NewBase 16 April 2015 - Issue No. 584 Khaled Al Awadi

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Saudi Aramco Starts Testing Parts Of Wasit Gas Programme

Saudi Aramco has started testing parts of its Wasit gas programme, raising hopes it can be begin part operations this summer when demand for power in the worlds top oil exporter peaks, four industry sources said.

Wasit, north of Jubail on the Kingdoms Gulf coast will be one of the largest gas plants not linked to oil wells ever built by Saudi Aramco. It has capacity to process up to three billion cubic feet per day of non-associated gas from the offshore fields Hasbah and Arabiyah.

Gas remains a top priority for Saudi Arabia as it tries to burn less crude for power generation and water desalination. Wasit is one of the new gas plants which will raise the raw gas feed for the master gas system (MGS) to almost 20 billion standard cubic feet per day (Bscfd), Aramco has said.

They have fed gas to boilers from the master gas system because gas from the fields is not ready yet but they want to bring at least one gas train from the plant and one train from the sulphur recovery unit online before June, one source said.

Construction of the main gas plant is almost complete and is expected to start very soon, said another source. The target is to start at least one train or 20-25 per cent of the capacity up and running, said the source.

Flare is operating, boilers are operating, said another.

But the plant wont be fully operational before the end of the year or the first quarter of 2016, said the sources. Sources told Reuters in October last year, Wasit was expected to partially start up in the first quarter of 2015 despite some difficulties linked to construction.

Aramco has said Wasit and another project, Karan, that has been in operation since 2012 will likely boost Saudi Arabian natural gas output by an estimated 40 per cent. The oil giant is building the gas plants in Wasit, Fadhili and plans another new plant in Abqaiq to implement a strategic plan called the Peak Seasonal Production (PSP). Last year, nine million barrels of crude oil were saved by implementing the plan, Saudi Aramco said in its weekly magazine the Arabian Sun.

Al Wasit Gas Program development The offshore development activities for the project will involve the installation of 15 platforms overall, comprising 12 wellhead platforms, two tie-in platforms and one injection platform.

The drilling activities for the two offshore fields commenced in 2011. Keppel FELS supplied a new Super B Class jack up drilling rig named SAR 202 to carry out the drilling activities. The rig is powered by six generators and an emergency generator. It is also equipped with a 54-motor jacking system and is capable of drilling at water depths of 30,000ft.

Drilling activities include the boring of the largest diameter holes and laying of

the longest casing strings. The project will implement state-of-the-art gas development technologies with large bore well designs and automated control systems.

The project also involves the construction of an onshore gas plant, Wasit central processing facility (CPF). The facility will process 2.5 billion scfd of non-associated gas from the two gas fields.

The inlet and gas facilities of the CPF will comprise four gas treating units, flare and burn pit facilities, substations and process interface buildings. The sulfur recovery (SRU) facilities and utilities include four SRUs, sulfur loading facilities, pipelines, substations, and a process interface building.

"The facility will also be capable of processing ethane, propane, butane and gasoline."

The project also involves the installation of natural gas liquids (NGL) fractionation and cogeneration facilities. The facilities will process approximately 240,000 barrels per day of C2+ NGL stream produced at the Khursaniyah gas plant. They comprise four 150MW cogeneration

(COGEN) units, three boilers, related electrical and non-electrical utilities and a central control building. The Wasit facility will also be capable of processing ethane, propane, butane and gasoline. As of 2011, the site works and construction of temporary facilities were completed.

Pipeline connections and subsea facilities The 260km export pipeline to connect the offshore facilities to the CPF will measure 36in in diameter. It will also be integrated with a 200km mono-ethylene glycol (MEG) pipeline. Offshore facilities will also comprise 200km of subsea electric and control cables and 40km of offshore flowlines. An onshore pipeline measuring 120km will also be constructed as part of the project.

