New base 778 special 02 februaury 2016 r2

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NewBase 02 February 2016 - Issue No. 778 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Oman:PDO to invest over $10 billion in 3 mega
Venture O&G
Oman Observer - Conrad Prabhu
Petroleum Development Oman (PDO), the Sultanate’s dominant oil and gas producer, aims to
invest in excess of $10 billion in a trio of signature integrated schemes that are key to sustaining
the company’s long-term hydrocarbon output.
All three mega ventures — the Rabab Harweel Integrated Project (RHIP), the Yibal Khuff
integrated oil and gas facility, and the Budour integrated project —are making commendable
headway in their planning and implementation, according to Managing Director Raoul Restucci.
“These are very large investments, which will probably total in excess of $10 billion over the next
5-10 years,” the Managing Director said.
Speaking on the sidelines of a
ceremony to mark the graduation
of nearly 200 young Omanis as 6G
welders, Restucci noted that the
Rabab Harweel Integrated Project
(RHIB) in particular continued to
make “impressive progress”.
“Work on the power plant is very
advanced, so are the foundations
and the wells. The contribution of
Local Community Contractors
(LCCs) is also very significant. As
many as 12 LCC companies are
working to prepare the site. There
is good progress overall, good
integration, and good safety; we
will deliver on target.”
At Harweel in the south of Oman,
PDO aims to harness part of
Rabab’s sour gas to inject as
miscible gas to produce oil from
Harweel’s sour oil reservoirs. Gas
will be injected at sufficient
pressure to allow it to mix with the

oil, thereby making it less viscous and enable it to flow to the surface. This integration of the
Harweel oil and Rabab gas components is slated for completion in 2019 with peak production of
36,000 barrels of oil per day (bpd) targeted thereafter.
Rabab-Harweel, Yibal Khuff and Budour are oil and gas reservoirs located in the Greater Birba in
the south of PDO’s Block 6 concession — an area that could potentially contribute nearly a third of
the company’s oil production in the future.
At Yibal Khuff, PDO has received shareholder approval for the simultaneously development of a
number of sour oil and gas reservoirs. A significant part of the investment in the project will go
towards the construction of an integrated oil and gas facility, billed as one of the largest and
technically most complex ventures to be implemented by PDO. The presence of H2S in the
hydrocarbons requires sizable investment in state-of-the-art sulphur removal technology.
At Budour, plans for the first-ever use of water injection in a sour oil field are being reviewed
following the discovery of additional gas reservoirs in the same area.
According to Restucci, PDO is now looking for an optimal solution for the field. The company’s
success in identifying additional gas reserves in the field now requires that the reservoir be tested
before the main project is suitably expanded, he said.

Iraq: KRG ready to make good on overdue oil payments
The National - Anthony McAuley
The Kurdistan Regional Government (KRG) in Iraq said on Monday that it would start making
regular monthly payments to international oil companies, including towards billions of dollars in
arrears.
The deal will mean that initially that its payments to the oil companies will be lower than the interim
payments it has been making since last September. But the move was still welcomed by the
companies. The KRG has paid the operating companies a gross US$75 million a month since last
September, for a total of $300m through the end of the year.
Yesterday, the KRG promised that “as of January 1, 2016, the Kurdistan Regional Government’s
monthly payments to the producing international oil companies will be based on the contractual
entitlements under the production sharing contract governing each licence, replacing the interim
payment arrangements in place since last September.” It added that it would make a further
payment of 5 per cent of each respective monthly payment to start clearing arrears.
Among those to benefit from the new pledge is the Norwegian oil company DNO, which is 40.4
per cent owned by RAK Petroleum. It has been receiving a 55 per cent share of $30m a month
interim payments as the operator of the Tawke field, for which Genel Energy has received $9m
monthly for its share. Taq Taq, which is operated by Genel with a 44 per cent interest, also has
received $30m monthly payments, while Gulf Keystone, which operates the Shaikan, has received
$15m a month.
“This is really, really good news, as it will give clarity about the timing and quantum of payments,”
said an executive at one of the operating companies. Although at current oil prices it means the
monthly payments will be about half what they have been – analysts estimate between $15m and
$20m for the larger field owners – the regularity will allow them possibly to resume stalled
investment.
Just two weeks ago, Genel said it would slash capital expenditure this year to between $50m and
$90m, compared with last year’s $150m. Gulf Keystone’s lack of investment at Shaikan similarly
had stalled production at 40,000 barrels per day compared to a target of 100,000 bpd.
Taqa, the Abu Dhabi government-owned energy company, had delayed the start-up of its Artrush
field to this year, partly due to its own cash worries. The company confirmed it expects to start that
field this year, ramping it up to 30,000 bpd.
Sharjah-based Dana Gas, which is owed at least $2 billion by the KRG, is not affected by the new
deal as it has a profit-sharing contract to develop the region’s largest gasfields. Genel Energy
shares rose 2.75 pence at 107.25 pence, Gulf Keystone gained £4.45 to £16.70 and DNO was
up46 Norwegian ore at 6.21 kroner.

