Microsoft word new base 675 special 30 august 2015

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NewBase 30 August 2015 - Issue No. 675 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Good news at the pumps: UAE fuel prices fall more
than 8 per cent for September
The National staff + NewBase
Fuel prices for next month have been cut by around 8 per cent across the board, in line with the
fall of international benchmark prices in the past month.
The government liberalised fuel price-setting last month in order to remove subsidies and let
prices reflect the vagaries of the international oil market, including the economics of refineries.
The Fuel Price Committee, chaired by a Ministry of Energy official and including the chiefs of the
two main distribution companies Adnoc and Enoc, said on Thursday that prices taking effect from
September 1 will see diesel fall by Dh0.16 to Dh1.89 per litre, a decline of almost 8 per cent on top
of the 29 per cent decline in August 29 for Dubai and the Northern Emirates, and 12 per cent for
Abu Dhabi.
Petrol prices for September decline as follows: E-plus (Octane 91 petrol) from Dh2.07 to 1.89, a
fall of 8.7 per cent; Special (95) from Dh2.14 to Dh1.96, a fall of 8.4 per cent; and Super (Octane
98 petrol) from Dh2.25 to Dh2.07, a decrease of 8 per cent.

The pricing committee has not yet provided details of which benchmarks it follows to set the
prices, but the cut for next month reflects the average decline in gasoline and diesel futures prices
in New York over the past month.
There might be further good news for motorists in the cards. The decline in forward futures prices
on the New York and London exchanges also suggest that there will be further sharp declines in
petrol prices through the end of the year.
The meltdown in China’s financial markets, which many analysts expect will put a dampener on its
economic growth, has flown through to commodity prices, including oil prices in recent weeks.
Crude oil prices are down about 30 per cent since the beginning of July, while diesel and gasoline
prices have fallen about half that much in the same period.
With the end of the peak summer driving season in the northern hemisphere and rising inventories
in the large industrialised countries, the futures markets are signalling that petrol is likely to see
further sharp price declines over the next few months.
Matar Al Nyadi, Undersecretary at the Ministry of Energy, said that October’s prices will be set on
September 28.
“The prices are based on the average global prices for diesel and gasoline with the addition of
operating costs and profit margins of the distributing companies,” Mr Al Nyadi said.
The government’s September price change suggests it is following New York and/or London
futures prices, which are the most actively traded .

Oman’s Oil production still profitable despite price slump
Oman Observer - Salim bin Nasser al Aufi
Oil companies operating in the Sultanate will continue to turn a profit even if oil
prices plummet below the present average of $46 per barrel for Omani crude,
according to a high ranking official of the Ministry of Oil and Gas. Salim bin
Nasser al Aufi, Under-Secretary, said that production costs averaging $12 per
barrel will ensure that oil producers enjoy attractive bottom-lines even if prices
tank below current levels.
“Making a profit is not an issue for oil companies in Oman,” said Al Aufi. “The
gap (between production costs and international oil prices) is still big enough.
As an industry, we are still profitable. Our average cost is $12 per barrel or thereabouts —
sometimes less — I’ve seen figures ranging from $7 to $12-$13. So in totality, we are still very
good,” he added in remarks to journalists on the sidelines of the launch of the 2015 edition of The
Oil & Gas Year (TOGY) annual book on Thursday.
But while companies are assured a profit despite the slump, low prices effectively deprive them of
the means to fund future projects necessary to sustain production over the long-term, the Under-
Secretary explained. “(The $12 per barrel production) cost is only the cost of running the business.
It does not include the cost of financing future projects that don’t necessarily produce anything
today. Take for example (BP’s) Khazzan project, which is an investment that is not generating any
return as yet. Likewise, some of the projects that Petroleum Development Oman (PDO) is
executing are an investment, but the returns will come later.”
A protracted downturn, he warned, has the potential to force companies to cut back on costs,
which would eventually impact production. In the upshot, the goal to sustain output at the current
1 million barrels per day — a record high first achieved in July this year — will be a major
challenge, he noted.
“There is only so much you can do before cutting down on production,” the under-secretary said.
“You can’t touch the oil rigs because they’re there for immediate production. You’re left with future
projects, which you may suspend for a while, but you need them eventually. You may slow down a
little bit on your exploration programme, but you will need the exploration finds in order to
generate wealth in the future.
You may slow down a little bit on seismic, because the return is not immediate, but again you
need it later on when you’re ready to pick up where you left off. So we’re cautious on the balance
between immediate gains and long-term pain.”
The industry’s recent success in topping the 1 million barrels per day (bpd) production level, said
Al Aufi, was the culmination of a number of factors. Firstly, oil companies — notably PDO, Oxy,
Daleel and CC Energy — achieved “good production levels during the summer”. CC Energy in
particular crossed the 30,000 bpd mark, while condensate output from PDO was strong during
July. Adding to this mix was the low level of deferment in production, which helped boost
production to over 1 million bpd for the first time in the nation’s history, he said.
But the goal to maintain output at this level would be daunting, going forward, the under-secretary
warned. “If we’re going to be hit with very low prices, and have to start cutting activities, then we
will definitely kiss the 1 million bpd target bye-bye quickly,” Al Aufi remarked in conclusion.

