New base special 14 september 2014

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NewBase 14 September 2014 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Dark clouds in the offing for oil
Saudi Gazette (SYED RASHID HUSAIN) + NewBase
Oil futures were registered at an eight-month low this week. On the New York Mercantile
Exchange, it was registered hovering around $91a barrel - the lowest since January 9. Brent was
also below $100 - floating around the $98 mark - the lowest seen since April 2013.
Demand growth is slowing. Demand for OPEC oil will be lower this year as well as next year, the
OPEC monthly oil report said.
Global demand is to grow by
1.05 million bpd in 2014 to
91.2 million barrels,
50,000bbls lower from earlier
projections and the demand
next year is expected to grow
1.19 million barrels per day
only - representing a marginal
downward adjustment.
Balance of supply and
demand for OPEC crude in
2014 was revised down by 0.2
million bpd from the previous month to stand at 29.5 million bpd In 2015. And the Paris-based IEA
was also not far behind - trimming its forecast for the rise in global oil demand this year for the
third month in a row, terming the recent slowdown in demand "nothing short of remarkable."
In its Monthly Oil Report, the IEA said it expected global oil demand to grow by 0.9 million bpd in
2014, a decrease of 65,000 bpd compared to last month's forecast and down by 300,000 bpd
since July. According to the IEA, oil demand growth in the second quarter was at its lowest in 2½
years.
Markets are reacting. Analysts are concerned. Brent futures are unlikely to repeat their
performance in the past two years, when dips below $100 a barrel were met by swift rebounds,
analysts at JBC Energy Market were reported as saying. Forecasts for economic growth are being
lowered, and worries about a potential recession are resurfacing in some parts of the world, they
added.
With demand growth slowing down, output is on radar. Saudi Arabia trimmed 400,000 bpd in
output last month, OPEC monthly market report said. As per the IEA, Saudi Arabia cut its output
by 330,000 barrels a day last month.

Melting markets are making some uneasy. Prices are too low for most OPEC countries to cover
their spending needs, a Reuters survey said. Although the cost of getting oil out of the ground is
low in most OPEC countries, growing social spending and ambitious infrastructure plans mean
many oil producers now earn less from their oil sales than they need to fund their budgets. Seven
of the 12 OPEC members, including Iraq, Iran and Nigeria, now need far higher oil prices to cover
their budgets, Reuters reported, quoting economists and industry analysts.
A number of other factors too are impacting - rather adversely. Rising costs and cost overruns on
oil mega projects, severe skilled manpower shortages, climate change concerns, low oil demand
growth, global economic weakness in the short term, and turmoil in oil-producing regions such as
Africa, the Middle East and the former Soviet Union - all point to uneasy calm in the market.
Instability and uncertainty continue to rule. And investments could be one major casualty. Despite
the North American shale revolution, the world needs Middle East oil for long-term sustainability
and market stability. Middle East will be crucial to meet the energy demand of a fast-growing
world, the IEA too has been underlining.
"We look at the Middle East, where increased investment remains absolutely critical to the longer
term outlook for oil markets, once the current surge in non OPEC production starts to plateau in
the 2020s," Maria van der Hoeven, executive director of the International Energy Agency said in
June. The IEA is of the view that an uncertain investment climate in oil-exporting Middle Eastern
countries may lead to a two million bpd shortfall and a $15 per barrel jump in oil prices by 2025.
The Middle East region has typically invested $62 billion each year on average over the past
decade in its oil sector, but it will need to steadily raise this to $78 billion each year until 2020, and
around $92 billion annually over the next decade, IEA estimates say. All in all, the Middle East
region needs to invest $3.2 trillion over the next two decades, with crude oil accounting for $1.9
trillion and natural gas garnering another $700 billion during the period.

