2015 Gea Insight Zmags

INSIGHT
2016 GLOBAL ENERGY OUTLOOK

December 2015
GLOBAL REBALANCING
The energy sector seeks a new equilibrium
CARBON RISK RISING

A future of emissions mitigation beckons
MOOD SWINGS
Where is the upside to oil prices?
NOTES ON AN EMISSIONS SCANDAL

Biofuels and the lessons from VW
PLUS: OPEC ON SHIFTING SANDS

EUROPE BENDING IN THE WIND
MAGHREB MISERY: NORTH AFRICA
IN CRISIS
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OVERSIGHT
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INSIGHT
December 2015
CONTENTS
GLOBAL REBALANCING: FINDING A NEW EQUILIBRIUM
Low oil, natural gas and coal prices should, in theory at least, prompt some
form of demand response. But demand growth in the last decade has come
primarily from China, where the economy is slowing, and the Middle East,
where oil revenues have been cut in half. Moreover, climate change policies
represent a big spanner in the works of normal market mechanisms.
Despite price, the demand outlook for hydrocarbons is highly uncertain.
CARBON RISK RISING
LOSING SUPPORT: ASIAN FUEL SUBSIDY REFORM STUTTERS 16

The thorny issue of fuel subsidy reform across Asia seemed to be taking
some giant steps forward, but is getting bogged down again. All parties
involved would benet from the certainty provided by a decisive move to
liberalization, allowing markets to function without interference. Energy
eciency, energy conservation, environmental protection and the
development of alternatives will follow on naturally.
20
For OPECs members, accustomed to oil prices of more than $100 a

barrel, the world looks a very dierent place now to how it did just two
years ago how dierent might it look in another year?
MAKING HAY: REFINERS SEE SOME BRIGHT SPOTS
25
28
The US shale oil revolution has fundamentally tilted the balance of the
global oil market and helped drive down prices. The resilience displayed
by US producers so far suggests low prices could be here to stay.
SURVIVAL OF THE FITTEST

32
The oil price collapse has unleashed a battle for survival within
the upstream industry, with winners and losers already starting
to emerge.
NOTES ON AN EMISSIONS SCANDAL
RENEWABLES IN THE PINK
41
Growth in utility scale wind and solar power in the US is surging, bringing
opportunities and challenges
SANCTIONS AND TAX: RUSSIAS DILEMMA
49
While the Russian oil sector has shown remarkable resilience in the face
of low oil prices and Western sanctions so far, those negative factors,
coupled with the national economic crisis and elusive hopes of nancial
help from China, are likely to present serious challenges to the industry if
they continue long-term. Early warning signs are already apparent.
BENDING IN THE WIND
54
With renewables, led by wind, set to become Europes biggest power

source by the middle of the next decade, there are a number of challenges
to be met, not least how to develop the exibility needed to cope with
more variable generation.
ENERGIEWENDING PATH OF PARADOXES
The crude pride downturn has been something of a blessing for reners
worldwide as margins turned much healthier in 2015. But with a growing
rened product glut particularly of diesel, previously the great hope for
reners there may be clouds on the horizon.
MOOD SWINGS: LOOKING FOR AN UPSIDE TO OIL PRICES
40
The Clean Power Plan couldnt have come at a worse time for a US coal
industry already looking vulnerable in the face of low natural gas prices
and other regulatory challenges. While its too early to say what the
impact of the CPP will be and whether it will withstand legal challenges
the long-term outlook looks fairly bleak for coal. Still, it looks set to
remain a major energy source for the US and the world for decades to
come.
10
On the heels of the Paris COP21 summit in December, local, regional and
national carbon emissions mitigation eorts are likely to be aligned at the
international level for the rst time. For business, carbon risk is set to
become an increasingly important element in investment decisions,
aecting most obviously those sectors on the wrong side of
environmental legislation.
ON SHIFTING SANDS
COAL BLUES
58
Germanys energy transition is throwing up a lot of challenges as well as

some curious, unintended eects, but the country seems set on the path
to a green energy future.
MAGHREB MISERY
62
In a region already beset by political problems, falling energy prices and

stagnant or falling output are piling on the pressure for North Africas
energy producers.
PRIVATE EQUITY PULLS BACK IN EUROPE
67
Private equity funding has spread from the US to become the largest
single source of nance for deals in the oil and gas sector but in the wake
of the dramatic decline of oil prices in the last 18 months, PE-backed deals
in Europe have taken a hit. Silvina Aldeco-Martinez and Olga Parryeva of
Platts sister company S&P Capital IQ and SNL analyze the deal-making
landscape in Northwest Europe.
36
The increasing complexity of calculating GHG savings for biofuels, and the
potential value that can be extracted in a system under self-regulation,
may place undue temptation in producers paths. The last thing the
industry needs now is a scandal.
PLATTS GLOBAL ENERGY AWARDS
90
A NEW FOCUS ON FINANCIAL OVERSIGHT: a special section on this years

winners of Platts Global Energy Awards.
DECEMBER 2015 INSIGHT 1
ALISDAIR BOWLES
Editor
INSIGHT
December 2015
ISSN 2153-1528 (print)
ISSN 2153-1536 (online)
EDITORS NOTE
There are some things in life possibly
too many that you just cant do
anything about. Due to the inexible
nature of publishing schedules, a
couple of big meetings in the energy
sphere will have taken place after
Insights deadline but before actual
publication. OPEC will have met again
in Vienna, with production cuts very
much still on the agenda but no real
expectation of a change in the Saudi
market share policy. If thats the
case, it probably spells further pain for
oil producers.
Meanwhile, in Paris there is the small
matter of the COP21 UN climate
change summit. At the time of writing,
it looked probable that some sort of
meaningful agreement would come
out of the meeting, one that as it
unfolds is likely to have fairly profound
eects on the global energy sector for
many years to come. Whatever the
outcome, it looks a fairly safe bet that
it will mark a signicant landmark of
one kind or another.
the West by the 1973 oil crisis was

called out recently for its forecasts
over the years on renewables growth,
which were described as being hugely
conservative by the Carbon Tracker
Initiative think-tank. Fatih Birol, the
head of the IEA and previously its chief
economist, defended his agencys
record saying it had been extremely
accurate in its previous forecasts for
renewables (apart from solar).
Carbon Trackers objection stems
from its argument that the majority
of the worlds fossil fuel suppliers
appear to be betting on demand for
their product growing as per business
as usual and that straight-line
forecasts like the IEAs allow that
mindset to continue to hold sway.
The IEA have persistently
underestimated the total capacity
additions of solar PV and wind, which
is likely to have fed through to energy
industry thinking more broadly,
Carbon Tracker said in its report.
FUDGING FORECASTS
Making forecasts is an important
business but fraught with obvious
diculties namely surprises. Its not
news that forecasts are often wrong;
its perhaps more noteworthy when a
prediction is actually correct, and so
criticism for being wrong can seem a
little bit unfair when being wrong is so
common.
They may well have a point, and

particularly about the potential for
future demand implied in the reports
title, Lost in transition: How the energy
sector is missing potential demand
destruction. But as Birol went on to point
out: In our scenarios we look at the
support of governments. If the support
of governments increases, then we
increase the projections... When policy
changes, our numbers change.
The Paris-based International Energy

Agency the energy watchdog born
out of the massive shock inicted on
Post-Paris, it should start to become

clearer just how much the numbers
might need to change.
2 INSIGHT DECEMBER 2015
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CUSTOM CONTENT
ROSS McCRACKEN
EDITOR
ENERGY ECONOMIST
GLOBAL REBALANCING:
FINDING A NEW EQUILIBRIUM
Low oil, natural gas and coal
prices should, in theory at least,
prompt some form of demand
response. But demand growth
in the last decade has come
primarily from China, where the
economy is slowing, and the
Middle East, where oil revenues
have been cut in half. Moreover,
climate change policies represent
a big spanner in the works of
normal market mechanisms.
Despite price, the demand
outlook for hydrocarbons is
highly uncertain.
Chinas currency devaluations and the

sharp drop in the value of its stock
markets in August sent tremors
through the world economy. Both in a
sense have been overstated. The
devaluation of the yuan was minor for
what might be expected in terms of
normal currency uctuations, and the
size of the Shanghai and Shenzhen
stock markets is small in relation to
the overall size of the Chinese
economy, when compared with the
US or other developed economies.
Nonetheless, they are both a
reection of a lack of market
condence in the Chinese economy.
Having posted above 10% rates of
GDP growth in the preceding
decade, the IMF sees Chinese
economic growth slowing to 6.7%
this year. After an explosive,
sustained and energy-intensive
period of expansion between
2002-2011, the Chinese juggernaut is
decelerating. The IMF forecasts
average annual GDP growth between
2016-2020 of 6.2%, the slowest rate
in more than two decades.
BROADER SLOWDOWN
One scenario is a controlled
slowdown, in which China rebalances
its economy away from its state-led
export-orientated model and nds a

lower, but more sustainable rate of
growth. Neil Ford, writing in Platts
Energy Economist in November,
noted the recent change in Chinas
electricity consumption:
Comparing the rst half of 2015 with
the same period last year, tertiary
electricity demand increased by
8.1%, residential demand rose 4.8%
and heavy industrial demand fell by
0.9%, suggesting a change in the
balance of the economy is already
taking place.
Another scenario, and one of much
more concern, is that the slowdown
exposes weaknesses, such as the
high level of bad debt, or housing and
stock market bubbles, resulting in a
hard landing. This, at worst, risks a
major regional, if not global, slowdown
and social instability within China,
which is still struggling to
accommodate major shifts in its
social and economic structure
brought about by the ongoing
urbanization of its population.
However, China is also part of a
broader trend in the world economy.
According to IMF and World Bank
forecasts, developed country growth
is picking up, while growth in
HYDROCARBONS ECONOMY
Courtesy: iStock.com
China decarbonizing: heavy industry on the Yangzte river
developing countries is decelerating,

a fundamental shift from the past
decade. In its April World Economic
Outlook, the IMF argued that
potential growth in advanced
economies is likely to increase
slightly from current rates, but
remain below pre-crisis rates in the
medium term In emerging market
economies, potential output growth
is expected to decline further in the
medium term.
Non-OECD oil demand increased by

12.7 million b/d between 2005-2014.
China accounted for about onethird of this. In contrast, OECD oil
demand contracted by 5.0 million
b/d over the same period.
For natural gas, between 2005-2014,

world gas demand rose by 617.8
Bcm. The non-OECD accounted

for 472 Bcm or 76.4%. China alone
accounted for 22.2%. The OECD
saw gas demand grow by 137.2 Bcm
or 23.6%.
Chinese total primary energy
consumption grew by only 2.6% in
2014, the lowest rate in years,
GDP FIGURES FOR REFERENCE ONLY ...

The implications for energy demand
are large.
Non-OECD coal demand grew by

759.5 million tons of oil equivalent
between 2005-2014, according to
BP data. Non-OECD coal demand
rose 894.6 mtoe, while OECD coal
demand fell by 135.1 mtoe. Of total
growth, China accounted for 644.1
mtoe or 85%.
GDP gures are man-made and therefore unreliable, Li Keqiang, then Communist
Party Secretary of Liaoning province, is reported to have said in 2007. Li said economic
growth can be measured relatively accurately by the volume of rail cargo, the amount of
loans disbursed and electricity consumption, giving rise to the Li Keqiang index. Li, who
is now prime minister of China, is reported to have said all other gures, especially GDP
statistics, are for reference only.
Chinas primary energy consumption grew by only 2.6% in 2014, compared with an
average 6.6% between 2004-2014. According to World Economics, Chinas ocial GDP
gure for second-quarter 2015 was 7.0%, but survey evidence from small and mediumscale industries suggest GDP growth at half that level.
compared with an average for the

decade to 2014 of 6.6%. Yet the
increase of 74 million tons of oil
equivalent accounted for 61% of the
0.9% increase in world primary energy
consumption.
Moreover, even if China avoids a hard
landing, the energy intensity of its
growth is declining and the near at
coal consumption gure for 2014
implies it is also decarbonizing. The
shift in growth from the non-OECD to

the OECD implies that world growth
overall will be less energy intensive.
CHINA FACTOR
The causes of Chinas energyintensive period of expansion are
generally held to be industrialization,
growth in the working population,
rising incomes that brought millions
of people into an income bracket
where they could aord more energy
WORLD GDP VS PRIMARY ENERGY CONSUMPTION

(%)
(%)
6
10
5
Non-OECD (right)
0
World (right)
OECD (right)
-5
World GDP market

exchange rates
(left)
-10
-2
1996
1999
2002
2005
2008
2011
2014
Source: World Bank, BP
WORLD GDP VS OIL, GAS AND COAL CONSUMPTION
consuming devices, such as cars,

and urbanization.
Chinas population growth has been
slow for years, with estimates
suggesting barely any between
2009-2013. However, the real problem
is the ratio of old and less
economically active people in
comparison with the working age
population. According to the OECD,
Chinas working age population will
peak in 2020 and decline thereafter,
although the overall population will
continue to increase to 1.6 billion by
2040. The OECD says that the average
age in China by 2025 will be 40, in
comparison with 27 in 1995.
The contribution of industrialization
to increasing energy consumption
and energy intensity is relatively
straightforward. According to a
University of Birmingham study,
Urbanization and Energy Intensity: A
Province-level Study for China,
between 2000 and 2011 Chinas
gross industrial production grew by
an average of 15% a year and, in
2010, industrial energy
consumption was responsible for
71.1% of total consumption.
(%)
(%)
6
10
Gas (right)
0
Coal (right)
Oil (right)
-5
-10
-2
1996
1999
2002
2005
2008
2011
2014
World GDP market

exchange rates
(left)
However, in recent years, reecting

the gradual rebalancing of the Chinese
economy towards services, and as
would be expected given decelerating
growth, the rate of industrial
production growth has also slowed.
China averaged industrial production
growth of 12.8% from 1990-2015, but
the rate of growth has been on a
downward trend since 2011, falling to
about 6% in July this year. The
implication is that Chinas period of
rapid industrialization has to a large
extent run its course.
Urbanization is also thought by many

studies to have been a major factor in
Chinas rapid growth in energy
consumption. The urban population is
still growing at about 3% a year, but
some studies suggest the process
may not have quite as large an
impact on energy consumption as
previously thought and may even
reduce energy intensity.
This is because, although urban
residents use more electrical
appliances and modern transport,
urbanization also concentrates
production and consumption in a
small area, allowing economies of
scale that can improve overall energy
eciency. For example, dense city
populations can result in lower
personal vehicle demand and greater
use of public transport.
The overall implication is that, bar
some kind of major crisis, China will
continue to grow, but it is not on a
course that would, for example, raise
the number of cars per person to the
level of the United States or even
Europe. Nor are the previous
decades rates of industrialization
likely to be repeated. And, as a result,
China will no longer be such a major
contributor to global demand growth
for hydrocarbons.
Slowing growth in China will aect
not just oil but also natural gas and
coal. China is the worlds biggest coal
producer and it had been emerging as
a major importer. Moreover, Chinese
coal imports play a pivotal role in
price formation in seaborne coal
markets. Chinese coal produced in
the north of the country competes for
demand in the south against coal
imported by ship from major coal-
exporting countries like Indonesia

and Australia.
Forecasts as recently as late 2014 saw
Chinese gross seaborne coal imports
power generation. Instead the

country is focusing on a rapid
build-out of wind, solar, hydro and
nuclear generating capacity to meet
electricity demand growth. China
Slowing growth in China will aect

not just oil but also natural gas and
coal China may in fact become a
net coal exporter
doubling from 200 million tons in 2011
to 400 million tons in 2040 as growth
in demand, at an average annual 1.9%,
outstripped growth in domestic
supply of 1.6%.
This forecast now looks unlikely to
be borne out as Beijing has
implemented a number of measures
limiting the growth of coal-red
may in fact become a net coal

exporter at some point.
China has also been a key target market
for LNG imports, but demand has not
been as strong as had been expected.
Moreover, the country has plans for two
major new pipelines from Russia, which,
if built, could cut deeply into expected
demand for imported LNG.
CHINA GDP VS PRIMARY ENERGY CONSUMPTION

(%)
20
China GDP
China PEC
15
10
0
1995
2000
2005
2010
2015
2020
OIL PRODUCERS
Another key source of hydrocarbon
demand growth over the past decade
has been oil producers themselves.
The Middle East saw crude oil demand
grow by an average of 3.9% a year to
8.706 million b/d in the decade to 2014,
compared with average global oil
demand growth of just 0.93%. Similarly
2014. In March, the EIA forecast that

OPECs net oil export revenues,
excluding Iran, would fall by almost
50% in 2015, slumping to $380 billion
from the $730 billion earnt in 2014,
itself down 11% from 2013.
In its October World Economic
Outlook, the IMF adjusted down by 0.2
There are forces militating against

cheap oil being able to recapture
market share in the OECD energy mix
simply on the grounds of price
with natural gas, Middle Eastern
demand grew by 6.0% on average in
2005-2014, compared with average
global demand growth of 2.3%
Middle Eastern oil demand has grown
to such an extent that many analysts
have seen the regions domestic
demand as a threat to the regions
ability to export oil to other parts of
the world. Countries in the Middle East,
such as Kuwait, have even become
LNG importers.
This growth in energy demand is
primarily a function of oil revenues.
The huge increase in oil income as a
result of rising prices from 2003 has
allowed Middle Eastern oil producers
to invest in the power plant capacity to
meet the rapidly rising energy needs
of their populations.
However, these producers are taking a
huge nancial hit as a result of the
decline in oil prices since summer
percentage points its expectations for

world GDP growth this year to 3.1%.
Signicantly, its report was entitled
Adjusting to lower commodity prices.
The report acknowledged the impact
of low commodity prices on
commodity exporting nations, but also
argued that the lower oil demand from
these countries would be oset by
increases in demand from commodity
importing countries.
CLIMATE CHANGE CONSTRAINTS
Although, according to the
International Energy Agency, world oil
demand in 2015 is growing at the
fastest rate in years 1.8 million b/d, a

forecast at the upper end of the range
of forecasts no acceleration in
demand is expected in 2016. In fact, as
a result of the IMFs downgrade to
expected GDP growth in 2016, the IEA
has tempered its forecast and now
expects global oil demand to grow by
1.2 million b/d in 2016.
There has been a low-price-inspired
demand response within the OECD,
particularly evident in US gasoline
sales, but how far this will be
sustained is an open question. OECD
oil demand has been on a downward
trend since 2005, dropping from 50
million b/d then to 45 million b/d in
2014. This trend reects not just the
high oil prices of the period
concerned, but attempts to
decarbonize energy production and
consumption.
Many policies and eciencies
introduced with this aim in mind will
not be reversed, so there are forces
militating against the idea that cheap
oil will be able to recapture market
share within the OECD energy mix
simply on the grounds of price.
Measures to address climate change
represent a major constraint on
growth in hydrocarbon use worldwide,
a constraint that is likely to gather
pace in the wake of the COP21 United
Nations Conference on Climate
Change in Paris.
OIL PRICE FORECASTS

Date
Goldman Sachs
Commerzbank
Jefferies
Bank of America
BMI Research
Citi Research
Sept 11
Sept 11
Sept 11
Aug 28
Aug 17
Aug 14
2015
Brent
53.70
56
54
55.66
57
54
2015
WTI
48.10
51
49
50.13
48
2016
Brent
49.50
62
61
55
55
53
2016
WTI
45
59
56
53
48
2017
Brent
65
73
61
65
2017
WTI
60
68
59
ln Energy Transactions
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MANAGING EDITOR
CARBON MARKETS
CARBON RISK RISING

On the heels of the Paris COP21
summit in December, local,
regional and national carbon
emissions mitigation eorts
are likely to be aligned at the
international level for the rst
time. For business, carbon
risk is set to become an
increasingly important element
in investment decisions,
aecting most obviously those
sectors on the wrong side of
environmental legislation.
By the time Insight hits the

newsstands and inboxes of the
world, heads of state and senior
diplomats from almost 200 countries
should be heading back from the
United Nations COP21 climate summit
in Paris perhaps, as at the last
major summit in Copenhagen,
skulking away under the dark cloud
of failure but more probably it seems,
given the largely positive buildup and
the immense pressure to succeed,
celebrating at the very least some
fairly signicant achievement.
Whether or not the summit has been
deemed a success, it is bound to be a
dening moment of one kind or
another. But in the short term little will
change on the ground because
detailed rules on implementing any
agreement will only emerge some
time after the core agreement.
However, a key outcome is likely to be
an identication of the decit
between the sum of global emissions
reductions listed under national
targets and the reduction needed to
avoid global warming of 2C or more.
If so, Paris will indicate what more
needs to be done.
The UN climate negotiations are not
the only driving force for global climate
action. Rather, they provide a
mechanism to capture, highlight,
formalize and encourage actions that
are already being implemented on the
ground by companies, industry groups,

cities, states, countries and regions.
Paris should have delivered a
transparent global pact to curb
greenhouse gas emissions, with each
countrys action plan available for
international scrutiny, and to include, it
seems, a ve-year assessment period.
This is expected to embolden
government eorts to curb climate
change as part of a global collective
push, while the assessment periods
will allow countries to progressively
increase their ambition on emissions
mitigation targets.
DIPLOMATIC GAP NARROWED
Previous attempts to nd agreement
on a global deal failed for a number of
reasons, chief among them being that
fast-developing economies such as
China and India wanted the
industrialized countries to act rst on
emissions cuts. This was
unacceptable to the West, with rich
countries rightly pointing out that,
under a business-as-usual trajectory,
any emission cuts achieved by the
industrialized countries would be
eclipsed by rising emissions in the
large developing countries, pushing
the atmospheric concentration of CO2
to a level regarded as dangerous.
The gulf between those two
positions was too big to bridge, and
the last major summit in Copenhagen
GLOBAL CLIMATE POLICY
in 2009 failed to deliver a meaningful

global accord. But the situation has
changed signicantly in the
intervening years. Almost all
countries are now on board with the
UN process. The worlds two largest
carbon emitters, China and the US,
have made strong diplomatic eorts
since 2013 to ensure there is
common ground on the way forward.
In addition, renewable energy prices
are falling to a point where they are
close to grid parity with conventional

fossil fuel-powered generation, and
are expected to be weaned o
government subsidy in the long run as
they become competitive with thermal
plant generation.
Moreover, governments are
recognizing that there are benets
in diversifying energy sources while
cutting emissions, and there is
growing recognition that the right
policy signals can spur industrial
innovation, leading to economic

growth and jobs in new clean
energy sectors.
INVESTMENT RISK
The risks associated with climate
change are leading to multiple linked
themes, and the extent to which
these themes impact on industry
relate to regulation just as much as
to whether climate events turn out to
be less or more severe than
scientists forecasts.
OVERVIEW OF EXISTING, EMERGING, AND POTENTIAL REGIONAL, NATIONAL, AND SUBNATIONAL CARBON PRICING
INSTRUMENTS (ETS AND TAX)
M ANI TOBA
B RI T I S H
C O LU M B I A
A LB E RTA
WAS H I N GTO N
OREGON
QUE BE C
ONTAR I O
SWEDEN
I C E L AND
F INL AND
NORWAY
ESTONIA
DENMARK L AT VIA
I R E L AND
P OL AND
UK
UKR AINE
FR ANCE
K AZAK H STAN
SLOV ENI A
R GGI
PORT UGAL
C A LI F O R N I A
JA PA N
TURKEY
CH INA
REP UBLIC
OF KORE A
MEXICO
TH AIL AND
BR AZI L
Rio de Janeiro
Sao Paulo
C HI L E
SOUTH AF RICA
Beijing
Tianjin
ETS implemented or scheduled for implementation

Carbon tax implemented or scheduled for implementation
ETS or carbon tax under consideration
ETS or carbon tax implemented or scheduled
ETS implemented or scheduled, tax under consideration
Carbon tax implemented or scheduled, ETS under consideration
Chongqing Hubei
Saitama
Saitama
NE W ZE AL AND
Kyoto Tokyo
Kyoto
Beijing
Guangdong
Taiwan
Shenzhen
The circles represent subnational jurisdictions. The circles are not representative of the size of the carbon pricing instrument, but show the
subnational regions (large circles) and cities (small circles).
Note: Carbon pricing instruments are considered scheduled for implementation once they have been formally adopted through legislation and have
an official, planned start date.
Source: World Bank Group: State and Trends of Carbon Pricing
In the long term, unabated burning of

fossil fuels is likely to become
increasingly costly and this will have
ramications for companies whose
market capitalization is based on an
assumption that their entire
recoverable reserves of fossil fuels
can be extracted and
commercialized.
Companies making energy from fossil
fuel combustion may nd that
continued growth will be dependent
on some form of carbon capture
The danger for the fossil fuel

companies is that downstream energy
generators wait too long to develop
commercially viable carbon capture,
allowing renewables to take over by
competing on cost. In fact, it may
already be too late to t fossil-fuel
combustion plants with carbon
capture and storage technology at a
cost that is competitive with booming
wind and solar energy.
The risk for investors is that the longer
the private sector fails to deal with
It may already be too late to t fossilfuel combustion plants with carbon

capture and storage technology at a
cost that is competitive with booming
wind and solar energy
technology. Fossil fuels are not in
themselves the problem; greenhouse
gas emissions are. There is no
inherent reason why the two cannot
be separated.
Fossil fuel companies social license to
grow, in the long term, may be linked
to their ability to separate fuels from
their carbon content. That will mean
coming up with a way to trap
emissions at scale. That, in turn, will
alter the economics of traditional
combustion energy and this, coupled
with increasingly prevalent carbon
pricing policies, will create a more level
playing eld for renewables, whose
cost is already falling as technology
improves and production is scaled up.
greenhouse gas emissions, the

greater the probability that
governments need to step in, and that
grass roots organizations take
matters into their own hands, for
example by ling lawsuits seeking
damages from those they hold
accountable and from the scaling up
of fossil fuel divestment campaigns.
The same process applies to big
nanciers. US banking giant Citigroup in
October became just the latest highprole investor to announce its intention
to cut back on nancing for coal mining
projects, citing climate change. The
move follows similar action in May by
Bank of America and Credit Agricole to
move away from coal mining.
RATING CARBON AND CLIMATE RISK

Furthermore, the major ratings
agencies are gearing up to assess the
credit implications of high exposure
to carbon and climate change,
meaning that nancial markets are
increasingly likely to have access to
tools allowing investors to better
assess carbon risk.
In 2014, ratings agency Standard &
Poors part of McGraw-Hill Financial
said climate change is threatening
the sovereign credit rating of nations,
indicating that the credit ratings of 128
countries are at risk. Potential
sovereign and corporate downgrades
by the ratings agencies would make it
more expensive for those aected to
borrow money.
Ratings agencies are there to
provide investors with meaningful
insights into risk. But they also have
their own interests at heart. The big
three ratings agencies came under
heavy re after failing to adequately
assess the risk of nancial
instruments linked to bad debts that
contributed to the 2007-2008
nancial crisis and resulting global
economic slowdown. They do not
want to repeat those failings when
applied to carbon and climate risk.
A report by the Centre for International
Environmental Law in June 2014
warned that credit ratings agencies
are miscalculating climate risks and
that business-as-usual could repeat
the global credit crisis. By not
factoring in climate risk, credit ratings
agencies are assuming a business-asusual approach to fossil fuel
investment, which would result in a
4C or greater warming of the planet,
the report warned.
If ratings agencies fail investors,

individuals, and nancial regulators
again, then credit crisis litigation and
the Dodd-Frank Act expose rating
agencies to potentially signicant legal
risk, the report said.
nancial stability, it may already be too

late, Carney warned.
ACTION AREAS
Eorts to limit greenhouse gas
emissions are happening in multiple
areas, driven by a number of forces.
The UN climate negotiations are only
part of that broader picture, and are
not necessarily the most powerful
driver, although the scale of
participation seen from countries in
the UN process in 2015 suggests the
negotiations are moving from the
sidelines into a more leading position.
Physical risks, such as oods and

storms that damage property or
disrupt trade.
Liability risks, as future climate

impacts cause parties who
have suered losses to seek
compensation from those they hold
responsible.
Transition risks, including the risk

that changes in policy, technology
and physical risks could prompt a
reassessment of the value of a large
range of assets.
Global climate action increased

signicantly in 2015, building
momentum ahead of the Paris
talks. In April 2015, nance
ministers of the G20 group of rich
nations asked the Financial Stability
Board headed by Bank of England
Governor Mark Carney to convene
a dialog to consider the implications
of climate-related issues for the
global nancial sector.
In a speech in London in September,
Carney warned that the global
nancial system faces a direct threat
from climate change, unless the risks
are managed in an orderly fashion.
The challenges currently posed by
climate change pale in signicance
compared with what might come,
Carney said. The far-sighted amongst
you are anticipating broader global
impacts on property, migration and
political stability, as well as food and
water security, he said. Once climate
change becomes a dening issue for
Carney set out three broad areas

where climate change could threaten
nancial stability:
The speed at which such re-pricing

occurs is uncertain and could be
decisive for nancial stability. There
have already been a few high prole
examples of jump-to-distress pricing
because of shifts in environmental
policy or performance, Carney said.
to climate change a move seen as

critical in gaining the support of
developing countries for a global deal.
Carbon markets could help provide
some of that nance, but markets did
not feature prominently in the draft
Paris negotiating text released by the
UN in early October. A failure to make
adequate use of markets, in the
fullness of time, may turn out to be a
missed opportunity. However, the
use of dierent mechanisms,
including credible monitoring,
reporting and verication of
emissions, will help to highlight which
are the most environmentally and
economically eective.
Absent a global deal thus far, cities
have also taken a lead in addressing
climate change. On October 15, the
Covenant of Mayors a movement of
climate friendly cities was set to join
forces with a sister initiative called
Mayors Adapt to commit to taking
climate action. This is signicant
because the program involves more
than 6,000 cities.
CLIMATE FINANCE
Elsewhere, climate commitments
continue to emerge outside of the UN
climate process. The G7 group of richest
countries in June 2015 committed to a
decarbonization of the global economy
this century and supported scientists
recommendations to cut emissions by
40-70% by 2050 from 2010 levels,
recognizing that this challenge can
only be met by a global response.
The initiative is expected to agree CO2

emissions targets for 2030, as well as
adaptation eorts by cities to combat
the unavoidable adverse eects of
climate change. Cities are set to be
home to a larger proportion of the
worlds population in the coming
years, and are also rst in the ring
line for climate change, due to many
cities proximity to the coast, exposing
populations to risks such as more
severe or frequent storm surges.
The G7 countries also rearmed their

strong commitment to providing $100
billion per year by 2020 for poor
countries to curb emissions and adapt
HYDROCARBONS OUTLOOK
As the most emissions-intensive of
the fossil fuels, coal was always at risk
of being rst in line to feel the eects
of environmental regulation. That may

have been clear to those who read
and understood the business
implications of the Intergovernmental
Panel on Climate Changes fourth and
fth assessment reports released in
2007 and 2014.
Coal producers have struggled in
recent years as cheap shale gas
undercut the coal market in the US,
led for bankruptcy as companies

struggled in the face of slowing
demand for coal, against a backdrop
of tough competition from cleaner
natural gas. Coals rich energy content
and reliability give it advantages over
other energy sources, but the rising
cost of its carbon content and
overweight exposure to environmental
legislation are big challenges that are
unlikely to go away.
Carbon markets did not feature

prominently in the draft Paris
negotiating text... A failure to make
adequate use of markets, in the
fullness of time, may turn out to be a
missed opportunity
while environmental legislation

began to factor in coals externality
the environmental cost of CO2
emissions. Coal is expected to
continue struggling, as addressing
climate change is a long-term
challenge and it is reasonable to
assume that the direction of travel is
toward more stringent environmental
regulation as the climate crisis
becomes more serious.
With funding for coal also potentially
seeing a long-term decline, these
factors taken together represent a
high level of risk for coal investors.
This process was highlighted in 2015,
when several major US coal producers
In the medium term, oil and gas may

continue to enjoy relatively favorable
conditions, even in the face of global
eorts to curb greenhouse gas
emissions. Thats because oil is not
only important for energy, but
remains integral to basic
manufacturing, with demand
expected to continue for
petrochemicals such as plastics and
other basic materials that have a
diverse range of applications,
including in a low-carbon economy.
However, a potential switch to
lower-carbon surface transport fuels,
for example from oil-based fuels to
electricity, is a major theme that
investors should consider.
Natural gas also has a strong longterm strategic position for several
reasons. Gas is around half as
emissions-intensive as coal per unit of
energy produced. Gas also has an
operational advantage: gas is a natural
partner for intermittent renewable
energy sources because gas-red
power units can quickly be ramped up
to balance electricity grids on days
when renewable generation is low or
when demand is unusually high.
Moreover, unless the world embraces
nuclear energy, it is hard to see how
the gap left by coal can be lled
without natural gas, at least in the
medium term.
European oil and gas companies
understand this strategic long-term
role for gas and thats partly why a
group of several majors started calling
for a global carbon price in 2015.
TRANSITION TIMING
However, under the COP process, the
future of energy belongs to
renewables, and the debate is really
over the timescale of the transition to
a low-carbon energy system. While the
market share of renewable energy in
the UK and US, for example, is still
small, solar and wind are already
inuencing when fossil fuel-powered
generating units operate in Germany.
Until now, the Achilles heel for
renewables has been intermittency: if
the wind isnt blowing and the sun isnt
shining, plants sit idle. But once the
installation costs have been paid, the
marginal cost of running renewables is
essentially zero because the operator
has no fuel costs to pay.
That means renewables are now the
fuel of choice in some countries,
competing directly with fossil fuel

generation and causing coal and gas
plants to operate progressively fewer
hours. That raises the cost of running
those traditional plants, meaning less
combustion capacity gets built.
Compounding this eect,
commercially viable battery storage,
and other forms of electricity storage,
while still small at this stage, hold
promise in solving the renewable
energy intermittency problem.
OPERATIONAL DECISIONS
A new climate agreement may not
materially alter the economics of fuels
for power generation or demand for
basic materials such as oil, chemicals
and steel, but industry makes
investment decisions based on
existing legal frameworks and
expected changes to them, as
changes can have a profound impact
on the underlying economics.
In the UK, to take just one example,
coal is already facing a strong
headwind due to a domestic tax on
CO2 emissions that is signicantly
higher than the price of carbon
allowances under the EU ETS, of which
the UK is a part. Thats prompting older
coal-red units to be decommissioned.
In countries such as the US and Poland,
where coal is more dominant,
addressing emissions has been more
dicult for political reasons, but the
long-term direction still applies.
A new comprehensive global climate
accord is likely to inuence capital
investment decisions in energy
markets. Indeed, Paris may prove a
decisive turning point in climate action
because eorts at the regional, national
and local level will for the rst time be
aligned within a global framework.
The pace of regulatory change may