Oman : ACWA consortium fufils financial close for Salalah 2 IPP
Saudi Gazette + NewBase
The consortium of ACWA Power, Mitsui& Co., Ltd. and Dhofar International Development and
Investment Holding Co (DIDIC) has achieved financial close for the development, construction,
ownership and operation of a 445 MW high efficiency gas fired power generation plant along with
the acquisition of an existing 273 MW natural gas fired Salalah 2 IPP power plant. This follows the
signing of a 15-year power purchase agreement (PPA) last April 19 by Oman Power and Water
Procurement Company (OPWP) with the developer consortium of ACWA Power, Mitsui and
DIDIC.
The project debt has
been structured as
long-term limited
recourse project
financing and funded
by a group of
international and
regional banks viz.
Standard Chartered
Bank, Sumitomo Mitsui
Trust Bank, KfW IPEX-
Bank GmbH, Sumitomo
Mitsui Banking
Corporation Europe
Limited, Mizuho Bank,
Ltd., Bank Muscat and
Bank Dhofar.
Paddy Padmanathan, President and CEO of ACWA Power, said “we are happy to achieve this
great milestone for the Salalah 2 IPP. Reaching financial close on this project once again
demonstrates the level of comfort and commitment that international and local banks have for
investing in the Sultanate of Oman. We are very enthusiastic to rapidly deliver in the execution
and construction of the project in collaboration with our local and international partners.”
The Project will be constructed under a lump-sum turnkey EPC Contract with SEPCOIII Electric
Power Construction Corp. In addition, First National Operation & Maintenance Company Limited
(Nomac), a wholly owned subsidiary of ACWA Power) shall be responsible for providing operation
and maintenance services for the plant.
Rajit Nanda, Chief Investment Officer at ACWA Power, said “we cherish the trust placed on us by
OPWP and look forward to delivering a plant that we can all be proud of which will then enable us
to reliably deliver the contracted energy over the full 15 year term of contract.”
ACWA Power established its presence in Oman through its acquisition of Barka1 IWPP in 2010,
which is currently listed on the Muscat Stock Market as ACWA Power Barka. Since this
acquisition, ACWA Power Barka has been awarded two water desalination expansion projects.
ACWA Power’s portfolio companies in Oman will now be responsible to deliver over 1,100 MW of
power and 193,000 m3/day of desalinated water to OPWP.

Egypt: EGAS Sign LNG Deal with Rosneft
Rosneft + NewBase
Rosneft Trading SA, a company of Rosneft Group, and the Egyptian Natural Gas Holding
Company (EGAS) signed a master LNG supply and purchase agreement, the Russian firm
announced Thursday.
The document was signed by the Chairman
of Rosneft Management Board Igor Sechin
and the Chairman of EGAS Eng. Khaled
Abdelbadie during the visit of Egyptian
President Hussein Abdel Fattah Saeed
Khalil al-Sisi to Russia.
“In accordance with this document, the
parties plan to organize the supply of LNG
to the Arab Republic of Egypt,” Rosneft
said.
Cooperation with EGAS marks Rosneft Group's entry into the world LNG trading market, the
company said, adding that implementation of the provisions of the signed documents will, in the
long term, open access for Rosneft Group to the Egyptian gas market which has a significant
growth potential.
The Egyptian economy is facing severe gas shortage as local demand has ballooned in recent
years amid declining domestic production. The government has been trying to procure LNG from
various sources to cater to growing demand.
In July, the two companies agreed a term sheet for future supplies of LNG to the Egyptian
company. The Russian energy firm will supply 24 shipment of LNG for a period of two years with
effect from the last quarter of this year.

