture the sulfur emitted – investments in refinery upgrades may not pay off.

The sulfur cap "is like the final nail in the coffin for them," Energy Aspects product analyst Nevyn Nah said of the worst-off refineries. "So I think we'll see a lot of refinery rationalization before 2020."

A CRUDE PROBLEM

The quickest route for cutting fuel oil output is changing the crude fed into a refinery – an unfortunate fact for producers of heavier oil that has more sulfur.

Typically, running light sweet North Sea crude through a refinery will make 12 percent fuel oil, while a heavy crude such as Iraq's Basra Heavy, can make as much as 50 percent fuel oil.

"It will drastically change the crude diet of refiners," said HPCL's former head of refineries, BK Namdeo, said of the shipping change.

Sources in South Korean and Japanese refining industries said companies are examining a shift toward lower sulfur crude, while European refineries will eschew heavier grades for lighter North Sea and West African crudes that are readily available.

Still, as the oil market rushes to prepare, the shipping industry could crush their best-laid plans; scrubbers, which cost $3-$10 million to retrofit onto existing vessels, are becoming more standard on new ships. And the expected sharp drop in fuel oil prices could make the investment worthwhile.

"If the shipping industry invests quickly, by 2025 the demand for fuel oil could be back," Gelder said.




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Khaled Malallah Al Awadi, Energy Consultant MS & BS Mechanical Engineering (HON), USA Emarat member since 1990

ASME member since 1995 Hawk Energy member 2010

Mobile: +97150-4822502 [email protected] [email protected]

Khaled Al Awadi is a UAE National with a total of 26 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 08 November 2016 K. Al Awadi

new base energy news issue 945 dated 08 november 2016

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