Mark Latham Commodity Equity Intelligence Service

Friday 19th June 2015
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    Oil and Gas


    China local railway bureaus allowed to lower freight rates up to 15%

    China’s local railway bureaus have been given the right to lower cargo freight rates by up to 15%, while more discounts would still need approval of the China Railway Corporation (CRC), a move aimed at boosting transport volume and facilitate marketization.

    Local railway authorities can decide the running time of rail lines and the number of rail wagons within their management, the CRC said.
    The move followed a decision by China Railway to deepen rail cargo reform and foster railways into modern logistics in April.
    In recent years, the share of rail cargo transport has been decreasing owing to the changes in energy and economic structure. Transport demand for bulk commodities like coal and steel, etc. has been continuing to decline, due to weak demand.
    Should the above policy be actually implemented, it will bode well for relevant companies. However, one railway insider told China coalResource that the discounts will not be applied to coal and oil shipment, without elaborating the reason.
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    Excerpts from Pope Francis encyclical on the environment

    Pope Francis on Thursday issued a major encyclical on the environment, called "Laudato Si (Praise Be), On the Care of Our Common Home". Here are some key excerpts from the official English version:

    Original document:

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    China’s energy guzzlers May power use down 1.1% on yr

    Power consumption of China’s four energy-intensive industries dropped 1.1% year on year to 145.1 TWh in May, accounting for 31.8% of the nation’s total power consumption in the month, the China Electricity Council (CEC) said on June 17.

    The ferrous metallurgy industry consumed 43.6 TWh of electricity in May, down 5.0% year on year but up 3.8% on month, compared to the growth of 1.2% in the previous year; while the non-ferrous metallurgy industry used 37.3 TWh of electricity, up 10.4% year on year and up 3.3% from April, lower than the growth of 2.4% a year ago.

    The chemical industries consumed 34.9 TWh of electricity in the month, down 2.1% year on year but up 2.0% from April, lower than a 6.4% growth a year ago; while power consumption of building materials industry dropped 6.6% year on year but increased 8.1% from April to 29.3 TWh, compared to a 7.8% rise in the preceding year.

    Over January-May this year, the four industries consumed a total 669.9 TWh of electricity, dipping 1.7% year on year, accounting for 30.6% of China’s total power consumption in the same period.

    The ferrous metallurgy industry consumed 206.9 TWh of electricity over this period, down 6.5% year on year; while the non-ferrous metallurgy industry used 176.3 TWh of electricity, up 5.0% from a year ago.

    The chemical industry consumed 169.7 TWh of electricity, up 1.6% year on year; while the building materials industry used 117 TWh of electricity, down 6.6% from a year prior.
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    Power glut leaves generation companies powerless

    Financial Express reported that even as private power producers with untied capacity are hoping to sign power purchase agreement with two states, Andhra Pradesh and Uttar Pradesh, they are anxious tariff levels could be unprofitable given the large surplus of power available.

    The Andhra Pradesh government has announced it is looking to buy 2,400 MW and tenders are slated to open on June 25th. Given that in the recent past the state has been compelled to buy expensive power generated by gas-based units, this time around it would look to procure electricity at a cheaper tariff.

    The purchase by the Andhra government will be the biggest long-term purchase of electricity in the country in the last four years. The stiff competition should see Andhra Pradesh procuring electricity at tariffs that were lower than in 2012, when it negotiated PPAs at an average levellised tariff of INR 4.82 per unit.

    Meanwhile, the Uttar Pradesh government is readying to negotiate the purchase of 3,800 MW and should sign PPAs in a couple of months. In 2012, the state was looking to buy 6,000 MW of power but ended up signing PPAs for for only 2,175 MW. It is now completing the purchase of the remaining amount, following some prompting by the state electricity regulator.

    Mr SK Agarwal, CFO of UPPCL, said that “We have appointed consultants and are moving ahead to buy close to 4000 MW.”

    While the sale of 6,200 MW via long-term PPAs should help revive the fortunes of the sector, power generators remain cautious since the total untied capacity in the country is more than three times, 20 GW, than the current round of procurement.

    Industry insiders believe that power producers whose plants have been up and running for months without PPAs in place would want to ink pacts to be able to utilise their assets. This, they believe, could lead to fierce bidding and drive down tariffs to unviable levels.
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    Chinese firms put cash to work in stocks

    Chinese firms put cash to work in stocks

    Chinese companies are turning to an unlikely source for profits in the soft economy: the country’s red-hot stock markets.

    Chinese companies are finding stock investing an attractive option as the wider economy struggles with tepid demand, excess industrial capacity, persistently high borrowing costs and other troubles. Their interest poses a challenge for policy makers, who want to nurture markets companies can tap for investment capital, rather than creating a venue for speculation.

    “The stock market is a big risk for China’s economy because the current rally isn’t supported by the economic fundamentals,” said China economist Zhu Chaoping at UOB Kay Hian Holdings Ltd., a Singapore-based investment bank. “Regulators will have their work cut out for them keeping the market in check.”

    According to the latest official data, profits earned by Chinese manufacturers rose 2.6 per cent from a year earlier in April, a turnaround from a drop of 0.4 per cent in the previous month. Yet nearly all of that increase—97 per cent—came from securities investment income, data from the National Bureau of Statistics show. Excluding the investment income, China’s industrial profits were up 0.09 per cent.

    Meanwhile, over the course of 2014, the value of stocks, bonds and other tradable securities owned by listed Chinese companies rose by 946 billion yuan ($152.4 billion), a 60 per cent increase, according to an analysis by Mr. Zhu.
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    Consol Energy launches IPO of CNX Coal partnership

    PBSIt reported that Consol Energy Inc. launched the initial offering of stock in a spin-off that will run its Pennsylvania coal mines, and possibly other operations.

    The Cecil-based coal and natural gas company said in a U Securities Exchange Commission filing that it would sell up to 11.5 million shares in CNX Coal Resources at a price of USD 19 to USD 21 per share. Consol will retain an interest of between 49.5 percent and 55.8 percent of the partnership, depending on whether underwriters of the offer exercise an option to buy more shares.

    Consol in March formed the spin-off as a master limited partnership, which provides certain tax benefits for energy companies while allowing them to seek separate investment in assets. CNX Coal Resources will include Consol's three coal mines in Greene and Washington counties — Bailey, Enlow Fork and Harvey — and could later assume Consol's Buchanan metallurgical coal mine in Virginia, its Baltimore export terminal and natural gas gathering pipeline system in Virginia, Kentucky and West Virginia.
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    China May power consumption up 1.6 pct on yr

    China’s power consumption rose 1.6% from a year ago and up 3.4% on month to 456.7 TWh in May, showed data from the National Energy Administration (NEA) on June 16.

    Power consumption by the residential segment was 53.3 TWh, rising 8.9% year on year but down 7.3% from April.

    For the non-residential segment, the primary industries – mainly the agricultural sector – used 8.7 TWh of electricity in May, a drop of 4.8% from the previous year but up 13.0% on month.

    The secondary industries – mainly the industrial sector – consumed 342.4 TWh of electricity, dipping 0.7% on year but up 6.1% from April.

    The industrial sector specifically, consumed 336.9 TWh of electricity in May, down 0.6% from the year before but up 6.2% from April, with the heavy industry accounting for 82.7% or 278.5 TWh, down 1.2% year on year but up 7.2% on month.

    Power consumption by tertiary industries – mainly the services sector – reached 52.3 TWh in May, increasing 9.8% year on year but down 2.8% from the month before.

    Over January-May of the year, China consumed a total 2,188.9 TWh of electricity, up 1.1% from the same period last year, the NEA said.
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    US Industrial Production Weakest Since January 2010 on Oil and Gas,dollar

    US Industrial production has missed expectations for 4 of the last 5 months (not seen outside recession) and has not seen notable MoM gains for 6 months in a row (not seen outside recession). Against expectations of a 0.3% gain, IP dropped 0.2% in May (not what the meteorconomists were hoping for). Without the over-stocking of motor vehicles, the number would have been a total disaster as Autos rose 1.&% MoM (the only industry to gain) but the 7.9% plunge in drilling/servicing at oil/gas wells is "unequivocally bad.

    "At 1.37% YoY growth, this is the weakest industrial production since January 2010. Minor upward revisions stalled the MoM drop streak but US factory output has now fallen YoY 6 months in a row (not seen outside recession)for the biggest drop in over 4 years.
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    Vedanta says buyout of Cairn India minorities moves it closer to becoming major player

    Vedanta Ltd's $2.3 billion offer to buy out minority shareholders in Cairn India moves the Indian mining and energy group closer to its goal of being a major diversified natural resources player, its chief executive said on Monday.

    The deal, which will help parent Vedanta Resources Plc repay hefty debts, is the first major structural change under Tom Albanese, the former Rio Tinto boss appointed chief executive of Vedanta Ltd last year.

    Vedanta began simplifying its complex structure with an overhaul in 2012, but further moves to clean up the group and buy out minorities in its cash-generating units have long been awaited by the market.

    Shareholders in Cairn India, India's cash-rich top private sector oil producer, will get one share in Vedanta Ltd for every share held, the companies said in a joint statement on Sunday.

    The shareholders will also get one redeemable preference share in Vedanta Ltd with a face value of 10 rupees, making the deal worth roughly $2.3 billion. That implies a premium of 7.3 percent to the closing price of Cairn's shares on Friday and a ratio of 1.04 for 1, marginally better than expectations of a simple 1 for 1 swap.

    "I believe this will provide us with an opportunity for a positive re-rating of the company," Albanese said in a call with journalists. "It will simplify the business and make it easier to understand, which is what holds back many investors in the UK market from considering the PLC right now."

    The deal is expected to close in the first quarter of 2016.

    Eliminating minority interests in the structure should also give the group unencumbered access to Cairn India's cash and align cash flow generation with debt, Barclays analysts said in a note. Cairn India has a roughly $2.6 billion cash pile.
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    Tough year, decline in prices to impact on ARM results

    Tough year, decline in prices to impact on ARM results 

    JSE-listed Africa Rainbow Minerals (ARM) expects its headline earnings for the year ending June 30 to fall by at least R1.8-billion year-on-year, owing to the decline in US dollar commodity prices compared with prices in the previous comparable period, particularly for iron-ore. 

    Headline earnings a share were also anticipated to be lower, dropping by at least 45% year-on-year. 

    However, the lower US dollar prices were partially offset by a weaker rand dollar exchange rate during the period.  

    ARM’s basic earnings were also expected to be negatively impacted by an unrealised mark-to-market loss on its Harmony Gold investment, owing to a decline in the Harmony share price of R21.61 a share, as well as an impairment of an operating furnace at Machadodorp Works.  

    The miner also noted that its basic earnings for the year could be at least 55%, or R1.8-billion lower than the R3.2-billion reported in 2014. The company’s results would be released in September.
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    Shanghai aims to cut energy use

    Shanghai aims to cut its energy consumption in industrial output by 2.3 percent this year, the Shanghai Commission of Economy and Informatization said yesterday.

    The city government will also replace around 2,000 coal-burning furnaces with clean-energy facilities this year, the commission said, adding that 27 percent of the work has been completed in the first five months of 2015.

    Shanghai will hold 352 programs to promote energy saving from June 13 to 19. A White Paper on the city¡¯s industrial energy consumption status in 2014 will also be released during the period.

    Officials and firms from Jiangsu and Zhejiang provinces will also join the programs as their officials also hope to address environmental issues in the Yangtze River Delta region.

    Shanghai has more than 180 professional companies that tackle pollution.
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    Former PetroChina vice chairman to be prosecuted for graft

    Former PetroChina Vice Chairman Liao Yongyuan has been expelled from the Communist Party and will be prosecuted for crimes including bribery, the party said on Monday, the latest official caught up in a sweeping corruption crackdown.

    Liao stepped down from his posts as vice chairman and non-executive director in March. He was the most senior of two vice chairmen at PetroChina, China's top oil and gas producer, making him the company's second-highest ranking official.

    The party's graft watchdog, the Central Commission for Discipline Inspection, said that Liao abused his position to help with job promotions, took "enormous" bribes and was an adulterer.

    "Liao Yongyuan was a senior party official, and seriously violated the party's political rules and the organisation's discipline," it said in a short statement.

    Liao and the evidence of his crimes will be handed over to the legal authorities for prosecution, it added.

    The Communist Party always conducts its own investigations before the courts are involved. As the party controls the courts, they generally do not challenge the party's accusations.

    The corruption watchdog had previously said Liao was under investigation for "serious disciplinary violations" stemming from his role as a general manager of China National Petroleum Corporation (CNPC), the parent company of PetroChina.

    Liao, a 30-year veteran at CNPC, was appointed vice chairman of PetroChina in May 2014, just months after China announced that several top executives from the two companies were under investigation. That included Jiang Jiemin, former chairman of both entities.

    President Xi Jinping has spent the past three years waging war on corruption, saying it threatens the party's very survival. Scores of senior officials in the party, the government, the military and state-owned enterprises have been brought down by the campaign.

    Some were protégées of former security tsar Zhou Yongkang, who was jailed for life last week after being found guilty of crimes ranging from taking bribes to leaking state secrets.

    In a separate statement, the graft watchdog said that Sun Hongzhi, who was a deputy head of one of China's business regulators, the State Administration for Industry and Commerce, had also been expelled from the party and would be prosecuted for bribery and embezzlement.
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    US Retail finally responds

    But May retail sales, reported Thursday, were up a robust 1.2% from April, and core sales–which exclude autos, gasoline and building materials—were up a solid 0.7%. Both March and April data were revised up.