"Yet the required upturn in investment is by no means guaranteed, even though the oil resources
of the Middle East remain ample and are among the cheapest in the world to develop," the IEA
insisted. There is also a creeping danger that OPEC revenues from oil exports will level off,
especially if non-OPEC supplies continue to rein in oil prices. Lower or flat prices could deter
Middle Eastern countries further from investing heavily in the energy sector, as required.
In addition, budget break-even
prices in many countries are
climbing up, leaving less free
cash for investments in the
sector. As per a report in Gulf
Business, the Gulf states'
breakeven prices rose from a
collective average of $43.2 per
barrel to $78.8 per barrel by
2011, as governments
loosened the purse strings and
showered a restive population
with salary hikes, subsidies
and job- stimulating
investments.
Speaking at the at the Offshore
Northern Seas energy
conference at Stavanger in
Norway late last month, Khalid
Al-Falih, Aramco CEO, warned
of an impending crisis. There
could be "downward pressure on supplies over the longer term, if the industry fails to make
prudent and timely investments."
Oil companies are squeezed between rising costs and shareholder demands, he said. The world's
oil fields are in decline, so the world needs to replace close to 40 million bpd of new capacity
within the next two decades, Al-Falih noted. “To put that figure into perspective, that’s equivalent
to approximately 30 Norway’s or 15 times America’s current unconventional oil production.” A lot
of those resources will be complex and expensive, such as shale oil and gas and heavy oil
projects.
"To tap these increasingly expensive oil resources, oil prices will need to be healthy enough to
attract needed investments," Al-Falih told a Reuters conference earlier. "Long-term prices will be
underpinned by more expensive marginal barrels."

Despite decline in some regions, world oil consumption still seen rising
Source: U.S. Energy Information Administration, International Energy Outlook 2014
The largest potential for growth in demand for liquid fuels lies in the emerging economies of China, India,
and countries in the Middle East, according to EIA's recently released International Energy Outlook 2014
(IEO2014). In the Reference case projection, world liquid fuels consumption increases 38% from 87 million
barrels per day (MMbbl/d) in 2010 to 119 MMbbl/d in 2040. China, India, and other developing countries in
Asia account for 72% of the net world increase in liquid fuels consumption, with Middle East consumers
accounting for another 13%. Most liquid fuel demand is for industrial uses and transportation.
In the United States, Europe, Japan, and other mature industrialized economies, liquid fuel demand has
leveled off and is projected to slowly decline. The combined effects of several factors have slowed or even
reversed the growth in liquid fuels use. These factors include sustained high oil prices, efficiency standards
for vehicles and equipment together with high taxation of motor fuels, price-driven fuel switching towards
non-oil fuels outside of transportation, vehicle saturation, as well as structural changes in factors such as
demographics and consumer behavior.
IEO2014 projects that 33 MMbbl/d of additional liquid fuel supply will be needed in 2040 compared to
2010 to satisfy growing demand for liquid fuels. The Reference case assumes that Organization of the
Petroleum Exporting Countries (OPEC) producers invest in incremental production capacity that enables
them to increase crude and lease condensate production by 14 MMbbl/d from 2010 to 2040 and that OPEC
crude and lease condensate producers maintain a share of between 40% and 45% of total world liquid fuels
production throughout the projection. The Middle East OPEC member countries alone account for 90% of
the total growth in projected OPEC crude and lease condensate production.

Non-OPEC crude and lease condensate production is projected to increase by 10 MMbbl/d between 2010
and 2040. Much of this production is projected to come from areas previously considered uneconomical, as
a combination of technological improvements and rising world oil prices attract additional investment. In
addition, oil from tight and shale resources will help to meet growing demand. Compared to previous
reports, IEO2014 incorporates larger new supplies of tight oil from the United States and Canada; but other
countries as well, including Mexico, Russia, Argentina, and China, begin producing substantial volumes of
tight oil in the IEO2014 Reference case.
Source: U.S. Energy Information Administration, International Energy Outlook 2014
Other liquid resources—including natural gas plant liquids, biofuels, coal-to-liquids, and gas-to-liquids—
currently supply a relatively small portion of total world petroleum and other liquid fuels, accounting for
about 14% of the total in 2010. However, they are expected to grow in importance, rising to 17% of the
world's total liquids supply in 2040.
In addition to the Reference case, the IEO2014 includes scenarios for low and high oil prices. The three
price cases examine a range of potential interactions of supply, demand, and prices in world liquids markets.
For additional information, see the full report.