also be determined by the physical
impacts of climate change itself an
element over which no-one has any
reasonable degree of control. For
long-term investors, that means
hedging risk by diversifying portfolios
and seeking exposure to industries
that could see growth arising from
more stringent environmental
legislation, helping to balance any
losses associated with increasing
carbon risk.
IF NOT CAPANDTRADE, THEN WHAT?
There is no doubt that the cap-andtrade approach to reducing emissions
is on the rise, with China and others
following the EUs ETS, despite its
limited success. In the US, that eort
has not been matched, given the lack
of cross-party support for carbon
markets at the federal level, although
regional US carbon markets have been
up and running for years.
One possibility that appears to be
gaining traction in the US is the idea
of a nationwide carbon tax, o set
by a reduction in corporation tax.
This could be part of a grand
bargain that would include an
agreement to rein in the power of
the EPA. To some, this may seem
attractive at rst pass, because it
has the potential to get political
backing from both sides of the aisle,
with support from large parts of the
business community.
The downside of such a proposal is
that, as emissions are eventually
reduced, the revenues accruing to
governments from such a tax would
decline, raising pressure on
lawmakers to either hike corporation
tax back to its original level or nd
something else to tax to plug the

resulting budgetary hole. Taking into
account a long-term decline in carbon
tax revenue might therefore have to
be built into the legislation.
PARIS AFTER DARK
Governments are seeing an
increasing need to regulate
greenhouse gas emissions, and a new
global deal will eectively mark a
more coordinated international
approach to the problem, while
allowing countries to act voluntarily
according to their individual
capacities and priorities.
A complete decarbonization of the
global economy this century has
profound implications for
investment in the energy and
emissions-intensive heavy industrial
sectors. The scale of the challenge
should not be underestimated. Many
energy generating plants and
industrial facilities built today might
still be operating in the 2050s. If a
large portion of that infrastructure is
high-carbon, this will raise the risk of
stranded assets and create a
steeper path to climb as time
passes, making the process more
costly and more dicult.
Dealing with climate change is
arguably less about technology than
about politics. As Carney rightly says,
leaving the risks to build up to
unmanageable levels heightens the
future need for sudden knee-jerk
policy reactions or a wholesale
reassessment of the value of assets
that could destabilize the global
nancial system. By contrast, a
managed transition to a low-carbon
economy is environmentally prudent
and economically aordable.
VANDANA HARI
EDITORIAL DIRECTOR
ASIA
LOSING SUPPORT:
ASIAN FUEL SUBSIDY
REFORM STUTTERS
The thorny issue of fuel subsidy
reform across Asia seemed
to be taking some giant steps
forward, but is getting bogged
down again. All parties involved
would benet from the certainty
provided by a decisive move to
liberalization, allowing markets
to function without interference.
Energy eciency, energy
conservation, environmental
protection and the development
of alternatives will follow on
naturally.
The almost heroic march of

governments across Asia unshackling
themselves from costly fuel subsidies
and striding toward domestic market
deregulation as world oil prices
skidded to levels of the subsidized
rates seems to have lost its way in a
few countries a year on, amid murky
policies and politics.
There has been some progress, no
doubt, especially on the removal and
reduction of subsidies on transport
fuels in countries from Indonesia to
India. But the price reforms have failed
to fully tap the momentum oered by
oil not just being 50% cheaper than a
year ago and 60% below its June 2014
peak, but also set on a path of lower
for longer.
Ination, a worrying factor for many of
Asias major emerging economies in
the credit boom following the nancial
crisis and a much-cited reason over
the years for maintaining articial
price caps on sensitive oil products,
also started easing toward the end of
2014, while economic growth has been
mostly on an even keel.
Rarely do markets provide such a

serendipitous conuence of conducive
factors. While one can argue for a
gradual evolution from regulated and
subsidized regimes to liberalization
and market-led pricing when oil prices
are, say, around $100/barrel, or
ination is a major threat, or economic
growth is faltering, the current
conditions are perfect for a mutation.
Liberalization in one fell swoop at this
juncture would not just be easier to
deliver politically and digest
economically, but also easier to
message to the consumers. It would
avoid the pitfalls of recurring protest
rallies, media sensationalism and
capitalization by opposition parties for
political one-upmanship every time a
small step is taken toward the end
goal.
Such a decisive move would also
throw into sharp relief the strategy of
targeted fuel subsidies for the poor,
which has been tried out successfully
in small pockets and merits further
experimentation, but remains out of
mainstream dialog thanks to our
ASIA
preoccupation with the bigger issues

around price regulation.
MAINTAINING MOMENTUM
What we are seeing instead is some
governments starting to rest on their
laurels, having ocially declared the
reduction or removal of selective fuel
subsidies and price controls, with no
clear road-map to complete
liberalization, while others have gone
back on their commitment to
deregulation under the garb of
protecting economic growth.
The Indonesian government, which
under then newly elected President
Joko Widodo instituted some of the
boldest fuel price reforms in late 2014,
has backpedaled on pump price
adjustments, delivering a blow to the
nances of state-owned rener and
marketer Pertamina. The company
said it suered Rupiah 15 trillion ($1.1
billion) in losses over January-August
this year because it was prevented
from adjusting retail product prices on
a monthly basis.
Barely six months after scrapping

government subsidy on 88 RON
gasoline and capping the subsidy on
gasoil at Rupiah 1,000/liter, President
Jokowi - as he is popularly known mid-year succumbed to pressure and
agreed to quarterly or half-yearly
adjustments in fuel prices. Between
January and November this year, the
country moved transport fuel prices
only twice. Meanwhile, regular sized
LPG cylinders, though not ocially
subsidized, continue to bring losses to
Pertamina, thanks to the government
keeping a lid on the price of the
cooking fuel.
Vietnam last November renewed its

commitment to an antiquated oil
price stabilization fund, which the
government seems to view as the
magic wand to shield consumers from
international price uctuations, with
little regard for its unintended
consequences.
The fund, rst launched in 2009 in the
aftermath of the oil price super-spike,
in essence works like a tax on the
consumer when world market prices
are low, which is then used to shave
o the peaks when prices rise. Each
retailer maintains its own fund, a
Liberalization in one fell swoop

at this juncture would not just be
easier to deliver politically and digest
economically, but also easier to
message to the consumers
ASIA
system that has come under criticism

for mismanagement and lack of
transparency. A less obvious impact of
such a system is it robs the economy
of some of the tailwinds provided by
lower oil prices.
Though Vietnam in 2009 gave retailers
the freedom to propose price
adjustments on the basis of the
uctuations in their oil import costs,
they need government approval
before moving and have no say in the
stabilization fund contribution
component of the product price.
China, though ocially free of fuel
subsidies for some years now, also has
strict government control over
domestic price adjustments. Beijing
happily raised taxes on oil products to
cash in on last years price crash, but
its benchmarking system has been
mired in opacity since 2013, when it
regressed to a vague formula tracking
Chinese crude import prices from a
previous system that followed
movements in Brent, Dubai and Cinta
crudes to adjust domestic prices.
In Thailand, the ruling military junta
eliminated massive LPG subsidies in
February by bringing wholesale prices
of the product in line with the world
market, and also consolidating
complex multi-tier pricing. The move is
expected to cut state-owned PTTs
losses on the product, which
amounted to over Baht 10 billion
($279.93 million) in 2014.
The resulting rise in the price of LPG,
commonly used as auto fuel in
Thailand, reduced consumption by
12.2% on year in the third quarter of
2015, with a corresponding 12.3% rise
in gasoline and a 5% rise in gasoil
demand a stark reminder of the
market distortionary impact of
subsidies.
The government still has some way to

go in removing subsidies on natural
gas for vehicles, or NGV, which despite
two modest price hikes this year, at
Baht 13.5/kg is still below the
production cost pegged at Baht 16/kg.
The fuel is priced even lower for public
transportation, at Baht 10/kg. With
NGV prices a political hot button
raising the specter of protest rallies,
the move will test the military
governments resolve to continue oil
price reforms.
Malaysia in December 2014 ocially
scrapped subsidies on 95 RON gasoline
and gasoil, bringing them under what it
calls a managed oat system, wherein
the fuel price is adjusted on a monthly
basis tracking price movements in the
benchmark Singapore products market,
provided global oil prices remain below
$80/barrel.
The government has hedged its bets,
indicating that it might consider
targeted, income-based subsidies if
prices cross $80/b, though no details
have been oered.
INDIA: PROGRESSIVE
AND UNWAVERING
In this landscape, India has emerged
as the most progressive and
unwavering on its price reforms, in

contrast to a somewhat checkered
recent history. The government of
Narendra Modi ended the politically
and economically sensitive gasoil
subsidies in October 2014. Not only are
the countrys dominant reners, who
are also its major retailers, free to
adjust prices based on benchmark
movements in Singapore and the
Persian Gulf, but they are also
transparent on the pricing formula.
Gasoline remains fully deregulated in
the country since 2013.
LPG, the last major remaining product
under subsidies, also looks set for a
gradual move to full market pricing,
given that the government has
successfully introduced a cap of 12
subsidized cylinders a year per family,
with a commitment to gradually
reducing that to zero.
Perhaps even more laudable is a
country notorious for its red tape
managing to successfully design and
implement a system for paying LPG
subsidies directly into the consumers
bank account, thus sharply reducing
the illegal diversion of subsidized
cylinders to commercial use. Also,
more than 2.2 million households had
Governments need to divest the

task of fuel price adjustments to the
business, while themselves keeping
an oversight of the industry. The
formula used to adjust fuel prices
needs to be crystal clear and fully
transparent to the public
ASIA
opted to forgo the LPG subsidy by

August this year, in response to a Give
It Up campaign launched by the
government.
The direct cash transfer of LPG subsidy
made it into the Guinness World
Records as the largest cash benet
program (households) in the world.
The next challenge looming for India is
how to direct LPG subsidies to the
rural poor, where the penetration rate
of the cleaner cooking fuel is
estimated at only about 15%, with the
rest burning kerosene or the
environmentally damaging and
unhealthy biomass.
With gasoline and gasoil now mostly
free from subsidies across Asia, albeit
not fully deregulated, LPG for
household use is now the main
laggard, joined only by kerosene, but
the use of the latter as cooking and
home lighting fuel is fast shrinking, so
its pricing might become moot
anyway.
When it comes to eliminating LPG
subsidies, India and Malaysia could
perhaps study Indonesias playbook.
The Indonesian government
introduced distinctive 3 kg LPG
cylinders sold at a subsidized rate to
the poorer households and microbusinesses in a massive kerosene-toLPG conversion program launched in
2007 across the country. While the
scheme saw its fair share of
controversy and missteps, it
ultimately succeeded in converting
several million households to the
cleaner burning fuel and saving the
government heavier subsidy
payments on kerosene.
Other targeted subsidy schemes,
though deployed on smaller scale,
include the use of smart cards and
ASIAS TOP 12 CONSUMERS REFINED PRODUCT SALES

(million b/d)
China
India
Japan
South Korea
Indonesia
Thailand
Australia
Taiwan
Malaysia
Pakistan
The Philippines
Vietnam
0
10
12
-5
Source: Various official data
ASIAN CURRENCIES SLIDE AGAINST USD (SEP-15 vs SEP-14)

($)
Malaysia (MYR)
Australia (AUD)
Indonesia (IDR)
Thailand (THB)
South Korea (KRW)
Japan (JPY)
Taiwan (TWD)
Vietnam (VND)
India (INR)
Philippines (PHP)
China (CNY)
Pakistan (PNR)
-30
-25
-20
-15
-10
Source: www.xe.com
direct cash transfer to the vulnerable

sections of society when oil prices are
hiked. But those dont necessarily
overcome the challenges of illegal
diversions and smuggling of the
subsidized product outside the
country.
ONLY THE START
Ultimately, the removal of blanket fuel
subsidies is just the start of the reform
process, not the end game.
Governments need to divest the task
of fuel price adjustments to the
business, while themselves keeping
an oversight of the industry. The
formula used to adjust fuel prices
needs to be crystal clear and fully
transparent to the public. A clear
pricing formula, which incorporates
transparently discovered rened
product prices in trading hubs,

enables reners and retailers to do
nancial planning and eectively
hedge their exposure in the derivatives
markets.
Back to the approach of mutation
rather than natural evolution: all
stakeholders - the government,
the oil business, as well as the
consumers - would be best served
by the certainty provided by a single,
decisive move to liberalization instead
of trundling along a tortuous path full
of U-turns and policy ip-ops. Once
markets are allowed to function
without interference, energy
eciency, energy conservation,
environmental protection and the
development of alternatives will
also follow more naturally.
MARGARET
MCQUAILE
SENIOR
CORRESPONDENT
ON SHIFTING SANDS
For OPECs members,
accustomed to oil prices of
more than $100 a barrel, the
world looks a very dierent
place now to how it did just two
years ago how dierent might
it look in another year?
The oil market is an unpredictable

beast. Could anyone have foreseen
two years ago in late 2013, when
Insight last focused on OPEC, that we
were going to see a battle for market
share that would slash the price of
crude by 60%? And could anyone have
predicted that an unholy army now
calling itself Islamic State would
sweep across huge swathes of Syria
and northern Iraq, taking control of oil
elds in both countries and

selling the production to fund
its barbaric efdom?
The answer to both questions is
almost certainly no, even though the
US shale oil boom was already well
established, the civil war in Syria had
already been raging for more than two
years, and Iraq had already started to
descend into all-out sectarian strife.
OPEC
But if Saudi Arabian oil minister Ali

Naimi had any suspicion in December
2013 that oil prices were set for a
major plunge in the middle of the
following year he wasnt letting on.
Demand for oil was great, global
economic growth was improving and
the market was in the best possible
situation, he said.
And, just a few weeks earlier, the
International Energy Agency said
that, while the world oil market was
well supplied, growing demand
pressures and ongoing disruptions in
some OPEC producing countries
could soon reverse a recent spate of
softer oil prices. Those softer
prices referred to by the IEA were
around $108 per barrel for North Sea
benchmark Brent.
Fast forward to OPECs June 2014
meeting and there was still no sense
that a vertiginous price fall was in the
ong. Iraqs oil minister was telling
journalists in Vienna ahead of the
formal meeting that the reopening of
Baghdads main crude export pipeline
to Turkey, out of action since early
March because of persistent
sabotage, was just a week or two
away. A day later, the world woke up
to the bizarre and incredible news
that a ragtag army calling itself
the Islamic State of Iraq and Syria
had taken over Mosul, Iraqs second
city. The pipeline has remained outof
action.
And as far as Saudi oil minister Naimi
was concerned, the oil market was
characterized by stability and
balance in terms of supply and
demand and prices were at a level
suitable for producing and
consuming countries as well as for the
petroleum industry.
The IEA, for its part, warned a week

later that world oil markets were
considerably tighter than a year earlier
currently and the industry and

leave readers to gure things out
for themselves.
The ght for market share is raging

not just between OPEC and non-OPEC
producers but also within OPEC itself
despite the US shale oil boom, with
political risk in North Africa and the
Middle East threatening production
and investment.
All of which goes to show that no one
knows everything.
So, with this in mind, Insight wont
attempt to predict what the world of
oil is going to look like in one years
time let alone two. But it will look at
the key issues driving the market
First, why prices have plunged, and

thats all down to supply, lots of it.
Crude prices in excess of $100/b had
made the development of previously
high-cost reserves, both conventional
and non-conventional, economic. But
it was in the United States where the
impact of the high prices was
producing incredible results. Thanks
to the shale oil boom, the US was
importing less crude and countries like
Nigeria were having to look east rather
than west to sell their oil.
PETROLEUM EXPORTS OF OPEC MEMBERS (IN $ BILLION)

Algeria
Angola
Ecuador
IR Iran
Iraq
Kuwait
Libya
Nigeria
Qatar
Saudi Arabia
UAE
Venezuela
OPEC
2010
40.11
49.38
9.69
72.23
51.59
61.75
47.25
67.03
43.37
214.90
74.64
62.32
794.24
2011
52.88
65.63
12.93
114.75
83.01
96.72
18.62
87.84
62.68
309.45
111.61
88.13
1,104.24
2012
49.99
69.954
13.750
101.468
94.103
112.933
60.188
94.642
65.065
329.327
119.986
93.569
1,204.977
2013
44.462
66.652
14.103
61.923
89.402
108.548
44.445
89.314
62.519
314.080
122.973
85.603
1,104.024
2014
40.639
57.609
11.401
53.652
84.303
97.537
14.897
76.925
56.912
285.139
107.853
77.776
964.643
OPEC has not forecast how much its members are likely to earn from petroleum exports this year. However, the US
Energy Information Administration projected in March that OPECs net oil export revenues excluding those of Iran
would fall to $380 billion this year from $824 billion in 2014, and then rebound to $515 billion in 2016.
Where applicable, petroleum product exports are included. Data for some countries may include condensates as
well as other NGLs. Some countries import substantial amounts of crude and products, resulting in lower net revenue from petroleum operations. Iraq excluding border trades.
Source: OPEC
OPEC
The price collapse was already well

under way when OPEC met in late
November 2014 and, persuaded by Saudi
Arabia, opted not to cut production but
to defend its market share against
climbing non-OPEC supply.
But non-OPEC supply growth has

pretty much come to a halt and OPEC
is looking at a rising call on its crude,
although its actual production
continues to outpace these higher
forecasts.
The past year has been a painful one

for producers, both inside and outside
OPEC, and for the oil sector as a whole.
Companies have slashed spending
because of the lower prices, which in
turn raises the potential for future
price spikes.
GEOPOLITICAL DANGERS
A remarkable sidebar to the price
collapse that took Brent from $115
per barrel in mid-June last year to
almost $42 in August this year has
been the fact that the geopolitical
dangers that have threatened supply
for the past few years have

not receded. If anything, they
have worsened.
Libya is still mired in chaos. There are
two rival governments, and oil
production is just a fraction of pre-2011
levels with key elds shut in as quickly
as they resume operation.
Iraq, despite the continuing sectarian
violence and the threat from the
so-called Islamic State, has been
increasing its crude production and
SAUDI ARABIA FACING TROUBLE ON ALL FRONTS

Saudi Arabias oil revenues have halved since last year,
dissatisfaction is apparently brewing in the royal court, and the
war in Yemen seems to have no end. Everywhere it looks, Riyadh
is facing trouble.
In late October, citing a negative swing in the kingdoms scal
balance, ratings agency Standard and Poors downgraded Saudi
Arabias debt rating to A+/A-1 from AA-/A-1+ with a negative
outlook. S&P followed up a week later, downgrading a number of
Saudi banks, citing many of the same issues.
The move by S&P, which like Platts is part of McGraw-Hill
Financial, brought a sharp riposte from the Saudi nance
ministry. In a statement released on state-run news agency SPA,
the ministry described the downgrade as reactionary.
We believe that S&Ps decision was not only rushed, but
analytically inconsistent with the idea of ratings being a mediumterm tool meant to look through the cycle while assessing
creditworthiness, the statement said.
Following Saudi Arabias decision earlier this year to terminate its
rating agreement, S&P issued an unsolicited sovereign rating
using publicly available information to support its analysis. It said
the sheer size of the shift in 2015 to a decit of 16% of GDP from a
decit of 1.5% of GDP in 2014 and a surplus of 7% of GDP in 2013,
combined with a high reliance on hydrocarbon revenues and
inexible current expenditure, pointed to vulnerabilities in Saudi
Arabias public nances.
OPECs top producer and the architect of the oil producer groups
current market share policy, Saudi Arabia has been drawing down
its foreign currency reserves since February, with the Saudi
Arabian Monetary Authority, the central bank, reporting the rst

drop in net foreign assets since 2010.
The kingdoms 2016 budget, due to be published in December, is
likely to be more closely watched than any previous nancial plan.
S&P forecasts that benchmark Brent crude oil prices will average
$63/b in 2015-2018, compared with the current level of around
$49/b. It also expects Saudi government revenues to run at 30% of
GDP during the same period, considerably lower than the 40%
posted in 2014. Hydrocarbons account for 80% of exports, and 40%
of GDP.
Given our view of the governments social and defense spending
priorities and taking into account public statements that the
government will postpone some investment not currently under
way and our expectation that the government will more tightly
control spending on goods and services, we project that general
government decits will decline to 10% of GDP in 2016, 8% of GDP
in 2017, and 5% of GDP in 2018, S&P said.
Some economists disagreed with S&Ps downgrade. John
Sfakianakis, the Middle East director of Ashmore Group, a
London-based investment rm, described the move as
impulsive and unrepresentative of actual economic activity.
Public debt, he told Abu Dhabis The National, was negligible and
oered ample scal support to the kingdom.
Over the next three years, S&P expects Saudi Arabia to nance its
decits by drawing down its scal assets and issuing debt. The
consolidation plan is also likely to include postponing some
capital spending projects, increasing non-oil revenues and
controlling current expenditures, the agency said.
OPEC
exports through projects involving

international oil companies and
improvements to export
infrastructure. But it depends almost
exclusively on the southern terminals
to export oil, an initially promisinglooking export deal with the
Kurdistan Regional Government late
last year to deliver oil on Baghdads
behalf to Ceyhan having sputtered to
a virtual halt.
question mark over the prospects for

Iraqs future output growth. As oil
prices have plunged, Iraq has had to
allocate increasing volumes of crude
oil as payback oil to contractors for
cost recovery and remuneration. Now,
it has told the companies not to take
on any new commitments in 2016
because lower revenues will mean
lower funds available to reimburse
contractors for costs.
And the oil price collapse has brought

a new complication that raises a
The Syrian conict continues, with

Bashar al-Assad still holding out
We also expect that electricity, water, and fuel subsidies could

be reformed, S&P said.
In fact, oil minister Ali al-Naimi told reporters in Riyadh in late
October that the government was now studying energy subsidy
reform. A move towards reforming fuel subsidies would follow the
lead from the UAE, which in August became the rst Gulf Arab
state to deregulate its gasoline and diesel markets.
But it is unlikely to come quickly. Despite studying possible
reforms, Naimi said just a week later, that the kingdom would not
cut fuel and power subsidies unless it was in dire need of doing
so. Fortunately, Saudi Arabia today is not in dire need, he said.
The IMF, which warned in October that Saudi Arabia could deplete
its nancial reserves in less than ve years if oil prices remained
low, estimates that subsidies cost Saudi Arabia $83 billion or
11% of GDP in 2014. With lower global oil prices, this should fall to
about $66 billion this year, the IMF said.
Subsidies have also fueled runaway consumption, including the
use of record-high volumes of crude being burnt in power plants,
the IMF said.
The kingdoms crude burn was 848,000 b/d in July, according to
the Riyadh-based Joint Oil Data Initiative (JODI), but volumes in
the peak summer months can be as high as 900,000 b/d.
UNPREDICTABLE POLICY OUTLOOK

S&Ps downgrade notes also looked at the increasing concern
over the stability of the Al-Saud ruling family. Since King Salman
acceded to the throne in January, the kingdom has faced a raft of
against opposition groups and Islamic

State still holding territory, including
oil elds. Russia, a long-time supporter
of Assad, earlier this year launched
airstrikes that some fear will further
destabilize a region where key powers
including Russia itself are vying for
inuence at a time of great change.
One of these powers is Iran, whose
historic nuclear deal with six world
powers in July has created the potential
for Iranian inuence in the region to
grow, both politically and economically.
unplanned expenses, most notably the military oensive in

Yemen that has been underway since March and seems to have
no end in sight in the short term.
At the same time, two letters reportedly authored by an unnamed
Saudi prince have been circulated calling for the King Salman to
step down and alleging that the current economic, political and
military policies, led by his son, deputy crown prince Mohammad
bin Salman, are leading the country to disaster.
It is unclear how widely held these views are, but the letters are
a reminder of the rivalries at play among the numerous Saudi
princes. The rapid rise to power of the young prince has
naturally caused plenty of disquiet. In our view, reconciling
intra-family issues around succession could make the
kingdoms policy decisions more challenging and dicult to
predict, S&P said.
The troubles also come at a time when many in the country feel
exposed internationally, with doubts about the commitment of
the US to the region as a nuclear deal with Iran inches closer.
- Adal Mirza, Senior Writer, Middle East
SAUDI ECONOMY KEY FIGURES

Indicator (%)
Nominal GDP ($ billion)
Real GDP growth
2014
752
3.5
2015
666
3.2
2016
690
2.5
2017
765
3.0
2018
820
3.0
Current account balance

GDP
10.2
Debt/GDP
0.1
-6.1
3.9
-5.9
8.8
-0.6
16.5
0.3
22.0
Source: S&P
OPEC
Assuming the International Atomic

Energy Agency veries in midDecember that Tehran has complied
with its commitments under the
nuclear deal, sanctions on the Islamic
Republic will be lifted early next year,
allowing Iranian oil to ow freely onto
world markets and international
investment to ow into Iran.
barred to them for several years and

whose oil and gas resources are still
vastly underdeveloped. Since July,
high-level political and trade
delegations from Europe, Asia and
Latin America have been ocking into
Tehran among them companies such
as BP, Shell, Total and Eni to talk about
future business.
The geopolitical dangers that have

threatened supply for the past few
years have not receded. If anything,
they have worsened.
The current sanctions regime has
limited the number of buyers of Iranian
oil to six China, India, Japan, South
Korea, Turkey and Taiwan. In return for
exemption from US nancial sanctions,
these countries have had to reduce
their imports of oil from Iran to an
overall cap of around 1 million b/d.
Iranian oil minister Bijan Zanganeh
says Tehran can supply an additional
1 million b/d of crude within six months
of the removal of sanctions. Analysts
reckon the extra volumes will be
smaller. The IEA, for example,
suggests that the upside potential for
Iranian barrels could be in the region of
600,000 b/d. But this is still a
signicant volume that will add to the
current oversupply which the IEA
believes will persist through 2016.
The nuclear deal has also made Iran
the destination of choice for many of
the big oil companies seeking new
upstream opportunities in a country
STRATEGIC COSTS
And what of Saudi Arabia, OPEC kingpin
and architect of the defense-ofmarket-share policy embraced (albeit
not altogether wholeheartedly) by the
group late last year? On the one hand,
the Saudis may feel they can
congratulate themselves for pushing
and persisting with a strategy that is
undoubtedly having an impact on
non-OPEC supply, which the IEA has
forecast will fall by nearly 500,000 b/d
next year as a result of producers
having slashed spending on both
future projects and existing
production.
But that strategy has come at a price.
In embarking on its defense of market
share, Saudi Arabia had a very
powerful weapon in its armory huge
nancial reserves from which it has
been drawing to fund its spending not
only on maintaining oil production
capacity and other key energy projects
but also on a range of social and
infrastructural projects and on a
military oensive in Yemen that shows

no sign of ending. However, that
nancial cushion is shrinking fast, with
the International Monetary Fund
warning in October that, based on
current trends, the kingdoms reserves
could be depleted in just ve years.
The IMF estimates the scal breakeven
oil price for Saudi Arabia at just under
$106/barrel in 2015 and just under $96/
barrel next year. Current oil prices, with
North Sea benchmark Brent trading
below $50/barrel, are nowhere near
this level.
By the time Insight is published, OPEC
ministers will have met in Vienna to
decide oil output policy for 2016. Saudi
Arabias shrinking coers and the IMFs
stark warning that the kingdom could
be bankrupt in ve years time may
have encouraged some to speculate
that a policy change could be in the
ong. But amid clear signs that the
current strategy is forcing a lot of
non-OPEC barrels o the market as
companies cut investment, it seems
unlikely that Saudi Arabia will be ready
to relax its approach to market share in
the short term and certainly not while
the prospect of additional oil from Iran
looms. The ght for market share is
raging not just between OPEC and
non-OPEC producers but also within
OPEC itself.
Its far too early to predict how this
battle for market share will end,
although, as the nancial news from
Riyadh shows, not even Saudi Arabia
will emerge unscathed. Its also
impossible to predict how the shifting
political sands of the Middle East may
settle.
Whats increasingly clear, though, is
that the geopolitics of the Middle East
is unlikely to remain in the background
for too much longer.
JEFF MOWER
REFINING
EDITORIAL DIRECTOR
US OIL
MAKING HAY: REFINERS

SEE SOME BRIGHT SPOTS
Oil producers took a hit in 2015 as
lower crude prices bit into company
earnings and state budgets. But the
downturn has for the most part been a
blessing for reners, who have
proted from a wide array of lowerpriced feedstocks and a surge in
gasoline demand. Reners face some
downside risk in 2016, however, as
strong margins over the past two
years have led to an abundance of
rened product inventories, especially
diesel.
The last year has seen reners all over
the world gain better access to
lower-priced crudes. The advantage of
US reners has already been welldocumented. As US domestic crude
production has grown, and crude
imports from Canada risen, US reners
have been able to back out higherpriced imports, primarily light sweet
crudes from the North Sea and West
Africa.
This gave US reners a distinct
advantage in 2014. But the advantages
of the North American oil boom shifted
to Europe and Asia in 2015, as the
backed-out US crude imports were
left on the international market,
oering sti competition at lower
prices. This led to some unusual
changes in crude ows, with North Sea

Forties crude heading to South Korea,
Colombian crude shipping to China,
and at one point, Western Canadian
crude making its way to Spain.
That shift in advantage could be seen
in Saudi Arabian crude prices. Saudi
Aramco, which markets Saudi crude,
cut is ocial selling prices for crudes
bound for Asia in order to hold onto
market share in that high growth
region. Asian buyers for years had
complained that they were paying too
high a price for Saudi crudes, relative
to reners in Europe and the US. But
with more crude available on the spot
market, Asian reners could now
demand a lower price.
The crude pride downturn has

been something of a blessing for
reners worldwide as margins
turned much healthier in 2015.
But with a growing rened
product glut particularly of
diesel, previously the great
hope for reners there may be
clouds on the horizon.
As a result, the Arab Light cracking

margin in Singapore jumped to
average $6.91/barrel during the rst
quarter of 2015, up from a negative
$1.41/b in Q1 2014, according to Platts
data. Singapore margins remained in
positive territory throughout 2015,
bolstered by lower crude prices.
The surge was also seen in Europe,
where the cracking margin for
Nigerian Brass River averaged $8.70/b
in the third quarter, up from $5.05/b in
Q3 2014.
REFINING
Fortunes were more mixed for reners

in the US, with margins declining for
domestic crudes and picking up for
imported crudes. This shifted the ow
of some imported crudes, such as Iraqi
Basrah Light, back to the US Gulf
Coast.
It also cut into the protability of
moving crude by rail. On the US
Atlantic Coast, for instance, by the
fourth quarter it was looking more
advantageous to import crude from
Nigeria or Canada than it was to rail
Bakken crude from North Dakota. US
Atlantic Coast reners were not yet
ramping up imports, but were also
considering not terming up so much
crude by rail.
For instance, PBF said during its Q3
earnings call that the companys
baseline for Bakken in Q4 would not
exceed 25,000 b/d, well below the
companys ooading rail capacity for
light crude of 130,000 b/d at the
182,200 b/d Delaware City renery.
GASOLINE IN THE DRIVERS SEAT
For reners, it is not the outright price
of crude that matters so much, but the
spread between the price of crude and
the price of the rened products
primarily gasoline, diesel and jet
created by the rener.
Even when crude prices were above
$100/b US reners were operating
protably because of relatively higher
rened product prices. In the second
quarter of 2014, for instance, the spot
price for US Gulf Coast Mars sour
crude averaged $100.70/b and the
spot price for Light Louisiana sweet
crude averaged $105.55/b, according
to Platts data. During the same
quarter, the USGC coking margin for
Mars averaged $11.63/b, while the

USGC cracking margin for LLS
averaged $14.30/b.
While refined product prices fell
along with crude in 2015, they were
high enough to keep margins
supported, with refiners pointed to a
surprising increase in US gasoline
demand. According to the US
Federal Highway Administration,
277.3 billion vehicle miles were
traveled in August, up 2.3% from the
prior year.
With US retail gasoline prices
averaging $2.73/gal that month,
down 84 cents/gal from the prior
year, according to the Energy
Information Administration, drivers
were less concerned with racking up
the miles.
Demand was also strong for gasoline
outside of the US, especially in Asia,
where Chinese and Indian demand
was up year-on-year through most of
2015. Gasoline demand growth in
Latin America, notably Mexico, gave
US reners a steady export market.
The US exported 545,000 b/d of

gasoline and gasoline blending
components in August, up 105,000
b/d year-on-year, according to the
EIA.
The US was also importing gasoline,
primarily from European reners, who
saw higher margins as a result.
European reners beneted from
slower-than-expected increases in
worldwide renery capacity and a
relative increase in demand for
gasoline versus diesel.
A lot has been done in the OECD to
close uncompetitive capacity
minus 5 million-6 million b/d in the
last 10 years so it clearly has an
inuence today, Totals rening and
chemicals president, Philippe
Sauquet, said at an Oil and Money
conference in October. Last year we
were forecasting an increase in
rening capacity worldwide of more
than 1 million b/d [but] we had a very
limited increase of capacity this
year only 0.2 million b/d so
much less, clearly, than the
increase of supply.
ARAB LIGHT CRACKING MARGINS

($/b)
15
10
0
US Gulf Coast
Northwest Europe
-5
Jan-14
Jul-14
Source: Platts; Turner, Mason & Co.
Jan-15
Jul-15
Singapore
REFINING
Delays around the world in building

new refinery capacity resulted from a
combination of technical difficulties
and integrated companies reining in
capital expenditure upstream and
downstream, Sauquet said.
VERGE OF COLLAPSE?
If gasoline demand growth does not hold
up in 2016, rening margins could
weaken, especially considering the rise in
diesel inventories and planned renery
expansions focused on diesel production.
Meanwhile, some expect gasoline

demand growth to continue in 2016.
We will continue to see gasoline play
bigger part in absolute demand
growth, said Energy Aspects
Richard Mallinson at a rening
conference in Brussels, although the
pace of growth is likely to slow from
2015.
ULSD was supposed to be the barrel

that reners wanted to make, but these
margins arent getting the uplift, said
Suzanne Minter, manager of energy
analysis at Platts unit Bentek Energy.
US diesel exports are slowing year-onyear, and part of that is the slowing
overall demand. Its Europe feeding
itself so existing reners are protable.
Diesel still accounts for nearly half of

Europes demand for oil products.
But gasoline demand is slowly rising,
bucking years of decline. For years,
this imbalance has plagued the
majority of European refineries which
were built in the 1960s to meet the
then prevailing demand for gasoline.
Jenna Delaney, senior energy analyst

for Bentek, said domestic demand for
distillate products increased by
200,000 b/d in the rst ve months of
both 2013 and 2014, while exports
increased by 100,000 b/d. Compared to
that same period this year, distillate
demand is down 70,000 b/d and
exports have increased only slightly at
about 30,000 b/d.
With Europe traditionally short diesel,

over the past few years reneries in
Europe and Russia prioritized
investments in hydrocrackers to
meet ever rising diesel demand. But
now some of these investments,
especially in Russia where half of the
diesel typically heads to exports,
appear to have been made at the
wrong time.
Growing populations in emerging
markets are opting for gasoline cars,
while in developed countries diesel is
losing the environmental advantage
and cost advantage over gasoline.
The new trend has caught the
market by surprise. Everything on the
supply side has been about increasing
diesel, but we need more gasoline,
Mallinson said.
Everybody thought that diesel was

the barrel that saves the rening
slate but weve grown production

since 2004 by 2.8 million b/d and the
rest of the globe has grown by 2.8
million b/d, Minter said. The world
is just making more and more of
everything. When you have a
chronically sustained oversupplied
market, ultimately prices break. You
cant keep prices up when you
oversaturate a market, and because
diesel is exportable, youre coming
into a globally oversaturated
market.
Ed Morse, head of global commodity
research at Citigroup Global Markets,
pointed to a glut of ULSD in the US
Northeast as indicative of the global
oversupply. This is a world where we
appear to be on the verge of a collapse
of the margin incentive for renery
throughput, which has been a buoyant
factor in the crude oil market and
demand over the past year, Morse
warned.
Whatever direction demand takes in
2016, those looking for guidance on
crude prices would be wise to keep an
eye on rening margins.
USAC COMBINED LOW SULFUR AND ULSD STOCKS

(million barrels)
60
40
20
Current year
0
Nov-14
Jan-15
Mar-15
Prior year
May-15
5-Year low
5-Year high
Jul-15
Sep-15
5-Year average
Nov-15
Source: US Energy Information Administration
NICOLE LEONARD
PLATTS BENTEK
MOOD SWINGS
LOOKING FOR AN UPSIDE
TO OIL PRICES
The US shale oil revolution
has fundamentally tilted the
balance of the global oil market
and helped drive down prices.
The resilience displayed by US
producers so far suggests low
prices could be here to stay.
The last year has been plagued by low

and volatile oil prices and unyielding
production growth out of North
America. The year began with oil prices
sliding to $46.01/barrel on January 12,
shortly after OPECs late-November
decision not to cut supply in order to
stabilize global prices. The exporters
group seemed condent that their own
low-cost supply would pressure the US
producer into submission or at least
that the alternatives were worse.
But one theme has become
increasingly evident the world has
Courtesy: Shutterstock.com
underestimated the US producer.