Tanzania: Aminex announces Kiliwani North update
Source: Aminex
Aminex has updated shareholders that the Kiliwani North-1 well is currently undergoing final
well integrity testing prior to first production. This follows the signing of a Gas Sales Agreement
('GSA') in January. The gas price agreed of $3.00 per mmBTU, approx. $3.07 per mcf, is
indexed-linked to the US CPI and not reliant on global oil prices. The Company will be paid in US
Dollars for all produced gas including commissioning and testing gas.
The Company has been
advised by the
Tanzanian Petroleum
Development
Corporation ('TPDC') to
prepare the Kiliwani
North 1 well for
production starting mid-
February. Initial
production rates will be
managed to allow for
testing and
commissioning of the
recently completed gas
processing plant and
pipeline, while
recording critical
pressure and flow rate
measurements to
determine the optimal
flow rate to maximize
the life of the
reservoir.
Solo holds an option to
acquire a further
interest in the Kiliwani
North Development
Licence. LR Senergy
has ascribed 28 BCF
contingent (2C)
resources (gross) to
Kiliwani North, which was contingent on completion of the GSA. It is therefore management’s
expectation that the Company will be able to book its first reserves for its Tanzanian assets later
this year.
Aminex CEO Jay Bhattacherjee commented: 'We are pleased to maintain our working interest in
the Kiliwani project post signing of the Gas Sales Agreement and are looking forward to
becoming a Tanzania gas producer. In addition to first production it is our belief that the Kiliwani
North Development Licence will also represent the first bookable reserves for the Company in
Tanzania and we look forward to updating the market in due course.'

Malaysia: Lundin Petroleum signs farm-out agreements with DYAS
Source: Lundin Petroleum
Lundin Petroleum has announced that its wholly owned subsidiary Lundin Malaysia has
signed farm-out agreements (FOA) with certain wholly owned subsidiaries of DYAS for part of its
working interests across three Production Sharing Contracts (PSC) in Malaysia. Ahead of the
recently commenced exploration campaign in the Sabah region, offshore East Malaysia, Lundin
Malaysia has entered into farm-out agreements with DYAS covering Blocks PM328,
SB307/308 and gas holding areas in SB303 with an effective date of 1 July 2015.
The terms of the farm-out agreements are as follows: -
• PSC SB307/308: DYAS to be transferred a 20 percent working interest for paying a
promote on certain forward costs in relation to the upcoming exploration campaign on
Block SB307/308 in the Sabah region offshore East Malaysia.
• PSC SB303: DYAS to be transferred a 20 percent working interest in the gas holding area
in Block SB303 in Sabah, offshore East Malaysia.
• PSC PM328: DYAS to be transferred a 15 percent working interest in PM328 in the Malay
basin, offshore Peninsular Malaysia.
Subsequent to this transaction, Lundin Petroleum holds a 65 percent working interest in
SB307/308, a 55 percent working interest in SB303 and a 35 percent working interest in
PM328.
DYAS is a Dutch, privately owned, experienced and active non-operating minority partner and
investor in oil and gas exploration and production projects, with a diverse portfolio of assets
primarily located in the Netherlands and UK North Sea.
Completion of this transaction is subject to approval from relevant authorities.