Indian Oil planning $2.4bn investment to make ethanol
Bloomberg + NewBase
Indian Oil Corp, the nation’s biggest refiner, plans to spend Rs160bn ($2.4bn) to build a plant for
producing synthetic ethanol as it seeks to secure supplies of the biofuel to meet mandatory
blending norms.
The state-run company is studying the project to produce 1 million metric tonnes of ethanol
annually for blending with gasoline, S Mitra, executive director at Indian Oil, said in an interview.
Indian Oil plans to seek investment approval from its board next year, after which the facility, to be
located at Paradip in eastern India, will take about four years to complete, he said.
The refiner will partner with Dallas-based Celanese Corp for the ethanol project, which will use
petroleum coke as feedstock from Indian Oil’s two refineries in the region, Mitra said.
India is facing a supply shortage of the biofuel, hindering plans to achieve mandatory 5%
blending, Oil Minister Dharmendra Pradhan said earlier this month. In December, the federal
government allowed ethanol production from non-food feedstock including petrochemicals to
improve availability.
Indian Oil and two other state-run refiners, Hindustan Petroleum Corp and Bharat Petroleum Corp,
are seeking 2.66bn litres of ethanol in the 12 months to November 30, 2016. The supply shortage
is prompting Indian Oil, which would need nearly half of the projected requirement, to consider
producing its own ethanol, Mitra said.
Indian Oil, which also runs the biggest network of fuel stations in the country, bought about 186mn
litres of ethanol for blending through the year to March 31. Indian Oil shares fell 1.1% to Rs405.25
at the close in Mumbai, after falling as much as 3.5% earlier.
The benchmark S&P BSE Sensex rose 0.6%.
In India, ethanol is primarily produced from molasses, a byproduct of sugar making. Molasses
output depends on the sugarcane crop, which varies each year. “At the moment we are short on
ethanol and sugarcane farmers won’t be able to produce enough,” Mitra said in Mumbai. The
ethanol unit will come up within a petrochemicals complex being built by Indian Oil adjacent to its
newly-built 15mn metric ton-a-year oil refinery on the country’s east coast.

ONGC plans to revive drilling off Vietnam
Bloomberg
India’s state-owned Oil & Natural Gas Corp plans to revive exploration activity in waters off
Vietnam’s coastline that are also claimed by China, a person with direct knowledge of the matter
said.
The company has approval from Prime Minister Narendra Modi’s administration to drill exploratory
wells in a disputed part of the South China Sea that it acquired rights to in 2006, the person said,
asking not to be identified because the discussions are confidential. ONGC last attempted drilling
in 2009, three years before China invited bids for the same area.
The move to assert India’s commercial rights in a contested area may be a sign Modi is joining the
US and other Asia-Pacific nations to check China’s territorial ambitions. Previous efforts by
Vietnam and the Philippines to explore in disputed parts of the South China Sea have led to
clashes with China.
“It’s clear that India has interests in the South China Sea as is evident by deepening maritime
relations with the US and Japan,” said Ralf Emmers, associate dean at the S
Rajaratnam School of International Studies in Singapore. “And certainly China has been more
active in the Indian Ocean, making Delhi a bit nervous.” China has stepped up efforts to assert
claims to more than 80% of the South China Sea, which hosts $5tn in annual shipping. It is
building artificial islands and runways in the area, fuelling tension and protests by fellow
claimants.China on Thursday again warned India to avoid any exploration activities in disputed
areas.
“It’s illegal if any foreign enterprise conducts activities in waters under Chinese jurisdiction without
permission,” the foreign ministry said in a faxed statement.

