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NewBase 10 September 2015 - Issue No. 684 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE: IMC Awards function concluded with recognition yesterday. NewBase
IMC Golden Helm Excellence Awards 2015 for Middle East has recognised individuals whose outstanding career achievements in Shipping, Marine, Offshore and Oil and Gas field has earned them national or international prominence.
These contributions can encompass leadership, publications, academics, statutory regulatory compliance, innovation, management & administration, trade & export or QHSE service. The recipient have demonstrated the highest level of professionalism, contributed towards the development of the maritime field in the Middle East and served as a role model for current and future maritime professionals. Main Categories: IMC Golden Helm Excellence Award 2015 for Maritime Services IMC Golden Helm Excellence Award 2015 for Offshore Services IMC Golden Helm Excellence Award 2015 for Oil and Gas Services
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Qatar scores high in BMI trade, investment market risks index Gulf Times + NewBase
Qatar’s most liberal tax regime, lack of bureaucratic obstacles for businesses, and an excellent rule of law have enabled the country to earn a high score of 63.8 on 100 in the BMI Trade and Investment Market Risks Index, ranking the country second in the Mena region.
Opportunities for investment in Qatar have opened up in recent years due to the requirements of hosting the FIFA World Cup in 2022, which has resulted in a booming construction sector, and the continuing importance of the LNG (liquefied natural gas) export market, BMI Research said in a recent report.
The most significant assets for Qatar in terms of trade and investment market risks are its liberal tax regime and lack of red tape. It means that the country comes highest in the region for government intervention, with a score 76.6. This indicates that there are very few barriers to trade in terms of high taxes on foreign businesses or arduous bureaucratic procedures for setting up a company, BMI Research said.
BMI notes that there are almost no risks to investors in this regard, other than the long amount of time required to close a business.
Legislation concerning actual property and intellectual property rights in Qatar is well established and enforced, while the country is moving towards excellent e-governance readiness. Qatar therefore scores highly for legal risks, with 71.7 placing it second in the Mena (Middle East and North Africa), BMI said.
Qatar is limited in terms of its openness to foreign direct investment (FDI) due to its historic reliance on revenues from gas and oil exports, which have been invested back into the economy, negating the need for outside investment. Consequently, Qatari investors are favoured by law, with entirely foreign-owned businesses are restricted to certain industries, and a 49% limit on foreign capital is imposed for most ventures.
BMI highlights these restrictions as “risks for businesses” because they limit the options and potential returns for investors in Qatar. The country, therefore receives its lowest trade and investment market risks score for ‘economic openness’, which at 43 ranks it ninth in the region.
In BMI’s opinion, the most promising options for investors in the country remain the LNG industry, which has traditionally been the most open to FDI, and the construction sector.
In addition, the 100% foreign ownership permitted for businesses in the agriculture, industry, health, education, tourism, and finance sectors, means that these industries may prove attractive options for investment, BMI Research said.
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Saudi oil Expectations of shake-up stir uncertainty By Reuters - Rania El Gamal and Angus McDowall
A shake-up of Saudi Arabia's oil leadership by King Salman has introduced a new element of unpredictability to its energy policymaking at a moment when Riyadh is grappling with slumping crude prices and its war in neighbouring Yemen. State oil giant Aramco has been without a permanent chief executive since April, when Khalid al-Falih was made health minister, and the old Supreme Petroleum Council, where energy policy was historically made, was abolished in January.
While the world's top crude exporter has always prized stability and consistency in crafting oil policy, the changes, alongside a shift in market strategy that contributed to the world price slump, have left analysts and traders guessing as to King Salman's long-term vision. The main tenets of Saudi oil policy - maintaining the ability to stabilise markets via an expensive spare-capacity cushion and a reluctance to interfere in the market for political reasons - are still set in stone, say market insiders. But the uncertainty has led to speculation over the fate of both veteran Oil Minister Ali al-Naimi and the wider composition of the kingdom's energy and minerals sectors, with rumours abounding that a sweeping restructure could be imminent. "There will be changes (at the oil ministry), but no one knows when or what will happen next. It could be tomorrow, next week or a month from now," said a Saudi insider. "The decisions are being taken by a small circle of people and a few advisers." The key person in that small circle is Prince Mohammed bin Salman, the young deputy crown prince who without having any previous oil experience has emerged since his father's accession to power as the most powerful figure in Saudi economic and energy policy. The prince heads both an economic development super committee and a new council overseeing Aramco, making him the first royal ever to directly supervise the state oil giant, the world's biggest energy company. The sense of unpredictability has only been sharpened by the wider geopolitical and market climate. "It's anybody's guess what will happen next," said a Western diplomat in Riyadh.