Production in the US continued to
grow despite the precipitous fall in oil
prices. Coupled with production
growth from countries like Saudi
Arabia, Iraq, and Russia, increased US
supply has helped usher in a period of
extended low prices, and it is far
from over.
MARKET SHARE
The antiquated regulations restricting
the export of US-produced crude has
kept most US-produced crude in North
America, but could not stop US
production from dramatically aecting
the global supply and demand balance.
As US producers ramped up
production, growing more than 1
million b/d each year since 2012, US
production displaced over 3 million b/d
of imports into the US renery
complex from outside North America,
nearly 1 million b/d of which originated
in the Middle East.
Though the US barrel was not
physically reaching foreign ports, it
forced comparable barrels into a
global demand market.
US OIL
Similarly, the US began the decade as

a net importer of rened products.
According to the Energy Information
Administration, the US net imported
635,000 b/d of rened products in
2010. As US reneries ramped up
utilization to absorb growing US
supply, an increasing volume of rened
products were exported. As early as
2011, the US became a net exporter of
rened products, and by 2015 the US
net exported 1.55 million b/d of
product to the globe as US reneries
ran at higher utilization rates and
domestic demand for rened products
stagnated, garnering market share in
the downstream market.
In November 2014, the viability of shale
production growth out of North
America was in question. The world
believed that shale production was the
most expensive and that US producers
could not possibly weather sub-$100/
barrel prices. OPECs drive to maintain
market share was not unfounded, but
it failed to take into the account the
fundamental shift in market dynamics
driven by US oil production growth and
the determination of US producers to
continue to produce.
than when prices started sliding in July

2014. Though the EIA estimates that
production has fallen slightly from its
peak to about 9.3 million b/d as of
August 2015, US supply has still grown
substantially year-over-year, settling
at to production levels at the
beginning of 2015, all while oil prices
were 60% lower than the year previous.
Persistent production growth was, in

part, driven by short-term economics
that shielded the producer from the
full eects of low pricing. With the fall
in oil prices, drilling and completion
service costs deated. Rig operators,
completion crews, sand producers,
and all other secondary markets
servicing the exploration and
US CRUDE IMPORTS BY REGION

(million b/d)
12
Africa/Asia
Canada/Mexico
South America
Middle East/Europe
10
8
6
4
2
0
2010
2011
2012
2013
2014
2015
Source: Platts
AVERAGE WELL COST BY BASIN (2014 VS. 2015Q1)

($ million/well)
10
US RESILIENCE
Innovation and eciencies in drilling
for oil and gas in North America were
apparent long before the price
collapse as North American producers
improved fracturing technology every
year since the shale revolution began.
However, the global market failed to
anticipate the rate at which the US
producer could accelerate those
eciencies in the face of a substantial
price collapse.
The EIA estimates that US oil
production peaked at 9.6 million b/d in
April 2015, nearly 1 million b/d more
2014 Average
2015Q1 Average
8
15%
19%
9%
16%
14%
0
Permian
Williston
*Data sample comprised of 20+ Producers
Source: Platts
Eagle Ford
Marcellus
DJ
US OIL
production industry reduced their

costs, lowering the cost threshold for
drilling and completing new wells and
thereby incentivizing producers to
continue drilling at reduced costs.
Producers also began employing
extensive hedging programs as the
price of oil continued to decline. Few

producers actually realized the low
spot prices that plagued most of 2015.
Some of the US resilience will be
short-lived as service companies have
reached their limits on discounts and
far fewer producers are hedged or
hedged at high prices in 2016.
US HORIZONTAL DRILLING DYNAMICS

2000
(number of wells/rigs)
(Wells per month per rig)
2.0
Horizontal wells drilled (left)

Horizontal rigs (left)
Wells drilled per rig per month (right)
1500
1.5
1000
1.0
500
0.5
0.0
0
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15
*Data sample comprised of 20+ Producers
Source: Platts
INITIAL PRODUCTION (IP) RATES VS DAYS TO DRILL

500
(Number of wells/rigs)
(Days)
35
Initial production (IP) rates (left)

Days to drill
400
30
300
25
200
20
100
15
0
Nov-10
Nov-11
Source: Bentek, Rig Data, DrillingInfo
Nov-12
Nov-13
Nov-14
Producers have, however, simply

gotten better at drilling and
producing. Even though drilling
activity has declined, the rigs still in
operation are far more ecient than
rigs that were decommissioned.
Producers can drill faster and
produce more oil than they could
before due to extensive
improvements in technology and
drilling techniques.
10
Nov-15
The average drill time, or the number

of days to drill a well, has fallen to 17
days in 2015, down from 30 days in
2010, while the average initial
production rate of horizontal wells in
the US has increased from 269 b/d in
2010 to 451 b/d in 2015, and the
downtime for each rig between wells
has declined.
Though some of this improvement in
production rates stems from
economics-driven high-grading, or the
drilling focus on a producers best
acreage, much of the productivity
gains can be attributed to innovation
in drilling and fracturing, such as
nding the optimal proppant volume,
lateral length or frack stages for any
given reservoir.
This innovation has made the North
American producer more nimble and
more responsive to uctuations in
commodity prices. Over the summer
when prices averaged $60/barrel for
about two months, the US producer
began ramping up drilling and
completion activity. The new
phenomenon of intentionally drilledbut-uncompleted wells, in which
producers are awaiting better
economics to bring wells into
production, even further reduces the
time it takes for producers to respond
to price uctuations.
US OIL
Does this make the US the worlds

new swing producer? The US is not
just one producer, but a collection of
over 10,000 producers that will never
operate as a cohesive, decisionmaking unit. Rather than a swing
producer, the US producers ability to
respond to prices quickly fashion the
US producer into a price cap, where
the US producer will take advantage
of price increases and ood the
market with more supply until prices
fall again.
In the years to come, the question is
whether the curtailment of investment
thats currently taking place will cause
future supply to fall out of balance with
demand growth.
DOWNSTREAM OVERSUPPLY
What does the future hold? How will
US producers fare and what role will
North America play in the global crude
market? The US producer has swung
the global oil markets far out of
balance.
In the near term, low oil prices may be
the cure for low prices. Such low
prices are forcing producers
worldwide to reduce their capital
expenditures and delay projects with
long lead times, which should diminish
future supply growth. In the long term,
however, equilibrium and upward
support for oil prices depends upon
incremental demand growth.
growth for fossil fuels, while countries

like Russia and Brazil could see
economic contraction due to the low
commodity price environment and
ination.
Nearly every market factor is pointing
to lower for longer prices. Though
there is little risk that demand growth
will exceed expectations, there is risk
to supply, particularly in North
America, where the US producer
operates under a mountain of debt.
Credit has been readily available and

cheap for the US producer, allowing
the US producer to continue to operate
even though the average producer is
net cash ow negative. Hedges
shielded many of the US producers in
2015, but their retrenchment strategy
could pose a risk to production growth
in the largely unhedged world of 2016.
The upside potential for oil prices lies
in the question can the US maintain
production growth and operate within
cash ow in 2016?
WTI PRICES AND ACTIVE RIG COUNT

($/barrel)
(rigs)
1400
120
WTI (left)
Active rigs (right)
100
1200
80
1000
60
800
40
Jan-14 Mar-14 May-14 Jul-14
Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15
600
Sep-15 Nov-15
Data as of November 6, 2015

Source: Platts Bentek, Platts, RigData
US AND CANADA QUARTERLY FREE CASH FLOW BURN

(billion $)
60
40
20
Global demand for crude is predicated

on continuing GDP growth in emerging
economies, such as China, India,
Russia and Brazil. However, these
emerging economies, particularly
China and India, though still growing,
are doing so at a much slower rate
than in the last decade, shedding
doubt on the projected demand
-20
Unlevered free cash flow

Capital expenditures
Cash flow from ops.
-40
Q3 2010
Q3 2011
Q3 2012
Q3 2013
Q3 2014
Q3 2015
YTD
U.S. E&P companies with market capitalization over $50MM as of 11/2/2015

Source: Capital IQ, Platts Bentek
NICK COLEMAN
SENIOR EDITOR
OIL NEWS
SURVIVAL
OF THE FITTEST
The oil price collapse has
unleashed a battle for survival
within the upstream industry,
with winners and losers already
starting to emerge.
When oil prices collapsed in mid-2014

many in the industry were caught
o-guard, with the belief that the only
way for prices was up having become
widely entrenched. As companies
scrambled to adapt to a new, more
hostile environment, exploration
spending was among the rst things
to be sacriced. Cuts in project
spending have been patchier, holding
up better because companies are
reluctant to abandon sunk costs in
projects already underway.
In new frontiers like east Africa and
Alaska, low prices are a complicating
factor, but not the only obstacle as
companies struggle with political and
infrastructure issues. Looking ahead
to next year and beyond, Irans hopes
for a renaissance in its oil industry
once sanctions are lifted add to the
complexity. On the mergers and
acquisitions front, meanwhile, there
have been conicting signals.
The market has become incredibly
competitive, more so than ever
perhaps. The US shale industry
portrayed as a prime target of Saudi
Arabias policy of maintaining high
production and holding down oil
prices, undercutting high-cost
producers has been paring back
costs hard. But Saudi Arabia is also
disinclined to make space in the

market even for fellow OPEC countries
such as Iraq, let alone Iran. Saudi
production rose for much of 2015, as it
did the previous year, averaging nearly
10.3 million b/d in the third quarter, up
600,000 b/d on the year, although it
declined into the winter, when the
countrys domestic oil needs fall.
OPEC secretary general Abdalla
el-Badri said on November 10 that
OPEC would not countenance less
than a 40% share of the global oil
market. And Saudi Arabias vice
minister of petroleum and mineral
resources, Abdulaziz bin Salman
al-Saud, made no distinction between
OPEC and non-OPEC production when
he commented on the situation
recently, in unapologetic tones.
LONGLASTING SCARS
Previous cycles have shown that the
impact of low oil prices is long lasting,
and that the scars from a sustained
period of low oil prices cant be easily
erased, he said. Beyond 2016 the fall
in non-OPEC supply is likely to
accelerate as the cancellation and
postponement of projects will start
feeding into future supplies and the
impact of previous record investments
on oil output starts to fade.
The US Energy Information
Administration says it expects US tight
UPSTREAM INDUSTRY
oil output to fall by 800,000-900,000

barrels a day up to the third quarter of
next year, from heights of over 4.5
million b/d in the second quarter this
year, but has also voiced concern that
companies may pull back from big
projects.
Its a mistake to think that everything
hinges on shale, the EIAs deputy
administrator, Howard Gruenspecht,
said in November, noting that US tight
oil output of around 4 million b/d was a
fraction of world demand. The
current change in investment is not
aecting production in conventionals
right now. But it will aect production
in conventionals, and at the same
time you have global demand
thats growing 1.3 million-1.4 million
b/d [annually].
Others point not only to the potential
investment shortfall, but to the risk that
job losses will lead to skills shortages.
RESETTING EXPECTATIONS
Some in the industry are more
optimistic however, viewing low oil
prices as a stimulus to eciency and a
reality check for governments. Some of
the more dire warnings of collapse, for
example in the North Sea, have not yet
come to pass the UK industry may
struggle to cope in the high-cost
Shetland area, but US operator Apache
has voiced condence in its North Sea
operations, for example.
The good thing about a price correction
is it resets government expectations
and demands and creates the
opportunity for a more collaborative
approach between governments and
industry, Tony Hayward, chief
executive of Genel Energy and a former
head of BP, said in October.
Meanwhile if the Saudi goal was to
knock out the US shale industry still
an open question some doubt that
story has played out. The Obama

administrations refusal in November to
allow construction of the Keystone XL
pipeline from Canada to the Gulf Coast
was a setback for Canadian oil
producers, but the US is unlikely to give
up on the idea of energy selfsuciency.
Observers note shale drillers record of
adapting to tougher conditions. And the
signals on the ground are mixed.
ConocoPhillips is an example of a
company that has cut deepwater
exploration in favor of shale and the
quicker rewards it brings. Chevron has
voiced similar thoughts about
strengthening its role in shale. Leading
players Continental Resources and
Concho Resources raised their oil
output targets toward the end of 2015,
even as they have cut spending plans.
Elsewhere in the world, the idea voiced
by Hayward of low oil prices spurring
UPSTREAM INDUSTRY
governments to reform has its

diculties. In Kazakhstan a new round
of privatization is promised: the
industry there is burdened by onerous
regulation and remoteness from world
markets, and much of the supply chain
is owned indirectly by the state.
But in Russia the talk is of toughing out
the crisis. State-controlled Rosneft has
suered some loss of prestige its
production is down, it has sought
bail-outs from the state, and
expectations of it making further big
acquisitions are in abeyance. Smaller
producers like Bashneft and Gazprom
Neft by contrast have increased their
production, spearheading increases in
Russias oil output to record levels in
recent months. But there is little sign of
any challenge to Rosneft, which is in
the vanguard of Russias growing
exports to China.
The risks to the industry are not all long
term however. Strikes by oil workers in
Brazil that began in October, stemming
from corruption and cost-cutting,
underline the potential for disruption in
times of stress.
PLAYING CATCH-UP
The major oil companies generally have
insisted they remain focused on
long-term value, arguing that spending
cuts will be mitigated by supply-chain
companies cutting their prices, in turn
helped by a strong dollar, which
restrains wage bills, and by low prices
for raw materials like steel and copper.
Former BP chief economist Christof
Ruhl, now global head of research at
the Abu Dhabi Investment Authority,
summed up this view in October: In the
oil industry cost follows prices,
always, he said. Its a causal
relationship and its something which is
straightforward. What we are seeing

right now is a very rapid decline in
prices, and costs just about to
catch up.
On the other hand, Totals chief
nancial ocer Patrick de la
Chevardiere said in October he hadnt
factor in Totals 21% increase in oil

output in the rst nine months of 2015.
By contrast some smaller companies
have had to immediately cut things
like drilling, hitting their production.
Abu Dhabi investor TAQA saw its oil
output fall 8% in the rst nine months,
Some in the industry are more

optimistic however, viewing low oil
prices as a stimulus to eciency
and a reality check for governments
seen much sign of deation and the
company was focused on self-help
measures related to changing the
cost-culture of the company. Total is
among the most indebted of the
majors, with a gearing ratio of nearly
27% at the end of the third quarter.
The majors have talked a good game.
Shell CEO Ben van Beurden said on
October 29 the company was
becoming more resilient and
competitive and future projects
would break even at $55/b oil prices.
BP CEO Bob Dudley has said his
company will be able to balance its
cash ows by 2017, assuming oil prices
of around $60/b.
The majors have been insulated to
some extent by their downstream
operations, which benet from cheap
crude, and by production sharing
contracts. The latter often entitle
companies to a greater share of
production from projects in developing
countries when prices are low a
to 79,000 b/d, as it slashed spending in

the North Sea.
MAJOR STRUGGLES
But all the majors are struggling to an
extent. Individual metrics are not
necessarily fair. Shell booked $8.2
billion of impairments in its thirdquarter results, relating to Alaskan
exploration, a Canadian oil sands
project and US shale gas assets, and
said it was splitting o its oil sands
and shale operations, more than 18
months after a similar move by BP. But
Shell has made some of the fastest,
deepest spending cuts in the industry
down 24% over the rst nine months
of 2015 and has one of the lowest
debt levels. It also has a plan to boost
its output through its acquisition of
the UKs BG.
Total, though indebted, still reported
relatively robust earnings in the rst
nine months of 2015, thanks partly to
the renewal of its concession in Abu
Dhabi, recent projects in Africa, and a
UPSTREAM INDUSTRY
rening segment that includes a new

joint venture in Saudi Arabia. It has
promised to keep increasing its oil and
gas output, but is slowing the pace of
the increase.
ExxonMobils capital expenditure was
down by 22% in the third quarter year
on year, at $7.7 billion, but it says it will
still increase its overall production to
4.3 million boe/d in 2017, from 4.0
million boe/d last year. CEO Rex
Tillerson says even high-cost oil sands
projects, from which others have
withdrawn, can be viable at the right
size. You have a massive resource,
youre not dealing with a lot of
geologic risk, youre in a very stable
environment in Canada. Its all about
technology improvements, cost
eciencies once those start up you
just continue to work on driving the
cost down and you create your own
margin, in eect, he said in October.
As for Chevron, its capital expenditure
cuts have been modest, at 13% over
the rst nine months compared with a
year earlier, and its debt ratio has
crept up, to nearly 19% at the end of
September. But the company argues it
is at the end of a spending cycle,
largely focused on LNG in Australia,
and will soon be able to ease o on
spending. CEO John Watson has
sounded relatively condent of prices
recovering.
The markets are showing signs of
rebalancing. With a new equilibrium
will come price recovery, which is one
of the levers that will help balance our
cash equation, Watson said on
October 30. While were condent in a
price recovery, the timing of course is
uncertain. Were taking actions that
will allow Chevron to compete
eectively in a low-price environment
while positioning us eectively for

value growth over the longer term.
WINNERS AND LOSERS
One potential llip for the majors is the
expected lifting of international
sanctions that have stopped them
operating in Iran. Companies have
been building relationships in Tehran,
while mindful of the need to avoid
breaching sanctions. Iran aims to add 2
million b/d of new production on the
basis of some 50 projects to be
unveiled, along with its new contract
model, in the coming months.
Companies will be able to hold on to
projects from exploration through to
commercial production a problem in
the past and to start recouping their
costs as soon as production starts, the
contracts architect, Mehdi Hosseini,
has said.
The ipside of Irans expected return is
the downward pressure it may put on
prices. Oil minister Bijan Zanganeh has
promised that Iranian production will
increase by 500,000 b/d as soon as
sanctions are lifted the country
currently produces a little under 3
million b/d.
A battle for market share in Europe has
been intensifying among other
producers, with Iraq a growing
presence. We will not ask for
permission [from OPEC] to increase
our oil production, Iranian oil minister
Bijan Zanganeh said on November 17.
Still unclear is whether the collapse of
value in the industry will unleash a
round of mergers and acquisitions.
Shells purchase of BG for over $60
billion has raised expectations.
Australia has seen a rash of
acquisitions and there have been small
deals elsewhere.
But there are obstacles, especially in

Europe, where governments often
own stakes in large oil companies. BP,
a perennial subject of takeover
rumors, may be o-limits after
discouraging signals from the UK
authorities.
Christof Ruhl, of the Abu Dhabi
Investment Authority, suggests the
whole topic is over-rated. Theres a
lot of fog on the ground. Investors may
not be completely mistaken to wait
and see, he told the Oil and Money
conference in October. Any eventual
deals would not necessarily result in
proven creation of value, he added.
There are several obvious losers from
the oil glut. Nigeria has struggled to
nd new markets for its crude since
US import demand receded.
Exploration and drilling activity there
has fallen sharply. But it continues to
attract interest and new deepwater
projects are expected to go ahead.
The picture is darker for Venezuela, a
lonely voice in OPEC along with
Algeria calling for the group to
engineer higher oil prices. Loss of
skills, combined with social and
economic breakdown are seen by
some as too serious for a recovery any
time soon.
Oil-for-nance deals with China have
provided some relief [for Venezuela],
but the scope to extend these is
limited. The ongoing cash crunch is a
major threat to the outlook for
production, the Paris-based
International Energy Agency has said.
Some commentators speculate that
when Saudi Arabia began its course of
squeezing the competition it was
Venezuela it had in mind all along.
TIM WORLEDGE
EDITOR IN CHIEF
AGRICULTURE
NOTES ON AN
EMISSIONS SCANDAL
The increasing complexity
of calculating GHG savings
for biofuels, and the potential
value that can be extracted in
a system under self-regulation,
may place undue temptation
in producers paths. The last
thing the industry needs now
is a scandal.
Volkswagens forced admission that its

stance on emissions testing had been
less than scrupulous may have dealt a
fatal blow to the German companys
ambition to topple Nissan as the
worlds biggest car maker. While
elements of the unfolding scam veer
from pure comedy to criminal genius,
the scandal joins other similar media
frenzies that swirled around sweat
shop labor in the clothing industry and
horse meat in convenience foods.
All of these throw light on the
challenges facing those working
with increasingly complex and often
far-ung supply chains, combined with
legislative requirements that often
hinge upon self-regulation. For the
modern energy mix, its a crossroads
that biofuels like ethanol and FAME sit
right, smack in the middle of.
The great English man of letters Dr
Johnson made no mention of a road
when he rst observed that Hell is
paved with good intentions, but
somewhere along its life the phrase
acquired the road, shifting the
emphasis away from the nal
destination and on to the journey
itself. The idea that eorts founded
upon the best will in the world may
end badly probably chimes with
producers of biofuels.
Seldom has an initiative set out with

such good intentions touted as an
answer to energy security, hailed as a
solution to global warming and
championed as a viable, dynamic new
industry delivering greater incentive
and investment to the agri-complex. It
found instead a path strewn with cow
pats of sometimes epic proportions. In
a mere decade, the biofuel complex
has stumbled from the food versus
fuel debate, to crude oils $147/barrel
peak, through the collapse of the
nancial sector, to the explosion in
shale oil, the withdrawal of goodwill by
wobbly politicians, and on into the holy
grail of a cellulosic future.
Throughout that time, mandates the
giver of life to biofuels have remained
implacably in place, despite challenges
from Big Oil and the apparent
misgivings of biofuels governmental
allies such as the US Environmental
Protection Agency and some
European nations. The twin pillars that
underpin Europe and North Americas
industry, the Renewable Energy
Directive and the Renewable Fuel
Standard, remain intact, although
progress towards the early lofty aims
has slowed markedly.
At a time when biofuels seemed to be
on their way back up again, shrugging
BIOFUELS
o their inability to compete pricewise with a low energy oil complex,

schemes such as Californias LCFS and
Germanys move towards mapping
and enshrining the literal carbon
savings from biofuels seemed to
breathe new life into the sector.
As Europes biggest renewable fuel
champion, Germany in particular
sought to bring the sector back to its
roots. From the start of 2015, the
country switched the emphasis of
biofuels policy to the core of the
environmental concerns, by weighting
and valuing each biofuel according to

its feedstock and the contribution
it made towards cutting greenhouse
gas emissions.
How ironic then, amidst such
innovation, that one of the bastions of
German industry should be so
completely exposed as a fraud and a
liar. And that California, the state that
has like Germany pioneered more
stringent fuel requirements, should be
at the epicenter of that investigation.
That there were anomalies swirling
around emissions and performance
data published by the car industry was

already known. Many motorists have
struggled to match the performance
data shown on the forecourt sticker. In
large part those discrepancies were
down to wholly tolerated practices
though. Stripping out all non-essential
pieces of kit to lighten the car and
taping up every crack or intake duct
were and remain wholly acceptable
parts of the performance testing
process. VW took it to the next level.
For the rest of the car industry, other
car manufacturers may enjoy a degree
BIOFUELS
of Schadenfreude at VWs expense.

Its been a torrid time of late, and no
doubt they could do with a good laugh.
But, as dark clouds brood over
economic outlooks, car sales gures
are dipping again and for those who
have championed the diesel engine
uncomfortable headlines around
health are seeing buyers switch back
to gasoline.
Even in France, where at its peak up to
75% of new car sales were diesel
engines, Paris has moved to cut them
out of the hubbub that swirls along the
Champs-Elyses, while the national
government has signaled its intention
to remove the preferential taxation
position that diesel has enjoyed at a
retail level and restore parity. Which,
based on other countries experience
of a similar model, should see diesel
fractionally more expensive at the
pumps. What that means for farmers
and hauliers remains to be seen.
ALL HOT AIR
But what has this to do with the biofuel
sector? VWs fortunes are the latest in
the twisting, turning history of biobased road fuels, and while the blow to
diesel cars may cause further
problems to an already fragmented
biodiesel sector, the challenge - and
the parallel - lies not in the landscape,
but in the paperwork.
Behind a relatively straightforward
principle, namely laying out precisely
the greenhouse gas savings a biofuel
consumer can expect to make versus
burning standard fossil fuels, lies a
shifting morass of feedstock types,
competition with food crops, land
usage, emissions released during
production, emissions produced
during farming and harvesting, and
emissions produced during the

various transportation stages.
Fortunately, all of that can be boiled
down to a formula as encapsulated
in the document Annotated Example
of a GHG calculation using the EU
Renewable Energy Directive
methodology, prepared by
consultancy ECOFYS in 2010, and
published on the European
Commissions website. And the
formula runs something like this:
E = Eec + El + Ep + Etd + Eu - Esca Eccs - Eccr - Eee
Which basically amounts to emissions
from cultivation, land, processing,
transportation and use, minus
emissions saved from carbon capture
and cogeneration. The last of these,
cogeneration, is an interesting
phenomenon which is proving hugely
successful in many sugar producing
countries particularly in Central and
South America. For the industry,
biomass is actually generating demand

for sugarcane in its own right, which in
turn is only adding to the current
oversupply of sugar. But I digress.
So, thats a simple formula. However,
the formula masks a number of other
formulas as evidenced in the
documentation provided by one of the
companies that provides the
certication that underpins
compliance requirements, the ISCC,
or International Sustainability and
Carbon Certication. Their document,
GHG Emission Requirements, also
available online, dissects the
individual components that contribute
to the formula above.
The point is, none of this is simple, and
all of it is reliant upon some
assumptions and full compliance all
along the fuel chain. At each step,
those who are involved are required to
incorporate all the GHG information
into the documentation that
accompanies each sale. From there,
The market will decide the value of

a fuels GHG saving, but where there
are nancial pressures, the same
temptations that VW caved into carry
the potential for mischief
ethanol production and cogeneration
of power provide valuable alternatives.
That in turn improves margins but
some in the sugar industry are voicing
concerns that the obligation to
produce power from sugar-based
the recipient adds in any further GHG

information relating to the
transportation and processing before
passing all that documentation into the
next stage of the production process.
The nal producer can then take all
BIOFUELS
that information and collate it into a

GHG saving, expressed as a
percentage. Currently, the requirement
for Europe is to bring a minimum of
35% GHG emissions savings versus
mineral fuel.
IDENTIFYING SAVINGS
And the process is wholly realistic
about the challenge it faces.
Producers face two main options (and
a third which is a combination of the
two main options) in attaining
certication for their emissions
savings. They can either use a set of
pre-dened default values, as
published by the European Unionfunded Biograce project, or they can
set out to calculate the savings
themselves. The former may well be
tempting, but the latter approach as
some producers are discovering
actually permits even greater scope
for GHG savings to be identied.
In short, you can stick with the default
settings and guarantee your savings.
Or you can dig into something that is
more closely tailored to your actual
processes. And you might just attain
even greater savings.
But, as the ISCCs document states, for
individually calculated values, all
relevant inputs throughout the
production process must be
considered. Which, as you can
imagine, is a lot of ground to cover.
Moreover, from a compliance
standpoint, all those inputs have to
come with their documentation,
production reports, delivery notes or
invoices made available. And a critical
part of the calculation the emission
factor either needs to come from an
approved list, or the value needs to be

supported by scientically peerreviewed literature.
But this calculation takes on ever
greater signicance. Currently, GHG
to bring in GHG savings that

consistently top 100%. Thats hugely
signicant for them, since the logical
next step is to hope such savings will
bring additional value to their
product.
GHG QUOTA IN GERMANY

100%
80%
60%
40%
20%
0%
20
40
60
80
100
Ethanol from sugar cane

Ethanol from sugar beet
Ethanol from corn (natural
gas as process fuel in CHP plant)
Ethanol from wheat (natural
gas as process fuel in CHP plant)
Ethanol from wheat
(no process specified)
Biodiesel from palm
(methanol capture)
Biodiesel from palm
(no process specified)
Biodiesel from soybean
Biodiesel from rapeseed
0
Cultivation emissions (g of CO2/MJ)
Processing emissions (g of CO2/MJ)
Transport emissions (g of CO2/MJ)
Default greenhouse gas emissions (top)
Source: Renewable Energy Directive
savings within the European ethanol

market are averaging around the
mid 50% to 60% level versus mineral
gasoline. Thats at least 15% above
the level required by the RED.
However, both the RED and Germanys
own biofuel scheme commit to
ramping up minimum savings
over time.
Alongside that, producers are getting
better at cogeneration, sourcing
feedstocks and using low intensity
solutions like gas-power, so that
some are condent they will be able
Ultimately the market will decide the

value of a fuels GHG saving, but
where there are nancial pressures,
the same temptations that VW caved
into carry the potential for mischief.
Those in the industry are quick to
point to third-party compliance
schemes, external scrutiny and their
own internal checks preventing such
pressures intervening, with traders in
the industry acknowledging that a
VW-style controversy surrounding the
emissions savings of biofuels would
be the last thing the industry needs
right now.
ANDREW MOORE
MANAGING EDITOR
US COAL
COAL BLUES
The Clean Power Plan couldnt
have come at a worse time for a
US coal industry already looking
vulnerable in the face of low
natural gas prices and other
regulatory challenges. While its
too early to say what the impact
of the CPP will be and whether
it will withstand legal challenges
the long-term outlook looks
fairly bleak for coal. Still, it looks
set to remain a major energy
source for the US and the world
for decades to come.
Last July, Minnesota Power said it

would idle and eventually close its
coal-red Taconite Harbor power plant
on the shore of Lake Superior. It
followed up the announcement in
September with an integrated
resource plan led with the state of
Minnesota, noting the closure would
be accompanied by plans to increase
natural gas generation and add
renewable power, all of which would
help the utility to position itself for
compliance with the US
Environmental Protection Agencys
recently released Clean Power Plan.
At 150 MW, the relatively small plant
burned only 684,000 short tons of coal
in 2014, a drop in the sea compared with
the 999.7 million st of coal mined in the

US last year. But it was enough to catch
the attention of Peabody Energy, the
largest US coal producer, which cited
the closure in an August ling with the
US Court of Appeals for the District of
Columbia in support of an emergency
stay petition brought against the EPA by
15 states opposing the CPP.
EPA tries to brush o the Taconite
shutdown as likely part of the
general shift away from coal, but the
unrebutted evidence is that the [CPP]
was a precipitating factor, said the
Peabody ling. Indeed, a sector
already weakened by market forces
and pre-existing environmental
regulations is even more vulnerable
to draconian regulatory measures
like the [CPP].
Vulnerable seems an apt description
for the US coal industry. While its too
early to tell what impact the CPP might
have, it couldnt come at a worse time.
Low natural gas prices have made coal
uneconomical to burn in many parts of
the country, and in markets where
coal can compete, producers are often
pitted against each other.
The outlook could look even gloomier

if utilities begin to view carbon dioxide
as a risk regardless of what happens
with the CPP.
continued on page 42
JEFFREY RYSER
US POWER
SENIOR WRITER
NORTH AMERICAN
POWER
RENEWABLES IN THE PINK

As a percentage of total electricity
generation in the US, wind and solar,
at a combined 6%, hardly seem
formidable. Yet, representing as they
have recently close to 50% of all
newly installed generation, and given
new federal carbon dioxide emission
curtailment plans, wind and solar
electricity generation has moved
deep into the mainstream of the US
power sector.
Numerous states have pushed up the
percentage of renewables they want
to see operating, though it will likely
be a federal government program
that gives them, especially wind, a
major boost.
In regions such as Southern California,

dry, warm weather weakened wind
speeds earlier this year, cutting power
generation from 44 wind farms by
approximately 35% compared to the
same period the year prior. That
decline led some nancial analysts to
raise concerns about the revenue
performance of certain yieldcos.
Growth in utility scale wind

and solar power in the US is
surging, bringing opportunities
and challenges
Solar both rooftop and utility-scale,

and either PV or concentrating is
surging and is seen as ideal for
shaving the peak o of high demand
during hot summer days. The
California Energy Commission said
continued on page 45
Utilities across the country, as well as

many merchant rms, have been busy
reconguring their generation
portfolios, and have even created new
corporate entities called yieldcos
to house their expanding renewable
operations (see box page 47).
Not all, though, is necessarily
bright and rosy with wind and solar
generation. One particularly
confounding development has
been the fall in the volumes of
wind power generation due to
weather conditions some believe
is being caused, or at least made
more severe, by the warming of
the atmosphere.
US COAL
COAL BLUES ... from page 40

