New base energy news issue 876 dated 20 june 2016

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NewBase Energy News 20 June 2016 - Issue No. 876 Edited & Produced by: Khaled Al Awadi

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In the Saudi-Iran Oil Clash, Riyadh Gains an Edge Bloomberg - By Julian Lee

Saudi Arabia is poised to boost its share of OPEC oil production in the coming months, as Iran's rapid recovery runs out of steam and the kingdom raises output as summer temperatures soar.

OPEC's biggest exporter has seen its share of the group's production chipped away despite its landmark decision in November 2014 to no longer support crude prices by holding back supply. The strategic shift was driven by a desire to protect its own market share, but that's been restrained by rising production from Iraq, Indonesia's return to OPEC and the easing of sanctions on Iran.

Outsiders won't be too fussed about Riyadh's share of OPEC output, but within the kingdom and the group this matters. Saudi Arabia wants to stay dominant in its biggest export markets, plus it desperately wants to avoid losing ground to arch-rival Iran.

Saudi Share Saudi Arabia's share of OPEC output has been cut by rising Iraqi and Iranian supply

Excludes Indonesia throughout

In April, Saudi Arabia's share of OPEC production (excluding recently returned Indonesia) was no higher than before the policy shift. That may be about to change.

The circumstances that have eaten into its market share since last summer are changing, while the kingdom holds almost all the world's readily available spare production capacity, leaving it the only country that can raise output quickly.

Iraq, whose daily output has risen by 1 million barrels since November 2014, will struggle to maintain growth. The collapse in oil prices and a costly war against the Islamic State have left the government unable to meet its share of the cost of developing fields in Iraq's south. It has asked




partner companies to cut spending and output is now 140,000 barrels a day lower than January's peak.

More recently, it's been Iran nibbling away at the Saudi market. Since the easing of sanctions, Iran has surprised analysts with the speed of its recovery. Observed crude exports, monitored by Bloomberg tanker tracking, jumped from 1.3 million barrels a day in January to more than 2 million barrels in April and May.

Yet, as Bloomberg News pointed out last week, the spectacular rise may have come to an end already. Further growth will depend on foreign investment that's far from certain. Bloomberg tanker tracking suggests the situation could be even more serious. Observed crude exports in the first half of June slumped to just 1.37 million barrels a day.

FALTERING RECOVERY?

This could just be a matter of scheduling tankers, but Iran will need a very strong upturn in the rest of June to match the average sales of the past two months.

Of greater concern, the shipment slump could show the surge has been driven, at least in part, by sales of crude from storage tanks. If that's the case, recent export levels will prove unsustainable. Iran remains an opaque place and official sources assert that May's daily output reached 3.8 million barrels. The IEA pegged May production at 3.64 million barrels a day, while Bloomberg's survey put it at 3.53 million.

If Iranian exports do keep faltering, don't be surprised if those of its rival across the Persian Gulf head in the opposite direction. Even as Riyadh eyes a post-oil future through its "Vision 2030" plan to diversify the economy, expect it to seize advantage of any slowing rival. The game is still about grabbing long-term markets for its own crude.




Russia: BP and Rosneft create joint venture to develop prospective resources in East and West Siberia Source: BP

Rosneft and BP on Friday signed final binding agreements to create a new joint venture, Yermak Neftegaz, to conduct exploration in the West Siberian and Yenisey-Khatanga basins in the Russian Federation.

The document was signed at the XX St Petersburg International Economic Forum (SPIEF) by Rosneft CEO Igor Sechin and President of BP Russia David Campbell.

The joint venture will focus on onshore exploration of two Areas of Mutual Interest (AMIs) in the West Siberian and Yenisey-Khatanga basins covering a combined area of about 260,000 sq kms. Yermak Neftegaz will be owned 51 per cent by Rosneft and 49 per cent by BP.

