NewBase 625 special 14 June 2015

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,

or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this

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NewBase 14 June 2015 - Issue No. 625 Khaled Al Awadi

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

ADFD extends AED33 Million loan for Hybrid Solar Project in Mali

(WAM) Abu Dhabi Fund for Development (ADFD) has signed an AED33 million loan agreement with the Government of Mali to finance a hybrid solar energy project in Mali. The funding articulates ADFD’s commitment to supporting renewable energy projects in brotherly and friendly nations given the sector’s crucial role in aiding economic and social development.

The agreement was formalised at a signing ceremony at the ADFD headquarters in Abu Dhabi that was attended by Mohammed Saif Al Suwaidi, Director General of ADFD, and Mamadou Frankaly Keita, Minister of Energy and water, Republic of Mali.

The project aims to contribute to the economic development of Mali through the optimal deployment of its renewable energy resources, reducing the cost of electricity on Mali where power generation is largely dependent on diesel.

The project will have positive impacts on the lives of rural population in the country through the supply of solar-powered electricity to 30 villages, benefiting nearly 123,000 people. The initiative




will also boost job creation and economic activity in the region through the construction, operation and maintenance works that the project will involve. Additionally, the provision of electricity will improve the quality of healthcare and education in the areas served by the project.

Mohammed Saif Al Suwaidi, Director General of ADFD, said, "Given the critical role of the renewable energy as a key enabler of sustainable development, ADFD is keen to finance vital projects in this sector to help developing countries unlock their potential. In line with this priority, ADFD supports countries that lack access to sufficient energy sources through enabling them to utilize their renewable sources."

"The development of such massive projects in Mali will help create hundreds of job opportunities for its citizens and increase their contribution to nation building and development, while attracting new investments to the country to achieve sustainable development."

In its priority to support renewable energy sector, ADFD in 2009 committed AED1.285 billion (US$350 million) towards the deployment of renewable energy in developing countries across seven loan cycles. ADFD agreed to provide loans worth AED183 million annually in each cycle to finance renewable energy projects in IRENA member countries.

The hybrid solar project is being funded as part of the AED150.6 million (US$41 million) second cycle of the ADFD/IRENA Project Facility that was announced at the end of 2013. This cycle provides concessionary loans to six renewable energy projects in Ecuador, Maldives, Mali, Samoa Islands, Mauritania and Sierra Leone.

The financed projects have a combined total capacity of 21MW and will bring reliable and sustainable power to rural communities that currently lack access to a modern energy grid.

The first and second cycles of ADFD/IRENA Project Facility provided US$98 million in loans to fund 11 projects in Ecuador, Maldives, Mali, Samoa Island, Mauritania (two projects), Sierra Leone, Argentina, Cuba, Iran, St. Vincent and the Grenadines. The loans were approved following close collaboration between ADFD and IRENA to assess and select the projects that meet specific criteria.

Commending the UAE’s pioneering role in supporting social and development projects in his country, Mamadou Frankaly Keita, Minister of Energy and water, Republic of Mali, said, "The Republic of Mali is keen to promote stronger synergies with ADFD in the area of financing development projects that serve key economic sectors and improve the standard of living for the people of Mali.

The bilateral relations between Mali and the UAE have witnessed remarkable progress over the past few years due to the continued efforts of the UAE to support stability and progress in Mali through providing precious development assistance."

ADFD’s engagement in the development of Mali began in 1976, when the Fund financed five development projects across transportation, water and agriculture sector at a total project outlay of AED230 million. The Fund also managed an AED30.6 million grant provided by the UAE Government to support the transportation sector in

the African nation.




Saudi efforts toward diversification cushion oil price drop Saudi Gazett + Newbase

Although Saudi Arabia has substantial financial reserves to withstand low oil prices over the next few years, recent government spending has intensified the need for longer term fiscal, environmental and resource sustainability in the Kingdom, according to a new report commissioned by ICAEW titled “Economic Insight: Middle East Q2 2015” produced by Cebr, ICAEW’s partner and economic forecaster.