    So it appears consumers, with a lag, have responded. The economy, reported to have shrunk at a 0.7% annual rate in the first quarter, may actually have been flat, andcould be growing as much as 3% in the current quarter.

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    Oil and Gas

    PTT to cut on LNG purchases

    PTT of Thailand could cut on buying LNG in the second half of 2015 as gas consumption is expected to be lower.

    Sources told Platts that gas consumption growth was lower than the expected 5% rise which cuts on PTT’s LNG requirements. The slow growth is due to a decline in domestic power demand.

    The company is assessing its market position for September after it completely abandoned LNG purchases in August.

    Although the gas consumption in 2015 is expected to grow slower than expected, a significant rise in LNG imports is predicted.

    The company already secured six cargoes through tenders, amounting to 370,000 tons of LNG, while it is also expected to receive 2 million tons of the chilled gas from Qatar through the 20-year supply deal it signed with Qatargas in 2012.
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    Shale Fallout Torments Nigeria as Flagship Oil at Decade-Low

    The shale boom that’s reduced U.S. dependence on overseas crude is reverberating in Nigeria as Africa’s biggest oil producer cuts the pricing for its flagship grade to the lowest in a decade.

    The country, part of the Organization of Petroleum Exporting Countries, will sell July supplies of its Bonny Light crude at 23 cents more than Dated Brent, according to an e-mailed statement from state-run Nigerian National Petroleum Corp. That’s the smallest differential since 2005 and compares with a 50 cent premium in June and $2.55 a year earlier, data compiled by Bloomberg show.

    Surging output from U.S. shale formations contributed to a market glut that drove crude almost 50 percent last year, roiling global markets as producer nations lost revenue and foreign-exchange reserves. While oil has pared losses this year, prices are still below what some producers including Nigeria and other OPEC members need to balance their budgets, data from the International Monetary Fund and ING Bank NV show.

    “Nigeria has no choice but to cut their price differential to fight for market share,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “The U.S. was its key oil buyer in the past but imports have been shrinking with more shale output in an already oversupplied market.”

    The slump in prices last year forced authorities in Nigeria, which relies on oil for about 70 percent of its income, to scale back budgeted spending and devalue the naira currency. The nation’s former finance minister, Ngozi Okonjo-Iweala, said earlier this month that her successor will face a “difficult” year because of plunging crude revenues.

    The U.S. has bought an average 30,000 barrels a day of Nigerian crude this year, data from the Energy Department show. It shipped almost 1 million barrels a day from the African nation in 2010, according to the data.
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    Gazprom to expand Nord Stream gas pipeline with E.ON, Shell, OMV

    Russian gas giant Gazprom has agreed to build a new pipeline to Germany under the Baltic Sea with a trio of Western energy companies, bringing Europe closer into Moscow's energy orbit.

    The Russian gas company is trying to find new ways to deliver gas to Europe bypassing conflict-stricken Ukraine.

    "Since the commissioning of Nord Stream pipeline, Gazprom has been investigating potential extension of this export route. Now we are going to proceed with the implementation of this project together with our partners," Gazprom Chief Executive Alexei Miller said in a statement.

    Gazprom's partners in the Nord Stream pipeline, a major gas supply artery feeding into western Europe, are Anglo-Dutch Shell , Germany's E.ON and Austria's OMV.

    Gazprom would own 51 percent in the project to build stage 3 and 4 of Nord Stream, with capacity of 55 billion cubic metres per year, Gazprom spokesman Sergei Kupriyanov said on the sidelines of the St Petersburg International Economic Forum.

    Gazprom wants to bypass Ukraine, its key gas export route to Europe, and plans to build the Turkish Stream pipeline beneath the Black Sea to ensure smooth transit of Russian gas when the transit contract with Kiev expires in 2019.

    Despite plans to start laying pipes in coming weeks, Moscow and Ankara have no firm agreement on the project yet.

    At the same time Gazprom's soured relationship with the European Commission over Russia's role in the Ukraine crisis means it may have a hard time convincing Europe to approve new pipelines that increase the region's dependence on Russian energy.

    But Nord Stream partner E.ON argues that Europe's demand for Russian gas will grow as domestic production declines. European gas output is set to shrink to 185 billion cubic metres (bcm) by 2030 from 275 bcm in 2010, it said in a statement.

    E.ON, Germany's biggest utility, said expanding Nord Stream was the most efficient and cheapest method of ensuring European energy security, pointing out that diversifying supply routes is was important as finding new suppliers.

    The aim was to complete the first expansion strand in the fourth-quarter of 2019 and the second in the fourth quarter of 2020, E.ON said.

    Nord Stream, which already consists of two lines, has an annual capacity of 55 billion cubic metres.

    Gazprom is currently allowed only limited access to the pipeline under a European Union law which seeks to prevent energy suppliers from dominating infrastructure.

    Kupriyanov told reporters that apart from E.ON, Shell and OMV there could be other shareholders in the expansion project.
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    Survey reveals bleak picture for North Sea oil and gas industry

    Two-thirds of North Sea oil and gas industry operators (67 per cent) have been forced to cancel projects because of the recent fall in oil price, according to an industry report published today.

    The findings, from the 22nd Oil and Gas Survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with law firm Bond Dickinson, reveal that half of operators (50 per cent) have been forced to reduce staff training for the same reason.

    The fall in oil price has been a contributory factor to a fall in confidence and activity levels in the sector. Contractors' confidence in the UK Continental Shelf is at its lowest point since the survey began in 2004. Only 7 per cent of contractors are more confident about their UKCS activities than they were a year ago, compared to 76 per cent who are less confident.

    The percentage of firms that report working at or above optimum levels in the UKCS has also fallen to its lowest level since the survey began in 2004. Just one in five contractors (21 per cent) is working at or above optimum levels, down from 47 per cent in the previous survey and just over half (52 per cent) report working at or above optimum levels in overseas markets, down from 72 per cent.

    Exploration has been a big casualty of the challenges facing the oil and gas industry, with 70 per cent of all firms involved in exploration having seen the value of it fall in the past 12 months, and just 8 per cent of them expecting the value of exploration to increase in the coming year.

    One respondent cautioned that although measures in the March 2015 Budget were welcome, further stimulus to exploration and investment is required: 'Allowances on producing fields were welcome, but more was needed to increase exploration drilling, without which there will be no new projects and decommissioning will accelerate, thus removing infrastructure and opportunity for good.'
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    Major investor in Dragon Oil says ENOC offer undervalues company

    Asset management company Baillie Gifford, oil producer Dragon Oil's largest independent investor, said an increased takeover offer from majority owner Emirates National Oil Co (ENOC) "materially undervalued" the company.

    ENOC, which owns 54 percent of Dragon Oil, increased its bid to buy out minority shareholders to 750 pence per share on Tuesday, valuing the stock it does not already own at about 1.7 billion pounds ($2.7 billion).

    Baillie Gifford, Dragon Oil's second-biggest investor after ENOC with a 7.2 percent stake, said the improved offer does not fully value the firm's growth potential.

    Baillie Gifford said on Thursday that it had offered to discuss the possibility of ENOC including a contingent payment note to shareholders as part of the deal.

    The note would pay out if production from Turkmenistan's Cheleken contract area, Dragon Oil's only producing field, hits certain milestones, Baillie Gifford said.

    Dragon Oil said it expects production at Cheleken to plateau at 100,000 barrels of oil per day for the next five years.

    A spokesman for ENOC maintained that the offer was a fair one.

    "The offer price was derived based on extensive feedback from numerous shareholders, and the independent committee of Dragon Oil," the spokesman said.

    The current round of bidding is ENOC's second attempt to buy Dragon Oil after failing to acquire the company in 2009.
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    Saudi April Crude Exports Drop as More Supply Used Locally

    Saudi Arabia reduced crude oil exports in April as the world’s biggest producer used record supplies domestically for a burgeoning refining industry.

    Shipments fell to 7.74 million barrels a day from 7.9 million in March, the Riyadh-based Joint Organisations Data Initiative said on its website Thursday. The nation processed 2.22 million barrels a day in domestic refineries in April, the most since at least January 2002 when JODI started collecting statistics from governments.

    Saudi Arabia began operating a 400,000 barrel-a-day refinery at Yanbu on the Red Sea last year. Another plant with the same capacity is scheduled to begin operation in 2017 at Jazan in the country’s southwest. The kingdom’s oil-product exports rose 44 percent last year following the startup of a refinery in the Gulf port of Jubail, according to JODI data.

    “Saudi needs more crude to stay at home,” Kamel al-Harami, an independent oil analyst in Kuwait, said by phone from Kuwait City on Thursday. “The Saudis want to put a cap on exports during summer and they are satisfied with anything around 7.7 million to 7.9 million barrels a day as they want to keep their market share.”

    Saudi Arabia’s output rose to 10.31 million barrels a day in April from 10.29 million in March, according to JODI. The nation was the world’s largest producer for a second month in a row, displacing Russia which had been first in February.

    Brent for August settlement traded at $63.81 a barrel, down 6 cents, on the London-based ICE Futures Europe exchange at 2:58 p.m. local time.
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    Wintershall to sell package of offshore Norway assets for $602 mln

    UK-based Sequa Petroleum has reached agreement to buy a portfolio of Norwegian offshore field interests for $602 million from Wintershall, the oil and gas subsidiary of BASF, the companies said on Thursday.

    Sequa said the transaction will be conducted by Oslo-based Tellus Petroleum Invest A/S, which it is also buying in a concurrent deal for $4 million plus 6 million shares in Sequa.

    The agreement with Wintershall will give Tellus interests in five fields – 20 percent of Knarr, 15 percent of Maria, 10 percent of Yme, 6.5 percent of Ivar Aasen and 4.5 percent of Veslefrikk.

    Wintershall will remain operator for the Maria development, retaining a 35 percent interest.

    Proven and probable reserves being acquired are estimated to be a net 59 million barrels of oil equivalent, based on data from the Norwegian Petroleum Directorat, the company said.
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    Rosneft in gas supply pact with E.ON

    Russia’s Rosneft has signed a new gas supply pact with the country subsidiary of German energy giant E.ON as the state-owned company seeks to boost its gas business in competition with compatriot Gazprom.

    The contract, signed at this week’s International Economic Forum in St Petersburg, entails the supply of 4.4 billion cubic metres of gas over a five-year period to E.ON Russia’s Surgut Power Plant-2 and is a continuaton of an existing supply deal that expires this year.

    Rosneft said in a statement it is the leading gas producer among Russian oil companies, with output of 56.7 billion cubic metres last year and estimated gas reserves of 7.2 trillion cubic metres.
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    Saudis Said to Discuss Sweetening India Oil Deals With Own Ships

    Saudi Arabia is said to be in talks with Indian oil buyers to ship crude on the Middle East supplier’s own tankers, potentially cutting the cost of cargoes.

    While the world’s biggest crude exporter won’t offer to sell its crude at a discount to its official selling price, it may pass on the benefit of lower shipping costs, four people with knowledge of the matter said, asking not to be identified because the talks are confidential. The use of vessels owned by Saudi Arabia may reduce the cost of its supplies by 25 to 30 cents a barrel, two officials at two Indian refiners said.

    OPEC’s biggest member is seeking to defend market share amid competition from other suppliers and as refiners across Asia look for bargains from Europe to Mexico. Producers are vying for sales as a global glut is exacerbated by the highest U.S. output in more than three decades and as the Organization of Petroleum Exporting Countries pumps at the fastest pace since 2012.

    “Everybody is trying to capture market share,” Ehsan Ul-Haq, an analyst at KBC Energy Economics in London, said by phone. “One of the things the Saudis can do is to provide better freight in order to somehow influence refiners to take more crude from them.”

    Saudi Arabia may sell its supply to India on a delivered basis, meaning shipping costs are included in the price paid by the buyer for the cargo, the people said. The Middle East nation typically sells its crude on a free-on-board basis, where the buyer arranges freight.

    The two sides are still discussing the plan, which would need government approval, said the people. Saudi Aramco, as the state oil company is known, sells its crude to Asia at a monthly differential to the average of the Dubai and Oman grades.
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    Gazprom, Shell agree to expand Sakhalin-2 project

    Russian gas producer Gazprom and Royal Dutch Shell have signed an agreement to expand the Sakhalin-2 LNG project.

    Officials from both companies signed the agreement at an economic forum in Russia's second city of St Petersburg on Thursday.

    The Sakhalin-2 project, Russia's sole LNG plant, has a current annual capacity of around 10 million tonnes. The third line would add another 5 million tonnes of liquefied natural gas a year.
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    Russia, Saudi oil ministers to mull cooperation agreement -source

    Russian and Saudi oil ministers plan to discuss a broad cooperation agreement on Thursday at an economic forum in Russia's second city of St Petersburg, two sources told Reuters.

    One source said the agreement to be discussed between Russian Energy Minister Alexander Novak and Saudi Arabia oil minister Ali al-Naimi would not be about joint oil production or export strategy.

    A spokeswoman for Russia's Energy Ministry confirmed the meeting but declined to comment on the agenda.

    Saudi Arabia is the leading oil producer in OPEC and the world's top oil exporter, while Russia, which is not an OPEC member, is the second biggest oil supplier to the global markets.