In the initial stage, the joint venture will carry out further appraisal work on the 2009 Rosneft-discovered Baikalovskiy field inside the Yenisey-Khatanga AMI and on exploration of Zapadno-Yarudeiskoye, Kheiginskoye and Anomalnoye licenses in the West Siberian AMI.

Exploration activities in the two AMIs will include regional research, acquisition of seismic data and drilling of exploration wells, with the beginning of field works anticipated in the winter season of 2016 / 2017. The preliminary agreement relating to this project was signed at SPIEF in 2015.




Igor Sechin, Rosneft CEO, said after signing:

'These agreements serve as an example of full scale cooperation with BP, Rosneft’s strategic partner and largest minority shareholder. After creation of the Taas-Yuryakh Neftegazodobycha LLC joint venture we are now broadening the geography of our cooperation and creating a precedent which allows us to pursue cooperation in partnership with leading international companies to implement upstream projects at the largest Rosneft greenfield sites in West and East Siberia.'

David Campbell, President BP Russia, said:

'This agreement and creation of a new joint venture reinforces BP’s commitment to our strategic investment in Russia and our long term partnership with Rosneft. In the current low oil price environment we continue to look for opportunities for future growth.'

BP has committed to provide up to $300 million in two phases as its contribution to the cost of the JV’s activities at the exploration stage. Rosneft will contribute licenses and operational experience in West Siberia and Yenisey-Khatanga with initial drilling to be performed by Rosneft subsidiaries.




Putin Said to Weigh $11 Billion Rosneft Sale to China and India Bloomberg - Elena Mazneva

Vladimir Putin is considering selling part of Russia’s corporate crown jewels to China and India as the president struggles to meet spending commitments before his possible re-election bid in less than two years.

Russia is seeking buyers for 19.5 percent of state oil champion Rosneft OJSC and would prefer a joint deal with the two nations leading the growth in global energy demand, two people familiar with the matter said. Officials in Moscow expect to raise at least 700 billion rubles ($11 billion) from the sale, which would set a privatization record for the country.

Bringing two of Asia’s three largest economies into Rosneft, which pumps more crude than Exxon Mobil Corp., would help Putin cover budget shortfalls while strengthening his geopolitical hand at a time when conflicts in Ukraine and Syria have driven relations with the U.S. and Europe to a post-Cold War low. It would also balance the near 20 percent stake that London-based BP Plc acquired in a landmark deal in 2013, a year before Putin stoked a separatist rebellion in neighboring Ukraine by annexing Crimea.

China and India have both publicly expressed interest in the Rosneft sale, which would cement their footholds inside the world’s largest energy exporter, but neither side has said whether a joint deal is being considered. On Friday, though, Indian Oil Minister Dharmendra Pradhan said one couldn’t be ruled out.

‘Not Rivals’

“We are not rivals,” Pradhan said in an interview at Putin’s annual economic forum in St. Petersburg, adding that India’s Oil & Natural Gas Corp. and China National Petroleum Corp. already have joint projects and more “would be nice.”




Rosneft shares jumped 5.3 percent on Friday in London, boosting its market value to $52.8 billion. The stock has gained more than 43 percent this year.

Russia’s energy strategy tilted toward Asia after western penalties over Ukraine curbed access to funding and demand in Europe flatlined even as prices tumbled. The focus so far has been on boosting oil and gas supplies to China, the region’s largest market and a pivotal financier for sanctions-hit Rosneft.

CNPC, based in Beijing, said in April it was studying the possibility of participating in the privatization, but didn’t elaborate. China has provided Rosneft and other Russian energy companies with more than $100 billion in loans and prepayments for supplies over the past decade, money that helped fund the acquisitions that turned the state-run company into the world’s largest publicly traded oil producer by output three years ago.

Fastest Growing

While Russia’s oil trade with India, by contrast, has been minimal, that’s starting to change now that the country is replacing China as the center of global growth. The International Energy Agency predicts India, the fastest-growing major economy, will consume 4.2 million barrels a day this year, surpassing Japan’s 4.1 million, and use an additional 6 million a day by 2040, compared with 4.8 million barrels a day more for China.