Lower oil prices will have a greater impact on Saudi Arabia’s economic growth over the medium rather than the short term. As a result of the government’s decision to allocate additional funding to social activities like education, the breakeven crude oil price has surged from just under $75 in 2009 to $90 in 2015. While the Finance Ministry plans to address this by curbing public sector salaries and allowances, which comprise roughly half of the budget, a longer- term strategy for generating growth among non-oil sectors is now crucial for the Kingdom. Fortunately, Saudi Arabia has been investing significantly for many years in education, agriculture, and banking and finance to limit its oil dependence. Recently, the Kingdom announced that from mid-June 2015 foreigners will have direct access to its stock market.




The opening of the $570 billion-plus bourse is a substantial leap forward for regional equity markets and is likely to draw a number of investors that see potential in the Kingdom’s proliferation of longstanding companies and the growing, increasingly affluent, population. GCC economies could take advantage of lower oil prices to justify fuel subsidy reductions since diminishing government revenue will create a more pressing need to limit spending. Also, if fuel subsidies are removed during a period of subdued oil prices, the inflationary impact will be felt less sharply by the population. Scott Corfe, ICAEW Economic Adviser and Associate Director at Cebr, said: “There is no doubt Saudi Arabia is on the right path for diversifying its economy, but with lower oil prices here to stay, more action needs to be taken to safeguard the Kingdom’s financial reserves over the medium term.” It is not just fiscal sustainability that will be a priority for Saudi Arabia over the coming years; environmental

sustainability is also crucial. GCC countries currently have some of the highest rates of carbon dioxide emissions in the world. While government-backed initiatives to promote environmentally-friendly business practices are being implemented, these alone will not sufficiently lower per capita CO2 emissions. The report outlined the need for the business community to self-regulate – and for action to be taken at industry level to help curb the GCC’s carbon footprint. It also highlighted the role of the accountancy profession in helping modify business’ behavior by setting benchmarks. It noted that governments or environmental ministries in the region can then use this approach to rank companies within a particular industry in terms of their carbon footprint, which in turn could encourage underperformers to re-evaluate their operations without actually imposing regulations. Resource sustainability is another important consideration for the sustainability of economic activity in the region. With population growth in the GCC region expected to expand at a rate above the world average, coupled by rapid urbanization, many countries will struggle to meet water demands. Since the GCC countries place substantial pressure upon their internal water resources for domestic and industrial use, in the interests of long-term, sustainability, there is an urgent need for a region-wide water management strategy. Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said: "The great fall in the global oil price need not reduce the impetus to use energy efficiently. Many of the GCC countries are now recognizing the urgency of the situation to secure their future development. This includes Saudi Arabia which is aiming to save a fifth of its energy use by 2030 through an




efficiency drive designed to prevent domestic consumption from eating up oil for export.” The report also showed that UAE’s GDP growth in 2015 should reach 3.9% thanks in part to its diversifying strategy.

In the last couple of years, the country has also invested greatly in setting up satellite campuses of world-renowned educational institutions such as New York University (NYU). This will not only draw international, tuition fee-paying students to the country but it should also boost the local labor force by giving Emirati populations access to world-class education. Besides, the report said despite a slight boost after hosting the Formula One Grand Prix in April, Bahrain’s economic growth in 2015 as a whole is expected to slow to 2.7%, down from 4.0% last year. Given that 90% of government revenues come from oil and gas, the country will be severely impacted by the drop in oil prices.

However, infrastructure spending should prove to be a source of growth in the short term. Furthermore, Qatar’s GDP is expected to grow 7.1% over 2015 as the country is less dependent on its hydrocarbons resources than many of its fellow GCC members.

The continued investment in ambitious projects such as Education City as well as less stringent restrictions on foreign firm ownership will support growth also. For Kuwait, the report said despite the countyr’s comparatively low fiscal break-even oil price, the country’s economy grew by just 1.4% in 2014. In 2015, the country’s GDP is expected to grow to 1.8%, fuelled by a sustained level of spending on job creation and youth development. In addition to this, the Capital Markets Authority’s plans to further align the regulations of the Kuwaiti stock exchange with international norms are expected to improve the country’s investment environment.