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Saudi Arabia maintained crude oil market share in Asia in the first half of 2015. Source: U.S. E I A, based on Global Trade Information Services and Apex
In the first half of 2015, Saudi Arabia exported on average 4.4 million barrels per day (b/d) of crude oil to seven major trading partners in Asia, making up more than half of Saudi Arabia's total crude oil exports over that period.
Even as global crude oil prices fell in 2014 and 2015, Saudi Arabia increased production and kept its export levels high, enabling it to maintain its market share in these countries. However, long-term trends within Saudi Arabia's energy sector may reduce its global crude oil market share.
In many past situations where global oil markets have experienced a supply glut and relatively low prices, Saudi Arabia has adjusted production levels in an attempt to raise prices. In 2014 and 2015, however, Saudi Arabia decided to focus more on maintaining its crude oil market share among its customers, particularly in Asia, where much of the recent growth in liquid fuels demand has occurred.
From January to June 2015, total crude oil imports reported for seven Asian countries averaged 19.1 million barrels per day (b/d), about 700,000 b/d higher than during the same period in 2014. The share of these crude oil imports from Saudi Arabia averaged 23.2% from January to June, compared to 23.9% in the same period in 2014. Saudi Arabian crude oil import shares were nearly unchanged in China, Japan, India, South Korea, Taiwan, and Thailand, while declining in Singapore.
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Long-term trends within Saudi Arabia's domestic energy sector in addition to competition from other crude oil-exporting nations may result in a decline in Saudi Arabia's global crude oil market share.
Saudi Arabia has invested heavily in its refining sector in an effort to reduce petroleum product imports, decrease its reliance on using crude oil for power generation, and shift towards exporting more petroleum products. With the commissioning of two major refineries in the past two years, Saudi Arabia added 800,000 b/d of refining capacity, which now stands at roughly 2.9 million b/d.
According to data from the Joint Organizations Data Initiative (JODI), Saudi Arabia's crude oil refinery input (the amount of crude oil processed domestically) has been gradually rising since 2014, and it reached a record 2.4 million b/d in May before dropping in June.
If Saudi Arabia continues to increase its refinery input, the amount of crude oil available for export may decline, reducing its crude oil market share not only in Asia but in other regions as well. However, with increased production of petroleum products from their new refineries, Saudi Arabia could gain market share in the distillate, jet fuel, and gasoline markets.
Competition from countries exporting crude oil can also affect Saudi Arabia's share in Asian markets. Russia is exporting more crude oil to China and Japan and temporarily surpassed Saudi Arabia's market share in China in May 2015. The potential for increased Iranian crude oil on the global market could also displace imports of Saudi Arabian crude oil.
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Egypt: Eni sees Egypt's Zohr gas field investment at $6-10 billion Source: Reuters
Eni expects a total investment of between $6-10 billion for the development of the Zohr gas field in Egypt, the chief executive of the Italian oil and gas group told a senate hearing in Rome.
'It's too early to make estimates, we are still refining the numbers. I can only say that it's an easy field. The Egyptian energy minister has given an estimate of $6-7 billion, which is a reasonable order of magnitude,' Claudio Descalzi said. 'I think we will remain within $10 billion for the overall development of the field.'
He also said that he expected Italian oil services group Saipem to play a big role in the development of the field, without giving details.
See related article: Eni discovers a supergiant gas field in the Egyptian offshore - the largest ever found in the Mediterranean Sea .
Zohr Discover Will Not Cover Egypt's Energy Needs for Next Four Years Egypt's new gas discovery will not cover energy needs in the next four years, according to Khaled Abu Bakr, Executive Chairman of energy firm Taqa Arabia.
While speaking at Euromoney conference on Tuesday in Cairo he said it will take about five years for the full infrastructure associated with the gas find to be built, reported Daily News Egypt.
The gas discovery will, when ready, enhance Egypt's economy, reduce the budget deficit and create job opportunities, he added. Eni late last month said it has made a “world class supergiant gas discovery” at its Zohr prospect, in the deep waters of Egypt.
According to Eni, the discovery could hold a potential of 30 trillion cubic feet of lean gas in place (5.5 billion barrels of oil equivalent in place) covering an area of about 100 square kilometres. Zohr is the largest gas discovery ever made in Egypt and in the Mediterranean Sea and could become one of the world’s largest natural-gas finds.
This exploration success will give a major contribution in satisfying Egypt’s natural gas demand for
decades, Eni said. Abu Bakr said the Egyptian government has to design an effective energy policy, liberalise the market and cut energy subsidies in order to boost the energy sector.
