Mais conteúdo relacionado Semelhante a New base 622 special 09 june 2015 (20) Mais de Khaled Al Awadi (20) New base 622 special 09 june 20151. 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
publication. However, no warranty is given to the accuracy of its content. Page 1
NewBase 09 June 2015 - Issue No. 622 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE: Boeing and Tawazun Precision Industries Break
Ground on New Aerospace Facility
Reuters + NewBase
Boeing and partner Tawazun Precision Industries (TPI ) broke ground today on a new aerospace
surface treatment facility for metallic parts in the United Arab Emirates (UAE). In a ceremonial
groundbreaking at the Tawazun Industrial Park in Abu Dhabi, company representatives said this
facility introduces a new aerospace manufacturing capability in the Gulf region.
"We are pleased to be part of this
unique project which further fosters the
UAE's regional leadership in high-
technology defense manufacturing,"
said H.E. Saif Al Hajeri, CEO of
Tawazun. "The establishment of this
capability is a significant step for the
UAE's aerospace industry, as the
metallic components manufacturing and
metallic sub-assembly will be entirely
performed in the UAE."
The project, made possible by the
Tawazun Economic Council, was first
announced at the Dubai Air Show in
2013, and is scheduled to be
operational in 2016. "The collaboration
between TPI and Boeing signifies the
vital role the Council plays in adding economic and commercial value to the UAE economy," said
Matar Al Romaithi, chief officer, Tawazun Economic Council-Industrial Development Unit.
The project will create high value jobs in the UAE, and enable TPI the opportunity to produce
complex metallic assemblies for Boeing , its suppliers and other aerospace OEMs around the
world.
"This new complex will be a state-of-the-art facility that will contribute to the growth of the UAE
aerospace industry," said Bernie Dunn, president of Boeing Middle East. "The development of key
capabilities through partnerships is of mutual benefit to both Boeing and the UAE."
"This project is a significant strategic investment and a key enabler for TPI , which will secure a
sustainable titanium and aluminium machining capability, with the potential to become a regional
and global Centre of Excellence," said Dr. Phillip Lewis, the CEO of Tawazun Precision
2. 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
publication. However, no warranty is given to the accuracy of its content. Page 2
Industries . "It provides the foundation for the development of a significant metallic aero-structures
assembly facility to be established in the UAE."
A unit of The Boeing Company , Boeing Defense, Space & Security Is one of the world's largest
defense, space and security businesses specializing in innovative and capabilities-driven customer
solutions, and the world's largest and most versatile manufacturer of military aircraft. Head
quartered in St. Louis, Boeing Defense, Space & Security is a $33 billion business with 58,000
employees worldwide. Follow us on Twitter: @BoeingDefense.
About Tawazun Economic Council
Based in Abu Dhabi, the Tawazun Economic Council was
founded in 1992 to fulfill a vision of comprehensive and
sustainable economic and social development within the UAE.
The Council is responsible for the Tawazun Economic Program,
formerly known as the UAE Offset Program, which was
established to diversify the UAE's economy and create new
ventures in various sectors through partnerships with
international defense contractors. To date, the Program has
resulted in the creation of several multi-million dollar joint ventures in various economic and
industrial sectors, including ship building, district cooling, aircraft leasing, fish farming, healthcare,
agriculture, banking and education.
About Tawazun
Tawazun borne out of the long-established Tawazun Economic
Council was created in 2007 to develop ventures through industrial
partnerships and strategic investments that add value to the UAE's
industrial manufacturing sector across a number of areas: defense
& aerospace, automotive, munitions, metals and technology.
Tawazun has established itself as an active industrial investor both
locally and internationally by partnering with a hand-picked selection of world-class market leaders
to build skills, expertise, products and systems in the UAE. Its investment strategy is designed to
drive change within the marketplace, while its aim is to inspire emerging companies by providing
strong and consistent support to aid their future expansion.
About Tawazun Precision Industries
Tawazun Precision Industries (TPI ) is a manufacturing facility
delivering components to the aerospace, oil and gas and
defense industries with export operations worldwide. With a
modern facility based in Tawazun Industrial Park, TPI 's state-
of-the-art production capabilities and turnkey service offers
include machining, surface treatment, heat treatment,
advanced coating solutions, plastic injection molding, metals
testing, repairing, and servicing. TPI acts as both a
manufacturer and a service center to a number of UAE based
operating companies and agents, as well as internationally renowned organizations across the
following specialty areas: Manufacturing Engineering, Tooling, Surface and Heat Treatment,
Coating, Repairing and Machining.