Generally speaking, utilities are
obviously looking at the CPP, and you
know, there is some pretty clear
handwriting on the wall here, and
some are starting to take some
action, said one utility ocial who did
not want to be identied.
What seems clear is the US coal
industry faces an uncertain future,
though by no means is it going away.
US COAL PRODUCTION
In 2008, US coal production peaked at
1,172 million st, with roughly 94%
consumed by industry and the electric
power sector, where coal-red
generation made up 48.2% of the US
power market. That same year, prices
reached an all-time high for the
physical coal underlying the two
Central Appalachia futures contracts:
the 12,500 Btu/lb CAPP rail (CSX)
contract, which hit $160.60/st, and the

12,000 Btu/lb CAPP barge contract,
which hit $143.25/st.
Seven years later, its a much dierent
picture. According to the Energy
Information Administration, US coal
production is estimated to total 914
million st in 2015, a 22% drop from the
recent peak, and the lowest annual
total since 1986.
Coal-generation is expected to make
up 35% of the US power market in
2015, with the most share lost to
natural gas, which made up 21.4% of
US generation in 2008 but is expected
to make up 31.6% in 2015.
And prices for the physical coal
underlying two of the three major
coal futures contracts are at multiyear lows. In early October, the CAPP
rail contract fell to $35.40/st, a 78%

drop from its 2008 peak, and the
CAPP barge contract dropped to
$40.75/st, down 72% from its
2008 peak.
All this has happened before the CPP
takes eect in 2022, though it faces
an uncertain future. Already, 26
states and a number of industry
groups have led legal challenges to
the plan.
CLEAN POWER PLAN IMPACT
But the EPAs projections dont
bode well for the coal industry.
According to the agencys
regulatory impact analysis for the
plan, US thermal coal production
could drop to 729 million st by 2025
in its base case review. The gure
could drop as low as 606 million st
under a more stringent scenario.
US COAL
Generally speaking, utilities are obviously looking at the

CPP, and you know, there is some pretty clear handwriting
on the wall here
The [CPP] turned out to be worse
than we thought it would be, said Paul
Bailey, senior vice president for policy
and aairs at the Washington, DCbased American Coalition for Clean
Coal Electricity, a coal industry
lobbying group.
Coal is down a lot, and the EPA likes
to claim thats because of natural gas
prices, and some is due to that, but a
great deal of it from the analysis
weve done is due to EPA
regulations, Bailey said.
In 2008, the net summer capacity of
US coal-red generation totaled
roughly 313 GW, according to the EIA.
As of October, Platts unit Bentek
Energy estimated net summer
capacity for US coal-red generation
at roughly 300 GW, with another 24 GW
of announced retirements by 2025.
Bailey and much of the industry
attribute the recent closures to the
EPAs Mercury and Air Toxics Standards
Rule, which mandated certain
emissions controls be installed by April
2015. Even though the Supreme Court
remanded the rule in June, utilities had
already made the decision to close
roughly 13 GW of coal-red generation
that wasnt economical to retrot.
With the CPP, Bailey believes utilities
could possibly shutter 40-50 GW of
coal-red generation, resulting in the
closure of huge chunk of the US coal
eet compared with 2008.
I think its a little premature to say

how it will really impact the industry,
and whether it will be actually
implemented, said Betsy Monseu, the
CEO of the Washington, DC-based
American Coal Council. We know
there is opposition to it far beyond just
coal; there are utilities concerned,
states concerned and there is going
to be a great deal of pushback.
COAL IS NOT GOING AWAY
Regardless of the outcome, Monseu
rightly points out that coal
generation is not going away. The
surviving plants will likely run at
higher capacity factors, but I dont
believe well resign to a smaller
market, she said.
Were existing in a smaller market
because of regulation in large part,
and changes in energy markets, and
were adapting to that, Monseu said.
Youre seeing lots of restructuring on
the coal side, and with eorts to
improve balance sheets and
restructure as a leaner, more ecient
segment for the future.
Robert Moore, the president and CEO of
Foresight Energy LP, a major producer
of Illinois Basin coal, wrote in response
to emailed questions from Platts that
he believes the US thermal coal market
might drop to 600 to 650 million st
annually if the CPP is implemented.
It is too early to tell what the coming
restructuring of the coal industry will
do to overall production levels in each

region, but it is evident that the CPP
encourages using higher Btu thermal
coal from the Illinois Basin, wrote
Moore. The 8,400 Btu/lb and lower
production in the Powder River Basin
will likely be negatively impacted.
In the base case review of the EPAs
regulatory impact analysis for the CPP,
the agency projects coal production
from the USs Interior region, which
includes the Illinois Basin, would total
250 million st in 2025. In 2014, Interior
production totaled 188.7 million st.
And in the Powder River Basin, the
nations largest coal-producing region,
the EPA forecasts 2025 production to
total 379 million st, down from 430.4
million st in 2014.
Without the CPP, Moore noted that US
coal production will likely remain
robust, referring to the EIAs most
recent long-term projections. In its
2015 Annual Energy Outlook, the EIA
forecast in its base case review that
US coal production would total 1,105
million st in 2025 and 1,118 million st by
2030, though it did not include the CPP
in its modeling.
The EIAs forecast points to the fact
that coal-red generation historically
has been an inexpensive baseload
power source, and will likely remain so
in the future, especially as natural gas
prices are forecast to increase due to
greater industrial and power demand
as well as increasing LNG exports.
US COAL
In 2008, when coal production

peaked, the average price for the
NYMEX Henry Hub natural gas futures
capacity to generate electricity from

coal-red plants, but utilities are
often choosing to generate or
Emissions reduction commitments

must be accompanied by appropriate
technological solutions.
contract was $8.891/MMBtu. As of
October 15, the 2015 contract price
averaged $2.744/MMBtu, and the
average price for the 2020 contract
was $3.224/MMBtu.
In the base case review in its annual
forecast, the EIA put spot natural gas
price at $4.88/MMBtu by 2020, and
$7.85/MMBtu by 2040, in 2013 dollars.
TECHNOLOGY SOLUTIONS NEEDED
Even if states and utilities work to
eliminate carbon emissions, coal
remains integral to the reliability of the
power grid.
Minnesota Power made headlines with
its plan to close Taconite Harbor, but
the utility will still have more than 11
GW of net summer coal-red
generation capacity in its eet by
2020, according to its recent
integrated resource plan.
Even though gas prices are still low,
coal is still very economical in many
places, said Joe Nipper, the senior
vice president of regulatory aairs
and communications for the
Arlington, Virginia-based American
Public Power Association. Its
available to run some are not
running because of gas prices, but its
available so we have lots more
dispatch from other sources, but may

be keeping coal capacity maintained
and up to date, and running those
units some of the time.
There is also the possibility that

commercial-scale carbon capture could
become economically viable, enabling
coal-red power plants to reduce their
carbon emissions. At the moment,
however, carbon capture is generally
conned to areas of the country that
contain oil elds. The captured CO2 is
pumped into existing oil wells to help
increase production, a process known
as enhanced oil recovery (EOR). But the
costs of capturing and transporting the
CO2 are high.
Further down the road, the coal
industry faces a daunting reality.
The last US coal plant entered
CPP IN BRIEF
The Clean Power Plan, issued by the EPA on August 3 and establishing the USs rst
ever national standards to limit greenhouse gas emissions from existing power plants,
requires states to reduce carbon emissions from power plants 32% below 2005 levels
by 2030.
The new rules are intended to mark the beginning of a signicant shift away from coal
as a source of electricity
States must submit nal implementation plans for achieving compliance by 2018 and
start taking action by 2022.
Interim state-level compliance targets or glide paths for 2022 through 2029 are
specied. Targets are established based on carbon emissions per MWh of electricity
generated in 2012 and applying a Best System of Emissions Reduction. The BSER
comprises three building blocks for reducing emissions:
i) Improve heat rates at coal-red steam power plants.
ii) Increase generation from lower-emitting existing natural gas combined cycle
power plants while reducing generation from higher-emitting steam power
plants.
iii) Increase generation from new zero-emitting renewable energy generating
capacity while reducing generation from fossil fuel-red power plants.
The nal rule expands the Clean Energy Incentive Program to oer credits to states
acting quickly to invest in renewable energy and energy eciency.
EPA also issued a rule setting standards for new coal-red power plants. Meeting the
new standard will require the use of technologies such as carbon capture and storage
technology or co-ring with natural gas. It includes a carbon emissions limit of 1,400
lbs per MWh, more lenient than the proposed 1,100 lbs per MWh.
US COAL
service in 2012, and while there are

several coal plants in various stages
of planning, only one is under
construction: Southern Companys
Kemper plant in Mississippi, which
gasies locally-mined lignite to re
an integrated gasication
combined-cycle power plant.
Despite the addition of carbon capture
technology, the plant is likely to serve
more as a warning than a sign of
progress, as its more than $4.7 billion
over its initial $2.2 billion budget.
Furthermore, in 2014 the EPA issued
stringent carbon emissions guidelines
for new power plants that essentially

rule out the construction of any new
coal-red plants, given that coal
would be physically unable to come
under the emissions limits. That
means that by 2040, most of the
plants in the existing US coal-red
eet will have reached the end of their
useful lives of 70-plus years. While
plants can be maintained and their
lives extended, costs go up while
eciencies go down, making it a less
attractive option.
Exports also remain an option, but not
in the current environment. A global
oversupply of coal has pushed down
prices worldwide, and new demand

from Asia is not likely to materialize for
several years.
Looking at this strategically, and for the
longer term, one thing that is very
important is technology, and continuing
to advance [carbon capture] and
support for that at the federal level,
said the American Coal Councils
Monseu. There is a recognition that
coal is going to be a major fuel source for
the US and the world for decades, and if
thats the case, then if there are goals
for emissions reductions, there needs
to be commitment to technological
solutions to making that happen.
RENEWABLES IN THE PINK ... from page 41

recently that distributed PV is
currently reducing peak load in that
state by about 3,000 MW, and
projected 6,800 MW of peak shaving
by 2025.
However, bouts of overcast skies
and particularly heavy rains in
September took their toll on the
daily output of power from some big
new utility-scale solar facilities. In a
recent report, Fitch Ratings warned
that PV panel degradation could
become a serious problem for the
solar industry.
Increasingly, it is beginning to dawn
that the current crop of large-scale
wind and solar facilities, based on
what is, in fact, some very old
technologies, have no operating
track record at the scale at which
they have been built. Big sprawling
wind farms with hundreds of
turbines, and 550-MW solar
facilities with 8 million PV panels
are, to a large degree, still in their

experimental phase.
BY THE NUMBERS
At the end of September 2015, the US
had a total of 1,164,440 MW of installed
electricity generating capacity, by far
the worlds largest country total.
Installed wind generation, at that time,
was 68,830 MW, or 5.9% of the total,
while installed solar generation was
13,180 MW, or 1.13%.
There were other renewables:
biomass totaled 16,600 MW, or 1.43%;
geothermal steam totaled 3,910 MW,
or 0.34%. The US has 100,080 MW of
hydroelectric power, or 8.59% of the
total installed capacity, but hydro is
not generally included in renewable
generation numbers.
In the month of September alone, wind
developers brought online three new
facilities with combined capacity of
448 MW, while six new solar facilities
were commissioned, adding 20 MW of

capacity. This 468 MW of newly
installed wind and solar capacity was
57% of all of the new generating
capacity brought online in September.
The remainder came from the
installation of two new natural gasred peaking units, which had a
combined capacity of 346 MW.
In April and in June, new wind and
solar installations were 100% and
97.1% of all new installations,
respectively.
But it is by comparing the rst nine
months of installations in 2015 to 2014
that a clearer picture of what is
actually happening to US power
generation portfolios emerges.
In the rst nine months of 2015, there
was 7,276 MW of new generating
capacity installed across the country.
Of that, wind amounted to 2,966 MW,
or 40%, while solar installations
US POWER
US
POW
OWER
ER
Courtesy: US Dept of Energy
totaled 1,137 MW, or 15.6%. There was

2,884 MW of new natural gas-red
generation in the rst nine months of
2015, or 39% of the total.
In 2014, the proportions were
reversed. Natural gas installations
were 54% of a larger installed total
5,808 MW out of 10,597 MW. Wind was
19%, solar 14%.
The big jump in wind installations in
2015 was due largely to the
scheduled expiration of the 2.3 cent/
kWh production tax credit.
Developers rushed to complete their
projects in order to qualify for the
PTC. Once a wind farm qualies for

the PTC they are good for ten years.
Solar is getting a similar boost from a
30% investment tax credit that
developers can claim once their
project is completed. The ITC, as it is
known, is due to step-down to 10%
on January 1, 2017.
Just as interesting as the wind and
solar numbers, though, are the natural
gas-red capacity numbers,
particularly as they relate to existing,
and declining, coal-red capacity
numbers. By the end of September
2015, installed gas capacity was just
shy of 500,000 MW, and was 42.8% of

the total. Coal-red generation, at
310,000 MW, was 26.6% of the total.
In September 2011, gas-red was
41.6% of the total, while coal was
almost 31%. Over the span of four
years from September 2011 to
September 2015, installed gas-red
capacity increased almost 25,000 MW,
while coal-red capacity fell 34,000
MW from 344,000 MW.
WIND AND THE EPAS CARBON PLAN
Out of the roughly 36 billion metric tons
of carbon dioxide emitted each year by
all countries around the globe, the US
The presumption is that to get and to keep these emissions

reductions will require not only further cuts in coal-red
generation and increased use of natural gas, but also
another big jump in wind generation
US POWER
is responsible for approximately 5.4

billion mt of the total.
While more than 50% of the US total
annual emissions come from the
transportation sector, a still hefty
portion comes from the electricity
sector. According to a report
released in May 2015 by the US
Department of Energys Energy
Information Administration, power
sector CO2 emissions declined by
363 million mt between 2005 and
2013, due to a decline in coal-red
generation and the growing use of
natural gas and renewables.
The EIA placed the amount of CO2
emissions by the sector in 2013 at
2.053 billion mt.
Now, the US Environmental
Protection Agency, with its Clean
Power Plan, wants to see the power
sectors emissions down to
approximately 1.74 billion mt in the
year 2020. It then wants to see the
power sectors annual emissions
down and stabilized in a range of
between 1.533 billion to 1.727 billion
mt, reecting a reduction of between
29% and 36% relative to the 2005
emissions level of 2.416 billion mt.
The presumption is that to get and
to keep these reductions will require
not only further cuts in coal-red
generation and increased use of
natural gas, but also another big
jump wind generation. In its analysis
of the CPP, the EIA has said that if
wind capacity increases to 100,000
MW by 2020, this should help
produce a drop in CO2 emissions to
1.814 billion mt.
Assuming that total generation
capacity is likely to increase to
around 1.226 million MW by 2030,
WIND AND SOLAR AS INVESTMENT PLAYS

Over the past four years, a number of companies have placed their renewable assets
into newly created rms called yieldcos, which were designed to attract investors to the
high yields brought by power sales under long-term contracts. Companies loaded their
yieldcos with wind and solar assets, and were anxious to buy more. In the summer of
2015, the stock market slide hit them hard.
One yieldco was particularly active. In June 2015, TerraForm Power, the yieldco aliate
of SunEdison, bought four US wind farms and portions of a Canadian facility that had
combined capacity of 930 MW, from developer Invenergy, for $2.1 billion. At the time of
the sale, Invenergys chief nancial ocer said his company chose to sell approximately
10% of its total generating capacity to TerraForm in order to raise funds to pay for
construction of new renewable facilities.
For example, said CFO Jim Murphy, Invenergy was already looking to build a 300-MW wind
farm in upstate New York near the border with Canada, 60 miles south of Montreal, Quebec.
Explaining the sale, Murphy said that valuations were strong for wind assets that have
long-term contracts with highly rated counterparties, and noted that Invenergy was
nonetheless retaining a 9.9% interest in the assets sold to TerraForm. He said that
Invenergys business model is basically one of building and transferring, where projects are
developed, built and then the majority ownership is eventually transferred, or sold to others.
SunEdison and its yieldco went on a buying and building spree. The parent rm announced it
would build the biggest wind farm in New England, the 185-MW, $400 million Bingham Wind
project in Maine, while TerraForm bought 521 MW of wind capacity in Idaho and Oklahoma
from Atlantic Power for $350 million. It formed a $1 billion construction and operating asset
warehouse investment vehicle with an equity commitment of $300 million by West Street
Infrastructure Partners III, an infrastructure fund managed by Goldman Sachs.
Then SunEdison announced it would pay $2.2 billion for Vivint Solar, a residential solar
installation company in Utah with a portfolio consisting of 523 MW of roof-top solar that
was expected to be installed by the end of 2015. The company had also just broken
ground on the 156-MW Comanche solar facility in Pueblo, Colorado.
In August SunEdison announced two deals with Dominion, the utility in Virginia, whereby the
two would joint venture on two utility-scale solar facilities with combined capacity of 665
MW to be built in Utah. Dominion agreed to put up $820 million as its share of the projects.
All this activity took place just as the stock market started to slide last summer.
SunEdisons stock value fell from $31.17/share on July 16, to $6.66/share on September
29. It closed the month of October at $7.30/share.
The companys yieldco, TerraForm Power, saw its stock value also plunge from a high of
$39.48/share on July 10 to a low on September 29 of $14.16/share. It closed October at
$18.25/share. The yieldcos owned by NextEra Energy, NRG Energy and Pattern Energy
also took a tumble.
Financial analysts argued that the stock value decline would further hurt the yieldcos by
blocking their access to equity markets, which they depend upon for funds to grow.
By late autumn, though, the analysts were warning that a very strong El Nio would not
only bring cooler temperatures but also softer air currents to the US, which would reduce
the power generation of a typical wind farm.
The bottom line, as one analyst wrote in late October, was that slower wind speeds and
the resulting reduced generation will likely lead to lower cash available for distribution
for wind-focused yieldcos.
US POWER
wind capacity of 192,000 MW could

help cut annual CO2 emissions to
1.596 billion mt in that year.
The EIA has said that the use of
natural gas for generation will rise
signicantly relative to baseline at the
start of Clean Power Plan
implementation, and estimates that
there could be as much as 520,000
MW of installed natural gas capacity by
2030, up from todays 497,000 MW. It
has projected 579,000 MW of natural
Texas has the most installed wind

capacity of any state 16,406 MW at
the end of the third quarter 2015. On
October 22, 2015, the Electric
Reliability Council of Texas set a record
by using 12,238 MW of wind generation
to meet 36.8% of its load at one
oclock in the morning.
Texas, however, has comparatively
little installed solar power capacity.
While the Solar Energy Industries
Association places Texas solar
Just as interesting as the wind and

solar numbers, though, are the
natural gas-red capacity numbers,
particularly as they relate to existing,
and declining, coal-red capacity
numbers
gas capacity by 2040, with coal-red
capacity down to 209,000 MW.
But the overall impact of natural gas
on CO2 emissions will fade over
time, the EIA analysts have said, as
renewables and energy eciency
programs increasingly become the
dominant compliance strategies of
the CPP plan.
CHANGING PORTFOLIOS
In the meantime, in such places as
Texas and California, renewables are
already supplying, on good days, as
much as 15% to 25% of their grids
power needs.
capacity in 2015 at 387 MW, ranking

the state tenth in total solar capacity,
only about half the total is available
to meet load.
California, which has just over 6,000
MW of installed wind capacity, also
has some 4,500 MW of solar
generation that is under contract to
utilities to meet load. There is also
approximately 7,000 MW of roof-top
solar in the state.
No region of the country and no
utility is today exempt from
considering how to add wind and
solar capacity to their portfolio.
Two of the countrys largest

coal-red generators, Duke Energy,
which is active in such states as
North and South Carolina, as well
as in Indiana and Ohio, and
Southern Company, the big utility
based in Atlanta, Georgia which
serves large swaths of the
Southeast region, have both been
talking up renewables to an
unprecedented degree.
Duke, which owns wind generation in
Texas, has a plan to spend $500
million building 278 MW of solar
generation in its home states.
Southern, which already owns more
than 400 MW of wind and solar, has
said it is planning 18 new solar,
biomass and wind projects with 1,200
MW of capacity.
Xcel Energy, based in Minneapolis,
Minnesota, has 17,019 MW of
generating capacity, of which
7,409 MW is coal-red and 6,877
MW gas-red with 1,594 MW
coming from its two nuclear units.
Only 327 MW is wind capacity. In
October, however, Xcel said it
wants to cut its carbon emissions
60% by 2030, mainly by building
two natural gas plants and adding
more than 2,000 MW of
renewables and keeping its
nuclear plants open.
Falling renewable prices should ease
the plans cost-eective
implementation, Xcel believes. If the
$23/MWh production tax credit is
factored in, some developers have
been oering utilities wind power at
prices in the mid-$20s/MWh. Those
rates are quite favorable even in a low
gas-price environment.
NADIA RODOVA
RUSSIAN OIL
MANAGING EDITOR
RUSSIA NEWS
SANCTIONS AND TAX

RUSSIAS DILEMMA
The perfect storm of negative
economic and political factors that
descended on Russia last year brought
a slew of gloomy forecasts suggesting
an imminent drop in the countrys oil
production. But while Russias state
budget has been severely hit by the
drop in oil prices from above $100/
barrel in mid-2014 to under $50/b, the
countrys exible taxation regime,
which reduced taxes in line with lower
prices, and the rubles depreciation
have to some extent shielded its
upstream oil industry.
So far Russian oil producers have
been largely able to maintain their
ruble-denominated investments
through a period that has seen
international peers slashing
investment programs and sta. There
is, however, a growing likelihood that
Russia, one of the top three oil
producers in the world, will see its
crude production start to decline
soon, possibly as early as 2016. In
fact, the countrys top two
companies, Rosneft and Lukoil, are on
course for a second consecutive year
of declining output after recording 1%
and 0.5% declines respectively in
January-October 2015.
Low oil prices are playing a

signicant role but the sanctions
imposed by the West over Russias
role in the Ukraine conict, which
have eectively blocked Russia from
global nancial markets, are possibly
having the greater impact. Even
those companies not on the
sanctions list have had diculties
attracting money and are having to
rely on their own cash ows to
nance operations, pay dividends
and meet nancial obligations.
On top of loss of access to Western
credit lines, Asian nancial institutions
seem to be adopting a more cautious
stance when it comes to Russia. And
there is a big question mark over
whether sanctions will be expanded,
bringing further pain.
While the Russian oil sector has

shown remarkable resilience
in the face of low oil prices and
Western sanctions so far, those
negative factors, coupled with
the national economic crisis
and elusive hopes of nancial
help from China, are likely to
present serious challenges to
the industry if they continue
long-term. Early warning signs
are already apparent.
Concurrent with the huge drop in oil

earnings due to lower prices, there has
been a signicant slowdown in the
Russian economy, with many
observers believing the worst is still to
come. This could spell further bad
news for Russias oil producers.
Desperate for funds, Moscow this year
pushed through in the face of erce
RUSSIAN OIL
opposition from companies an

increase in oil taxes that will bolster its
coers by around Rb196 billion (about
$3 billion) for 2016. Given their highly
limited nancial options, oil producers
are bound to have to reduce
investments by a similar amount,
which is likely to have a knock-on
impact on the drilling operations that
are crucial for maintaining production
in Russias mature oil provinces such
as West Siberia.
Russian crude production is balanced
on a knife edge, so that any reductions
to investment into upstream projects
could have an almost immediate
negative impact on production.
A key factor in this is that Russias
recent growth has been sustained
mainly by small- and medium-sized
companies, and their situation is much
more vulnerable than that of the
majors as they dont have the safety
net of wide-scale operations. Nor have
they really seen the benets of the
rubles depreciation, as they mainly
sell on the domestic market rather
than receiving dollar-denominated
earnings from crude exports. They
also enjoy signicantly less, if
anything, in the way of the tax breaks

granted for major and challenging
projects.
The energy ministrys latest forecasts
reect this, with the long-term growth
trend coming to a halt next year. The
countrys crude production has been
growing steadily since 1998, with the
exception of 2008 when there was a
1% fall spurred by the drop in oil prices.
Production in 2015 is set to grow by
1.3% to 532-533 million mt, or around
10.7 million b/d, then stay at in 2016,
followed by a drop of between 100,000
b/d and 200,000 b/d in 2017.
Those forecasts could be revised

down further as fresh changes to the
oil taxation system have not been
ruled out next year if the
macroeconomic situation, as seems
likely, remains tough.
THE TOUGHEST MARKET
Meanwhile, as domestic rening
throughput falls following a huge
modernization program to raise the
eciency of Russias rening sector
and also a signicant drop in
domestic rening margins this year,
crude exports are seen jumping by
7% year on year to 237 million mt (4.8
RUSSIAN TOTAL CRUDE PRODUCTION

(million b/d)
12
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
RUSSIAN OIL
million b/d) in 2015 then attening

next year.
These exports, though, are looking for
homes in what energy minister
Alexander Novak recently described as
the toughest market, with
uncertainties over demand given
Chinas economic slowdown and
signicant fresh export volumes
expected from Iran following its
nuclear agreement adding more
downward pressure to oil markets
already laboring under oversupply
caused by the US shale revolution.
Amid widespread panic over prices,
speculation has persisted that
Russia could strike a production
restraint deal with exporters group
OPEC, with some of the worst-hit
OPEC members calling for
coordinated action with non-OPEC
producers to underpin prices
though notably not the cartels
kingpin, Saudi Arabia, which appears
to be committed to a market share
strategy.
Novak has repeatedly played down
such expectations, arguing that
articial measures to cut production
would not help stabilize prices but
instead give a short-term boost that
would likely lead to further volatility
down the line. In any case, the nature
of Russias oil sector which operates
mainly in challenging climatic
conditions means its big national
companies cant really turn the taps
on and o at will.
There is, then, little choice for Russia
but to follow the Saudi strategy to
defend market share, and the key
battleground is the markets of Asia,
where economic growth has slowed
but is still on the rise. Russias
traditional markets in Europe are also

at risk, however. There are genuine
reasons for Russia to be nervous
about its European backyard as
supplies of alternative sour grades
from the Middle East, notably Iraqi
swing after testing spot cargoes

from the country in November. It is
also interested in Iranian crude to
process at its reneries in Poland, the
Czech Republic and Lithuania, while
keeping deliveries under long-term
Russias recent growth has been

sustained mainly by small- and
medium-sized companies, and their
situation is much more vulnerable
than that of the majors
Kurdistan and Saudi Arabia, are
considered increasingly attractive by
some buyers that have always relied
on Russian Urals blend.
Polands biggest rener PKN Orlen, for
example, has said it hopes to get
cooperation with Saudi Arabia in full
contracts at a minimum with a view to

securing more favorable terms and
conditions. This has raised concerns
over Russian state-owned major
Rosnefts future deliveries to those
countries as its two current threeyear crude supply contracts with PKN
for around 170,000 b/d and another
IMPORTS OF RUSSIAN CRUDE BY KEY ASIAN CONSUMERS (b/d)

China
Japan
South Korea
Thailand
Jan-Sep 2015
813,692
253,469
135,187
43,947
Jan-Sep 2014
626,113
239,083
100,076
62,934
Change %
29.6
6.0
35.1
-30.2
Source: National statistics bodies of the countries
URALS EXPORTS VIA THE DRUZHBA PIPELINE TO EUROPE (mil mt)

Germany
Poland
The Czech Republic
Slovakia
Hungary
Bosnia&Herzegovina
Jan-Sep 2015
418,857
346,363
85,919
118,139
99,344
10,740
Jan-Sep 2014
370,527
357,103
75,180
102,029
112,769
16,110
Change %
13
-3.0
14.3
15.8
-11.9
-33.3
Source: Russian energy ministrys CDU data
RUSSIAN OIL
There are grounds for Russia to be nervous about its

European market as supplies of alternative sour grades
from the Middle East are considered increasingly attractive
by some buyers
one-year contract on additional
supplies of nearly 30,000 b/d all expire
next year.
For now, however, the position of Urals
crude in the European markets
remains solid, with deliveries via the
Druzhba pipeline rising 4.4% year on
year to nearly 1.1 million b/d in the rst
nine months of 2015, and seaborne
shipments via ports in western Russia
rising by 6.9% to 1.9 million b/d.
Likewise, exports of Russian crude to

Asian markets have continued to grow
through the year as national oil
producers look to increase deliveries
to markets where Russian blends can
achieve a healthy premium over sales
in Europe.
Chinas imports of Russian crude grew
by 30% year on year to over 810,000
b/d in the rst nine months of the year
and are set to grow further, including
RUSSIAN CRUDE SEABOUND EXPORTS (million mt)

Jan-Sep 2015
Jan-Sep 2014
Change %
Western direction:
Primorsk
Novorossiisk
Ust-Luga
Others*
Total
885,265
457,897
362,204
185,291
1,890,657
876,405
469,684
289,548
132,423
1,768,060
1
-2.5
25.1
39.9
6.9
Eastern direction:
Kozmino
Others**
Total
602,134
303,134
905,268
496,910
261,517
758,426
21.2
15.9
19.4
*Including Light Siberian and other grades supplies via terminals of Murmansk, Arkhangelsk and Varandei in the
north and Astrakhan and Makhachkala in the south
**Including Sokol and Sakhalin Blend supplies via the terminal of De-Kastri on the Pacific coast and from Sakhalin
Island
RUSSIAN ENERGY MINISTRY CRUDE OUTPUT AND EXPORT FORECASTS

(conservative scenario in parentheses)*
Crude output (million mt)
Crude exports (million mt)
2014
526.8
223.0
2020
525 (516)
252 (239)
2025
525 (505)
266 (257)
2035
525 (476)
276 (242)
*Both the conservative and target forecasts take into account Western sanctions introduced in response to Russias
role in the conflict in Ukraine, which have targeted the banking and energy sectors, and have been expected to
significantly hamper new crude production in Russia in the long term. A drop is likely if oil prices fall to $40/barrel or
lower and stay at this level for a significant period of time, the ministry estimates.
under long-term contracts between

Rosneft and China National Petroleum
Corp. Russia is the second-biggest
crude supplier to China after Saudi
Arabia, while monthly imports of
Russian crude surpassed those from
Saudi Arabia for the second time this
year, hitting a new monthly record
high of 987,100 b/d in September.
Similarly, South Korea increased its
imports of Russian crude by 35% to
135,187 b/d in January-September,
while Japans imports of Russian
crude added 6% on the year to
284,761 b/d in January-August.
LOOKING EAST
The increases exemplify Russias
growing cooperation with Asian
countries as it seeks to diversify its
markets beyond Europe, which
despite deteriorating diplomatic
relations remains the main consumer
of Russian crude and gas. Investors
in Asia are being oered special
price conditions and special
conditions for investments,
according to Rosnefts CEO Igor
Sechin. Despite some high-prole
initiatives and a lot of work behind
the scenes, however, Moscows
pivot to the east has brought only
limited results this year.
A new showcase hosted by Russia in
September to boost cooperation with
the Asian region, the Eastern
Economic Forum in Vladivostok,
attracted huge interest. China, India,
RUSSIAN OIL
South Korea and a number of other

countries sent high-ranking
delegations to the event, which was
attended by Russias President
Vladimir Putin. Interest was so high
the organizers had to ask that
countries reduce the size of their
delegations.
But, although Putin said at the forum
he was condent that despite current
problems, Asian countries will be a
locomotive for development in
Russia, only a few binding
agreements were signed, in sharp
contrast to earlier similar forums held
annually in St Petersburg. In the oil
sector, the only binding agreement
inked covered the purchase of a 15%
stake in Rosnefts Vankor, the biggest
producing oil eld in East Siberia, by
Indias ONGC.
Meanwhile, Russias hopes that China
could pick up the slack from Western
nancial markets for its national
companies have faded through the
year. Novatek, for example, together
with Frances Total and Chinas CNPC,
has yet to nalize long-running talks
on a multi-billion dollar loan for their
Yamal LNG project, the rst cargo
from which is scheduled for 2017.
Chinese banks preliminarily agreed to
provide $12 billion, with Western
banks also expected to take part in
nancing of the $27 billion project.
The deadline for completing the deal,
however, has been repeatedly
pushed back.
Nor have other Russian companies
been particularly successful in
attracting loans in China. Chinas
banks set tough conditions for
nancing, seeking to back loans with
oil deliveries or equipment supplies.
This makes them the most expensive
in the world, according to Vagit

Alekperov, CEO of Russias second
biggest oil producer Lukoil, who said
that his company had never been
successful in talks with Chinese
banks.
facing diculties, including the Power

of Siberia, the gas pipeline to be built
from East Siberia under a contract
between Gazprom and CNPC. The
economic viability of the project was
questioned under oil prices of around
Russias hopes that China would pick

up the slack from Western nancial
markets for national companies have
seemed to fade through the year
Despite Russia and China sharply
intensifying diplomatic relations this
year with the reciprocal state visits by
President Xi Jinping and President
Putin, the economic relationship
between the two countries remains
relatively weak. Turnover between
Moscow and Beijing dropped by
almost a third year on year to around
$50 billion in the rst nine months of
2015, after hitting a record $96 billion
in 2014. In comparison, Chinas
turnover with the EU fell by 8% to
$420.4 billion in January-September,
but rose by 2% with the US to $412.7
billion in the same period.
Some observers believe that China,
like Japan and South Korea, is
adopting a more cautious stance in its
relations with Russia on account of
the Western nancial and sectoral
sanctions. While not ocially joining
them, Beijing is thought to be
prioritizing economic relations with
the US and the EU over those with
Russia.
Even major oil and gas projects already
inked by the two countries have been
$100/b and expected to be feasible

only due to unprecedented tax breaks
granted by the Russian government.
At current prices the project seems
even less realistic.
In the oil sector, deliveries under
existing long-term deals have
remained below expected levels as
Chinas demand growth has slowed
down, and Beijing has delayed the
expansion of its infrastructure to take
additional volumes through an
oshoot from the East Siberia-Pacic
Ocean pipeline (ESPO) by two years,
forcing Rosneft to redirect some
volumes via the Kozmino port and
limiting ESPO cargo deliveries to spot
market.
Despite the current issues, those
landmark oil and gas projects between
Moscow and Beijing are expected to
shape the strengthening of
cooperation between Russia, China
and other Asian countries, including
India and Vietnam, in the longer term
not least because Russias
opportunities in the Western
hemisphere look increasingly sparse.
SIOBHAN HALL
SENIOR EDITOR
EU ENERGY POLICY
BENDING IN THE WIND

