New base 782 special 08 februaury 2016

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NewBase 08 February 2016 - Issue No. 782 Edited & Produced by: Khaled Al Awadi

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Saudi, Venezuela oil ministers hold ‘successful’ talks on market Bloomberg + Gulf News + NewBase

Saudi Arabian Oil Minister Ali Al Naimi said he held “successful” talks with his Venezuelan counterpart about ways of cooperating to stabilise the crude market, without saying what steps producers should take to shore up prices.

The two ministers, who met on Sunday in Riyadh, discussed Venezuelan Oil Minister Eulogio Del Pino’s recent discussions with other crude producers and the results of those meetings that seek cooperation among suppliers to bring stability to the market, the Saudi ministry said in an emailed statement. Venezuela and Saudi Arabia, the biggest exporter, are both members of the Organisation of

Petroleum Exporting Countries (Opec), which supplies about 40 per cent of the world’s oil. “I’m very happy to meet and consult with my colleague Venezuelan Oil Minister Eulogio Del Pino,” Naimi said in the statement. “It was a successful meeting in a positive atmosphere,” he said, without elaborating.




Del Pino met with Al Naimi after visiting Russia, Iran, Qatar, and Oman on a tour to drum up support for Venezuela’s attempt to buttress oil prices. Saudi Arabia is the largest producer in Opec and led the group’s strategy in 2014 to defend market share against rival high-cost producers, including US shale drillers, instead of defending oil prices. Benchmark Brent crude fell 35 per cent in 2015 and a further 8.6 per cent this year. The contract finished 40 cents lower on Friday at $34.06 (Dh125.10) as barrel in London.

Oil Holds Drop After Saudi-Venezuela Talks

Oil held losses near $31 a barrel after Saudi Arabia and Venezuela met to discuss cooperating to stabilize the market and U.S. data signaled investors are split on the direction for prices.

Futures were little changed in New York after falling 8.1 percent last week. Saudi Arabian Oil Minister Ali al-Naimi met with his Venezuelan counterpart on Sunday in Riyadh, the Middle East nation’s petroleum ministry said in a statement, without elaborating on steps required to shore up the market. Speculators’ short positions on crude were near a record while longs were at the highest since June, lifting total wagers to unprecedented levels, data from the U.S. Commodity Futures Trading Commission show.

Oil is down about 16 percent this year amid concerns about Iran’s effort to boost exports after the removal of sanctions and brimming U.S. crude stockpiles. The nation’s drillers idled the most rigs since April last week as inventories rose above 500 million barrels to the highest level since 1930.

“There are very little signs of abatement on the supply side,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “West Texas is likely to trade between $30 and $34. We could get a push outside of this, but I suspect that’s going to be a central range for months to come.”

West Texas Intermediate for March delivery was at $30.97 a barrel on the New York Mercantile Exchange, up 8 cents, at 11:03 a.m. Hong Kong time. The contract fell 83 cents to $30.89 on Friday. Total volume traded was about 5 percent above the 100-day average. Prices lost 30 percent last year. Saudi Talks

Brent for April settlement was at $34.13 a barrel on the London-based ICE Futures Europe exchange, up 7 cents. The contract slid 2 percent last week. The European benchmark crude was at a premium of $1.33 to WTI for April.

Venezuela’s Oil Minister Eulogio Del Pino met with al-Naimi after visiting Russia, Iran, Qatar and Oman on a tour to drum up support for a coordinated approach to address the slide in prices. Six members of the Organization of Petroleum Exporting Countries and two non-OPEC producers would be open to attending an extraordinary meeting if one is called, the South American country said last week.

U.S. stockpiles remain more than 130 million barrels above the five-year average after expanding for a fourth week through Jan. 29, according to data from the Energy Information Administration. Rigs targeting oil fell by 31 to 467, the lowest since March 2010, Baker Hughes said on its website Friday.