Last month, India’s largest oil company, ONGC, agreed to pay Rosneft $1.27 billion for 15 percent of Vankor, one of the largest Russian oil fields to go into production in the last quarter century.

And in St. Petersburg on Friday, Rosneft agreed to sell another 23.9 percent of the project to three other Indian companies -- Oil India Ltd., Indian Oil Corp. and

Bharat PetroResources Ltd. The terms weren’t disclosed, but two people involved in the deal valued it at $2.02 billion, the same price ratio ONGC paid.

Two Investors

Rosneft Chairman Andrey Belousov, who is also an aide to Putin, said last month that Russia would prefer to sell the stake to two strategic partners, without elaborating. Energy Minister Alexander Novak said in an interview in St. Petersburg that Russia would welcome interest from both China and India, but declined to comment on the possibility of a joint deal.

Complications related to sanctions may delay the sale, which would still leave Russia’s government with control of the company, until next year, one person involved in the planning said. Other options, such as offering some shares to the public, are being considered, another person said.

Still, Economy Minister Alexei Ulyukayev said Friday he expects a deal this year, reflecting the urgency Putin expressed in April. Putin said then that he wants to complete the transaction as soon as a strategic partner can be found who isn’t a “cheapskate.” “We need the money,” Putin said at the time.




Pakistan Working on Building 3600mw LNG Based Power Plants

Pakistan is working on building 3,600MW of LNG power projects, country’s planning and development minister Ahsan Iqbal has on Saturday.

The government has made it clear than LNG would the primary source of fuel for the energy starved economy in the medium to long term. The South Asian nation has been facing severe gas shortage since last few years. To augment energy supplies, Pakistan has stepped up effort to attract foreign as well as domestic investment, especially in the oil, gas and LNG sectors.

The planning and development ministry is undertaking fast-tracking projects to overcome natural gas shortage. Pakistan LNG Terminal Company Limited (PLTCL) is overseeing the process of establishing country’s second LNG import terminal.

The bids for second terminal were invited by PLTCL and are under evaluation by the company. The emphasis is on creating sufficient infrastructure to ease the process of importing LNG. Earlier this year, Pakistan signed a 15-year LNG import deal with Qatar with initial quantities of 2.75 million tonne for the first year and 3.75 MTPA by 2017.

Another major project being implemented is Gwadar-Nawabshah LNG terminal and pipeline project. As per the plan, a 700-km pipeline will be built along with LNG terminal with capacity of 600 MMCFD.

A framework agreement has been signed between the National Energy Administration (NEA), China and Ministry of Petroleum and Natural Resources. The Gwadar-Nawabshah LNG terminal and pipeline project is expected to be complete completed by 2018.

Engro Corp currently operates Pakistan’s first FSRU through Engro Elengy Terminal Private Limited (EETPL). The LNG terminal, utilising Excelerate's technology, is first of its type for the country and has been built at a cost of $125 million.

The terminal has peak capacity for regasification of up to 690 mmcfd of LNG which provides for surplus capacity setup. The terminal received its first shipment in March 2015.




US: Oil bust leaves states with massive well cleanup AP + Gulf News + NewBase

The worst oil bust since the 1980s is putting Texas and other oil producing states on the hook for thousands of newly abandoned drilling sites at a time when they have little money to plug wells and seal off environmental hazards.

As US rig counts plunge to historic lows, and with at least 60 oil producers declaring bankruptcy since 2014, energy-producing states are confronting both holes in their budgets and potentially leaking ones in the ground. In Texas alone, the roughly $165 million (Dh606 million) price tag of plugging nearly 10,000 abandoned wells is double the entire budget of the agency that regulates the industry.

The problem is forcing states to get creative: Texas regulators now want taxpayers to cover more of the clean-up, supplementing industry payments. Wyoming and Louisiana are riling drillers with steeper fees. Oklahoma is reshuffling money among agencies in the face of a $1.1 billion state budget shortfall, while regulators also grapple with earthquakes linked to oil and gas activities.