With renewables, led by wind,
set to become Europes biggest
power source by the middle of
the next decade, there are a
number of challenges to be met,
not least how to develop the
exibility needed to cope with
more variable generation.
In just 10 years time, wind is forecast

to overtake natural gas as the biggest
single power generation source by
installed capacity in Europe.
Renewables as a whole, including
solar, hydropower and biomass, would
account for more than half of installed
capacity by 2025.
Given Europe is one of the worlds
largest integrated power markets
with half a billion customers, this is
a big event in itself. But it also has
ramications for European oil and
natural gas demand in transport
and heating.
The rise of renewables, with their low
marginal costs that depress wholesale
power prices, could create a new
world of cheap, clean electricity. In this
world, electric cars and heating
become much more attractive, and oil
and natural gas risk also losing market
share in these sectors.
the continental grid, such as Albania

and Ukraine-West. These are the
people that have to build the
infrastructure to carry the electricity,
so they have a strong interest in
guring out where that electricity will
come from.
According to Entso-es scenario, wind
on its own would reach 255 GW of
installed capacity by 2025, which is
22% of the total 1,167 GW forecast and
up 80% on the 142 GW forecast for
2016. Solar is forecast to reach 139 GW
in 2025, 12% of the total and up 60%
on the 88 GW forecast for 2016.
Natural gas, meanwhile, is forecast to
reach 229 GW by 2025, up just 11% on
the 207 GW forecast for 2016.
All Europe has to do is gure out how

to keep the lights on during cloudy,
calm days which might not be cheap.
THE SPEED OF WIND

According to the scenario, installed
wind capacity is forecast to grow
more than seven times as fast as
natural gas, and solar more than
ve times as fast. Total installed
capacity is forecast to grow 14%,
slower than wind or solar, but
faster than natural gas.
The forecast comes from the best

estimate scenario in formal EU
electricity transmission system
operators body Entso-es 2015 edition
of its Scenario Outlook and Adequacy
Forecast, which looks out to 2025. The
outlook covers the 41 Entso-e TSO
members in 34 countries, plus
countries synchronously connected to
Given all this, natural gas is doing

relatively well by maintaining its
20% share of the forecast total
over the 10 years, but by 2025 is
outstripped by wind with 22%. The
big losers are nuclear, hard coal and
lignite, which are all forecast to have
lower installed capacity and to lose
market share.
EUROPEAN ENERGY
Even if the specic gures prove wide

of the mark eventually, the trend is
clear. There will be far more
renewables in the European power
system in 2025 than now. This is no
real surprise given that this is an EU
political goal unless the surprise is in
achieving it.
EU TARGETS
The EU, which has 28 member
countries, has a binding target to
source 20% of its nal energy demand
from renewables by 2020. That
equates to about a 35% renewables
share in electricity, with the rest
coming from heating and transport.
EU leaders have committed to source
at least 27% of nal energy demand
from renewables by 2030, which
equates to a nearly 50% renewables
share of electricity, though this will not
be binding at national level.
Its not clear yet quite how that will
work, as EU national governments
dont have a great track record in
All Europe has to do is gure out

how to keep the lights on during
cloudy, calm days which might
not be cheap
meeting non-binding targets, but the
European Commission, which drafts
EU legislation, is working on draft
proposals for a governance system.
Meanwhile, the more pressing issue is
how to make sure the European grid
can safely integrate large amounts of
the variable generation typical of wind
and solar, which generate based on
the weather rather than demand.
The European Commission is also
working on this, and ran public
consultations over the summer on
both energy market design and
electricity supply security. The results
are to feed into formal legislative
proposals planned by the end of 2016,

as part of the EUs wider energy
union policy.
CROSS-BORDER MARKETS
TO THE RESCUE?
A key question the European
Commission asked in its consultation
was how to develop the exibility
needed to cope with more variable
generation over shorter periods,
higher price volatility and potentially
very high prices that reect scarcity.
For example, on a cloudy, calm day.
It is pinning its hopes on cross-border
markets coming to the rescue dayahead, intraday and balancing, for
EUROPEAN ENERGY
The more pressing issue is how to make sure the European

grid can safely integrate large amounts of the variable
generation typical of wind and solar
example to give the needed
exibility, a clear price and stimulate
products, services and investments
promoting it.
Whats clear is that the EUs 28
national governments are not all
waiting to see what the European
Commissions market design
proposals will be, as they would likely
only apply from 2018 or later given how
long it takes to approve EU legislation.
France and the UK, for example, have
recently developed national capacity
mechanisms to ensure long-term
system stability, while TSOs and
power exchanges have already
developed a European cross-border
day-ahead market and hope to launch
an intraday one in mid-2017.
BIG FIVE DOMINATE EUROPEAN RENEWABLES

The ve biggest renewable power markets in Europe are Germany, Spain, Italy,
France and the UK, accounting for more than 75% of installed capacity in Europe.
As of mid-2015, they had a combined installed capacity of 175 GW 97.5 GW of wind
and 77.6 GW of solar. This capacity generated 20.7 TWh of electricity in September,
up 49% or almost 7 TWh on September last year, data from the monthly Platts
European Renewable Power Tracker shows.
The average load factor for both wind and solar across these ve countries for
September was around 16% with the hourly average output falling to 28.7 GW down
from 36 GW back in June.
WIND, SOLAR OUTPUT IN EUROPES BIG 5, OCTOBER 2015

U N IT ED
KIN G DO M
Platts Renewable Power Tracker monitors monthly

wind and solar power generation across Europes
five biggest markets UK, France, Germany, Italy
and Spain. Together these markets (Big 5) account
for more than three quarters of the EUs total
installed capacity with a combined 178 GW*.
0.4
Combined
output
1.8 TWh
Installed capacity
13.6 GW
G ER MAN Y
1.4
8.2 GW
Installed
wind capacity
99.0 GW
Installed
solar capacity
79.1 GW
Solar output
1.9
The role of the European

Commissions proposals then will
be to get all 28 national governments
talking to each other about market
design, and seeing if they can align
their dierent approaches, taking
account of their dierent national
circumstances. This is particularly
critical for Germany, given its
inuence on its neighbors power
grids and markets.
The future of the EUs internal
electricity market an initiative
started more than 20 years ago
hangs in the balance.
0.5
Installed capacity
Wind
10.0 GW
Solar
6.1 GW
Wind output
Combined
output
5.9 TWh
Combined
output
1.7 TWh
Installed capacity
43.5 GW
4.0
39.4 GW
1.2
FR AN CE
Installed capacity
8.9 GW
0.7
1.4
Combined
output
2.6 TWh
1.2
Big 5 YTD output
18.4 GW
Combined
output
4.6 TWh
3.9
SPA I N
*Installed capacity refers to end-September 2015.

Source: Platts Powervision, TSOs, BNetza, DECC, FEE, ANIE
81.6
Installed capacity
23.0 GW
7.0 GW
Total
224.0 TWh
ITALY
142.5
EUROPEAN ENERGY
INNOVATING IN OFFSHORE WIND

Oshore wind has a lot going for it. Its large-scale, so ts
the utility model. Load factors how much a turbine is
used are better at around 35% than onshore winds 25%.
It largely avoids the political and resource constraints that
dog onshore renewables. Costs are coming down and
technology development in turbines, foundations,
transmission is vibrant and dynamic.
around 20% based on clearing prices in the governments

rst Contract for Dierence auction for renewables this year.
So there is a clear downward trend in costs, largely because
of bigger turbines improving scale economies.
The industry is on the cusp of industrial scale. For it to kick
on and maximize savings the technology needs longerterm clarity on deployment volumes in the major markets
of the UK and Germany.
The downside is that costs are still high and the

technology has a shrinking window of opportunity in which
But oshore wind has to compete for future funds with
to hit and then exceed its own target of 100/MWh (UK)
technologies that will always be cheaper onshore wind,
and 100/MWh (Northwest Europe).
solar and biomass. It also has to compete with emerging
The window is shrinking because subsidies are nite and
technologies such as wave and tidal. And against
development is restricted. Beyond 2020 it is unclear to
conventional power generation technology it is only likely
what degree oshore wind in Europe will garner political
to be competitive with nuclear.
support. To some extent it is this uncertainty that is holding
Still, the Platts Powervision database shows that 11.8 GW
back the sectors strenuous eorts to drive costs down.
of oshore wind projects were either fully approved or in
To date, substantial support for oshore wind in UK,
construction as of October 2015. That includes 5.7 GW in
Danish and German waters has delivered material
the UK, 4 GW in Germany, 1.4 GW in Belgium and 744 MW in
reductions in costs. In Denmark, for example, the
the Netherlands. Germany alone brought online eight
government this year awarded the 400 MW Horns Rev 3
oshore wind farms in the North Sea in 2015, adding some
contract to Vattenfall Vindkraft at a price of 77 ore per
2.5 GW of capacity.
kWh, around 103/MWh or just under 80/MWh. This is
For all the doubts and risks, oshore wind is a remarkable
32% cheaper than its mid-2010 tender for the 400 MW
Anholt oshore wind farm, won by Dong Energy, and about success story. In ten years, substantial capacity has been
14% lower than the pre-award assumption that bids would deployed and the supply chain is poised to roll out more.
And there is another technological breakthrough quite
focus around 90 ore per kWh.
literally on the horizon oating turbines.
Horns Rev 3 is now the cheapest oshore wind park in
Europe. It was a stunning breakthrough on costs, with the Floating wind power technology has global potential,
according to offshore wind expert Johan Sandberg
potential to change nancial and political hearts and
minds. Driving the point home, the Danish Energy Agency from energy advisory, testing and certification authority
DNV GL. Even in Europe only a few areas, such as the
estimated that Danish consumers would save around
south North Sea, are shallow enough for fixed offshore
295 million over the 11- to 12-year support period for the
project when compared to previous oshore wind awards. wind. But markets like France, Spain, Portugal, Norway,
much of Scotland you have to go floating, he said.
Horns Rev 3 could be an outlier though, rather than an
Japan, large parts of Asia and the US would also need
indicator of radical cost reduction available to everyone.
floating turbines.
After all, it had a happily optimal set-up, close to existing
DNV GL is researching internally conceptual ideas for a
projects and the shore.
new oating wind design, without any patents or IP rights,
Even so, research organization ORE Catapults UK oshore
in order to push the technology and market forward,
wind report this year estimated that the levelized cost of
Sandberg said. Weve done it before in the shipping and in
electricity across 20-25 years of UK oshore wind operation the oil and gas industry, and it triggers the market to think
fell by 11% between 2011 and 2014. The cost is now down by in new ways and embrace innovation.
Henry Edwardes-Evans
ANDREAS FRANKE
MANAGING EDITOR
EUROPEAN POWER
ENERGIEWENDING
PATH OF PARADOXES
Germanys energy transition is
throwing up a lot of challenges
as well as some curious,
unintended eects, but the
country seems set on the path
to a green energy future.
One sunny, windy Sunday afternoon

this August, some 80% of domestic
power demand in Germany was met by
renewables yet at the same time
around 17 GW of conventional power
plant kept generating for export. It is
an arresting statistic that shows on
the one hand how far Germanys
energy transition has come already,
but on the other exemplies some of
the contradictions the Energiewende
has thrown up so far.
Europes largest economy is far ahead
of many of its neighbors in
transitioning to a green power future
but still needs considerable further
action to achieve its ambitious
national climate targets for reducing
carbon emissions by 40% from 2008
levels and it has a ne line to tread in
achieving its transition to a green
power future. Whatever it brings, that
path now seems irreversible though.
This year has seen German wholesale
power prices fall to their lowest level
since 2003, yet German households
and industry still pay some of the
highest power bills across the
European Union. With low wholesale
prices and falling demand undermining
conventional business models, utilities

are facing an uncertain future so
much so that the countrys largest
utility E.ON has decided to split itself in
two, spinning o its fossil-fuel
generation business.
Nor are the problems being thrown up
conned to Germany. Exports of
cheap German wind and solar
surpluses have damaged generator
economics in neighboring markets,
and pose technical challenges for
ageing grids.
Most ironically of all, despite the
massive boom in renewables expected to reach a total of nearly
30% of the power generation mix for
2015 - the country still gets most of its
electricity from coal, either domestic
lignite or imported hard coal, and
carbon emissions remain stubbornly
high until at least 2014, the latest
available statistics show.
With global coal prices in freefall
throughout 2015, fuel economics have
almost totally displaced natural gas in
wholesale power generation, with
some of the worlds most modern
CCGT plants among the earliest
GERMANY
casualties of the Energiewende,

although the plant will be needed for
exibility once all of Germanys
nuclear power plants are switched o
from 2023.
Last year, cross-border ows
accounted for almost 20% of
domestic power demand with
Germanys net power surplus rising
to a record 34 TWh and a new record
expected for 2015. The oversupply is
set to extend until the end of the
decade after a nal wave of coal-red
power plants entered service over
the past two years. Far from a coal
renaissance, though, these plants
are mainly legacy projects planned
a decade ago amid a radically
dierent scenario, but delayed
for various reasons.
Almost 10 GW of highly-ecient new
coal plants will be providing baseload
power for decades to come if you
include three additional new coal
plants in the Netherlands.
Conventional plant additions combine
with ever-growing renewables to
extend the current oversupply
scenario until the nuclear exit nally
settled after the Japans Fukushima
disaster in 2011 is completed in the
early 2020s, putting an
unprecedented strain on the whole
system.
Therefore, Germany will need

increased capacity of emergency
reserves especially for the winter
months. The government and the
utilities are also banking on occasional
price spikes to oset the general
weakness in power prices, giving the
right investment signals for the future
of power generation.
BACKBONE OF THE ENERGIEWENDE
Wind energy and solar PV are the
backbone of the Energiewende and
exibility is the new paradigm of the
power sector. Germanys existing
wind and solar portfolio has risen
above 80 GW of installed capacity,
far ahead of any other European
nation. Wind and solar this year will
generate more than 100 TWh of
power, moving ahead of nuclear
output for the rst time.
Slower expansion is expected for the
second half of the decade. The
massive annual costs for the
renewables bonanza, in excess of
Eur20 billion ($21.3 billion), have
already forced the government into
major changes to the way renewables
are subsidized, with Germany set to
move to an auctioning system for
Key to further reforms will be the

question of how to integrate
renewables into the market place.
While no one expects the government
to halt growth in renewables
altogether, it remains to be seen how
internal and regional divisions will
favor certain green technologies
over others.
More than half of Germanys nearly 40
GW of solar plants were added in three
extraordinary boom years between
2010 and 2012 when the cost for solar
equipment plunged while subsidies
remained high. Since then, the
government has cut feed-in-taris
sharply and installations have slowed
to their lowest level since 2007.
However, the PV boom has already
fundamentally altered the daily load
prole outside of winter months,
attening peakload prices and forcing
gas-red power plants out of the
merit order. It is now also impacting
coal and even nuclear plants,
GERMAN RENEWABLES COST EEGUMLAGE

25
With wind and solar already generating

more electricity than nuclear, the real
challenge is not capacity but the
increased exibility needed for the
system. According to the German grid
regulator BNetzA, regional imbalances
are set to increase with most of the
capacity additions located in the
north, while the demand-intensive
south will be more aected by plant
closures and the nuclear phase-out.
large-scale projects from 2017. This

should slow down the expansion of
renewables over coming years to a
more manageable level.
(billion Eur)
(ct KWh)
7
Total cost (left)

EEG-Umlage (right)
20
15
10
0
2010
2011
2012
2013
2014
2015
2016
Source: Platts
GERMANY
especially if there is some wind to

complement solar with combined
wind and solar output already peaking
above 40 GW at times.
The surge in solar additions was
replaced by a boom in wind
installations with Germany adding on
average 13 MW of new wind turbines
every day over the past three years
(2013-2015), more than double the
pace of the previous six years.
Germanys wind portfolio may reach
45 GW before the end of 2015 with the
rst wave of oshore wind farms
nally coming online after bottlenecks
with the onshore grid links eased
earlier this year. Some eight projects
with a combined capacity of 2.4 GW
started this year in the German North
Sea.
The government has cut its oshore
expansion target to a more realistic
6.5 GW by 2020 and 15 GW by 2030,
bringing the ambitious hope that
oshore wind would help plug an 8 GW
gap left by the nuclear phase-out
around 2021/22 closer to reality.
Onshore, the boom was partially
triggered by a grace period ahead of
an annual cap of 2.5 GW for onshore
wind from 2016, but repowering of
existing sites with more powerful
wind turbines is exempt from the
annual cap.
Despite reduced subsidies and a move
to auctioning, wind and solar are on
track to reach 100 GW before the end
of the decade. With that in sight, the
rst major milestone for the
Energiewende, achieving a 35%-40%
share of renewables in the power mix
by 2025, doesnt seem that far o. The
focus for achieving those targets will
now move to the grid expansion.
GRID EXPANSION LAGS

Grid expansion in Germany is lagging
behind the rapid expansion of
renewables creating bottlenecks inside
Germany between an oversupplied
north and major consumption centers
in the south, which at times can
overburden the power grids of
Germanys eastern neighbors through
loop ows. Loop ows occur when a
country does not have enough internal
grid infrastructure to handle new
production, for example from wind, and
so the power is diverted through
neighboring countries grids and then
back into a dierent part of the
producing country.
In September, European regulatory
body ACER at the request the Polish
regulator asked the German and
Austrian grid regulators to set up a
timeline for the introduction of
capacity allocations on the GermanAustrian border by January next year,
which in eect would split the
common bidding zone for Europes
most liquid power market, in order to
reduce the loop ows through the
Polish and Czech grids.
In an eort to speed up the planning
procedures for the grid expansion, the
government wants TSOs to lay new
HVDC cables mainly underground to
increase public acceptance, but this
may add costs of up to Eur8 billion and
further delay the vital SuedLink project
deeper into the mid-2020s. Even

before that, Germanys four TSOs
estimated the cost for the necessary
grid measures over the next 10 years
at around Eur23 billion ($26 billion),
according to the annual grid
development plan. The latest plan to
2024 will boost power transport
capacity along major north-south
connections by up to 12 GW with some
2,750 km of new high-voltage power
cables needed.
The main burden for the renewables
the build-up is borne by consumers
through the EEG-Umlage (green power
surcharge), adding around Eur250 to
the average annual household power
bill. The green levy has more than
doubled since 2010 as renewable
output has increased and wholesale
prices declined.
In 2016 the EEG is set to pay out some
Eur23 billion to eligible operators of
renewable installations. According to
Germanys utility lobby group BDEW, the
average household now pays around
Eur83 for their monthly electricity bill
based on an average household retail
power price of Eur287/MWh after
Denmark the highest in Europe with
fees, taxes and other levies accounting
for more than 50% of this.
However, with lower wholesale prices
nally feeding through to consumer
prices and generally lower electricity
GERMAN INSTALLED RENEWABLE CAPACITY FORECAST (IN GW)

2016
2017
2018
2019
2020
Wind
48.3
51.7
54.8
57.8
60.4
Source: TSO estimates on netztransparenz.de
Solar
39.9
41.6
43.4
45.3
47.2
Total
97.1
102.3
107.2
112.2
116.8
GERMANY
usage due to improved eciency, the

pressure on politicians to act has
eased somewhat with overall power
bills falling in 2015 for the rst time
since 2000.
COAL DAYS NUMBERED
Given the extent of Germanys green
boom it comes as some surprise that
the countrys coal- and lignite-red
power stations are increasing their
dominance in the generation mix.
Taken together, hard coal and lignite
powers share in the German
generation mix was still 44% in 2014,
while gas-red powers share dropped
below 10%, with even the most
modern CCGT plants seriously underutilized but still needed for security
of supply during the winter months.
Output from lignite-red plants has
risen to its highest level since German
reunication in 1990 as relatively low
carbon allowance prices under the EU
Emissions Trading Scheme make it
more protable. The price of EU
carbon allowances would have to rise
to Eur30-40/mt to make coal-to-gas
switching protable, analysts say. This
is unlikely to happen in the next couple
of years despite the EU plans for a
Market Stability Reserve already
boosting the price of carbon
allowances. Currently, EUAs trade
between Eur8/mt and Eur9/mt after
falling close to zero in 2012.
Additional policy measures, like the
governments initial plan for a de-facto
coal tax through its so-called climate
change levy on fossil-fueled power
plants older than 20 years were
shelved amid protests from unions,
operators and politicians in lignitemining regions with the government
opting in the end for a so-called
climate reserve, planning to remove

2.7 GW of the oldest lignite-red plants
from the market. The climate and
capacity reserve laws are currently
under discussion in Berlin.
The next game changer could be the

development of large-scale battery
storage, but that process still seems
far o in Europe with only a handful of
pilot projects to date and the largest
Despite the massive boom in

renewables expected to reach a total
of nearly 30% of the power generation
mix for 2015 the country still gets
most of its electricity from coal
It has become increasingly clear
that something needs to give, at
least temporarily, in what is often
called the trilemma for German
politicians to achieve the goal of a
clean, secure and aordable energy
landscape without nuclear and coal,
which accounted for almost threequarters of its power demand until
very recently.
of these a 10 MW battery in rural

eastern Germany.
Older coal-red power stations are

increasingly become the marginal,
price-setting units, meaning that coal
and carbon prices will remain the
dominant drivers of German forward
power.
Another development may be the

expansion of Germanys electric
vehicle eet. Currently there are less
than 50,000 electric cars on German
roads but the government has a target
of one million electric cars on the road
by 2020. Further subsidies would be
needed to incentivize the uptake of
electric cars and to install the charging
station infrastructure up-front
together with the utilities, but some
utilities would like to position
themselves in this new arena as they
try to develop new business models.
DISRUPTIVE FORCES
The general trend of demand decline
due to increased energy eciency
may help in achieving the targets, but
for utilities this has become the real
game changer with the most
expensive plants falling o the grid
rst, starting a downward spiral for
wholesale power prices, which have
more than halved since 2011.
Research into power demand of

electric cars varies widely, but
according to some experts, one
million electric cars may have an
annual impact of only 6 TWh/year on
demand for electricity, which is
around 1% of Germanys annual power
demand and similar in size to the
annual demand destruction from
energy eciency.
STUART ELLIOT
SENIOR WRITER
GAS AND LNG
MAGHREB MISERY
In a region already beset by
political problems, falling energy
prices and stagnant or falling
output are piling on the pressure
for North Africas energy
producers.
The impact of low oil prices has been

felt in pretty much every oil and gas
producing country across the globe,
with dire warnings for the economies
of nations as diverse as Venezuela,
Equatorial Guinea and Kazakhstan
coming thick and fast. Theres no
getting around the fact that if you are
heavily dependent on oil and gas
revenues, then when the price falls, so
does your income.
But in one region of the world, North
Africa, the changing oil price
environment has come at a time when
other very serious issues are also
taking hold issues that cannot be
easily ignored. Were talking about
terrorism, civil war, popular protest,
tribal unrest and environmental
concerns, among other things, that
are plaguing the oil and gas producers
of the region.
Libya, of course, and to a lesser extent
Algeria and Tunisia, are all suering
from popular opposition of one kind or
another that is exacerbating problems
for their already struggling energy
sectors.
In Libya, the unrest that has blighted
the country for four years since the
death of former strongman Moammar
Qadha continues despite hopes of a
return to political stability.
A peace deal would likely go some way
to helping boost oil production and
exports in the crisis-hit North African

country, but it wont solve all of
Libyas problems not least reaching
an agreement with the tribes in
the southwest of the country that
continue to hold the authorities
to ransom by disrupting oil operations
as they demand more autonomy
and jobs.
A government that unites the two rival
administrations the Islamist-led
regime in Tripoli and the internationally
recognized government based in
Tobruk in the east would be
extremely welcome for the countrys
oil sector. At the very least it would
theoretically see an end to the
standos that have closed the key oil
export terminals of Ras Lanuf and Es
Sider, which remain shut due to
continued standos between troops
loyal to the two sides.
A deal could see Libyan production get
a quick boost from current levels of a
little more than 400,000 b/d to close
to 1 million b/d as output ramps up
from elds that serve the two ports
and which are currently shut in. Of
course that is still some way o the
countrys theoretical capacity of
1.5-1.6 million b/d, and the production
gures to date this year make for
somber reading. 2015 output has
averaged just 400,000 b/d, according
to Platts data, compared with average
output of 460,000 b/d in 2014 and
920,000 b/d in 2013.
NORTH AFRICA
Analysts see any political breakthrough

as probably short-lived. There will be
near-term benets for oil exports, but
they will be vulnerable again to
political dierences in the not too
distant future. There are still
fundamental disputes that have not
been addressed. Theyve just been
overshadowed, Geo Porter of North
Africa Risk Consulting told Platts.
While there is still hope of increased
stability in Libya, there remain other
threats the biggest of which is the
so-called Islamic State militant group,
which seems intent on destroying the
Libyan hydrocarbons sector. Its eorts
so far destroying key equipment at

elds across Libya have been
interpreted as an attempt to deprive
the governments in Tripoli and Tobruk
of hydrocarbons revenue.
exporters to maintain their share amid

tough competition in the market
place, NOC chief Mustafa Sanalla said
in June.
Libya has other problems too. The

majority of its oil has been out of the
market for so long that its traditional
buyers reners in the Mediterranean
have to some extent moved on given
the unreliability of exports from the
North African country in recent years
and found themselves alternatives.
Exports from Iraq are on the rise,

hitting a post-1979 high of more than 3
million b/d this year, while other crudes
can also be used to substitute Libyan
oil, including Azerbaijans Azeri Light,
Kazakhstans CPC Blend and Algerias
Saharan, in addition to light sweet
crude barrels from other regions like
West Africa.
Libya, too, knows it has competition.

Libya understands the desire of other
And if international sanctions against

Iran are lifted at the end of this year as
NORTH AFRICA
expected, up to 1 million b/d of new

Iranian oil could be hitting global
markets in early 2016, eading to further
erosion of Libyas market share.
Libya has become incredibly poor
incredibly quickly. Estimates vary, but
last year it was believed that Libya
was losing around $130 million/day
because of the disruption to its oil
operations. That gure will be lower
now because of the lower oil price, but
clearly the country is suering a
continued major nancial hit.
For sure, Algeria has a lot riding on the

oil price. Earlier this year, Prime
Minister Abdelmalek Sellal said Algeria
was in a state of economic crisis and
would have to defer a number of key
infrastructure projects due to the
falling oil price.
Sellal in late September called for the
state to rationalize public spending
and develop capital markets in
response to a sustained drop in oil
prices. The sharp decline in oil and
gas prices, which could be lasting, has
Tunisia has expressed optimism that

it can develop a major unconventional
gas industry, but it has already faced
the kind of environmental opposition
more commonly associated with
Europe
ALGERIAN WOES
Algeria is also feeling the pain. The
North African countrys overwhelming
dependence on its hydrocarbon
revenues is well known, but with no
sign of an oil price recovery in sight the
country is facing ever-worsening
economic pressure.
The dual impact of low prices and
stagnant production means Algeria is
among the worlds oil producers
most badly hit by the change in
market dynamics: the global oil price
slide has resulted in a 45% drop in
Algerias revenue from oil and gas
exports.
an impact on our countrys [nancial]

resources, Sellal said.
He projected that lower oil prices
would cause Algerias full-year state
revenue to fall by between $33 billion
and $35 billion in 2015 from last years
level. The consequences of such a
decline would include shrinkage of
the national oil-revenue stabilization
fund and increasing government
debt.
Algerias state revenue from oil and
gas exports for the rst seven months
of 2015 fell 42.1% year on year to
$21.56 billion from $38.49 billion,
customs data shows. Oil and gas

account for nearly 94% of total
Algerian exports.
Producing more oil and gas is one way
to compensate for lower prices, and
in May Sellal ordered state-owned
Sonatrach as a matter of urgency
to invest more in oil and gas
developments to raise output.
The continued exploitation and
monetization of hydrocarbons is a
strategic objective. Our potential is not
suciently explored and put into
production, Sellal said.
Algeria seemed to have turned a
corner in 2014 when oil and gas
production rose for the rst time in
years. But things have again taken a
turn for the worse as commercial
output slipped by 6% in the rst
quarter of 2015 to 38.1 million mt of oil
equivalent (3.1 million boe/d). Exports
in the rst quarter also dropped, by
8.9% to 23.4 million mtoe.
This is bad news for the North
African country, which said at the
start of the year it expected
production and exports to rise in
2015. The most recent forecast was
for exports to grow to 127 million
mtoe in 2015 and to reach 144 million
mtoe by 2019.
UNCONVENTIONAL OPPOSITION
To achieve the longer-term growth,
Algeria needs to move quickly, and the
countrys relatively new oil minister
Salah Khebri has signaled that the
focus should be on developing
conventional reserves close to existing
producing elds rather than continuing
down the path of Algerias muchpublicized, and much-criticized, foray
into unconventional shale gas
developments.
NORTH AFRICA
Energy consultant Ali Aissaoui

believes Khebri will strive to avoid
getting distracted by the controversial
shale policy of his predecessor.
Instead, he would focus
Sonatrachs eorts on conventional
low risk ventures and rapid results,
Aissaoui said.
There has been much talk of Algeria
having a shale gas revolution to mirror
that in the US. According to estimates,
Algeria has more than 700 Tcf in
recoverable shale gas reserves and
around 248 billion barrels of shale oil
resources.
The country has started a pilot shale
gas development project in the south
at In Salah, but there have been
protests by the local population
concerned over the possible
environmental impact of hydraulic
fracturing.
Civil unrest and opposition to the
governments commercialization
of shale resources may present
obstacles to attracting foreign
investment, the US Energy
Information Administration said
in a recent country prole.
Analysts have been surprised by the
intensity of the environmental
opposition to shale gas in Algeria.
Protests in Algeria are common,
but what makes these unique
is that they are targeting the
hydrocarbons sector, which is the
backbone of the Algerian economy,
NARCOs Porter said.
The Algerian government and
Sonatrach have gone to great lengths
to try to convince the people that
hydraulic fracturing the main

technique for producing gas from
shale rock is safe. Peoples fears are
often legitimate, but I insist that what
we are doing or will do later will never
be harmful to people or the
environment, former company CEO
Said Sahnoun said earlier this year.
No economic benet will ever distract
Sonatrach from prioritizing the
protection of peoples health
and the preservation of the
environment, he added.
Sonatrach has been using fracking
since 1992 and between 2006 and
2010 fracked an average of 50 wells
a year at the Hassi Messaoud eld.
Sonatrach claims to have mastered
the technology.
Porter said Algeria would not abandon
plans to exploit shale gas despite the
opposition. Algeria knows too well
the destabilizing backlash of putting
down protests, but it also desperately
needs more hydrocarbons revenue,
he said. Even before the recent
collapse in crude prices, Algeria was
facing a hydrocarbons revenue decline
due to declining oil production and
decreasing natural gas exports.
Given the slow unconventional start,
Algeria might be better o developing
its conventional resources and hoping
the oil price recovers sooner rather
than later.
Most recently, Sonatrach brought two

new oil projects on stream, but there
needs to be more where they came
from. In mid-July, the Bir Sebaa and Bir
Msana oil elds began production,
adding some 32,000 b/d to the
countrys output not a major
contribution, but every little helps.
Others are due soon too around 20
new elds are set to begin production
between now and 2020.
So while Algeria focuses on its
conventional sector, North Africas
unconventional oil and gas potential
seems to be on the back-burner. The
potential is vast. On top of Algerias
700 Tcf of shale gas resources, Libya
is said to hold 122 Tcf and Egypt 100
Tcf, while Tunisia and Morocco lag with
23 Tcf and 20 Tcf, respectively.
Tunisia has expressed optimism that
it can develop a major unconventional
gas industry, but it has already faced
the kind of environmental opposition
more commonly associated with
Europe. Tunisia believes the
prognosis for its unconventional oil
and gas sector is good, but there has
been some public discontent against
the development of shale gas and
shale oil in the country in recent
years.
Despite the opposition, Tunisia is
pushing ahead and believes the time is
right to invest in the countrys
unconventional oil and gas sector
The so-called Islamic State militant

group seems intent on destroying
the Libyan hydrocarbons sector
NORTH AFRICA
Algeria seemed to have turned a corner in 2014 when

oil and gas production rose for the rst time in years.
But things have again taken a turn for the worse
despite the current low oil price.
Development costs have been driven
down by the lower oil price, and
because rst production would be at
least ve to six years away, prices may
well have recovered by then.
Elsewhere, in Morocco, a handful of
companies are looking to develop the
countrys shale gas potential located
near Tangiers, Timahdit and Tarfaya.
UK explorer San Leon Energy and
Brazils Petrobras hold rights.
Algeria has also been advising Tunisia
on how to develop unconventional oil
and gas and Tunis is eyeing its
neighbors recent legislative changes
as a model it too could follow. Algeria
amended its hydrocarbon law in
January 2013 as a way of encouraging
the development of the countrys
unconventional resources.
It introduced tax incentives for
unconventional drilling, revisions to the
methodology for determining the tax
rate on oil revenues and the
introduction of new specic provisions
to support research into and
production of unconventional oil and
gas. It also set new terms for
exploration licenses so that licenses
will last for 30 years for developing
unconventional oil and 40 years for
unconventional gas.
Tunisia has consulted experts in
unconventional energy from the US
and from Algeria and has plans for
a new hydrocarbon law to also

encourage unconventional
exploration.
But new exploration is naturally in
part dependent on countries and
companies having the money to carry
out the work. And the money comes
from production, which in turn is more

or less lucrative depending on the price.
Its a vicious circle. And frankly, with
no rebound in oil prices on the
horizon, North Africa nds itself
sitting rather uncomfortably right in
the middle of it.
ALGERIAN EXPANSION PROJECTS