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    Noble outflanked a pair of rivals to secure Rosetta deal, docs show

    Noble Energy outbid at least two other companies interested in buying Rosetta Resources after offering the smaller independent producer a sweeter deal with a higher premium than its competitors, new regulatory filings showed.

    Analysts have said for months that the global oil slump would mean large, well-financed companies snapping up small firms with good acreage and heavy debt loads. But the Noble-Rosetta deal, announced in May, has been the only such transaction of its kind involving a large U.S. oil and gas producer since crude collapsed last year.

    Details about the negotiations were revealed in recent U.S. Securities and Exchange Commission filings ahead of a special shareholder meeting to decide whether to approve the deal. The meeting is slated for July 20.

    Houston-based Rosetta began eying a deal in December shortly after crude prices began plummeting, but the firm originally had another partner in mind, according to the SEC filings.

    Months earlier, when oil was trading around $100 per barrel, Rosetta considered combining with another exploration and production company, even signing a confidentiality agreement in the first step toward making a deal. But those discussions fizzled out before December, according to the filings. The company is not named in the documents.

    By mid-December, Rosetta was feeling pressure from oil prices that had collapsed nearly in half. Craddock met with the CEO of the unnamed oil producer, who expressed interest in a deal. Rosetta also hired Morgan Stanley & Co. to identify potential candidates for a merger or acquisition.

    Morgan Stanley in January shopped the Rosetta deal out to 17 companies, and seven expressed interest, including Noble.

    Noble’s CEO David Stover met Craddock in person in mid-February and made his pitch: Rosetta’s assets in Texas’ Eagle Ford Shale and Permian Basin were a “strategic fit” for his company, which did not have a significant foothold in those oil-rich regions.

    The opportunity was huge for Houston-based Noble, which for years had mapped and analyzed the Eagle Ford and Permian, hoping to jump-start the company’s foray into those prime shale plays. Noble already had a footprint in some key U.S. shale plays, including the DJ Basin in northern Colorado and the Marcellus Shale in the northeastern United States.

    Rosetta wanted to work with a company that had a slate of good assets and a healthy balance sheet. The firm also wanted an all-stock transaction, allowing Rosetta’s shareholders to benefit from rising oil prices.

    Stover made a “best and final offer,” the exchange ratio of .542 shares of Noble common stock in a deal worth 38 percent more than the closing price of Rosetta’s common stock. The other firm’s proposal represented a 23 percent premium, according to filings. Stover also agreed to reduce the termination fee by $5 million to $65 million and to drop the “force-the-vote” provision.
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    U.S. Petroleum Balance Sheet, Week Ending 6/12/2015

                                                               Latest   Last week   Year ago

    Domestic Production .................... 9,589    9,610 -21    8,477 1,112

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    Summary of Weekly Petroleum Data for the Week Ending June 12, 2015

     U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending June 12, 2015, 294,000 barrels per day less than the previous week’s average. Refineries operated at 93.1% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.7 million barrels per day. Distillate fuel production decreased last week, averaging over 5.0 million barrels per day.

    U.S. crude oil imports averaged about 7.1 million barrels per day last week, up by 444,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 6.9 million barrels per day, 5.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 682,000 barrels per day. Distillate fuel imports averaged 147,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.7 million barrels from the previous week. At 467.9 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 0.5 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 0.1 million barrels last week but are in the lower half of the average range for this time of year.

    Propane/propylene inventories rose 1.9 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.7 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.7 million barrels per day, up by 5.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged almost 9.4 million barrels per day, up by 3.3% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, down by 2.1% from the same period last year. Jet fuel product supplied is up 4.9% compared to the same four-week period last year.

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    National Oilwell Varco to cut 1,500 Norwegian jobs

    National Oilwell Varco, the largest U.S. oilfield equipment maker, said it will cut its Norwegian workforce by 1,500 by the end of this year as low oil prices have reduced investments.

    It plans to cut 900 permanent jobs and 600 contractors, the firm said in a statement on Wednesday.

    “The reason for the lay-offs is the big change in the market situation for our industry over the last year with reduced investments and reduced sale of new equipment,” it said.

    “The uncertain market situation also means that we can’t say how comprehensive the process of laying off people will be in the longer term”.
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    BHP Billiton offers one LNG cargo from Australian export plant

    A division of mining group BHP Billiton is holding a closed tender to sell a liquefied natural gas (LNG) cargo from Australia's North West Shelf export plant, trading sources said.

    It was not clear whether the cargo had yet been awarded, they said.

    A recent change in the way the North West Shelf project markets LNG cargoes means that the six equal shareholders in the facility will from now on sell cargoes individually.

    The shareholders are BHP Billiton, BP, Chevron , Japan Australia LNG (a joint venture of Japanese firms Mitsubishi and Mitsui plus Shell and Woodside.
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    Energen updates on common stock offering and on oil hedges for 2016

    Energen Corp. has launched an underwritten public offering of 5,700,000 shares of its common stock. The company has also begun hedging its 2016 oil production and has added to its 2015 oil hedge position.

    The underwriter of the common stock offering will have a 30-day option to purchase up to 855,000 additional shares of common stock from Energen. The underwriter intends to offer the shares from time to time for sale in one or more transactions on the New York Stock Exchange, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices.

    Energen intends to use the net proceeds from the offering to fund a slight increase in drilling activity in the Midland Basinin the second half of 2015 and, more significantly, to begin a multi-year acceleration of development activities in thePermian Basin in 2016, with capital investment in 2016 of $1 billion or more; net proceeds also may be used for other general corporate purposes, including the acquisition of proved and unproved leasehold. Pending such uses, Energen intends to use the net proceeds from this offering to repay borrowings outstanding under its credit facility.

    Energen has also begun hedging its 2016 oil production and has added to its 2015 oil hedge position. Over the past week, Energen has entered into swap contracts for 1.1 million barrels of 2016 oil production at an average NYMEX price of $63.80 per barrel. The company also has hedged an additional 2.9 million barrels of 2015 oil production in July through December 2015 at an average NYMEX price of $62.46 per barrel.

    Adjusted for the new 2015 swaps, Energen’s oil hedge position for the period April through December 2015 (as disclosed on May 6) now covers 82% of the company’s estimated 2015 production midpoint for the last nine months of the year of 11.1 million barrels (based on production guidance issued on May 6) at an average NYMEX price of $80.76 per barrel.
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    The impact of the fracklog on the US short-term liquids supply

    In the first months of 2015, the US shale industry faced a rapid decline in drilling activity, yet oil supply has not been showing any signs of entering into a consistent decline phase. This opposite movement is mainly due to drilled uncompleted wells, namely fracklog. The following examines how drilling and fracking activity in the US shale evolved in 2014-2015 and to what extent accumulated fracklog can affect light tight oil (LTO) supply in 2015-2016.

    Figure 1 provides a full insight into the fracklog evolution in the largest LTO plays 'The Big Three' Bakken, Eagle Ford and Permian Basin, which together accounted for 80% of LTO production growth in 2014. Last year, driven by expansion of tight formations in the Permian Basin, drillers outperformed completion crews by three horizontal wells per day on average. This has led to a significant accumulation of the fracklog with an annual increase of 1,100 wells as of year-end. When drilling had started falling with almost 35% decline from October 2014 to February 2015, fracking activity showed a delayed response, declining by less than 25% in the same period. However, the decline accelerated in March and April 2015. As a result, the fracklog decreased by 200 wells in the first five months of 2015.

    Figure 1 also demonstrates a strong correlation between the number of fracked and started wells, as 80% of the wells come online within three weeks after completion. Thus, massive well completion delays prevented aggressive fracklog reduction, but the number of fracked wells has been sufficient to balance base production decline to date.Image title

    In the beginning of June 2015, the scale of the fracklog in 'The Big Three' plays remains alarming with 3,850 wells awaiting completion crews. As much as 35% of these wells were drilled more than five months ago. This number corresponds to 7-8 months of drilling at the current pace and indicates that the US shale has sufficient inventory to restore growth when market conditions become favourable.

    Charts and more: title

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    Valero and Suncor question Enbridge Line 9 delay

    The two biggest customers on Enbridge Inc's newly reversed pipeline to carry Western Canadian oil from Sarnia, Ontario, to Montreal want to meet Canada's energy regulator to find out why the pipeline's opening has been delayed by months.

    Valero Energy Corp and Suncor Energy Inc, each of which owns of two refineries in the province of Quebec, said in separate letters posted on the NEB's website that the delay in approving the startup of the 300 000 bpd Line 9 pipeline is pushing up their costs and harming their operations.

    They requested a meeting with the board's chairman, Peter Watson.

    "We believe it is important that you are aware of the high cost and negative economic impacts to our business, and by extension to those communities and provinces in which we operate, as the time for a decision is ongoing," wrote Kris Smith, Suncor's Executive Vice-President of Refining and Marketing.

    The controversial project will carry Western Canadian crude to Quebec, replacing supplies currently shipped by rail or imported from abroad. The board approved the project in February but refused to let Enbridge open the 639-km (400-mile) line until it met 30 conditions related to emergency response, continued consultation and pipeline integrity.

    "Following the board's approval of the project...we made capital investments, including major structural work at our Montreal East terminal and Levis refinery, of close to CAN$200 million (US$162 million), in anticipation of receiving deliveries via Line 9," Ross Bayus, President of Valero's Canadian operations wrote.

    "Moreover, the delays associated with satisfying certain of the conditions imposed by the board, particularly from last fall, required Valero to revert to international markets for supplies of crude oil to answer Eastern Canada's demand for petroleum products."

    The reversal will benefit Suncor's 130 000 bpd Montreal refinery and Valero's 265,000 bpd Jean Gaulin refinery in Levis, Quebec.
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    Bets Israel Gas Dispute May End Send Delek Group to 6-Month High

    Delek Group Ltd. rose to the highest since December as investors discerned an end to months of regulatory uncertainty that halted development of Israel’s offshore natural gas fields.

    The company’s shares jumped after Yuval Steinitz, Minister for National Infrastructures, Energy and Water resources, told Army Radio that the Israeli government wants to reach an agreement with exploration companies on a natural gas policy framework as soon as possible.

    “I think we are nearing the end of the regulatory saga as all parties want to reach a solution,” Eldad Tamir, chief executive officer of Tel Aviv-based Tamir Fishman Group, said by phone. “Any delay hurts the Israeli economy.” Tamir said his financial services company, which has $5 billion in assets under management, recently upped its stake in Delek Group.

    The development of Leviathan, Israel’s largest offshore natural gas field, held by Houston-based Noble Energy Inc. and units of Delek Group, has stalled amid arguments over policy. The country’s antitrust commissioner, David Gilo, tendered his resignation last month to protest the blueprint that is set to be approved. Gilo said it doesn’t do enough to break up the gas monopoly that emerged after two major offshore fields were discovered several years ago.
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    Small, mid-cap E&P companies to see $16 bln funding gap in 2016 - Cowen & Co

    Small, mid-cap E&P companies to see $16 bln funding gap in 2016 - Cowen & Co

    Small and mid-cap exploration and production companies in the United States are expected to see a gap of $16 billion between spending estimates and projected cash flows for 2016, Cowen & Co analysts said.

    Oil producers have been lowering capital budgets and rig counts, hit by a 44 percent decline in global crude prices since last June.

    Barclays said in January oil and gas companies could cut exploration and production spending in North America by 30 percent or more this year if U.S. crude continued to trade in the $50-$60 per barrel range.

    Brent crude futures were at $65.21 on Wednesday, while U.S. crude futures were at $61.20. Brent hit a high of $115.06 in June last year.

    "... borrowing bases will be declining and debt metrics deteriorating," Cowen & Co said on Wednesday, leading small and mid-cap companies to issue additional equity this year to support 2016 budgets.

    Small and mid-cap companies will need $8.6 billion to meet the Street's 2016 production growth projections, the brokerage's analysts wrote in a note.

    They reviewed 46 liquids-weighted and 12 gas-weighted E&P operators and used their first-quarter results to reach a consensus for 2016 U.S. capital expenditure.
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    Oilfield services provider Calfrac halves dividend

    Canadian oilfield services provider Calfrac Well Services Ltd halved its quarterly dividend to 6.25 Canadian cents per share, citing lower crude oil prices and weak demand for oilfield services.

    Calfrac's board also approved an additional capital of about C$12 million for 2015 to expand in Latin America, the company said on Wednesday.

    The company, whose services include hydraulic fracturing, cementing and well stimulation, had forecast capital expenses of C$215 million for the year in February.

    At that time the Calgary, Alberta-based company forecast a drop of at least C$25 million in general and administrative costs, including a 20 percent cut in compensation of board members and a 10 percent reduction in salaries.

    Calfrac gets most of its revenue from the United States and Canada. Oilfield services providers in North America have been hit by lower drilling activity as producers scale back spending to cope with the decline in global crude prices since last June.

    Calfrac's stock fell more than 61 percent to C$7.85 on the Toronto Stock Exchange in the 12 months through Tuesday.
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    Rosneft to maintain hydrocarbon output in 2015-2017 - CEO

    Rosneft to maintain hydrocarbon output in 2015-2017 - CEO

    Russian oil producer Rosneft plans to keep its hydrocarbon production stable in 2015-2017, Chief Executive Officer Igor Sechin said on Wednesday, potentially increasing output by 2 percent if market conditions are favourable.

    Rosneft, the world's top listed oil company by output, faces financial and technologicalrestrictions due to Western sanctions imposed over Moscow's role in the Ukraine crisis.