Azerbaijan, Indonesia to Deepen Energy Cooperation
Natural Gas Asia
Azerbaijan and Indonesia have agreed to further expand cooperate in the energy sector.
An agreement was signed on Monday in Baku during the Azerbaijan-Indonesia Energy Forum by
Azerbaijani deputy minister of energy Natig Abbasov and Director General for Oil and Gas at
Indonesia's Energy and Mineral Resources Ministry Gusti Nyoman Wiratmaja Puja, reported state
news agency Azertag.
"Success Azerbaijan has gained in the oil and gas industry paves the way for our cooperation with
other countries. Indonesia is one of these countries," the Azerbaijani minister said. “Both countries
have great energy potential. Azerbaijan can share its experience in the energy sector with
Indonesia, and the forum is of great significance from this point of view. One of the key objectives
of the forum is to explore a range of areas the two countries can cooperate in.”
Director General for Oil and Gas at Indonesia's Energy and Mineral Resources Ministry Gusti
Nyoman Wiratmaja Puja emphasized Indonesia`s interest in expanding cooperation with
Azerbaijan in the energy sector. He said mutual investment in the field of energy, especially active
participation of the private sector, would make a significant contribution to the development of the
bilateral relations.
The event also focused on the partnership between the Azerbaijani State Oil Company (SOCAR)
and Indonesian state oil company Pertamina, the news agency reported.

Mozambique: Sasol obtains approval for Mozambique field
development plan.. Source: Sasol
Sasol has obtained approval from the Mozambique Council of Ministers for its field development
plan (FDP) that will see further hydrocarbon resources developed to support Southern Africa
growth.
To be developed in phases, the first phase of the Production Sharing Agreement (PSA)
licence area development proposes an integrated oil, LPG and gas project adjacent to Sasol’s
existingPetroleum Production Agreement (PPA) area. The PPA area is where natural gas
from the Pande and Temane fields is currently produced and processed in a central processing
facility before being transported via an 865-km pipeline to gas markets in Mozambique and South
Africa.
'The Mozambican gas industry is playing an increasingly important role in the regional energy
landscape, and this project represents a major milestone in further developing natural resources,
which will significantly benefit Southern Africa,' said David Constable, President and Chief
Executive Officer, Sasol.
'The PSA development is aligned with our commitment to both Mozambique and South Africa,
and will enable us to drive our broader 2050 strategy, which reaffirms Sasol’s longer term role in
Southern Africa'.

India, government aid helps carmakers go green
and cheap to fight smog crisis…REUTERS + NEWBASE
Carmakers are gearing up to launch affordable hybrid and electric cars for India in the next few
years, executives said, lured by government incentives for fuel-efficient vehicles as the country
accelerates efforts to cut worsening air pollution.
As the industry descends on
smog-bound New Delhi for India's
biggest car show, starting
Wednesday, foreign firms like
Toyota Motor Corp will join
domestic players like Tata
Motors and Mahindra & Mahindra
in displaying green cars designed
to reel in potential buyers.
The stakes are high in one of the
fastest-growing car markets in the
world. While hybrid and electric
cars now make up a tiny fraction
of sales, new government aid
worth up to $2,000 per car could
help catapult green vehicles to
nearly a third of a 5 million car
market by 2020, IHS Automotive
says.
"It is not enough to just introduce
new technology in India, you have
to make it relevant for the market
and the buyers," said C.V. Raman,
head of engineering at Maruti
Suzuki India Ltd, India's top-
selling carmaker. India's rampant pollution has forced the government's hand. The Supreme
Court last month ordered an overnight temporary ban on the sale of large diesel cars in New
Delhi, among the world's most polluted cities.
Carmakers were left jittery, many having invested heavily in comparatively cheap diesel
technology over the years to conquer India. Reliance on imported parts still makes full-scale
hybrid technology cars expensive, but with India's new sales incentives, 'semi-hybrid' technology
is seen as a potential longer term solution.
HYBRID ACCELERATION
To incentivise carmakers, the government introduced a scheme last year called FAME - Faster
Adoption and Manufacturing of Hybrid and Electric cars - that offers concessions of up to 138,000
rupees ($2,032) on the sale of such cars.