Algeria has plans to bring on a raft of new oil and gas projects in the coming years as it
looks to halt the recent decline in production.
Later this year, the second phase of the Sud dIn Salah project is expected to come on
stream, while Sonatrach is also due to launch a new compression facility at the In
Amenas gas plant before end-2015.
In 2016, Sonatrach is set to launch a new gas unit at its Alrar eld as well as starting up
new gas output from elds near Bir Berkine and Djebel Mouina Sud.
The Gour Mahmoud and In Salah gas projects joint ventures with BP and Norways
Statoil are also set to begin next year, as well as the Touat eld with GDF Suez,
Timimoun with a Total/Cepsa consortium, and the CAFC eld, under development with
Italys Eni.
In 2017, more Sonatrach developments are due to come online, namely a new oil project
near the Hassi Messaoud eld, as well as new gas output from the Tinhert eld and from
a satellite of the Gassi Touil eld.
Also due to launch in 2017 are the El MZaid oil eld together with Chinas CNPC, the Gara
Tisselit eld, being developed with a Rosneft-Stroytransgaz consortium, and the
Reggane Nord gas eld a Repsol/RWE Dea/Edison project.
In 2018, Sonatrach is set to start up the Hassi Mouina and Hassi Ba Hamou gas elds,
while it is also set to launch a number of other elds in partnership with international
companies.
These comprise the Isarene gas/condensate eld with Irelands Petroceltic and Italys
Enel, and the Bourarhat Nord and Erg Issaouane oil and gas elds with Medex Petroleum.
In 2019, meanwhile, Sonatrach plans to launch a number of satellite projects of the
Menzel Ledjmet Sud Est eld, as well as the Ahnet eld.
SILVINA ALDECO
MARTINEZ
OLGA PARFIRYEVA
S&P CAPITAL IQ AND SNL
S&P CAPITAL IQ AND SNL
PRIVATE EQUITY
PULLS BACK IN EUROPE
Private equity funding has steadily
spread to become a major source of
nance for the oil and gas sector.
Boosted by a few large deals at the
beginning of 2015, PE-backed M&A
deal volume accounted for 23% of
global deals in the rst three quarters
of 2015.
Traditionally a mainstay of the US, PE
activity has become increasingly
relevant in the high-cost North Sea
dened for the purposes of this
article as the Netherlands, the UK,
Germany, Denmark and Norway, with
total transaction value greater than
50 million. The last ve years has
seen unprecedented growth, with a
compound annual growth rate over
2010-2015 of 68.4% against 7.8% in
2005-2010.
While North America remains the
largest region for private equity funding
in the oil and gas sector, at 1.6 billion
(about $1.7 billion) in YTD 2015 (until
October 15), for the fth year running
the average deal size of private equity
investments made into the North Sea
surpassed the average North America
deal size of 870.6 million.
However, following the dramatic
decline of oil prices in 2014 and 2015,
the private equity industry has been

left with an unusual deal-making
landscape in EMEA, featuring both
pitfalls and prizes. It had been
expected that 2014 would be a
strong year for deal-making activity
in the North Sea, with larger
companies withdrawing from what is
now seen as a declining region and
leaving the field open to smaller
players.
But the increased oil price volatility
and market uncertainty since mid2014 appears to have translated into
an inability to agree on asset
valuations between buyers and sellers,
stunting the ow of deals through
2015.
Private equity funding has

spread from the US to become
the largest single source of
nance for deals in the oil and
gas sector but in the wake of the
dramatic decline of oil prices in
the last 18 months, PE-backed
deals in Europe have taken a
hit. Silvina Aldeco-Martinez and
Olga Parryeva of Platts sister
company S&P Capital IQ and
SNL analyze the deal-making
landscape in Northwest Europe.
The malaise has aected EMEA more

broadly than the North Sea, and recent
investment activity in the oil and gas
sector in EMEA has been
disappointing. While 2014 saw the
largest number of new investments
into EMEA from global private equity
rms over the last 10 years (63), the
total deal volume was considerably
lower compared with the peak year in
the post-nancial crisis era. That was
2012, which saw total transaction
value reach 9.8 billion spread across
51 deals.
OIL & GAS FINANCE
This contrast between actual volumes

versus number of transaction
supports the theory that private equity
rms are less willing to invest given
the recent oil price volatility and
market uncertainties regarding the
energy sector.
Not surprisingly, new investments
into EMEA during the second half of
2014 fell by 38%, going from 39 in the
rst half of 2014 to 24 in the second.
Total deal size also saw a 30%

decline: 3.9 billion versus 2.7
billion. This trend continued in 2015
with only 23 new deals recorded
during Q1-Q3 2015 totaling 663.9
million. (This transaction total has
been calculated after removing the
amount of the single largest
transaction, LetterOne Holdings
acquisition of RWE Dea for 4.5billion,
to avoid overestimating the trend on
the back of a single deal.
FIGURE 1.
(EURmn)
(EUM)
100
5000
EMEA Transaction Volume
4000
Reviewing sponsored investment

activity in EMEA on a quarter-byquarter breakdown, Q3 2015 recorded
new investments of just 460.7
million, one of the lowest thirdquarter gures of the past 10 years,
and this represents a signicant 82%
decline in capital deployed by global
private equity rms compared to Q3
2014 which recorded a total of 2.6
billion invested. At the same time,
deal count (8) was also one of the
lowest since 2010 as illustrated in
Figure 1.
80
Deal count (number)

Brent Crude day close price
3000
60
2000
40
1000
20
0
0
2000
2002
2004
2006
2008
2010
2012
Source: S&P Capital IQ, as of October 15th 2015

For illustrative purposes only.
FIGURE 2.
6%
3%
12%
Integrated
Drilling
Equipment & services
39%
Exploration & production

Refining & marketing
Storage & transportation
34%
6%
Source: S&P Capital IQ, featuring total aggregated transactions in volume terms from 2010
till October 15th 2015. For illustrative purposes only.
PE divestiture activity also registered

a signicant decline in both 2014 and
2015 over a 10-year time frame. There
was a 91% drop in total capital realized
by global private equity rms in 2014
compared to the previous year, when
the aggregate transaction value stood
at remarkable 24 billion. This trend
continued into 2015, with PE exit
numbers falling to 12 during Q1-Q3
2015 and total capital realized
dropping to 1.8 billion.
2014
Analyzing the data on a quarterly

breakdown, Q3 2015 continued on a
downward slope, as only ve exit deals
were closed, realizing 3.4 million
compared to 600 million in Q3 2014.
The Q3 2015 gure represents the
lowest amount of capital realized over
the last 10 years. This lackluster
performance on the exit front appears
to be a natural extension of a weak
second half of 2014 that recorded only
663 million in divestiture.
On a subsector basis new global
private equity investments into EMEA
targets continued to demonstrate
more negative features throughout
both 2014 and 2015. All six subsectors
showed a decline in capital deployed
by private equity rms.
OIL & GAS FINANCE
On the ip side, the Exploration &

Production subsector attracted the
largest deal in Q1 2015 (L1 Energys
acquisition of RWE Dea). Not only was
this the largest deal of 2015 so far at
4.5 billion, but also the largest over
the last 10 years across all
subsectors. This deal meant the E&P
subsector accounted for 90% of total
sector activity as of October 15,
versus the 34% proportion registered
over the ve-year study period (as
illustrated in gure 2).
single large deals early in 2014 and

again 2015.
In terms of divestitures, capital

realized from EMEA-located targets
sales across all subsectors has gone
down by 11% in 2015 YTD compared to
the same period of 2014, declining
from 2 billion to 1.8 billion. Some
subsectors have recorded more exit
activity than others with Equipment &
Services and Exploration & Production
showing an increase in capital
realization in 2015 YTD compared to
2014 YTD the former up by a notable
154% and latter up by 27%.
8000
Based on S&P Capital IQs transaction

data, while 2014 saw an increase in PE
investments into the North Sea
compared to previous years, going
from two in 2013 to 13 deals in 2014,
there were only three deals in the rst
three quarters of 2015. It is interesting
to note that, while 2014 did record a

higher interest in the North Sea area,
all the investments were completed
through Q1-Q3, with Q4 seeing no
activity.
On the deal size front, investments
into the North Sea saw the biggest
increase in terms of aggregate capital
deployed by global private equity rms
FIGURE 3. DEAL VOLUME

()
In sum, only a few selected assets are

changing hands and some nancial
sponsors seem to have chosen to hold
on to portfolio companies operating in
this sector, in the hope of some
recovery later next year. Expected
continued growth in production and
inventory make it unlikely supply-side
dynamics will provide any hope for
prospective sellers in the short term.
North Sea
Rest of EMEA
6000
4000
2000
0
2010
2011
2012
2013
2014
2014YTD
2015YTD
2014YTD
2015YTD

YTD: 1st January 15th October
FIGURE 4. DEAL COUNT

(transactions)
20
North Sea
Rest of EMEA
15
10
NORTH SEA DEAL MAKING

FREEZING OUT?
When analyzing the attractiveness of
the region for deal making over the
past ve years, 2012 stands out both
on the deal count and deal volume
front. Since then activity can be
dened as erratic at best, and more
recently inated in volume terms by
0
2010
2011
2012
2013
2014

YTD: 1st January 15th October
OIL & GAS FINANCE
with 4.9 billion invested in the period

Q1-Q3 of 2014 compared to previous
years. However, as noted already this
signicant signs of uncertainty around

the energy sector that have become
apparent more recently.
Increased oil price volatility and

market uncertainty since mid-2014
appears to have translated into an
inability to agree on asset valuations
between buyers and sellers, stunting
the ow of deals through 2015
was mostly contributed by one large
deal Goldman Sachs Infrastructure
Partners and Broad Street Energy
Partners invested a total of 1.7 billion
in DONG Energy in the rst quarter of
2014. This came at a time when the
market was not showing the
In contrast, 2015 so far has not seen

the same inux of new investments
with only three new deals completed
during Q1-Q3 2015. This brings the
industry back to the deal making
numbers of 2010 and 2011, where only
two and four new investments were
PUBLIC COMPANY FUNDAMENTALS, AGGREGATES

EBITDA (mm)
Operating Margin, %
Net Income (mm)
Net Income Margin, %
LTM 20151
84,809
-5%
12,172
-22%
FY 2014
90,304
1%
14,707
-15%
PRIVATE COMPANY FUNDAMENTALS, AGGREGATES

EBITDA (mm)
Operating Margin, %
Net Income (mm)
Net Income Margin, %
FY 20142
8,644
23%
1,580
181%

1
LTM stands for Last Twelve Months and for public companies it has been calculated as of 15th October 2015.
Due to the fiscal year 2015 data have not yet been reported by most private companies, only FY2014 data is displayed.
realized, respectively. The total deal

volume in 2015 YTD, however, has
already reached 4.7 billion, although
96% of this total is contributed by the
L1/RWE Dea deal in Q1 2015. Taking
away one large deal bias, the
combined total of Q2 and Q3 of 2015
only stands at 201 million versus
2.5 billion invested during Q2-Q3 of
2014.
While the prevailing market
conditions dont appear favorable for
deal making, there may be some
positive news for the North Sea
region in the mid-to-long term. One of
the encouraging developments, was
the UK governments 2015 budget
announcement of a reduction in the
supplementary tax on North Sea
prots as well as a new investment
allowance for North Sea eld
investments. As ocially stated by
the UK Treasury, these are clear
eorts to boost condence and to
improve competitiveness in the North
Sea.
At a time when most super-majors are
retreating from the larger elds where
production is dwindling, this may
prompt private equity investors to
re-examine North Sea opportunities
more closely in the near future. The
sector oers deal-making
opportunities for larger private equity
investors looking to invest into the
operation of smaller and later-stage oil
elds that may not meet the stringent
production requirements for larger
industry players.
CARLYLE AND BLACKSTONE:
AHEAD OF THE CURVE
An example of this strategy can be
found in PE-backed Siccar Point which
has indicated its intention to buy
marginal or mature oil elds, aiming to
OIL & GAS FINANCE
Some bright spots in the North Sea.
build up the company for public

otation or sale to a utility or national
oil company. The company has also
recently attracted investments from
Blackstone Energy Partners as well as
GIC Pte Limited.
Similarly, the Carlyle group raised $2.5
billion in 2013 for its International
Energy Partners vehicle which has
earmarked $1 billion for investment
into the North Sea. The group has
already made four acquisitions
including two into exploration and
production companies; Discover
Exploration Limited in December 2013
and Midia Resources SRL announced
as recently as March 2015. Similarly,
Blackstone closed Blackstone Energy
Partners in 2012 having raised $2.5
billion and subsequently closed a
second fund, Blackstone Energy
Partners II, in February 2015 on $4.5
billion and GSO, Blackstones credit
arm, is setting up a fund to extend
credit to distressed energy companies.
Although larger private equity rms
have begun to deploy capital into this
sector, the North Sea oil elds
intrinsically weaker position within
the industrys cost curve may
prevent much more signicant
private equity investment in this
space until oil prices recover. More

generally, the size and scale of
investment required into this
industry means that future deals are
likely to stem primarily from large
private equity rms. In this respect,
Carlyle and Blackstone would be the
main prospective investors in
this area.
income margin. As illustrated in tables

1 and 2, there has been a sharp decline
in companies performance measure
both in EBITDA and net income terms.
While the landscape within the EMEA
oil and gas sector, and specically the
North Sea, may not be hospitable
enough for private equity at present, it
While the prevailing market conditions

dont appear favorable for deal
making, there may be some positive
news for the North Sea region in the
mid-to-long term
Additionally, from a fundamental
performance perspective, 2014 was
not a strong year for the larger players
in this sector, and this has dampened
deal-making prospects further.
Based on S&P Capital IQ fundamental
data, both private and publicly listed
oil and gas companies in EMEA
exhibited on aggregate a reduction in
key nancials such as EBITDA, net
income, operating margin and net
constitutes a space to watch.

According to our database, over the
last six months, 23 oil and gas
companies located in EMEA were
agged as seeking nancing or
partners. Ten of these are exploration
and production companies, reinforcing
the idea that there a number of
potential targets waiting for a better
commodity price window to secure
investors.
SPECIAL ADVERTISING SECTION
INDUSTRY LEADER PROFILE

SANDY REISKY
CEO
APEX CLEAN ENERGY

Apex brings clean energy resources to market. We add
value through the full asset life cycle, from site origination
and nancing to turnkey construction and long-term asset
management.
This year, Apex is bringing ve new wind energy facilities
ALTAAQA
ALTAAQA ALTERNATIVE SOLUTIONS
Established in 2004 by the Saudi conglomerate Zahid
Group, Altaaqa Alternative Solutions is Saudi Arabias
leading provider of total utility solutions, executing tailored
and turnkey projects for water, energy (1.3GW power
capacity) and cooling through seven strategically located
branches. The company is the largest provider of temporary
energy solutions in Saudi Arabia and oers zero initial
investment to its clients.
Altaaqas cutting-edge solutions, dynamic and seasoned
workforce, and enduring partnerships with the worlds
leading brands allow it to bridge the gap between supply and
demand, and provide a complete service to meet temporary
to long-term power, water and cooling requirements.
online in Illinois, Texas, and Oklahoma comprising 1,161 MW

of capacity. As additional assets now under construction
come online during 2016, Apex will have over $1.5 billion of
operating assets under management.
Our resources can provide low-cost, rapid decarbonization at utility scale, making us well positioned to
support a low-carbon future.
PETER
DEN BOOGERT
MARWAN
AZRAQ
CEO
DIRECTOR OF
OPERATIONS
ALTAAQA GLOBAL
Established in 2012, in partnership with Caterpillar, Inc., to
replicate the success of Altaaqa in Saudi Arabia on a global
scale, Altaaqa Global owns, mobilizes, installs and operates
large-scale rental power plants tailored to customers
specic applications. The company rapidly deploys exible,
scalable and reliable temporary power plant solutions from
20 MW and up.
Altaaqa Global oers services from designing to
demobilization to a range of industries, including Power
Generation, Transmission & Distribution, Government &
NGOs, Mining, Oil & Gas, Petrochemicals & Reneries, Ports
& Harbors, and process industries.
Altaaqa Global and Altaaqa have a combined eet capacity
of 1,600 MW.

AL WALKER
CHAIRMAN, PRESIDENT
AND CEO
ANADARKO PETROLEUM CORP

Anadarko is among the worlds largest independent oil and
natural gas exploration and production companies, with
approximately 2.86 billion barrels of oil equivalent (BOE) of
proved reserves at year-end 2014. The company is committed
to operating in a sustainable manner and proactively working
with the communities where we operate from premier
positions in the Rocky Mountain region, the southern United
States and the Appalachian Basin to the deepwater Gulf of
Mexico and more than a dozen countries worldwide including
Algeria, Colombia, Ghana, Cte dIvoire and Mozambique.
Anadarkos mission is to deliver a competitive and
sustainable rate of return to shareholders by exploring for,
acquiring and developing oil and natural gas resources vital
to the worlds health and welfare.
emerging massive natural gas discoveries in a frontier

basin oshore Mozambique.
In the current challenging market environment, Anadarko
has focused on preserving value, rather than pursuing
growth. As a result, the company has achieved signicant
eciency gains and cost reductions throughout its US
onshore operating areas. Drilling costs per foot have been
dramatically reduced, wellbore designs optimized, and
impacts minimized, all while increasing higher-margin oil
production on a divestiture-adjusted basis, reducing
capital investments, advancing large-scale mega projects,
and continuing deepwater exploration success.
In carrying out this mission, the 6,000 men and women

directly employed by Anadarko adhere to the companys
core values of integrity and trust, open communication,
servant leadership, people and passion, and commercial
focus in all of its day-to-day operations and activities.
ANADARKOS COMMITMENT
We recognize that the companys best assets are its people,
and we work to foster a culture that inspires an
entrepreneurial spirit and rewards innovation. That pursuit
of innovation has led to the achievements mentioned above,
as well as creative partnerships to study air quality and
reduce methane emissions, enhance water management
and conservation, and create a new ecosystem in the Gulf of
Mexico from a decommissioned oshore facility.
ANADARKOS OPERATIONS
For Anadarko, it all begins with safety. Our goal is to send
each of our employees and contractors home safely every
day. Anadarko also approaches its business with a focus
on prudent care of the environment, protection of public
health and with a drive for continuous improvement that
makes our operations more compatible with the areas in
which we operate.
Oil and natural gas are essential to modern life and critical to
the success of industrial and developing societies. Anadarko
will continue to operate in a fashion that preserves the
environment while adapting to evolving global politics,
cultures and priorities. The relentless drive, passion and
focus of Anadarkos employees will continue to make it a
better company that delivers upon its mission of developing
energy resources for the welfare of a global society.
The companys primary areas of operations in the U.S.

onshore include the Wattenberg eld in northeastern
Colorado, the Delaware Basin of West Texas and the
Eagleford Shale in south Texas. For a number of years,
Anadarko has been recognized for its industry-leading
project-management expertise that has delivered worldclass projects on time and on budget in the deepwater Gulf
of Mexico, Ghana and Algeria. This track record has also
resulted in numerous Platts Global Energy Awards for
Independence Hub, Caesar/Tonga, Marco Polo and its
STATISTICS
Dierentiating 5-Year Track Record
8+% production growth
160+% reserve replacement
~65% deepwater exploration/appraisal success
~4 billion BOE net discovered resources
~$12.5 billion asset monetizations

AMIT NARAYAN
CEO
AUTOGRID
AutoGrid transforms data into the cleanest, cheapest
source of power. The companys Energy Data Platform
(EDP) and suite of Energy Internet applications enable
global utilities, energy service providers and Internet-ofThings (IoT) vendors to improve customer engagement,
enhance grid reliability, drive resource exibility and
increase protability.
EDP creates a comprehensive, dynamic portrait of the
power system, giving utilities the exibility to leverage the
power of the Energy Internet of Things, including smart
thermostats, lighting systems, energy storage devices,
HVAC systems, solar systems, and Electric Vehicle Supply
Equipment (EVSE). EDP enables utilities and energy
service providers to implement dispatch-grade

commercial, industrial, and residential demand response
programs, reduce the cost of energy theft, improve
customer enrollment and engagement, optimize
equipment maintenance, and launch Bring Your Own
Things programs that unlock the value of connected
devices.
Utilities like E.ON, Florida Power & Light, Southern
California Edison, Bonneville Power Administration,
Oklahoma Gas & Electric, Austin Energy, and the City of
Palo Alto Utilities use AutoGrids big data analytics
technology to improve the reliability and productivity of
their operations. AutoGrids technology is also embedded
in software products from leading vendors, such as
Schneider Electric, Silver Spring Networks, and NTT Data.
NISHI VASUDEVA
CHAIRMAN & MANAGING
DIRECTOR
HINDUSTAN PETROLEUM CORPORATION

LIMITED
Ms. Nishi Vasudeva, Chairman & Managing Director of
Hindustan Petroleum Corporation Limited is MBA from IIM,
Calcutta and is the rst woman in India to head a Fortune
500 company in the Energy sector.
She has experience spanning over 38 years in the Oil sector
across core functions including marketing, fuel retailing,
strategy and information systems. She has played a key
role in the development of several high impact strategies
as well as in design and implementation of mission critical
initiatives which include BPR, ERP implementation,
integrated margin management, central procurement, etc.,

which have transformed the way the organization
conducts its business and enhanced its enterprise value.
Ms. Nishi Vasudeva was elected to the position of Vice
President Youth and Gender (2011 to 2014) and is currently
a Member of the Executive Committee of the World
Petroleum Council. She has been honoured and conferred
with various prestigious awards like Platts Asia CEO of the
Year (2014-15 ), Outstanding Woman Manager Award
(2010-11) by SCOPE, Government of India, 5th position in
the list of Most Powerful Women in Asia Pacic
FORTUNE magazine and Most Powerful Women in Indian
Business by Business Today for the third consecutive year.

DUNCAN
HAWTHORNE
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
BRUCE POWER
Bruce Power is Canadas rst private nuclear generator,
providing 30% of Ontarios power. Our eight units provide
over 4,000 full-time, direct jobs to highly skilled employees,
and thousands more indirectly. We inject billions of dollars
into Ontarios economy annually, while producing safe
energy that produces zero carbon emissions.
Bruce Power is the largest employer along the Lake Huron
shoreline, in southern Ontario, Canada. The company was
formed in 2001 as an innovative public-private partnership,
which sees it lease the site from the Government of Ontario,
while investing private dollars into these public assets. Since
it was formed, Bruce Power has invested over $7 billion into
its reactors, including returning four dormant units to service
3,000 megawatts of carbon-free electricity to Ontarios
electrical grid. This additional power provided the province
with 70% of the power it needed to close its remaining coal
plants; a goal that was achieved in 2014 and has been
deemed North Americas largest clean-air initiatives.
Bruce Power is a partnership among TransCanada Corp.,
Borealis Infrastructure (a trust established by the Ontario
Municipal Employees Retirement System), The Power
Workers Union and The Society of Energy Professionals.
Over 90% of employees also own a part of the company.
As the executive lead during the acquisition of several

power plants in North America, Duncan was responsible for
the acquisition of the Bruce nuclear facility and the
formation of Bruce Power.
Duncan is an active advocate for the nuclear industry and
has been Chair of the Canadian Nuclear Association and
the President of the World Association of Nuclear
Operators (WANO).
Duncans leadership has been recognized by his peers
through a series of awards such as the Ontario Electricity
Association Leader of the Year and the Ian McCrae award
for leadership in the Canadian nuclear industry. He has also
been honoured by the Association of Power Producers of
Ontario with their 2004 Hedley Palmer Award for
outstanding contributions to Ontarios electricity
generation industry and by the Energy Council of Canada
as their 2005 Canadian Energy Person of the Year.
Duncan is a chartered engineer with an honours degree in
control engineering and an MBA from Strathclyde
University in Scotland. He is a Fellow of both the Institution
of Electrical Engineers and the Institution of Mechanical
Engineers.
Duncan Hawthorne is the President and Chief Executive

Ocer of Bruce Power, the worlds largest operating
nuclear facility, with eight units capable of generating
6,300 megawatts.
STATISTICS
CANDU reactors:
Megawatts:
6,300
With roughly 30 years in the power generation business,

Duncan began his career as a craft apprentice in the
Scottish electricity industry and advanced to hold senior
positions in power companies in the United Kingdom,
United States and Canada.
Percentage of Ontarios electricity:
30
Units returned to service since 2003:
Employees:
Over 4,000

NIGEL PARKINSON
MANAGING DIRECTOR
CATEPILLAR MARINE
CATERPILLAR INC
For more than 90 years, Caterpillar Inc. has been making
sustainable progress possible by driving positive change
on every continent. Caterpillar is a technology leader and
the worlds leading manufacturer of construction and
mining equipment, clean diesel and natural gas engines,
and industrial gas turbines.
Caterpillar Marine combines all the marketing and service
activities for Cat and MaKTM marine engines within
Caterpillar, and recently added the two-stroke EMD brand
into the portfolio along with Caterpillar Propulsion, one of
the worlds leading designers and producers of Controllable
Pitch Propellers. Caterpillar Marine is headquartered in
Hamburg (Germany), with major hubs in Grin, Miami
(USA), Sao Paolo (Brazil), Shanghai (China), Singapore and
Hn (Sweden), and eld oces around the world. In 2015,
in the strive to be at the forefront of technology
development and innovations, Caterpillar further expanded
their monitoring, analytics and prognostic capabilities to
the entire vessel through the addition of Cat Marine Asset
Intelligence solutions, based in Virginia Beach, Virginia. As a
result, Caterpillar Marine is evolving beyond engine-focused
monitoring to provide monitoring and diagnostic solutions
for an entire vessel, and now have the expertise to provide
meaningful recommendations to ship owners to help
increase eciency, reduce downtime on their vessels and
assist shipyards in reducing warranty expenses.
The company is honoured and proud to be associated with
global owners and operators, as well as the best shipyards,
naval architects, and OEMs in the world. With a
commitment to quality products and services, Caterpillar is
the primary solution provider for a wide array of marine
applications throughout the industry. By striving to gain a
deep understanding of customers needs, Caterpillar is
able to deliver highly-customised and eective solutions.
The business oers premier, single-source power solutions
for segments related to the global ocean-going, commercial,
and pleasure craft sectors in the medium- and high-speed
markets. Outstanding power range, along with our complete,

continuously evolving product line, provides customers one
source for complete propulsion systems emissions
compliant engines, diesel-electric drives, dual fuel and gas
only solutions, after treatment systems, controllable pitch
propellers, transverse and azimuth thrusters, and controls.
Whats more, our investment in research and development
proves the companys intense dedication to the marine
market. Cat, EMD, and MaK products and technologies are
proven reliable, and are built to last in all marine applications,
demonstrating superior productivity and lifecycle value.
Caterpillar Marine has one simple objective: to surpass
customer expectations by demonstrating outstanding
sales and service support in a professional, consistent
manner. The groups distribution and service activities are
executed through a global network of independent Cat
dealers a team Caterpillar believes to be unrivalled and
dedicated to supporting all customers whenever, wherever,
and whatever the need. Caterpillar customers know the
global dealer organisation has the local expertise,
specialists, and extensive spare parts inventory to keep
them up and running.
The essence of Caterpillar is one of progress, so it only
makes sense that the development we enable strengthens
economies, communities, and businesses. Caterpillar is
committed to driving sustainability in product
manufacturing as well as embedding an environmentallyfocused culture for all employees at work and home. From
designing engines to exceed global emissions standards
and embracing remanufacturing and recycling of
components, to redesigning oce spaces to reduce
energy consumption, employees are constantly working to
shrink their overall carbon footprint. By pursuing
sustainable development and progress in every aspect of
business, Caterpillar Marine and its global dealer network
strive to meet the emerging sustainability requirements of
their worldwide customers, while doing its part to develop
new solutions and create a more sustainable world.
Together, we can make it happen.

RAVI KAILAS
FOUNDER AND CHAIRMAN
MYTRAH ENERGY
Operating in the most exciting power market in the world,
Mytrah is a pioneer in the renewable energy sector. Its
innovative approach has created a dynamic, cost ecient
power company poised for accelerating growth.
Through a diversied portfolio, Mytrah generates the
maximum amount of electricity from its wind and solar
farms using its strong end-to-end capabilities. Mytrahs
model enables it to identify, plan and execute projects
rapidly and cost eectively, ensuring a sustainable
competitive advantage.
Mytrahs fully integrated project team has delivered ten
sites with a generating capacity of 578 MW across six
States in India in just 5 years. With the largest wind data
bank among its peers, Mytrah has also created a highly
visible pipeline of 3500MW in wind and solar. This will
enable continued rapid growth as the Company looks to be
generating 5000 MW of renewable energy for India.
Mytrah Energy redened the renewable energy business in
India by breaking traditional perceptions.
PERCEPTION #1
The renewable energy industry is subsidy-dependant
Mytrahs wind energy is delivered to its customers at, or
below, the cost of energy based on fossil fuels. Wind farms
can be built faster than fossil fuel plants and hence are an
attractive solution for India, where electricity demand
exceeds supply. This is very dierent from many European
countries, where renewables have received substantial
subsidies and typically add new electricity supply into a
market where there is already enough supply from other
sources. We provide electricity to an undersupplied
market at a price competitive with fossil fuel.
PERCEPTION #2
Governance takes a backseat in fast growing companies.
Mytrah took a dierent view, and invested proactively in
governance from the rst day in business. The board of
Mytrah Energy, Ltd. brings together exceptional governance
experience across multiple countries. It is supported by the

strong and highly experienced Board of our Indian operating
company, Mytrah Energy (India), Ltd. Mytrah invested in SAP
before it installed any wind turbines, convinced that
process would precede prot. All its payments are
processed through this system and checked by the internal
audit team. Mytrah appointed Big Four auditors (E&Y as the
external-internal auditor and KPMG as the external auditor)
even before it had generated a rupee of revenue. We
combine the exceptional talent of our Directors with strong
internal processes to ensure world-class governance.
PERCEPTION #3
There is no role for Intellectual Property in utilities.
Mytrah chooses to use in house expertise to develop and
build its own wind farms rather than simply purchasing
wind farms constructed by others. This approach captures
additional value from knowledge of wind patterns, wind
turbine capabilities and local relationships. Mytrahs team
includes some of the most knowledgeable wind industry
experts in India. We believe that the only long-term driver
of business competitiveness is knowledge.
PERCEPTION #4
Utilities cannot grow quickly.
Often considered to be large and slow-moving, utilities
have a reputation for stability and slow growth. Mytrah
combines the stability of long-term utility cash ows with
the entrepreneurial growth of a technology company. We
have built a 578 MW business in 5 years, with revenues
growing 37% in 2014.
PERCEPTION #5
It is best to focus on one location.
It is simpler to build in one location where wind and
governance are well understood. However, at Mytrah, we
choose to adopt a more complex approach building our
capacities in 11 wind farms across six Indian states. The
result is risk reduction, minimizing the impact of wind
variations and political changes, and faster growth with
improved returns, because we possess better knowledge
over a wider area. We choose multiple locations,
increasing revenue stability and reducing risk.
MORGAN STANLEY COMMODITIES GROUP

Morgan Stanley has been at the forefront of global
commodity markets for three decades. As a consistent
partner, we help clients navigate every market and
negotiate all economic cycles.
Our Commodities team has grown from a small group of
industry pioneers into a truly global business. Over the
years, our business has evolved by consistently delivering
intelligent risk management solutions, competitive pricing,
speed and ease of execution, and an ever-expanding suite
of nancing solutions.
These strengths along with our commitment to always
put our clients rst will advance Morgan Stanleys
industry leadership well into the future.
EXPERTISE DRIVES MARKET INTELLIGENCE
We are highly tenured commodities specialists with
extensive experience in and knowledge of energy and
metals markets, both physical and nancial. Our talented
team is a complementary mix of industry and nancial
professionals whose comprehensive understanding of the
entire commodities supply chain and global nancial
markets drives innovative ideas for our clients.
GLOBAL RESOURCES AND EXTENSIVE CAPABILITIES
The Morgan Stanley Commodities group provides aroundthe-clock access to markets and products in key geographic
regions. Our track record of client service includes:
Real-time market access with competitive pricing
Managing multi-commodity and multi-jurisdictional

commodity risks simultaneously
Leveraging our global nancial markets and local

commodities industry knowledge for corporations and
institutional investors
NANCY
KING
PETER
SHERK
GLOBAL
CO HEAD
OF MORGAN
STANLEY
COMMODITIES
GLOBAL
CO HEAD
OF MORGAN
STANLEY
COMMODITIES
Providing access to capital through commodity-linked

nancing solutions, which includes helping develop
projects such as power plants
A TAILORED APPROACH
We begin every client engagement the same way: by taking
the time to listen. From there, we combine our passion for
innovation with our in-depth understanding of the
challenges each client faces. The result of this approach?
Truly bespoke solutions that are optimal for the needs of
each client.
A BESTINCLASS BUSINESS IN A BESTINCLASS BANK
As an integral part of Morgan Stanley, the Commodities
group is well positioned to deliver clients the full expertise
and talents of the rm. We collaborate with our industryleading colleagues around the world to provide ecient
access to capital and to help clients protect and grow their
businesses.
CUSTOMIZED ENERGY SERVICES
Highly complex, large structured deals for managing

long-term price risk
Provision of liquidity based on trading acumen and risk

management expertise
Reserve-based and direct lending
Scheduling of power hourly from two real-time, 24-hour

power trading desks
Project nance for new power generation projects
Management of variable wind generation
Revenue puts for power generators to reduce cost of

capital
An Enduring
Commitment
to Commodities
Weve been helping clients in the energy sector
manage price risk for three decades. Today, that
commitment is stronger than ever.
Our longstanding expertise and exceptional energy
market intelligence are a powerful combination:
We partner with clients to develop sophisticated,
bespoke solutions for their unique and often
complex needs.
Learn how we can help you grow your business and
benefit from energy market opportunities.
To learn more:
New York +1 914 225 1460
London
+44 20 7677 3003
Singapore +65 6834 6918
2015 Morgan Stanley Capital Group Inc. This

advertisement is not an offer (or solicitation of an offer)
to buy or sell the securities or instruments that may be
mentioned. Morgan Stanley is not acting as an advisor
and the opinions or views contained herein are not
intended to be, and do not constitute, advice, including
within the meaning of Section 975 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act.

JAMES M. WOOD
PRESIDENT
NOBLE SOLUTIONS
Noble Solutions is a leading retail electricity service
provider in the United States. Headquartered in San Diego,
Calif., the company has regional oces in Texas, Illinois,
Ohio, Massachusetts, and New Jersey. It is the only ISO
(Intl. Organization for Standardization) 9001
2008-certied energy services provider in the country.
Nobles focus is on providing best in class energy risk
management solutions relating to the deregulated
electricity exposures of its clients.
Noble Solutions is part of a larger international
commodities provider Noble Group Ltd. In the US, the
Noble Solutions footprint covers all 17 US states that have
deregulated electricity markets plus natural gas in
California, Oregon and Nevada. Noble Americas Energy
Solutions serves more than 1,700 commercial and
Industrial customers who require more than 8,000 MW of
electricity.
The Noble Group (SGX:N21) manages a portfolio of global
supply chains covering a range of industrial and energy
products. Operating from over 60 locations and employing
more than 40 nationalities, Noble facilitates the
marketing, processing, nancing and transportation of
essential raw materials. Sourcing bulk commodities from
low cost regions such as South America, South Africa,
Australia and Indonesia, the Group supplies high growth
demand markets, particularly in Asia and the Middle East.
Noble is ranked number 77 in the 2015 Fortune Global 500.
Noble has been recognized for changing the face of US
deregulated power by providing an industry leading web
enabled risk management solution, PowerFolio3D. This
platform provides customers with an understanding of
their potential risks and rewards, helps them produce
optimal strategies to mitigate risk and drive value into
their portfolios, creates an ecient execution plan for
their strategies, and monitors and assesses the results.

