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New base 983 special 05 january 2017 energy news
1. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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 05 January 2017 - Issue No. 983 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE:Distric cooling Empower registered 255,000 client-
servicing transactions in 2016
(WAM) -- Emirates Central Cooling Systems Corporation (Empower) has registered 255,000
client-servicing transactions last year ranging from face to face client servicing in the branches,
telephone calls and e-mail correspondences.
This is represents a breakthrough in the use of modern methods and techniques in managing day
to day queries and transactions at Empower as the company has accommodated the increasing
number of customers reflecting the expansion of its district cooling network in Dubai.
"In 2016, our client servicing department has seen significant development of advanced
technologies in order to keep abreast of increasing demand. Through these technologies, we were
able to cater to the needs of the year, which has seen a significant expansion in the demand of
district cooling services across Dubai," said Ahmad Bin Shafar, Chief Executive Officer of
Empower.
"We firmly believe that we are making strong strides in responding to customersâ requirements,
which has resulted in the recent figures that reflect the success of our team in achieving
customersâ satisfaction as we continuously work on improving the services to our customers."
Empower currently operates more than 1,100,000 RT, providing environmentally responsible
district cooling services to large-scale real estate developments, such as Jumeirah Group,
Business Bay, Jumeirah Beach Residence, Dubai International Financial Centre, Palm Jumeirah,
Jumeirah Lake Towers, Ibn Battuta Mall, Discovery Gardens, Dubai Healthcare City, Dubai World
Trade Centre Residences and Dubai Design District, among others.
2. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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
Saudi: McDermott to build four jackets for Saudi Aramco
McDermott has been awarded a contract from Saudi Aramco for the engineering, procurement,
construction and installation (EPCI) of four jackets and three gas observation platforms offshore
Saudi Arabia.
The American EPCI company said on Wednesday that the total weight of all structures combined
is 11,595 tons.
âAs the third fast-track jacket contract from Saudi Aramco in the last 18 months, this award is a
testament to McDermottâs successful performance on previous fast-track projects for Saudi
Aramco,â said Linh Austin, McDermottâs Vice President, Middle East & Caspian.
âMcDermottâs fully-integrated EPCI solution provides Saudi Aramco schedule certainty, one of
their key drivers, while helping them meet their aggressive schedule.â
In 2015, McDermott was awarded a project by Saudi Aramco for the EPCI of twelve jackets; a
project completed in 2016. McDermott is currently executing EPCI work for Saudi Aramco on nine
jackets offshore Saudi Arabia, which are expected to be delivered in the third quarter of 2017.
The contract award will be reflected in McDermottâs fourth quarter 2016 backlog. Work on the
contract is expected to be executed through the fourth quarter of 2017. McDermott also said it
plans to use its Engineering teams in Dubai, Chennai, India and Al Khobar, Saudi Arabia with
construction taking place at McDermottâs fabrication facilities in Dubai and Dammam, Saudi
Arabia. Vessels from McDermottâs global fleet are scheduled to perform the installation work.
McDermott's facility in Dubai
3. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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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South Sudan plans to increase oil production as prices go up
:
South Sudan is planning to increase its oil production in the coming days as oil prices increase
following last monthâs Opec agreement to cap output, a top diplomat in South Sudan embassy told
Gulf News.
âWe are planning to increase oil production as oil prices go up to increase our revenue and
expand the ways of oil industry,â said Mayom Alier, Deputy Head of mission in South Sudan
embassy in Abu Dhabi.
He did not give a specific figure to what extent output is expected to rise but said they are trying to
reach the levels of 500,000 barrels per day which the country was producing when the conflict
began in 2013.
The current oil production of South Sudan, which is heavily dependent on oil revenue, is about
130,000 barrels per day. The countryâs oil output plummeted due to conflict following the rebellion
of former vice president Riek Machar in 2013 and the escalation of fighting in the subsequent
months.