Contracts awarded for the Al Wasit Gas Program SK Engineering & Construction has been awarded the EPC contract for the SRU, fractionation inlet and gas facilities. The EPC contract for the cogeneration and steam generation units was awarded to Samsung Engineering. The contracts were awarded based on a Lump Sum Turn Key (LSTK) basis.

"The investment for the entire project is $4.7bn." The engineering, procurement, installation and construction (EPIC) contract for the two offshore gas fields has been awarded to Saipem. The total value of the contract is $2.2bn. Most of the offshore activities are being performed using Saipem's Castoro II and Castoro Otto vessels. The front-end engineering (FEED) and project management services for the entire project are being overseen by SNC-Lavalin. The contract, which spans five years, was awarded in September 2009.

The Arabiyah offshore gas field will have a production capacity of 1.2 Bcf/d.33

The Hasbah offshore gas field will have a production capacity of 1.3 Bcf/d.34

According to OGJ, Saudi Arabia has a total gas processing capacity of 11.8 Bcf/d as of January 1, 2014. The Wasit Gas Program is an initiative to develop two offshore natural gas fields, the Arabiyah and Hasbah fields, and to construct the Wasit Gas Plant capable of processing 2.5 Bcf/d of natural gas from these fields. It will be one of the largest gas plants Saudi Aramco has ever built and is scheduled to be completed in 2014. However, there have been reports of delays that may push the completion date back to 2016.

Qatargas 13 years without a lost time incident in offshore facilities

Qatargas has completed 13 years of operations in its offshore facilities without a lost time incident (LTI). Comprising nine offshore platforms, the Qatargas offshore facilities supply gas and condensate to the onshore liquefaction plant at Ras Laffan, the largest in the world, with a

production capacity of 42mn tonnes per annum (MTA) of liquefied natural gas (LNG).

The Qatargas offshore facilities are

located approximately 80km northeast of Qatars mainland. A total of 85 wells together supply about 7.5bn standard cubic feet of gas to the seven LNG production trains onshore. The

gas, along with the associated condensate is transferred to shore via subsea pipelines. The Qatargas offshore facilities are outstanding not only in terms of safety record, but also from a reliability perspective, ensuring sustained production of LNG from Qatargas onshore plant, its spokesman said.

The company attributed this achievement to the hard work and dedication of everyone working on North Field Bravo (NFB), commissioned in 1996 and is the heart of its offshore operations, along with the continuous support from other departments.

Qatargas offshore operations operate three assets Qatargas 1, Qatargas 2 and Qatargas 3&4 (joint asset of Qatargas 3 and Qatargas 4). There are seven remote wellheads platforms, and the farthest platform is wellhead-4, which is 29.6km away from the NFB complex.

NFB has 90 Qatargas direct hire employees and 36 permanent contractors working onboard for 28 days followed by a field break for 28 days. Qatari employees working on NFB follow a seven days on and seven days off cycle. The average number of personnel on NFB at any given time is around 120.

Qatargas has hired three marine vessels (one safety stand-by vessel and two dynamic positioning vessels for transfer of passengers and materials. The materials include food supply, plant equipment related spares and chemicals, which are normally brought in once a week. One DP vessel is located in the field to meet ad hoc accommodation requirements of small project works on a need basis.

Helicopter operations are mainly utilised for the transfer of passengers from Doha heliport to the main offshore facility and back. Remote platforms are also accessed using helicopters during bad weather conditions and emergencies.

UAE ADNOC weighs options as it negotiates on concessions Gulf News + NewBase

Abu Dhabi ADNOC is believed to be in advanced talks to award contracts to international oil companies to develop its onshore oilfields after French energy giant Total was awarded a 10 per cent stake in late January this year, experts said.

A number of Asian and western oil companies are bidding for stakes in the concession after a deal with western oil majors dating back to the 1970s expired in January last year. In the fray are Royal Dutch Shell, BP, Occidental Petroleum from the US, Statoil from Norway, China National Petroleum Corporation (CNPC), Japans Inpex, South Koreas Korea National Oil Corporation and Italys ENI.

