newbase 642 special 07 july 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,

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NewBase 07 July 2015 - Issue No. 642 Senior Editor Eng. Khaled Al Awadi

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Apicorp launches $3b sukuk to diversify funding AFP + NewBase

The Arab Petroleum Investments Corporation (Apicorp) said Monday it has established a $3-billion Islamic sukuk program to diversify its sources of funding and enhance links to global investors. The program marks a strategic step for Apicorp, the investment company of the Organization of the Arab Petroleum Exporting Countries, as it is set to become a regular issuer of sukuk in global markets, it said in a statement.

Chairman Abed Al-Saadoun said the move "will allow Apicorp to diversify its funding sources, reduce the overall cost of financing, extend the company's debt maturity profile, and enhance our access to a diverse set of global investors." He said the program will enable Apicorp to extend attractive financing terms to its clients and partners and enhance its ability to participate in financing some energy projects not currently attractive to commercial banks. Standard Chartered Bank is acting as sole arranger for the program, which will be listed on the Irish Stock Exchange and rated by Moody's. Apicorp may start issuing its first sukuk later this year subject to market conditions, it said. Established in 1975, Apicorp, which is based in Dammam, Saudi Arabia, provides investments, loans and expert research to the Arab energy industry.




Egypt: Maersk Discoverer completes deepest well drilled in Egypt - longest in Med. Source: Maersk Drilling

Maersk Drilling reports that at the beginning of May, the crew on Maersk Discoverer reached a great milestone when they finalised their latest well two months ahead of time. The well was another East Nile Delta success for BP, discovering 50 m of gas pay in high-quality Oligocene sandstones.

On 5 May, Maersk Discoverer completed the deepest well ever drilled in Egypt and the longest ever drilled in the Mediterranean Sea. What makes the well an even greater success is that it was drilled in 234 days, which was a staggering 62 days ahead of BP’s AFE target, thus creating a substantial cost saving.

'The strong performance is a result of the dedicated use of the ‘Plan Do Study Act’ methodology in the planning and execution of the work. Also, a structured approach to applying lessons learned from the previous wells Geb and Salamat played an important role,' says Rig Leader Allan McColl.

Observation studies optimised operational

procedures Allan McColl also highlights the strong focus on actively using observation studies to optimise operational performance as a key driver in continuously improving the operational procedures. An example of this was how the auxiliary well centre was used as a 'test bed' to break the BHA (Bottom Hole Assembly) handling process into small clearly defined optimised steps. Following a micro KPI process

there was a forty five minute time saving on the critical path by integrating the lessons learned. This benefit was then applied on subsequent occasion of handling the BHA. Another great achievement that significantly contributed to beating the AFE target was BOP reliability. Thorough maintenance of the BOP prior to the Atoll well and involvement of BP and Maersk Drilling Technical Authority teams in evaluating equipment risk assessments enabled the team to keep the BOP functioning on the wellhead for no less than 201 days. A fruitful collaboration with BP The success on Atoll marks another milestone in the collaboration between BP and Maersk Drilling in Egypt. 'After all the effort everyone on the BP/Maersk Drilling team has put into building a strong joint performance culture this was a very well deserved achievement that everyone should be very proud of' says Unit Director Thomas Falk. He continues: 'We have shown BP what we mean when we talk about jointly creating value and we look forward to continuing our discussions with BP on how we mutually benefit from this in our drilling contracts.'




Iraq to tap retail investors in $5bn domestic bond offer Reuters

Iraq’s government plans a domestic issue of $5bn worth of bonds starting in the fourth quarter of this year as it seeks to relieve the pressure of low oil prices on its finances, an official told Reuters yesterday. The medium-term notes, with maturities of between 12 and 18 months, will help to finance the budget deficit and be open to local banks, other institutions and retail investors, said Mudher Saleh Kasim, a former senior central bank official who advises Prime Minister Haider al-Abadi on

financial policy. Through years of conflict and upheaval, Iraqis have become used to hoarding large sums of foreign currency in their homes. The bond issue will seek to tap this hoard. “It gives a unique opportunity to a group of investors who are cash-rich and essentially hoarders,” Kasim said. “We think there will be good demand for investment.” The bonds will be denominated in US dollars

