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NewBase 26 August 2015 - Issue No. 673 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Drone technology spurs global buzz – Oil & Gas Industeries
Agencies
Oil rig inspection is a dangerous business. Traditionally, in the United States, “roughnecks”
dangled from a wire, in gale-force winds if needed, to manually log wear and tear on the girders.
Assessments include giant chimneys – called flare stacks – that belch fire during million-dollar-a-
day shutdowns. Increasingly, the industry has found that swapping abseiling humans for small
drones equipped with high-definition and thermal cameras can save time, cut costs and improve
safety.
“These are large metal structures in a big pond of seawater. They will rust a lot, particularly in the
North Sea where rigs designed to last 20 years are lasting more than 40. They are continually
getting cracks and physical damage from the waves and need to be refurbished and fixed,” says
Chris Blackford, the Sky Futures’ chief operations officer.
Sky Futures – headquartered in London – is a drone inspection company specialising in the oil
and gas industry and counts BP, Shell, Apache, BG Group and Statoil among its clients. It is one
of a handful of companies – including CyberHawk, PrecisionHawk and SenseFly – finding
commercial applications for drones.

“We decided to focus on oil and gas because the barriers to entry are very high, but there are real
problems to be solved and the economics were better, despite the very low oil price,” Mr Blackford
says. Business, he adds, is booming. Although the first drone inspections were carried out five
years ago, demand for Sky Futures’ and Cyberhawk’s services has surged, more than doubling in
the last year alone.
Outside of the West, Sony plans to offer commercial drone services targeting the construction,
logistics and agriculture industries from the first half of next year. The company’s Aerosense
venture is making automated drones to capture high-definition images and transmit them to the
cloud for analysis, Sony says.
The jointly owned company with robotics firm ZMP expects sales to total about ¥10 billion by
2020, says Kotaro Sabe, the Aerosense chief technology officer.
Sony, whose Xperia smartphones have failed to gain market share, is looking to find another use
for its mobile phone and digital camera technologies in the nascent drone market. The unmanned
aircraft industry may be worth US$82 billion by 2025 in the US alone, and has already attracted
investments from Google, General Electric and Qualcomm despite privacy and safety concerns.
“It’s difficult to expect growth in the smartphone business with smartphones alone, which is why
we are looking at new opportunities such as this,” says Hiroki Totoki, the head of Sony’s mobile
business. Drones drew scrutiny in Japan when an anti-nuclear power protester used one to deliver
a payload of radioactive material to the roof of the prime minister Shinzo Abe’s office in April. The
incident prompted the government to consider strengthening regulation of unmanned aircraft.
At the start of 2015 the US federal aviation administration finally relaxed its stance on drones
flying in US airspace, giving companies such as Sky Futures access to the world’s largest offshore
market. “We will continue doubling if not tripling revenues over the next three to five years,” says
Mr Blackford.
Inspections involve sending one drone operator and one engineer out to a rig to fly a small aerial
vehicle around the platform, building a 3D model of the structure and mapping any anomalies.
“What we can capture in five days using a drone could take eight weeks with human inspectors,”