Related parties should “avoid taking actions that will make disputes complicated.” The South
China Sea is estimated to hold as much as 30bn metric tonnes of oil and 16tn cubic metres of
gas, which would account for about one-third of China’s oil and gas resources, according to the
official Xinhua news agency.
ONGC Videsh – the New Delhi-based explorer’s overseas unit – hasn’t drilled a single well in
Vietnam’s oil and gas Block 128 since it was awarded rights nine years ago.
ONGC said on Thursday in an exchange filing that its partner Vietnam Oil & Gas Group, also
known as PetroVietnam, has extended the permit for Block 128 to June 2016 after it expired two
months ago. Officials at PetroVietnam didn’t return calls seeking comments.
ONGC is also
seeking renewal
for Block 06.1,
which has a
permit that ends
in 2022, the
person said. The
block, ONGC’s
first overseas
asset, started
natural gas
production in
2002.
ONGC is
expanding its
presence
everywhere and
Vietnam isn’t an
exception,
chairman Dinesh
Kumar Sarraf
said in New
Delhi on August
13. Spokesman Pallab Bhattacharya didn’t respond to two e-mails seeking comment. The
company has few reasons to be optimistic about Block 128. The company earlier abandoned
adjacent Block 127 after failing to find oil or gas.
In 2012, China invited foreign companies to explore nine blocks that overlapped with Block 128
and other areas Vietnam had already awarded to companies including Exxon Mobil Corp. Since
taking power last year, Modi has invested in India’s navy and called for protecting freedom of
navigation in the South China Sea. He’s also bolstered defence ties in the region, agreeing to sell
Vietnam four offshore patrol boats and approving India’s first-ever naval exercises with Australia.
Vikas Swarup, the spokesman for India’s foreign ministry, didn’t answer calls to his phone or an e-
mail seeking comment.
India must be cautious as it lacks the ability to match China both militarily and economically, said
C Uday Bhaskar, director, Society for Policy Studies in New Delhi. “Will India go to war with China
over this?” he said.

Tap Oil to Explore for Gas in Myanmar
Australia’s Tap Oil Limited will explore for natural gas in Myanmar’s shallow water Block M-7 in
the Moattama Basin.
On Wednesday, Tap Energy (M7) Pte. Ltd, and its local joint venture participant, Smart E&P
International Company Ltd., signed a Production Sharing Contract with
Myanmar Oil and Gas Enterprise (MOGE) at an official ceremony in Nay Pyi
Taw.
Under the PSC, the JV
partners have agreed to
undertake an 18 month
Environmental and Social
Impact Assessment (ESIA)
and Study Period, followed
by an option to proceed to a
three-year commitment
exploration work
programme.
Tap expects to spend
approximately $2.75 million
on the M-7 Block up to and
including the Study Period,
which has a minimum
expenditure requirement of
$2 million.
The 13,372km2 M-7 Block
is located in Myanmar’s
most prolific offshore
hydrocarbon province, the
Moattama Basin, which has
existing production from a
number of multi-tcf offshore
fields. Block M-7 is 160km
east of the 6.5tcf Yadana
gas field, and 70km north
east of the 1.5tcf Zawtika
gas field.

Norway: Statoil receives consent to drill Sigrun East well in Block 15/3
Source: Petroleum Safety Authority Norway
Statoil has received consent to drill an exploration well in Block 15/3. Statoil is the operator for
exploration licences 025 and 187 in Block 15/3 in the southern North Sea. Consent has been
applied for to drill exploration well 15/3-10 in a prospect named Sigrun East. The application also
covers a potential sidetrack.
The area where the well is to be drilled is around 180 km west-south-west of Utsira in Rogaland
and around 40 km north of the Volve field. Water depth at the site is 107 metres.
The well is to be drilled by the Songa Trym mobile drilling facility. During drilling, the facility's
coordinates will be: 58°46' 35.25" N 01°53' 18.29" E
Drilling is scheduled to begin in the first part of October. Including the sidetrack, drilling will last a
total of around 73 days.
Songa Trym is a drilling facility of the Aker H-3 type. It was built at Aker Verdal in 1976 and has
been upgraded several times, most recently in 2013. The facility is operated by Songa Offshore.

NewBase 30 August- 2015 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil extends biggest rally in six years to top $50
Reuters + NewBase
World oil prices roared back to $50 a barrel in the second day of a frenetic short-covering rally on Friday,
with violence in Yemen, a storm in the Gulf and refinery outages helping extend the biggest two-day rally in
six years.
Oil had tumbled in tandem with stocks over much of the past week, hitting 6-1/2-year lows below $40 a
barrel as Chinese financial tumult stoked fears of slowing growth. Oil rallied on Thursday as equities
rebounded, but on Friday oil kept pushing higher even as equity markets were calm.
Dealers said a handful of emerging risks fed oil's gains. Warplanes from a Saudi-led coalition killed 10
people in air raids over Yemen ; Tropical Storm Erika moved closer to Florida, prompting worries about oil
and gas installations in the US Gulf.
Brent, the global oil benchmark, closed up $2.49, or 5 per cent, at $50.05, after nearly reaching $51 a barrel.
It gained 10 per cent on the week. US crude's front-month contract snapped an eight-week losing streak,
rising $2.66, or 6.3 per cent, to settle at $45.22 a barrel. At its session high, it was up more than $3, or 7 per
cent at nearly $46. For the week, it rose 12 per cent.
"A severely oversold and shorted oil market is creating a bid for covering," said Chris Jarvis, analyst at
Caprock Risk Management in Frederick, Maryland. US crude's 17 per cent gain over the past two sessions
Oil price special
coverage