The scheme, introduced before the New Delhi court order and originally planned for two years, will
now likely be extended till 2020.
To be sure, some carmakers, like General Motors Co, Hyundai Motor Co and Honda Motor Co,
are yet to be convinced on hybrid technology potential in India. Instead, they will focus their
presence at the New Delhi auto show on gas-guzzling sport-utility vehicles.
Toyota is among those now looking at bringing in a hybrid variant for future models, as well as
cars it now sells in India, which is also moving towards stricter emission norms.
"Our strategy is to go for hybridisation," said Naomi Ishii, head of Toyota's India unit. Ishii did not
give a specific timeline, but said the Japanese carmaker will first bring hybrid in for its top-end
models and then in the mass segment, mainly because of the high cost of imported components.
Meanwhile Maruti, majority-owned by Suzuki Motor Corp, has already invested in developing a
low-cost version of hybrid technology, irrespective of government incentives. Maruti says the
technology combines fuel efficiency and lower emissions, but is not as expensive as existing
traditional hybrid technology.

NewBase 02 February 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil falls on China economic woes, rising OPEC supply
Reuters + NewBase
Oil prices fell for a second session in Asian trade on Tuesday as worries about top energy
consumer China and rising oil supply weighed on markets, although possible talks between OPEC
and Russia on output cuts offered some support.
Brent for April delivery had dropped 56 cents to $33.68 a barrel as of 0358 GMT, after settling
down $1.75, or 4.9 percent, in the previous session. The front month contract for West Texas
Intermediate (WTI) was down 67 cents at $30.95 after falling $2.00, or 5.9 percent, the session
before.
Despite the declines, U.S. crude is still nearly 19 percent above the more than 12-year low of
$26.19 hit in mid-January.
"(Prices) have just come back to reality a bit, although they are holding water above $30 a barrel,"
said Ben Le Brun, market analyst at Sydney's OptionsXpress, pointing to concern over rising oil
supplies and weaker economic data.
Oil prices could nudge below $30 a barrel again if investors saw hopes fading of a deal between
members of oil producers cartel OPEC and Russia on production cuts, he said. Russia's energy
minister and Venezuela's oil minister discussed the possibility of holding joint consultations
between OPEC and non-OPEC countries in the near future, the Russian Energy Ministry said on
Monday.
Oil price special
coverage

But Goldman Sachs said it was "highly unlikely" OPEC producers would co-operate with Russia to
cut output, while also being self-defeating as stronger prices would bring previously shelved
production back to the market.
Crude prices fell after China's purchasing managers index dropped to a three-year low in January,
coupled with climbing oil supplies, ANZ said in a note on Tuesday.
"Rising supply also suggests further downside risk to short-term prices. Output from OPEC rose to
33.1 million barrels per day last month as Indonesia's membership to the group was reactivated,"
the note added.
Investors are waiting on a slew of economic data, including U.S. non-farm payroll and
unemployment figures and producer prices from the euro zone, to give oil markets further
direction, Le Brun added.
That came as U.S. commercial crude oil inventories likely rose by 4.7 million barrels last week to a
new record high of 499.6 million barrels, a preliminary Reuters survey taken ahead of industry and
official data showed on Monday.
Gasoline stocks likely rose 1.3 million barrels last week, while distillate inventories, which include
heating oil and diesel fuel, were seen falling 1.7 million barrels.
The Reuters poll was taken ahead of weekly inventory reports from industry group the American
Petroleum Institute (API), due out later on Tuesday, and the U.S. Department of Energy's Energy
Information Administration (EIA), due for release on Wednesday.
Elsewhere, production from Iraq's southern fields dropped to an average 3.9 million barrels per
day (bpd) in January from a record 4.13 million bpd the previous month, the oil ministry said.

