New base 19 november 2017 energy news issue 1102 by khaled al awadi

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,
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NewBase Energy News 19 November 2017 - Issue No. 1102 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; Mubadala seeks to invest in Mexico’s oil drilling, refining
Gulf News - Fareed Rahman (images by NewBase)
Mubadala Petroleum is keen to invest in Mexico both in the upstream in oil production as well as
downstream sector in petrochemicals, the chief executive officer of the state-owned Mexican oil
firm Pemex told Gulf News in an interview.
“Mubadala is keen to invest in both upstream as well as downstream sectors. Discussions are
going on and there could be something concrete early next year moving forward,” said José
Antonio González.
The two companies signed an agreement last year to provide the basis for discussions between
the two companies and their affiliates about potential
opportunities in Mexico’s energy sector. “Mubadala is a
sophisticated company and we are looking for strong
allies to benefit.”
The Pemex CEO also met the chief of Abu Dhabi
National Oil Company as part of this visit to the UAE to
boost cooperation, he said. “We are in initial discussions
with Adnoc for potential collaboration and we will see
where it goes.”

Mexico, one of the world’s largest producers of oil, has a current production of 2 million barrels per
day of oil apart from 4 billion cubic feet of gas. “The production has gone down from 3 million
barrels of oil per day because the fields have become old. We are working hard to replenish it and
increase production.”
Opec, non-Opec agreement
The country is also part of the Opec and non-Opec production cut agreement that came into effect
earlier this year. Mexico has not been reducing output as the production has been falling on its
own, he said. “I think this agreement has given stability and certainty to the oil markets.”
The Latin American country also undertook reforms in the energy sector in 2013, ending Pemex’s
monopoly on the oil and natural gas sector and opening the industry to greater foreign investment.
“Opening of the sector had a tremendous impact. We have attracted enormous amount of
investment and the commitment in the hydrocarbon sector is $80 billion in the coming years with
big names like BP, Eni, Total, Shell, Exxon Mobil.”
Shale oil exists in Mexico because it is in the same basin as in the United States but due to some
environmental regulations, the country has not been undertaking shale production, he said. “We
are trying to get our production slowly
back up with lot investments in the
upstream.
We are also trying to get our refinery to
function as efficiently as possible.
Right now we can process roughly half
of our oil production. If we can
maintain our refineries better and
operate them better we could increase
that up to 60 to 70 per cent of our
production,” he added.

Oman: Musandam power plant to offer smart power solutions
Oman Observer
The Musandam Independent Power Project (IPP) power plant in northern Oman, supplied and
built by the technology group Wärtsilä, will provide eco-friendly power generation solutions to the
region, according to the equipment’s Finnish suppliers.
High-level representatives from Wärtsilä attended the official inauguration of the project last week.
The ceremony was attended by executives from the plant owners, Musandam Power Company
(MPC). The 120 MW generating facility will contribute to the overall economic development of the
Musandam Governorate.
The Musandam Governorate is a rapidly developing region, and the Wärtsilä Smart Power Generation
plant will provide much needed grid stability, the Finnish corporation said in a press statment. In addition to
providing a sustainable and reliable electricity supply to support the region’s economic development, the
plant will also provide significant environmental benefits by operating on associated gas from local oil wells,
which would otherwise be flared into the atmosphere, it noted.
The plant was delivered by Wärtsilä on a turnkey contract. Power is generated by 15 Wärtsilä 34DF dual-
fuel engines running primarily on gas but capable of switching to light fuel oil if necessary. The efficient
34DF engines can reliably operate in high humidity and ambient temperatures that can reach 50 degrees C
in the region. The Smart Power Generation plant also requires almost no water for cooling, which was an
important consideration in the selection of the Wärtsilä solution. In officially opening the facility, Salim al
Hashmi, Project Director, Musandam Power Company, stated: “This plant is a central part of the major
integrated development of the Musandam Governorate. The project will play a significant role in meeting
the power needs of the region’s current and upcoming industries, while at the same time benefiting the
local community.”
In his speech, Sushil Purohit, Vice-President, Middle East, Asia and Australia, Energy Solutions, said: “We are proud
to showcase the capabilities of Wärtsilä’s Smart Power Generation in meeting the region’s strict grid code
requirements. We are proud that we can also contribute to a cleaner environment by lowering CO2 emissions through
our advanced technology. We congratulate MPC and the Omani authorities for their vision and foresight in developing
and supporting this project.”