China market electrifying for ‘green’ cars AFP + Gulf Times + NewBase

Government subsidies are fuelling a boom in electric vehicles in China, driving hopes for the industry’s global future as the world’s biggest car market offers economies of scale that could make the technology mainstream.

Sales of electric cars, though still modest, have rocketed four-fold in a year—thanks in part to lavish government handouts—as Beijing looks to cut down on dangerous air pollution that shrouds urban areas.

The sector has been a contrast with the rest of the market for cars in China, where growth has slowed markedly alongside the wider economy. And observers say if carmakers can crack China, with its vast population and burgeoning middle class, the rest of the planet could follow.

“If China gets moving on electric cars then that would automatically lower prices and have a favourable ripple effect across the whole world,” said Ernst and Young auto expert Jean-Francois Belorgey.

“Pollution levels mean the government has no other choice” than to encourage the development of new energy vehicles, he added. Chinese cities are regularly smothered in a haze of particulates, often far exceeding global health guidelines.

While much of the pollution comes from coal burning for industry, vehicle exhausts exacerbate the problem. Only 331,000 of the 24mn new cars sold in China last year were electric or plug-in hybrids.

Growing public anger has propelled Beijing to act, with central government subsidies of up to 55,000 yuan ($8,400) for buyers of zero- or low-emission vehicles, which are often matched by local authorities. The government says it wants 5mn “green” vehicles on the road by 2020 in the country of more than 1bn people.

Drivers of such cars can also avoid restrictions imposed on heavy smog days, when some cities limit vehicles according to their licence plate. They are also exempt from lotteries for plates several cities have set up in an attempt to cap on the total number of cars.

Domestic firms have benefited, with Warren Buffett-backed Chinese firm BYD claiming to be the biggest electric vehicle maker in the world. China’s Geely, which owns Volvo, is another major player, and says it wants to shift 90% of its sales to hybrid and electric vehicles by 2020 with the government’s blessing.




The subsidy incentives only apply to domestic brands, not foreign manufactured cars, and the government says it will gradually phase them out by 2020 to ensure the sector does not become dependent on handouts.

Despite the handicap, foreign firms have also tried to cash in on the potential gold rush.

France’s Renault is one of a growing number of foreign manufacturers that see China as an ideal test ground for low-cost electric vehicles that can attract buyers in other markets. The company opened its first Chinese factory last Monday in the central industrial hub of Wuhan and will start to produce electric cars there as early as next year, in co-operation with local company Dongfeng.

“If we can succeed in China we can succeed elsewhere,” says Renault CEO Carlos Ghosn, whose firm has already produced several models in Europe. US giant General Motors is making and selling its hybrid Cadillac CT6 in China, and exporting it to the US, according to reports.

Its American rival Ford has announced it will invest $4.5bn in electric cars between now and 2020, adding 13 models to its range, with a particular focus on China. Mercedes-Benz also sells several hybrid models in China, and Nissan has a version of its electric Leaf on the Chinese market, and has found favour with domestic consumers.

But as with other parts of the world, the market still remains on the margins because relatively high costs and a lack of charging stations has dampened public enthusiasm. “A large part of sales of vehicles with purely electric motors are transportation buses,” said Jia Xinguang, an expert from China Automotive Industry Consulting.

Another problem is that China generates most of the electric power which would be used to charge the cars from coal burning—the biggest source of the country’s smog. Analysts say that if they are charged from a mostly coal-powered electricity grid, pollutant emissions from electric cars could be higher than their petrol equivalents.

Plug-in hybrids may have the most growth potential, Jia believes, since they use a combination of combustion and a rechargeable electric battery, allaying drivers’ worries about short-lived batteries.




NewBase 08 February 2016 Khaled Al Awadi

NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE

Crude oil edges up in holiday-constrained trade Reuters + NewBase

Crude oil futures inched up on Monday in thin trade as many Asian markets were on holiday for Lunar New Year, with few trading cues expected until Federal Reserve Chair Janet Yellen gives testimony to lawmakers later in the week.