and issued in stages, according to investor demand. Investors will be able to choose to receive the principal on maturity in dollars or in dinars at a more attractive rate than the current market rate. The plunge of oil prices since last year and Iraq’s fight against Islamic State militants has put severe pressure on its finances; the government has projected a budget deficit of about $25bn this year, in a budget of roughly $100bn. International reserves at the central bank fell to $66bn at end-2014 from $78bn at end-2013, according to the International Monetary Fund, and they may have dropped further since then. This has started to put pressure on the Iraqi currency in the secondary market, which sank as low as 1,400 to the dollar in mid-June from 1,228 a week earlier. It was trading at 1,240 on Monday, dealers said. The central bank auctions dollars to banks and licensed traders at a fixed price of 1,166. Abadi told local television channel Al Sumeria in mid-June that the dinar was “strongly backed and there’s no fear about the exchange rate against the dollar”. But he added, “There’s been speculation and scheming in recent days by those who are enemies of Iraq and finance corrupt people, and are trying to affect the current situation.” In addition to the domestic bond issue, Iraq has said it plans to raise $5bn with an international bond issue this year. In early June, the IMF agreed to lend Iraq $833mn, and last week the finance ministry said the World Bank would provide loans totalling $1.7bn.




Norway: Premier Oil receives consent to drill Myrhauk well in PL539 Source: Petroleum Safety Authority Norway

Premier Oil Norge (PONAS) has received consent to drill exploration well 3/7-10 S in the southern part of the North Sea. PONAS is the operator for production licence PL539 (Block 3/7) in the North Sea. The formation to be drilled into is called Myrhauk and is around 240 kms from the nearest mainland at Lista.

Drilling is scheduled to begin in August 2015 and estimated to last 62 days, depending on whether a discovery is made. The well will be drilled by Mærsk Guardian which is a jack-up mobile drilling facility. It is owned and operated by the A.P. Møller-Mærsk Group. It was built in Japan by Hitachi and completed in 1986.

According to information on the Premier Oil web site: Premier’s immediate exploration focus in Norway is on the Myrhauk well (PL539, 40% operated interest) which is expected to spud mid-2015 and will be the company’s first test of the emerging Mandal High play. Premier has built an extensive acreage position over the Mandal High, both organically and through acquisition, and has identified significant follow on potential to the Myrhauk well in the success case. Myrhauk is described as a robust closure with estimated gross prospective resources of 10-50-135 mmboe.




Special Report : Refracking Is the New Fracking by Bloomberg- Dan MurtaughLynn DoanBradley Olson Share on Faceboo kShare on Twitter Share on Lin kedIn Share on RedditShare on Google+E-mail

The technique itself is nothing new. Oil crews across the world have been schooled on its simple principles for

generations: Identify aging, low-output wells and hit them with a blast of sand and water to bolster the flow of crude.

The idea originated somewhere in the plains of the American Midwest, back in the 1950s.

But as today’s engineers start applying the procedure to the horizontal wells that went up during the fracking boom

that swept across U.S. shale fields over the past decade, something more powerful, more financially rewarding is

happening.

The short life span of these wells, long thought to be perhaps the single biggest weakness of the shale industry, is

being stretched out. Early evidence of the effects of restimulation suggests that the fields could actually contain

enough reserves to last about 50 years, according to a calculation based on Wood Mackenzie Ltd and ITG Investment

Research data.

America's tight-oil production is set to peak in 2020, based on U.S. forecasts, but a technique known as refracking

could keep output booming for longer by increasing the yield from old wells.

If the word fracking has carved out a spot in the lexicon of Americans as the nation advances toward energy

independence, then refracking, as roughnecks have begun calling it, could be next. And for an industry that has been

hammered by the 50 percent drop in crude prices over the past year, the finding on the technique’s potential -- at a

fraction of the cost of the initial well -- provides a much-needed sense of hope.




The risks abound -- from inadvertently siphoning oil from an adjacent well to ruining a whole reservoir -- and the

sample size so far isn’t big enough to be conclusive, but oil giants like Marathon Oil Corp. and ConocoPhillips aren’t

waiting to incorporate refracking into their shale operations.