Pakistan: Mitsui to participate in FSRU project in Pakistan
Source: Mitsui
Mitsui & Co has entered into an agreement with BW Group to form a joint venture and to
acquire a 49% stake in the JV to jointly own the Floating Storage and Regasification Unit
('FSRU') BW Integrity.
The deal is expected to close as soon as the payment for the acquisition is completed. This deal is
the first FSRU project for Mitsui, and the first project for a Japanese company to participate in the
LNG receiving infrastructure business in Pakistan.
The JV will lease the FSRU to PGP Consortium ('PGPC') based on a long-term FSRU lease
agreement and PGPC will provide LNG regasification services to Pakistan LNG Terminals Ltd
('PLTL'), a state-owned company.
Pakistan began importing LNG in 2015
to cater to growing domestic demand
for natural gas, and declining
production of indigenous gas. The
demand for imported LNG in Pakistan
is expected to grow steadily and reach
20 million tons per annum by 2022. As
Pakistan's second LNG receiving
facility in the country, this project
delivers a key energy infrastructure
project of high national importance.
BW Group is a major player in the
maritime oil and gas industry, with a
well-diversified fleet of over 150 vessels which includes LNG and LPG carriers, floating gas
infrastructure, product tankers, FPSOs, dry bulkers, chemical tankers, and possesses a long-
standing and best-in-class vessel management capabilities. This is BW's second FSRU project,
with the first being a sister vessel, BW Singapore, which is currently based in Egypt on a five-year
charter.

UK: Angus Energy commences production from Lidsey-X2
Source: Angus Energy
Angus Energy, a conventional oil and gas production and development company, has commenced
production at the Lidsey oil field from the well, Lidsey-X2.
Following the drilling and completion of the Lidsey-X2 horizontal production well, which was drilled on time
and within budget, the Company is working through the production start-up and production has now been
initiated. Initial start-up rates of production from the Great Oolite reservoir are coming in at forty barrels of
38.5 API of dry oil per day.
The fluid column (oil) extends to 322m from surface (bottom hole depth of 1,009.3m) with a measured
static bottom hole pressure of 764 psi. The Great Oolite is the first of three reservoirs with potential viability
in Lidsey-X2 as per the Company RNS of 6 November 2017.
Compared to pre-drill assessments set forth in the Competent Person's Report ('CPR') of the 7 November
2016 Admission Document, flow rates from the Great Oolite reservoir are below expectations, and work is
continuing to clean up the well.
The Company is investigating the new geological and borehole information to update its understanding of
the reservoir. In addition, the Company is currently examining evidence that suggests a partial flow
reduction is the result of a hole in the production tubing, therefore not allowing the well to be fully drawn
down.
The Company is conducting further analysis and if confirmed, the Company will undertake operations to
repair the tubing which will allow maximum draw from the reservoir. This is the priority for the Company
over the coming weeks.
In addition to any necessary repair, industry information and technical guidance on analogous wells in the
region suggest initial flow rates can be improved. Angus Energy believes its initial flow rates from Lidsey-
X2 have similar potential for increased yield. Therefore, the Company is conducting a thorough study to
optimise and enhance production levels from the Great Oolite.

Further to the Company RNS of 6 November 2017, Angus Energy will submit an FDP Addendum to the Oil
and Gas Authority ('OGA') to begin production appraisal of the Kimmeridge and Oxford layers at Lidsey.
Operations Update: Lidsey-X1
The Lidsey-X1 well, first drilled in 1987, will now resume production from the Great Oolite reservoir in
addition to production from Lidsey-X2. The Company expects to achieve the historic production levels of
15-20 barrels of oil per day ('bopd') before the well was shut in nearly 2 years ago in January 2016.
Given the encouraging geochemical analysis of Lidsey-X2's Kimmeridge and Oxford Layers, disclosed in
the Company RNS of 6 November 2017, the above-mentioned FDP Addendum will include a submission to
conduct analysis of the production potential from the Kimmeridge layer and Lias source rock from Lidsey-
X1. The Lidsey-X1 exploration well was previously drilled through all the aforementioned layers.
The Lias source rock, positioned beneath the Great Oolite, has a comparable composition to the
interbedded limestones / shales found in the hybrid Kimmeridge reservoir at the Company's Brockham Oil
Field, located on the northern end of the Weald Basin.
The deeper depth of the Lias source rock in the Lidsey-X1 indicates an increased maturity as compared to
layers above the Great Oolite such as the component Kimmeridge and Oxford layers of the Lidsey-X2, as
outlined in the Company RNS of 6 November 2017.
Paul Vonk, Manging Director of Angus Energy, commented:
'Production has now commenced from Lidsey-X2. This project was delivered on time and on budget. Even
with these initial flow rates, Lidsey-X2 provides commercial production and cash flow. We will continue to
optimise production from the Great Oolite reservoir at Lidsey as we work to increase flow rates and we look
forward to developing its additional reservoirs to enhance long run value for our shareholders.'