Global benchmark Brent futures were up 9 cents at $34.157 at 0403 GMT. They fell 40 cents to $34.06 a barrel on Friday. U.S. crude futures were also up 9 cents at $30.98, after falling 83 cents to $30.89 on Friday.

"The strength we saw in the middle of last week has not been completely overturned but the direction has reversed," said Ric Spooner, chief market analyst at CMC Markets in Sydney. The market is looking forward to Yellen's testimony on Wednesday along with U.S. crude inventory levels the same day, Spooner said.

A meeting between OPEC producers Saudi Arabia and Venezuela on Sunday to discuss coordination on prices ended with few signs there would be steps taken to boost prices. Saudi Arabia's oil minister Ali al-Naimi talked about cooperation between Organisation of Petroleum Exporting Countries members and other oil producers to stabilise the global oil market with his Venezuelan counterpart, but there was no agreement to hold an early meeting of suppliers. Venezuela's Oil Minister Eulogio Del Pino, who is on a tour of oil producers to lobby for action to prop up prices, said his meeting with Naimi was "productive". The prospect of a supply restraint helped oil prices rise from 12-year lows last month, even though there was widespread scepticism that a deal would happen.

Oil price special

coverage




A Record Number of Investors Are Piling Into Oil Bloomberg - Mark Shenk Money managers may not agree where oil prices are headed, but they are increasingly eager to place their bets.

Total wagers on the price of crude climbed to the highest since the U.S. Commodity Futures Trading Commission began tracking the data in 2006. Speculators’ combined short and long positions in West Texas Intermediate crude, the U.S. benchmark, rose to 497,280 futures and options contracts in the week ended Feb. 2.

WTI moved more than 1 percent each day in the past three weeks. U.S. crude stockpiles climbed to the highest level in more than 85 years and Venezuela called for cooperation between OPEC and other oil-exporting countries to stem the drop in prices. The slump has slashed earnings from Royal Dutch Shell Plc to Chevron Corp., while Exxon Mobil Corp. reduced its drilling budget to a 10-year low.

“This is a reflection of a lot of conviction on both sides,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’re seeing a battle royal between those who think a bottom has been put in and those who think we have lower to go.”

WTI slumped 5 percent to $29.88 a barrel in the report week on the New York Mercantile Exchange. The March contract added 10 cents, or 0.3 percent, to $30.99 at 12:18 p.m. Singapore time on Monday. OPEC Meeting

Six members of the Organization of Petroleum Exporting Countries and two non-members would be open to attending an extraordinary meeting, Venezuela said after Oil Minister Eulogio Del Pino held talks in Iran on Feb. 3. Del Pino traveled to Russia, Iran, Qatar and Saudi Arabia in an effort




to gain support for a meeting that would address the drop in prices that’s devastated his country’s economy.

"These efforts to come to an agreement between OPEC and non-OPEC have boosted optimism that an end to the rout is near," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "The likelihood of success is slight, but any sign of action is eagerly awaited."

Speculators’ short position in WTI rose by 17,299 contracts, or 9.7 percent, to 196,048 futures and options, just shy of the all-time high reached three weeks ago, CFTC data show. Longs, or bets that prices will rise, climbed 12,051 to 301,232, the highest level since June. Net longs dropped 4.8 percent. Winning Shorts

“There’s a difference of opinion about the direction of the market,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It looks like some of the high price levels offered an opening for shorts to get back into the market. The shorts were the winners on a net basis.”

In other markets, net bearish wagers on U.S. ultra low sulfur diesel increased 11 percent to 23,765 contracts. Diesel futures advanced 4.5 percent in the period. Net bullish bets on Nymex gasoline slipped 18 percent to 14,328 contracts as futures dropped 4.4 percent.

The risks are weighted to the downside because of the global glut, Citi’s Evans said. U.S. crude stockpiles climbed 7.79 million barrels to 502.7 million in the week ended Jan. 29, the highest since 1930, according to Energy Information Administration. Gasoline supplies climbed 5.94 million barrels to 254.4 million, the highest in weekly records going back to 1990.