“As downtown turns go, this one happened faster and accelerated. It moved downward faster than the big downturn we had in the ’80s,” said John Graves, a Houston oil consultant.

“For some people in our industry, it’s been more intense.”

Crude prices that peaked above $100 a barrel in 2014 plunged by 60 per cent in just six months.




But these responses — if they even wind up working — are still years from meeting the growing backlog of untended wells. Texas officials predict the number of orphaned wells could soar to 12,000, which would be nearly 25 per cent more than what regulators can’t keep up with now.

Landowners, meanwhile, are growing restless with abandoned pump jacks and damage while drillers warn that crackdowns would only put them out of business faster at a time when oil has finally crept from below $30 a barrel to about $50.

“It’s the magnitude because this bust is so deep. In Wyoming they had a single operator walk away, and instead of it being 5, 10, 20 wells, it was 150,” said Bruce Baizel, who monitors oil and gas regulators for the environmental group Earthworks. “It’s not the small, marginal operators. You’re starting to get into some medium-sized independents walking away from things.”

Orphaned wells are potential environmental hazards below ground as well as rusted-out eyesores above. A 2011 report by the multistate Ground Water Protection Council found at least 30 cases of groundwater contamination in Texas caused by orphan wells between 1993 and 2008.




NewBase 20 June 2016 Khaled Al Awadi

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

Oil price extends gains, up 0.6%, as Brexit fears ease Reuters + NewBAse

Oil prices extended gains on Monday as a weaker dollar and easing worries over Britain's possible exit from the European Union helped buy back the commodity after six straight days of declines.

London Brent crude for August delivery was up 29 cents at $49.46 a barrel by 2238 GMT on Sunday, after settling up $1.98, or 4.2 percent, at $49.17 on Friday.

NYMEX crude for July delivery, which expires on Tuesday, was up 31 cents at $48.29 a barrel, after closing up $1.77, or 3.8 percent, on Friday.

Campaigning for Britain's vote on EU membership resumed on Sunday after a three-day hiatus prompted by the killing of a pro-EU lawmaker. Three opinion polls ahead of Thursday's vote showed the 'Remain' camp recovering some momentum, although the overall picture remained one of an evenly split electorate.

The pound was last up against the dollar at $1.4450 from $1.4350 on Friday. The Japanese yen held not far from its highest level against the dollar in almost two years.

Oil prices continued to recover despite data showing U.S. energy firms adding oil rigs for a third week in a row, suggesting higher production to come. Oil services firm Baker Hughes reported nine rig additions in the week to June 17.

Oil price special

coverage




Sizzling home price rises in China's biggest cities showed signs of easing in May but sharp gains appeared to be spreading to smaller cities, making policymakers' job harder as they look to support the faltering economy without inflating bubbles.

France's hardline CGT union ended a strike on Friday that had paralyzed traffic for 26 days at the Fos Lavera oil terminals on the Mediterranean, the country's biggest oil hub, a management official at port operator Fluxel said.

The Bloomberg Dollar Spot Index fell for a fourth day after closing at the lowest since June 9. Russian President Vladimir Putin is considering selling part of oil producer Rosneft OJSC to China and India as he struggles to meet spending commitments before a possible re-election bid in less than two years.

Crude has advanced more than 80 percent from the lowest level in 12 years as disruptions from Nigeria to Canada and falling output in the U.S. trim a global glut. The U.K. entered the final week of campaigning ahead of its referendum on European Union membership that is being watched by governments and investors around the

West Texas Intermediate for July delivery, which expires Tuesday, rose as much as 59 cents to $48.57 a barrel on the New York Mercantile Exchange and was at $48.56 at 9:47 a.m. Hong Kong time. Total volume traded was about 38 percent below the 100-day average. The more-active August contract gained as much as 62 cents to $49.18 a barrel.