    "The business plan envisages a stable production level in 2015-2017 with the potential for an increase of 2 percent if market conditions are favourable," Sechin told Rosneft shareholders at the company's annual general meeting.

    Sechin added that Rosneft planned to produce 252 million tonnes of oil equivalent this year. He did not give a breakdown for oil and gas.

    In 2014, Rosneft oil production reached 205 million tonnes (4.1 million barrels per day), compared to 4.2 million barrels per day in 2013.

    Speaking in St Petersburg, Sechin said Rosneft planned to invest 300-350 billion roubles ($5.6-$6.5 billion) into new large upstream projects in 2015-2017.

    Rosneft, in which BP owns almost a 20 percent stake, spent 533 billion roubles on capital expenditure last year. Sechin also said the firm planned to ship around 40 percent of its exports to Asia by 2019.

    He was quoted as saying by Interfax news agency that it was hard to predict when the state would further reduce its holding in Rosneft - a plan delayed due to the weak economy - and that the chief executive officer at oil producer Surgutneftegaz, Vladimir Bogdanov, had no plans to buy Rosneft shares.
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    China's sagging diesel demand finds hope in e-commerce boom

    Diesel has found an unexpected ally in the growing legion of delivery trucks spawned by China's rapidly expanding e-commerce, forestalling any drop in the country's consumption of the fuel as the economy shifts its focus away from manufacturing.

    In a sign of China's migration to a services-based economy from an industrial powerhouse, its demand for diesel used to power machinery and fuel trucks, as well as generate electricity, has been flat this year.

    That economic restructuring has led to predictions China's diesel consumption will peak soon. But with e-commerce delivery trucks picking up some of the slack, diesel use is now seen growing slightly till 2020.

    "China's soaring e-commerce growth has spurred a surprise strength in diesel demand this year, offsetting continuing weakness from the industrial and manufacturing sector," said analyst Gordon Kwan of Nomura research.

    China's e-commerce market has overtaken that of the United States as the world's largest and is seen expanding nearly 25 percent a year to 4.5 trillion yuan ($726 billion) by end-2017, according to iResearch, a Chinese Internet research firm.

    The country is home to the world's biggest e-commerce company, Alibaba Group Holding Ltd, which handles more online commerce than Inc and eBay Inc combined.

    To cash in on the growing demand for delivery vehicles, China's e-commerce logistic and transport service providers have increased their fleet of trucks. Yuantong Express, among the top four in the sector, added 300 trucks in 2014 and now owns a total of 3,000, most of which run on diesel.

    The firm expects its shipments to jump to 30-40 million packages during the massive online shopping sale on Singles' Day, a Nov. 11 Chinese response to Valentine's Day, from 25 million on the same day a year ago.

    A regional logistics hub of Inc - China's No.2 e-commerce company - has also been expanding its truck fleet, up more than threefold over two years with a target to own a total of 1,000 trucks next year, said a Sinopec fuel marketing official, who closely follows key clients including e-commerce logistics firms.

    A spokesman could not confirm the figure but said the company's total sales value had quadrupled in the past two years.

    As more people shop online, diesel use in the world's No.2 economy will grow, though only slightly, sources said.
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    Japan: LNG imports down 11.4 pct in May

    Japan’s imports of liquefied natural gas dropped 11.4 percent in May, as compared to the same month a year ago, preliminary data from the Ministry of Finance reveals.

    The world’s largest buyer of the chilled gas imported 5.75 million tonnes of LNG in May.

    Japan paid 315,439 million yen for LNG imports in May, down 44.1 percent on year, according to the data.

    LNG use by Japan’s ten independent regional electric power companies was lower 7 percent to 3.99 million mt in May.

    Total electricity generated and purchased across the ten companies in May declined by 3 percent from a year earlier to 64.98 billion kWh, data from the Federation of Electric Power Companies of Japan showed.
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    Tropical Storm Bill charges across Texas

    Tropical Storm Bill headed further into central Texas with heavy rains and high winds on Wednesday but no serious injuries were reported, relieving officials and residents just three weeks after floods killed about 30 people in the state.

    The second named tropical storm of the 2015 Atlantic hurricane season made landfall on Tuesday afternoon near the sportfishing town of Matagorda, then lost much of its punch, the U.S. National Weather Service said.

    There were no reports of substantial damage, and oilfields in the Gulf of Mexico and near the coast were not impacted by the storm. Refineries and a nuclear power plant, the South Texas Nuclear Generating Station in Bay City, also operated normally.

    "This is a rain event," Houston Mayor Annise Parker said at a news conference. "This is a normal rain event."

    Flash flood watches were issued for six states. The watch area included Houston and central Texas, where floods over Memorial Day weekend last month swept away thousands of vehicles and damaged homes.

    The storm was forecast to sweep over the Texas capital of Austin and then drive on to Dallas on Wednesday. It has maximum sustained winds of 45 miles per hour (70 kph).

    Heavy rain had already drenched parts of Texas over the weekend, pushing high rivers closer to overflowing their banks.

    The National Hurricane Center said the storm was expected to weaken into a tropical depression overnight, but it could bring up to 8 inches (20 cm) of rain to eastern Texas and Oklahoma and up to 4 inches (10 cm) to Arkansas and southern Missouri.

    Flooding could snarl work in onshore oilfields, but producers including EOG Resources and ConocoPhillips said they were unaffected.
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    Congo parliament adopts new hydrocarbons code

    Democratic Republic of Congo lawmakers have adopted a new hydrocarbons code that the country hopes will allow it to draw more benefits from its expanding oil sector.

    The Central African mining nation pumps 25,000 barrels per day, accounting for just 11 percent of its export revenues, although exploration off the Atlantic coast and near its eastern border with Uganda could increase that significantly.

    Perenco, an Anglo-French oil and gas company, is Congo's only active producer of oil, but French company Total and a company owned by Israeli billionaire Dan Gertler are exploring near Lake Albert, straddling the border with Uganda.

    "The implementation of this law will allow (Congo) to assure the security of investments and to put in place a fiscal regime that permits the Congolese state to profit from its hydrocarbon resources so that those contribute in particular to growth and the fight against poverty," Minaku said.

    The code, which has not yet been made law by President Joseph Kabila, would replace a 1981 law widely considered to be obsolete. The final text of the bill was not immediately available.

    Previous drafts have included a 40 percent capital gains tax on all contracts, although it was not clear if this clause remained in the version adopted by parliament.

    One point of controversy among lawmakers was a provision in the National Assembly version that would require oil companies to cede at least 20 percent of shares in their operations to a "national society of commercial character."

    The Senate called the provision "contrary to the principle of economic liberalism" and said it risked creating conflicts of interest.
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    Petrobras delays cuts to July when govt meets for oil plan- sources

    Brazil's state-run oil company Petrobras will likely delay details of major cuts to its $221 billion five-year spending plan until July, two sources said, when the government plans to announce a rescue program for the industry.

    Petrobras, which is struggling with a corruption scandal, falling oil prices, stagnant output, and the largest debt of any oil company, had planned to announce deep spending cuts, expected to be about 30 percent of the proposed spending, by the end of June.

    However, executives at Petroleo Brasileiro SA, as Petrobras is formally known, have run into internal and political resistance to cuts given the major role the company plays in Brazil's economy, a top Petrobras executive with direct knowledge of company discussions told Reuters.

    The government is only coming to terms with Petrobras' economic fragility and how government efforts to increase control over the country's natural resources could make Petrobras weaker still, the senior coalition member told Reuters.

    The government's July oil plan is likely to mimic a program announced earlier this month to bolster shrinking government funds for investment in ports, highways and other infrastructure with private capital, one of the officials said.

    That will require changes to Brazil's 2010 oil law, the official said, most notably ending a requirement that Petrobras take a minimum 30 percent stake and serve as operator in any new development contracts in Brazil's most prolific oil areas.

    Oliveira said the bill would likely substitute a Petrobras right of first refusal to operate and participate financially in new areas in place of its current obligation.

    Despite growing Senate support, a change is unlikely to be made by July, the official said, adding that it could possibly win Rousseff's support. The official's opinion is backed by a third source, a senior government bureaucrat involved in day-to-day oil-planning talks.

    Oil-industry officials, including some at Petrobras, also want Brazilian-content requirements, blamed for higher costs and project delays, eased. Rousseff has said she won't change them.
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    European oil 'mini-major' challenges industry's old model

    A fast-growing European oil venture between the world's top energy trader Vitol and private equity firm Carlyle Group is attempting to cash in where the industry's biggest companies have struggled for years.

    European oil companies, or "majors", such as Total , BP and Royal Dutch Shell have significantly downsized their European refining and distribution businesses in recent years due to shrinking demand and an ageing, oversized refining industry.

    But for Swiss-based venture Varo Energy, combining refining and other downstream assets with its central oil trading business makes sense: by offering products and services across the value chain on a smaller scale, it says it can reduce inefficiencies that have weighed on the big oil companies.

    "The key is to build more downstream presence and to complement that with trading around the assets," said veteran Dutch oil entrepreneur Marcel van Poecke, 55, who is managing director of Carlyle International Energy Partners (CIEP) and the driver behind the Varo model.

    Founded in 2012, Varo was renamed Varo Energy after merging last month with Dutch-based storage and trading company Argos. The merged company controls businesses from oil production to refineries to storage terminals and petrol stations, creating what van Poecke says is a "mini-major" focused on a strip of western Europe.

    "You will see more coordinated trading around those assets because now it becomes one company from Rotterdam up to Switzerland," he said.

    Trading houses like Vitol say that refineries and other businesses can become inefficient after decades under the ownership of big oil companies. By taking them over, traders can make them leaner and lift profit margins, they say.

    As oil majors seek to get rid of refineries and focus on their more profitable upstream businesses, Varo Energy says it is scooping up downstream assets at cheap prices.

    "Major oil companies have been selling refineries to free up capital for upstream ventures where they can make better margins ... (Traders) tend to get those refinery assets very cheap so they don't weigh heavily on their books as working capital," said Steve Sawyer, downstream consultant at FGE.

    "For a trader, having a refinery gives a physical outlet for his oil to reduce his exposure in the market. It also gives him information he might not have access to so, all in all, he has better information that can help him make better decisions on what crude to buy."
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    Wintershall examining stake in Occidental's Libyan oil assets -NOC

    Germany's Wintershall is eyeing a stake in the Libyan oil assets of Occidental Petroleum, the chairman of Libya's National Oil Corp (NOC) said on Tuesday.

    Mustafa Sanallah said NOC had given Wintershall, a subsidiary of BASF, access to confidential technical information at the request of Occidental.

    He added that this did not signify that Occidental is looking to exit its business in Libya.

    "This does not mean they are going to get out," Sanallah said. "It could be a joint venture."
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    Halliburton reveals new dissolvable frac plug

    Halliburton’s Completion Tools has introduced the Illusion fully dissolvable frac plug. The 10,000-psi rated frac plug eliminates the need to mill out a plug after fracing.

    Halliburton says the plug can be installed anywhere in the wellbore for optimal placement of perforations to improved fracturing, without prepositioned locator subs or other equipment that remains in the wellbore post-frac. Illusion frac plugs dissolve completely to leave an unrestricted bore for production, and no intervention is required to clean the wellbore after the frac, Halliburton continues.

    Halliburton’s new Illusion dissolvable frac plug

    Halliburton’s new Illusion dissolvable frac plug.
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    Low oil price hits $200 billion in mega-projects

    Deepwater oil projects and complex gas facilities worth around $200 billion have been cancelled or put on hold worldwide in recent months due to the sharp drop in oil prices over the past year, consultancy Ernst and Young said on Tuesday.

    Further project cuts and delays are likely as the industry braces for an extended period of lower oil prices as a result of a supply glut.

    "The mind set in the industry at the moment is that prices are unlikely to be bouncing up materially in the near term," the consultancy's Andy Brogan said in a presentation. "There is an expectation that volatility is with us for a reasonable period of time to come and companies need to cope with that."

    International companies have responded rapidly to the near halving of oil prices since last June, slashing tens of billions of dollars in capital spending in order to boost their balance sheets and maintain dividend payouts to investors.

    "A total of $200 billion of oil and gas projects have been deferred or cancelled," said Brogan, global oil and gas transactions leader at Ernst and Young.

    "Portfolios reviews are happening more frequently and probably with more rigour," Brogan told the World National Oil Companies Congress. "There isn't anywhere for projects to hide."

    The main 24 mega projects that have been put on ice or scrapped are spread across the globe, according to EY.

    For oil, many of the projects are complex, deepwater fields in the Gulf of Mexico, the North Sea, West Africa and Southeast Asia with budgets of up to $20 billion.

    Among the most expensive are liquefied natural gas facilities such as the Arrow liquefied natural gas (LNG) project in Australia, operated by Royal Dutch Shell's and PetroChina and BG Group's Prince Rupert LNG project in Canada.

    Though often just as expensive, most oil mega-projects benefit from the advantage of returning value within 3 to 4 years from first investment, compared with up to 12 years for LNG projects, Brogan said.

    "We have seen IOCs (international oil companies) already go through one rigorous review of their portfolio. We are now seeing them turning their attention to see how flexibility can be embedded in their portfolios and businesses"

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    Libya eyes 200,000 b/d output rise

    Platts - Libya eyes 200,000 b/d rudeoil output rise from 432,000 b/d in 'coming weeks'; increase to come from Waha fields, NOC chief Sanalla says
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    Gazprom’s Baltic LNG to cost over USD 18 bln

    Gazprom’s Baltic LNG project in the Baltic Sea port of Ust-Luga is estimated at 1 trillion roubles (around $18.5 billion), a port official told reporters at a conference, Reuters reports.

