New base 759 special 31 december 2015

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NewBase 31 December 2015 - Issue No. 759 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Oman to raise tax and cut subsidies as oil rout hits Oman hard
The National - Adam Bouyamourn
Oman will trim spending, cut subsidies and raise corporation tax as it seeks to curtail the effect of
the oil-price rout that has hit the sultanate harder than neighbouring Arabian Gulf states. This is
the latest in a series of belt-tightening budgets in the Gulf, as the region’s oil producers wrestle
with Brent prices near an 11-year low.
“The council of ministers approved a number of procedures to face the impact of lower oil prices in
order to ensure the sustainability of the financial situation of the state,” ONA, the Omani state
news agency, said on Wednesday.
“The most important of these actions include a reduction in government spending and the
development of non-oil revenues by raising tax rates on profits of corporations, reviewing and
raising fees on some government services, and adjusting prices of petroleum products.”

The government did not provide further details.
Describing Oman’s 2016 budget plans last week, Darwish bin Ismail Al Balushi, the minister
responsible for financial affairs, said: “The current situation requires everyone to join hands, as
covering the deficit is a joint responsibility. Efforts to rationalise expenditure are going on.”
Fuel prices, which are
heavily subsidised by
the Omani
government, will be
“altered according to
global prices” from
mid-January, the ONA
said.
Oman, which the US-
based ratings agency
Standard & Poor’s has
named as the Gulf
state most vulnerable
to an extended oil
price rout, is to run a
budget deficit equal to
17.7 per cent of GDP
this year.
Unlike the UAE, which
has reserves of more than 275 per cent of its GDP, and Saudi Arabia, with reserves of about 100
per cent of GDP, the Oman Investment Fund, the sultanate’s sovereign wealth fund, has 5.4
billion rials (Dh5.28bn) in assets under management, equivalent to 40 per cent of GDP.
The Omani fund is dwarfed in size by the sovereign wealth funds of its neighbours. The Abu Dhabi
Investment Authority and Saudi’s SAMA Foreign Holdings each have more than US$600bn in
assets under management.
Standard & Poor’s has cut Oman’s credit rating twice this year, as the oil rout had a greater effect
on the country’s fiscal and trade positions than previously forecast.
Oman’s main stock index, the Muscat MSM 30, is down 14.1 per cent for the year to date. It rose
by 0.2 per cent on Wednesday.
The sultanate’s 2015 budget anticipated an oil price of $75 per barrel this year; Brent crude has
since fallen to $37, close to its 11-year low. The IMF estimates that the sultanate needs an oil
price of $95 per barrel for it to cover its spending.
Oman’s budget cuts follow reductions in spending in the UAE and Saudi Arabia.
On Monday, Saudi Arabia said that it would reduce government spending by 13 per cent in its
2016 budget. The UAE trimmed spending by 21.6 per cent in the third quarter of the year, on the
back of cuts to its subsidy bills.

Ireland: Shell gears up for Corrib first gas after final hurdle skipped
Offshore energy
Shell, operator of the Corrib gas project, dubbed Ireland’s largest ever energy investments, has
received the final remaining consent required for production from the office of Ireland’s Minister for
Communications, Energy and Natural Resources.
The Corrib partners Shell, Vermilion and Statoil will now focus on final preparations to initiate first
gas production at Corrib. Production levels at Corrib are expected to rise over a period of
approximately six months to a peak rate estimated at 58 mmcf/d (9,700 boe/d), net to Vermilion.
“Receipt of Ministerial Consent marks the end of a lengthy and comprehensive regulatory
review by a number of Irish regulatory agencies,” said Lorenzo Donadeo, CEO of
Vermilion. “Achievement of first gas at Corrib will mark a significant milestone for
Vermilion.”
Corrib is a natural gas field located
approximately 83 km off the northwest
coast of Ireland. The field is believed to
contain approximately 1 trillion cubic
feet of natural gas reserves. At peak
production, the Corrib field has the
potential to meet up to 60% of Ireland’s
gas needs.
Natural gas will be transported from the
field through a 20-inch pipeline to the
Bellanaboy Bridge Gas Terminal in
northwest Mayo where it is processed
before being transferred to the Gas
Networks Ireland (GNI) national gas grid for distribution to Irish gas consumers.