was the second largest in 25 years. Yet prices remain at half their year-ago level. Traders noted a lingering
global glut of oil supplies, and said the rally was largely fueled by a rush by market players to exit a
crowded bearish trade.
Late on Friday, US data showed that big hedge funds had slightly increased their bullish net long bets on US
crude in the week through Tuesday. But gross short positions barely dipped, leaving a near record number
of bearish bets poised to cover as prices turned higher later in the week.
In Europe, diesel prices led gains in the complex, rising nearly 8 per cent after Genscape said Shell's
404,000 bpd crude distillation unit in Pernis, Rotterdam, was offline, a day after a brief shutdown.
New York gasoline prices jumped after news that Phillips 66 had unexpectedly shut down a 150,000-barrel-
per-day fluid catalytic cracker at its refinery in Linden, New Jersey, although the contract ended up only 4
per cent as the unit was expected to restart this weekend.
A global glut of fuel and sluggish demand have cut oil prices in half from a year ago. Worries over China's
economy have also weighed on the market in recent weeks. Some analysts said the two-month slump of
nearly 30 per cent meant a rebound was due.
But others were convinced the rally would sputter, pushing prices lower again. Spreads between spot and
one-year forward US crude were little changed on Friday, suggesting little improvement in fundamentals of
oil.
US energy companies added one rig to their fields over the past week, a sixth consecutive gain that is
expected to temper the decline in domestic production over coming months.

For Opec, this year’s painful oil slump will bring gains in 2016
Bloomberg + NewBase
While Opec’s fight to snatch market share from rival oil producers might look like a costly failure
as prices languish below $50 a barrel, an entirely different picture could emerge next year.
Supplies outside Opec are expected to contract in 2016 for the first time since 2008, sliding by
200,000 bpd, according to the International Energy Agency. With consumption set to grow by
1.4mn bpd, Opec and its leading member Saudi Arabia could seize the chance to broaden their
market as competitors damaged by the price slump fall off.
“To declare their policy a failure is a pretty big leap,” said Greg Sharenow, who manages $15bn
as executive vice president of Pacific Investment Management Co. “I don’t think you could view
Saudi and Opec’s business plan and model as being a six- or 12-month view. In the long-run,
what you’re going to see is lower non-Opec supply, higher demand and greater market share for
them.”
The Organisation of Petroleum Exporting Countries in November 2014 diverged from its traditional
policy of adjusting supply to manage prices, announcing it would maintain output to defend its
position in the market. That decision has been tested by the collapse in crude, which has since
dropped more than 40% amid a global supply glut.
Opec’s share of the world oil market dwindled to the lowest in a decade last year as surging
output from US shale wells eclipsed gains in fuel demand. Yet the steep slide in Brent, which
traded near $49 on Friday after recovering to more than $60 in May, could prove beneficial to the
12-member group as higher-cost competitors struggle. “The worst thing for the Saudi strategy was
when prices rallied to $60 and looked like they’d stay there, because other producers can learn to
live with it,” said Paul Horsnell, head of commodities research at Standard Chartered. “For that
strategy to work, it needed a further severe downward correction in prices.”
Many US shale companies are burdened by the borrowings that fuelled the industry’s boom.
Interest payments on the $235bn debt of drillers in the Bloomberg Intelligence North America
Independent Explorers & Producers Index may thin out some companies even after others found
ways to cut costs and boost efficiency. The longer the crude price flags, the greater the pressure
on shale producers to retrench.
Such cuts at competitors may be little consolation to Opec’s most vulnerable members. The
weakest - the “Fragile Five” of Algeria, Iraq, Libya, Nigeria and Venezuela - have had to slash
social spending following the drop in prices and face increasing risk of political unrest, according
to RBC Capital Markets. Ecuador, the member with the smallest crude reserves, is producing at a
loss of about $9 a barrel, President Rafael Correa said on August 25.
Algeria’s call for an emergency Opec conference, backed by Libya and Venezuela, hasn’t
received a public response from Saudi Arabia.
Even Opec’s biggest member isn’t immune to the pain. The Saudi government is seeking to cut
billions of dollars from next year’s budget after running the biggest deficit since 1987 this year,
according to two people familiar with the matter. Meanwhile Iran, once Opec’s No 2 producer, is
set to swell global oil supply further by raising output once sanctions against the country are lifted.