According to the diplomat, 98 per
cent of the countryâs budget is
dependent on oil revenue and the
drop in oil prices has heavily
impacted its economy. âWe suffered
the most due to low oil prices. Rise
in oil prices is a good news for us.â
South Sudan has the third largest oil
reserves in sub-Saharan Africa after
Nigeria and Angola. The main oil
companies operating in the country
include China National Petroleum
Corporation, Indiaâs Oil and Natural
Gas Corporation and Malaysiaâs
Petronas.
The landlocked country does not have oil infrastructure and uses the pipeline in its northern
neighbour Sudan to transport its crude oil to the international market. South Sudan is also trying to
strengthen its trade ties with the UAE, but it is yet to sign protection of investment agreement and
double taxation avoidance agreement with the emirates.
âSouth Sudan offers investment opportunities in tourism, oil industry and in agriculture sectors for
the UAE government to invest,â said Alier. âWe have enormous resources that are yet to be
tapped. As the UAE mulls investment in various countries, South Sudan could be a good option in
future specially in areas of food security.â
South Sudan, which gained independence from Sudan in 2011, opened its embassy in Abu Dhabi
2014. Opec (Organisation of the Petroleum Exporting Countries) and non-Opec members reached
an agreement on November 30 to slash production by about 1.8 million barrels per day starting
this week to stabilise oil prices.
International benchmark, Brent surged by more than 20 per cent following the agreement and is
currently trading at more than $56 per barrel.
4. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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
Lebanon Set to Join East Mediterranean Race for Oil and Gas
Bloomberg - Dana Khraiche
Lebanon approved two measures allowing it to auction its first offshore oil and natural gas rights,
ending three years of delays that kept the tiny country from joining a regional race to tap energy
wealth in the eastern Mediterranean.
The newly formed
government headed
by Prime Minister
Saad Hariri passed
the two decrees on
Wednesday, state-
run National News
Agency reported,
citing Foreign Affairs
Minister Gebran
Bassil. The decrees
demarcate energy
blocks, establish
production-sharing
contracts and
specify tender
protocols. They take
effect with no need
for additional approval. The cabinet formed ministerial committees to study a petroleum tax draft
law and another proposed law governing onshore oil resources, Information Minister Melhem
Riachi said in a televised news conference. The cabinet also discussed the establishment of a
sovereign wealth fund to manage the oil and gas revenue.
Lebanon has lagged behind neighboring Israel, Cyprus and Egypt in developing oil and gas
deposits that may lie beneath its share of the Mediterranean Sea. Seismic surveys show the
country could hold at least 96 trillion cubic feet of gas and 850 million barrels of oil, Bassil, who
was then the countryâs energy minister, said in a December 2013 interview. Exxon Mobil Corp.
and Eni SpA are among companies qualified to bid to explore off the countryâs coast.
An auction of energy assets first scheduled for November 2013 was delayed after the government
failed to pass the decrees. Political disputes then left the country without a president for more than
two years until the Oct. 31 election of Michel Aoun, a Christian close ally of the Iran-backed
Hezbollah group. Lebanon, which is struggling with severe power shortages and hosting more
than a million Syrian and Palestinian refugees, needs revenue to trim its public debt, the highest
as a share of annual economic output among Arab states.
ExxonMobil, Eni, Chevron Corp., Petroleo Brasileiro SA and Royal Dutch Shell Plc are among
companies qualified to bid as operators. Thirty-four companies qualified as non-operators,
including Marathon Oil Corp., OMV AG and Dana Petroleum Plc.
Under Lebanese law, the government should start auctioning exploration rights six months after
the date of the decrees.
5. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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
MENA:Projects worth $208bn to be awarded across Mena 2017
Gulf Times
A pipeline of about $208bn of major contracts is scheduled to be awarded across the Middle East
and North Africa (Mena) this year, a new report has shown. A majority of these, 61% are in the
GCC region, the latest issue of âMeed Business Reviewâ shows.
In terms of mega projects (contracts valued at $1bn or above), there are about $75bn of deals
scheduled to be let in the GCC and Egypt this year.