    The plant capacity will amount to 10 million tons of LNG a year with the possibility of expansion to 15 million tons.

    It will be supplied with gas from the Unified Gas Supply System of Russia, according to Gazprom.

    In 2013, Gazprom signed the memorandum of understanding and cooperation with Leningrad region as part of the liquefied natural gas plant project.
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    Wintershall's Unmanned North Sea Platform Produces 1st Gas.

    German oil and gas firm Wintershall announced Tuesday that the unmanned mini-platform, L6-B, has started producing natural gas off the Dutch North Sea coast.

    The platform was built in just nine months and was brought to its offshore location in June 2014. Wintershall said that the advantage of the new generation of "Minimum Facility" platforms is that they can be deployed in particularly shallow waters and can economically produce even from very small natural gas fields. Another benefit is that the can help the firm cut down on costs thanks to the short time needed for construction and their simple installation.

    The L6-B field is located in a restricted military zone, with Wintershall Noordzee being the first company allowed to operate in the area. Consequently, the installation needs to be as small as possible and Wintershall believes its topside may be the smallest in the world.

    The facility is anchored to the seabed through suction piles. It rises about 60 feet above the sea and has three decks but no helideck. The facility can accommodate a maximum of two producing wells. The substructure weighs just 1,100 tons, with the topside weighing only 100 tons. A pipeline will transport gas produced by L6-B to the neighboring platform of L8-P4.

    Wintershall sees the North Sea as a core region for it. The firm now operates 25 offshore platforms in Dutch, German and UK waters, and it expects natural gas production to be one of its main areas of activity in the Netherlands and in the southern North Sea.

    - See more at:
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    ExxonMobil Announces Kearl Expansion Project Starts Production Ahead of Schedule

    Exxon Mobil Corporation (NYSE:XOM) today announced that production at its Kearl oil sands expansion project in Alberta, Canada, started ahead of schedule and is expected to double overall capacity to 220,000 barrels of bitumen a day.

    “Kearl’s bitumen was first processed in ExxonMobil refineries to help the company fully understand its properties before introducing it to the market”

    The expansion project is ultimately expected to reach 110,000 barrels per day. Kearl will access approximately 4.6 billion barrels of resource for more than 40 years.

    “The ahead-of-schedule startup of the Kearl expansion demonstrates ExxonMobil’s project management expertise and highlights our ability to safely and successfully execute complex projects,” said Neil Duffin, president of ExxonMobil Development Company. “The improved understanding gained from the initial Kearl development phase was applied to the expansion project to produce this outstanding result.”

    The expansion project consists of three additional trains that use proprietary paraffinic froth treatment technology to produce bitumen. The process reduces energy requirements and environmental impacts by not requiring an on-site upgrader, which avoided a multi-billion dollar capital investment and associated operating expenses. Energy needs are further reduced through the installation of energy-saving cogeneration facilities.

    The project produces blended bitumen with about the same lifecycle greenhouse gas emissions as the average crude oil refined in the United States. Other environmental innovations include on-site water storage to reduce water use, progressive land and tailings reclamation, and a state-of-the-art waterfowl deterrent system.

    “Kearl’s bitumen was first processed in ExxonMobil refineries to help the company fully understand its properties before introducing it to the market,” Duffin said. “It is now processed in more than 25 refineries around the world.”
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    H-Energy selling stake in LNG Gateway project

    Hiranandani Group’s H-Energy is reportedly looking to sell a stake in its LNG terminal on India’s west coast in order to raise funds for the construction.

    A 26% stake has already been sold in an LNG terminal on the east coast and talks for a similar deal are underway for a project on the west coast, Live Mint reports.

    Darshan Hiranandani, director at H-Energy said the company signed a deal with Excelerate Energy for the east coast project that is set to cost $600 million. The project is based on an FSRU and will be set up off West Bengal.

    The company is in similar negotiations with major oil and gas companies for its LNG terminal project on the west coast, as it needs funds before the construction on the 8 mtpa facility kicks off in August. This terminal will be the first to allow third parties to import LNG and regasify it for a fee.

    The LNG terminal project is located at JSW Jaigarh Port near Ratnagiri, Maharashtra.
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    North Dakota Shale Play Has Flattened Out Substantially

    The North Dakota Industrial Commission is out with the April production Data for the Bakken and all North Dakota.

    Eight month of flat to down production from the Bakken.

    I have shortened the data to 16 months here to give a better picture of what is really happening. North Dakota reached an 8 month low. North Dakota, in April, was 17,631 barrels per day below their September 2014 production. The Bakken was only 11,024 below September 2014, so conventional wells seem to be dropping off pretty fast.

    LOTS more:
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    China's May crude stocks post biggest monthly decline since Oct 2013 at 631,000 b/d

    China's volume of net crude oil imports and domestic crude production lagged its overall refinery throughput in May, implying a drawdown of 631,000 b/d of crude stocks during the month, Platts calculations based on recently released data showed.

    This is the highest monthly drawn down since October 2013, when there was an implied stock draw of 638,000 b/d, according to Platts data.

    The drawdown last month was also a reversal from April, when 1.03 million b/d of crude was likely added to storage.

    The level of stocks held by refiners in China is not disclosed.

    Platts calculates China's net crude stock draw or build by subtracting refinery throughput from the country's crude oil supply.

    The latter takes into account net imports and domestic production of crude.

    The stock draw was mainly due to crude imports sliding to a 19-month low of 5.5 million b/d in May. In comparison, crude imports in April hit a record high of 7.4 million b/d.

    Discounting crude exports of 31,000 b/d, net crude oil imports in May averaged 5.46 million b/d, down 11.4% year on year and 25.1% month on month.

    On the other hand, refinery throughput rose 7.4% year on year to an average of 10.39 million b/d. But on a month-on-month basis it was 1.5% lower than April.

    Crude oil production in May was 4.29 million b/d, up 2% year on year and 0.3% higher than April.

    From January to May, China saw an overall crude inventory build of 278,000 b/d, a 49.7% drop from the same period of last year, according to Platts calculations.
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    China's energy output expected to grow in 2015: report

    China's energy output is expected to grow while energy consumption will dip in 2015, according to a report released on Monday.

    Domestic crude oil output is expected to grow by 0.4 percent to reach 217 million tonnes in 2015, while refined oil and natural gas output will reach 294 million tonnes and 134.4 billion cubic meters respectively, according to a report released by a research center and a publishing house with the Chinese Academy of Social Sciences.

    Consumption of refined oil is expected to grow by 2.1 percent to reach 277 million tonnes this year, one percent lower than the production growth. P

    Meanwhile, refined oil net exports are estimated to reach 20.8 million tonnes, up 41.9 percent year on year, with export of diesel taking the lead, the report said.

    Attached Files
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    Canada's Alberta promises again to hike taxes, review royalties

    The New Democratic government in Canada's province of Alberta, the largest source of U.S. oil imports, said on Monday it would follow through on plans to hike taxes on corporations and high-income earners but gave no indication on when it would move to review oil and gas royalty rates.

    In a speech setting out its first legislative agenda after being elected last month, the government said it would introduce bills to raise the corporate tax rate to 12 percent from 10 percent, end the province's 10 percent flat tax for those earning more than C$125,000 (US$101,568) and ban corporate and union donations to political parties.

    The New Democrats will also introduce legislation to fund the government in advance of a fall budget planned by Alberta's new Premier Rachel Notley.

    However the speech gave no indication when Notley, whose election victory last month ended 44 years of Conservative rule, would follow through on her most contentious promise to review how much oil and gas companies pay to exploit provincially-owned reserves.

    This has unsettled the oil industry but there was nothing concrete as to when a panel might convene to review oil and gas royalties.

    "We need to review how the people of Alberta ... will be rewarded for the development of their own energy resources," the government said in the text of speech.
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    Oil prices rise as Texas braces for tropical storm

    Crude prices rose after a cautious start on Tuesday, boosted by warnings that a tropical storm was about to hit the coast of oil producing state Texas.

    The U.S. National Hurricane Center (NHC) issued a tropical storm warning on Tuesday morning at 0200 GMT for the Texas coast from Baffin Bay to High Island.

    "On the forecast track the centre ... is expected to make landfall in the warning area along the Texas coast Tuesday morning and move inland over south-central Texas Tuesday afternoon and Tuesday night," the NHC said, adding that strong winds, rain and some flooding were expected.

    Front month U.S. crude futures were up around half a dollar at $60 a barrel at 0216, although the contract remains in a trend channel of $57-$62 per barrel that has been in place since the beginning of May. Brent climbed 22 cents to $64.17 per barrel.

    More than 45 percent of U.S. refining capacity is located along the U.S. Gulf Coast, which is also home to about half of total U.S. natural gas processing capability.

    The stronger U.S. prices meant that Brent's premium over American crude CL-LCO1=R has fallen almost 60 percent to around $3.70 per barrel, a level last seen briefly in April and before that at the beginning of the year.
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    Argentina's Oil Output Up Yr/Yr In April For First Time In 2015

    Argentina's oil output rose in April thanks to increased production by state-controlled energy company YPF, the government said on Monday, marking the first year-on-year monthly increase in 2015.

    YPF, taken over by the government in 2012, is Argentina's biggest energy company. The state seized control of YPF after accusing its previous parent company, Spain's Repsol, of underinvesting in production.

    Argentina's overall crude output rose 3.6 percent in April versus April 2014 to 2.54 million cubic meters, according to data published on the website of Argentina's energy secretariat. The overall production increase was driven by a 9.1 percent jump in YPF output to 1.07 million cubic meters, the statement said.

    Argentina's natural gas output rose 8 percent in April to 3.52 billion cubic meters, pushed by an 18.4 percent increase in production by YPF to 1.07 billion cubic meters, it said.

    - See more at:
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    Canamax in business combination with Powder Mountain Energy

    Canamax Energy Ltd. is pleased to announce that it has entered into an arrangement agreement with Powder Mountain Energy Ltd. to acquire all of the common shares of Powder for total expected consideration of approximately $27.35 million, payable through the issuance of Canamax common shares having a deemed value of $0.60 per share. The total consideration being paid is based on an attributed value of $5.85 million for Powder's existing lands, production and reserves and a working capital surplus (substantially all cash) of $21.5 million estimated on the closing date of the Powder Combination.

    Strategic Rationale

    Cash proceeds from the closing of the Powder Combination, together with anticipated closing of the recently announced $15.0 million commercially reasonable efforts private placement financing, should allow Canamax to execute on the following:

    Close the recently announced $24.0 million property acquisition from an intermediate oil and gas company (such acquisition scheduled to close on or before July 31, 2015 and add an estimated 750 boe/d of production) (the 'Asset Acquisition');
    Accelerate the Company's planned drilling program on its core Greater Grimshaw area where Canamax has a 100% working interest in the production, facilities and the majority of the 96 net sections of land in the area. Canamax has identified approximately 190 potential Montney oil drilling locations on these lands;
    Provide additional capital to pursue further potential strategic corporate and property acquisitions;
    Eliminate the use of the previously announced $20.0 million standby bridge facility; and

    After closing of the Asset Acquisition, the Powder Combination, and the Private Placement financing, Canamax is expecting to have an estimated production rate of approximately 1,900 boe/d (56% oil & NGL - including approximately 150 boe/d of currently shut-in Canamax production) and approximately $3.0 to $4.0 million of cash and working capital with no debt.
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    Essar Oil Surges to Highest Price in 4 Years on Rosneft Report

    Essar Oil Ltd., India’s second-biggest non-state oil refiner, jumped to the highest level in more than four years in Mumbai following reports OAO Rosneft may acquire a 50 percent stake.

    The shares climbed 4.7 percent to 146.25 rupees, the highest since November 2010. The stock surged 42 percent last week, the most since the period ended April 2009.

    The founders of Essar Oil are in discussions to sell up to 50 percent in the 400,000-barrels-per-day refinery in the western state of Gujarat, BTVI reported Monday, citing people it didn’t identify.

    Billionaire brothers Shashikant and Ravikant Ruia are set to sell 49 percent in Essar Oil to state-run Rosneft, which pumps about 40 percent of Russia’s oil, for about 105 billion rupees ($1.64 billion), Business Standard newspaper reported Monday, citing a banker it didn’t identify. The deal may be announced as early as Tuesday, the newspaper reported.

    “It is not our policy to comment on market speculations,” Essar Oil said in an e-mailed statement.

    In December, Essar Oil signed key terms with Rosneft for buying 10 million metric tons of crude oil annually for 10 years starting as early as this year.
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    Schlumberger’s Eurasia deal ‘needs more time

    ’An official decision for Schlumberger’s $1.7 billion deal to acquire a stake in Russian rig contractor Eurasia Drilling may come summer, according to reports.

    Russia's Federal Antimonopoly Service (FAS) is close to making its decision on the bid, but still needs to “further review the deal”, RIA news agency reported on Monday.

    It had been expected that the special government commission could make its decision on Schlumberger's offer for a 45.65% stake in Eurasia later this month, amid reports in May that it had “no objections to the deal” and an official decision was due “soon”.