"The rise in U.S. inventories is confirmation of a larger physical supply surplus," Evans said. "Any commodity market where inventories are at the highest level in more than 85 years is going to be bearish."




NewBase Special Coverage

News Agencies News Release 08 February 2016

As Big Oil companies shrinks, boards plot different paths out of crisis Reuters + Gulf News + NewBase

As oil and gas companies cut ever-deeper into the bone to weather their worst downturn in decades, boards have adopted contrasting strategies to lead them out of the crisis.

Crude prices have tumbled around 70 per cent over the past 18 months to around $35 a barrel, leading to five of the world’s top oil companies reporting sharp declines in profits in recent days.

Executives at energy firms face a tough balancing act: they must cut spending to stay financially afloat while preserving the production infrastructure and capacity that will allow them to compete and grow when the market recovers.

Companies have opted for differing approaches to secure future growth, often choosing to narrow focus to their areas of expertise and the geographic location of their main assets.

American firms Chevron ConocoPhillips and Hess Corp are withdrawing from more costly deepwater projects to focus on shale oilfields on their home turf, for example.

Britain’s BP is betting on offshore gas in Egypt, while Royal Dutch Shell has opted for an alternative route as it seeks to safeguard its future: the $50 billion takeover of BG Group.

In the five years before the downturn began in mid-2014, when crude prices held above $100 a barrel, big energy firms had raced to expand production capacity, including buying stakes in vast, costly fields sometimes located thousands of metres under the sea, and miles from land.

Over the past year however, companies have slashed their overall capital expenditure, scrapping plans for mega projects that cost billions to develop and take up to a decade to bring online.

“Companies want to strike a balance between long and short-cycle investments while maintaining a robust balance sheet to fund their way through the down cycle,” said BMO Capital analyst Brendan Warn. Focusing on a specific set of expertise and geographies allowed them to offer investors a “unique value proposition”, he added.

US shale, Egypt gas

Chevron, the second-largest US oil firm after Exxon Mobil by market value, last week outlined plans to target spending on “short-cycle” investments — lower-cost projects that can take months, rather then several years, to come online.

In particular, it is focusing on its big presence in shale oilfields in the US. Permian basin at the expense of high-cost, complex deepwater projects after cutting its 2016 capital expenditure, or capex, by 24 per cent.




“In terms of longer-cycle projects, we aren’t initiating. We aren’t initiating any ... You are going to see us preferentially favour short-cycle investments, and if they don’t meet our hurdles, we won’t invest,” Chevron Chief Executive Officer John Watson said in an analyst call.

Even though developing shale wells can be more costly than some deepwater projects on a per-barrel basis, a much shorter development cycle and lower execution risks mean that companies can reap benefits quicker.

The short-term investment strategy is driven in part by the fact that, unlike for example BP, it already has a pipeline of longer-term projects — it is currently developing some of the world’s largest liquefied natural gas (LNG) projects such as the Gorgon and Wheatstone plants in Australia.

Smaller firms ConocoPhillips and Hess have also shifted away from deepwater projects to onshore shale production including in North Dakota’s Bakken Shale.

BP was one of very few companies that approved a major project last year, with its $12 billion investment decision in the West Nile Delta gas project in Egypt. The strategy is partly based its plans to see a large part of its future production growth come from gas off the coast of the North African country.

But the company, which reported its biggest-ever loss last week, also does not have the line-up of long-term projects boasted by the likes of Chevron; the development is also driven by the fact it sold more than $50 billion (Dh184 billion) of assets after the deadly 2010 Gulf of Mexico oil spill, leading to a significant decline in output, according to analysts.

“BP aren’t digging themselves through a hole. They are investing a little bit through the cycle,” said Warn.