he adds. “We can even inspect the flare stacks while in production, which saves money.” Avoiding
a shutdown can save more than $4 million, the company says.
Once the data is captured it is analysed using proprietary algorithms and presented through an
online portal – instead of a traditional paper report. Each flaw is flagged in red, amber or green,
based on urgency. Thanks to lasers, Sky Futures’ drones can track cracks and corrosion and map
how they evolve over time. They can even sniff for gas leaks.
CyberHawk, founded in 2008 in Scotland, offers a similar service to oil and gas companies as well
as inspecting renewable energy plants with wind turbines, communications towers, pipelines and
railway lines and bridges. Cyberhawk’s commercial director, Phil Buchan, says his customers do
not care about the drones, only the data. “They care about the information you can give them and
the decisions you can help them make.”
Mr Blackford agrees: “We view ourselves as a data business and not a drone business.”
North Carolina’s PrecisionHawk has served the oil and gas industry by mapping the ice roads
across remote areas of Alaska. In the past, coming within five miles of a polar bear den would
have meant the replanning of routes at a cost of millions of dollars to avoid the animals.
PrecisionHawk’s drones can identify the dens in advance.
The next milestone for inspection drones is automating their flight. “We still have to send out an oil
and gas inspection engineer and a drone pilot. Our vision is total automation,” says Mr Blackford.
The trouble is, drone technology is not yet good enough.
“Once aircraft know where other vehicles and obstacles are and they have the ability to safely
avoid collisions and areas of known traffic density, it will open up many new applications,” says
Jeremy Howitt, who oversees drone research at Qinetiq.
“Oil and gas is a big vertical, but the same technology applies to lots of industries – wind farms,
solar, other refineries, pipelines and other fixed infrastructure,” says Simon Menashy, the
investment director at venture capital firm MMC Ventures, which invested $4m in Sky Futures in
May. That is before even looking at construction and agriculture. “There is lots of opportunity,” he
adds. Still, several other countries such as Canada and France have been faster to permit
commercial drone flights than the US, a government study found.
Canada has even granted blanket approvals for people flying the smallest drones, weighing less
than 6kg, according to the report. In France and the United Kingdom, governments have begun
permitting limited flights beyond a drone operator’s view. Such flights will not be permitted initially
under the FAA’s proposed rules.
That proposal contains many similarities to drone-flight restrictions in other nations, the GAO said.
The FAA has said it expects to finalise the rule by the end of this year. Until then, the FAA has
been granting waivers for drone operations. As of Monday, it had approved 1,201 such
exemptions.
The FAA administrator Michael Huerta has told Congress the US has had to move more slowly
because it has far more aviation traffic than other countries. The US also faces a challenge with
drone safety as incidents in which the unmanned vehicles fly too close to traditional aircraft rise
swiftly. There were 650 such incidents through August 9 this year compared with 238 for all of
2014. Still, the potential of drones is creating a serious buzz across many sectorss

Qatar raises its game to sustain LNG dominance
Reuters + NewBase
Gas giant Qatar is becoming commercially sharper, using traders and tenders to grab new
customers, and fighting to hold on to its share in the prized Asian market.
Qatar is the world’s top supplier of liquefied natural gas (LNG), but in the coming five years it
could be surpassed by Australia, a shift which could weigh on its dominance in Asia, which
accounts for almost three quarters of the global market and has paid the highest prices.
“Previously Qatar’s strategy had been about retaining price, in future it’s going to be about
retaining market share,” said Noel Tomnay, head of global gas and LNG research at Wood
Mackenzie. “As lots of Australian LNG comes into the market, it’s inevitably going to push out
some Qatari volumes from Asia,” Tomnay said.
This has prompted Qatar to work more closely with trade houses who are focused on short-term
deals, often in riskier markets, while also lowering its price expectations.
“In the past Qatar did not need to be commercial. Now they are a lot more commercial, a lot
sharper,” said a trader at an international trade house. “They are dealing with traders more and
have started participating in tenders.”
Qatar is the world’s top supplier of liquefied natural gas (LNG), but in the coming five years it
could be surpassed by Australia, a shift which could weigh on its dominance in Asia, which
accounts for almost three quarters of the global market and has paid the highest prices
36.1 MMt – 1,770 BCF
42.8 MMt – 1,988 BCF

With the help of trade houses, Qatar has been supplying LNG to some of the newest importers
including Egypt, Jordan and Pakistan, who are securing vast amounts via short term tenders.
Qatar’s largest customers are Japan, South Korea and India.
The global LNG market was based on bilateral long-term deals, with contracts lasting years, but
the new supply has increased uncommitted volumes, triggering more focus on ‘spot’ trade.
“Qatar as a supplier can afford to provide their long-term contracts and then on top of that they
have flexible LNG to attack new markets. It’s a strategy to adapt itself to the new world,” a trader
at an oil major said.
Independent LNG consultant Andy Flower estimated Qatar’s exports to Asia in the first half of the
year fell by around 2.7mn tonnes compared to the same period a year ago, while exports to
Eastern Mediterranean countries were up by 0.4mn tonnes and exports to Europe were up by
around 2.5mn tonnes.
“This suggests that they are showing increased flexibility in responding to the changes in the
markets,” Flower said. Qatar was previously able to charge a premium on the basis that they were
a very reliable supplier. Its major LNG producers Qatargas and RasGas produce around 77mn
tonnes per year.