    However the deal, originally expected to be approved by the end of March, has so far been delayed three times against a background of concerns that Eurasia’s activities could be affected if Western sanctions against Russia over the crisis in Ukraine are extended further.

    The latest extension for the completion of the deal is now 30 June, although the date could yet again be pushed forward.  

    Oilfield services giant Schlumberger agreed in January to buy a stake in Eurasia, with an option to buy the rest of the Russian company at a later date.
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    Fracking could return to the UK next year

    Cuadrilla today are one step closer to realising their plans to frack in the UK, after Lancashire council recommended they be granted planning permission to explore for shale gas at the Preston New Road site.

    The company received all the necessary environmental permits in January 2015, but since then the council have deferred their final decision.

    Today's recommendation is a step in the right direction for Cuadrilla, but there can be no guarantee on the outcome until the council announce their final decision next week. Although it is common for the final decision to reflect the recommendation, this would not be the first time Cuadrilla's activities have been refused to the contrary: in February the council recommended the company be granted approval for their planning application at the Grange Hill site, but ultimately permission was denied - despite no planned hydraulic fracturing operations.

    Today also saw a major setback for the Company, as officials recommended permission to frack at another site, Roseacre, be refused. The council were concerned about the impact operations would have on traffic and road safety in the area.

    If successful next week, Cuadrilla could be the first to resume fracking in the UK after the government imposed a ban in 2011 - despite the ban being lifted in 2012.
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    Contango Announces Initial Muddy Sandstone Oil Discovery

    Contango Oil & Gas Company announced today the discovery and successful completion of the Elliott #1H well (80% WI) in the Muddy Sandstone formation in Weston County, Wyoming (N. Cheyenne Prospect Area). The well tested at a maximum 24 hour rate of 907 Boepd (98% Oil, 39 degree API) from a 6,601 foot completed lateral section using 25 stages of fracture stimulation. Total measured depth was 13,116 feet (6,235 feet true vertical depth).

    The Elliott #1H is Contango’s initial well in the N. Cheyenne Prospect and is located between two legacy vertical Muddy Sandstone oil fields, being the Fiddler Creek Field to the north and the Clareton Field to the south. Both fields were discovered in the 1940’s and have a combined cumulative production in excess of 50 million barrels of oil.

    The Elliot #1H was initially drilled as a vertical pilot to a true vertical depth of 6,650 feet. Rock and petrophysical data were collected on multiple prospective zones in the well. In addition to the Muddy Sandstone, the slightly deeper Dakota and Lakota sands were evaluated and exhibit thicker intervals and greater oil saturations than the Muddy. Both of these zones are proven productive in vertical producing wells in the area. These two additional zones could add additional layers of horizontal oil development potential across the leasehold position. The Niobrara Shale was also encountered and shows prospective reservoir characteristics and will be further evaluated in future wells.

    Contango’s initial interest and entry into this play was based on its similarity to the Company’s horizontal Woodbine play in Madison County, Texas where the Company has been drilling since 2012. Both plays target the “halo area” around established conventional oil fields where the producibility of the reservoir declines and becomes uneconomic for a conventional vertical play, but where the unconventional horizontal wells have proven to provide significant uplift in both rate and reserves sufficient to provide superior returns on a repeatable basis.
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    Sete Brazil: big rig contractor in 'financial reorganisation'

    A reorganization plan to help oil rig supplier Sete Brasil Participações SA remain in business should be ready by the end of June, after shareholders and creditors agreed to extend financing as credit dried up, the president of Brazil's state development bank BNDES said on Thursday.

    Last week, commercial banks signed a memorandum of understanding to avert demanding repayment of as much as 11 billion reais ($3.7 billion) in loans to Sete Brasil that matured this month, extending them for a further 90 days.

    The decision was aimed at helping the ailing oil rig supplier to come up with alternatives to stay current on its debts and afloat, BNDES President Luciano Coutinho said at a congressional hearing. Coutinho was summoned to speak about BNDES' exposure to Sete Brasil.Image title

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    IEA releases oil market report for June

    Global oil supplies fell by 155 000 barrels per day (155 kb/d) in May to 96 million barrels per day (mb/d) on lower non-OPEC output, but remained at a steep 3 mb/d above the level of May 2014, the IEA Oil Market Report (OMR) for June informed subscribers. Annual growth slowed marginally from March and April and remained roughly split between non-OPEC and OPEC countries. The June issue raised the forecast of non-OPEC supply growth for 2015 by 195 kb/d to 1 mb/d.

    OPEC supply edged up 50 kb/d in May to 31.33 mb/d, the highest rate since August 2012. Saudi Arabia, Iraq and the United Arab Emirates pumped at record monthly rates to keep output more than 1 mb/d above OPEC’s official supply target for a third month running. Oil ministers agreed to maintain that target at their 5 June meeting.

    The estimate of global demand growth has been revised up to 1.7 mb/d for the first quarter of 2015 and 1.4 mb/d for all of 2015. Momentum is expected to ease somewhat the current quarter, assuming a return to normal weather conditions and given the recent partial recovery in oil prices.

    Global refinery crude runs reached an estimated 77.9 mb/d in April, 0.3 mb/d lower than March, and 1.7 mb/d above a year earlier. Delayed new capacity of 1.5 mb/d in non-OECD regions has lifted product cracks and OECD refining utilisation rates, and caused backwardation to re-appear in oil products markets. (Backwardation is the market situation in which futures prices are progressively lower in the distant delivery months.)

    OECD industry oil stocks built by a steep 38.0 mb in April, to stand 147 mb above average levels, as refined-product stocks moved to their widest surplus in more than four years. Preliminary data indicate that OECD inventories added a further 12.6 mb in May, though US crude stocks posted their first draw in nine months.
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    Enoc ups its offer to seal Dragon Oil deal

    Emirates National Oil Company has upped the ante to buy the remainder of Dragon Oil, valued at £1.7bn.

    Shareholders of oil and gas explorer Dragon Oil will receive 750p per share, the company said in an announcement on Monday.

    The offer valued Dragon Oil at £3.7b, and would be financed through Enoc’s existing cash resources.

    The deal followed several unsuccessful approaches by Enoc to purchase the approximately 46% it did not own.

    Enoc group chief executive Saif Al Falasi said the company improved its offer to 750p per share following a recommendation of Dragon Oil’s independent committee.

    “We believe that Dragon Oil has now achieved as much as is possible through its existing upstream strategy,” he said.

    Enoc, which is ultimately owned by the government of Dubai, said production is close to plateau at Dragon Oil’s sole producing asset, making the deal a good exit opportunity for minority shareholders.

    - See more at:
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    Distillate line space values jump with US Gulf Coast salt cavern storage problems

    Distillate line space values jump with US Gulf Coast salt cavern storage problems

    A lack of available US Gulf Coast distillate storage space due to torrential rains in the region has reduced tankage capacity, resulting in a scuttle for line space on Colonial Pipeline, which sources say is being used as secondary storage space.

    Line space on Colonial Pipeline's 1.16 million b/d Line 2 was still talked unseasonably strong Friday, and was assessed at 3.25 cents/gal Thursday. Values rose as high as 3.75 cents/gal early in the week, the highest point since March 6, which was at the tail-end of peak distillate demand from a long winter in the Northeast.

    Line 2 space is typically negative during the summer months, but sources said companies are buying up space in order to put barrels on the pipeline as a cheaper alternative to storing them, due to constraints with salt cavern reserves for ULSD.

    "There is a storage issue in the Gulf Coast related to the caverns," a ULSD trader said. "It seems to have calmed down a bit, but there is too much brine. They use brine to raise and lower the product, and if there is too much brine - because of the recent rain - there is no room to pump out the brine to make room for the product."

    The US Department of Energy says that salt caverns are a cheaper alternative to storing in a tank farm.

    "Created deep within the massive salt deposits that underlie most of the Texas and Louisiana coastline, the caverns offer the best security and are the most affordable means of storage, costing up to 10 times less than aboveground tanks and 20 times less than hard rock mines," the DOE says on its website.
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    Oil layoffs reach 150,000, recruiting firm says

    Pelted by the oil-market crash, the energy industry’s job cuts reached 150,000 by the end of May, says energy recruiting firm Swift Worldwide Resources, and that figure had grown by a fifth since March.

    While the pace of layoff announcements has certainly slowed in recent months, the United States has nonetheless seen the “the fastest and steepest decline,” Swift said in a recent update on job losses. Oil operations in the North Sea have also been hit hard.

    Swift said the layoffs are ubiquitous, impacting western oil producers, state-owned oil companies, oil field service firms, engineering and construction companies and manufacturers. Contractors, the kind of labor Swift specializes in, are “often the first to get let go, with little fanfare,” though direct employees have been affected, as well.

    The recruiting firm tracks both public and non-public data, and it is possible the industry’s layoffs actually exceed Swift’s numbers, Swift CEO Tobias Read said in the report.

    “Where data is not publicly available we have kept our ear to the ground and made assumptions based on likely impact,” he said. “Our assumptions remain conservative and the likelihood is that total job losses probably substantially exceeds Swift’s forecast.”

    A big portion of the layoffs have come from the oil fields service sector. In recent months, Schlumberger, Halliburton, Baker Hughes and Weatherford, the world’s four biggest oil-tool providers, have announced plans to ax nearly 50,000 jobs, all told.

    Southeast Asia hasn’t seen substantial job losses, Swift said, but that could change in Korea, China and Singapore as orders haven’t come in as much as in the past. Angola and Nigeria have seen rigs sidelined and spending cuts, and Russia is still struggling under the weight of economic sanctions.

    “The only substantially buoyant market is the Middle East, led by Saudi Arabia, where drilling activity is at a 20-year high,” Swift said. “Despite this, only a modest number of jobs are being created.”
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    Libya's oil production at 500,000 bpd - NOC statement

    Libya's oil production at 500,000 barrels per day, according to the state-run National Oil Corporation, the country's LANA news agency reported from Tripoli on Sunday.

    The figure is slightly higher than the 460,000 barrels a day production reported last week.

    More than a dozen fields in central and western Libya have closed due to protests and fighting between two rival governments, armed factions, or by Islamic State attacks. Two major oil ports are also closed in the North African OPEC producer.
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    US rig count continues fall

    The US drilling rig count declined 9 units during the week ended June 12 to settle at 859 rigs working, according to data fromBaker Hughes Inc.

    After 22 straight weeks of double-digit and near triple-digit declines, the count over the past 5 weeks has dropped by an average of just 7 rigs/week. It has now fallen in 27 consecutive weeks overall, during which time it has lost 1,061 units (OGJ Online, Dec. 5, 2014). Compared with this week a year ago, the count is down 995 units.

    “New permits issued have remained relatively stable over the last 3 months, which makes us confident that this indicator has bottomed some time ago,” RJA explained. “However, the lack of a material upswing seems indicative of what we believe should be a slow recovery in rig activity.”

    During the week, oil-directed rigs decreased 7 units to 635, down 974 from a recent peak on Oct. 10, 2014, and 907 year-over-year. Gas-directed rigs edged down a unit to 221. Rigs considered unclassified also edged down a unit, settling at 3.

    Land rigs lost 12 units to 825, down 955 year-over-year. A week after their smallest decline of the year, rigs engaged in horizontal drilling dropped 10 units to 663, down 709 from a recent peak on Nov. 21, 2014, and 585 year-over-year. Rigs drilling directionally edged down a unit to 95.

    Offshore rigs gained 2 units to 29, down 26 since the beginning of the year and 30 year-over-year. Rigs drilling in inland waters edged up a unit to 5.

    Canada’s rig count continued its upward trajectory, gaining 11 units to 127, down 117 year-over-year. Oil-directed rigs jumped 9 units to 68 while gas-directed rigs gained 2 units to 59.

    All of the major oil- and gas-producing states reported rig counts that were either up a unit, unchanged from last week, or down a unit. Down a unit each was Texas at 363, New Mexico at 45, Colorado at 38, Ohio at 21, West Virginia at 19, Kansas at 13, Alaska at 9, and Utah at 6.

    Unchanged from a week ago were Pennsylvania at 46, Wyoming at 22, California at 11, and Arkansas at 5. Oklahoma at 107 and Louisiana at 71 each edged up a unit.

    Just four of the major basins reported movement. Down a unit apiece was the Permian at 232, Marcellus at 63, and Utica at 23. The Eagle Ford edged up a unit to 104.
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    Vedanta makes $2.3 bln bid to buy out minorities in Cairn India

    Indian mining and energy group Vedanta Ltd made a $2.3 billion offer on Sunday to buy out minority shareholders in cash-rich oil unit Cairn India , a deal that helps parent Vedanta Resources Plc repay hefty debts.

    Shareholders in Cairn India, India's top private sector oil producer, will get one share in Vedanta Ltd for every share held, the companies said in a joint statement on Sunday.

    The shareholders will also get one redeemable preference share in Vedanta Ltd with a face value of 10 rupees, making the deal worth roughly $2.3 billion. That implies a premium of 7.3 percent to Cairn's Friday close and a ratio of 1.04 for 1, marginally better than expectations of a simple 1 for 1 swap.

    Vedanta began simplifying its complex structure with a 2012 overhaul, but further moves to clean up the group and buy out minorities in its cash generating units have long been awaited by the market. Cairn India has a roughly $2.6 billion cash pile.

    The deal, expected to close in the first quarter of 2016, is the first major structural change under Vedanta Ltd Chief Executive Tom Albanese, the former Rio Tinto boss appointed last year. He said the deal moved Vedanta closer to its goal of being a major diversified player.