Oman’s economy, on the contrary, is expected to expand by 3.5% in 2015. Helping economic growth will be infrastructure investment into ports, roads, and railways. Assuming a deal with Iran is reached this year, the country also stands to gain from welcoming an international expansion of Iranian businesses.




Oman:Petrofac wins $900m PDO contract – Yibal oilfield By Times of Oman News Service

Petrofac, a petroleum oil servicing firm based in the UK, said it has won a $900 million engineering and procurement contract from Petroleum Development Oman (PDO) to provide services for its Yibal Khuff oilfield, located around 350km south west of Muscat.

The UK-based firm will provide detailed engineering, and construction and commissioning management support services, as well as procurement on an incentivised pass-through basis for four and a half years. “This will extend throughout construction and during start-up of the integrated oil and sour gas facility,” said the company statement. The total contract value is expected to be around $900 million with around one-quarter of the revenues relating to

professional services (engineering, construction and commissioning management). The development of the field will add to PDO’s future oil production while the associated gas will be utilised for power generation and enhanced oil recovery developments. “This contract builds on the Rabab Harweel Integrated Project, which we are already executing alongside PDO and represents a further milestone in the development of our EPCm delivery strategy.

Furthermore, it reinforces our presence in Oman where we have a number of ongoing projects and a local engineering office, and where this project will further complement our agenda for increasing in country value. We will continue to maintain a strong focus on this aspect of our delivery by accessing the local supply chain and recruitment of local resources, and we are very much looking forward to growing and strengthening the team working alongside PDO to deliver this project,” said Craig Muir, managing director for Petrofac’s Engineering and Consulting Services.




Qatar crude production to rebound © The Peninsula + NewBase

Qatar's crude oil production is expected to rebound, averaging 709,000 barrels per day in 2015. The country's crude production fell to 635,000 barrels per day in April 2015 from 708,000 barrels per day in March. The country's hydrocarbon sector expanded by 1.3 percent in the fourth quarter of 2014, after shrinking 2.8 percent in the second quarter. Barzan gas project is forecast to generate modest growth in the hydrocarbon sector, QNB 's monthly monitor on Qatari economy noted. On Tuesday, in its "Qatar Economic Outlook 2015-17', The Ministry of Development Planning and Statistics (MDPS) also noted that Barzan gas project will boost the country's upstream hydrocarbon production. According to the QNB research note, the share of investment in GDP rose to 33.4 percent in 2014 from 29.6 percent in 2013 on rising capital spending from the government; the share of exports declined with lower oil prices. "We expect the shares of private consumption and investment to increase on high population growth and strong government investments; lower expected oil prices in 2015 should reduce the share of exports, before bouncing back in 2016", the analysts said. Qatar population grew by 9.2 percent year-on-year in May 2015 to reach 2.37m, driven by the large ramp up in infrastructure spending. "We expect Qatar's ongoing investment programme to continue to attract expatriates, resulting in an overall population growth of 7.0 percent in 2015". On Qatar's broad money (M2) growth, QNB analysts noted that the M2 growth was stable in April (5.4 percent) compared to March (5.2 percent) on steady deposit growth. QNB expects M2 growth to pick up, reaching 10.8 percent in 2015 as strong population growth is projected to drive deposit growth.




The Qatar Central Bank (QCB) real estate index rose 29.6 percent year-on-year in March 2015. Real estate price inflation moderated from the second successive month. QNB expects real estate prices to continue their strong growth although at a more moderate pace. Qatar's international reserves rose to $41.0bn in April 2015 from $39.5bn in March. The accumulation of international reserves is expected to continue, reaching $46.0bn, or 8 months of import cover in 2015. Bank deposits grew by 6.1 percent year-on-year in April 2015. Public sector deposits contracted by 8.4 percent; but the private sector deposits grew by 5.5 percent and non-resident deposits grew by a whopping 119.5 percent. Banking credit grew strongly in April, driven by private sector and foreign credit. Public sector lending contracted by 9.6 percent year-on-year while lending to the private and foreign sectors grew by 10.6 percent and 58.6 percent, respectively. QNB forecast bank lending to grow by 9.0 percent in 2015, increasingly driven by project lending and expanding population. Banking sector assets grew in April on the expansion of domestic and foreign credit. Banks' assets grew by 6.9 percent year-on-year in April 2015 driven by strong lending growth. Banking assets are expected to rise by 10.0 percent in 2015, increasingly driven by project lending.