Oman: Orpic invites bids for flare gas recovery project
Oman Observer + NewBase
International engineering firms are lining up to bid for a multi-million dollar contract for the
installation of a Flare Gas Recovery System at the Sohar Refinery complex of Oman Oil
Refineries & Petroleum Industries Company SAOC (Orpic).
The state-owned refining
and petrochemicals
flagship is investing in a
state-of-the-art system
to help capture and
compress waste gas —
currently being flared —
for use in the refinery as
a fuel gas.
“The use of the Flare
Gas Recovery system
(FGRS) in the facility will
provide the dual benefits
of energy conservation
and emissions abatement by recovering, instead of flaring, process vent gases,” said Orpic in an
overview on this key initiative.
In refinery operations, significant quantities of waste gas are vented from process units during
process upsets, start-ups, turndowns and normal operations as well. The waste gas is collected
and routed to the flare system for venting — a process faulted not only for the wasteful burning of
a potentially valuable resource, but also because it generates greenhouse gases that contribute to
global warming.
Under an earlier initiative to reduce flaring at its Sohar facility, Orpic was able to slash flared
volumes to 4.5 tonnes per hour in August 2013, down from 12.5 tonnes per hour in 2010. While
that initiative, undertaken as part of Orpic’s $50 million environment improvement programme,
helped pare down flaring, the upcoming Flare Gas Recovery project is expected to dramatically
reduce flaring.
Technology for the Flare Gas Recovery Project is being sourced from John Zink Hamworthy
Combustion, a US-based firm specialising in the design of advanced flare gas recovery systems
that enable oil refineries and related facilities to achieve near-zero flaring. The Okhlahoma-
headquartered firm was also selected by Orpic to provide the basic engineering design for the
project.
“The basic processes employed in the (Flare Gas Recovery System) are the collection of flare
gases from the liquid seal drum, compression of the gases, and physical separation. Gas
compression is performed by liquid ring compressors and the separation of recovered vapour from
a mixed liquid is accomplished in a horizontal separator vessel,” said Orpic.
The successful bidder will secure a contract for the design, fabrication, supply and installation of a
package of works that includes liquid ring compressors and associated equipment. Bids are due in
by September 20, 2015.

Japan oil refiners needs 1 Cent Saving to Look Beyond Mideast Oil
Bloomberg + NewBase
Japan’s biggest refiner will opt for a “one cent” saving on crude purchases even if that means
shipping from places other than the Middle East, a region it’s always depended on for stable
supplies.
JX Nippon Oil & Energy Corp. is examining more samples of crude that have previously never
been processed at its plants, according to Minoru Minegishi, a group manager at the company’s
crude oil trading and shipping department. It’s becoming more price sensitive amid shrinking
refining margins in Asia, with China accelerating fuel exports because of weak domestic demand.
“We now have a mindset that we should take cheaper crude even when it’s a one-cent
difference,” Minegishi said. “We live in difficult times in terms of domestic and overseas
competition.”
Japanese refiners, which have traditionally favored cargoes from Saudi Arabia or Abu Dhabi for
stability of supply, are boosting imports from other regions including Latin America. Their
shipments of Mexican oil more than doubled to 812,619 kiloliters in the first half of 2015 from a
year earlier, according to the Finance Ministry. China’s fuel exports are exerting “strong
downwards pressure” on Asian refinery margins, Citigroup Inc. said Aug. 10.
Tokyo-based JX agreed to buy 6 million barrels of Isthmus crude from August and January 2016,
according to Mexico’s state-owned Petroleos Mexicanos. The Japanese refiner has already taken
delivery of 4 million barrels over the first half of this year.
“We are more price sensitive than we were in the good old days,” Minegishi said.
The shale boom that’s driven U.S. oil production to the highest level in more than three decades
has reduced America’s need for imports, displacing crude from nations such as Mexico and
Venezuela as benchmark prices plunged more than 50 percent over the past year. That’s boosting
cheaper South American deliveries to Asian even as the Organization of Petroleum Exporting
Countries including Saudi Arabia maintain output in a bid to defend market share.