Cheap oil less of a boon for US growth than in the past
Reuters
US consumers are cautious about spending their windfall from cheap gasoline and are saving
more, according to a Reuters poll and official data, suggesting low oil prices are less of a boon for
the US economy than in the past.
Commerce Department data shows that the crude’s 70% drop since mid-2014 cut households’
annual spending on gasoline and other energy products by $115bn, equivalent to roughly 0.5% of
gross domestic product.
At the same time, however, savings increased by $121bn and while the data gives no indication
where the money has come from, the survey suggests the windfall accounted for a significant part
of the sum.
The Reuters/Ipsos poll shows 75%
of 3,068 Americans who answered
questions on gasoline savings said
the extra money helped them cover
basic needs and the majority have
not used their windfall to buy big
ticket items. Over 40% of
respondents said the savings had
helped them pay down debts,
according to the Jan. 15-27 online
poll, which had a credibility interval of
plus or minus 1.8 percentage points.
“It obviously hurts less when I go to
the grocery store,” said Karen
Joines, a recruiting firm product
manager from Peachtree City,
Georgia. Joines, who participated in
the survey, estimates she saves $30
a week thanks to cheaper gasoline
but has no plans for big purchases,
in part because she worries low
prices will not last.
Some economists say such doubts
and the still-fresh scars of the 2007-
2009 recession could explain the
muted effect of cheap gas on
consumption. For example, the
economy only in mid-2014 recovered
the more than 7mn jobs lost during the downturn. “We don’t seem to be getting the benefits from
cheaper gasoline that we did when the economy was healthier,” said veteran oil economist and
independent consultant Phil Verleger.
Dallas Federal Reserve President Robert Kaplan said another reason Americans appeared wary
of spending what they saved at the pump could be that more and more of them were approaching
retirement.

“They are conscious of
that (and) they need to
save more,” Kaplan
told Reuters in an
interview. The Dallas
Fed, whose area
includes the oil
patches of Texas,
Louisiana and New
Mexico, estimates that
a 50% fall in oil prices
now adds around 0.5
percentage points to
economic growth over
a year, half of the
impact seen before
America’s oil boom.
One reason is that the
oil sector has grown over the past decade, so spending and job cuts there weigh more on the
whole economy. Cheaper oil also helps less because cars and machinery have become more fuel
efficient, according to the Dallas Fed.
Thanks to hydraulic fracturing and shale drilling boom that made the US the world’s top oil
producer in 2014, the nation also imports less oil than ever.
That goes to explain why in the public eye the modest benefits of cheap energy enjoyed by all get
overshadowed by the havoc the oil slump wreaked in the energy sector and the nation’s oil
patches.
Tumbling prices forced producers and oilfield services companies to slash budgets, driving some
into bankruptcy and many deep into the red. Markets have grown so bearish about the sector that
when oil producer Hess reported a fourth quarter loss of over $1.8bn, its shares have risen
because investors had braced for even more damage.
Yet even as job losses and lost tax revenues hit oil-producing states such as Texas or Alaska, the
drag on the US economy as a whole has been limited.
The oil-dominated mining sector accounted for just 1.6% of GDP in the third quarter and jobs in oil
and gas extraction and services account for 0.3% of US employment, down from 0.4% during the
boom years.
The investment in US mining structures, which is dominated by oil and gas exploration and well
drilling, has fallen at a $70bn annual rate since the fourth quarter of 2014, according to Commerce
Department data. Yet as Goldman Sachs estimates the overall drop in energy investment
subtracted only about 0.3 percentage points from 2015 economic growth.
Barclays economist Michael Gapen forecasts that a further decline in energy investment could
knock another 0.2% from this year’s US economic output.
The US job market also appears robust enough to absorb job losses in the energy sector and
related industries. Goldman Sachs estimates such losses at 30,000 to 35,000 a month, but that
compares with 292,000 jobs US economy as a whole added last month.