Survey unearths Lebanon onshore oil potential © Copyright The Daily Star 2015. + NewBase

The airborne survey conducted by U.S.-based NEOS GeoSolutions revealed the potential presence onshore of conventional oil and gas in Lebanon, said Jim Hollis, president and CEO of NEOS GeoSolutions. “Our surveys show that conventional oil and gas exist in the Lebanese onshore which is cheaper to drill as opposed to shale oil, which requires an industrial process to be extracted,” he said. “The economics of shale oil and gas is a little bit complicated,” he added.

The conventional oil and gas drilling process involves the boring of a well, a reservoir that has pressure, from which oil flows out of the ground. Conventional oil drilling is far cheaper than the

unconventional processes used to extract shale oil and gas. Hollis’ remarks Wednesday came during a conference held at the Hilton to announce the results of the survey conducted by NEOS GeoSolutions six months ago. The conference was organized by the General Directorate of Oil, the Lebanese

Petroleum Administration and Lebanese oil installations in

cooperation with NEOS GeoSolutions and Petroserv.

NEOS GeoSolutions completed its airborne oil and gas survey of most Lebanese territories last

December, with the support of its local partner Petroserv. The survey covered 6,000 square

kilometers including the onshore northern half of the country and the transition zone along the

Mediterranean coastline.

The survey was designed to map the regional prospectivity by integrating legacy well and 2-D

seismic data with other newly acquired airborne geophysical datasets. “There are multiple places

and different geologies that could yield hydrocarbon in different areas of the country,” Hollis said.




“We identified a series of targets and they are available to the LPA and to anybody who would like to step up and license this data,” he added. Hollis also gave an explanation about the methodology used by NEOS GeoSolutions in conducting their surveys.

He said that NEOS uses a highly technical approach of gathering information in a non-invasive environmentally friendly way from the air with a few measurements on the ground. “After that, we integrate this data with all the scientific work that has been done over the years. Moreover, we use the data in the offshore to understand better

what is happening on the onshore and then we have a whole set of tools that allows us to do correlations between known areas and the unknown areas,” he said.

Hollis added that the next step for NEOS is to go to the south and finish its regional survey. Energy and Water Minister Arthur Nazarian said it was easier to invite oil companies to bid for onshore oil exploration because the drilling on land is much cheaper than drilling in the sea.

“The cost of oil exploration on land is cheaper by one-fifth than the cost of drilling in the sea. We can invite medium-size companies to bid onshore because this procedure is less complicated than the ones in the sea,” Nazarian explained.

He added that it was easier to transfer oil extracted from onshore to any destination. Wissam Chbat, head of geology and geophysics at LPA, said the results of the survey conducted by NEOS would encourage international companies to come to Lebanon for oil exploration.

“Results are promising and companies will come to invest,” he said. Chbat explained that the surveys were able to confirm the similarities between an

existing petroleum system and discoveries in Syria – the Palmerite basin – with the onshore of Lebanon. “We were able briefly to identify all the constituents of the petroleum system in this survey along with other previously conducted surveys,” he said. He added that companies can analyze the existing data by comparing it to data taken in Syria. “Companies should take the data and do the analysis like they did with the offshore,” he said.




Turkmenistan Plans to Complete East-West Gas Pipeline by Year End

Turkmenistan plans to complete construction of the East-West main gas pipeline by late 2015,Trend News Agency reported Thursday citing a statement by country’s oil and mineral resources.

With the pipeline fully complete, Turkmenistan expects to unite all the major gas fields into a single system, as well as create conditions for the export of Turkmen gas to world markets in either direction. According to Trend, a new regional gas pipeline is being laid from Shatlyk to Belek which will transport natural gas from the largest fields in the eastern regions to the country’s other gas pipelines. Turkmenistan’s largest gas field Galkynysh

will be the main supply source for the East-West gas pipeline.