Iran crude oil investments shrink to ‘almost nothing’
Bloomberg
Iran, the world’s fifth largest crude producer, has set aside almost nothing for oil investments this
year because of the drop in prices. Money put into the industry dropped from about $40bn for
2011 and 2012 combined to $6bn last year, Iran’s Oil Minister Bijan Namdar Zanganeh said
yesterday, according to the ministry’s news website Shana.
Brent crude
prices slumped
below $45 a
barrel on
Monday for the
first time since
2009.
Iran’s oil industry
needs $100bn to
$500bn over the
next five years,
Iran’s state-run
news agency
IRNA reported
on August 3,
citing Saeed
Ghavampour,
general manager
of the oil
ministry’s strategic planning. Oil producers such as BP and Royal Dutch Shell have expressed
interest in developing Iran’s reserves, the world’s fourth-biggest, when sanctions are removed
following last month’s nuclear agreement with world powers. “Because of the drop in the price of
oil, almost nothing has been set aside for investment in the oil industry this year,” Zanganeh said,
according to Shana.
Iran pumped 3.6mn bpd last year, down from 4.4mn in 2011, according to BP data. The US was
the biggest producer at 11.6mn bpd, followed by Saudi Arabia at 11.5mn, Russia at 10.8mn and
China at 4.2mn .
A global oil surplus estimated by Iran now at 3mn bpd has been maintained nine months after
Saudi Arabia pressed the Organisation of Petroleum Exporting Countries to hold production in the
hopes that rivals would cut first. On Monday, Iran backed calls for an emergency Opec meeting
even as it repeated plans to boost its own production as soon as international sanctions end.
Opec is pumping at near record levels, even amid a global glut of crude. Algeria wrote to others in
the 12-member group saying they should consider measures for reviving oil prices and stabilising
the market, two delegates familiar with the request said last week.
Opec produced 32.1mn bpd of crude in July. Zanganeh has said that other Opec members should
make room for Iran when it raises output after sanctions are lifted as a result of last month’s
nuclear pact with world powers. Iran pumped 2.85mn bpd in July, down from 3.6mn at the end of
2011, data compiled by Bloomberg show.

Myanmar: Shell to Cooperate in Development of LNG Terminal
Shell has signed an agreement with Italian-Thai Development Public Company limited (ITD) and
LNG Plus International company limited (LNGP) to cooperate on the development of a proposed
LNG receiving and re-gasification terminal in the Dawei Special Economic Zone (DSEZ) in
Myanmar.
Roger Bounds, Vice President Global LNG at Shell said earlier this week: “We are very pleased
with this agreement. We believe that this opportunity will enable Shell, together with its partners,
to bring its global expertise in LNG to Myanmar to help meet the country’s energy aspirations.”
Under the agreement, Shell will provide technical expertise on the development of the LNG
terminal. It will also have access to terminal capacity and supply LNG to DSEZ customers.
Earlier this month, Thailand's Italian-Thai Development PCL signed a concession agreement with
Myanmar to construct the terminal. The $500-million LNG terminal is part of a $1.7-billion deal to
develop the first phase of the long-delayed Dawei project, which includes a $500-million, 450-
megawatt gas-fired power plant.