NewBase Special Coverage
News Agencies News Release 02 February 2016
Four Theories on How Oil Has Hypnotized the Global Stock Market
Bloomberg - Dani Burger
Even casual observers know oil is exerting uncommon influence on stocks. What’s less clear is
how the energy market has come to dominate sentiment in industries with seemingly no
connection to crude prices.
Understanding why oil is casting such a spell is more than an academic inquiry. The reason
matters, given how big the moves have been. Almost $1.6 trillion has been erased from U.S.
stocks in 2016. If oil is contributing, it’d be nice to know why.
Here are four theories on what’s underpinning the connection. They range from a straight
economic signal to speculation oil’s plunge threatens to lay low everything up to and including the
financial system. None is authoritative -- it can’t be -- and it’s possible that something else entirely
is only making it seem like oil and stocks are moving in lockstep. But these are the hypotheses
most often cited by equity investors this week.
1) The Economy
Theory: oil traders have sassed out information on the direction of the global economy and the
plunging price reflects a world hurtling into a recession. U.S. stocks have taken note, or have
drawn the same conclusion on their own.

“Oil is a proxy for global demand and growth and there’s a real view that as prices move it’s
reflective of the global economy,” says Michael Arone, the Boston-based chief investment
strategist at State Street Global Advisors’ U.S. Intermediary Business. “Who’s leading who is
perhaps hard to tell here, but it certainly seems both are indicating concerns about the world
economy. ”
Skeptics would say oil’s fall is an overproduction issue: the demand side has yet to wane and
signal a collapse in global growth. Still, coupled with fears of China’s shrinking appetite, bears
persist in pinning oil’s plunge to concern about demand.
2) Credit
Theory: The price of crude underpins the value of so many corporate bonds and loans that its 57
percent decline since June will ignite a crush of defaults that bankrupt hedge funds and banks.
Energy makes up a fair portion of riskier bonds: 19 percent of the Bloomberg High Yield Index, or
$284.1 billion.

“The major risk banks have is not to their normal retail-oriented stuff, it’s to the oil space,” says
Andrew Brenner, head of international fixed income at National Alliance Capital Markets in New
York. “Shale drillers and various oil situations have made up an increasing amount of high yield
lately, and banks have lent a lot of money to energy, so you have the high-yield loop and you have
the financials loop.”
Default rates in the oil patch could reach as much as 15 percent this year, with the overall
corporate default rate rising to 7 percent, according to BCA Research Inc. That’s almost double
the pace of the mid-1980s, when an oil price correction sent energy sector defaults soaring.
Furthermore, energy companies are on the hook for $190 billion, or 2 percent of all bank loans,
according to BCA.
If prices stay sub-$30 a barrel, smaller energy companies that borrowed money to finance projects
may be unable to repay their debt or funnel cash to shareholders. There’s fear of contagion
beyond energy and financials: banks could react by tightening credit lines, thus magnifying the
credit crunch. That fear fuels a broader selloff in equities.
3) Investment
Theory: Energy and commodity companies do so much hiring and building in the U.S. economy
and when they stop, earnings will suffer both within and outside of the industry.
“The energy space was the fastest growing part of the U.S. economy post-financial crisis and now
it reverses. Businesses are shuttered and people are laid off,” said Nick Sargen, who helps
manage $46.2 billion as chief economist and senior investment adviser for Fort Washington
Investment Advisors Inc. “There are some people beginning to worry that this thing could spread
like the subprime crisis. People had said then that it was too small to matter, and then you find out
there are linkages you didn’t know about.”