East-West gas pipeline can be used to supply Turkmen gas to Europe. Laying of a 300-kilomter-gas pipeline across the Caspian Sea to the coast of Azerbaijan would be the most optimal route,Trend said.




Oil Price Drop Special Coverage

Oil prices rally & slips on Saudi supplies & drop in US stockpiles AFP + NewBase

Oil prices on Friday gave up gains made earlier this week after the world's top crude exporter Saudi Arabia said it stood ready to raise output to new record highs, potentially adding to a global supply glut.

A stronger U.S. currency against the euro also weighed on the dollar-denominated oil market after the International Monetary Fund pulled out of stalled debt talks with Greece. Saudi Arabia said it was in talks with Indian buyers to supply additional crude, meaning the Middle Eastern exporter could top its record of 10.3 million barrels per day produced in May.

Additional production in an already oversupplied market would further depress prices that are around 45 percent below highs reached a year ago. Brent crude was trading 55 cents lower at $64.56 a barrel at 1345 GMT, while U.S. light crude was down 62 cents at $60.15.

OIL: Crude futures rallied as data showed a much bigger than expected drop in US crude inventories, while Opec said demand would pick up.

Oil prices had surged more than $2 Tuesday on expectations that the US inventory data would reveal a drop, The Department of Energy indeed said that commercial stockpiles of US crude slumped by 6.8mn barrels last week to 470.6mn. Analysts’ consensus forecast had been for a drop of 1.45mn, according to Bloomberg.

A drop in US stockpiles is seen as an indicator of healthy demand in the world’s top crude consumer, supporting global prices. Opec meanwhile stuck to its forecast that oil demand will pick up this year but warned that over-supply may still keep a “ceiling” on crude prices, even as it kept on increasing its own output to a two-year high.




The Organisation of the Petroleum Exporting Countries stuck to its prediction of total oil demand in 2015 of 92.5mn barrels per day, up 1.18 mbpd from 2014. Consumption is expected to pick up pace in the second half in line with a global economic rebound, the 12-country cartel said in its June monthly report.

Opec, which has traditionally sought to defend price levels by cutting output if needed, dramatically switched strategy last November when it opted to leave its production target unchanged.

At its bi-annual production earlier this month, Opec stuck to this strategy, keeping its output target unchanged at 30mn barrels per day. This is seen as an attempt to maintain market share and put pressure on US shale oil producers, which need a higher oil price to be profitable than in traditional extraction methods—a strategy that experts say has had some success. Oil prices meanwhile fell at the end of the week as the International Energy Agency predicted that a recent surge in world crude demand was set to end.

World oil demand growth soared to a four-year high in the first three months of 2015, but the surge is unlikely to persist, the IEA said Thursday in its monthly report.

The strong growth, which reached 1.7mn bpd in the first quarter, was underpinned by an economic recovery, a European winter that was colder than the previous year’s, and lower crude prices which spurred consumption.

“However, there are doubts that this trio will persist” in the second half of 2015, said the IEA. Heating needs are not expected to return to such levels and crude prices have also started to rise and are therefore likely to stymie demand.

Oil fell Friday but still managed to show a sizeable gain over the week, despite the dollar rising as traders grew concerned about Greece’s troubled debt negotiations, traders said. The International Monetary Fund (IMF) on Thursday withdrew from eleventh-hour talks in Brussels, saying an agreement remained far-off after a five-month stalemate with Greece’s anti-austerity government, which faces being unable to pay huge debts at the end of the month.

Greece must reach a compromise with its creditors—the IMF, European Commission and European Central Bank—before the end of the month to unlock much-needed cash to service its debts. Failure to do so will lead it to default and possibly exit the eurozone.

By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in July jumped to $64.35 a barrel from $61.15 a week earlier. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for July increased to $59.99 a barrel from $57.54 a week earlier.




Supply cutbacks likely to push up oil prices from 2016: QNB Gulf Times + NewBase

Supply cutbacks are expected to push up oil prices from 2016, QNB has said in a report. Oil prices have rebounded by 33.1% since their trough in January to $62 per barrel. To answer many questions related to the oil price recovery QNB has adopted a methodology, which allowed it to quantitatively disentangle demand from supply factors.