3. 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
publication. However, no warranty is given to the accuracy of its content. Page 3
About Tawazun Industrial Park
Tawazun industrial Park (TIP) is a unique, self-contained world class industrial zone belonging to
Tawazun Holding to develop the emirates' industrial capabilities. Playing host to an exclusive
sector of the industry, TIP primarily provides a manufacturing base for defense related products
while also playing host to industries from selected sectors: Basic Metal Industries, Precision
manufacturing, Aerospace, Oil & gas support and service Industry. TIP's core principle is to
provide its clients with supportive and nurturing environment. Offering world class infrastructure in
an enhanced secure area, TIP is strategically located off the Abu Dhabi-Dubai highway and
provides easy accessibility from all emirates, airports and ports.
The product portfolio offered by TIP includes highly specialized manufacturing/assembly, storage
and demilitarization facilities for defense related products, industrial land, built-to-lease
customized factories/workshops, showrooms. Offices and staff accommodation in a commercial
and sustainable community environment. Furthermore, TIP's one-stop-shop supports its clients
through all government & regulatory services, procurement & logistics, supply of skilled workforce,
training facilities, visitor/delegation management.
4. 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
publication. However, no warranty is given to the accuracy of its content. Page 4
Oman Gas to seek pact on new tariff system
Oman Observer + NewBase
The Sultanate’s gas transportation flagship, Oman Gas Company, says it plans to hammer out a
new agreement with the Omani government on the tariff governing the cost of transporting natural
gas to its expanding portfolio of customers across the country.
The move, according to a top official of the state-owned utility,
is part of a raft of substantive initiatives lined up for
implementation through to 2020. It includes investments in new
gas transportation infrastructure, as well as OGC’s first large-
scale foray into the midstream energy and downstream
petrochemicals sector.
“Our outlook over the next five years focuses on reaching an
agreement with (Oman’s) government on a new tariff system in
2015, the award of (an Engineering-Procurement-Construction
contract) for Al Duqm (pipeline) in 2015, award of Salalah LPG
(Engineering-Procurement-Construction) in 2016 and
commissioning of Al Duqm pipeline and Salalah LPG in 2018,” OGC’s Acting CEO Abdulaziz
bin Said al Mujaibi (pictured) stated in the company’s newly issued Annual Report for 2014.
The revised tariff system sought by OGC comes against a backdrop of soaring demand for natural
gas as a fuel resource and industrial feedstock. In 2014, the utility delivered 16.18 billion cubic
metres of natural gas to its expanding customer base, comprising a mix of power and water
desalination plants, industrial and petrochemical schemes, refineries, steel mills, industrial parks,
cement factors and oil companies.
Consumption was up 5.5 per cent in comparison with figures for 2013. Gas delivery averaged
44.33 million cubic metres per day, spiking to an all-new record of 53.79 million cubic metres on
July 21, 2014, according to the company.
OGC delivers gas to its customers via a massive pipeline network extending some 2,500
kilometres across the length and breadth of the Sultanate. Customers tap into the network at 46
take-off points — a figure poised to rise as new consumers join its customer base.
Looking back on OGC’s performance during 2014, the Acting CEO said the company had initiated
work on a number of key ventures. Notable was the award of a contract for the manufacture of
pipes for a gas pipeline that will supply energy to the Duqm Special Economic Zone (SEZ).
Another landmark project set to make headway during the course of 2015 is the Salalah LPG
Extraction scheme, which is currently in the Front-End Engineering Design (FEED) stage. Plans
drawn up by OGC envisage a state-of-the-art facility that will extract the different components of
LPG — chiefly propane (C3), butane (C4) and light condensate (C5) — from natural gas flowing
5. 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
publication. However, no warranty is given to the accuracy of its content. Page 5
Through the utility’s southern grid. At full capacity, the plant is expected to produce 153,000
tonnes per annum (tpa) of propane, 115,000 tpa of butane and 59,000 tpa of condensate.