Although cheap oil is theoretically a boon to stores and restaurants, equities take a bigger cue
from business spending, much of which is tied to commodities. In 2014, the energy sector
accounted for nearly one-third of S&P 500 capital expenditures, according to data compiled by
Bloomberg. The average energy company spent $5.7 billion on capex that year, compared with an
average $1.5 billion in the overall index.
Jobs in fields such as drilling, fracking and rigs make up 0.4 percent of total U.S. employment, and
1.6 percent of real value added, according to BCA. Investors are concerned that energy’s
contribution to the U.S. economy will evaporate as oil sinks, said Sargen.
4) Pain trade
Theory: The world’s biggest investors are being forced to sell everything that isn’t nailed down to
offset the hit they are taking on their crude holdings. After getting pummeled in commodity trading,
investors may be stepping into stocks and unloading.
“If you have a multi-asset portfolio and you’re looking to de-risk and you have problems in one
sector, you’ll attempt to sell others to get your overall risk profile lower,” says Krishna Memani,
chief investment officer at Oppenheimer Funds Inc. in New York. “Credit markets were tanking, oil
markets tanking and equities were at their highs so where do you go to reduce risk? You go to
equities.”
One big seller may be oil-rich nations from the Middle East to Latin America, which account for
about 5 percent to 10 percent of global assets. After years of using oil money to buy assets, now
they’re selling them, sending petrodollars pouring out of investment vehicles like sovereign-wealth
funds, stabilization funds, development funds, and foreign-exchange reserves sitting in central
banks.
The gross flow of petrodollars into the global economy last year fell to as little as $200 billion,
down from nearly $800 billion in 2012, according to Royal Bank of Scotland Group Plc.

Saudi's China challenge: How much can it pay for oil market share
REUTERS - CLYDE RUSSELL
It's probably no coincidence that Saudi Aramco revealed it is in advanced talks to buy stakes in
Chinese refineries just as data came out showing that Russia toppled Saudi Arabia as China's
biggest crude provider in December.
This was the fourth month this occurred in 2015, underscoring that state-owned Saudi Aramco,
the world's largest oil exporter, is facing serious competition in maintaining its market share in
China, which may overtake the United States as the world's largest crude importer in 2016.
China imported 50.55 million tonnes of crude from Saudi Arabia in 2015, according to customs
data, up 1.8 percent from the previous year.
That is equivalent to about 1.01 million barrels per day (bpd) and roughly in line with the 1.1
million bpd in term contracts the Saudis are believed to hold with Chinese refineries.
The likelihood is that China's imports from Saudi Arabia won't show much change this year, given
the renewal of term crude contracts at the same volumes as in 2015, although shipments could
rise if refineries request more crude than they are contractually obligated to buy.
Saudi Arabia's market share of Chinese imports was 15 percent in 2015, down from 16.1 percent
in 2014 and significantly lower than 20 percent in 2012. Still, Saudi exports to China have been
remarkably stable, at 53.91 million tonnes in 2012, 53.9 million in 2013 and 49.67 million in 2014.
This shows that while Chinese refiners are more than willing to enter into term contracts for
substantial volumes, crucially, they haven't been seeking to boost the amount of contracted
volumes from Saudi Arabia in recent years.

Rather, Chinese refineries have been diversifying their supply base, which makes sense from both
a business and strategic viewpoint. Russia exported 42.43 million tonnes of crude to China in
2015, up 28.2 percent on the prior year, giving it a market share of 12.6 percent last year, up from
10.7 percent in 2014.
Among other major suppliers, Iraq increased exports to China by 12.4 percent and Brazil by 98.4
percent, while volumes from Angola and Iran fell 4.8 percent and 3.1 percent, respectively.
It's likely, however, that with the easing of Western sanctions against Iran in the wake of the
nuclear agreement, Tehran will seek to regain some of its lost market share, which could put
pressure on similar Middle Eastern grades supplied by Iraq, Kuwait and the United Arab Emirates.
Chinese refiners are most likely quite willing to encourage competition among suppliers, especially
in an environment of low crude prices, although the question has to be asked how Saudi Arabia
will respond. It's unlikely that Saudi Aramco is happy just to keep volumes supplied to China
steady, which would cede market share as overall imports keep growing.
China and India are likely to be the drivers of crude oil demand growth in coming years, and the
Saudis will want to ensure they maintain their position as the supplier of choice in both of those
markets.
REPLICATING U.S. SUCCESS
Saudi Aramco may be trying to pursue a strategy in China similar to what has worked well for it in
the United States.
There, the company bought into the refining industry in 1988 by acquiring a 50 percent stake in
Texaco's operations, and this has over the years morphed into the 50-50 joint venture with Royal
Dutch Shell known as Motiva.
Owning refineries and providing the right type of crude for them to run optimally has enabled
Saudi Arabia to keep its exports to the United States relatively constant at around 1.2 million bpd
since 2009, even as tanker arrivals from other countries halved to 3 million bpd, according to
Reuters market analyst John Kemp.
Saudi Aramco Chairman Khalid al-Falih told reporters last week that the company was in talks
with China's oil majors, China National Petroleum Corp [CNPET.UL] and Sinopec, for joint
ventures at "many refineries".
This would expand to China the existing cooperation between the two nations, with state-owned
Sinopec being a partner in the kingdom's 400,000 bpd Yasref plant. If Saudi Aramco is looking to
do nothing more than make sure its volumes of exports to China don't decline, then buying stakes
in Chinese refineries will probably work well.
However, if the Middle Eastern energy giant wants to reclaim lost market share, besides buying
significant stakes in many refineries, it will also have to somehow encourage CNPC and Sinopec
to boost contracted volumes. If Aramco wanted to regain a 20 percent share of China's imports,
this would imply boosting exports by about 300,000 bpd to around 1.4 million bpd.