The Octofrac

Mike Vincent, a well-completion engineer who teaches the technique to industry workers, said he’s been overwhelmed by the sudden interest in the class. He even had to abandon plans he had been making to spend a week fly-fishing in the Rocky Mountains over the summer. “I’m booked every week teaching refrack classes out to November,” said Vincent, who runs a Denver-based firm called Insight Consulting. “It’s amazing how much passion there is.”

Years of working on traditional wells have shown that they can be restimulated multiple times, Vincent said. In the

industry’s lingo, a well that has been blasted five times is a “Cinco de Fraco.” Eight times gets you an “Octofrac.”

When done right, the procedure not only boosts the flow of crude, but can also increase the estimate of reserves held

in the well. Vincent said it’s common to see oil recovery climb 60 percent or more.

“I’ve seen a well get 10 fracs through the same perfs, and it appears that we’re adding reserves every time,” he said.

100,000 Wells

A study by Bloomberg Intelligence of about 80 wells that were originally tapped in North Dakota’s Bakken formation in 2008 or 2009 and then refracked again years later shows a clear pickup in output. The wells on average produced more than 30 percent more oil in the month after the refrack than they did after the original completion, according to analysts William Foiles and Peter Pulikkan.




A Bloomberg Intelligence analysis of wells blasted with hydraulic fracturing fluids for a second time, known as

refracking, revealed initial production rates more than 30 percent higher than the original.

While these kinds of increases are important to traditional drillers, they’re crucial in the shale industry, where output

can start falling within days of a well being tapped. Companies such as EOG Resources Inc., the largest shale oil

producer, have long acknowledged that they generally are recovering just a small fraction of the oil and gas in place in

the biggest and most prolific reservoirs.

“We’ve seen big changes in completion technology, and it looks like that’s only going to continue,” said R.T. Dukes,

an upstream analyst at Wood Mackenzie in Houston. He estimates that there are about 100,000 horizontal wells that

could be restimulated. “At that point, it becomes significant.”

Many Risks

So far, a few hundred refracks of shale wells have been done in the U.S., a figure that Vincent predicts will grow to at least 3,000 over the next two years. And IHS Inc. forecasts they will come to make up as much as 11 percent of all hydraulic fracturing activity in the country by 2020.

The process to refrack a well isn’t that different than the original frac. Water, sand and other chemicals are pushed

down the well, beyond the previously tapped areas, to create new fissures or to re-open clefts in the rocks that have

closed.

It’s easy for things to go wrong. If poorly executed, the maneuver could take oil from the producing zones of other

wells, or worse yet, ruin a reservoir. Then there’s the concern that some industry analysts have that a refrack only

accelerates the flow without increasing the actual total output over the life of the well. EOG is among the drillers that

remain reluctant to start using the procedure.

Refracking is still in its “early days,” said Robin Mann, global leader of the resource evaluation and advisory group in

Deloitte LLP’s Houston office. “There’s always a risk you’re going to damage the reservoir or create interference

between wells.”

‘Compelling Prize’

But in an industry that is desperately trying to cut expenses after oil fell below $60 a barrel from over $100 a year ago, the technique’s low cost has great appeal. Because the first step in the fracking process is already done -- the drilling of the wellbore -- the outlay is just a fraction of the $8 million or so it costs to tap a new well.

Sanchez Energy Corp., a Houston-based oil producer, expects to spend between $1 million to $1.5 million per well

when it starts carrying out its first horizontal-well refracks later this year. The extra oil and gas it will pull out from

each one as a result, meanwhile, could have a value, when measured in today’s dollars, of as much as $2.5 million,

according to Chris Heinson, the company’s senior vice president and chief operating officer.

“It’s a compelling prize,” Heinson said in an interview last month. “There were a large number of wells out there that we know were originally completed with something that we could do better today. That’s really exciting.”




Oil Price Drop Special Coverage

Oil prices stabilize after massive sell-off Reuters + NewBase

Crude oil prices stabilized on Tuesday morning after posting one of their biggest selloffs this year the previous day over Greece's rejection of debt bailout terms and China's stock market woes.