US: Eagle Ford production remains resilient
http://www.woodmac.com/public/media-centre/12529050
Despite the slowdown, production growth in the Eagle Ford remains resilient as sweet spots
emerge across all active sub-plays according to Wood Mackenzie's North America Key play
analysis. Wood Mackenzie divided the Eagle Ford into 9 distinct sub-plays and results show
its core areas are still some of the most attractive oil and gas investment opportunities across
the globe.
"Market participants are currently focused on rig count and waiting for production to roll over,
but that's not really happening yet. Companies are still increasing production over 2014
averages and active rigs are producing more," says Jeremy Sherby, Research Analyst Lower
48 Upstream Oil and Gas at Wood Mackenzie.
Production growth will slow in the near term, but the full effect of lower oil prices is moderated
by improved recoveries as operators retrench to the core areas.
"We still believe that the Eagle Ford will hit 2 million barrels per day of oil and
condensate production in 2020 but the path to get there will be different," notes Sherby.
Wood Mackenzie increased type well Estimated Ultimate Recovery's (EURs) in six of the nine
sub-plays as a result of continued improvements in well performance. The analysis highlights
that three core sub-plays (Karnes Trough, Edwards Condensate and Black Oil) account for
about 75% of the play’s remaining NPV10 and will be the source of much of the near term
growth – to average 10% in 2015.
"The Eagle Ford has an enviable position as it continues to outperform other shales and
remains the focus of Lower 48 tight oil development spend in 2015." concludes Sherby.
The following are the key findings from Wood Mackenzie's analysis
• Year-on-year our total NPV is up $27 billion due to well performance improvements as
well as additional derisking of acreage. Specifically in the Karnes Trough, we have
increased our type well EUR by almost 15% in this ultra-core sub-play which has the
lowest breakevens in the L48 at $42 per barrel.
• While capex cuts have impacted all plays, the Eagle Ford will attract the most spend of
any L48 tight oil play in 2015 at around $20 billion. Over 50% of undrilled liquids
volumes for the companies we model breakeven below $60/bbl.
• M&A activity is expected to remain subdued through the end of 2015 as companies
focus on core areas and maintain as much financial flexibility as possible.
• We expect wells brought online in 2015 to fall to around 2,700 - down from around
4,000 in 2014.

NewBase 26 August- 2015 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil near six-and-a-half-year lows as China economy fears linger
REUTERS + NEWBASE
Crude oil futures edged up on Wednesday, but were still not far off 6-1/2 year lows after China's
central bank moved to support the country's stumbling economy, while concerns about a supply
glut capped gains.
Asian shares struggled on Wednesday as investors feared fresh rate cuts in China would not be
enough to stabilize the country's slowing economy or halt a stock collapse that is wreaking havoc
in global markets.
Brent LCOc1 was trading 29 cents higher at $43.50 a barrel as of 0541 GMT, and U.S. October
crude CLc1 was also up 29 cents at $39.60 a barrel.
ANZ said China's rate cuts had calmed commodity markets, but they remained cautious and gains
would be limited. "The displacement of high-cost supply from the United States is taking much
longer than expected, and it's likely to keep the market substantially oversupplied in the short
term," it said.
Daniel Ang, an investment analyst at Phillip Futures Pte Ltd, said China's rate cut prevented oil
prices from finding a new low. "However, with a new day, new challenges await. We would likely
be seeing US crude inventories pushing prices down today due to slowing refinery activities."
U.S. crude stocks fell by 7.3 million barrels last week to 449.3 million, compared with analysts'
expectations for a rise of 1 million barrels as refinery runs increased, data from the American
Petroleum Institute showed on Tuesday.
Oil price special
coverage

Energy Information Administration data is later on Wednesday.
"While the rate of global oil stock build is still set to decline, stocks will build for longer than initially
anticipated," BNP Paribas said late on Tuesday.
"As such, any price
improvement will
most likely take
place from a lower
starting point and the
pace of any price
improvement is likely
to be slower than
previously
assumed."
Macquarie noted a
slowdown in auto
sales which impact
many commodities
including oil in China
and other emerging
markets such as
Russia, Indonesia,
Brazil and Thailand.
"Industrial demand
has struggled in
many key emerging
markets – this is
perhaps best
evidenced by auto
sales, where the
trend has continued
to slide into mid-
2015," the bank
said.
In China, car sales
have fallen for four
straight months, with
the steepest month
so far in July, at over
7 percent.
Iran will ramp up crude oil production and reclaim its lost share of exports shortly after
international sanctions on the OPEC member are lifted, Iran's oil minister Bijan Zanganeh said on
Tuesday, while Nigeria is also boosting exports.