    Though long-expected, the timing of the Cairn buyout is likely to have been triggered by a sharp drop in Cairn India's stock as oil prices fell, making for a favourable merger ratio for Vedanta. Cairn India shares have dropped over 50 percent over the past year.

    Vedanta Resource Plc, Anil Agarwal, currently holds a majority interest in Mumbai-listed operating unit Vedanta Ltd, which in turn holds a 59.88 percent stake in Cairn India.

    But Vedanta Ltd also holds other assets, including about 65 percent in Hindustan Zinc, whose minorities are likely to be the next target of the group's clean-up effort, and aluminium producer BALCO, in which it has a 51 percent stake.

    Both companies count the Indian government as minority shareholders, limiting Vedanta's ability to move.
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    Canada approves $1.3bn North Montney Mainline pipeline project

    Canada has given consent to Nova Gas Transmission (NGTL)'s proposal to build C$1.7bn ($1.38bn) North Montney Mainline Pipeline project.

    The project is proposed by Nova Gas Transmission, a subsidiary of TransCanada to transport natural gas from northeastern British Columbia to the existing NGTL system.

    North Montney Mainline Pipeline project will feed gas to a second pipeline called the Prince Rupert Gas Transmission line.

    "Through our plan for Responsible Resource Development, we are enhancing environmental protection and engaging First Nations in all aspects of resource development."

    It is planned to be connected to Pacific NorthWest LNG terminal, which is a $11bn LNG terminal being illion liquefied natural gas export terminal being proposed by Petronas.

    Nova Gas Transmission had submitted to Canada National Energy Board (NEB) for review, which NED had recommended for approval.

    The government approval, however, comes with 45 terms and conditions, which ensure public safety and environmental protection.

    The proposed pipeline will have an initial capacity to transport 2.1 billion ft3 of gas per day.

    Prior to the start of pipeline construction, NEB will ensure if it meets specified conditions through a NGTL demonstration.

    NGTL is expected to increase engagements with Aboriginal groups and local communities, before initiating work on the project, to ease its impacts on them.

    Canada Minister of Natural Resources Greg Rickford said: "The approval of this project contributes to Canadian energy security and jobs while supporting the competitiveness of our natural resources globally.

    "Through our plan for Responsible Resource Development, we are enhancing environmental protection and engaging First Nations in all aspects of resource development."

    TransCanada has also secured NEB approval for its King's North Connection project as part of the Canadian Mainline system.
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    Indian oil min says met Cairn India over Vedanta merger

    India's oil minister met executives from oil company Cairn India this week to discuss its potential merger with parent Vedanta Ltd, the operating unit of London-listed mining and energy group Vedanta Resources Plc.

    Vedanta earlier this week signalled it was considering merging those two listed subsidiaries, as it tries to resolve a mismatch between its debt -- held at the top of the group -- and its cash, largely generated by subsidiaries including Cairn.

    Asked on Friday if he had met the companies to discuss the deal, Oil Minister Dharmendra Pradhan said the government's main concern was that any deal should not affect Cairn's investments.

    "They met me, but my ministry's concern is that capital expenditure should grow. My ministry's expectation is oil and gas production should increase," he told Reuters.

    Debt-burdened Vedanta began simplifying its byzantine structure with a 2012 overhaul, but further moves to streamline the group and buy out minorities in cash-rich subsidiaries have long been awaited by the market.

    A source familiar with the matter said the deal -- a test for new Indian rules protecting minority shareholders -- could be announced as early as Sunday.

    The move is reported to have been triggered by a drop in Cairn's shares as oil prices weakened, making for a more favourable merger ratio for Vedanta.

    "There's no question that they do it the moment they feel capable of doing it. It's always been the best thing for them to do," said one industry banker in London.

    Analysts calculate that almost three-quarters of Vedanta's debt is held at either the group or the operating level. Cairn, by contrast, had roughly $2.6 billion in cash on its balance sheet as of March 31.

    This matters particularly at a time when analysts estimate the group's debt repayments over the next five years will outpace its free cash flow. According to UBS analysts those repayments come to $15 billion, against an estimated free cash flow of $9.9 billion.
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    Iran Seeks $100 Billion for Gas as World Fixates on Nation’s Oil

    Iran needs $100 billion to rebuild its gas industry and has met with European energy giants as an end to decades of international sanctions looms, according to the state-run company in charge of discussions.

    “We welcome and appreciate investment by companies; we welcome new technology,” Azizollah Ramazani, international affairs director at National Iranian Gas Co., said in an interview in Paris. “During the last 18 months we have had many discussions with foreign companies.”

    While commodity markets fixate on a return of Iranian oil, the importance of gas in the longer term was underlined Wednesday as BP Plc data showed the Islamic Republic held its position as the nation with the largest proven reserves of the fuel after snatching the crown from Russia in 2011.

    Deputy Oil Minister Hamid Reza Araghi met with international companies at the World Gas Conference in June, Ramazani said, adding that half of the $100 billion that Iran requires will need to come from foreign producers.

    “In Paris, we met a lot of companies and they were very eager to have negotiations,” primarily from Europe, Ramazani said .

    The prospect of renewed fossil-fuel supplies from Iran is one of the great unknowns for global energy markets already shaken by surging U.S. shale output and Saudi Arabia’s decision to keep pumping oil even as prices collapsed.

    If a final agreement on Iran’s nuclear program is reached by the June 30 deadline and sanctions eased, Iran plans to increase gas exports sevenfold to 200 million cubic meters a day in four years, said Ramazani. It wants to raise production to 1.2 billion cubic meters a day in five years, from 800 million now, he said.
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    Berkshire’s Suncor Bet Endorses Long-Term View for CEO Williams

    Warren Buffett’s Berkshire Hathaway Inc. and Steve Williams have one thing in common. They both dumped Exxon Mobil Corp. for Suncor Energy Inc.

    For Williams, a former Exxon executive who is now the Canadian oil-sands producer’s chief executive officer, Berkshire’s stake in Suncor is a testament to a strategy of cutting costs and investing in its best assets even as the industry confronts a price collapse.

    “I’m very proud that Warren has come in so heavily to the stock.” Williams, who’s had “occasional discussions” with the billionaire, said in an interview at Bloomberg’s Calgary bureau on Wednesday. “I’m particularly pleased because I worked for Exxon for 20 years before I came to Suncor, so it’s slightly personal as well.”

    Suncor has the highest gross margins among 18 of the world’s largest oil and natural gas producers, four times higher than Exxon’s, data compiled by Bloomberg show. The margins have risen while those of global and Canadian peers declined, according to the data.

    Suncor became Berkshire’s biggest oil holding after the company sold all shares in Exxon last year, while increasing its stake in the Calgary-based producer since the second quarter of 2014.

    Alan Jeffers, a spokesman for Exxon, declined to comment. Buffett didn’t return a message left with an assistant.

    Berkshire owned about 22.3 million shares of Suncor as of the end of the first quarter, up from 13 million at the end of 2013, according to data compiled by Bloomberg. Since the end of 2013, Suncor has declined 4.7 percent.

    The shares have failed to keep pace with growing margins as a result of investor concerns that a declining Canadian dollar will erode asset values and delayed pipeline projects will limit market access for Canadian crude, Williams said.
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    Alternative Energy

    OCI Solar Power LLC Begins Construction Of Largest Solar Plant In Texas

    San Antonio-based OCI Solar Power LLC has started construction on a 110-megawatt (MW) solar plant in eastern Pecos County near Bakersfield. At full build-out, this would be the largest solar plant in Texas. The solar arrays will track the sun horizontally and vertically, making this one of the largest dual-axis solar projects in the world.

    The Alamo 6 plant is near Bakersfield. It is on the 1,200-acre Apollo reinvestment zone, which was renamed from Wala when OCI Solar purchased the project from Macquarie, the original developer. A private landowner holds the lease.

    The project is one of seven facilities that compose a 400MW project OCI Solar is constructing for CPS Energy, Greater San Antonio's energy company. As part of the agreement with CPS Energy, OCI Solar has committed to bring over 800 long-term jobs to the San Antonio area.

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    Uruguay Spends $2.6 Billion to Become South America Wind Leader

    Uruguay hopes to generate as much as 38 percent of its power from wind by the end of 2017, up from about 13 percent now, cementing Uruguay’s position as South America’s top wind-energy user, according to Gonzalo Casaravilla, chairman of the state- owned electric utility UTE.

    That would put Uruguay in the same league as Denmark, the global wind energy trailblazer that got 43 percent of its power from wind last year. The country of 3.3 million is embracing wind because it offers low operating costs and as a hedge against drought, which reduces power from hydroelectric dams and in the past has forced it to fall back on fossil fuels.

    “When someone calculates the percentage of wind power in our energy matrix, we’ll surely rank among the leaders in the world,” Casaravilla said in an interview May 15 in Montevideo. He expects the country to get about 30 percent of its power from wind by the end of next year.

    “In percentage terms, Uruguay is a leader in wind generation in Latin America, and you can even compare it to some of the leaders worldwide,” said Lilian Alves, an analyst based in Sao Paulo for Bloomberg New Energy Finance.

    Uruguay was the fastest-growing wind market in the world in 2014, according to the World Wind Energy Association. Installed capacity surged almost eight fold to 479 megawatts, according to the Energy Ministry.

    In a wet year like 2014, about 74 percent of Uruguay’s electricity came from hydropower. Now, with a drought affecting parts of the country, wind is coming to the rescue as hydropower’s share slips below 70 percent.

    Uruguay is especially well-suited for wind with low ridges smoothing the flow of steady winds coming off the Atlantic Ocean. That helps turbines run at about 40 percent of capacity, said Fernando Schaich, a director at the Montevideo-based renewable-energy developer SEG Ingenieria.
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    India ramps up solar power target to 100 GW

    The Union Cabinet, in an ambitious push for clean energy, ramped up the country's solar energy generation target five times to 100 GW by 2022, from 20,000 MW under the Jawaharlal Nehru National Solar Mission (JNNUSM) on Wednesday. If India manages to achieve this target, it will become one of the largest green energy producers in the world. JNNUSM was launched by the United Progressive Alliance in 2009. This will also greatly reduce the country's reliance on fossil fuels thus reducing our carbon emissions, which is the third largest in the world behind China and United States of America. Currently, India has an installed solar photovoltaic capacity of 3,800MW.

    Along with this decision, the Cabinet Committee on Economic Affairs also approved setting up of over 2,000 MW of grid-connected solar projects on build, own and operate (BOO) basis under JNNUSM Phase-II. As per the Centre's plan, of the 100 GW, 40 GW would be rooftop solar energy and 60 GW wouild be through large and medium scale grid connected solar power projects.

    The big push for solar would need an investment of Rs 6 lakh crore. In the first phase, the Centre will be providing Rs.15,050 crore as capital subsidy to promote solar capacity addition. Primarily, the capital subsidy would be too promote Rooftop solar projects.
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    Earlier end to subsidies for new UK onshore wind farms

    New onshore wind farms will be excluded from a subsidy scheme from 1 April 2016, a year earlier than expected. There will be a grace period for projects which already have planning permission, the Department of Energy and Climate Change said.

    But it is estimated that almost 3,000 wind turbines are awaiting planning permission and this announcement could jeopardise those plans.

    Energy firms had been facing an end to generous subsidies in 2017.

    The funding for the subsidy comes from the Renewables Obligation, which is funded by levies added to household fuel bills.

    After the announcement was made, Fergus Ewing, Scottish minister for business, energy and tourism and member of the Scottish parliament, said he had warned the UK government that the decision could be the subject of a judicial review.

    "The decision by the UK government to end the Renewables Obligation next year is deeply regrettable and will have a disproportionate impact on Scotland, as around 70% of onshore wind projects in the UK planning system are here," he added.

    The move was part of a manifesto commitment by the Conservative party ahead of the general election in May.

    "We are driving forward our commitment to end new onshore wind subsidies and give local communities the final say over any new wind farms," said Energy and Climate Change Secretary Amber Rudd.

    "Onshore wind is an important part of our energy mix and we now have enough subsidised projects in the pipeline to meet our renewable energy commitments," she said.

    The grace period could allow up to 5.2 gigawatts (GW) of wind capacity to go ahead, which could mean hundreds more wind turbines going up across the UK.
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    Japan offshore wind project to gain largest ever turbine

    Japan’s $405million offshore wind project is set to gain a 7-megawatt turbine.

    The turbine, which will be the largest of its kind ever to be used at sea, will generate power 12 miles (20km) off the coast of Fukushima.

    The project, which was established two years ago, already has a 2-megawatt model.

    Yasuhiro Matsuyama, a trade ministry official in charge of clean energy projects, said: “Countries are exploring floating offshore wind technology and Japan is in a sense at the same level with Norway and Portugal.

    “This will be the world’s first pilot project to use such an extremely large-size turbine.”

    The scheme is funded by the Japanese government and led by Marubeni Corp.

