New base energy news issue 874 dated 16 june 2016

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NewBase Energy News 16 June 2016 - Issue No. 874 Edited & Produced by: Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE: Irena says renewable energy costs set to tumble as UAE
plays major role
The National LeAnne Graves
Producing electricity from the sun and wind is about to get even cheaper around the world with the
UAE helping to further drive down costs, according to the International Renewable Energy Agency
(Irena).
The Abu Dhabi-based organisation released a report yesterday projecting the cost of renewable
energy to drop, in some cases by more than half the price of current averages by 2025.
“Given that solar and wind are already the cheapest source of new generation capacity in many
markets around the world, this further cost reduction will broaden that trend and strengthen the
compelling business case to switch from fossil fuels to renewables," Irena director general, Adnan
Amin, said on the release of its report titled The Power To Change: Solar And Wind Cost
Reduction Potential To 2025.
Since 2011, renewable energy power generation technologies have made up for at least half of
the total new power generation capacity added worldwide. And last year alone a new record was

set with around 148 gigawatts of renewable energy power added, meaning that many millions of
homes are now being powered by solar, wind and hydropower.
The levelised cost of electricity, or a measure of comparison for various power generation
methods, for wind could fall by 35 per cent. However, the major winner in terms of lower costs is
solar, including photovoltaic (PV) and concentrated solar power (CSP) applications, which could
drop by as much as 59 per cent and 43 per cent respectively during the next 10 years.
The cheaper rates for solar applications can be attributed to evolving technology as well as the
wide scale rollout. The UAE is leading the charge in the region. Dubai is developing a 5GW solar
park using a mix of PV and CSP and has been driving down prices with record low bids submitted
for its construction phases for PV.
Michael Taylor, Irena’s renewable costing analyst, said that CSP had more room to drop in pricing
as only 5GW was installed worldwide by the end of last year, compared to 220GW of PV.
Irena said that CSP costs could fall to between 8 US cents per kilowatt hour (kWh) and 12 cents
per kWh depending on the location and solar resource quality. Regionally, the lowest cost was in
Morocco at around 15 cents per kWh.
“Dewa’s recent announcement of a first tender for 200 MW of CSP to be operational in 2021, is
another reminder that CSP can offer competitive electricity and generation flexibility in areas with
excellent solar resources, strong civil engineering companies and a stable regulatory and
financing environment," he said. “Projects with access to lower costs of capital, as might be
expected for many Gulf countries, could see electricity costs even lower than this range."
Yet CSP applications have specific obstacles to overcome compared
to PV, said Hadi Tahboub, president of the Middle East Solar
Industry Association. “Dubai wants to tell the world: ‘Yes, it can be
done,’ and this is a good thing because it literally drives [research and
development] forward, lowers costs and creates more competition. But
CSP is a totally different game of parameters," he said, adding that
CSP technology required more land than PV plants by a ratio of
roughly 10 to 8.

Bahrain’s Bapco seeks bids for oil refinery expansion
Reuters + gulf news + NewBase
State-run Bahrain Petroleum Company (Bapco) has launched bidding to expand its Sitra oil
refinery, industry sources said. It aims to boost processing capacity of the country’s only oil
refinery to 360,000 barrels per day (bpd) from its current 267,000 bpd under its BAPCO
Modernisation Program (BMP).
The expansion is expected to cost about $5 billion (Dh18.36 billion), according to the sources.
Bapco said last year it would make a final decision on whether to expand its Sitra oil refinery in
2016.
Companies that are planning to submit bids and that have formed consortia are: Japan’s JGC
Corp and South Korea’s GS; Technip, Tecnicas Reunidas and Samsung Engineering; Fluor,
Hyundai Engineering and Construction and Daewoo E & C; and CB & I and Petrofac.
South Korea’s GS E & C, Samsung Engineering, Hyundai E & C and Daewoo E & C said they had
received a request to bid and were currently preparing to do so. Samsung Engineering said it
plans to bid as a joint venture with Technip and Tecnicas Reunidas.
Hyundai said it was preparing to bid with Daewoo E & C, itself a part of a consortium led by Fluor,
Daewoo said. The bidding closing date is on October 5 and the award of the contract is expected
to be made in the first quarter or second quarter of 2017, the sources said.
A JGC spokesman said the Japanese company is interested in the project. Tecnicas Reunidas
declined to comment. Bapco, CB & I and Petrofac did not respond to requests for comment.