NewBase Special Coverage
NewBase News Release 26 Aug 2015
Low-energy, healthy homes: Europe’s answer to shale gas?
Reuters + NewBase
With street names such as Temperance and Hygiene and plenty of green open spaces, the 1920s Bon Air
(Good Air) housing estate in a working-class district of Brussels was meant to provide a healthy "garden
city" way of life.
Now 21st-century planners are striving to turn it into a modern ideal with the kind of renovations EU
policymakers sitting in their shiny offices across the city want to see throughout the European Union.
Work starts in Bon Air in September to transform a prototype from damp and dingy into a light, well-
ventilated and very low-energy home. It is the model for 86 social houses in Bon Air and La Roue (the
Wheel), another housing estate in the same Brussels district of Anderlecht, with a budget of 17.4 million
euros ($19.7 million). In the European Commission, meanwhile, policymakers have begun a review of EU
buildings law.
The aim is to work out how to enforce requirements that all new buildings be nearly zero-energy by the end
of 2020 and to transform existing property, including through deep renovation, meaning tackling 80 percent
or more of a building and cutting energy use by a similar amount.

As a bloc, the 28-member EU spends more than a billion euros a day on importing fossil fuel, much of
which is used by buildings, chiefly for heating and cooling. The Commission says buildings consume 40
percent of EU energy and the potential for savings is vast as three quarters of property is inefficient.
Smarter building, it says, creates millions of jobs, fuels growth and cuts health bills: insulation cures the
damp that causes asthma, while using less energy lowers emissions and improves air quality. The industry
says it is Europe's answer to the US shale gas revolution, which has greatly reduced US energy costs.
"This sector is ready and waiting to eclipse shale gas as the biggest source of energy saved in this case,"
Barry Lynham, director of strategy for German firm Knauf Insulation, said. Fuel charges for the Bon Air
prototype will shrink from an estimated nearly 6,000 euros per year to 580 euros after the renovation, its
architects say.
A major obstacle is the initial outlay, which has limited deep renovation to barely 1 percent of buildings per
year versus a non-binding EU goal of 3 percent. Those behind the Anderlecht project say the cost — which
in this case includes extending the property, as well as insulation, a new heating system and new windows
— is not the sole consideration.
Demolishing the houses and replacing them with zero-energy homes was not possible because the garden
city estates are regarded as part of Brussels' heritage. For VELUX of Denmark, which has teamed up with
the Brussels civic authorities, it's the chance to deploy technology on a scale that makes it more competitive
and to check it is user-friendly.
In return for financing the prototype, VELUX is allowed to monitor it for two years, once tenants move in
sometime in 2017. To quote the company's founder on the wisdom of testing theory — or EU policy — on
real people: "One experiment is better than a thousand expert assumptions."
The International Energy Agency says making the relevant technology widely available and competitive
will take a decade. As both a world leader in smart building and home to historic property that is the most
wasteful on the planet, the EU therefore must forge ahead. "The European Union needs to be pro-active in
addressing deep energy renovation," IEA analyst Marc Lafrance said. The potential losers are the utilities.
Sabine Froning, head of public affairs and communication at Sweden's Vattenfall, said the company sought
to become more of a service provider, while retaining a supply role, notably as a specialist in efficient
district heating. "A building is never going to be zero every hour of the day. It will always need to export
and/or import energy," Froning said.