US: Marcellus, Utica provide 85% of U.S. shale gas
production growth since start of 2012
U.S. EIA, Drilling Productivity Report, July 2015
The productivity of natural gas wells in the Marcellus Shale and the neighboring Utica Shale is
steadily increasing because of ongoing improvements in precision and efficiency of horizontal
drilling and hydraulic fracturing occurring in those regions. Since January 2012, natural gas
production in the Marcellus and Utica regions has accounted for 85% of the increase in natural
gas production reported in EIA's Drilling Productivity Report (DPR) and has driven recent growth
in total U.S. natural gas production.
The DPR provides a month-ahead projection of both oil and natural gas production for the seven
most significant shale formations in the United States. Although the DPR regions are grouped
according to the name of the predominant shale formation, the report analyzes all drilling and
production within each geographic area. In practice, this means natural gas production activity in
the Marcellus region, which includes Pennsylvania and West Virginia, encompasses not only the
Marcellus formation, but also portions of the Utica shale and conventional formations that lay
beneath those states.
The Utica DPR region, which includes resources that lay beneath Ohio, includes production from
the bulk of the Utica formation as well as production from the Point Pleasant shale formation and
(to a lesser extent) conventional resources.
The DPR identifies trends in total production and rig productivity, expressed as new-well gas
production per rig. The July edition of the DPR noted that average new-well gas production per rig
in the Marcellus region was 3.2 million cubic feet of natural gas per day (MMcf/d) in January 2012.
In July 2015, new-well gas production per rig increased to 8.3 MMcf/d.
This trend corresponded with an overall increase in the amount of natural gas produced in the
Marcellus region during the same period. The DPR also indicates that the Marcellus region

produced an estimated 6.3 billion cubic feet of natural gas per day (Bcf/d) in January 2012,
increasing to 16.5 Bcf/d in July 2015.
The Utica region also experienced significant gains in rig productivity and production. In January
2012, new-well gas production per rig in the Utica region averaged 0.31 MMcf/d. July 2015 new-
well gas production per rig is 6.9 MMcf/d. The DPR also indicates that the region's total natural
gas production increased rapidly over the same period: production in July 2015 was almost 18
times higher than in January 2013 (2.6 Bcf/d and 0.15 Bcf/d, respectively).
Increases in natural gas production from these regions occurred because of many factors,
including:
• Greater use of advanced drilling techniques
• Increased number of stages used in hydraulic fracturing operations
• Increased use of techniques such as zipper fracturing (simultaneous fracturing of
individual stages of two parallel horizontal wells)
• Use of specific components during well completion that aid in increasing fracture size
and porosity of the geologic formation being targeted
EIA's latest data show that natural gas produced from U.S. shale basins now accounts for 56% of
U.S. dry natural gas production. Collectively, shale gas production from the Marcellus and Utica
regions increased by 12.6 Bcf/d from January 2012 to June 2015, making these regions the
driving forces behind overall U.S. natural gas production growth.
Marcellus shale gas processing to remove valuable gas liquids

US: Wind generation seasonal patterns vary across the US
Source: U.S. Energy Information Administration, Forms EIA-860 and EIA-923
Wind plant generation performance varies throughout the year as a result of highly seasonal wind
patterns. Nationally, wind plant performance tends to be highest during the spring and lowest
during the mid- to late summer, while performance during the winter (November through February)
is around the annual median. However, this pattern can vary considerably across regions, mostly
based on local atmospheric and geographic conditions.
Unlike conventional fossil-fueled generators, there is no fuel or other variable cost associated with
wind power generation. As a result, a wind plant's capacity factor—a measure of the plant's
generation as a percentage of its maximum generating capacity—is very closely related to the
available wind resource, or average wind speed. In general, wind plant capacity factors tend to be
higher during windier periods of the year.
Because seasonal wind patterns vary by location, seasonal capacity factor patterns also vary
across regions. Capacity factors for most regions of the country rise or are flat January through
April, fall through August or September, and increase through the remainder of the year.
In California, however, wind capacity factors rise through June and fall from that point through
December. Thus, the median winter (November through February) wind plant capacity factor in
California for 2001 to 2013 is about 15%—considerably below California's annual median capacity
factor of 26%. However, during the late summer months when California tends to experience the
highest levels of demand (July, August, and September), monthly median wind capacity factors
are closer to 30%—above the annual median.
California's unique seasonal wind performance pattern is a result of a combination of the strong,
cold Pacific current on the West Coast, the land-sea breeze effect working with the normal west-
to-east winds due the earth's rotation, and the major wind farms being located in mountain passes
relatively near the coast.