US shale gas boom impacted GCC petrochemical Industeires
ArabianBusiness + NewBase
The increased competitiveness of the petrochemical industry in the United States due to the discovery of
large reserves of shale gas has impacted the Middle East, which is already grappling with reduced natural
gas supplies, a new report has
said.The adverse effects of these
developments have been particularly
felt by the Gulf Corporation Council
(GCC) countries, Frost & Sullivan
said in a new analysis. "Once the
exporting hub for natural gas, the
region has now transformed into an
import destination as the demand for
fossil fuel exceeds its supply," the
report said.
It added that this demand-supply gap
across most parts of the Middle East
has changed the competitive
dynamics in the global energy market
and demands quick remedial
measures. The Frost & Sullivan report found that the assessment of shale gas resources in the Middle East
has assumed critical importance since yields from conventional natural gas sources are fast declining.
"New unconventional energy discoveries are essential to ensure sustainable gas supplies and to reenergise
the region’s petrochemical industry," it added. “It will be prudent to unearth and tap the large volumes of
shale gas believed to be trapped in various countries across the region,” said a Frost & Sullivan chemicals,
materials & food research analyst.
“The kingdom of Saudi Arabia alone is likely to hold reserves close to 650 trillion cubic feet. While it might
not be economically viable to retrieve all these reserves, significant volumes can certainly be exploited.” He
added that regional governments have taken a hands-off approach and not responded adequately to the
decline in conventional natural gas production.
The longer governments in the Middle East delay implementing restorative measures, the more drastic
future corrective measures will have to be, he said.
“As such, the buck ends with the governments to launch short-term and long-term initiatives to renew the
region’s competitive advantage in the global petrochemical industry,” said the analyst. “Undertaking
surveys of unconventional energy sources would be a good start as it often takes several years before energy
reserves can be productively accessed.”

GCC fertiliser industry vital role in boosting global food security
Oman Observer + NewBase
The GCC’s export-oriented fertiliser industry is set to play a key role in fortifying global food
security, says a new report by the Gulf Petrochemicals & Chemicals Association (GPCA) and
Nexant. According to The
Role of GCC Fertilisers in
Addressing Food Security,
upcoming fertiliser
capacity additions for
ammonia and urea
products will be critical for
the farmlands in South and
South East Asia, highly
populous regions which
often lack natural
resources to produce
fertilisers for strengthening
agricultural productivity.
“In addition to gaining
valuable export revenues
for the region’s economies,
fertiliser producers will
soon make significant
contributions to the global
food banks,” said Dr
Abdulwahab al Sadoun,
Secretary General, GPCA.
“By 2030, the world will
need to feed an estimated
2 billion more people, so
fertilisers will be crucial in
ensuring that these
individuals have access to
edible, sufficient and
nutritious food.”
The Gulf’s fertiliser
capacity reached 42.7
million tonnes in 2013,
nearly half of which was
exported to markets
across the world, as per
GPCA data. The GCC’s
fertiliser sector is also
growing: production gained 4 per cent from the previous year, while the global fertiliser industry
grew by just 1.7 per cent in the same period.

Fertiliser sector growth has been augmented by the GCC’s vast reserves of natural gas, essential
for producing ammonia and urea
fertilisers. With relatively low
domestic demand, the Gulf’s
fertiliser exports are set continue to
rise in the long- term. The growth of
the GCC fertiliser industry, therefore,
has the potential not only to
overcome serious food security
challenges, but also to raise the
region’s profile as a major trade
partner and producer of high- value
commodities.”
The Role of GCC Fertilisers in
Addressing Food Security is an in-
depth report that surveys major
trends across the agriculture, food,
energy and petrochemical industries. Jointly produced by the GPCA and Nexant, it will be
released at GPCA’s Fertilizer Convention from September 16-18 in Dubai.

Poland resumes Ukraine gas supplies
Reuters + NewBase
Poland resumed natural gas deliveries to Ukraine yesterday after receiving a pledge that Russia’s
Gazprom would deliver requested supplies to Polish state-run gas importer PGNiG.
Poland, at odds with Russia over the standoff in Ukraine, stopped reverse flows to Ukraine.
PGNiG said it had received less gas than ordered on Wednesday and Thursday from Gazprom.
“We confirm that the Polish side has resumed gas supplies to Ukraine, the volume will be known
tomorrow,” a spokesman for the Ukrtransgas monopoly said.
Pipeline operator Gaz-System said it could resume reverse flows to Ukraine, reporting that Poland
received about 20 million cubic metres (mcm) of gas from Gazprom on Thursday, up from about
15mcm on Wednesday.
Gazprom, which meets about a third of the European Union’s gas demand, said it had been
pumping the same amount to Poland as the previous week although Reuters data showed
Russian gas flows to Poland this month are down 12 percent. Supplies this summer have also
been lower than last year, although they are significantly higher than two years ago. Utility traders
said the recent drop-off has been within the contractual norms.
“There may be some Russian maintenance work going on, or the Russians are injecting gas into
their own storage in preparation for winter. Or perhaps they are sending a warning signal to
Europe, because such a drop in the peak winter heating season will have a severe effect on the