Norway Idea to Exit Oil Stocks Is ‘Shot Heard Around the World’
Bloomberg - Joe Ryan
Norway’s $1 trillion sovereign wealth fund proposed an exit from nearly $35 billion in oil and gas
stocks. Norway’s proposal to sell off $35 billion in oil and natural gas stocks brings sudden and
unparalleled heft to a once-grassroots movement to
enlist investors in the fight against climate change.
The Nordic nation’s $1 trillion sovereign wealth fund said
Thursday that it’s considering unloading its shares of
Exxon Mobil Corp., Royal Dutch Shell Plc and other oil
giants to diversify its holdings and guard against drops in
crude prices. European oil stocks fell.
Norges Bank Investment Management would not be the
first institutional investor to back away from fossil fuels. But until now, most have been state
pension funds, universities and other smaller players that have limited their divestments to coal,
tar sands or some of the other dirtiest fossil fuels. Norway’s fund is the world’s largest equity
investor, controlling about 1.5 percent of global stocks. If it follows through on its proposal, it would
be the first to abandon the sector altogether.
“This is an enormous change,” said Mindy Lubber, president of Ceres, a non-profit that advocates
for sustainable investing. “It’s a shot heard around the world.”
The proposal rattled equity markets. While Norwegian officials say the plan isn’t based on any
particular view about future oil prices, it’s apt to ratchet up pressure on fossil fuel companies
already struggling with the growth of renewable energy.
Norway’s Finance Ministry, which oversees the fund, said it will study the proposal and will take at
least a year to decide what to do. The fund has already sold off most of its coal stocks.
“People are starting to recognize the risks of oil and gas,” said Jason Disterhoft of the Rainforest
Action Network, which pushes banks to divest from fossil fuels.

The fossil fuel divestment movement began on college campuses about five years ago and has
gained momentum since. The argument is simple: climate change has exponentially increased the
risk of backing coal, oil and gas, so investors should put their money elsewhere for the sake of
both the planet and their own fortunes.
The Rockefeller Family Fund announced in 2016 that it sold its stake in Exxon and would dump all
other fossil-fuel investments. The California State Teachers’ Retirement System board voted to
divest from U.S. coal companies. AXA SA, the French insurance giant, said it would sell 500
million euros ($589 million) in coal holdings.
Norway’s fund dwarfs them all.
“The divestment movement just got some new juice,” said Jamie Webster, a fellow at the Center
on Global Energy Policy at Columbia University.
While environmentalists heralded the fund’s proposal, the move has more to do with hedging risk
than saving the planet. Norway derives about 20 percent of its economic output from oil and gas.

Finance officials have long debated whether reinvesting those profits back into petroleum
producers leaves Norwegians overly exposed to the volatility of oil prices.
“Our perspective here is to spread the risks for the state’s wealth,” Egil Matsen, the deputy
governor at the central bank in charge of overseeing the fund, said in an interview in Oslo
Thursday. “We can do that better by not adding oil price risk through the fund.”
It won’t happen quickly, said Per Magnus Nysveen, senior partner and head of analysis at the
Oslo-based consulting company Rystad Energy. Norway’s positions in oil companies are vast, and
finance ministers will unload their shares gradually if they want to maximize returns, Nysveen said.
“We are taking about years rather than months or quarters,” he said. “This has nothing to do with
the environment. It is purely a financial debate.”
That’s true, Lubber said. But the debate, she said, underscores that climate change has made
fossil fuels increasingly risky
investments -- even in the eyes of
a petroleum giant like Norway.
“It’s an enormously important
statement,” Lubber said. “Once
one major player does it, others
will follow.”