Wind plant performance is highly site-specific, and it is influenced not just by wind speed, but also
its direction, constancy, and variation by height above ground. These wind characteristics are
caused by other atmospheric conditions, primarily temperature differences at different locations.
For most of the other regions, the seasonal pattern is reversed: wind plant performance is highest
in the early and later months of the year, not the summer. For example, in New England, the
median January capacity factor is about 32%, well above the annual median, while the July
capacity factor is closer to 14%, far below the annual median.
Although July tends to be the month with the highest electricity demand in the New England
region, January also has above-average electricity demand. Wind can be particularly valuable
during the winter season when natural gas demand is high—as a direct heating fuel in homes and
businesses and as a source for power
generation.
Although winter capacity factors tend to be
above the average in most regions, the national
average was heavily influenced by the larger
proportion of plants in California in the early
2000s. As the majority of planned wind capacity
additions over the next several years are
expected to be in the Upper and Lower Plains
regions, the national median capacity factor
curve will likely continue to shift toward a slightly
higher winter performance.

NewBase 31 December - 2015 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil ends 2015 in downbeat mood, hangover to be long and painful
Reuters
Oil prices opened the final trading session of 2015 in a downbeat mood after record U.S. crude
inventories reinforced concerns over a global supply glut that has pulled down prices by a third
over the past year.
Crude inventories in the United States, the world's largest petroleum producer, rose 2.6 million
barrels last week, the U.S. Energy Information Administration said. Analysts polled by Reuters
had expected a draw of 2.5 million barrels.
Crude prices held
losses after falling 3
percent in the
previous session,
with U.S. West
Texas Intermediate
(WTI) crude futures
trading around
$36.70 per barrel in
early Asian hours on
Thursday
and Brent opening
around $36.60 per
barrel.
The immediate
outlook for oil prices
remains bleak, with some analysts like Goldman Sachs saying prices as low as $20 per barrel
might be necessary to push enough production out of business and allow a rebalancing of the
market.
U.S. bank Morgan Stanley said in its outlook for next year that "headwinds (are) growing for 2016
oil" citing ongoing increases in available global supplies despite some cuts particularly by U.S.
shale drillers as well as a slowdown in demand as the main reasons.
"The imbalance in the global oil market has been diminishing in 2015, but the hope for a
rebalancing in 2016 continues to suffer serious setbacks," the bank said, reflecting a market
consensus that meaningfully higher prices are not expected before late 2016.
Traders expect some U.S. oil to be taken out of America and supplied into global markets,
following the surprise lifting of a decades-old U.S. crude export ban in December, which ended a
years-old discount in U.S. crude prices to international Brent
Oil price special
coverage

"At a time when U.S. shale is facing headwinds due to the collapse in crude oil prices... U.S. crude
oil exports are likely to help reduce congestion concerns in the U.S.," ING bank said.
Industry Pain
Oil prices began falling in mid-2014 as ballooning output from the Organization of the Petroleum
Exporting Countries (OPEC), Russia and also U.S. shale drillers started to outpace demand.
The downturn gained pace at the end of 2014 after a Saudi-led OPEC decided to keep production
high to defend global market share rather than cut output to prop up prices.
A year on, and the oil downturn has turned into a rout with Brent prices briefly falling below $36
per barrel and to levels last seen in over a decade, effectively wiping out the gains from a decade-
long commodity super-cycle sparked by China's unprecedented energy demand boom.
The downturn has caused pain across the energy supply chain, including shippers, private oil
drillers and oil-dependent countries from Venezuela and Russia to the Middle East.
Analysts estimate global crude production exceeds demand by anywhere between half a million
and 2 million barrels every day.
This means that even the most aggressive estimates of expected U.S. production cuts of 500,000
bpd for 2016 would be unlikely to fully rebalance the market.
Russia and OPEC are so far showing few signs of reining in production, leading traders to
establish record high active short positions in the market that would profit from further crude price
falls.