Rosneft Sale

Brent for August settlement climbed as much as 57 cents, or 1.2 percent, to $49.74 a barrel on the London-based ICE Futures Europe exchange. The contract advanced $1.98 to $49.17 on Friday. The global benchmark crude was at a premium of 56 cents to WTI for August.




NewBase Special Coverage

News Agencies News Release 20 June 2016

BASF's Prudence Pays Off .. BASF finally found its "big" deal. Bloomberg - Brooke Sutherland

The world's biggest chemical maker has been conspicuously absent from the industry's rush of mergers, but not for lack of trying. BASF has reportedly considered buying everything from giants like DuPont, Syngenta and Monsanto to a business that Air Products was divesting, only to stay on the sidelines. The German company's position as a sort of last man standing has given way to near constant will-they-or-won't-they speculation. Friday brought the big reveal of its largest acquisition in six years and the winner is...Albemarle's surface-treatment business, Chemetall.

CHEMICAL ATTRACTION

It's not the sexiest deal (metal coatings, oh boy!) and at $3.2 billion, it seems rather puny stacked up next to ChemChina's$46 billion bid for Syngenta and Bayer's rebuffed $62 billion offer for Monsanto. But BASF gets points for biding its time and striking only when it felt the price was right.

The takeout implies a trailing 12-month Ebitda multiple for Albemarle's Chemetall business of about 15.3, the companies said. That's not dirt cheap, but it looks pretty reasonable in an industry that's gone hog wild with expensive deals lately. Chemical targets larger than $1 billion have commanded a median takeover valuation of 17 times Ebitda in the past three years. That's roughly double the typical multiple paid in the three years before that.

Price Hike




Data reflects the median Ebitda multiple for takeovers of chemical makers valued at more than $1 billion.

BASF certainly could have done a lot worse. ChemChina's bid for Syngenta in February valued the Swiss company at about 17 times its projected Ebitda and Monsanto may seek an even higher valuation from Bayer. That Air Products performance materials division BASF wanted? It went for almost 16 times trailing adjusted Ebitda before accounting for tax benefits.

Importantly, BASF can easily finance the all-cash purchase and will have no need to significantly increase its debt load, or seek an equity offering -- something investors had been fearful the company might need to do should it seek a mega-merger with the likes of Syngenta, DuPont or Monsanto. BASF also successfully negotiated a clause that allows it to pay less for the Chemetall business should any surprises arise with regard to pension liabilities, debt or working capital.

Strategically, it's not a slam-dunk given Chemetall's significant exposure to the growth-challenged European industrial sector, as Bernstein analysts noted in a report Friday. But Chemetall, which makes surface treatments that help protect metal used in car parts from corrosion, does fit well with BASF's existing coatings division. That business has become more focused on the auto industry after BASF agreed in February to sell its industrial coatings operations to Akzo Nobel for 475 million euros ($530 million).

The acquisition will certainly be a heck of a lot more manageable than a mega-bet on agricultural chemicals, an industry that's also struggling with slower growth as farmers cut back their budgets to cope with weak commodity prices.

BASF CEO Kurt Bock has long reiterated that he will make acquisitions only when the price is right. That's a hard position to stick to when all of your rivals are striking huge deals. But he's held his ground so far, and the strategy seems to be successful.

Which Would You Rather Be?

While Bayer has plunged on concern it's overreaching with its pursuit of Monsanto, BASF has stayed essentially flat.

Shares of the German chemical giant were essentially unchanged on Friday. In light of the precipitous drop in Bayer's stock after its bold reach for Monsanto, Bock has got to feel pretty OK with that.C O N T R I B U T O R




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Khaled Malallah Al Awadi, Energy Consultant MS & BS Mechanical Engineering (HON), USA Emarat member since 1990

ASME member since 1995 Hawk Energy member 2010

Mobile: +97150-4822502 [email protected] [email protected]

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 20 June 2016 K. Al Awadi




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New base energy news issue 876 dated 20 june 2016