Lessons from the oil market
Reuters - By John Kemp
Saudi Arabia and its Opec allies are counting on strong growth in demand coupled with slower
growth in non-Opec supply to rebalance the oil market in 2016. But the experience of the "lost
decade" after prices slumped in 1986 suggests rebalancing could take longer than some Opec
members and market analysts expect.
Following the price slump in 1985/86, the oil market struggled with persistent surpluses for much
of the next 17 years. In real terms, oil prices did not rise above the 1986 crisis level on a sustained
basis until 2003 (http://link.reuters.com/qax45w).
Lower prices led to consistent strong growth in oil consumption after 1986, reversing the decline in
demand that had occurred in the first half of the 1980s (http://link.reuters.com/bab55w and
http://link.reuters.com/dab55w).
Non-Opec supplies were flat between 1985 and 1989, as lower prices halted the exploration and
production boom that had caused non-Opec production to surge since 1976.
But non-Opec oil supplies did not fall, disappointing expectations of some oil ministers that lower
production outside the organisation would make way for increased production by its members.

From 1991 onwards, non-Opec began growing rapidly again, and generally kept pace with the
growth in the organisation's output until 2003.
Opec's own output grew strongly after 1986 even though prices failed to rise. Real prices were
essentially unchanged between 1986 and 1997 while the organisation's output rose from 18.5
million barrels per day to 29.5 million bpd.
Saudi Arabia, Iraq, Iran, Kuwait and the UAE all boosted production and invested in extra capacity
in pursuit of a higher share of the oil market.
The unexpected resilience of non-Opec production, coupled with continued output increases from
within Opec itself, ensured real oil prices did not rise despite the rapid growth in consumption.
The organisation's members successfully increased their market share after 1986, but failed to
achieve the rise in real prices that they repeatedly stated was their objective.
It was not until the early 2000s, almost two decades later, that falling non-Opec supplies and
surging fuel demand from China and the rest of East Asia, resulted in sustained price increases.
ADJUSTMENT, EVENTUALLY
In a prescient editorial published in the New York Times in July 1985, oil expert Daniel Yergin
reviewed the factors which had caused prices to fall and how the market would eventually recover.
"When corrected for inflation, US oil prices in 1985 are just about back to where they were in
1975," he wrote ("An oil surplus - for now" July 8, 1985).
"Four factors have been responsible for this: conservation, the recession, weak economic activity
and the growth of alternative, non-Opec supplies. All of this has put us in an era of surplus in
which prices have nowhere to go but down."
Yergin went on to predict the oil market would eventually adjust. "Further weakness in price will
undermine the rationale for a great deal of existing and new investment in energy. Energy
consumers will conclude that conservation investment is less important. Oil companies will reduce
their efforts to develop new oil fields in frontier regions," he concluded.
"Does this mean that the world will again face a difficult energy situation in the future? Not for
several years, at least. The surplus of oil and energy worldwide is very large ... That cushion will
be quite a number of years in eroding. Oil will become more like other commodities, with volatile
prices."
Yergin was correct that reduced investment would eventually erode spare capacity and the era of
surplus would end, but even he might have been surprised that it would take almost 20 years.
There are important differences between the oil market situation in 2015 and back in 1986. There
is less spare capacity to work off now, less than 2 million bpd compared with 6 million in 1986.
Much of the growth in non-Opec supply during 2010-2015 has come from shale rather than
conventional fields, which some analysts think makes it more responsive to prices.

So perhaps the oil market will adjust faster this time without another "lost decade". But shale
production has so far proved more resilient than most forecasters expected, like the North Sea
during the 1980s and 1990s.
This time might be different, but producers cannot be sure consumption growth will absorb the
surplus and push prices higher in the short to medium term. –

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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Khaled Malallah Al Awadi,
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MS & BS Mechanical Engineering (HON), USA
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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.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase 26 August 2015 K. Al Awadi

6th
– 8th
Oct.

Microsoft word new base 673 special 26 august 2015

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Microsoft word new base 673 special 26 august 2015