NewBase Special Coverage
News Agencies News Release 31 Dec.. 2015
Recession, retrenchment, revolution? Impact of low crude prices
on oil powers
In an unprecedented year for the oil business, each of the major producers has its own problems.
How will they react? The Guardian
Aglut of oil, the demise of Opec and weakening global demand combined to make 2015 the year
of crashing oil prices. The cost of crude fell to levels not seen for 11 years – and the decline may
have further to go.
There have been four sharp increases in the price of oil in the past four decades – in 1973, 1979,
1990 and 2008 – and each has led to a global recession. By that measure, a lower oil price should
be positive for the world economy, with lower fuel costs for consumers and businesses in those
countries that import crude outweighing the losses to producing nations.
But the evidence since oil
prices started falling from
their peak of $115 a barrel
in August 2014 has not
supported that thesis – or
not yet. Oil producers have
certainly felt the impact of
the lower prices on their
growth rates, their trade
figures and their public
finances butthere has been
no surge in consumer
spending or business
investment elsewhere.
Economist still reckon
there will be a boost from a
lower oil price particularly if
it looks as if the lower cost
of crude will be sustained.
Dhaval Joshi, an
economist at BCA, a
London-based research
company, said: “A commodity bubble has deflated three times in the past 100 years: the first was
after world war one; the second was after the 1980s oil shock; the third is happening right now.”
For the big producer countries, this is a major headache, the ramifications of which are only
starting to be felt. Oil powers base their spending plans on an assumed crude price. The graphic
below shows just how far below water their budgets are.

Joshi says crude prices may fall by a further 35% to reach its long-term trend. That would mean
an oil price closer to $25 a barrel - and fiscal crises in some of the world’s most pivotal economies.
Saudi Arabia
Low oil prices are not just squeezing Saudi Arabia’s domestic budget, imposing austerity on a
kingdom not used to it: it is taking its toll on Saudi support for foreign projects too.
The kingdom this week announced
swingeing budget cuts for 2016 to
address an alarming deficit of 15% of
GDP run up this year. Subsidies for water,
electricity and petroleum products are
likely to be cut, and government projects
reined in.
But overseas beneficiaries will face some
austerity too. For years, Saudi Arabia has
used its oil wealth to support friends and
allies around the world, including media
organisations, thinktanks, academic
institutions, religious schools and
charities. Countries that have traditionally
benefited from Saudi largesse include Jordan, Lebanon, Bahrain, Palestine and Egypt.
But now the IMF has raised the prospect that Saudi Arabia could go bankrupt in five years without
changes to its economic policy, cuts in support to foreign allies seem inevitable.
Egypt’s black-hole economy is potentially the kingdom’s most expensive foreign policy
commitment. In recent years, Saudi Arabia has donated billions in cash and oil products but,
despite this, the Egyptian economy, battered by war, terrorism and political instability, is facing an
acute foreign currency shortage.
Speculation is mounting that Saudi financial support to Egypt is starting to dry up – something the
Egyptian authorities have denied – and that this is damaging the bilateral relationship.
There have been some signs of tension. In July, Egypt’s oil minister said he had no objections to
importing crude oil from Iran, a move sure to ruffle the Saudis. In September, the Saudi journalist
Jamal Khashoggi – known for his closeness to the Saudi state – raised eyebrows when he said
the new Egyptian culture minister, Hilmi al-Namnam, who is well known for his secularism and
dislike of Wahhabi Islam, should never have been appointed.
So far, the Saudi authorities have given few clear signs about how they are planning to respond to
the oil price crisis, let alone lay out a long-term plan for a post-oil Saudi Arabia.
Options under consideration are thought to include cutting construction projects, energy subsidies
and public sector wages, introducing new taxes and privatisations, and issuing debt.
Another possibility foreign observers have posited is that the Saudis will be forced to unpeg the
riyal from the dollar, although given the potential this would have for uncontrollable knock-on
effects on the rest of the economy, this seems likely to be a last resort.