NewBase Special Coverage
Oil & Gas Agencies News Release 30 Aug 2015
Opportunities and challenges for the downstream oil
sector in the Middle East
The National + Mirko Rubeis
Falling oil prices have deeply affected oil and gas upstream, with many projects shelved or put on
hold around the world. For much of the downstream sector, though, the current environment also
provided cheaper feedstock (crude oil) and a sudden stimulus to demand.
Overall, sinking oil prices have served as a shot in the arm for the
downstream sector in the short term. The fundamental challenges for the
refining industry, however, remain.
The market is set to remain oversupplied in the coming years. This could
only be alleviated if low prices persist and a large portion of planned
refining projects are cancelled. Nevertheless, even in the case of
persisting low crude oil prices, several questions exist on the degree to which demand could
increase in the medium or long term.
Efficiency and substitution may limit the demand growth upside. Furthermore, in many Asian
countries fuel prices remain regulated and the impact of lower oil prices on demand could not be
immediate. Or, if these countries decide to remove the subsidies, (as India and Indonesia have
just done) prices could even increase, adversely impacting the demand.
Based on this, we expect that refining margins will remain under pressure for the medium and
longer term, largely because of overcapacity and relatively slow demand growth.
In the Middle East, refiners have reaped significant benefits from the temporary overall
improvement in margins. For GCC countries that have invested heavily in the downstream sector,
higher downstream margins have provided partial relief from the drop in crude oil revenue.
Still, the increased exposure to an oversupplied refining sector requires regional players to
improve their ability to compete more aggressively in the market – scale, supply advantage and
location may not be the only attributes sufficient to ensure satisfactory returns anymore.
We identified four key opportunities for Middle Eastern downstream players:
• Focus on operational excellence.
• Build strong trading capabilities.
• Expand internationally in refining.
• Advocate for subsidies reduction or removal on refined products.
In the first place, Middle Eastern players need to focus on operational excellence, which still lags
behind international best practices. Limited pressure on reducing personnel, subsidised energy

and security of supply considerations are among the reasons for the efficiency gaps that still
persist in the region.
In our experience, a systematic profit improvement scheme can result in a margin improvement of
between US$1 and $2 a barrel, acting on technical levers such gross margin optimisation, energy
management, maintenance and auxiliary operations. It also acts on soft levers such as
organisation and culture that hardwire desired behaviours in employees that are required to make
the change and the gains sustainable over time.
Besides manufacturing efficiency, Middle Eastern players should also improve the way in which
they market their products. Regionally, oil and gas companies should strengthen their trading
capabilities and make additional investments in logistics assets in markets to help them efficiently
dispose of the growing export product volumes from domestic assets and secure the necessary
products for their domestic markets.
A strong trading arm could make the argument for domestic self-sufficiency at all costs less
compelling, and provide an alternative to additional large grass roots domestic refining
investments.
In the current environment, Middle Eastern producers should increase their presence in
international refineries. In addition to causing a steep fall in oil prices, the oversupply of crude has
triggered a fierce battle for market share among producers.
Investments in refining assets in key markets secure the placement of volumes and curb the need
to slash crude official selling prices to defend market share. Although it may seem counter-intuitive
in an oversupplied market, investments in refining assets can still be economical if purchased or
built at the right price. These opportunities exist because of the low trading multiples of refining
assets in mature markets, or the incentives provided by developing countries seeking to attract
partners with crude and capital to develop domestic refineries.
Finally, today’s low-oil-price environment presents an opportune moment to eliminate or reduce
subsidies on refined products – a major burden on regional government budgets and oil
downstream companies’ bottom line. The UAE has made the first move, linking gasoline and
diesel to international market prices and creating an example for other countries to
follow.
Mirko Rubeis is a principal for the Middle East at The Boston Consulting Group.
Trusted advisor to top management of oil & gas companies
~14 years of extensive experience in managing strategic, operational and organizational changes, gained working in
international teams across Europe, Middle East and Africa . Based in Dubai since October 2008.
Key areas of expertise include:
- Upstream operating models and organization
- Optimization of upstream support functions
- Long range Refining & Marketing Strategy, scenario planning
- Value Chain Optimization
- Refining operational improvement
- Refining & Petrochemical integration
- Fuel retail strategy and operations (including non-fuel)
- International expansions in Refining & Marketing in emerging markets
- Target screening and due diligence + - JVs design and management .