Underlining the LPG project’s potential to spawn further downstream investments in Oman, Al
Mujaibi welcomed efforts by Oman Oil Company Group (OGC’s parent organisation) and other
private investors in evaluating opportunities that could arise from the LPG product to feedstock
other projects — ventures that will contribute to industrial growth and skilled employment
opportunities, he noted.
“Equally important is ORPIC’s NGL (natural gas liquids) extraction project at Fahud for which
OGC is providing its technical support for the FEED work, and planning to continue this support
through the project lifecycle,” the Acting CEO stated.
Also during the course of 2014, OGC undertook several concept engineering studies that will
enable a number of new customers to be added to the utility’s gas supply system. Projects lined
up for eventual integration with the OGC network are the Ibri power scheme, Sohar-3 power plant,
Salalah-2 power plant, and the Purified Isophthalic Acid (PIA) and PTA/PET projects at Sohar
Port.
6. 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
publication. However, no warranty is given to the accuracy of its content. Page 6
U.S. Shale Oil Boom Grinds to a Halt as OPEC Keeps Pumping
Bloomberg + NewBase
The shale oil boom that turned the U.S. into the world’s largest fuel exporter and brought $3
gasoline back to America’s pumps is grinding to a halt.
Crude output from the prolific tight-rock formations such as North Dakota’s Bakken and Texas’s
Eagle Ford shale will shrink 1.3 percent to 5.58 million barrels a day this month, based on Energy
Information Administration estimates. It’ll drop further in July to 5.49 million, the lowest level since
January, the agency said Monday.
With the Organization of Petroleum Exporting Countries maintaining its own oil production, U.S.
shale is coming under pressure to rebalance a global supply glut. EOG Resources Inc., the
country’s biggest shale-oil producer, hedge fund manager Andrew J. Hall and banks including
Standard Chartered Plc have forecast declines in U.S. output following last year’s plunge in crude
prices. The nation was still pumping the most in four decades in March.
“Production has to come down because rigs drilling for oil are down 57 percent this year,” James
Williams, president of energy consultancy WTRG Economics, said by phone Monday from
London, Arkansas. “Countering that is the fact that the rigs we’re still using are more efficient and
drilling in areas where you get higher production. So that has delayed the decline.”
West Texas Intermediate crude for July delivery added 26 cents to $58.40 a barrel in electronic
trading on the New York Mercantile Exchange at 11:29 a.m. Singapore time. Futures have
rebounded 30 percent since March 18 through Monday amid speculation U.S. oil drillers had laid
down enough rigs to curb supply.
7. 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
publication. However, no warranty is given to the accuracy of its content. Page 7
Fewer Rigs
Despite the U.S. oil rig count falling for 26 straight weeks, domestic crude production surged
126,000 barrels a day, or 1.3 percent, to 9.53 million in March, the most since 1972, Energy
Information Administration data show.
“We do not believe that the direction of U.S. oil output has changed,” Standard Chartered analysts
including Nicholas Snowdon said in a research note June 1. “In our view, U.S. oil supply is still
falling, and it is likely to carry on falling for the rest of this year.”
Shale oil output will decline by 105,000 barrels a day in July after dropping 86,000 barrels in June,
according to the London-based bank. EOG Resources Chief Executive Officer Bill Thomas said
at a conference last month that U.S. production would drop through the end of the year.
The EIA’s forecasts for U.S. oil production cover the yield from major plays that together
accounted for 95 percent of domestic output growth from 2011 to 2013.
8. 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
publication. However, no warranty is given to the accuracy of its content. Page 8
Eagle Ford
Output from the Eagle Ford in Texas, the second-largest oil field in the U.S., will contract by
49,000 barrels a day in July to 1.59 million. Production in the Bakken shale region of North Dakota
will slip by 29,000 to 1.24 million, the EIA said.
Yield from the Permian Basin in West Texas and New Mexico, the largest U.S. oil field, will rise by
3,000 barrels a day to 2.06 million.
The EIA’s oil-production forecasts are based on the number of rigs drilling in each play and
estimates on how productive they are.
U.S. drillers are retreating from oil fields as OPEC, which accounts for more than a third of the
world’s oil, continues to resist calls to curb its own supply. The 12-nation group decided last week
to instead maintain a combined daily production target of 30 million barrels. Production from the
group has exceeded that level for each of the past 12 months, according to data compiled by
Bloomberg.