Cuts impacting on ordinary Saudis are something the government will be keen to avoid to
maintain political stability, so industry, the public sector and foreign allies are likely to bear the
brunt of the economic burden.
Nigeria
The oil price slump has not prevented Nigeria’s new government from unveiling big spending
plans – but analysts warn that the generosity is misplaced at a time when oil prices languish below
$40 a barrel.
Nigeria is Africa’s top oil producer and the World Bank estimates crude sales fund about 75% of
the country’s budget.
In its £19.8bn budget proposal, the government plans to increase spending by about one quarter
over last year’s budget, and to pay for it by improving tax collection and cutting the cost of
government.
The budget includes £1.65bn for cash transfers to poor Nigerians. The programme was a
campaign promise of the president, Muhammadu Buhari, who was elected in March on a platform
of cutting corruption and weaning Nigeria’s economy off its dependence on oil revenue.
But some analysts think the proposed budget is unrealistic during times of $40 oil.
“This brings a dose of reality to a people who have extremely high expectations,” said Bismarck
Rewane, the chief executive of Financial Derivatives Co. He predicted the government would have
to back down on some of its promises.
Nigeria is Africa’s largest economy, but most of the money is concentrated in the hands of a
wealthy elite and about two-thirds of Nigerians live in poverty, according to the United Nations
development programme.
Unemployment has climbed this year, hitting 9.9% in the third quarter, according to the National
Bureau of Statistics.

Chuba Ezekwesili, research analyst at Nigerian Economic Summit Group, says despite the falling
price of crude, the country has been able to avoid a jump in inflation by imposing limits on the
availability of foreign currency.
While other major oil producing economies have let their currencies lose value along with oil
prices, Nigeria has spent its reserves to prop up the value of the naira. But Ezekwesili says they
can only do that for so long.
“They’re sort of delaying the inevitable,” he said. “I feel like eventually it has to give way, and by
the time it does I feel the economy is going to be hurt because a lot of businesses can’t work
under those conditions.”
Ezekwesili was also sceptical of the government’s ability to generate the revenue necessary to
pay for programmes such as cash transfers to the poor. He doubts the government can
accomplish its goals of streamlining its costs and generating more revenue by next year.
“One thing I’ve learned about policies in Nigeria is we tend to be very optimistic but it never really
works out exactly as we want it to,” Ezekwesili said.
Russia
Vladimir Putin goes into 2016 with record approval ratings but the shakiest economic outlook
since he took charge. In the 15 years he has been at the helm, 2015 was the first year that real
wages registered a decline, something that did not happen even during the 2008-09 financial
crisis.
Oil and gas exports make up about half of the Russian budget, and the rouble ratehas been
strongly linked to the price of oil.
Sanctions against Russia, particularly the ban on Russian banks seeking western credit,
combined with falling oil prices in late 2014 to create a perfect storm that demolished the rouble,
with the currency losing half of its value against the dollar, reviving memories of previous crashes.
The currency regained some of its value by spring, but falling oil prices in autumn have caused it
to fall back to lows similar to those it experienced in late 2014.

Falling oil prices were one of the principal reasons for the collapse in the Soviet economy, and
some economists are warning of history repeating itself. Riding on a wave of high oil prices for
most of his presidency, the Russian president did not expect such a sharp downturn. Last
October, Putin said that if the price of oil fell below $80 a barrel, the world economy would crash.
A range of other top Russian officials made similar statements, in effect ruling out the possibility
that oil could fall below $70.
Some analysts say the rouble is still overvalued, and the current oil price should theoretically push
the rouble down further. This is necessary to balance the budget: the fewer dollars Russia
receives for the oil it sells, the higher the exchange rate needs to be for the budget to receive the
requisite amount of roubles. For the budget to balance at 65 roubles, not far off the current rate,
the price of oil should be $70, a recent Bank of America Merrill Lynch report found.
For ordinary Russians, it could be a tough year ahead. Those who were used to travelling abroad
have already had to scale back as the rouble made the cost of visiting foreign cities prohibitive;
and rising food prices have made it harder to balance the books for many families.
The 2016 budget, fixed in October, requires oil to be at $50 in order to run a 3% deficit within
“acceptable” rouble rate limits, meaning if the price does not rise soon, cuts will need to be made
or reserves spent. The war in Syria is an extra cost, and the announced increases in military
spending are not likely to be reversed.
USA
Filling up at the gas station hasn’t been this cheap in the US since the recession. The nationwide
average price of a gallon of regular is now $2.02 (£1.36), down 58 cents from this time last year,
according to auto club AAA, and expected to fall further.
Scared that North America’s oil boom
threatens its grip, Opec, the oil cartel,
stepped up production and forced a price
war that has driven oil prices down to
below $35 a barrel. US consumers have
benefited from lower petrol prices to the
tune of about $700 a year, according to
the US government, and that money is
fuelling consumer spending. According to
a recent report from JP Morgan, 80% of
that saving is being spent on goods and
services.
But the collapsing price of oil has also cast
a shadow over the US energy industry –
formerly one of the country’s fastest
growing employers. Fracking – the
controversial process of extracting oil and
gas from shale rock – has become less attractive to investors as the oil price has fallen, and tens
of thousands of jobs have been lost as a result. This year, the International Energy Agency said
low oil prices would “slam the brakes” on the US shale industry and the impact is already being
felt across the country’s oil producing areas.