Kurds Ready For New Oil Deal With Baghdad If They Get $1B A Month
Reuters|Maher Chmaytelli
Iraq's Kurds are ready to strike an agreement with the central government in Baghdad on a deal to
increase oil exports, if it guarantees them a monthly revenue of $1 billion, a spokesman for the
Kurdistan Regional Government (KRG) said.
Iraq's central government in March
stopped oil exports through a Kurdish
pipeline to pressure the local authorities to
resume talks about an oil revenue sharing
agreement. Iraq's state-run North Oil
Company normally exported 150,000
barrels a day through the pipeline that
comes out at the Mediterranean port of
Ceyhan, in Turkey. The pipeline also
carries oil produced in the Kurdish region in
northern Iraq and sold independently from
the central government.
KRG spokesman Safeen Dizayee said in
an interview in the Iraqi Kurdish capital Erbil on Tuesday that the Kurdish authorities would be
willing to sell the oil through Baghdad if they get a share from the federal budget amounting to a
$1 billion a month.
"If Baghdad comes and says ok, give me all the oil that you have and I'll give you the 17 percent
as per the budget, which equals to one billion, I think, logically it should be the thing to accept," he
told Reuters, specifying later that the amount referred to a monthly payment in dollars.
"Whether this oil goes to the international market or first to Baghdad and then to the market, it
doesn't make any difference," he said. "We are ready to enter dialogue with Baghdad." The KRG
stopped delivering crude oil to the central government a year ago, a decision taken when
Baghdad's payment fell under $400 million a month, according to Dizayee.
The Kurdish region exported an average of 513,041 barrels in May through the pipeline to Turkey,
generating about $391 million, of which about $75 million was paid to oil companies that produce
the crude, according to KRG official estimates.
"The companies have been assured that certain amounts will be made on a monthly basis," said
Dizayee, referring to the three foreign oil producers in the KRG region - DNO, Gulf Keystone and
Genel.
"We have started to pay some of it, at least it has rebuilt that confidence between the government
and the IPCs (oil companies)," he said, referring to arrears owed to the companies. The KRG in
February said it will be paying international oil companies in 2016 according to the terms of their
contracts, after making ad-hoc payments last year.
The foreign operators have been reluctant to invest and further develop assets in the region
without the promise of regular payment, while the cash-strapped KRG needs production to
increase as it struggles to avert an economic collapse.

US:Why Billions in Proven Shale Oil Reserves Suddenly Became Unproven
Bloomberg - Asjylyn Loder
Ultra Petroleum Corp. was a shale success story. A former penny stock that made the big
leagues, it was worth almost $15 billion at its 2012 peak.
Then came the bust. Almost half of Ultra’s reserves were erased from its books this year. The
company filed for bankruptcy on April 29 owing $3.9 billion.
Ultra’s rise and fall isn’t unique. Proven reserves -- gas and oil resources that are among the best
measures of a company’s ability to reward its shareholders and repay its debts -- are disappearing
across the shale patch.
This year, 59 U.S. oil and gas
companies deleted the equivalent of
9.2 billion barrels, more than 20
percent of their inventories, according
to data compiled by Bloomberg. It’s by
far the largest amount since 2009,
when the Securities and Exchange
Commission tweaked a rule to make it
easier for producers to claim wells that
wouldn’t be drilled for years.
Wider Effort
The SEC routinely questions companies about their reserves. Now, agency investigators are also
on the hunt for inflated reserves estimates, according to a person familiar with the matter.
“Reserves make up a large share of the value of these companies, so it really matters,” said David
Woodcock, a partner at Jones Day in Dallas who served as the SEC regional director in Fort
Worth, Texas, from 2011 to 2015. “They’re looking even more closely at how companies are
booking reserves, how they’re evaluating the quality of those reserves and what their intentions
really are. They’re not accepting pat answers.”
Drillers face pressure to keep reserves growing. For many, the size of their credit line is tied to the
measure. Investors want to see that a company can replace the oil and gas that’s been pumped
from the ground and sold.
Find More
There are two ways to increase reserves: buy more or find more. Fracking made it easier to do the
latter, and the industry lobbied the SEC to count more undeveloped acreage as proved reserves,
arguing that shale prospects are predictable across wide expanses.
The SEC agreed, with two key limits. First, the wells must be profitable to drill at a price set by
an SEC formula. The companies got a temporary reprieve for 2014 because the SEC number was
about $95 a barrel even though crude had plummeted to less than $50 by the time results were
reported in early 2015.