system despite being within the rules of their contracts,” one utility trader said. PGNiG said on
Thursday it had received 45 percent less natural gas on Wednesday than it requested from
Gazprom.
Poland’s economy minister said Gazprom had promised to deliver requested gas supplies.
Disputes with Kiev have prompted
Russia to halt gas flows to Ukraine
three times in the past decade
including stoppages in 2006, 2009
and since June this year. So far in
the latest standoff, flows via Ukraine
for EU have been unaffected.
In Slovakia, the main entry point for
Russian supplies to the EU,
importer SPP said it had seen about
a 10 percent reduction in deliveries
yesterday.
The country, which opened a
pipeline in September able to
deliver natural gas from the EU to
Ukraine, also reassured Kiev it
would not disrupt these reverse
flows.
Opening up gas flows eastward was
part of the EU’s response to
Gazprom’s decision to cut supplies
to Kiev. Poland and Hungary can
also send gas to Ukraine but the
Slovak link boasts the biggest
capacity of the three.
“This involves concrete agreements
among companies,” Slovak Foreign
Minister Miroslav Lajcak said in
comments on Slovak news website
hnonline.sk.
“The government does not have the opportunity nor any interest to get involved in this.” Russian
gas deliveries to Austria were down as much as 15 percent yesterday but within a normal
fluctuation range for the season, oil and gas company OMV said.
Hungary’s pipeline operator said flows from Ukraine yesterday were running in line with its
contract with Gazprom while Romania’s imports of Russian gas were down five percent from
planned volumes.

Iran, Turkey to Reach Gas Price Agreement by Year End
Trend News + NewBase
Iran and Turkey are expected to reach an agreement on the price of natural gas that latter imports
from its eastern neighbour by the year end, according to Trend News.
“The parties have not come to a consensus about the gas prices up until now,” Turkish Minister of
Energy and Natural Resources Taner Yildiz said on Thursday. He added that Iran has tabled new
proposals for reduction in gas prices.
“According to these conditions, the gas prices can be reduced,” Yildiz was quoted by Trend as
saying.
Although official price is not made public, according to various reports, Turkey buys Iranian gas at
(10.55 $/MMBTU) $490 per 1,000 cubic meters, Trend added. Anakara pays $335 per 1,000 cubic
meters for Azerbaijani gas, which is supplied via the South Caucasus gas pipeline (Baku-Tbilisi-
Erzurum).
Russian gas costs Turkey $ 425 per 1,000 cubic meters. Turkey has been demanding Iran to
reduce the price of gas it exports.

Japan’s nuclear ramp up to weigh on Asia oil and gas market
The National + NewBase
The approval in Japan to restart nuclear reactors, the first since the earthquake and tsunami that
led to the Fukushima Daiichi nuclear plant disaster in 2011, is another bearish development for oil
and gas markets in Asia, the most important market for Middle East producers.
Japan’s Nuclear Regulation
Authority, last week gave final
approval to restart two reactors at
Kyushu Electric Power’s Sendai
plant, about 1,360 kilometres
south of Tokyo.
The plant’s two reactors had
been shut down after the
Fukushima disaster, along with
48 others across the country.
Now, the Sendai plant is the first
to have met the much tougher
standards set by the authority,
which was set up after the
disaster with a strict safety
mandate.
The Sendai reactors still must get
approvals from city and regional
governments before they can
resume operations, but they are
expected to be clear to start
producing electricity again from
early next year. Sendai is one of
10 utilities that have applied so far to get safety approval for 20 reactors. The shutdown of Japan’s
nuclear power sector has hit the country hard, both economically and environmentally.
According to the International Energy Agency, Japan’s carbon dioxide emissions rose by 70
million tonnes, or 5.8 per cent, in 2012, a rate of growth that had not been seen in two decades,
as fossil fuels were burnt to make up for the loss of 90 per cent of the electricity generation that
had been coming from nuclear power. About 30 per cent of Japan’s total electricity had been
supplied by the nuclear sector before the Fukushima disaster.
Japan’s prime minister, Shinzo Abe, has been making great efforts to soothe public opinion to
start getting nuclear capacity back online. The increase in fossil-fuel imports was also a large
contributor to Japan’s record trade deficit of ¥6.9 trillion (Dh236 billion) in 2012.
The most expensive and least efficient method of power generation is oil-fired, which accounts for
about 15 per cent of Japan’s power generation and will be first to be substituted, says Laszlo
Varro, the head of power, coal and natural gas analysis at the IEA.
However, the natural gas market is likely to feel the impact even more, as Japan has relied heavily
on LNG for gas-fired generation – which runs more consistently than oil-fired – to fill the power