To make sure Saudi crude was being processed at that level, how much refining capacity would
they have to become joint venture partners in?
A fair assumption would be at least 1 million bpd, meaning the Saudis would have to spend
billions of dollars buying stakes, assuming the Chinese would be willing to sell this much.
This raises questions as to whether Saudi Aramco currently has the balance sheet strength for
such an investment, and further fuels speculation as to why the company may be willing to sell
part of itself, or its units, to outside investors.
Saudi Aramco is considering various ideas over the possible listing of the company or its
subsidiaries, the Wall Street Journal reported on Jan. 11, citing an interview with the chairman.
Much will depend on the scale of the Saudi ambition, whether keeping volumes relatively steady is
enough, or whether absolute market share is the more important long-term goal.

UAE : Dubai to host WEPC Forum 2016 ( 14-15 Mar-16)
NewBase
WEPC 2016 is a global platform for senior professionals to come on board to share, listen and
learn from their peers and counterparts having same challenges with respect to EPC.
The execution phase of industrial projects such as Oil & Gas , Power etc. projects consists of
detailed engineering, procurement and construction, normally known as EPC and starts after Ainal
investment decision by the owners.
Companies who provide an integrated engineering, procurement and construction services are
called EPC contractors. Managing the EPC contracts are usually complicated and require special
expertise and knowledge, especially in the present low oil prices scenario.
The FORUM will provide an opportunity to have overview of such expertise and knowledge. In
particular, the attributes of EPC business, EPC project lifecycle, phases and gates will be
discussed , the Alow of engineering activities and interconnections between engineering
disciplines will be debated as described, and the fundamentals of project procurement
management and administration, logistics, bidding and contracting are planned to be reviewed.
Also, it is planned to introduce and discuss the major construction management activities are
explained and tools & techniques to monitor and control project performance by experts in EPC
Aields.
The Forum covers in-depth on the following topics:
• Risk Management
• Influence of low oil prices on Contracting

• Examining the impact of quality management on project costs and schedule and life-cycle
costs
• Best Practices for Project Management
• International perspective on how quality is managed on mega-projects
• Best Practices for Contractor Performance Management
• Different contracting strategies for the EPC Contractor
• Delivering efficient project cost estimations to minimise the risk and deliver accurate cost
expectations
Format of the Forum:
The forum is predominantly based on the interactive format which will include presentations, case
studies and knowledge sharing sessions.
The forum under the leadership of Executive Committee, will formulate a rich interactive exchange
which will discuss the most pertinent challenges faced by you in dealing with the EPC
The Steering Committee would greatly benefit from your expertise as well as contribute
extensively to the industry’s future methods to manage these issues.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
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 02 February 2016 K. Al Awadi

New base 778 special 02 februaury 2016 r2

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