Pyrrhic Victory
The EIA expects production from the shale plays to drop in July by 93,000 barrels a day, the
largest drop since the boom began. The steepening decline provides some validation to OPEC
members who decided to preserve their market share and let falling prices force others to cut
back, said Bill O’Grady, chief market strategist at Confluence Investment Management in St.
Louis, which oversees $3.4 billion.
It may be a Pyrrhic victory for some OPEC members, such as Venezuela, whose budgets have
been hampered by oil prices that fell more than 50 percent from last summer. The declines in U.S.
production might not be piling up fast enough to boost crude revenues for them, O’Grady said.
“You’re seeing production go down, but is it going down fast enough?” O’Grady said by phone
Monday. “If you’re a country like Venezuela, is it happening fast enough for you to basically be
saved? That’s really the rub.”
9. 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
publication. However, no warranty is given to the accuracy of its content. Page 9
New data series show more detail for crude oil stocks, storage by region
Source: U.S. Energy Information Administration, Report
In an effort to better present crude oil storage capacity and use across the United States, EIA has
prepared new tables as part of the semiannual Working and Net Available Shell Storage Capacity
Report. The new series show crude oil stocks held at refineries crude oil in tanks and underground
storage in each Petroleum Administration for Defense District (PADD). Previously, this information
was only available at the national level.
Crude oil stocks in tanks and underground storage are used to calculate storage capacity
utilization rates and to derive the quantity of crude oil held in pipelines and in transit by rail and
water. Refinery stocks and storage capacity data by PADD have both been available since 2011,
but the new table brings together these two sets of data to simplify the task of calculating
utilization rates by PADD.
EIA updates storage capacity data twice each year, reflecting capacities as of the end of March
and September. EIA has crude oil inventory data back to 1981, but storage capacity data were
first reported by EIA for the end of March 2011.
EIA reports crude oil inventories held in four types of locations:
• At refineries
• In pipelines and tank farms, which are further classified as:
• In tanks and underground storage
• In pipelines, and other forms of transit (by rail, by water)
• On producing leases (storage on production sites)
All four of these categories are considered when calculating inventories, but only two categories
are relevant to calculating capacity utilization: crude oil held at refineries and in tanks and
underground storage.
Note: PADD is Petroleum Administration for Defense District.
10. 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
publication. However, no warranty is given to the accuracy of its content. Page 10
Some of the stocks reported as being held at refineries are actually in transit (on their way to the
refinery), but these volumes are assumed to be minimal relative to stocks in refinery tanks and
refinery storage capacity.
Some of the more significant changes in crude oil storage have occurred in the Midwest, where
26% of the nation's working storage capacity, including storage at Cushing, Oklahoma, is located.
Storage utilization at Midwest refineries (as defined by PADD 2) in March 2015 reached 80%, the
highest storage utilization rate observed for any month since EIA started collecting storage
capacity data. Again, the refinery storage utilization rate may be somewhat overstated, as the
refinery stock data include volumes of crude oil in transit by rail and water being transported to
refineries.
In the case of crude oil stocks held in tank farms and pipelines, crude oil in transit by pipeline,
water, and rail can be separately tabulated. These volumes are not measured directly but rather
are derived by subtracting the stocks in tanks and underground storage from the combined
pipeline and tank farm quantity.
In the Midwest, stocks in pipelines and in transit by rail and water increased from 25.3 million
barrels in March 2011 to 35.0 million barrels in March 2015. This increase occurred primarily
because of pipeline expansions and increased quantities of crude oil being transported by rail and
water. Because pipelines must be full in order to operate, stocks held in pipelines (known as
pipeline fill) are not considered in the storage utilization calculation.
11. 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
publication. However, no warranty is given to the accuracy of its content. Page 11
Utilization of working capacity of tanks and underground storage was 73% in March 2015, nearly
equal to the rate in March 2011, as Midwest crude oil stocks and storage capacities increased at
similar rates.
Utilization of combined storage capacity at Midwest refineries and tank farms was 74% at the end
of March 2015, the highest PADD 2 storage capacity utilization rate recorded in the five years EIA
has been collecting data.