The power, oil and transport sectors will drive mega projects spending this year, accounting for
83% of the total value. Major awarded expected include contracts on the Mohamed bin Rashid al-
Maktoum Solar Park in Dubai and upgrades at the Ruwais Refinery in the UAE.
âIt is no secret that 2017 will continue to be a tough year for the region, but the gradual rise in the
oil price will see the projectsâ market begin to regain some vigour. Governments still plan to invest
in the much-needed infrastructure and are looking at alternate ways to fund schemes,â âMeed
Business Reviewâ said.
Between 2018 and the start of 2020, there is a pipeline of more than $500bn of contracts slated
for award in the GCC and Egypt. Not all will be let over the period, but the value of awards is
expected to pick up, especially as Dubai and Qatar head towards hosting their respective global
events of Expo 2020 and the 2022 FIFA World Cup.
According to Meed Business Review, the GCC has been predominantly driven by major
infrastructure projects in the past 15 years. These schemes have created jobs, fuelled
immigration, expanded economies and changed the landscape of many cities in the region.
But some mega projects in the past few years have been dogged by delays, cancellations and
cost overruns. Postponements of tender deadlines or awards have also become a common
problem for major infrastructure upgrades.
Mega projects may drive economies, but they are the result of long-term masterplans drawn up by
governments. The most recent to be launched is Riyadhâs vision 2030 and the National Transformation
Programme, released in late April 2016 in response to low oil prices and its fiscal deficit. The plan calls for
a significant programme of infrastructure upgrades.
In 2016, the value of major contract awards in the kingdom fell by about 52% to $25.1bn, compared with
$52.1bn of deals let in 2015. This year, Saudi Arabia is expected to award about $43bn of deals, a 73%
uplift on 2016, but still lower than the 2015 figure, âMeed Business Reviewâ said.
6. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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
Report: Asia becoming largest importer of U.S. LNG
Oak Spirit loading at Sabine Pass LNG terminal on December 6 (Image courtesy of Jera)
Cheniereâs Sabine Pass LNG terminal in Louisiana shipped nine liquefied natural gas cargoes to
Asian countries during December.
The facility shipped a total of 12 cargoes during the last month of 2016, Bloomberg reports, noting
that the rise in number of cargoes sent to Asia is a strong indication that the previous trend of
sending cargoes to Latin America is changing.
The demand for US LNG in Asia stems from the cold winter temperatures pushing the demand for
heating and power production up. Spot LNG prices have also gone up 79 percent since July, the
report shows.
Cheniere started exports from the Sabine Pass liquefaction plant in February last year with the
majority of cargoes landing in Latin America.
The U.S. is expected to become the worldâs third-largest LNG supplier by 2020 with an export
capacity of 60 million mt coming from five export terminals.
7. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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
NewBase 05 January 2017 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil dips on doubts over touted production cuts
Oil prices dipped on Thursday on doubts producers would fully deliver on promises to cut output,
although record U.S. automobile sales and falling crude stocks offered markets some support.
Brent crude futures, the international benchmark for oil prices, were trading at $56.28 per barrel at
0150 GMT (8.50 p.m. ET), down 18 cents from their last close.
Traders said the decline came on the back of worries that plans by the Organization of the
Petroleum Exporting Countries (OPEC) and other leading producers to cut crude supply would be
fully implemented.
"There remains a question mark over whether OPEC, with a long history of non-compliance, will
actually follow through (with the cuts). Very few respondents expect full compliance," Singapore
Exchange (SGX) said on Thursday, citing results from a survey of its participants.
"Three quarters of those surveyed went for (crude) prices averaging within the current $50-
60/barrel range (for 2017)," SGX added.
Reuters commodity analyst Wang Tao said that technical price trend indicators showed Brent may
soon test support at $55.43 a barrel, although he added that the longer-term upward trend in
crude prices that started in the second half of last year was still in place.
In the United States, crude prices were firmer than on international markets, supported by strong
vehicle sales and a report of falling commercial crude stockpiles.