Front-month U.S. crude futures CLc1 were trading at $52.91 per barrel at 0011 GMT, up 38 cents from their last settlement. The slight gain followed an almost 8 percent fall on Monday that pulled the contract down to levels last seen in April.

Front-month Brent crude LCOc1 was stronger, rising over half a dollar to $57.07 a barrel following a more than 6 percent fall the previous session.

"Crude oil prices hit a two month low amid mounting concerns over economic stability in Europe and Asia. On the supply side, an increase in Iranian supply is expected to compete with Russian sales when the new supply hits the market," ANZ bank said on Tuesday.

Major global powers and Iran are negotiating a nuclear compromise that could end sanctions against Tehran and open up oil exports into an already oversupplied market, although diplomatic sources told Reuters on Monday that important issues remain unresolved.

And not all analysts are bearish in their oil price outlook.

U.S. PIRA Energy Group said in a note published on Tuesday that "the worst of oil market imbalance is over with inventory overhang being much less than generally expected" and that "longer-term supply/demand fundamentals are bullish."




Oil Crash Sent Canada Into First-Half Recession, TD Says By Bloomberg - Greg Quinn

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Canada probably fell into a recession this year because of damage from the drop in crude oil prices, according to Randall Bartlett, senior economist at Toronto-Dominion Bank, who now predicts the central bank will cut interest rates next week.

There are signs output fell at a 1 percent annualized pace between January and March, more than Statistics Canada’s estimate of a 0.6 percent decline, and gross domestic product probably fell at a 0.6 percent second-quarter pace, he said.

“It is likely that the Canadian economy was in recession in the first half of the year,” Bartlett wrote in a research note Monday. “It is commonplace to define a recession as two consecutive quarters of negative real GDP growth,” he said. “The second half of the year is also likely to be weaker than previously expected, reducing annual real GDP growth to around 1.2 percent in 2015.”

The Bank of Canada will probably cut its 0.75 percent key interest rate for the second time this year at its July 15 meeting to revive growth, and not raise it until mid-2017, Bartlett said. That will probably keep Canada’s exchange rate below 80 U.S. cents through this year, he said.




The central bank reported Monday that business sentiment for future sales growth remained “weak” in the second quarter as Canada’s energy industry struggled with an oil shock. Crude oil is the country’s top export and Statistics Canada also said Monday companies intend to cut capital investment by 18.7 percent this year in the oil and gas, mining and quarrying category.

Oliver’s Optimism

TD’s forecast runs counter to the Canadian government’s view. Finance Minister Joe Oliver predicted Monday the economy will record “solid” growth this year.

On Friday, Oliver said the country wouldn’t fall into a recession, citing optimism from manufacturers and consumers as economic bright spots. The latest Bloomberg Nanos Canadian Confidence Index, which last week remained close to the 2015 high, supports that view.

Bartlett cut his forecast after weeks of subpar economic reports capped by one on June 30 showing the economy shrank for the fourth straight month in April. Consumers may feel pain later this year even as growth recovers because it takes longer for companies to curb hiring, he said.

Canada’s labor market has “held up very well” so far, he said in a telephone interview. “Job growth isn’t going to be as robust in the second half of the year.”

Election Year

Prime Minister Stephen Harper’s Conservatives unveiled family tax cuts late last year, and as the country gears up for a fall election Oliver has resisted adding fresh stimulus.

“Economic growth will come back, and the year overall will represent solid growth,” the finance minister told reporters in Vancouver late Monday, calling his prior tax cuts “timely and appropriate.”

Bartlett said tax cuts or new government spending probably wouldn’t be effective because they would do little to stimulate the energy industry, while other growing parts of the economy -- such as the housing market -- don’t need help.

“I’m not convinced this is necessarily the right time to turn on the fiscal taps,” he said. Statistics Canada will report second-quarter gross domestic product on Sept. 1. Voters are scheduled to go to the polls on Oct. 19.

The TD forecast for a second-quarter contraction matches one made last week by Emanuella Enenajor, senior Canada economist at Bank of America Merrill Lynch in New York. She said in a research note that recent economic indicators were “suggesting a recession.”




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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

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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 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.

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NewBase 07 July 2015 K. Al Awadi

newbase 642 special 07 july 2015

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