The QNB methodology showed that demand was single-handedly behind the recent recovery, but that supply was responsible for the majority of the 60% collapse in oil prices in the second half of 2014. “Our conclusions about the relative roles of demand and supply are supported by independent data from the International Energy Agency (IEA).

This suggests that the recovery in oil prices still has legs as the adjustment through lower supply is yet to happen. As a result, we expect average oil prices to rise in 2016 to $64.1 (for a barrel) from an expected $56.2 in

2015,” QNB said.

A simple way to distinguish between the demand and supply factors is to look at their impact on both oil and stock prices. Higher global demand, due to stronger growth for example, will push up oil prices. It should also boost the earnings of companies, leading to higher stock prices.

On the other hand, higher oil supply will reduce oil prices, but, it should also lead to lower energy costs, higher corporate profits and consequently rising stock prices. Therefore, the co-movement between oil and stock prices provides a basis for identifying demand and supply shocks.

If oil and stock prices move in the same direction, QNB interprets this as being caused by a demand shock. Conversely, if they move in opposite directions, the bank interprets this as being driven by an oil supply shock.

“Our methodology is a modified version of the one recently used by the IMF,” QNB said. “We apply this method to daily data on oil prices (Brent crude oil) and stock prices (S&P500 index excluding the energy sector).

Each day we attribute the change in oil prices, either to changes in expectations of global demand (if oil prices and stock prices move in the same direction), or to changes in expectations about oil supply (if oil prices and stock prices move in different directions).




“We then add up the change in the oil price that is attributable to global demand and the change that is attributable to oil supply over a period of time. We reach two conclusions. First, oil supply contributed 54% to the fall in oil prices in the period from June 19, 2014 to January 13, 2015. Second, the recovery in oil prices since January 14, 2015 is exclusively attributable to global demand (97%).”

The method yields sensible results, QNB said. For example, it correctly attributes the fall in oil prices around Opec’s meeting on November 27, 2014 to supply. Opec surprised markets by not reducing its production ceiling, oil prices tumbled and stock prices rose.

The conclusions are also consistent with independent data from the IEA. From June 2014 to December 2015, the IEA continuously revised up its forecast for non-Opec production in 2015, while revising down its forecast for global demand. This supports QNB’s first conclusion that both demand and supply factors were responsible for the oil price fall in this period.

Furthermore, the IEA’s forecast for non-Opec production in 2015 was unchanged in June 2015 relative to December 2014. Meanwhile, the IEA has continuously revised up its forecast for global demand since the end of last year. This is in line with QNB’s second conclusion that the oil price recovery was solely demand-driven.

“In summary, our new methodology allows us to disentangle demand factors from supply shocks, and its conclusions are consistent with other data in the oil market. Our method shows that the recent recovery in oil prices was driven by a strengthening in demand. This could be due to the improvement in growth prospects in advanced economies, especially in the Euro area and Japan,” QNB said.




Price stability seen as oil oversupply likely to diminish Saudi Gazette + Syd Hussain + NewBase