The US energy sector has cut more than 90,000 jobs this year, according to outplacement
company Challenger, Gray & Christmas. And while the overall US unemployment rate has
continued to fall, in Texas unemployment has risen since August, according to the Bureau of
Labour Statistics. In North Dakota, home of the Bakken shale oil field, more than 17% of the
mining jobs – which include oil and natural gas – have disappeared in the past year. More jobs
look certain to be lost in the coming months.
North of the border in Canada, things are even worse. In Alberta, “the Texas of the north”, job
layoffs and the downturn of the economy have been blamed for a30% rise in suicides between
January and June, compared with 2014. In Saskatchewan, another energy-dependent region,
there have been 19% moresuicides this year.
Daniel Pavilonis, senior commodity broker with RJO Futures, said the situation was only likely to
get worse for those employed in the US energy sector. “There are oil tankers just sitting off the
coast because we don’t need more supply. We have too much,” he said. “There’s oversupply and
a lack of anybody trying to tighten production because they don’t want to lose market share.”
As a result he predicts oil prices will go lower, taking more jobs with it. But for most consumers, it’s
a win. Unlike other global economic trends, the oil price fall actually benefits average Americans,
said Pavilonis. “This is our money,” he said. “For most people, it’s a good thing.”
Venezuela
In most of the world, falling oil prices have caused significant reductions in petrol prices. But in the
country with the world’s largest oil reserves, the oil glut could force a price rise.
“It’s probably the only place in the world where with oil prices so low, they may raise gasoline
prices,” says Pedro Méndez, an informal taxi driver in Caracas, the Venezuelan capital, who fills
the tank of his Ford Laser for less than a dollar.
But the lower the price of oil goes, the deeper
Venezuela’s economy sinks. It’s near total
dependence on crude exports for hard currency
has seen the government of president Nicolás
Maduro struggling to try keep the economy
afloat.
The political effect is already being felt. Gripped
by spiraling inflation, chronic shortages of basic
goods and a quickly depreciating currency,
Venezuelan voters this month gave the
opposition an overwhelming majority in the new
legislature, which takes office in January.
Advertisement
Each $1 drop in oil prices results in more than $685m in lost yearly oil income for PDVSA, the
state-owned oil company, according to analysts.
And every drop in crude prices means less funding for the health, education and housing and
other social welfare programmes that won Maduro’s predecessor, Hugo Chávez, widespread
support for his self-styled “Bolivarian revolution”.
the price of gasoline in Venezuela

While dwindling oil revenue hurts the social programmes, Antonio Azpurua, a financial consultant
with CFS Partners/LA Group, says it could be a blessing in disguise, allowing Venezuela to wean
itself of its dependence on crude. “Venezuela needs to take advantage of low oil prices to build its
industrial base,” he says.
With a super-majority in the National Assembly, the opposition could reverse some of Maduro’s
populist measures, which have contributed to the current economic crisis. They could also choose
to raise petrol prices.
Iran
Iran is rushing to implement the landmark nuclear accord in order to cash in on sanctions relief as
early as next month, but the plummeting price of oil is tempering its expectations even though its
economy has become less dependent on crude sales.
Tehran currently exports 1.1m barrels of oil per a but the Iranian oil minister, Bijan Zanganeh, has
announced that the country is aiming to double that amount within six months of sanctions being
lifted, hoping it will return to the pre-sanctions level of 2.2m.
Although the EU lifted Iranian sanctions in October after the Vienna nuclear agreement, the
measures will only come into effect after what has become known as “implementation day”, the
unknown date when the UN nuclear watchdog, IAEA, will verify that Iran has taken the necessary
steps as outlined under the nuclear deal. Iran is expediting whatever it can to bring this date
forward to as early as January.
In an effort to woo foreign investment in the post-sanctions era, Iran put a set of new lucrative oil
and gas contracts, worth more than $30bn, on the market this month. But all these efforts have
come at a time when global oil prices are falling as a result of a crude surplus of 2m barrels a day,
a phenomenon Tehran blames on the Saudis.