That advantage has disappeared. When companies reported their 2015 reserves this year, the
SEC price was about $50. Wells that vanished this year may return if prices rise.
The SEC also requires that undeveloped wells be drilled within five years of being added to a
company’s books. The five-year plan can’t just be wishful thinking. “The mere intent to develop,
without more, does not constitute ‘adoption’ of a development plan,” the SEC explained in 2009.
Despite those limitations, reserves surged 67 percent in the five years after the 2009 rule change,
according to 53 companies that have records going back that far. Almost half the gains came from
wells that existed only on paper.
Fix Estimates
By the end of 2014, undeveloped properties accounted for 39 percent of proved oil and gas
reserves, up from 33 percent at the end of 2009, an increase of nearly 8 billion barrels.
In its first letter to Ultra, in July 2014, the SEC said it would take about 13 years for the company
to drill its backlog. About two months later, Ultra raised $850 million in debt. The SEC letters
weren’t yet public. Over the next 19 months, the regulator twice told the company to revise its
estimates.
Falling Prices
Ultra responded that its drilling plans changed due to falling prices and the shrinking availability of
financing. The company sometimes delayed or canceled certain wells in favor of more profitable
locations, the company wrote.
Ultra ultimately agreed to a small revision to its 2011 reserves booking. It was disclosed in a
footnote to its 2015 annual report, after the SEC completed its review in February. In the same
report, Ultra deleted all of its undeveloped reserves because of uncertainty about financing.

The letters were made public in mid-March. By then, Ultra’s shares had plummeted to 58 cents,
and the bonds issued less than two years before were selling for about 8 cents on the dollar.
Prices have since rebounded.
Sandi Kraemer, Ultra’s director of investor relations, declined to comment. So did Judith Burns, an
SEC spokeswoman.
Other companies have also drawn SEC scrutiny. The agency said in correspondence with
Goodrich Petroleum Corp. that the company drilled only 4 percent of its undeveloped reserves
each year, a slower pace than necessary to comply with the five-year rule. Linn Energy LLC kept
undeveloped reserves on its books at the end of 2014 even after cutting its drilling budget by 61
percent. Both companies have gone bankrupt in recent months owing a combined $8.1 billion.
Neither would comment for this story.
For many drillers, “development plans weren’t realistic,” said Julie Hilt Hannink, head of energy
research at CFRA, an accounting advisory firm in New York.
Rising Bankruptcies
Penn Virginia Corp., a company in which billionaire George Soros had a stake, booked paper
wells in natural gas prospects where it hadn’t drilled in years, according to letters from the SEC.
“Your actual drilling has consistently failed to follow schedules,” the SEC wrote in an April 2015
letter. Penn Virginia responded that it had intended to get to the wells within five years but its
plans changed when prices fell.
That’s not what company
executives told investors,
according to conference
call transcripts. H. Baird
Whitehead, Penn Virginia’s
chief executive officer, said
in a November 2012 call
that “under almost no
scenario” would the
company resume gas
drilling. Yet, when Penn
Virginia filed its report with
the SEC three months
later, the prospects
accounted for more than 40
percent of its reserves.
During an April 2013 call,
Whitehead said, “We don’t plan on drilling natural gas wells.” Still, the undeveloped natural gas
wells comprised 19 percent of the company’s reserves at the end of that year. Patrick Scanlan, a
spokesman for Penn Virginia, declined to comment.
The company intended to follow the SEC’s five-year rule, according to a person familiar with
Whitehead’s thinking. Penn Virginia erased most of its undeveloped reserves this year. The
company filed for bankruptcy May 12 with $1.2 billion in debt. Records show Soros sold his six
million shares in the first quarter.

NewBase 16 June 2016 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil futures down on US stockpile report, Brexit concern
Reuters + NewBase
Oil prices fell in early Asian trade on Thursday, heading for a sixth day of declines, following a
lower than expected draw on U.S. stockpiles and amid worries Britain might leave the European
Union.
Front-month U.S. crude futures were down 56 cents, or 1.2 percent, at $47.45 a barrel at 0043
GMT. The contract fell 1 percent the previous session, the fifth straight day of declines.
Brent crude was 44 cents, or 0.9 percent, lower at $48.53 a barrel.
The contract settled down 1.7 percent on Wednesday, a fifth day it has closed lower.
U.S. crude stocks fell last week, the government said on Wednesday, but the decline was much
smaller than anticipated, while gasoline stocks decreased sharply. Crude inventories fell by
933,000 barrels in the last week, the U.S. Energy Information Administration reported, less than
half the 2.3 million barrel decrease expected by analysts.
The U.S. Federal Reserve signaled on Wednesday that it still plans two U.S. rate hikes this year
despite slower growth expectations, also hitting the oil market.
With a week to go before Britain votes on leaving the European Union, oil and other markets also
remain in thrall to opinion polls, which are increasingly showing those supporting an exit are in the
majority.
Oil price special
coverage

A so-called Brexit will lead to a Europe-wide recession and hit demand for oil, many analysts say.
U.S. Stockpiles
WTI for July delivery fell as much as 66 cents to $47.35 a barrel on the New York Mercantile
Exchange and was at $47.56 at 12:03 p.m. Tokyo time. Total volume traded was 6 percent below
the 100-day average. The contract slipped 48 cents to settle at $48.01 on Wednesday.
Brent for August settlement declined as much as 49 cents to $48.48 a barrel on the London-based
ICE Futures Europe exchange. Prices on Wednesday dropped 86 cents, or 1.7 percent, to
$48.97. The global benchmark crude traded at a 56-cent premium to WTI for August delivery.
U.S. stockpiles declined 933,000 barrels last week, EIA data showed. The drop was smaller than
the 2.33 million barrel slide forecast in a Bloomberg survey. Crude inventories at Cushing,
Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, rose to 66.5 million
barrels.