Oil price special
coverage
8. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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
U.S. West Texas Intermediate (WTI) crude oil futures were trading down 10 cents at $53.16 per
barrel.
Firmer prices for WTI than for Brent were supported by an American Petroleum Institute (API)
report showing U.S. crude inventories fell 7.4 million barrels in the week ended Dec. 30 to 482.7
million, compared with analyst expectations for a decrease of 2.2 million barrels.
"We expect Asia to trade on the positive-side today, supported by the API number," said Jeffrey
Halley, senior market analyst at OANDA brokerage in Singapore.
WTI was also buoyed by U.S. car and truck sales, which were up 3.1 percent in December from
the same month last year, and hit a record 17.55 million overall in 2016.
Shale production is rising even as OPEC and friends cut output
Major oil producers have started cutting output but the rally in crude prices could be capped
as U.S. shale companies boost production in the latter half of the year, according to JPMorgan.
"Towards the second half of this year, U.S. shale starts to kick in," said Scott Darling, the
investment bank's Asia-Pacific oil and gas research head.
U.S. West Texas Intermediate crude oil futures were moving around $53 a barrel and Brent crude
futures at around $56 a barrel on Thursday morning in Asia, up from sub-$50-a-barrel levels
before the OPEC production cuts were announced.
Late last year, OPEC and major non-OPEC countries announced join production cuts of around
1.8 million barrels a day starting this year.
Darling said sustained crude prices of $50 a barrel in the second half of 2017 will aid U.S. shale
growth of 200,000 barrels a day while the jump will be at 600,000 barrels a day if crude prices
move up to $60 a barrel. Any further rise may even see shale production growth breaching 1
million barrels a day, he added.
Rival Goldman Sachs noted Thursday U.S. shale activity has already picked up strongly, with the
horizontal oil rig count at a 13-
month high, and it expect U.S.
shale producers to continue to
ramp up activity at current price
levels.
JPMorgan's forecast for Brent
crude averages $58 a barrel in
2017 with prices sliding to $55 in
the fourth quarter as shale
production starts to impact the
market.
9. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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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There's an Early Sign OPEC's Push to 'Fast-Forward' the
Normalization of the Oil Market May Be Working
by Luke Kawa
When it comes to OPEC production cuts, "We tend to cheat," said former Saudi Arabia Oil
Minister Ali al-Naimi after the group reached an agreement to curb output late last year.
But the extent of that cheating won't be too bad this time around, reckons Goldman Sachs Group
Inc.'s Damien Courvalin. The analyst sees OPEC and non-OPEC nations enacting a full 84
percent of their agreed-upon cuts, citing the incentive among lower-cost producers to "fast-forward
the normalization in inventories."
Such a move would effectively alter the shape of the oil futures curve, ensuring that competing
shale producers will be less likely to lock in 2018 production as longer-dated contracts cheapen
relative to near-dated ones, helping to reduce the global glut in crude. The dramatic change in the
shape of the Brent futures curve over the past five weeks may be an early sign that the tactic is
poised to bear fruit.
While the curve was in a state of contango before the November 2016 agreement â meaning
near-dated oil delivery contracts were less pricey than longer-dated contracts â part of the curve
has now shifted into the opposing state of backwardation, meaning a contract expiring in
December 2018 is now trading at lower price than contracts expiring in September 2017, for
instance.
BRENT CURVE OPEC WINNING
Source: Bloomberg
10. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,
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This dynamic can make locking in next year's production a less attractive prospect for higher-cost
shale drillers, Courvalin explains, and will expedite the market's return to balance and foster a
"meaningful" drawdown in previously built-up stockpiles of crude. There are also ancillary benefits
to consider for major producers that may be planning on selling a stake in their state-run oil
companies, which the analyst alludes to.
The "normalization of inventories is key to low-cost producers," he writes in a Jan. 4 note to
clients, as "it generates backwardation, which removes hedging gains from high-cost producers
and helps low-cost producers grow market share," he said. It also "reduces oil price volatility,
which increases the valuation of the debt and equity they are issuing."