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Kenya: Erin Energy awarded licence extension offshore Kenya - still seeking farm-in partners . Source: Erin Energy
Erin Energy has obtained an eighteen-month extension of the Initial Exploration Period (IEP) of its offshore Kenya Blocks, L27 and L28. The IEP on blocks L27 and L28 has been extended to February 2017.
'We are delighted to receive this eighteen-month extension,' said Segun Omidele, Senior Vice President, Exploration and Production. 'This additional time to evaluate these blocks will allow us to acquire 3D seismic data and to look for suitable partners on the blocks.'
The extension of the IEP of the Production Sharing Contracts for Blocks L27 and L28 is effective as of August 9, 2015. The required work remaining includes the acquisition, processing, and interpretation of 3D seismic data on both blocks. Erin Energy is the operator and has a 100% interest in both offshore blocks.
Location of Erin Energy's onshore and offshore Kenya blocks
Note: Erin Energy, on August 21 2015, was given approval by the government of Kenya to enter the First Additional Exploration Period (FAEP) on its onshore Kenya Blocks, L1B and L16.
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EU: GE’s Alstom buyout approved by EU AFP + Oman Observer
Strasbourg, France: The EU announced it had approved a deal for US giant General Electric to acquire the energy business of French company Alstom for 12 billion euros ($13.4 billion), after Alstom agreed to sell some assets to an Italian rival.
The decision ends months of uncertainty and tension over the deal, part of a drive by the American conglomerate to stake more of its future on industrial operations.
EU anti-trust regulators had expressed concern the deal could lead to too much concentration in the gas-turbine sector, leaving only GE and Siemens in the highly strategic market.
“Following an in-depth review, the Commission has approved the acquisition of Alstom’s energy businesses by General Electric subject to divestment of central parts of Alstom’s heavy duty gas turbines business to Ansaldo,” the European Commission said. EU Competition Commissioner Margrethe Vestager said her greenlight was a “big deal”, opening the way to GE’s biggest-ever acquisition.
With it, GE also succeeds where it fell short with the EU’s 2001 rejection of a takeover of fellow US giant Honeywell, which sent a shockwave across the world of big business.
Vestager said “the case illustrates that Europe is open to investment” but that “you cannot buy your way to a monopoly.” With the Alstom decision now behind her, the tough-minded former Danish finance minister must focus on Google, the US Internet giant.
The EU has filed formal anti-trust charges against Google’s shopping services, but the Silicon Valley firm is not backing down calling the accusations “wrong”. GE hailed the EU green light.
“We are very happy with this decision,” said Mark Hutchinson, the GE executive in charge of handling the Alstom buyout. “We wanted to preserve the economic rationale for this transaction. We believe we have achieved that,” he said.
Alstom CEO Patrick Kron said that in addition to fulfilling the EU’s wish to maintain competition, GE’s commitments “protect the interests of Alstom employees, shareholders and customers.”
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NewBase 10 September - 2015 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices fall as Asia's leading economies Reuters + NewBase
Oil prices fell on Thursday as weak Japanese and Chinese economic data fueled concerns that low levels of investment could further erode already slowing global growth. Japan's core machinery orders fell 3.6 percent in July, official data showed, much worse than a 3.7 percent increase expected by economists, and followed a 7.9 percent month-on-month decline in June. In Asia's biggest economy China, the producer price index fell 5.9 percent in August from the same period last year, its 42nd consecutive month of decline and the biggest drop since the depths of the global financial crisis in late 2009, data showed on Thursday. With many economies facing headwinds, ANZ bank said global growth for 2016 and 2017 would hold around 3.5 percent, revised down from the 4 percent it had previously forecast. ANZ added that "in the near term the risks are skewed to further downward revision." Benchmark Brent crude oil futures fell by around 1 percent to $47.09 per barrel at 0433 GMT. U.S. crude futures were down 0.8 percent at $43.79 a barrel.
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Oil prices have fallen by more than 50 percent since June 2014 as soaring output clashed with slowing economies in Asia, the main growth engine for commodities over the previous years. The weakening in Asia's economies and commodity demand is having far-reaching effects. On Wednesday, Standard & Poor's downgraded Brazil to a junk-grade credit rating, just seven years after it first won an investment-grade rating. Brazil, one of the main commodity exporters to China and a member of the so-called BRICS emerging economies - Brazil, Russia, India, China and South Africa - was until recently seen as one of the key drivers of the global economy. The oil price fall was compounded after the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, decided last November to keep output high in favor of market share over prices. "In the first half of 2015, Saudi Arabia exported on average 4.4 million barrels per day (b/d) of crude oil to seven major trading partners in Asia, making up more than half of Saudi Arabia's total crude oil exports over that period," the U.S. Energy Information Administration (EIA) said. "Even as global crude oil prices fell in 2014 and 2015, Saudi Arabia increased production and kept its export levels high, enabling it to maintain its market share in these countries," the EIA added.