Total won a 10 per cent stake to develop land based oilfields in January. The company is said to have paid $2.2 billion to win the contract. Other bidding companies were

asked to match the amount paid by Total to win the contracts.

Alex Schindelar, Dubai bureau chief of Energy Intelligence said this is an extremely important decision for Abu Dhabi and they will take as much time as they need to get it right. There is no official timetable of when a decision will be reached. It is strategic for Abu Dhabi as the company selected would be in the country for 40 years, he said.

Abu Dhabi needs to decide whether it will accommodate the requests by international oil companies to adjust the commercial terms, which several, if not all of the bidders have said will result in rates of return that are far below acceptable levels, even for low-cost, low-risk reserves like in Abu Dhabi.

According to him, BP and Royal Dutch Shell have requested an adjustment to the terms in order to make the $2.2 billion bonus more palatable. When contacted BP refused to comment while Royal Dutch Shell said it is keen to continue its long cooperation and partnership with Abu Dhabi and the Adnoc Group of companies.

Meanwhile, a report in Korea Herald said Korean company GS Energy is seeking to buy a five per cent stake in the Abu Dhabi Company for Onshore Oil Operations, (Adco), a subsidiary of Adnoc at an estimated cost of $1.1 billion. The report said the if GS Energy secures a 5 per cent stake, the companys daily crude oil production capacity will jump to 90,000 barrels, surpassing the 77,000 barrels via overseas oilfields by SK Innovation, the nations top crude oil producer.

Another Korean company Korea National Oil Corporation is also in the fray to win the bid.

The UAE, which holds about six per cent of global oil reserves is intending to increase the production capacity to 3.5 million barrels of oil per day by 2017 from the present capacity of around 2.8 million barrels of oil per day.

The country is not planning to reduce its investment in the energy sector despite drop in oil prices, which went down by more than 50 per cent since June last year.

Netherlands: Exxon-Shell gas venture may have to adjust Groningen output after ruling. Source: Reuters

Dutch gas production company NAM and national gas trading company GasTerra said on Wednesday they were studying how to compensate for a court ruling that halted production at part of the massive Groningen gas field because of safety concerns.

A spokesman for GasTerra said it was not yet clear whether his organisation may have to purchase additional gas on the open market, or whether NAM may be able to increase production in other areas to make up for the production halt around the town of Loppersum. 'Yes we do think we can meet all our contractual obligations, so in that sense the court ruling doesn't change much,' Anton Buijs said. 'What does change is where does the gas come from', he said.

Production at the Groningen gas field, Europe's largest, has been increasingly under fire since the Dutch Safey Board censored the government in February for failing to take into account adequately the risk the small earthquakes it causes pose to citizens of Groningen.

GasTerra, which buys and sells all the gas produced by NAM and a number of smaller Dutch fields, also purchases some of its supplies from the TTF trading hub, where Norwegian and Russian gas are also traded. Buijs noted that fields around Loppersum, which make up about 9 percent of Groningen production, have already pumped one billion cubic meters (bcm) of gas this year, one third of their budgeted output in 2015 before the court ruling.

In a letter to parliament on Wednesday, Economic Affairs Minister Henk Kamp said NAM may have to make 'operational adjustments' in other areas to compensate for the Loppersum halt. NAM spokesman Ernst Moeksis declined to say whether that would mean increasing production in other areas of Groningen, which is possible under the court ruling but would be unpopular in Groningen - and politically sensitive in The Hague.

GasTerra spokesman Buijs said other possibilities include a mix of increasing purchases from Norway or Russia, using stored gas if necessary, and increasing purchases from many small Dutch fields outside Groningen. And the court's ruling doesn't exclude the possibility of restarting production at Loppersum in an emergency, he added.