generation gap left by nuclear. Now, says Mr Varro, “there is a feeling in the gas markets that
Japan has turned the corner”. The Japanese nuclear ramp-up comes at a time when a
considerable amount of new LNG supply is due on the market.
Australia has seven large LNG programmes at various stages of development, with total
investment of more than $200bn, and production from those plants is due to start hitting the Asian
market soon, adding to the more than 20 million tonnes a year of LNG Australia already exports
from its three big LNG plants.
Australia is set to surpass Qatar as the world’s biggest exporter of LNG, according to Citibank,
which forecasts Australia’s exports will climb to 83 million tonnes a year by 2020, compared with
79 million tonnes for Qatar. The market already has been weak, mainly because of lacklustre
economic performances in Asia and elsewhere.
LNG prices for delivery to north-east Asia were at US$12.50 per million British thermal units at the
end of last week, near to their lowest levels since 2011. The good news for Japan’s nuclear
industry is likely to darken the mood further in the LNG market.

US: Technip awarded subsea contract for the Kodiak project in the Gulf of Mexico
Source: Technip
Technip has been awarded by Deep Gulf Energy II LLC a lump sum contract for the development of the
Kodiak field, located in Mississippi Canyon Blocks 727 and 771, in the Gulf of Mexico, at water depths
ranging from 1,472 meters to 1,710 meters.
The project consists of a subsea tie-back to the Devils Tower Truss Spar located in Mississippi Canyon
Block 773. To withstand Kodiak field’s high temperature and pressure as well as extremely corrosive
production fluids, the pipeline will be of a bi-metallic construction, lined with corrosion resistant alloy(1).
This solution effectively addresses the challenges of increasingly demanding operating conditions.
This contract covers:
• project management,
• fabrication(2) and installation of more than 12 kilometers of reeled bi-metallic flowline and riser,
• installation of an 11-kilometer umbilical, associated terminations and flying leads,
• pre-commissioning and testing for the rigid line,
• crossings preparation along with pre-lay and post-lay survey.
Technip's operating center in Houston, Texas, USA, will perform the overall project management. The
infield flowline and riser will be welded at the Group’s spoolbase in Mobile, Alabama, USA. The offshore
installation is expected to be performed in the second half of 2015 by vessels from the Technip’s fleet: the
Deep Blue, one of the world's largest purpose-built ultra deepwater pipelay and subsea construction vessel,
and the Global Orion, a support vessel.
Deanna Goodwin, President North America at Technip, has declared: “We are delighted to have been
awarded this new project. Technip will leverage its unique subsea vertical integration, offering support to
our client, from concept to execution.”

China: CNOOC issues exploration tender for Open Blocks Offshore in 2014
Source: energy-pedia
State-run CNOOC has issued a tender inviting foreign firms to bid for 33 oil and gas blocks covering an
area of 126,108 sq km. A data room is available from Setember 11 to December 31 2014. Closing date for
bids is April 30 2015.

Your partner in Energy Services
Your partner in Energy Services

Khaled Malallah Al Awadi,
Energy Consultant
MSc. & BSc. Mechanical Engineering (HON), USA
ASME member since 1995
Emarat member since 1990
Mobile : +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 yearsKhaled Al Awadi is a UAE National with a total of 24 years of experience in theof experience in theof experience in theof experience in the Oil & Gas sector. Currently working asOil & Gas sector. Currently working asOil & Gas sector. Currently working asOil & Gas sector. Currently working as
Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external volTechnical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external volTechnical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external volTechnical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation foruntary Energy consultation foruntary Energy consultation foruntary Energy consultation for
the GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operationsthe GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operationsthe GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operationsthe 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 stationsManager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stationsManager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stationsManager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years , he has developed. Through the years , he has developed. Through the years , he has developed. Through the years , he has developed
great experiences in the designing & constructinggreat experiences in the designing & constructinggreat experiences in the designing & constructinggreat experiences in the designing & constructing of gas pipelines, gas metering & regulating stations and in the engineering of supplyof gas pipelines, gas metering & regulating stations and in the engineering of supplyof gas pipelines, gas metering & regulating stations and in the engineering of supplyof gas pipelines, gas metering & regulating stations and in the engineering of supply
routes. Many years were spent drafting, & compiling gas transportation , operatroutes. Many years were spent drafting, & compiling gas transportation , operatroutes. Many years were spent drafting, & compiling gas transportation , operatroutes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreements along with many MOUs forion & maintenance agreements along with many MOUs forion & maintenance agreements along with many MOUs forion & 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 andthe local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE andthe local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE andthe local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcastedEnergy program broadcastedEnergy program broadcastedEnergy program broadcasted
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NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
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