US: Keystone pipeline spill pushes oil higher, fuels TransCanada opponents
Reuters - Nia Williams, Kevin O'Hanlon
A major oil spill on the Keystone pipeline in South Dakota helped push U.S. crude prices higher on
Friday, while fueling opposition to another pipeline project by owner TransCanada Corp that faces
a crunch decision in Nebraska next week.
An aerial view shows the darkened ground of an oil spill which shut down the Keystone pipeline between
Canada and the United States, located in an agricultural area near Amherst, South Dakota, U.S., in this
photo provided November 18, 2017.
The climb in U.S crude futures and slide in Canadian heavy crude prices, as well as TransCanada
Corp shares, came the day after the 5,000 barrel spill, tied for this year’s largest pipeline leak in
the United States.
No date has been set for reopening Keystone, TransCanada said, adding that a media report that
had identified a restart date was incorrect. The spill gave further ammunition to environmental
groups and other U.S. opponents of another pipeline the company has proposed, the long-
delayed Keystone XL.
Keystone carries 590,000 barrels per day of crude from Alberta’s oil sands to markets in the
United States. The state of Nebraska was set to decide on Monday whether to approve Keystone
XL.
On Thursday, Calgary, Alberta-based TransCanada said it had contained the leak in the town of
Amherst, South Dakota, and was investigating the cause. It said the pipeline will be shut until it
gets approval to restart from the U.S. Pipeline and Hazardous Materials Safety Administration
(PHMSA).
“It’s not a tiny spill by any means,” said Kim McIntosh, environmental scientist manager at the
South Dakota Department of Environment and Natural Resources. McIntosh said it may take

longer than usual for the company to determine the extent of contamination, a process that usually
takes days.
The last Keystone pipeline spill recorded was about 400 barrels of oil in Hutchinson County, South
Dakota, in April 2016. “The 2016 release took around 10 months to clean up; this will take longer,”
said McIntosh. “I can’t predict whether it will take 20 months or 12 months.”
In Nebraska, Keystone XL opponents seized on the spill as an example of its environmental risks.
“Pipelines are basically plumbing; and plumbing leaks. It comes as no surprise,” said Tom
Genung, who lives near the proposed Keystone XL route in Holt County, Nebraska.
The Nebraska Public Service Commission, or PSC, is scheduled to announce a decision on
Monday on Keystone XL. Its decision focuses narrowly on whether the pipeline is in the public
interest, and not on environmental issues, which it is not allowed to consider.
Art Tanderup’s family farm in Neligh, Nebraska, lies in the path of the 830,000 bpd Keystone XL
project. He said the proposed XL pipeline would be built over huge swaths of porous, sand-like
soil atop the Ogallala aquifer, putting farmers and ranchers at risk of water contamination if a spill
occurs. ”We would have so much crud and chemicals in the Ogallala aquifer that we could never
clean up,” he said.
TransCanada shares closed down 0.9 percent on the Toronto Stock Exchange at C$62.54.
The South Dakota spill ties with January’s spill from the Seaway pipeline near Trenton, Texas, for
the largest U.S. crude oil pipeline spill in 2017, U.S. data showed. TransCanada spokesman Terry
Cunha said the company is assisting with the storage of crude in Hardisty, where Keystone
originates, and that it regrets the impact caused to customers.
No date set yet for Keystone pipeline restart: TransCanada spokesman
U.S. West Texas Intermediate crude ended up $1.41, or 2.6 percent, at $56.55 a barrel. Traders
said the shut-in would add to bullish sentiment due to fewer barrels going into Cushing,
Oklahoma, the delivery point of the WTI contract. The WTI prompt spread (CLc1-CLc2) narrowed
by as much as 8 cents.
If the pipeline is shut for a week, it would affect at least 2 million barrels of crude going into
Cushing, according to estimates by traders. The pipeline also brings oil into Patoka, Illinois. Export
pipeline shutdowns also pressure the price of Canadian crude because barrels get bottle-necked
in Alberta.
The discount for Western Canada Select for January delivery in Hardisty, Alberta, widened to
$16.00 per barrel below the West Texas Intermediate benchmark, according to Shorcan Energy
brokers. On Thursday, January barrels settled at $15.50 per barrel below U.S. crude.