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Global Energy E&P cuts topping U$D132 Billion in 2 years Bloomberg + Gulf News + NewBase
The global energy industry is cutting $132 billion in exploration and production spending this year, and then some more next year, according to Barclays Plc.
It will be the first back-to-back decline in spending since the crude crash of the 1980s as
producers are poised to reduce development budgets by 3 to 8 per cent in 2016, following a 20 decrease this year, Barclays research analysts led by J. David Anderson wrote in a report published Tuesday. North American cuts may be deeper, dropping as much as 15 per cent next year after a 35 per cent decline in 2015, the analysts said.
Producers worldwide have been delaying projects, cancelling rig contracts and cutting jobs as a prolonged rout has kept crude prices more than 50 per cent lower than last year’s peak.
“If oil prices move lower or continue to be volatile, we could expect actual spend to come in at the low-end or below company budgets,” the analysts wrote.
The analysts based their outlook on surveys of about 175 oil and gas companies between Aug. 10 and Sept. 2 that relied on news releases, public commentary and discussions with executives. The results should be interpreted as a snapshot of company views in a period where Brent oil prices traded around $55 a barrel and West Texas Intermediate prices averaged about $50 a barrel, according to the report.
US crude for October delivery declined 0.2 per cent to close at $45.94 a barrel on the New York Mercantile Exchange. Brent crude gained 4 per cent in London to settle at $49.52.
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NewBase Special Coverage
News Agencies News Release 10 Sep. 2015
UK: Low oil price accelerating decommissioning in the UKCS Wood Mac + NewBase
A high oil price has enabled operators to extend field life and delay decommissioning time and time again on the UK continental shelf (UKCS), however the current low oil price has brought into stark relief that this cannot continue indefinitely concludes a new analysis by Wood Mackenzie.
The report, prepared for Offshore Europe 2015, forecasts that while a small number of decommissioning projects have been completed to date, decommissioning activity and spend are forecast to ramp up over the next five years as mature fields are no longer economically viable in a low oil price environment. 140 fields could cease over the next five years. Ms. Fiona Legate, UK upstream research analyst for Wood Mackenzie elaborates: "In 2015 operators have reacted to the low oil price environment by deferring spend and delaying sanction of new developments. We have analysed the impact of the low oil price on decommissioning activity looking at the timing of cessation, retained decommissioning liabilities from previous deals and batch decommissioning." Wood Mackenzie forecasts that around 140 UKCS fields will cease over the next five years even if oil prices return to US$85 a barrel ($/bbl). However we may
see around 50 fields ceasing even earlier than expected if the oil price returns to a level around US$70/bbl. This is compared with 38 new fields that are expected to be brought on stream in the same time. "17 fields are expected to be sanctioned over the next 5 years. In the current price
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environment there is a risk projects may be cancelled or delayed. We could start to see a shift away from work in new developments to decommissioning projects," Ms Legate explains. And with a shift in activity, so too would be a corresponding shift in spend: "We expect around £54 billion (in nominal terms) will be spent on decommissioning on the UKCS and anticipate it to be completed in the early 2060's. Decommissioning spend is expected to increase by over 50% by 2019 and will overtake development spend in the same year. "There have been announcements of five fields to be retired early this year, none of which have come as a surprise. The fields most likely to be decommissioned are uneconomic without high oil prices to justify escalating maintenance costs and declining production which are unable to support the high operating costs. 30 fields have been abandoned in the UKCS to date and companies have gone through a steep learning curve. The costs assumptions for decommissioning projects are higher than estimates from ten years ago as there is more knowledge of what is involved, through regular decommissioning reviews; benchmarking against previous projects and more accurate estimates as the industry seeks costs savings across the board. Stricter plugging and abandonment rules have also driven up well abandonment costs." Ms. Legate says. In fact with decommissioning costs top of mind for mature assets, it's become more common for sellers to retain decommissioning liabilities as is the case with fields such as Beatrice, Heather and Kittiwake. "Buyers want to protect themselves from the burden of decommissioning liabilities, especially on mature assets." Ms. Legate qualifies. Wood Mackenzie concludes its analysis by offering one possible solution to managing costs:
"Batch decommissioning involves a group of fields being abandoned together. These are selected by geographical proximity, operator or play. Our analysis takes a group of geographically close fields in three sectors (the central north sea, northern north sea and southern gas basin) and applies reductions to get an indicative view of the benefits of batch decommissioning. By our estimations this could yield an average cost reduction of around 20% for small batches in the three sectors. " offers Ms. Legate in closing.
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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
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
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