WHAT is driving the Saudi oil policy, or to extend it further, the current OPEC oil policy? The debate is on and refuses to end. Yet, the view from Washington seems getting close to the Saudi take on the global energy dynamics. Saudi Arabia, by continuing to push for higher output is not aiming to curb the US production, as some regard, but instead is attempting to maintain its share of the global oil markets, argued David Petraeus, the still influential, former director of the United States Central Intelligence Agency. Despite the fall from grace, Petraues continues to be a Washington insider. In fact he is set to represent the United States on security issues at the upcoming Bilderbeg conference, so romanticized by William Engdahl in his book, 'A Century of War - Anglo-American Oil Politics and the New World Order' for its May 1973 meeting and the role in oil price jump later the year. "I'm very confident that what they (the Saudis) are doing is trying to keep their market share, not trying to drive others out of the market. Now if that happens, so be it," he told the program "Wall Street Week" scheduled to be televised Saturday (yesterday). Petraues further underlined that Saudi Arabia understands that the US is becoming a more efficient oil producer and that there is not a set cost for production, Bloomberg reported citing the interview. The Saudi Ministry of Petroleum in a press statement last Tuesday too underlined, in rather clear terms, that the rise in Saudi output over the past three months was a result of increased global demand and the needs of its customers and not to compensate for lower oil prices - as some continue to assert. In fact, Saudi Arabia is prepared to increase its oil output further in the coming months to a new record to meet a rise in global demand, despite increased domestic use, Ahmed Al-Subaey Saudi Aramco's executive director for marketing was quoted by Reuters as saying last Thursday. "We have plenty of crude... You are not going to see any cuts from Saudi Arabia," Al-Subaey said after meetings in New Delhi. And the policy is set to continue. Already Saudi Arabian crude output hit a record level in May, as a result of this increased demand. Saudi crude output in May reached 10.33 million bpd as compared to 10.31m bpd in April, Opec reported. With summer just round the corner, Saudi Arabia needs additional crude to generate power required to meet the spiking summer demand. The kingdom also has a new 400,000-barrel-a-day refinery at the Red Sea port of Yanbu to feed. Hence Saudi Arabia needs additional crude to meet the burgeoning domestic crude demand without jettisoning its regular crude customers. In case output doesn't go up, hand in hand, crude exports could be impacted. Other OPEC states too are on course to increase their output. Iraqi production is on up too. As per OPEC figures, Baghdad pumped about 3.8 million bpd in May. If sustained, this could set a national record, analysts underline.




And Baghdad seems set to continue with the policy - come what may. Even if prices were to fall to $20 a barrel, “we don’t think we will reduce exports. We will increase production,” Falih Alamri, director general of the state-run Iraqi State Organization for Marketing of Oil, was quoted as saying recently at an Iraq oil conference in London. Optimism of a kind seems creeping back in OPEC headquarters. At the Opec ministerial last week, Saudi Oil Minister Ali Al-Naimi said he expected demand to rise and supplies to decline, bringing the market into balance later this year. Such a scenario would tend to push prices higher. In its Monthly Oil Report (MOR) too, OPEC pointed out that low oil prices were driving demand up in places like the US, where sales of gas-guzzling sport-utility vehicles and pickup trucks have risen. There were also positive figures about demand in Europe and China, OPEC analysts reported. “The current oversupply in the market is likely to ease over the coming quarters,” the report said displaying some optimism in its ranks - finally. As per monthly oil report, the global oil demand in 2015 is growing to 92.5 million bpd as compared to 91.3 million bpd in 2014. “The global economy recovery appears to have stabilized at a moderate level,” OPEC said, projecting the non-OPEC supply to decline in the second half of the year, compared with an increase in the first six months. “The current oversupply in the market is likely to ease in the coming quarters,” the report added, expecting the call on its crude to stand at 29.3m bpd in 2015. However, with OPEC's May output touching the 30.98 million bpd, it is overshooting the target by a considerable margin. But again one has to concede; the output figure of 30 million bpd outlined by OPEC, was an "indicator" and not a ceiling, as Secretary General Abdalla Salem El-Badri had clarified - in rather plain terms - last week. Earlier the year, while talking in Berlin, Minister Naimi had insisted, 'history will vindicate the Saudi oil strategy.' He then added, "going forward, I hope and expect supply and demand to balance and for prices to stabilize... Global economic growth seems more robust." He had also reiterated then that Saudi Arabia was not responsible for "subsidizing" higher cost oil producers, emphasizing the Saudi position that the Kingdom would not reduce its output unless there was less demand from customers. "In November (2014), OPEC made an historic decision, it did not interfere in the market. I think history will prove that this was the correct path forward," he said. Firming up demand levels seem ruling the markets, generating some sense of optimism within OPEC ranks. Are markets out of woods - finally? Is this a vindication of the Saudi oil strategy? Let's wait for some more time before giving the final verdict on the issue. Yet the trend is getting less hazy - the strategy seems working - at least for now. And the unexpected support from far-flung Washington is all the more welcome in this phase of intense focus and debate on the Saudi oil policy.