Deal-making

Shell, by contrast, opted at an early stage of the downturn to acquire Britain’s BG Group in the sector’s largest deal in a decade. It will make it a leader in LNG and offshore oil production in Brazil and increase its energy reserves by about a fifth.

The Anglo-Dutch group, which posted its lowest annual income for 13 years last week, expects to complete the deal this month.

US giant Exxon may need to take a leaf out of Shell’s book and seek a major M&A deal after it surprised many in the market last week by slashing its 2016 spending by a quarter to $23 billion, said Anish Kapadia, analyst at Tudor, Pickering, Holt and Co.

The capex cut signals the company — which reported its smallest quarterly profit in more than a decade — is not planning to invest in many new projects, he said.

“That is a signal that Exxon doesn’t have an attractive enough project queue to invest in and is not willing to invest in upstream, so if it wants to grow it will have to make an acquisition,” added Kapadia.




“In this environment with the potential for higher oil price, Chevron are doing the right thing. They can survive over the next few years and have the option to grow. Exxon is at the bottom of the pile. It looks the most expensive but it is hard to justify given the lack of growth outlook.” Tudor, Pickering, Holt and Co. has a “buy” recommendation on Chevron and Shell, a ‘hold’ on BP and “sell” on Exxon.

Norway’s Statoil and France’s Total, meanwhile, appear to be sitting in the middle ground: both have indicated they will not invest in new projects this year but they also have big projects coming on stream in the coming years that will counter production declines.

Loss-making oil fields unlikely to be shut willingly - Wood Mackenzie Source: Reuters Even as millions of barrels of oil are pumped at a loss at current prices, only a fraction of the production has been shut, industry research group Wood Mackenzie said on Friday. The apparent financial resilience of some producers could delay a recovery in the oil market that has seen an oversupply of 2 million barrels per day (bpd) push prices down by some 70 percent over the past 18 months.

'Curtailed budgets have slowed investment which will reduce future volumes, but there is little evidence of production shut-ins for economic reasons,' said Robert Plummer, Wood Mackenzie's vice president of investment research. Just 100,000 bpd out of the 96.1 million bpd of oil pumped worldwide have been closed so far since the price plunge, most of it in Canada's oil sands, conventional U.S. projects and ageing fields in Britain's North Sea, according to the research.

The group's analysis showed that 3.4 million bpd of oil pumped now, 3.5 percent of worldwide production, is "cash negative" at Brent prices of $35 per barrel. Brent was trading at $34.60 per barrel on Friday morning, meaning selling this oilcurrently costs more than it takes to get the barrels out of the ground.

But the hope of a rebound could keep even these from closing. 'Given the cost of restarting production, many producers will continue to take the loss in the hope of a rebound in prices,' Plummer said.




The bulk of the most expensive to produce oil is in Canada, where 2.2 million bpd is 'cash negative' at current prices, most of it in oil sands and small conventional wells. An additional 230,000 bpd in is Venezuela's heavy oil fields, and 220,000 bpd is in the United Kingdom. Those operators, Wood Mackenzie said, were likely to store their oil to sell later, only shutting fields if mechanical or maintenance problems required investments they 'can't rationalise' at current prices.

In the United States the research found that aggressive cost cutting had enabled more of the shale plays to make money - and survive - at lower prices. 'In the past year we have seen a significant lowering of production costs in the U.S., which has resulted in only 190,000 bpd being cash negative at a Brent price of $35,' said Stewart Williams, vice president of upstream research at Wood Mackenzie, adding that 'the majority' only become cash negative at Brent prices 'well-below $30 per barrel.' Wood Mackenzie currently forecasts Brent prices to avergage $41 per barrel in 2016.




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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

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Khaled Al Awadi is a UAE National with a total of 25 years of experience in the Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operations Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years, he has developed great experiences in the designing & constructing of gas pipelines, gas metering &

regulating stations and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation, operation & maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcasted internationally, via GCC leading satellite Channels.

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NewBase 08 February 2016 K. Al Awadi







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New base 782 special 08 februaury 2016