NewBase November 19 - 2017 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil rises over 2 percent, but shows first weekly fall in six
Reuters + NewBase + Bloomberg
Oil rebounded more than 2 percent on Friday after falling for five straight session as a major U.S.
crude pipeline was shut and traders anticipated an OPEC deal to extend curbs on production.
Brent crude oil LCOc1 rose $1.36, or 2.2 percent, to settle at $62.72 a barrel while U.S. West
Texas Intermediate crude (WTI) CLc1 ended $1.41, or 2.6 percent, at $56.55 a barrel. For the
week, Brent was down 1.3 percent and WTI fell 0.3 percent.
Prices, however, fell for the first week in six, pressured by rising U.S. output data and doubts that
Russia would support an extension of the OPEC output cut deal. Prices rebounded after
Thursday’s comments by Saudi Arabia’s energy minister signaled a willingness to extend output
cuts when OPEC meets on Nov. 30.
Oil price special
coverage

“Obviously, the comments gave us guarantee that the extension is going to happen and was a
driving story overnight,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
TransCanada Corp’s (TRP.TO) 590,000 barrel-per-day (bpd) Keystone pipeline remained shut
after a leak in South Dakota on Thursday.
Traders said the shut-in would add to bullish sentiment due to fewer barrels going into Cushing,
Oklahoma, the delivery point of the WTI contract. The WTI prompt spread CLc1-CLc2 narrowed
by as much as 7 cents in the day. Meanwhile, money managers raised their net long U.S. crude
futures and options positions this week, with short positions at their lowest level since March.
Prices fell this week as fears of oversupply remained after U.S. government data showed oil
output C-OUT-T-EIA touching a record 9.65 million bpd last week. The International Energy
Agency also said that the United States would account for 80 percent of the global increase in oil
production over the next decade.
“Market participants are closely watching the rising oil-production profile in the U.S., which will
remain the predominant bearish factor,” said Abhishek Kumar, senior energy analyst at Interfax
Energy’s Global Gas Analytics in London.
U.S. energy companies kept the oil rig count unchanged this week, General Electric Co’s Baker
Hughes energy services firm said on Friday. Some analysts expect a gradual decline in the fourth
quarter.
Signs of rising U.S. output have dampened the impact of output cuts by the Organization of the
Petroleum Exporting Countries (OPEC), Russia and several other producers. Earlier this week,
Russia’s Rosneft said an exit from the supply curb deal was a serious challenge, though added
that it was committed to a deal.
"Ahead of the OPEC meeting, we’re going to see a little bit of volatility," Gene McGillian, a market
research manager at Tradition Energy in Stamford, Connecticut, said by phone. "Going forward,
the market needs to keep seeing that the fundamental picture is continuing to tighten."

Oil’s rally to the highest in more than two years last week faltered as Russia is said to
be hesitant to commit to a decision on the cuts so soon, suggesting OPEC wait until closer to the
deal’s expiration at the end of March. U.S. crude output gained this week to the highest in more
than three decades, according to government data.
Adding to the tension, the International Energy Agency said milder-than-normal winter weather is
putting a brake on demand growth. West Texas Intermediate for December delivery settled $1.41
higher at $56.55 a barrel on the New York Mercantile Exchange.
Doubts Loom on OPEC's Horizon
After bullish bets on Brent crude hit a record and futures surged to two-year highs, hedge funds
are pulling back with a sense that the rally reached its limit for now. Wagers on lower prices rose
by the most since June as Middle East tensions took a backseat, while uncertainty looms over
Saudi Arabia’s push to extend OPEC’s output curbs this month.
"We’re at levels where the market appears to have crested," said Gene McGillian, a market
research manager at Tradition Energy in Stamford, Connecticut. "Continuing to see supply draw-
downs is probably what the next leg of the rally will be predicated on."
Doubts over Russia’s willingness to go along with the Saudis, record production from America’s
prolific shale fields and a worse outlook for demand from the International Energy Agency helped
snap oil’s longest streak of weekly gains in a year.
At the same time, concern over heightened geopolitical risks in the Middle East seems to have
subsided, at least for now, said Rob Haworth, who helps oversee about $150 billion in assets at
U.S. Bank Wealth Management in Seattle.
"We haven’t seen more conflict," he said. "For prices to get a lot higher, you have to see a
meaningful increase in disruptions -- and we haven’t."