NAM (Nederlandse Aardolie Maatschappij) is a joint venture between Royal Dutch Shell and Exxon Mobil. The national gas trading company GasTerra, half owned by the Dutch state and half owned by NAM, said GasTerra, NAM and government-owned grid operator GasUnie would discuss the next steps on Wednesday.

Indonesia: Lion Energy reports Hyd.Carbon from Lofin-2 Source: Lion Energy

Lion Energy has advised that the Lofin-2 appraisal well has reached a depth of 5471m MD/ 5128m TVDSS, slightly below its initial planned total depth of 5425m MD, as the well continues to encounter hydrocarbon shows. Wireline logging is currently underway to evaluate the 861m open-hole section of the Manusela primary objective.

Since Lions last update on the well on 25 March 2015, further coring was undertaken prior to a resumption of drilling 6 inch hole in the Manusela limestone objective from 4870m to the current total depth of 5871m MD.

On completion of Wireline logging, the well will be flow tested and, subject to a successful flow period and shut-in pressure build up, production logging tools will be run to determine potential productive zones within the extensive Manusela Formation limestone section. Should the evaluation confirm that the well is still in hydrocarbons at the current depth, it is likely the well would be deepened beyond the initial planned total depth to fully appraise the extent of the potential hydrocarbon column.

Lofin-2, which spudded on 31 October 2014, is located in the Seram (Non Bula) PSC in eastern Indonesia and is being drilled to appraise the Lofin-1 discovery made in 2012. Lofin-1 flowed 15.7 mmscfd and 171 bpd oil/condensate from the fractured Manusela Formation encountered from 4267m MD/4164m SSTVD through to total depth 4427m MD/4324m SSTVD. The objective of the well is to investigate the extent of the hydrocarbon column below the 160m delineated in Lofin-1 which could not be drilled deeper due to engineering issues.

Lion has a 2.5% interest in the Seram (Non Bula) PSC which is operated by CITIC Seram Energy (51%) with other co-venturers being KUFPEC (Indonesia) (30%) and Gulf Petroleum Investment Company (16.5%).

US to become a net exporter of natural gas by 2017 - EIA Source: Reuters + NewBase (http://www.eia.gov/forecasts/aeo/pdf/0383%282015%29.pdf)

The United States will transition from a net importer of natural gas to a net exporter of the fuel by 2017 as the nation's shale gas production continues to grow, the U.S. Energy Information Administration said on Tuesday in its Annual Energy Outlook. In its 2014 outlook, the EIA

forecast the U.S. would become a net exporter of gas before 2020. The EIA said increases in domestic gas production are expected to reduce demand for gas imports from Canada and support growth in exports to Mexico, Asia and Europe. Net gas exports would continue to grow after 2017, with annual net exports reaching 3.0 trillion cubic feet to 13.1 Tcf in 2040, the agency said.

The United States produced a total of 24.4 Tcf of dry gas in 2013 and was expected to produce between 31.9 Tcf to 50.6 Tcf in 2040, according to the report. There are four LNG export terminals under construction in the United States in Maryland, Louisiana and Texas. The four terminals have contracts to export gas to customers in Asia and Europe and are expected to enter service between 2016 and 2019.

In addition, there are more than half a dozen pipeline projects to move gas from the United States to Mexico under construction or in development with some expected to enter service over the next few years.

IEA: Global oil supply rises on OPECs record production boost

The IEA Oil Market Report for April raised its forecast of 2015 global oil demand by 90