“The drop in oil prices hurts all oil producers, not just Iran,” said Amir Handjani, president of PG
International commodities trading services and a member of the board directors of RAK
Petroleum.
“Saudi Arabia is very aware that Iran will be able to sell its crude unencumbered by sanctions on
the international market very soon and will use all means at its disposal to make sure Iran doesn’t
recapture the market share it lost over the past four years,” he said.
“Basically, Riyadh’s message to Tehran is simple: we can endure low oil prices for a while; can
you?”
But the experience of years under sanctions has made the Iranian economy “incredibly resilient”,
according to Handjani. Iran’s economy faced huge economic problems in recent years due to
international sanctions imposed over Tehran’s nuclear programme. Plummeting oil prices only
added to economic woes in a country with the world’s fourth-largest oil reserves.
“To be sure, low oil prices deny Tehran much needed revenue but unlike the Saudis, Iran’s
economy is not solely dependent on oil exports. Oil revenue accounts for about 15% of Iran’s
GDP,” Handjani told the Guardian. Sanctions have forced Iran to diversify its economy, he said. It
has a large manufacturing base, IT sector, and robust agro-industries, which make its economy on
the whole “much more balanced” than Saudi Arabia.
“The Iranian economy has absorbed so many shocks over the past 36 years, from war to
sanctions, that the pain of low oil prices now, as it breaks from international isolation, pales in
comparison.”
Without naming Saudi Arabia, Zanganeh said last week that it was clear which country had an
excess of supply and that there was “no ambiguity about who they are”. On the occasion of
unveiling new oil contracts, the Iranian minister said last month that his country was willing to play
a major role in oil supply and was even ready to work with American companies. “The way for the
presence of these companies in Iran’s oil industry is open,” he said at the Iran Petroleum
Contracts Conference in Tehran.
The deputy managing director of the national Iranian oil company (NIOC) told the Guardian in
September that the Iranian government was earning more from tax than oil for the first time in
almost half a century as the country shifts its traditional reliance on crude to taxation revenues in
the face of falling oil prices. Critics say Iran is unlikely to maintain that equation when the lifting of
sanctions allows it to export more oil.
According to Opec, Iran on average was selling oil at $38.92 a barrel in November, $5.63 less
than the average in October, which is the worst drop among the group’s members.
Libya
Plunging oil prices are threatening disaster in Libya, where civil war has left the population
depending on fast-dwindling oil revenues to survive.

Libya has Africa’s largest oil reserves and in normal times this provides 95% of the country’s export
revenues, keeping the economy afloat. But civil war between rival governments at either end of the country
has shattered the economy, leaving the population almost wholly dependent on revenue generated
overseas. The crash in oil prices has halved revenues, and shortages of foodstuffs and medicines – even
petrol – are starting to be felt.
This cash squeeze has triggered a three-way battle for control of what remains of the country’s oil
wealth. Much of Libya’s largest group of oil fields, the Sirte Basin, is now held by Islamic State,
which has interposed itself between forces of the rival governments. Most of what remains is in
eastern Libya, held by the elected parliament based in Tobruk.
Tobruk is using its status as the internationally recognised government to battle in foreign courts
for the right to income from other producing fields, opposing the state-owned National Oil
Corporation, whose headquarters remains in Tripoli, held by a rival parliament.
Tobruk has set up a second National Oil Corporation, based in eastern Libya, and last month
demanded international oil companies switch payments that currently go to Tripoli.
Countering that, Tripoli’s NOC chief, Mustafa Sanallah, convened a conference in London in
October calling on oil buyers to stick with him. Two of the world’s largest oil buyers, Glencore and
Vitol, have agreed, but the eastern government has vowed legal action.
London courts are likely to be the proving ground for this test of wills, with both governments
already gearing up for a precedent-setting high court battle, due early next year, for control of the
Libya Investment Authority, the country’s £65bn sovereign wealth fund.
But whoever wins control of what remains of the oil industry may find it a pyrrhic victory. John
Hamilton, director of London’s Cross-border Information, says the glut of oil on world markets and
turbulence around the few remaining oil ports means Libyan oil has already been “priced out” by
many buyers.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
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
khdmohd@hawkenergy.net
khdmohd@hotmail.com
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 31 December 2015 K. Al Awadi

New base 759 special 31 december 2015

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