Asia oil refiners display animal spirits as crude glut persists Bloomberg + NewBase

The surge in oil supplies that has crushed prices is prompting some refiners in Asia to buy more crude that can be delivered immediately rather than at some future date, adding to pressure on sellers.

With Opec pumping the most in almost three years and the US producing the most in three decades, the refiners are showing little concern that prices will suddenly surge. Japan’s JX Nippon Oil & Energy Corp, South Korea’s SK Innovation Co and Indian Oil Corp are among the processors seeking to boost profits by purchasing more in the spot market while shrinking what they buy under long-term contracts where prices are generally higher. The shift is a challenge for producers such as Saudi Arabia, the largest exporter, that sell crude through term contracts, undermining their attempts to defend market share with more output. Demand for last-minute deals may prompt Middle East suppliers to cut prices, according to IHS Inc, an Englewood, Colorado-based industry consultant. “As competition to sell crude has intensified, refiners have been opportunistically picking up spot cargoes,” said Virendra Chauhan, an analyst at Energy Aspects in London. “In a volatile trading environment, the opportunity to pick up cargoes at an attractive price is higher.” The Chicago Board Options Exchange Crude Oil Volatility Index averaged 54.68 in the first quarter of this year, the highest level since the same period in 2009. The measure almost tripled in 2014.

Crude prices have rebounded from a six-year low after slumping almost 50% in 2014. Brent, the benchmark for more than half the world’s oil, has gained about 40% since January 13 and fell 30 cents to $64.81 a barrel on Friday at 9:52 am New York time. West Texas Intermediate crude, the US marker, was down 41 cents at $60.36. WTI will slide to $45 by October as the crude surplus weighs on the market, Jeffrey Currie, an analyst at Goldman Sachs Group in New York, wrote in a May 22 report. SK Innovation, based in Seoul, plans to buy as much as 6mn barrels of the UK’s Forties crude in 2015 on a spot basis, Kim Hyung Kun, the chief executive officer of the company’s trading division, said last month. South Korea’s largest refiner has already more than doubled the purchase of US condensate in 2015 from last year to about 900,000 barrels, said Kim Woo Kyung, a spokeswoman. “It’s become less important for us to secure stable volumes under term contracts because there is a lot of crude available,” said Kim of the trading division. “We now think in terms of profitability and that’s why we’re buying more spot crude this year.” Global supplies are increasing as the Organisation of Petroleum Exporting Countries sticks to its policy of favouring market share over supporting prices by cutting output. There’s a “perceptible shift” from term contracts to spot purchases, said H Kumar, managing director at Mangalore Refinery and Petrochemicals, an Indian processor. Short-term deals that in the past were about 10% of purchases by the nation’s refiners are now increasing and may account for as much as a quarter in the future, he said.

SK Innovation’s Ulsan oil refinery facilities operate at night. The Seoul-based company

plans to buy as much as 6mn barrels of the UK’s Forties crude in 2015 on a spot basis,

Kim Hyung Kun, chief executive officer of the company’s trading division, said.




The need to procure oil under firm contracts has been “slightly reduced,” Tokyo-based JX’s executive vice president Michio Ikeda said in May. Japan’s biggest refiner buys about 15% of its crude through spot contracts and may double those purchases in the long term, he said. “This is going to put some downward price pressure on Middle East suppliers,” Victor Shum, Singapore-based vice president at IHS, said by phone.Term contracts accounted for about 70% of Mumbai- based Indian Oil Corp’s oil purchases in the last fiscal year, down from 80% previously because spot agreements offer more “flexibility,” said Sanjiv Singh, director of refineries at the country’s biggest processor. The global surplus is forcing producers to adopt new strategies to lock in sales. Saudi Arabian Oil Co plans to spend $70bn to $80bn on overseas acquisitions and investments in the next five years, people with knowledge of the matter said in May. The producer sold March supplies of its Arab Light oil to Asia at the biggest discount in at least 14 years as it sought to defend market share.

“Refiners perceive that there’s ample supply,” said Suresh Sivanandam, a refining and chemical analyst at Wood Mackenzie Ltd in Singapore. They’ll “be able to reduce their exposure to term barrels and look for more spot barrels,” he said.




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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 &

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