In absolute amounts, the crude oil stored at Midwest refineries and tank farms in March 2015 was
103.7 million barrels, slightly lower than the total Midwest working storage capacity four years
before. Because storage capacity has increased, however, the March 2015 utilization rate is only
about 2 percentage points above the previous high of 72% at the end of March 2011.
12. 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
publication. However, no warranty is given to the accuracy of its content. Page 12
Oil Price Drop Special Coverage
Oil prices rise on hopes for China stimulus
Reuters + NewBase
Oil prices edged up on Tuesday on hopes of more economic stimulus in China after disappointing
data from the world's No.2 economy. China's consumer inflation weakened more than expected,
to 1.2 percent year-on-year in May, raising concerns about growing deflationary pressures as the
economy cools. Its producer prices fell for the 38th straight month.
"The weak data continues to point out the sluggish demand in the real economy. The government
should roll out more easing measures to lower the real financing costs to boost growth," said Yu
Yafang, macro strategist at Huachuang Securities in Beijing.
Front month U.S. crude CLc1 climbed 27 cents to $58.41 a barrel by 0430 GMT (1230 ET), after
ending the previous session down 99 cents. Brent for June delivery LCOc1 rose 23 cents to
$62.92 a barrel, having settled down 62 cents in the previous session.
Chinese oil imports fell about 11 percent in May from a year ago in the steepest drop since
November 2013.
"The weak import numbers were a result of a significant increase in refinery maintenance in May
... At the same time, the strong level of imports in recent months has put pressure on storage
facilities at ports in China," Australia and New Zealand Banking Group Ltd (ANZ) said in a
research note on Tuesday.
"This should be alleviated later this year as the construction of new storage facilities is
completed."
EYES ON SUPPLY FROM IRAQ, IRAN
Investors have also been concentrating on supply, with OPEC on Friday agreeing to continue
unconstrained output and Iran and Iraq potentially boosting production.
13. 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
publication. However, no warranty is given to the accuracy of its content. Page 13
"Iran in particular has the potential to flood the market with the most crude oil if sanctions are lifted
later this month," ANZ said.
In Iraq, government forces backed by U.S.-led coalition air strikes have opened supply lines into
Baiji town and its nearby oil refinery, making progress against Islamic State rebels in a seesaw
battle that has gone on for months, the Pentagon said on Monday.
An official in Iran - OPEC's fifth-largest crude producer - said on Monday that eight western
European companies are keen to invest in the country's $2.8 billion Siraf oil refinery project, as it
ramps up capacity to reduce its dependence on imports.
Elsewhere, oil production declines from the largest U.S. shale plays are forecast to deepen for a
third consecutive month in July even as rig productivity remains high, data from the U.S. Energy
Information Administration showed.
OPEC adjusts to new oil market reality
Reuters + NewBase
OPEC has never really been a "cartel" in the conventional sense of an organisation that agrees to
restrict output to maximise revenues. So its decision on Friday not to cut production was entirely
predictable and the only practical option open to its members.
The strategy of maintaining production even as prices fall, led by the Saudis but now more or less
embraced by most of the organisation's membership is really the only sensible course. Most
traders sense this: the price of Brent for delivery in December 2015 has been virtually unchanged
since February and barely moved on Friday.
If the organisation was confronted by a temporary shortfall in demand it might make sense to cut
output to secure more revenue.
But faced with a permanent shock from the supply side, such as the shale revolution, and the
permanent loss of demand from substitution and conservation, the organisation's only sustainable
response is to continue pumping and allow the market to adjust.
Attempts to buck the market always end in failure, a lesson top Saudi officials and others in OPEC
have learned the hard way over the last 50 years.
OPEC OBJECTIVES
According to its founding statute, the Organization of the Petroleum Exporting Countries, to use its
full name, was established in 1960 to coordinate and unify the petroleum policies of its members
(Article 2(A)).
The organisation also seeks "ways and means of ensuring the stabilization of prices ... with a view
to eliminating harmful and unnecessary fluctuations" (Art. 2(B)) as well as a "steady income" for
producing countries and a "fair return" on capital for investors in the oil industry (Art. 2(C)).
OPEC ministers confer regularly and typically announce their decision in the form of a collective
production target and sometimes allocations (colloquially termed "quotas") for individual member
countries.