Arab Opec producers brace for oil-price weakness for rest of ’15
Reuters + NewBase
A second oil price rout of 2015 has forced Arab Opec members to cut their price expectations for
this year, showing they are prepared to tolerate cheaper crude for longer to defend market share
and curb rivals’ output.
Opec delegates, including those from core Gulf Opec countries, see economic troubles in top
energy consumer China as short term and unlikely to have much impact on demand for crude
which will rise seasonally in the fourth quarter.
But they also believe it will take more than just a few months for weak oil prices, which fell to a
more than six-year low near $42 on Monday, to reduce supplies from higher-cost producers such
as US shale and stimulate demand.
They expect the recent price drop will help reduce the crude oversupply towards the end of the
year and thus lift oil prices slightly.
The comments further indicate that the Organisation of the Petroleum Exporting Countries is
sticking to its policy of defending market share rather than cutting production to shore up prices —
regardless of how low they would fall and how long it would take to balance the market.
“It will be better to leave the market to correct itself. I don’t think this low price will continue,” said a
Gulf Opec delegate who declined to be identified. “Prices will be around $40-$50 a barrel until the
end of the year and hopefully they will reach $60, assuming there will be a recovery in China.”
A second Gulf Opec delegate also expected the oil price to remain around $40-$50 a barrel for the
rest of the year. A third Gulf oil source said: “People are over-reacting to China. But you cannot
underestimate the sentiment, that’s the problem.”
“Oil is bottoming... and the deeper it goes the more the rebound will be quicker and the supply
reaction will be even bigger,” the source said, adding prices may dip again to slightly below $45
before slowly recovering to around $60 by December when Opec meets next.

Arab Opec delegates initially thought prices would recover more quickly after the group’s shift to
the market-share strategy in 2014 deepened the decline, saying last December they saw oil
between $70 and $80 by the end of 2015.
Other Opec delegates outside the Gulf are also bracing for a prolonged period of low prices as
they do not expect the group’s top producer Saudi Arabia, the driving force behind Opec’s refusal
to cut output, to change course and prop up prices.
“If this oversupply continues with no action from Opec or Saudi Arabia, then I expect prices will
stay around $45 until the end of the year,” said one. As a policy, Opec has not openly targeted
specific oil prices for over a decade, ever since it abandoned a $22 to $28 price band instituted
after a price crash in the late 1990s.
But the comments signal how big producers see the market playing out and that Opec’s strategy
championed by Saudi Arabia is not a short-term one, but rather a plan that needs time to work and
they are willing to wait.
Gulf oil insiders see no sign of Saudi Arabia wavering on its long-term strategy. “This is not going
to be two-three quarters’ adjustments, this is going to be a two-three years’ adjustments,” said
Yasser Elguindi of economic consultants Medley Global Advisors.
Opec reconfirmed the market-share strategy at its last meeting in June and the Gulf Opec
delegates were still expecting a recovery in prices towards the end of 2015, supported by higher
global demand.
But those sentiments have changed with the latest unexpected price drop, growing concern about
the demand outlook in China and persistent oversupply.
Opec’s own forecasts show the group initially over estimated the speed at which low prices would
curb non-Opec supply. This, plus record-high output from Saudi Arabia and Iraq, point to an
oversupply of more than 2mn barrels per day (bpd).
A big uncertainty in 2016 is the extent to which Iran boosts production if and when sanctions are
lifted. Iran’s insistence that it will take back more than 1mn bpd of market share has worried the
Gulf members.
Still, even Opec members who are less wealthy than Gulf Arab producers and want higher prices
agree the latest drop would mean less oversupply in coming months, potentially supporting prices
in the last quarter of the year.

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,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile: +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
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 30 August 2015 K. Al Awadi

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