Noble is the only active ISO 9001:2008 quality certied
electricity provider ensuring its customers with the
highest degree of quality in the industry
For Noble, this started about 4 years ago by asking its
customers how do we create a better market experience
for you? They responded by stating their needs for
transparency, eciency, and performance tracking. It
has since been Nobles mission to provide these aspects
and a better customer experience for its clients all of
which result in superior risk management and nancial
results ensuring year over year success.
Jim Wood is the president of Noble Americas Energy
Solutions. Jim joined Noble Americas by way of Nobles
acquisition of Sempra Energy Solutions in 2010. He started
with Sempra as Vice President of commodity sales in 2002
and was responsible for implementing Sempra Energy
Solutions growth strategy prior to becoming president in
2006. Over the past 9 years, Jim has led NESs
tremendous growth and developed it into one of the
largest and most respected energy providers in the US.
STATISTICS
Load served: 8,000 MWs
Serving 1,700 customers in all 17 deregulated US states

and Washington D.C.
Number of Employees: Noble Solution 200/The Noble

Group 1,900
NAES has been serving commercial and industrial

consumers in deregulated markets since 1998
The Noble Group is ranked #77 on the Global Fortune

500 list

SEAH MOON MING
EXECUTIVE DIRECTOR &
GROUP CEO
PAVILION ENERGY PTE LTD

Pavilion Energy is a Temasek Portfolio Company that was
set up to provide clean energy to support growth and
contribute to a sustainable future in the Asia region,
including Singapore. Through our dedicated approach to
integrate and build synergies in our business, we have
acquired key assets, formed strategic partnerships, and
developed strong operational and engineering capabilities
across the LNG value chain.
On the upstream business, Pavilion Energy has a working
interest in Tanzania Gas Blocks 1, 3 and 4. This is one of the
major investments by a Singaporean rm in Africa and
supports our plans to secure long-term energy supply at
competitive prices. Together with partners in Block 2, the
Tanzania LNG project consortium intends to invest in a joint
LNG plant.
Pavilion Energy has also formed several strategic
partnerships to secure diversied global LNG supplies.
Such supplies will meet the growing energy needs of the
region. These volumes from various sources across the
globe further strengthen our overall LNG supply portfolio.
To enable the company to eectively connect our LNG
supplies to demand centers in the region, Pavilion Energy
has established a joint venture with a leading maritime
group to acquire, manage and charter maritime LNG
assets. The joint venture, BW Pavilion LNG, currently owns
three Singapore-agged LNG carriers.
Pavilion Gas, a wholly-owned subsidiary of Pavilion Energy,
manages downstream natural gas operations for both
PNG and LNG in Singapore, and is responsible for the
marketing, trading and distributing of natural gas in
Singapore and the region. Pavilion Gas has a proven and
independent downstream capability in Singapore and
currently supplies gas to industrial users across various
industries. The company has also been steadily building
its LNG trading capabilities and has an established trading
track record.
PAVILION ENERGYS ROLE AS A REGIONAL LNG PLAYER

Enhancing the maritime supply chain is in our blood in
Singapore, honed by many decades of experience as a
seaport and trading hub. Pavilion Energy is keen to play a
part in forming a small-scale LNG ecosystem through
developing small-scale LNG supply chain solutions within
the Asian region. In particular, the Southeast Asian region
has numerous small and remote islands, of which many are
inhabited and require power. As economies in the region
look to replace diesel with cleaner and cheaper alternatives
such as natural gas, the market potential for small-scale
LNG will become evident in the near future.
As the energy demands in Asia increase, it is critical to
ensure that LNG continues to be aordable and
economically viable. Pavilion Energy is an industry partner
and foundation market participant of the Asian LNG Hub
initiative in Singapore. An Asian LNG Hub will provide a
platform that facilitates fair and transparent LNG pricing.
Independent of the oil market, an Asian LNG price index
would better reect actual regional gas supply and demand
dynamics. LNG prices in Asia would then take reference on a
netback basis from this price index. Pavilion Energy strongly
believes that the Asian LNG Hub is a worthwhile initiative
that will benet the region in the long run. Together, we can
all look forward to a bright and promising LNG future that will
better serve our industries, communities and stakeholders.
STATISTICS
Established in 2013
Committed capital of US$6.9 billion
Owns 3 Singapore-agged LNG carriers
Secured diversied gas supply portfolio from over 20

LNG plants globally
Supplies natural gas to more than 1/3 of industrial users

in Singapore

TERRY BOSTON
PRESIDENT & CHIEF
EXECUTIVE OFFICER
PJM INTERCONNECTION
Terry Boston is retiring this year as president and chief
executive ocer of PJM Interconnection the nations
largest Regional Transmission Organization culminating a
43-year career in the electric utility industry. Before joining
PJM in 2008, Mr. Boston was executive vice president of
the Tennessee Valley Authoritys power system operations.
TVA is the nations largest wholesale public power provider.
Mr. Boston is past president of the Association of Edison
Illuminating Companies, Inc. and immediate past president of
GO 15, the association of the worlds largest power grid
operators. He also served as board chairman of the North
American Transmission Forum dedicated to excellence in

performance and sharing industry best practices. He was one
of eight industry experts selected to direct the NERC
investigation of the August 2003 Northeast/Midwest blackout.
Mr. Boston served as vice president of the International
Council of Large Electric Systems and was elected to the
National Academy of Engineering, the highest honor
bestowed in the engineering profession. He served three
years as chairman of the Southeastern Electric Reliability
Council board of directors. Mr. Boston also led the North
American SynchroPhasor Initiative, which seeks to
implement eective technological elements of the smart
grid at the transmission and generation level.
KEN ISONO
KENJI KAWADO MASAYA HASEGAWA

REPRESENTATIVE DIRECTORS
SHIZEN ENERGY INC

At Shizen Energy Inc., our strength lies in our ability to
provide all necessary integrated services for renewable
energy power plants, from planning and development to
fundraising, EPC and O&M, within our Group. Three
representative directors, Ken Isono, Kenji Kawado and
Masaya Hasegawa, established the company in June 2011
following the Great East Japan Earthquake. These
entrepreneurs in their thirties are unique in the Japanese
construction and power industries, which are dominated
by time-honored companies. Based on the slogan of Local
and Global, they established juwi Shizen Energy Inc. (EPC)
and juwi Shizen Energy Operation Inc. (O&M) in 2013, in

collaboration with juwi AG of Germany. Our involvement in
the photovoltaic power generation business has amounted
to 700MW, including joint development projects. The
projects our group completed currently number about 30
for a total of 37.4 MW around Japan. We also launched IPP,
wind and small hydroelectric power generation business.
We are also planning a model by which we will return some
of the proceeds from electricity sales to the community.
Based on our philosophy of Changing the World with
Energy, we aim to spread high-quality renewable energy
power plants that contribute to regional development from
a long-term standpoint.

NIKHIL
MESWANI
EXECUTIVE
DIRECTOR
RELIANCE INDUSTRIES LTD (RIL)

Our motto, Growth is Life, sums up the continually
evolving spirit of Reliance. Our activities span hydrocarbon
E&P, rening & marketing, petrochemicals, retail, and
digital services. We have achieved global leadership in
many of our businesses.
Inspired and guided by the life story and philosophy of
Founder Chairman Dhirubhai Ambani, RIL has now set
sight on loftier goals under the stewardship of Mukesh
Ambani, Chairman & Managing Director. A believer in
game-changing businesses for the future, Mukesh
challenges conventional wisdom and spots opportunities
quickly. A born leader personifying extreme innovation,
excellence and execution, he is never short of creating
disruptive next practices and generating exponential
value for the company, for the nation and for the
people.
VIPUL SHAH
COO,
PETROCHEMICALS
propositions and a strong meritocratic culture. He is the

architect of transformational innovation eorts at Reliance.
Nikhil has headed multiple responsibilities at Reliance,
including rening & marketing, corporate aairs, group
taxation policies, and sport franchisee, to name a few.
Today, he is involved in the companys ambitious roll-out of
a Pan-India 4G-Digital initiative Jio.
Nikhil became the youngest chairman of the Asian
Chemical Fibre Industries Federation, and was named
Young Global Leader by the World Economic Forum in 2005.
He is ranked fourth among the Top 5 Global Power Players
in the chemical industry. He is a member of several key
committees set up by the government of India. For Nikhil
Meswani, excellence is the innite value.
Vipul Shah is a sought-after leader in the petrochemical
world. He has rich geographic, business and multifunctional experience. Among his many achievements at
Dow, the most memorable one is that of transforming Dow
Indias growth from $10 million to over $1 billion.
As a corporation aware of its social responsibilities, RILs

aim has always been to empower people and improve
their lives. It is with this purpose that Reliance Foundation
was set up in 2010. Ever since, the Foundation has
provided impetus to the various philanthropic initiatives
of RIL. Led by Nita Ambani, the Foundations eorts have
already touched the lives of more than four million people
across India, in more than 5,500 villages and urban
locations.
At Reliance, he has set a vision of recreating this success

in a shorter time. To provide balanced and intelligent
growth, he has adopted a granular approach to identify
key growth markets. While striving for strategic harmony,
he is building an adaptive organization to meet with the
challenges of change.
RIL, as the largest Indian private sector company, is the

rst Indian company to make it to Fortunes Global 500 and
is currently ranked 114th in terms of revenues and 155th in
terms of prots. RIL ranks 194th in the Financial Times
Global 500 2014 list of Worlds Largest Companies.
He has provided clarity of purpose: defend and extend the

core businesses, expand to adjacencies and build
emerging businesses to provide the next S-curve, with an
emphasis to transform the business model from being
transactional to relationship based.
Nikhil Meswani has been on Reliances board since 1988. He

propelled petrochemical business into the global league of
the Top 10 and helped create markets for major
petrochemicals in India resulting in massive direct and
indirect employment. He built competitive advantage
through integration, segment dierentiated value
He has identied the capabilities needed, gaps thereof, and

has developed an execution plan to build competencies
that compliment the overall growth strategy. This initiative
meets with his expertise, for which he was the winner of
the Global Genesis Award at Dow for his Talent
Development Skills.

JOSU JON IMAZ
CEO
REPSOL
environmental and eciency goals were complementary,

the company persevered, creating one of Europes most
Repsol is a Spanish publicly-traded oil and gas company
competitive portfolio of assets which has provided a key
present in 40 countries and employing 27,000. It has built on its counter-cyclical balance to upstream operations amid
historic foundations as a rener to become a fully-integrated
falling oil prices.
enterprise with production on every continent, beneting from
the strength and stability that its business model provides.
During 2015, downstream earnings allowed the Repsol
Group to post much more resilient results than upstreamThe company currently produces almost 700,000 barrels of focused companies.
oil equivalent a day, renes approximately a million barrels a
day and operates a signicant chemicals business. Repsol
Repsol has become an industry leader with increased
also has more than 4,500 service stations and is one of the eciency and lower emissions, generating sustainable
worlds largest LPG marketers.
value and demonstrating that European reneries can
compete with other regions at the same time as they
The company has made signicant eorts to increase the
respect the highest safety and environmental standards.
sustainability of its activities both in environmental and
social terms, garnering Repsol a position of leadership in
TECHNOLOGY AND INNOVATION
the FTSE4Good and Dow Jones Sustainability Indexes,
In every part of the company, Repsol has made a policy of
amongst others.
refusing to accept conventional wisdom and has instead
nurtured and empowered those who choose to think outside
UPSTREAM
the box. This has led the company to question everything it
In 2015 Repsol acquired Canadian oil company Talisman
does to improve its operations and adapt to societys
Energy, almost doubling the reserves and production of the
changing energy needs. This has resulted in innovative ways
Repsol Group and creating the worlds 15th largest publiclyof nding and developing hydrocarbons based on the use of
traded oil and gas company. Talisman and Repsol are a perfect new technology and its application to our industry, pushing
t, operating in dierent geographical areas and specializing in the boundaries of what was thought to be possible. Boasting
complementary techniques. As a result, the company boasts a a highly-successful track record, it is no coincidence that IBM
global collection of assets that can be managed to increase
is developing its rst ever energy-focused Cognitive
resistance to volatile markets and optimize project
Technology partnership with Repsol.
development, generating value for its shareholders and
opportunities for its workforce in every scenario.
Repsol has also developed new products, from roadsurfacing compounds made from recycled tyres, which
This acquisition completed a growth cycle in which Repsol
reduce noise and vehicle emissions, to the worlds rst fully
succeeded in building itself up into a truly global company,
automatic early oil spill detection system. Its Technology
outpacing rivals in production and reserve additions by
Centre in Madrid provides a perfect environment for scientic
leveraging technology, know-how and imagination.
development, both for Repsol and for entrepreneurs whose
work is encouraged to ourish in the form of grants and
DOWNSTREAM
support that help turn great ideas into great projects.
Repsol also chose to invest heavily in its downstream
assets during the rening industrys downturn in the latter
Repsols motto Lets invent the future, is not just a slogan, but
part of the last decade, to improve eciency and the ability rather a rallying cry for every worker and company stakeholder.
to maximize the value extracted from every barrel rened.
The results have been very encouraging, and the company
In the face of criticism from those who did not believe
aims to continue making an impact by daring to be dierent.
RESTORE
REstore is an energy technology company focused on
automated Demand Response. It oers curtailable
capacity to energy utilities, balance responsible parties
and transmission system operators in the form of a virtual
power plant, oering specications that are fully
comparable to a gas-red power plant. The company is a
leading actor in the fast-growing European Primary
Reserve/Frequency control market, operating in all
ancillary service and capacity markets. REstores
proprietary platform Flexpond is used by over 125 of
Europes largest industrial energy consumers to reduce
power demand without aecting industrial processes.
Participants include ArcelorMittal, Barclays, Celsa Steel,
Total and Praxair. In exchange, REstores industrial
consumers receive signicant cash payments and
contribute to CO2 reductions. Jan-Willem Rombouts and
Pieter-Jan Mermans founded the company in 2010.
The principle behind REstore is similar to that of Uber or
AirBnB. REstore contracts industrial consumers that are
prepared to curtail electro-intensive machinery at times of
grid stress or imbalance. REstore aggregates and controls
these consumers in real-time to oer a large-scale,
reliable virtual power plant to TSOs and BRPs using its
cloud-based technology platform Flexpond. The cost
structure of this new type of VPP is more attractive than a
gas-red peaking plant in current market conditions: an
open cycle gas turbine needs CAPEX equal to 500,000/
MW, whereas REstores VPP costs 10,000/MW.
In October REstore won Frost & Sullivans 2015 European
Award for Competitive Strategy Innovation and
Leadership. The award was based on Frost & Sullivans
analysis of the Demand Response market, in which it
concluded: Boasting a broad range of DR solutions in all
key European energy markets, REstore is in an ideal
position to make the most of the growth opportunities in
the European market. On the strength of its sophisticated
JAN-WILLEM
ROMBOUTS
PIETER-JAN
MERMANS
CEO
CEO
and patented Flexpond automated DR platform,

presence in high opportunity countries and smart
automated energy management, the company is expected
to achieve its goal of 20-30% market share by 2018.
In November, meanwhile, REstore won a prestigious
Product Innovation Award at European Utility Week,
conrming the companys position among European
leaders in Demand Response.
FACTS & FIGURES

REstore is the only Demand Response aggregator that
oers DR programs in all CWE energy markets
REstore is the only Demand Response aggregator that

can access the entire spectrum of reserves
REstore delivers within seconds, faster than a

combined cycle gas turbine, with 100% reliability
REstore guarantees real-time portfolio management of

industrial processes
Flexpond is delivering Clean Demand Response with

99.9% availability
REstore does not take control of the plant (no loss of

sovereignty)
REstore DR programs do not reduce the output of a

plant
Large industrial consumers work with REstore for

reasons of technology-enabled access-to-market
and risk management
Utilities work with REstore because Flexpond adapts

industrial processes to the needs of the energy market

YOUSEF AL-BENYAN
VICE CHAIRMAN AND CEO
ACTING
SAUDI BASIC INDUSTRIES CORP (SABIC)

Saudi Basic Industries Corporation (SABIC) ranks as the
worlds third largest diversied chemical company
(Forbes 2015). The company is among the worlds market
leaders in the production of polyethylene, polypropylene
and other advanced thermoplastics, glycols, methanol
and agri-nutrients.
SABICs businesses are grouped into Chemicals, Polymers,
Agri-Nutrients, Metals and Innovative Plastics. It has
signicant research resources with innovation hubs in ve
key geographies USA, Europe, Middle East, South East
Asia and North East Asia. The company operates in more
than 50 countries across the world with around 40,000
employees worldwide.
SABIC manufactures on a global scale in Saudi Arabia, the
Americas, Europe and Asia Pacic.
SABICs acquisition strategy has strengthened its ability to
provide innovative and global end-to-end solutions for its
customers. It has made three key acquisitions in the last 13
years: DSM Petrochemicals in 2002, the companys platform
for development in Europe; Huntsman Petrochemicals (UK)
in 2006, renamed SABIC UK Petrochemicals, adding
substantial capacity to the companys Europe operations;
and GE Plastics in 2007, now SABICs Innovative Plastics
SBU, opening the way for advanced materials
SABIC has long recognized the need to be at the cutting
edge of technological development, developing an approach
to technology and innovation that puts community needs
and the customer rst. SABIC has invested considerably in
technological development and has established an
increasingly independent research program.
SABICs sustainability initiative explores new business

strategies, innovative technologies and environmental
excellence in operations to help ensure the long term
vitality of its products and to provide the necessary
stewardship of earths resources.
SABIC has a wide-ranging Corporate Social Responsibility
program. Its commitment to global communities is fullled
through charitable contributions, employee volunteer
programs, in-kind contributions and unique projects and
sponsorships.
Headquartered in Riyadh, SABIC was founded in 1976
when the Saudi Arabian Government decided to use the
hydrocarbon gases associated with its oil production as
the principal feedstock for production of chemicals,
polymers and fertilizers. The Saudi Arabian Government
owns 70 percent of SABIC shares with the remaining 30
percent publicly traded on the Saudi stock exchange.
KEY STATISTICS (2014)
Total Assets: US$90.7 billion
Annual Revenue: US$50.2 billion
Net Income: US$ 6.2 billion
Total Employees: 40,000
Global Technology & Innovation Centers: 19
Global Manufacturing and Compounding Centers: 64

VICTOR A. CONSUNJI
PRESIDENT
SEMIRARA MINING & POWER CORP

Semirara Mining and Power Corporation (SMPC) is an
integrated energy company with strategic investments in
coal extraction and power generation. It is the only
independent power producer in the Philippines that
generates its own fuel (coal). Its coal extraction facility is
based in Semirara Island, Caluya in Antique Province while its
power plant complex is located in Calaca, Batangas Province.
Education
Employment and Livelihood
Electrication and Basic Infrastructure
Environmental Stewardship
Emergency Preparedness
HIGHLIGHTS
FUELING A NATION
SMPC supplies around 24% of the Philippine coal requirements,
serving six (6) power plants and all domestic cement plants.
UPLIFTING HOST COMMUNITIES

Through its 5Es Program, SMPC uplifts the living conditions
in its host communities, while empowering them for the
future. Its projects and initiatives are focused on the
following areas:
Market Capitalization: US$3.4 billion

Average Growth Rate in the last 10 years: 29%
Average Dividend Payout Ratio in the last 5 years: 87%
Return on Equity in the last 5 years: 36%
Accounts for 97% of the total coal production of the
Philippines
Operates the largest and most modern open pit mine in
the Philippines
Generated 2,840 GWh of baseload power in 2014
Expansion projects to generate additional 1,350 MW
More than 3 million trees planted
KEVIN SMITH
CEO
SOLARRESERVE
SolarReserve is a leading global developer of utility-scale
solar power projects, which include electricity generation
by solar thermal energy with energy storage, as well as
photovoltaic panels. The company has more than $1.8
billion of projects in construction and operation
worldwide, with development and long-term power
contracts for 482 megawatts of solar projects
representing $2.8 billion of project capital. In addition,
SolarReserve has commercialized a proprietary
advanced solar thermal technology with integrated
energy storage that solves the intermittency issues
experienced with other renewable energy sources.
SolarReserves U.S. developed technology uses mirrors
to concentrate sunlight to directly heat molten salt and
then store it so electricity can be produced day and

night, with no fossil fuel required. Solar facilities using
this technology operate like fossil fuel or nuclear
powered plants except with zero emissions or
hazardous waste. The deployment of this technology
brings additional bene ts to global economies through
job creation, greater energy security, and a more
sustainable future. Since the companys formation in
early 2008, SolarReserves experienced team has
assembled a pipeline of 6.6 gigawatts across the worlds
most attractive, high growth renewable energy markets.
SolarReserve is headquartered in California, and
maintains a global presence with seven international
oces to support widespread project development
activities across more than 20 countries.

LEE McINTIRE
CHIEF EXECUTIVE
OFFICER
TERRAPOWER, LLC
Washington-based TerraPower develops sustainable,
carbon-free, cost-competitive generation technologies
and solutions for the nuclear energy sector. The companys
mission-driven innovation aims to bring new energy
technologies rapidly to market, such as the Traveling Wave
Reactor (TWR). TerraPower developed this fast-reactor
technology with the goal to make clean, carbon-free,
low-cost electricity available to the world, especially to the
1.6 billion people without access to dependable electricity.
As a rst-mover in a growing global market, TerraPowers TWR
is an attractive technology to sovereign nations and private
companies alike. This technology will simplify the nuclear
energy supply chain, signicantly mitigate shortcomings of

existing nuclear energy technologies, and operate at a higher
eciency than current reactors. TerraPower plans to have
commercial TWR plants online by the early 2030s.
TerraPower aims to unite the strengths and experiences of
the worlds public and private nuclear energy sectors to
drive change. Since 2008, the company has established
relationships with companies, universities and national
labs, creating an international supply chain for advanced
reactor components. In addition to developing the TWR,
TerraPower explores options to improve other nuclear
energy technologies.
To learn more, visit www.TerraPower.com.
ALAN ARMSTRONG
PRESIDENT & CEO
WILLIAMS
Williams (NYSE: WMB) is a premier provider of large-scale
infrastructure connecting North American natural gas and
natural gas products to growing demand for cleaner fuel and
feedstocks. Headquartered in Tulsa, Okla., Williams owns
approximately 60% of Williams Partners L.P. (NYSE: WPZ),
including all of the 2% general-partner interest.
Williams Partners is an industry-leading, large-cap master
limited partnership with operations across the natural gas value
chain from gathering, processing and interstate transportation
of natural gas and natural gas liquids (NGLs) to petchem
production of ethylene, propylene and other olens. In addition,
Williams Partners processes oil sands o-gas in Canada.
With major positions in top supply basins in North

America, Williams Partners owns and operates more
than 33,000 miles of pipelines system wide including
the nations largest volume and fastest growing
pipeline providing natural gas for clean-power
generation, heating and industrial use.
Williams Partners handles approximately 30% of
US natural gas and supplies nearly half of the natural
gas that heats New York City. As demand for natural
gas continues to grow, William Partners is executing
on a large portfolio of projects and expansions to
connect the best supplies of natural gas and NGLs
with the best markets.
www.williams.com
YASREF
The Yanbu Aramco Sinopec Rening Company (YASREF) is
a joint venture between Saudi Aramco, Saudi Arabias
national oil company which owns 62.5% of YASREF, and
Sinopec, Chinas largest national oil company which owns
37.5 percent. YASREF operates a world class fullconversion renery constructed on the banks of the Red
Sea that processes 400,000 bpd of crude oil into gasoline,
high quality diesel, and liqueed petroleum gases (LPG) as
well as byproducts including sulfur and petroleum coke for
export. The rening complex was designed to process
predominantly Arabian heavy crude oil.
YASREF is a signicant addition to the impressive
downstream portfolio of Saudi Aramco, and it also further
serves to build on the strategic partnership with Sinopec,
Saudi Aramcos largest crude oil partner and buyer. Both
companies bring commercial and technical expertise to the
joint venture which will enhance the trading of transportation
fuels between a signicant energy producer and an equally
signicant consumer. In addition, YASREF represents a
continuing step forward in the strategies of Saudi Aramco
and Sinopec to drive integrated growth further downstream
to capture additional value along the hydrocarbon chain.
The Renery is a product of the Kingdom of Saudi Arabias
strategy to address global energy demand while attracting
foreign investment to expand the countrys economy. Due
to its diet of large quantities of heavy crude, not only does
the facility ease tight rening capacities but it also
addresses the mismatch between the available crude
supplies and current renery congurations that
complicate the industry worldwide.
YASREF was registered in January 2012 with the single
purpose to establish, operate, and manage a full
conversion-rening complex. Being on the Red Sea just
south of the Suez Canal, YASREF possesses the location
advantage to eectively and eciently supply both
international and domestic markets. The products include
90,000 bpd of gasoline, 263,000 bpd of ultra-low sulfur
diesel, 6,200 metric tons per day (mtd) of petcoke, 1,200
mtd of sulfur, and 140,000 tons per year of benzene.

YASREF also has discussed plans for potential growth that
could include future production of petrochemicals and
other products to support downstream industries.
As a fully operating renery, YASREF has generated 1,200
direct employment opportunities in the Kingdom and some
5,000 additional indirect jobs through industrial
development.
YASREFs President & CEO Mohammad Saud Alshammari
joined Saudi Aramco in 1981 working in a variety of
entrepreneurial and leadership capacities worldwide. He
led the construction, start-up and operation of the YASREF
mega renery and terminal facilities as well as the
companys development after joining the company in 2012.
Previously, Alshammari assumed a number of progressive
leadership positions including serving as the President &
CEO and Board member of Saudi Rening Inc. in the USA.
Additionally, he has sat on the Boards of Showa Shell in
Japan, Aramco Services Company and Motiva Enterprise,
and been a member of steering committees overseeing
the development of the Fujian Project in China and Sadara
Chemicals Company. Alshammari is team manager
responsible for the development of the Saudi Aramco
Rening and Marketing Strategy up to 2030.
YASREFs Continuous Catalytic Reformer unit designed by UOP.
MURRAY FISHER
Senior Manager
Platts Global Energy
Awards
A NEW FOCUS ON
FINANCIAL OVERSIGHT
The Platts Global Energy Awards
program, now in its 17th year,
highlights corporate and individual
innovation, leadership and superior
performance from across the energy
arena. The 2015 winners were chosen
from nearly 200 nominees hailing
from nearly three dozen countries on
four continents.
Asias ongoing advancement in
global energy is evident in this years
CEO of the Year category, with nearly
75% of nalists hailing from the
region. The US also made a strong
showing, with some 55% of the
nalists in all categories; India and
the United Kingdom were also
well-represented. These gures are
not only indicative of a wide
geographic footprint, but also reect
several changes to long-standing
awards categories and the addition
of new ones.
More than 30 nalists competed in
2015s new or rened categories. The
Financial Deal of the Year category
showcases performance from private
equity, hedge funds and other
investment groups and the vital role
they are playing amid the energy
industrys consolidation and low oil
price environment. The new Industry
Leadership Award Downstream

captures a broadening array of
rened products entrants, including
makers of petrochemicals and LPG.
The Industry Leadership Award for
Power and Grid Edge Award,
evolutions of previously existing
awards, now recognize performance
not only in power generation, but also
storage, load management and
distributed generation on both sides
of the meter.
The winners, chosen by a judging
panel that included former national
regulators, legislators, heads of major
energy companies and leading
analysts, consistently stood out for
their strong nancial oversight. And in
another sign of the evolution of the
world of energy, both the Rising Star
Individual and CEO of the Year
honors went to females from outside
the US.
These top performers deserve
commendation for their hard work
and dedication, as well as for their
decisive actions in an ever-uctuating
market. For their exemplary
leadership, performance and
innovation, Platts is proud to honor its
recipients of the 2015 Platts Global
Energy Awards.
GLOBAL ENERGY AWARDS
ENERGY COMPANY OF THE YEAR

Repsol
Spain
Judges select the Energy Company
of the Year Award winner, the
programs highest honor, from all
Platts Global Energy Awards nalists.
The award recognizes all-around
excellence in executing a total energy
strategy. This years honoree was a
prominent contender in multiple
categories, taking the top prize for
both Industry Leadership
Downstream and Rising Star
Individual, and receiving high marks
for Strategic Deal of the Year. Despite
its considerable size, Spains largest
oil and gas company was described
during deliberations as brave,
agile, swift and strategic.
Judges recognize in Repsols
leadership an athleticism necessary
to survive and compete in todays
global energy markets.
Repsols roots are in rening; the
company was the state-owned rener
before being privatized in the 1990s. It
has built a signicant upstream
portfolio over the past 15 years,
claiming more than 40 discoveries
since 2007, including eight of the
largest nds worldwide, and proved
reserves of 2.2 billion barrels of oil
equivalent.
The company currently produces
almost 700,000 barrels of oil
equivalent a day and renes
approximately a million barrels a day
at its six reneries, ve in Spain and
one in Peru. Together, these
reneries processed 9.5 million tons

of crude oil in 2014, a 3.7% increase
compared to the previous year.
Repsol owns and operates
approximately 4,500 service stations
in Europe and Latin America. The
company also has a signicant
chemicals business based in Europe,
and is one of the worlds largest LPG
marketers through its business in
Spain and Latin America.
In 2014, the company completed its
$8.3 billion acquisition of Canadian oil
company Talisman Energy to bolster
its upstream businesses, funded in
part with proceeds from its
settlement with the government of
Argentina over its YPF expropriation.
It also reported strong results in its
core operations downstream, which
balanced the companys overall
earnings due to the counter-cyclical
hedge that the downstream business
units provide in a conservative
commodity price environment. Again
and again, they negotiated
themselves o the brink, marveled
one judge, applauding Repsols ability
to execute strategic moves across
the board.
CEO OF THE YEAR

Nishi Vasudeva
Hindustan Petroleum Corporation Ltd
India
The CEO of the Year, who was also
honored by Platts as its 2015 Top 250
Asia CEO of the Year, has eectively
turned around state-owned
Hindustan Petroleum Corporation

Limited (HPCL), delivering an increase
of over 200% in stock market value
during her rst year on the job. Judges
duly noted not only this leaders sharp
business acumen, but also her ability
to smash the glass ceiling: Chair and
Managing Director Nishi Vasudeva is
the rst female head of a large Indian
oil company, and one of only 14
women to helm a Global Fortune 500
company.
Vasudeva, the daughter of a railway
ocer who migrated to India, is a
graduate of the prestigious Indian
Institute of Management Calcutta.
She has spent 36 years in marketing,
corporate strategy and planning; and
information systems roles within the
petroleum industry, rst at
Engineers India Ltd. and then at
Bhagyanagar Gas Ltd. She has also
served the World Petroleum Council
as Vice President Youth & Gender.
At HPCL, she oversees 11,000
employees in three oil reneries, 127
depots and terminals, 45 LPG
bottling plants, and more than
13,200 fuel retail outlets.
Vasudeva is well known for her
courage and dedication to making a
dierence, both at a company level
and in the lives of employees and
customers. During her tenure,
performance metrics have soared:
share price and market capitalization
have increased, and the company,
which boasts $36 billion in revenue,
reported a record pro t of $245
million last year, up 37% despite
challenging market conditions. She
has strengthened the companys
primary distribution infrastructure,
commissioning new depots and
revamping facilities. HPCL is
therefore better equipped to
withstand the areas oods and

cyclones, earning widespread praise
for its ability to quickly restore power
to aected customers. The company
is also exploring its options
upstream, through acquisition of
minority stakes in Australian gas
assets.
As CEO of the Year, both in her region
and internationally, judges felt
Vasudeva exhibited strategic
marketing and eective nancial
management skills, as well as
consistent clarity of vision and sound
judgment. She is set to retire in 2016;
judges felt that her immediate impact
on HPCL will have long-term positive
resonance throughout the energy
community.
LIFETIME ACHIEVEMENT AWARD

Terry Boston
PJM Interconnection
United States
The judges unanimous selection for
this years Lifetime Achievement
Award boasts outstanding
performance in a challenging, highly
regulated sector. Early on in the
deregulation of the markets, PJM
Interconnections Terry Boston
steered the industrys attention away
from a sole focus on generator
protability and back to the
importance of reliable transmission.
Since 2008, Boston has served as
president and CEO at PJM, where he
oversees the largest power grid in
North America, serving 62 million
people; and the largest electricity

market in the world, averaging $138
million per day of transactions.
Following the deregulation of the
electric industry, Boston led the
discussion and implementation of new
rules for wholesale markets, in the
process helping PJM strengthen its
position as an industry leader in grid
operations and market design and
eciency.
Boston, recognized by judges as a
household name in the industry, is
known as a strong proponent of
reliable power grids. To help lead this
evolution of the power industry, he has
served on numerous industry boards
and committees, including the Electric
Power Research Institute and a
Bipartisan Policy Center task force to
develop recommendations for US
energy policy. He is the immediate
past president of the Very Large
Power Grid Operators of the World and
the Association of Edison Electric
Illuminating Companies. In 2014,
Boston was elected to the National
Academy of Engineering, one of the
highest professional honors accorded
an engineer.
Prior to joining PJM, Boston was the
executive vice president of the
Tennessee Valley Authority, the
nations largest public power provider,
which he joined as a project engineer
in 1972. In his 35 years at TVA, Boston
directed divisions in transmission and
power operations, pricing, contracts
and electric system reliability, earning
a reputation as a straight shooter
without a political agenda that served
him well as he ascended to national
and international stages.
The judges felt that Boston deserves
lifetime recognition not only for his
business acumen, but also for his

reputation as a forward-thinking,
approachable leader with a unique
aptitude for team building. Boston
retires from his 43-year career at the
end of 2015. Judges concur with his
Congressman, who honored Boston
with a statement in the Congressional
Record ocially thanking him for
providing access to reliable,
aordable, and high quality electricity
Mr. Boston and his team truly keep
the lights on for millions, and for that
we are grateful.
RISING STAR AWARD COMPANY