NewBase Special Coverage
News Agencies News Release 16 June 2016
OPEC Turmoil Could Turn IEA’s Balanced Market Into Shortfall
Bloomberg - Javier Blas
The world’s most prominent oil forecaster, the International Energy Agency, anticipates near-
equilibrium between supply and demand in global crude markets next year. If OPEC members
can’t resolve some massive output disruptions, that will turn into a significant shortfall.
World oil production in 2017 will very nearly match consumption, ending several years of
oversupply, the Paris-based IEA forecast on June 14. For that to happen, the Organization of
Petroleum Exporting Countries would have to pump an extra 650,000 barrels a day over the
year, according to Bloomberg calculations based on IEA data. That would require solutions to
militant attacks in Nigeria, deep political divisions in Libya or an economic crisis in Venezuela.

"The IEA is highly optimistic in its assumption of elevated OPEC supplies next year," said Amrita
Sen, chief oil analyst at consultants Energy Aspects Ltd. in London. "Even though many view
outages in Libya and Nigeria as unplanned, we would argue they are partly symptomatic of low oil
prices and unlikely to be resolved any time soon."
The supply and demand forecasts from the IEA, which advises 29 nations on energy policy, are
important because they shape trading. The oil price has been on a roller coaster since 2014, with
a global surplus driving prices down 75 percent to a 12-year low of about $28 a barrel in January,
only to rebound to almost $50 amid supply disruptions and unprecedented investment cuts.
Million Barrels
By the end of next year, OPEC will need to pump nearly 1 million barrels above last month’s
production level to keep the market in balance, according to Bloomberg calculations based on IEA
data. The agency doesn’t publish the OPEC production level it assumes to calculate its balances
and its press office declined to provide the figures or comment on the basis for its assumptions.
Fulfilling the IEA’s forecast would require OPEC to overcome some major hurdles. In Nigeria, oil
production has slumped to a 28-year low of 1.37 million barrels a day -- about 480,000 below its
full capacity, IEA data show. A militant group calling itself the Niger Delta Avengers has been
targeting pipelines and other infrastructure in the African nation for several months.
Libyan output remains just a fraction of the 1.6 million barrels a day pumped before the toppling of
Moammar Qaddafi in 2011. The nation pumped 270,000 barrels a day in May, a decrease of
80,000 from the previous month as a dispute between rival governments in the west and east
halted tanker loading at the port of Hariga for several weeks. Many of the country’s oil fields and
export terminals are in the hands of armed groups with competing interests.
State of Crisis
In Venezuela, a severe economic crisis brought about by the slump in oil prices is making it
difficult for the state oil company to pay its contractors for work necessary to sustain output, the
IEA said. Output last month was 2.29 million barrels a day, the lowest since 2009, and the Latin
American nation is on track for a drop of 100,000 barrels a day this year, it said.

Some additional output could be provided by Iran, which is restoring exports after nuclear-related
sanctions were lifted in January. The Persian Gulf nation will boost output to more than 3.7 million
barrels a day next year, having pumped at a five-year high of 3.6 million in May, according to the
IEA. Saudi Arabia, the world’s biggest exporter, could also increase output during the summer
months to cover an increase in domestic demand, it said.
After two years of oversupply, the world’s most industrialized countries have more than 3 billion
barrels of oil in storage. This “enormous inventory overhang” dampens the prospects of “a
significant increase in prices,” according to the IEA.
The agency estimates that inventories will decline very slightly in 2017, by an average of 100,000
barrels a day over the year. That narrow shortfall assumes OPEC will pump 33.3 million barrels of
crude a day, compared with the organization’s May output of 32.6 million a day.
If OPEC output falls short of IEA estimates, those stockpiles would start shrink rapidly, according
to Bloomberg calculations.
“Without the return of Libya, it will be difficult for OPEC to meet the call for 2017,” said Olivier
Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland. “That should lead
to more structural stock draws in 2017.”
C R E D I T : R E Z A / C O N T R I B U T O R

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
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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. “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 16 June 2016 K. Al Awadi

New base energy news issue 874 dated 16 june 2016

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New base energy news issue 874 dated 16 june 2016