Of course, the swiftness of the response of U.S. shale companies, which expanded output in
October by the most since April 2014, could throw a wrench in the analyst's estimates.
Courvalin forecasts that Brent prices peak at $59 per barrel in 2017 amid these inventory draws,
but warns that investment in new projects will pick up steam as crude stabilizes between $55 and
$60 per barrel, effectively capping the upside for front-month prices.
As such, he expects better returns from futures than the spot price, as the current structure of the
curve provides opportunities for positive carry.
11. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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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Crude oil prices increased in 2016, still below 2015 averages
Source: U.S. Energy Information Administration, based on Thompson Reuters
Crude oil prices ended the year above $50 per barrel (b). Although the annual average West
Texas Intermediate (WTI) crude oil price in 2016 was $43/bâdown $5/b from 2015âthe WTI
price ended 2016 at $53/b, $16/b higher than at the end of 2015. Similarly, Brent ended the year
up $17 from the end of 2015, at $54/b, but the 2016 annual average of $44/b was $8 below the
2015 average.
Despite robust demand for petroleum products, relatively high production and inventory levels
provided downward pressure on crude oil prices throughout most of 2016. However, recent
agreements to curb production over the next six months within the Organization of the Petroleum
Exporting Countries (OPEC) and additional pledges by some key non-OPEC producers
put upward pressure on prices at the end of 2016 as markets appear to be anticipating tighter
balances than previously forecast.
12. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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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U.S. highlights for 2016
⢠U.S. crude oil production was lower in 2016 than in 2015 by more than 500,000 barrels per day
(b/d) using estimates from the December Short-Term Energy Outlook (STEO). The decrease was
driven by reductions in Lower 48 onshore production, with an estimated decline in production from
2015 to 2016 of nearly 700,000 b/d. Despite the decline, production of crude oil is forecast to
average 8.9 million b/d in 2016, the second highest level since 1985.
⢠The Brent-WTI price spread averaged less than $1/b in 2016, significantly below the 2015 average
spread of $3.45/b.
⢠Based on data through September 2016, average U.S. imports of crude oil increased by more than
500,000 b/d from 2015 to 7.9 million b/d, the highest level since 2012. The United States imported
the three largest volumes of crude oil from Canada, Saudi Arabia, and Venezuela.
⢠The number of countries receiving U.S. crude oil exports has risen since restrictions on exporting
U.S. crude oil were lifted in December 2015. Despite declines in domestic production, total crude oil
exports for 2016 were up, with estimates through October 2016 totaling more than 500,000 b/d, an
increase of more than 30,000 b/d from the same period in 2015.
International highlights for 2016
⢠EIA estimates that total OPEC crude oil and other liquids production increased 3% to 39.3 million
b/d in 2016.
⢠At the November 30 OPEC meeting, member countries agreed to reduce production by
approximately 1.2 million b/d from an October baseline to lower OPEC's production ceiling to 32.5
million b/d beginning January 1, 2017.
⢠Non-OPEC countries met following OPECâs agreement and agreed to cut production by 558,000
b/d, with Russia making the largest cuts of approximately 300,000 b/d.
13. Copyright Š 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi â 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
NewBase Special Coverage
News Agencies News Release 05 Jan. 2017
U.S. refiners face severe labor shortage for deferred maintenance
By Jarrett Renshaw
After years of running flat out, U.S. Gulf Coast refiners are lining up repairs to plants in 2017 - but
facing a severe labor shortage that could delay work, drive up costs and raise accident risks.
Fuel producers such as Marathon Petroleum Corp (MPC.N) and Valero Energy Corp (VLO.N)
have delayed routine work in the past 24 months amid high margins. Those margins collapsed this
year in a global fuel supply glut, providing an incentive for refiners to undertake the shutdowns
necessary for maintenance.
But refiners are now competing for pipe fitters and ironworkers with a host of billion-dollar energy
projects, including Cheniere Energy's liquefied natural gas export terminals and a new
petrochemical unit for Dow Chemical.