SolarReserve
United States
The global demand for renewable
energy generation is expected to grow
by 45% by 2020. As renewable energy
penetration grows, the need for
utility-scale renewable generation
with storage technology is
increasingly important to mitigate its
fundamental barriers: intermittency
problems, dispatchability during peak
demand periods, and transmission
system reliability. Or, as one judge put
it, without proper storage, Solar
power is a tough business; it only
works when the sun is shining. This
years Rising Star Company alleviates
solars inherent issues through its
creative use of integrated energy
storage.
Founded in 2008, California-based
SolarReserve was formed to
commercialize advanced molten salt
technology for utility-scale
concentrating solar thermal power.
SolarReserve rst exclusively licensed

and then acquired Aerojet
Rocketdynes molten salt technology,
developed by Rocketdyne scientists
over a period of two decades.
SolarReserve now develops utilityscale solar power projects, which
include electricity generation by solar
thermal energy and PV panels. The
company currently has more than $1.8
billion of projects in construction and
operation worldwide, with
development and long-term power
contracts for 482 MW of solar projects
representing $2.8 billion of project
capital.
big money. The company has

received environmental approval to
build one of the worlds largest solar
projects in Chile and is also
developing in Saudi Arabia, Egypt,
China, Australia and Mexico. Judges
believe that this Rising Stars
approach to meeting growing energy
demands is potentially
transformational for the global
energy economy.
Of particular interest to judges,

SolarReserve has mitigated solars
intermittency issues by
commercializing a proprietary
advanced solar thermal technology
with integrated energy storage. The
technology uses mirrors to focus
sunlight to directly heat molten salt
and then store it so electricity can be
produced around the clock. Solar
facilities using this technology work
just like coal, oil, natural gas or
nuclear power plants only with zero
emissions, zero hazardous waste and
low water use, equipping solar to
compete more directly with fossil
fuels. The company claims that when
combined with its technology, this
groundbreaking use of molten salt
represents the most exible,
ecient and cost-eective form of
large-scale energy storage available
today.
RISING STAR AWARD INDIVIDUAL

Maria Victoria Zingoni
Repsol
Spain
The Rising Star Individual winner this
year hails from Repsol, the Energy
Company of the Year, where she
served rst as Executive Director of
Corporate Financing before being
promoted to Executive Managing
Director of Downstream in 2015. Her
colleagues applaud her as one of the
most decisive members of Repsols
top management in the last decades
two most dening moments: the
seizure of its Argentine-based
business YPF in 2012, and the
companys $8.3 billion acquisition of
Canadian oil company Talisman
Energy in 2014.
Judges applauded SolarReserve,

founded just seven years ago, for
applying intelligent solutions to the
industrys core issues, and for
surviving a challenging period for
the solar industry, emerging with
real scale, geographic diversity, and
In April 2012, eager to meet domestic

fuel demand and increase its cash
ow, Argentinian government ocials
made a move that infuriated Spain, its
largest foreign investor: it expropriated
Repsol YPF SAs majority stake in
Argentinas formerly state-owned YPF
energy company. As the corporate

nancial manager, Zingoni was directly
responsible for supervising nancial
planning and structuring, as well as
risk management, during this time of
extreme crisis.
A native of Argentina, she was one of
three negotiators sent to hold nal
talks with the Argentinean
government in pursuit of a settlement.
She then led the sale of bonds to the
government of Argentina as
compensation for YPFs
renationalization in February 2014, a
strategic operation that allowed
Repsol to strengthen its nances and
move forward.
The YPF settlement of $5 billion, paid
in Argentine sovereign bonds in May
2014, went straight to work as
nancing for Repsols Talisman
acquisition, which practically doubled
the reserves and production of the
Repsol Group, and lled a gap in the
business left by the YPF expropriation.
Zingoni then led the team responsible
for implementing the integration of
Talisman, accomplishing it in a mere
six months.
In May 2015, Zingoni moved to her
current post heading Repsols
downstream area, directing a
workforce of 20,000 in Rening,
Marketing, Chemicals and LPG, and
reporting directly to the CEO. She is
now responsible for this cashgenerating business, one of the most
competitive in the sector.
In her rapid rise through the company,
Zingoni has survived and prevailed in
situations that were high stress and
high stakes, marveled judges. Shes
truly a star now, with an equally bright
future ahead.
E N E RGY I N V E STOR S S I NC E 1983
FINANCIAL DEAL OF THE YEAR

Apex Clean Energy; First Reserve;
Gulf Power Company; Morgan Stanley
Commodities Group Inc.
United States
Specic to investment and capital
groups, Financial Deal of the Year is a
new award that highlights the strategic
spirit that nancial rms bring to
energy. One multicourse deal with
many players stood out to judges for
the innovative nature of its contract
and nancing structure: First Reserves
acquisition of the Kingsher Wind
Project from Apex Clean Energy; and
Morgan Stanley Commodities Groups
related agreement to nancially hedge
Kingshers energy output.
The Kingsher Wind Project, located in
central Oklahoma, is a 298 MW wind
energy generating facility developed
by Apex. The project cost an
estimated $452 million in private
investment and is expected to bring a
total of $446 million into the local
economy over 25 years. Upon
completion, Kingsher will be capable
of powering 100,000 homes each year.
In a unique 20-year wind power
purchase agreement by Gulf Power
with Morgan Stanley, 178 MW of
Kingshers electricity will be sold to
Florida-based Gulf Power for delivery to

its local grid, providing approximately
5% of the companys energy. The
20-year agreement is expected to save
Gulf Power customers between $11
million and $48 million. Through its
arrangement with Morgan Stanley, Gulf
Power is entitled to receive and retain
all environmental attributes, including
renewable energy credits, associated
with Kingshers output. Gulf will return
any proceeds from REC sales to
customers through its fuel charge. In
issuing unanimous approval of the
agreement, Floridas Public Service
Commission chairman stated, Not
only does this project encourage
renewable energy development, its
also cost eective for Gulfs
customers.
Judges were captivated by the
projects mitigation of the inherently
variable nature of wind generation
through the energy hedge, as well as
the involvement of expert players who
are uniquely positioned to optimize the
agreement. For example, Morgan
Stanley is not only well qualied to
hedge Kingshers power and
environmental attribute risks; it is also
able to manage delivery of
environmental attributes from windrich Oklahoma to the high-energydemand service area in Florida. Judges
especially noted the involvement of
First Reserve, the ultimate owner and
nancial manager of Kingsher, as the
largest global private equity and
infrastructure investment rm focused
exclusively on energy. In recognition of
this innovative solution and the close
cooperation it required, judges salute
Apex Clean Energy, First Reserve, Gulf
Power, and Morgan Stanley for
executing the Financial Deal of the
Year.
STRATEGIC DEAL OF THE YEAR

Dynegy
United States
Deal activity in 2014 uctuated
throughout the energy industry but
reached ve-year highs in the power
sector, as utilities sought to grow
their earnings through mergers and
acquisitions. Against this busy
backdrop, Texas-based Dynegy
vaulted to the top of the category
with a deal of great strategic
signicance, transforming its
power generation eet and equipping
it for the long haul through the
acquisition of assets from Duke
Energy and Energy Capital
Partners (ECP).
Dynegys deal involved two highly
complex, interdependent transactions
executed simultaneously, in a bid to
strengthen the company and reduce
its risk through increased scale and
market and fuel diversity. Through the
deal, Dynegy gained 12,500 MW of coal
and gas generation from Duke and
ECP, acquiring Dukes assets and retail
business for $2.8 billion in cash and
ECPs power generating assets for
$3.45 billion.
The transactions doubled Dynegys
power generation capacity from
13,000 MW to nearly 26,000 MW,
capable of generating enough
electricity to power about 21 million
homes in eight states, as well as
providing retail electricity to 830,000
residential customers and 23,000
commercial, industrial and municipal
customers.
The agreements shot Dynegy from

the eighth to third-largest power
generator in the US, and gave it the
largest combined cycle eet in two of
the most attractive US power
markets, PJM and ISO-NE. The
company estimated that its larger
size enables it to drop overhead costs
by 34% to $1.10 per MWH.
The nancial communitys reaction to
the transactions was immediate and
positive. The announcement of two
large purchases on a single day
boosted Dynegys stock nearly 8.8%.
Standard & Poors subsequently
raised its corporate credit rating on
Dynegy based on expectations of
lower business risk with the
acquisition The acquisitions will
improve Dynegys scale and market
diversity materially.
Judges concurred, noting that coal is
not easy to nance and declaring
Dynegys meticulously orchestrated
eorts a staggering deal, a power
play and a game changer for the
addition of what its President and CEO
Robert C. Flexon called, substantial
scale as well as geographic and fuel
diversity. This Strategic Deal of the
Year gives Dynegy the strength and
heft it needs to persevere in a dicult,
deregulated electricity business.
INDUSTRY LEADERSHIP AWARD:

BIOFUELS
Honeywell UOP LLC
United States
Tight competition in the Industry
Leadership Award for Biofuels
category reects a competitive
marketplace, as the momentum

behind this industry is challenging to
maintain. This years winner, with a
long record of innovations including
the rst biodegradable detergents,
unleaded gasoline and the catalytic
converter, bested its rivals by
applying its substantial resources
towards developing renewable
transportation fuels.
Honeywell UOP LLC, headquartered in
Illinois, has a 100-year history as an
international supplier and licensor for
the petroleum rening, gas
processing, petrochemical production
and major manufacturing industries.
The company boasts more than 3,000
active patents; and more than 60% of
the worlds gasoline and 85% of
biodegradable detergents are made
using its technology.
Now UOP, a world leader in licensing
renery process technologies, aims
to increase the renewable content in
the global fuel supply. Two of its
products include Honeywell Clean
Diesel, produced via the companys
Econing process, which is a
sustainable high quality renewable
diesel; and Honeywell Green Jet Fuel,
optimized to maximize renewable jet
yield.
These biofuels oer many benets
for users: they provide a high degree
of feedstock exibility, reduce costs
and risks of compliance by enabling
users to make renewable fuels
instead of buying them, and produce
high yields. As a demonstration of the
processes exibility, UOP has
converted inedible oils such as used
cooking oil to produce over one
million gallons of renewable diesel
and jet fuel for fuel certication
eorts and military and commercial

airline demonstrations.
Commercially, UOP has proven the
fuels capabilities at Diamond Green
Diesel, a 10,000-barrel-per-day
renewable diesel renery. The plant
is capable of annually converting
approximately 1.3 billion pounds of
fat into more than 150 million gallons
of renewable diesel. UOP also works
with reners to identify underutilized
renery assets and convert them to
green reneries; its agreement with
Italys largest energy company, Eni
S.p.A., marks the rst conversion of
a process unit producing petroleumbased fuel into a unit for
renewable fuel.
UOPs ability to produce a
sophisticated biorenery that
creates end products out of a waste
stream that is otherwise a big
problem registered with judges.
They feel that the companys solution
to a worldwide dilemma, emblematic
of the companys history as an
innovator, is deserving of the Award
for Industry Leadership in Biofuels.

EXPLORATION & PRODUCTION
Anadarko
United States
The Industry Leader in the
Exploration & Production category is
also its 2013 winner, and judges noted
that on some levels, Anadarko is
continuing to do what they do best.
However, in navigating a recent
leadership transition and a
challenging commodity-price
environment, this repeat winner has
played oense, not defense; it

impressed judges with its strong
nancial oversight, operational
performance and commitment to
CSR.
Texas-based Anadarko Petroleum is
among the worlds largest
independent oil and natural gas
exploration and production
companies, with 2.86 billion barrels
of oil equivalent of proved reserves at
year-end 2014 and activity in more
than 15 countries. The company,
which employs more than 6,000
worldwide, expects to invest
between $5.4 and $5.7 billion in 2015
to nd and develop oil and natural
gas resources.
In 2012, when Al Walker replaced the
retiring Jim Hackett as Anadarkos
CEO, the companys meticulously
crafted succession plan kicked into
gear. This smooth transition enabled
the companys management to focus
on balancing the portfolio between
predictable, repeatable US onshore
opportunities and large-scale oil
projects in the Gulf of Mexico and
international basins.
The companys balanced portfolio
translated to nancial success; as of
2015, the company has delivered
record sales-volume growth of 11%;
reported a reserve-replacement ratio
of more than 160% at competitive
costs; and accelerated more than
$2.5 billion of value through asset
monetization.
Operationally, Anadarko has also
continued to exhibit the excellence
that captivated judges back in 2013,
when they rewarded the companys
massive LNG nd in Mozambique.
Recently the company has achieved

rst oil at the Lucius megaproject in
the Gulf of Mexico, advanced its
Heidelberg and TEN LNG deepwater
projects, as well as Mozambique;
and successfully appraised
discoveries at Shenandoah and Paon
in the Gulf of Mexico and o shore
Cte dIvoire. Since 2009, the
company boasts an average 70%
exploration and appraisal success
rate, well above the industry
average.
the exploration and production

business and focused on becoming
the midstream infrastructure leader in
all North American basins where the
company had a presence. Now,
Williams planning has paid o in its
new iteration as a premier
infrastructure network one that
touches about 30% of US natural gas
and spans the value chain from
gathering, processing and
transmission all the way to
petrochemical services.
Beyond its nancial and operational

performance, Anadarko has
signicantly expanded its corporate
social responsibility initiatives
incorporating information from
regulators and other stakeholders
feedback to improve the companys
operational impacts.
As long-term demand for natural

gas continues to grow, Oklahomabased Williams is executing a series
of large-scale, integrated projects
that move surging supplies to
high-value markets. These range
from the Rockaway Lateral Project
serving approximately 1.2 million
natural gas customers in New York
City to its Gulfstar FPS (Floating
Production System), moored in
4,000 feet of water in the Gulf of
Mexico. In total, the company
expects to bring into service about
$4.5 billion in large-scale projects in
2014 and 2015, and plans more than
$30 billion in capital projects
through 2020.
Consistency is the key to success

for Anadarko, armed one judge,
noting that maintaining consistency in
todays uctuating energy markets is
the true hallmark of an Exploration &
Production Industry Leader.

MIDSTREAM
Williams
United States
Williams is another familiar name to
judges, who awarded the company
2014 Deal of the Year honors for its
nearly $6 billion acquisition of Access
Midstream Partners. The transaction
represented a strategic move on
Williams part, as the company exited
Judges were particularly taken with

Williams commitment to operational
excellence, which prevents loss of
product and environmental damage.
The company literally looks for the
cracks, said judges, employing
everything from helicopters, bicycles
and old-school walking the lines to
the latest technology. The companys
mobile app, Pi, enables its eld
technicians to monitor metrics on gas
pressure, ow and vibration levels and
resolve slowdowns in natural gas ow
improving eciency and, in one
region, raising gas production

revenues between $1 million to $2
million.
By aligning its nancial performance
and capital spending with lower
assumptions for oil and gas prices
based on the historically low
commodity price environment, Williams
expects strong cash ows in 2015 with
about 88% of the gross margin coming
from fee-based revenues.
Judges remarked that this Midstream
Industry Leadership winner, with its
large scale and long-term contracts,
has overcome many challenges and is
well-positioned to tackle many more
with its trademark agility and strong
resolve.

DOWNSTREAM
Repsol
Spain
This new category recognizes
exceptional operational and nancial
performance in an ever-changing
downstream market and is the third
honor this year for this company in
the Platts Global Energy Awards.
Repsol, who faced criticism from
analysts in the early part of the
decade for not spinning o its
downstream assets and focusing on
its booming upstream business,
argued that an ecient downstream
unit was a good counter-cyclical
balance to upstream operations when
oil prices uctuate. The company then
committed to investing in and

expanding its rening system a
decision that once again exhibits the
companys talent for making sound,
strategic decisions and executing
them awlessly.
Repsols downstream activity
involves the supply and trade of crude
oils and products, oil rening, the sale
of petroleum products, the
distribution and sale of LPG and the
production and sale of chemical
products. In recent years it has
invested $4.24 billion to upgrade its
Spanish rening operations, enabling
the company to convert a larger
portion of the crude oil processed
into transportation fuels. The
modernization also allows Repsol to
process heavy types of crude oil from
Mexico and Venezuela, which sell at a
lower price than other, lighter
varieties of crude oil.
In upgrading its downstream
operations, the company applied its
talent for innovation in both processes
and management. Its renery in
Cartagena , whose overhaul was
Spains largest-ever industrial
investment, is among the most
ecient in Europe, boasting the
worlds rst fully automated coke
cutting process. Repsol has also
introduced an innovative system of
joint management of its ve Spanish
reneries, another rst in Europe,
ensuring that the ve plants, with their
dierent rening schemes, operate as
a single unit and can be managed
accordingly.
Repsols investments in revitalizing
plants are now paying o. The
companys rening margin reached a
record $9.1 per barrel in the rst half
of 2015 up from $8.7 per barrel in

the rst quarter and from $3.1 per
barrel a year earlier. It recently
unveiled a strategic plan to take it
through 2020, with a focus on
eciency and asset portfolio
management. The judges look for
continuing strong results from this
sophisticated and wellorchestrated industry leader, thanks
to its innate ability to do business
well all along the value chain.

POWER
Bruce Power
Canada
Proponents of Canadas nuclear power
plants, which supply about 15% of the
countrys electricity, point to its
merits: nuclear has zero carbon
emissions and generates no
greenhouse gases, while cleaning the
air and generating the same reliable
and aordable baseload power of
other energy sources. However, while
nuclears operating and fuel costs are
comparatively low, building nuclear
power plants is a capital-intensive
business. To solve this problem,
Canadas largest public-private
partnership, Bruce Power, came up
with a plan to refurbish older reactors
to provide the province with a reliable
baseload source of electricity.
In 2001, the prognosis on the four
existing CANDU reactors at the
Tiverton, Ontario site was grim; they
were expected to be dead by 2018
and required immediate attention.
The all-Canadian partnership formed
to develop the site included Borealis
Infrastructure Management (a
division of the Ontario Municipal
Employees Retirement System),
TransCanada, the Power Workers
Union and the Society of Energy
Professionals.
The group came to an agreement in
which the site is leased from the
Province of Ontario under a long-term
arrangement where all of the assets
remain publicly owned, while the
company makes annual rent
payments and funds the cost of
operating and investing in the units, as
well as waste management and
eventual decommissioning of the
facilities. The initial lease term was for
18 years with options to extend up to
an additional 25 years.
Today, Bruce Power operates the
worlds largest operating nuclear
generating facility and is the source
of roughly 30% of Ontarios
electricity. The company employs
approximately 4,100 people, 87% of
whom are investors, and is the single
largest private investor in Ontarios
electricity infrastructure with a total
injection of $10 billion into the Bruce
Power site since 2001. Its eight
reactors produce a total of 6,300 MW
of energy.
Though the public was initially wary
of the project, support for
refurbishment of nuclear plants in
Ontario has now reached a record
high approval rating of 81%. Judges
approved as well, observing that
Bruce Power saved the Canadians a
lot of money by taking a mothballed
nuclear eet and turning it into
low-carbon power, setting a new
standard for creative solutions within
the industry.
consumers receive signicant cash

payments and contribute to the
reduction in CO2 emissions.
GRID EDGE AWARD
ENERGY MANAGEMENT
REstore
Belgium
The new Grid Edge Award for Energy
Management reects the blurring lines
between energy consumers and the
grid, as utilities, end-users and vendors
all seek new ways to solve the problem
of intermittency. The inaugural winner
is REstore, a young Belgian energy
technology company that earned
judges respect for maximizing the
European markets opportunities for
demand response technology and by
operating at lighting speed.
Historically, energy companies have
activated fast reacting power plants to
eliminate grid imbalances a costly
solution that emits vast amounts of CO2.
Today, automated demand response is
increasingly used to balance the grid,
emitting less CO2 and at lower cost.
Founded in 2010, REstore has
developed a solution that aggregates
and controls exible capacity from
both commercial and industrial
consumers in real time previously
unheard of in the market to oer a
large-scale, reliable virtual power plant
to energy utilities and transmission grid
operators, with technical specications
comparable to a gas-red plant.
The companys proprietary Flexpond
platform is used by more than 80 of
Europes largest industrial energy
consumers including ArcelorMittal,
Praxair, Sappi and Barclays to curtail
their power demand without
impacting their industrial processes.
In exchange, REstores industrial
In the past four years, REstore has

grown from a few megawatts of
industrial load to more than 1 gigawatt
of peak load under management. The
companys revenues grew 700% from
2013 to 2014, and it has increased its
share of 95% reliable load from 250
megawatts to 350 megawatts.
REstores platform currently provides
100% of the available dynamic primary
reserve market in Europe. Long-term,
REstore aims to employ its growing
data analytics capability to harness
the vast quantities of real-time factory
data logged from customers and use it
to manage exposure to balancing
markets, spot energy markets and
mitigate peaks in energy consumption.
By implementing Flexpond in highopportunity countries and practicing
smart automated energy
management, REstore expects to
reach 20 to 30% market share by
2018. Judges are optimistic that this
Grid Edge leader will continue to attain
its goals; as one remarked
approvingly, They are newer in
Europe, and hundreds of industrials
are ready to play with them.
CORPORATE SOCIAL
RESPONSIBILITY AWARD
Reliance Industries Limited
India
Character is at the core of the
Corporate Social Responsibility (CSR)
award: it lies at the convergence of
protability and company values. This

years winner is Indias most protable
company, and its CSR performance is
a shining example of the enormous
positive impact on society that a
corporate giant can bring when it
commits to sustainable development.
Reliance, Indias second-largest
company by market value and led by
Indias richest man, earned 2015
revenue of $62.2 billion. Judges
admired its robust, long-standing
portfolio, deriving much of its
revenue from its verticals in the
energy value chain, including
businesses in exploration &
production, rening & marketing and
petrochemicals. It has also balanced
its portfolio with businesses in media,
retail and telecommunications.
Last year, Indian ocials began
requiring companies to spend 2% of
their net prot on social development.
The countrys energy sector was the
highest-spending sector in the
programs rst year, focusing on
issues such as hunger, poverty,
preventive health care, sanitation and
safe drinking water.
Reliance continued its primacy by
leading the energy sector and
exceeding the required spending
amount. The company aimed to
advance knowledge and improve
lives by rst assessing the segments
in which it could make the most
impact, and then deploying its
considerable resources to solve
problems. The companys CSR
programs are conducted under the
Reliance Foundation, which operates
initiatives in key segments including
Rural Transformation; Health;
Education; Sports for Development;
Disaster Response; Art, Heritage &

Culture; and Urban Renewal.
Reliances eorts, which judges called
diverse and comprehensive, include
supporting small farmers in order to
bridge the gap between rural and
urban India; operating multiple medical
care facilities including the areas only
private indoor facility for HIV/AIDS
patients; sponsoring 14,000 corneal
transplants for the visually impaired;
providing access to education for more
than 15,000 children in 13 schools;
creating exhibitions of Indian art;
building parks, walkways and jogging
paths; and even collaborating with the
NBA to bring the joy of basketball to
more than 800,000 children.
Project owners are reviewed on their

ability to recognize an opportunity,
move quickly to propose and nance
new facilities, manage all
construction issues, and bring the
project to life with scal
responsibility. One new renery on
the Red Sea, with its sheer scale and
degree of international coordination,
satised all criteria for judges on an
impressive scale.
Judges marveled at the programs

successfully undertaken by Reliance,
and appreciated that its long-standing
tradition of social responsibility
predates the governments
requirement to participate in CSR; as
famed basketball coach John Wooden
stated, The true test of a mans
character is what he does when no
one is watching.
Yanbu Aramco Sinopec Rening

Company (YASREF) is a joint venture
between Saudi Aramco and China
Petrochemical Corporation (Sinopec).
The project, registered in 2012 and
completed in 2014, is a fullconversion renery that covers
approximately 5.2 million square
meters in the Yanbu Industrial City on
Saudi Arabias west coast, a key
location to eectively supply both
domestic and international markets.
YASREF uses 400,000 barrels per
day of Arabian heavy crude oil to
produce gasoline, high quality diesel,
and LPG as well as byproducts
including sulfur and petroleum coke
for export.
CONSTRUCTION PROJECT
OF THE YEAR
Yanbu Aramco Sinopec Rening
Company (YASREF)
Saudi Arabia
The Construction Project of the Year
award recognizes excellence in
project execution and management.
The massive project incorporated

80,000 tons of structural steel, 1,300
km of pipe, 430,000 cubic meters of
concrete, and 11,000 km of cable. Its
products include 90,000 barrels per
day of gasoline, 263,000 barrels per
day of ultra-low sulfur diesel, 6,200
metric tons per day of petcoke, 1,200
metric tons per day of sulfur, and
140,000 tons per year of benzene.
YASREF plans to process Arabian
Heavy crude oil into high-quality
rened products that could include
future production of Paraxylene and
other products to support downstream
industries.
The sheer size of the project required

a formidable labor force. Nearly
40,000 workers were on site at peak
construction; within a few years of
operation, the company expects to
generate about 6,000 direct and
indirect jobs for the community. It has
already enrolled approximately 700
Saudi employees in the apprentice
program in order to ready them to
assume full jobs in operations,
maintenance, industrial relations and
engineering activities. The project
also adhered to local and
international environmental
guidelines; along Yanbus coast, pipes
and other infrastructure
requirements were strategically laid
to avoid any disruption to the
sensitive ecosystem.
Judges hailed YASREF for successful
construction of one of the worlds
largest and most sophisticated
reneries ahead of schedule and
within budget truly demonstrating
its mastery of large-scale projects.
ENGINEERING PROJECT
OF THE YEAR
Royal Dutch Shell
Netherlands
Top honors for this years Engineering
Project go to a Netherlands-based
company that judges called the best
technical oil company in the world.
Royal Dutch Shells prolic Bonga
North West project, which ties into one
of the largest oating production,
storage and ooading vessels in the

world, is an outstanding example of
success with a complex browneld
project. It is an important asset not
only for Shell and for the projects
home country of Nigeria, but also for
the global energy community, as it
suggests that one solution to the
worlds energy problem may lie in
deep water.
Shells Bonga North West
development, located approximately
120 km o the coast of Nigeria in the
Gulf of Guinea at a depth o more
than 1,000 meters (3,300 feet), is a
major browneld development with
subsea tieback to the Bonga Main
Field. Its four oil producing and two
water injection wells, which
commenced production in 2014,
contribute more than 40,000 barrels
of oil equivalent at peak annual
production. The oil and gas is
transported by a new undersea
pipeline from a production module
that sits in the seabed to a processing
facility with impressive metrics the
height of a 12-story building with a
deck the size of three football elds
oating on the sea surface above.
Collaboration, both internal and
external, was an important aspect of
Bonga North West. Shell leveraged the
experience of its global deepwater
workforce to facilitate knowledge
transfer, learning particularly from its
Houston group that works in the Gulf
of Mexico. Shell also helped create the
rst generation of Nigerian deepwater
oil and gas engineers through job
creation and training in its initial Bonga
project. These eorts continued with
Bonga North West: over 90% of people
who worked on the project are
Nigerian. The team also worked
seamlessly in conjunction with local

government ocials, who praised it as
the best oshore project in Nigeria,
and with two subsea vendors,
integrating production and water
injection systems in the project.
Judges took into account the
consequential environment of
Bonga North West, commending the
Bonga North West team for
successfully working 4 million hours
without a single injury. Once again,
Shell has earned the panels respect
by delivering this benchmark
project safely and ahead of
schedule.
COMMERCIAL APPLICATION
OF THE YEAR
Caterpillar Inc.
United States
The Commercial Application award
honors a company that is developing
a new technology and applying it to
boost efficiency, business
advantage and profits, with a
distinct focus on innovation that
results in commercial success.
Illinois-based Caterpillar, founded in
1925, is becoming synonymous with
innovation as it constantly works to
improve the construction and mining
equipment, diesel and natural gas
engines, industrial gas turbines and
diesel-electric locomotives it
manufactures.
Caterpillar Propulsion focuses on
moving beyond engines and parts to
supply fully-integrated vessel
systems for commercial marine
applications everything that
generates, distributes or consumes

power onboard a ship. The companys
new Cat Propulsion Twin Fin System is
a diesel-electric solution that saves
on fuel and emissions, while
improving overall vessel performance.
The Twin Fin System protects all of
the propulsion mechanical parts
within a ships hull prole while
retaining the cargo space-saving and
maneuverability claims made for
outboard solutions and
simultaneously oering critical
reliability gains.
Initially conceived for harsh operating
environments, the Cat Propulsion
Twin Fin System comprises a
compact electric motor and gearbox
conguration connected via short
drive shaft, rotating a pair of
controllable pitch propellers whose
performance is enhanced by two
tailor-made ns attached to the hull.
The Twin Fin solution can be retrot
to an existing ships propulsion
systems or custom-designed for new
vessels.
As Twin Fin has been engineered into
vessels, its customers testify to
eciency gains measurable across a
range of performance criteria. It oers
increased thrust and requires lower
input power thanks to larger
propellers running at low shaft speed
plus minimal mechanical loss.
Hydrodynamically designed ns
ensure homogenous water ow to the
propellers for lower fuel consumption
plus lower emissions, as the system is
lubricated with water instead of oil.
The rst twin n installation was a
retrot on a seismic survey vessel in
2014. The customer reported a 30%
gain in fuel eciency and an 84%
performance improvement in thrust

for the vessel, with no reliability
problems boosting its revenue by
approximately $3.3 million per year.
This is a big deal for global shipping,
one judge remarked, pointing out the
potentially massive impacts that Twin
Fins incremental improvement could
have on operating eciencies. Judges
agreed that in this competitive
category, Caterpillar earned the top
spot for bringing this game changer
to the shipping industry.
that judges called straight from the

pipe. Using proprietary algae,
sunlight, carbon dioxide and saltwater,
it eciently produces ethanol,
gasoline, jet and diesel the four most
important transportation fuels for
approximately $1.30 per gallon. This
process reduces greenhouse gas
emissions by 69% per gallon
compared to traditional fuels, meaning
just one of the companys 2,000-acre
modules equates to planting 40 million
trees or removing 36,000 vehicles
from the road.
BREAKTHROUGH SOLUTION
OF THE YEAR
Algenol
United States
According to scientists, CO2 levels are
the highest in 650,000 years. These
ndings have spurred many regulatory
actions including the EPAs recent Clean
Power Plan acknowledging the value of
carbon capture and utilization (CCU).
This technology is the cornerstone of
the Direct to Ethanol method
developed by Algenol, this years
recipient of the Breakthrough Solution
of the Year Award, which honors the
vast potential of technologies not yet
commercially deployed.
Judges, who have watched the

company expectantly since its Biofuels
win last year, appreciated that the
company has received EPA approval and
is now very close to being the rst to
commercially distribute ethanol made
from algae. The company has partnered
with Protec Fuel Management to market
and distribute ethanol from Algenols
commercial distribution module in its
home state of Florida, and to oer
Algenols future 18 million gallons per
year from its commercial plant, which is
planned for development beginning in
2016. Protec Fuel will distribute and
market the fuel for E15 and E85
applications for both retail stations and
general public consumption, as well as
eet applications. Beyond the US,
Algenol is also exploring projects in India
and China.
Algenol is a global, industrial

biotechnology company that plans to
commercialize its patented algae
technology platform for production of
ethanol and other biofuels. Algenols
CCU technology is unique in its ability
to monetize CO2. It takes carbon
dioxide pollution directly from power
plants, without the need for additional
treatment or ltration a pathway
Algenols founder and CEO, Paul

Woods, says his companys carbon
utilization technology reduces the
costs of emissions and improves our
environment, creating a win-win for
utilities and ratepayers. Judges feel
that with this revolutionary solution,
Algenol is truly leading the charge in
innovative and cost-eective
solutions to mitigate climate change.
Qatar
ENERGY
for life
Energy powers our world, it enriches our lives.
Qatari artist Yousef Ahmed uses energy as an inspiration for his art.
It fuels his imagination.
RasGas liqueed natural gas has a transformative and sustainable
effect on Qatars future.
Clean, reliable energy for Qatar and the world.
Energy for Life.
Energy and form are a major inspiration for my work

Yousef Ahmad - Artist

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INSIGHT

2016 GLOBAL ENERGY OUTLOOK

CARBON RISK RISING

NOTES ON AN EMISSIONS SCANDAL

PLUS: OPEC ON SHIFTING SANDS

A NEW FOCUS ON FINANCIAL

Visit www.marketview.com to learn more.

AMERICAS +1 312 628 2900 | EUROPE/AFRICA +44 207 280 0530

CARBON RISK RISING

LOSING SUPPORT: ASIAN FUEL SUBSIDY REFORM STUTTERS 16

For OPECs members, accustomed to oil prices of more than $100 a

MAKING HAY: REFINERS SEE SOME BRIGHT SPOTS

SURVIVAL OF THE FITTEST

RENEWABLES IN THE PINK

SANCTIONS AND TAX: RUSSIAS DILEMMA

BENDING IN THE WIND

With renewables, led by wind, set to become Europes biggest power

ENERGIEWENDING PATH OF PARADOXES

MOOD SWINGS: LOOKING FOR AN UPSIDE TO OIL PRICES

Germanys energy transition is throwing up a lot of challenges as well as

In a region already beset by political problems, falling energy prices and

PRIVATE EQUITY PULLS BACK IN EUROPE

PLATTS GLOBAL ENERGY AWARDS

A NEW FOCUS ON FINANCIAL OVERSIGHT: a special section on this years

DECEMBER 2015 INSIGHT 1

the West by the 1973 oil crisis was

They may well have a point, and

The Paris-based International Energy

Post-Paris, it should start to become

2 INSIGHT DECEMBER 2015

Powering the world. Its a massive undertakingone

From best-in-class oil and natural gas companies to

NORTH AMERICAN EDITION 2016

Chinas currency devaluations and the

4 INSIGHT DECEMBER 2015

export-orientated model and nds a

developing countries is decelerating,

Non-OECD oil demand increased by

For natural gas, between 2005-2014,

Bcm. The non-OECD accounted

GDP FIGURES FOR REFERENCE ONLY ...

Non-OECD coal demand grew by

DECEMBER 2015 INSIGHT 5

compared with an average for the

shift in growth from the non-OECD to

WORLD GDP VS PRIMARY ENERGY CONSUMPTION

World GDP market

Source: World Bank, BP

WORLD GDP VS OIL, GAS AND COAL CONSUMPTION

consuming devices, such as cars,

Source: World Bank, BP

6 INSIGHT DECEMBER 2015

World GDP market

However, in recent years, reecting

Urbanization is also thought by many

exporting countries like Indonesia

power generation. Instead the

Slowing growth in China will aect

may in fact become a net coal

CHINA GDP VS PRIMARY ENERGY CONSUMPTION

Source: World Bank, BP

DECEMBER 2015 INSIGHT 7

2014. In March, the EIA forecast that

There are forces militating against

However, in recent years, reecting

Physical risks, such as oods and