000 barrels per day (90 kb/d) to 93.6 million barrels per day (mb/d), a gain of 1.1 mb/d on the year, informing subscribers that the notable acceleration from 2014s 0.7 mb/d growth builds on cold first-quarter temperatures and a steadily improving

global economic

backdrop. Global supply rose by an estimated 1

mb/d during March, to 95.2

mb/d, as OPEC production

recorded its

highest monthly increase in nearly four years. Year-on-year gains

totaling a whopping 3.5 mb/d were split between OPEC and non-OPEC production

OPEC crude oil output soared by 890 kb/d in March, to 31.02 mb/d, on sharply higher Saudi Arabian, Iraqi and Libyan supplies. The OMR call on OPEC crude and stock change was revised marginally higher for the current quarter, to 30.35 mb/d, above the groups

official production ceiling, but left unchanged for full 2015 from the March Report, at 29.5 mb/d. OECD industry stocks slipped by 1.7 mb in February, despite a massive 36.4 mb build

in crude oil stocks. Preliminary data show OECD inventories up a counter-seasonal 29.2 mb in March, as US crude holdings extended recent builds and refined products

defied seasonal trends.

Global refinery crude demand is expected to fall seasonally to 77.3 mb/d in the

current quarter, from 78 mb/d in the first quarter of the year. While Atlantic Basin refiners mostly completed turnarounds in the last quarter, Asian refinery maintenance is set to ramp up sharply this quarter, with up to 2.5 mb/d of distillation capacity offline at its peak in May.

The Oil Market Report (OMR) is a monthly International Energy Agency publication which provides a view of the state of the international oil market and projections for oil supply and demand 12-18 months ahead.

http://www.eia.gov/forecasts/aeo/pdf/0383%282015%29.pdf

Oil Price Drop Special Coverage

Brent crude ( Jun-2015 ) oil surges to 2015 highs

Today Brent crude oil hit 2015 highs above $63 per barrel on Thursday after a rally of more than 5 per cent the previous session and analysts said more price rises were likely despite market oversupply.

Front-month Brent crude futures rose above $63 a barrel for the first time this year on Wednesday, although they had dipped back to $62.96 by 0413 GMT on Thursday. US crude was at $56.23 after hitting a 2015 high of $56.69 on Wednesday.

Reuters technical analyst Wang Tao said in the Global Oil Forum that Brent could rise towards $70 a barrel in the near term, but that a sharp downturn could happen after that

Oil prices jumped on Wednesday after US inventories built up more slowly than expected and talks between major oil producers this week triggered speculation of production cuts, although most analysts said these were currently unlikely.

Additionally, data showed that US crude inventories rose less than expected last week, although hitting a record level for a 14th consecutive week, to 483.69 million barrels. Despite the dip on Thursday morning, crude prices have risen around 15 per cent since the beginning of April and are back to levels reached in February, which marked the 2015 highs.

The International Energy Agency said on Wednesday that world oil markets may take longer to tighten than expected due to a surge in Opec supply and a potential rise in Iranian exports, even as demand strengthens.

Energy consultancy Wood Mackenzie said the "low oil price leads to exploration budget cuts averaging 30 per cent across the industry in 2015", but added that exploration cost deflation would average 33 per cent, presenting an opportunity for strong explorers to increase drilling. Oil market jumps on hopes of easing global supply glut AFP + NewBase

World oil prices ( May 15-2015 ) shot higher Wednesday on forecasts that US shale production would likely drop and help ease a global supply glut, analysts said. US benchmark West Texas Intermediate for delivery in May rallied to a two-month peak at $54.25 per barrel, before pulling back to $53.89, up 60 cents from Tuesdays close.

Brent North Sea crude for May hit a three-week high at $59.63 a barrel. It later stood at $59.16 in midday deals, up 73 cents. Oil prices are continuing their upswing, said Commerzbank analyst Carsten Fritsch.

Brent is nearing the $60 per barrel mark, while WTI is already trading at a 2.5-month high of a good $54 per barrel. Speculative financial investors are clearly taking the latest news of a declining US oil supply as reason enough to further step up their investments in the oil market.

But he cautioned: Despite all the euphoria, the production falls reported so far are not nearly sufficient to stop US crude oil stocks from rising, as inventory data due to be published ... this afternoon are likely to show.

The US Energy Information Administration said on Monday that output from the countrys seven shale regions, which has driven production to a record high, looked set to fall by 57,000 barrels per day in May.