Hedge funds lowered their Brent net-long position -- the difference between bets on a price
increase and wagers on a drop -- by 1 percent to 537,557 contracts in the week ended Nov. 14,
according to data from ICE Futures Europe. Shorts surged 8.7 percent, while longs fell 0.1
percent.
Meanwhile, the net-bullish position on West Texas Intermediate, the U.S. benchmark, rose 10
percent to 349,712 contracts over the same period, according to the Commodity Futures Trading
Commission. The net-long position on benchmark U.S. gasoline rose 11 percent, and diesel net-
longs rose 3.3 percent.
But that optimism may be fading, too. WTI also fell from its recent highs, with American crude
stockpiles rising by more than 4 million barrels in two weeks.
Plus, there are real risks that OPEC may not be able to effectively extend cuts and will add to the
overhang spurred by the U.S. shale surge, said Haworth. "It’s hard for me to make a case that
we’re creating a new higher trading range," he said. "We’re still staying cautious here."
Tesla Truck Could Threaten Big Chunk of Oil Demand, If It Works
Tesla Inc.’s unveiling on Thursday of a new electric truck showed Elon Musk can match Steve
Jobs’s ability to wow the tech crowd with a glimpse of the future. If he can equal the manufacturing
prowess of Apple Inc.’s current Chief Executive Officer Tim Cook, he might just clobber the oil
industry too.
That’s a big if, given Tesla’s current inability to meet manufacturing targets on the mass-market
Model 3 electric car. But if the company really can deliver a battery-powered big rig with a 500-
mile range and lower lifetime costs than diesel vehicles, then a big chunk of future oil demand
growth is in peril.
Road freight accounts for about a fifth of world oil consumption, mostly diesel, according to the
annual World Energy Outlook published by the International Energy Agency this week. Trucks are
responsible for about 60
percent of the increase in
global diesel demand since
2000, the report shows.
Freight will be even more
important to the oil market in
the future. The IEA expects
gasoline demand to start
falling before 2040 -- in part
because of the big increase
in electric cars -- but it says
road freight and aviation will
have no choice but to keep
using oil. Buses and trucks
will drive a 2 million barrel-a-
day increase in diesel
demand from 2016 to 2040,
and overall oil demand will keep growing, it said.
Musk said his new truck “can transform into a robot, fight aliens and make one hell of a latte.”
Showmanship aside, if the truck is a success, the IEA’s forecasts may prove wildly optimistic.

NewBase Special Coverage
News Agencies News Release November 19-2017
Forgot About Keystone? Canada's Oil Majors Haven't
By Liam Denning
P H O T O G R A P H E R : A N D R E W B U R T O N
Canada's oil means no disrespect -- it is Canadian -- but it would just like to get the hell out of
Canada.
The question is: Can it?
I wrote here last week about logistical bottlenecks playing havoc with U.S. oil pricing. But Canada
takes this to a new level.
Most of the country's oil comes from Alberta. Heavier, higher in sulfur and far from the American
refineries on the Gulf Coast optimized to take it, Western Canada Select crude oil tends to trade at
a discount to West Texas Intermediate.
It also trades at a discount to Mexican Maya crude, which is similarly tough to refine but much
closer to the Gulf. In general, therefore, the discount of WCS versus Maya usually reflects the
extra cost of piping those Canadian barrels south, roughly $7 to $10 a barrel. Recently, though,
the spread has blown out:
Heavy
Canadian heavy oil usually trades at a discount to Mexican barrels because it has to travel further
to market. But the spread is now well beyond pipeline costs
This partly reflects some of those U.S. bottlenecks I mentioned. Meanwhile, production of heavy
oil from Mexico -- and another regional supplier, Venezuela -- has been declining, and Saudi
Arabia has been withholding barrels.