This has given rise to the myth that OPEC is a cartel that has successfully raised prices by
restricting the amount of oil that its members produce. "OPEC has ... achieved a reputation that
embraces extremes of response," Ian Skeet, a former Shell executive, wrote almost 30 years ago.
"It has been commended, reviled, supported, and opposed."
14. 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
publication. However, no warranty is given to the accuracy of its content. Page 14
"It has been variously envied and derided for the transfer to itself of hundreds of billions of dollars,
and for having been, or not been, a successful cartel," Skeet explained ("OPEC, twenty-five years
of prices and politics" 1988).
The reality, however, has been very different. OPEC has only intermittently and with limited
success behaved like a cartel. Its power over the oil market has been vastly exaggerated. During
its first decade, OPEC was almost exclusively concerned with raising its share of oil revenues by
taking ownership of the oilfields and increasing taxation on operating companies.
Most OPEC members raced to increase their output as quickly as possible.
In the 1970s, members turned their attention to coordinating prices and discounts but were still
free to pump as much as possible. It was not until March 1982 that OPEC began to announce a
collective production target and allocations for individual member countries ("OPEC Annual
Statistical Bulletin" 2014).
For the last 33 years, the organisation has announced a collective target but has not always been
able to agree on individual allocations and the target has sometimes excluded certain member
countries such as Iraq.
There have been only three periods when members agreed to restrict production significantly to
remove supply from the market and achieve higher prices: 1984-1986, 1998-2002 and 2008-2010.
Even in these periods, the cuts for most members were notional, with widespread cheating and
non-compliance. Real cuts fell almost entirely on Saudi Arabia, Kuwait and the United Arab
Emirates.
Other members such as Iran and Iraq have consistently rejected production restraints because
they need to maintain government income and pay for defense-related expenditures. At its most
powerful during the oil shock of 1973/74, OPEC accounted for half of global oil production. But its
share since the 1980s has generally been no more than around 40 percent.
If OPEC has ever really behaved like a cartel, it has been a very incomplete one.
"Unless it controlled the world's entire production, it could not possibly maintain the new status
quo forever. Sooner or later other producers would challenge it," historian Stephen Howarth wrote
about the organisation's problems with rival producers in the 1980s ("A century in oil" 1997).
EXTERNAL SHOCKS
The big shocks in oil prices over the last 50 years have all originated outside the organisation. In
1973, it was the exhaustion of spare capacity in the United States after two decades of very low
prices which set the stage for the oil shock.
In the 1980s and 1990s production from newly developed fields in the North Sea, Alaska, the
Soviet Union, China and the Gulf of Mexico which depressed prices for around 15 years. In 1997-
98, the Asian financial crisis depressed demand sending prices below $10 per barrel. In 2004-
2008, it was booming demand in Asia, and especially China, that sent prices soaring above $140.
Most recently, the global financial crisis and now the shale revolution in North America have sent
oil prices plunging. In all these instances, OPEC and its members have been forced to adapt to
market conditions rather than driven them.
The organisation has been most successful when it accommodated itself to changing supply and
demand conditions rather than tried to fight them. Efforts to change prices by restraining supply
15. 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
publication. However, no warranty is given to the accuracy of its content. Page 15
have generally failed and left member countries with both lower prices and lower market share
(1982-85) or succeeded only in the short term (1998-2000 and 2008-2009).
Faced with the shale revolution in the United States, which has unleashed a wave of mid-priced
crude onto the market, Saudi Arabia and the rest of OPEC have taken the only sensible course
open to them: do nothing.
The oil market will gradually rebalance. There are signs that the process is already well underway.
Demand will grow much faster than when prices were over $100 per barrel while new investment
in supply will be curbed.
The major producers around the Middle East Gulf will continue to increase their production though
they will see sharply reduced revenues. Shale producers, too, will survive, though the industry will
be forced to become more efficient and some of the highest cost and most speculative projects
will be abandoned.
The real burden of adjustment will fall on the highest cost and most risky projects which are
caught in the cross-fire. The North Sea, the Arctic and OPEC's own weaker members in Africa
and Latin America will all struggle to attract investment and maintain let alone grow output in a
low-price environment.
16. 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
publication. However, no warranty is given to the accuracy of its content. Page 16
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Your partner in Energy Services
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 08 June 2015 K. Al Awadi
17. 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
publication. However, no warranty is given to the accuracy of its content. Page 17