Analysts said a decline should help ease the global crude oversupply, which led to a collapse in prices of more than 50 percent between June and January. We have been seeing forecasts of

lower oil production suggesting that current oil production should be dropping already, added Daniel Ang, analyst with Philip Futures in Singapore.

But United Overseas Bank said there could be a price reversal after the release of the weekly US crude stockpiles report later on Wednesday. Analysts expect it to show another increase, pointing to weaker demand in the worlds biggest oil consuming nation.

Traders meanwhile set aside the International Energy Agencys latest monthly report on Wednesday. The Paris-based IEA cut its supply forecast for non-OPEC countries, citing downturns in North America and the worsening conflict in Yemen.

The agency cut its 2015 forecast for non-OPEC output by 120,000 barrels a day to 630,000 bpd on the back of a slightly more negative outlook for the US LTO (light tight oil) production and Canadian non-oil sands output, and of the fallout from the worsening conflict in Yemen, it said in the report.

Although Yemen is a small oil producer accounting for a fraction of global output with negligible effect on prices, it borders Saudi Arabia and affects other Gulf markets. The start of a Saudi-led military campaign against Yemen in late March sparked concern of possible supply disruptions through the areas vital sea lanes.

IEA: Oil supply boost to defer market tightening Reuters + NewBase

World oil markets may take longer to tighten than expected due to a surge in OPEC supply and a potential rise in Iranian exports, even as demand shows signs of strength, the International Energy Agency said on Wednesday.

The agency raised its forecast for global oil demand growth in 2015 for a second consecutive month, citing strong pockets of consumption in Europe, India and the United States.

Oil prices have halved from above $115 a barrel last June due to ample supply, in a decline that deepened after the Organization of the Petroleum Exporting Countries chose to defend market share rather than cut output.

Global oil demand is rising faster than projected, but so are supply, and the IEA, which advises industrialized countries on energy policy, rolled back its prediction of when the market would tighten.

Recent developments thus may call into question past expectations that supply and demand responses would tighten the market from mid-year on, the IEA said in its monthly report. OPEC production surged to 31.02 million barrels per day (bpd) in March, almost a two-year high, led by Saudi Arabia.

Saudi output is likely to keep rising, analysts say, reducing global spare production capacity. London-based consultancy Energy Aspects said this week Saudi crude production could reach a record 11 million bpd this summer.

Iranian oil production could rise sharply if economic sanctions are removed from the Islamic

Republic. Advances in talks on Tehran's nuclear program not only call into question past working assumptions on future Iranian output, but may already have encouraged other producers to hike supply and stake out market share ahead of Iran's potential return, the IEA said.

In previous reports, the IEA predicted the oil market would rebalance in the second half of 2015; as North American supply growth slows and lower prices help boost demand. The IEA raised its forecast for growth in world oil use this year by 90,000 bpd to 1.08 million bpd, bringing demand in 2015 to an average of 93.60 million bpd.

It said consumption may falter in some areas but OPEC production was likely to stay high and could even rise further in April. The agency left its forecast of demand for OPEC crude in 2015 unchanged at 29.50 million bpd, pointing to a rising supply surplus if OPEC keeps the same output. The IEA said Iran's framework agreement with six world powers over its nuclear program could open the way for Tehran to increase its share of the world oil market. Iran could pump as much as 3.6 million bpd within months of sanctions being lifted, up from 2.8 million bpd in March, it said. Iran has around 30 million barrels in storage on tankers that could be shipped quickly.

Substantially higher production is unlikely before next year, but Tehran could, in theory, raise exports out of floating storage before then, the IEA said.

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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

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Khaled Al Awadi is a UAE National with a total of 25 years of experience in the Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates General Petroleum Corp. Emarat with external voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operations Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years, he has developed great

experiences in the designing & constructing of gas pipelines, gas metering & 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 April 2015 K. Al Awadi