But the bigger issue is that Alberta's production is outpacing its pipelines. And the problem will get
worse before it gets better: Futures imply average spreads of about $17 a barrel over the next two
years.
Western Canada produced 3.9 million barrels a day in 2016, and that's set to reach almost 4.8
million a day in 2022, according to the Canadian Association of Petroleum Producers. That growth
is front-loaded, too:
Sand Storm
New oil-sands projects are about to start up, boosting Alberta's production
Note: Data after 2016 are projections.
Local refineries can process about 525,000 barrels a day, and a new one starting up next year
should run roughly another 40,000 a day.
With about 3.3 million barrels a day of effective pipeline export capacity, that leaves about
330,000 barrels a day looking for a way out this year. That jumps to more than 600,000 a day next
year and almost 700,000 a day by 2019.
Oil that can't secure space on a pipe has to go by rail instead, which costs more like $13-$18 a
barrel to get to the Gulf Coast. Hence the widening spreads in futures prices (and lower margins
for producers).
Three new pipelines are proposed. But getting pipelines built isn't straightforward these days --
one of the three is that Keystone XL project you might have heard about over the past
decade. Even assuming they clear all their regulatory hurdles, secure customers and go smoothly,
extra capacity wouldn't begin to show up until the second half of 2019:

Coming Down The Pipe?
Three proposed pipeline projects could eventually add another 1.5 million barrels a day of export
capacity for western Canada's oil producers
Note: Production data post-2016 are projections. Assumes local refinery utilization of 85 percent. Assumes existing-
pipeline utilization of 80 percent; planned pipelines at 85 percent. Assumes Line 3 replacement enters service in 2H2019.
For the next two years, at least, therefore, pricing will be a headwind for producers in western
Canada, though not all equally. Imperial Oil Ltd. and Cenovus Energy Inc. are more exposed
because they refine less of their own heavy oil production compared to, say, Canadian Natural
Resources Ltd. and Suncor Energy Inc.
On the flip-side, Canadian National Railway Co. and some of its peers should benefit as more
barrels switch to rail:
Rolling Along
Canadian producers have started loading more barrels on to trains again as pipeline constraints
start to bite
Note: Trailing 12-month averages.
U.S. refiners able to process Canadian barrels looking for a home could also benefit from cheaper
raw materials (similar to what happened with Midwestern crude before the U.S. export ban was

lifted in late 2015). HollyFrontier Corp. and Phillips 66 should capture some of the discount on
Canadian oil for themselves.
Looking beyond 2019, though, it's worth remembering there's no guarantee all these pipelines get
built. Besides regulatory hurdles, if they all show up, western Canada would flip quickly from a
pipeline shortage to a surplus. The chart below shows what happens if Enbridge Inc.'s Line 3
replacement project -- the likeliest of the three -- goes ahead and neither, one, or both of the
others get built:
XL or Excess?
There is clearly room for two new pipelines, but the addition of both Trans Mountain and Keystone
XL after the Line 3 project would create a lot of surplus export capacity
Note: Oil production projections as per CAPP figures noted in the accompanying column. Assumes local refinery
utilization of 85 percent; existing pipeline utilization of 80 percent; new pipeline utilization of 85 percent.
TransCanada Corp. told investors last week that if regulators in Nebraska give the go-ahead later
this month, it has clients ready to support the Keystone XL project. Despite the apparent
surplus this would entail, Canadian oil producers may well value an extra option. Two other
pipeline proposals have died already -- including TransCanada's own Energy East proposal -- and
there's no guarantee Kinder Morgan Canada Ltd.'s Trans Mountain expansion gets built.
Spare capacity could also accommodate potential new oil-sands projects down the road.
That last point still looks like a stretch, though. Besides the uncertainty around medium-term
oil markets right now, heavy barrels like those from Alberta face a particular problem from 2020
onward.
That's when tighter regulations for marine fuel kick in. Analysts at Tudor, Pickering, Holt & Co., a
boutique energy bank, estimate this could result in at least 1.75 million barrels a day of high-sulfur
fuel oil effectively flowing back onto the market as ships switch to cleaner options. Those barrels
would compete closely with western Canada's output; another headwind to pricing.
For all the puts and takes, two things are clear over the next few years. First, Albertan producers
that also refine their output can weather the dislocations better. Second, it's a good time to own
the exits.
This column does not necessarily reflect the opinion of NewBase and its owners.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
The Editor :”Khaled Al Awadi” Your partner in Energy Services
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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 27 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 November 2017 K. Al Awadi

New base 19 november 2017 energy news issue 1102 by khaled al awadi

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New base 19 november 2017 energy news issue 1102 by khaled al awadi