Without undertaking the work they need, refineries run the risk of more unscheduled outages at
plants. Plant shutdowns can disrupt fuel supplies and are closely tracked by oil traders because
they directly affect demand for crude and supply of fuel.
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"Putting off work definitely affects the safety of the refinery," said Ed Lee, an independent refinery
safety consultant who worked at Royal Dutch Shell for three decades.
Refiners can mitigate the risks - but at a cost, by slowing output or avoiding types of crude that are
difficult to process, Less said.
In recent months, a spate of unexpected outages have hit refineries nationwide, taking hundreds
of thousands of barrels off the market and boosting gasoline prices and margins.
U.S. refiners are expected to spend $1.26 billion on planned maintenance next year, up 38
percent from this year and the highest level since at least 2010, according to Industrial Information
Resources (IIR), which tracks labor supply for refiners and other industrial companies.
Many will struggle to execute those plans, said Anthony Salemme, a vice president at IIR.
"Refiners are going to have trouble finding even the lowest skilled workers, such as scaffold
builders, and you can't do work at a refinery without a scaffold," Salemme said. "That's going to
complicate scheduling and even extend outages."
FEW WORKERS, MANY PROJECTS
IIR estimates that the coastal region from Brownsville, Texas to New Orleans - the largest U.S.
refining region - will be short roughly 37,400 craftsman needed to complete all of the planned
capital projects in 2017.
"We are definitely feeling the labor shortages in skilled craft labor," said Paul Tooze, construction
manager for the oil, gas and chemicals business at Bechtel, one of the world's largest industrial
contractors.
Tooze said the company spends a lot of time and money to attract and retain employees, but still
has to bring in workers from other regions to complete projects. That typically requires $100-per-
day travel allowances that drive up project costs.
Bechtel employs between 40 percent and 70 percent workers requiring daily allowances on their
Gulf Coast projects, Tooze said.
The shortage will be most acute in Lake Charles, Louisiana, the home to several refineries and
petrochemical plants. There, South African energy firm Sasol (SOLJ.J) is investing billions on a
chemical project, and the call on labor for the plant is one of the reasons the area will be short
more than 18,000 workers in 2017, according to IIR.
Sasol raised its cost estimate on the project in August by 25 percent to $11 billion, in part due to
rising labor costs.
Chevron Phillips â the joint venture between Chevron (CVX.N) and Phillips 66 (PSX.N) â is
spending $6 billion on building a petrochemical units in Baytown and Old Ocean in Texas. Labor
costs would drive the projects' costs up 10 percent from previous expectations, Phillips 66
President Tim Taylor said in an earnings call earlier this month.
Fluor (FLR.N), one of the world's largest industrial contractors, took a $154 million charge on the
plant in November due to cost overruns, including labor.
Earlier this year, Fluor opened a skilled craft training center in the Gulf Coast, stating that while
the firm could not train its way out of the shortage, it hope to alleviate the problem.
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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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COMPETITION FROM MANUFACTURERS
Refiners are also competing for workers with a broader range of power companies,
pharmaceutical firms and industrial manufacturers nationwide, which are also preparing for a
spike in maintenance projects in 2017, according to IIR.
In the southwest region that includes Texas, Louisiana, Oklahoma and Arkansas, IIR counted 952
planned projects among the various groups it tracks, the most since at least 2010 and a 24
percent increase from this year.
A recent survey conducted by the Associated General Contractors of America found that 74
percent of Texas contractors are having trouble filling hourly craft worker positions, and a majority
of them believed they would continue to struggle over the next year.
More than 60 percent of the respondents said they bumped up salaries to attract more skilled craft
workers.
"These shortages have the potential to undermine broader economic growth by forcing contractors
to slow scheduled work or choose not to bid on projects, thereby inflating the cost of construction,"
said Stephen Sandherr, head of the Associated General Contractors.
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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
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Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile: +97150-4822502
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. âEmaratâ 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 January 2017 K. Al Awadi