    The floating structure, made by Mitsubishi Heavy Industries, is expected to start trial operation in May.
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    Orocobre: Olaroz Lithium Facility Operations Update

    Orocobre: Olaroz Lithium Facility Operations Update

    Production ramp up slower than expected due to equipment limitations and early operational issues

    Production bottlenecks have been sequentially identified and all bar one have been successfully rectified

    Improving production rate through Q3 whilst final modification is completed

    Company reaffirm guidance to meet nameplate monthly run rate of 1,450 tonnes during Q4

    CY2015 production now fully committed

    Strong market growth and lithium price growth

    Full news release:
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    SunEdison scoops up Continuum’s Wind in biggest clean energy buyout

    SunEdison scoops up Continuum’s Wind in biggest clean energy buyout

    SunEdison, the largest renewable energy development company in the world by generation capacity, on Tuesday announced it has signed a definitive agreement to acquire Mumbai-based Continuum Wind Energy. The buyout - the biggest in the clean energy sector in the country so far - will significantly consolidate its local presence and further highlight the frenzied global interest in the Indian renewable energy sector in the backdrop of the Modi government's renewed focus on the space and its ambitious target to add 100 GW (100,000 MW) renewable capacity by 2022. Currently only 20 GW of wind farms operate in India.

    The Belmont, California headquartered SunEdison, which is listed on Nasdaq, will take over 242 MW of operating wind assets that Continuum owns and operates in Maharastra and Gujarat as well as 170 MW of assets under contruction. The company also has 1000 MW of plants in development across 6 states. This will be the third wind buy for SunEdison - In May, they acquired two renewable energy portfolios, including the domestic portfolio of around 100 MW of Spain-based FersaEnergias Renovables, SA.

    Sun Edison has not disclosed the deal value in any official communication, but sources close to the transaction said Continuum Wind Energy has been valued at Rs 3,720-3,900 crore ($620-650 million), inclusive of its debt. The equity value alone has been pegged at around Rs 1,920 crore ($320 million). Analysts tracking the sector estimate that the company should close FY15 with Rs 400 crore of revenue. The deal is expected to close in the next 6-8 weeks.

    "India is a core market for SunEdison and offers tremendous growth opportunities in both wind and solar energy. We made a commitment to Prime Minister Modi that we will deliver 15.2 GW of renewable energy by 2022. We are putting our money where our mouth is," Pashupathy Gopalan, President of SunEdison, Asia Pacific told ET on a call from South Africa.

    Read more at:
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    Molycorp defers second interest payment in 2 weeks

    US rare earths producer Molycorp on Monday deferred making a second interest payment in two weeks.

    The Greenwood Village, Colorado-based miner said that it would take advantage of a 30-day grace period on a $3.36-million semi-annual interest payment related to its 3.25% senior unsecured convertible notes due 2016. 

    Molycorp said the decision would not trigger any cross-defaults on its other loans. The NYSE-listed company early this month deferred a $32.5 million interest payment on its 10% senior notes due 2020, choosing to also use the 30-day grace period. 

    The Wall Street Journal reported that analysts expected the company to file for bankruptcy protection before the end of the month. Facing a $1.7-billion debt load, Molycorp, which operated the Mountain Pass rare earths mine and processing facility, in California, the largest rare earths mine outside of China, had retained financial and legal advisers to assist it in restructuring its debt and was in discussions with its creditors.

    The company had in March warned that it might not have enough money to continue as a viable entity if its debt restructuring efforts failed. Investors were encouraged by he company's debt restructuring efforts, raising the NYSE-listed stock price 21% to $0.44 apiece on Monday afternoon
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    Adani Group in pact for 10,000 mw solar power park in JV with Rajasthan

    Adani Group has set a target of 10,000 mw of solar power generation capacity by 2022 and has signed a joint venture agreement with the government of Rajasthan to set up a 10,000 mw, the Gautam Adani-led company said Monday.

    The group's arm Adani Renewable Energy Park has signed a pact with the Rajasthan government for a 50:50 joint venture, namely Adani Renewable Energy Park Rajasthan, for the solar power project which will emerge as the largest such integrated facility in India, the release said.

    The proposed park will attract investments over Rs 60,000 crore and it will include generation projects and a manufacturing unit for solar module, parts and equipment. Adani itself plans to generate 5,000 mw in this solar park.

    "We have embarked upon a mission of becoming a world leader in renewable power generation technologies, with a special focus on solar. The development of Solar Park facility is our contribution towards realization of our Honorable Prime Minister's campaign and commitment towards clean and green energy in India," said Gautam Adani, chairman, Adani Group.

    The government of Rajasthan is keen to enhance the solar power generation capacity in the state and has committed to achieve 25,000 mw capacity by 2022. The solar park is a part of this plan.
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    Hanergy loses $585 mln intra-group order signed in May

    Hanergy Thin Film Power Group's biggest client has cancelled a recently signed $585 million order that makes up nearly half its annual sales, in another setback to the Chinese solar energy firm which is being probed by Hong Kong financial regulators.

    Hanergy said in a stock exchange filing on Monday that an equipment sales and technical services deal struck in May between its parent Hanergy Holding - its biggest customer accounting for two-thirds of sales - and wholly-owned subsidiary Fujian Apollo is off. It gave no reason for the move.

    The cancellation underscores Hanergy's vulnerability given its dependence on a limited client base - its five largest customers account for 98 percent of its sales. Since its revenues are predominantly driven by affiliated companies, earnings could be volatile.

    "Whether it is an external or internal client, it's not a good sign because of the size of the order," said an analyst at a research firm in Hong Kong, declining to be identified because his firm did not formally cover Hanergy.

    Fujian had agreed in May to sell and provide technical services to Hanergy Holding, which owns a 73.19 percent stake in Hanergy. Under that arrangement, Hanergy Holding agreed to buy six sets of silicon-based thin-film solar energy panel module assembly lines with a production capacity of 900 MW from Fujian for $175.5 million.

    A technical services deal between the two had also been agreed, under which $409.5 million would be paid to Fujian.

    Hanergy said on Monday that after "arm's length negotiations" the companies had cancelled the agreements and that there would be no material adverse impact on the group's business.
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    Harvard says Solar threatens US gas consumption.

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    French minister asks shops to stop selling Monsanto Roundup weedkiller

    French Environment and Energy Minister Segolene Royal has asked garden shops to stop over-the-counter sales of Monsanto's Roundup weedkiller as part of a wider fight against pesticides seen as potentially harmful to humans.

    "France must be offensive on stopping pesticides," Royal told France 3 television on Sunday.

    She did not specify how she would enforce any move to curb over-the-counter sales of Roundup, one of the most widely used herbicides.

    The International Agency for Research on Cancer (IARC), part of the World Health Organization (WHO), said in March that glyphosate, the key ingredient in Monsanto's Roundup was "probably carcinogenic to humans."

    That prompted calls from some public officials and consumers for a ban on the pesticide.

    Monsanto said on Sunday it had no information relating to a change in the marketing authorisation for Roundup and that there was no new scientific data available to challenge it.

    "Under the conditions recommended on the label, the product does not present any particular risk for the user," the company said in an email.

    France is already considering a move to restrict self-service sales of plant protection products for domestic gardeners as part of a wider move to crackdown on pesticides, although this would only apply from 2018. Sales would have to be done through a certified vendor.

    A full ban on the use of pesticides by home gardeners in France is planned for 2022.
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    Precious Metals

    Gold price: Hedge funds scramble to cover 233 tonnes

    Gold on Thursday was clawing its way back to the $1,200 an ounce level, buoyed by dovish comments from the US Federal Reserve about the pacing of interest rate cuts which took some shine of the strong dollar.

    In brisk afternoon trade in New York, gold for delivery in August, the most active contract, added $25.50 an ounce or 2.2% from Wednesday's close to exchange hands for $1,202.40 an ounce, the best level since May 22.

    The latest positioning comes within shouting distance of the record-breaking shorts going into 2014

    Lower-for-longer interest rates add to the allure of gold which produces no income and relies on price appreciation to attract investors.

    Worries about the economic impact of the Greek debt crisis and a weaker dollar also boosted the yellow metal which usually moves in the opposite direction to the greenback.

    But much of Thursday action stemmed from speculators trying to cover massive short positions on the futures market that had been built up over several weeks.

    Last week large investors on the futures market such as hedge funds, referred to as "managed money", added a whopping 31% to bearish bets compared to the week before.

    In the week to June 9 according to the Commodity Futures Trading Commission's weekly Commitment of Traders data, speculators' short positions – bets that gold could be bought cheaper in the future – jumped to more than 8.2 million ounces (233.5 tonnes).

    The latest figure surpasses the 7.7 million in March when gold was hitting lows for 2015 of around $1,150 and comes within shouting distance of the record-breaking short positions going into 2014. That December 2013 short position was the highest since 2007, back when gold changed hands for $700 an ounce.

    On a net basis hedge funds are now long under 4.5 million ounces, more than 10 million ounces below levels hit in January this year.
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    India proposes gold-linked bonds to lower bullion imports

    India is planning to issue sovereign bonds linked to the bullion price in an effort to divert some of the estimated 300 tonnes plus of annual demand for gold bars and coins and curb bullion imports, which can push up the trade deficit.

    The Reserve Bank of India, the central bank, will issue the bonds on behalf of the government, with a minimum interest rate of 2 percent, according to a draft outline issued by the government late on Thursday.

    "The main idea is to reduce the demand for physical gold," according to the draft.

    Indians prize gold as gifts and as a way of storing wealth. The country consumes nearly 1,000 tonnes of gold every year, most of it imported, and gold is the second-biggest expense on the import bill after oil.

    To reduce overseas purchases of the precious metal, Finance Minister Arun Jaitley unveiled plans in February for a sovereign gold bond and a bullion deposit scheme.

    While the deposit scheme aims to mobilise idle household gold, estimated at more than 20,000 tonnes, the sovereign bond would allow consumers to invest in 'paper' gold rather than physical gold.

    The price of the bond would be linked to the price of gold and it would pay an interest rate linked to the international rate for gold borrowing.

    For interest rates, "an indicative lower limit of 2 percent may be given but the actual rate will have to be market-determined", the government proposal said.

    The sovereign bonds would be issued in denominations of two, five and 10 grams of gold or other sizes for a minimum term of five to seven years and they could be used as collateral for loans, it said.

    The government aims to issue bonds worth 135 billion rupees ($2.12 billion) or the equivalent of 50 tonnes of gold in the first year.

    It invited the public to comment on the plans by July 2.
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    Goldcorp sells off 26% stake in Tahoe to raise cash

    Canadian gold giant Goldcorp has sold its 26% stake in Tahoe Resources for just under $1 billion as the miner continues to try increasing cash flow amid weak bullion prices.

    The Vancouver-based miner, the world’s largest gold producer by market value, offered 58.1 million common shares of Tahoe for Cdn$17.20 each in a secondary share sale, according to a company statement. Tahoe won’t receive any of the proceeds from the offering, Goldcorp added.

    A group of banks led by GMP Securities and Bank of Montreal bought Tahoe shares and will resell them to investors.

    A group of banks led by GMP Securities and Bank of Montreal bought Tahoe shares and will resell them to investors. The transaction is expected to close by June 30.

    The news came on the same day Royal Bank of Canada downgraded Goldcorp’s stock to “sector perform” from “outperform,” citing missed guidance and concerns over the miner’s ability to continue paying its monthly dividend.

    Reno, Nevada-based Tahoe operates the Escobal silver mine in Guatemala, which it acquired in 2010 from Goldcorp in return for shares and cash, and La Arena gold mine in Peru.
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    Petra Diamonds forecasts full-year revenue below market estimates

    Petra Diamonds Ltd forecast full-year revenue below market expectations as the smaller diamonds mined from late stage ores at its Finsch and Cullinan mines in South Africa have been fetching lower prices.

    Petra said it expected revenue of about $430 million for the year ended June 30, almost 9 percent lower than a year earlier and below an average market estimate of $442 million, according to three analysts.

    The company had warned twice earlier this year that its results would be below consensus due to variability in grade and production mix and softness in the diamond market earlier in the year.

    Petra has been mining at mature caves at Finsch and Cullinan and has therefore seen a lower incidence of the high quality stones that have traditionally boosted the company's results.

    Cullinan, located in the foothills of the Magaliesberg mountain range northeast of Pretoria, has in particular been the source of many large diamonds.

    Petra in 2014 unearthed three large stones at the mine, which is the source of the largest rough diamond ever recovered - the 3,106-carat Cullinan Diamond found in 1905. Petra has not revealed any major discovery at Cullinan in 2015.

    Mining at Cullinan's mature underground area has also meant that the ore mined has been more diluted, costing the company more to move additional waste material.

    Petra, however, kept its full-year production target of about 3.2 million carats and said its reliance on heavily diluted ore would be reduced in fiscal year 2016 as it ramps up production from new areas.
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    Base Metals

    Western Areas adds Glencore’s Cosmos nickel complex to its portfolio

    Nickel miner Western Areas on Friday announced that it would buy the Cosmos nickel complex, in Western Australia, from Glencore subsidiary Xstrata Nickel Australasia Operations. 

    The acquisition would provide Western Areas with substantial additional exploration upside and a potential second mining operation, which would complement its existing Forrestania nickel operation, MD Dan Lougher commented.

     “The Cosmos nickel complex is an excellent, prudent and low-cost investment, which is consistent with our brownfields acquisition strategy,” he said. Western Areas would pay A$24.5-million for Cosmos, which is located in the world-class Agnew Wiluna nickel belt, which has an endowment of more than nine-million tonnes of nickel. 

    Historical production from the Cosmos complex was around 127 000 t of nickel at an average grade of 5.0%. Western Areas believed the complex had “substantial exploration opportunities” in areas which remained largely untested and said it was planning a 24-month exploration programme for the site. There was also the potential to establish an underground mine at the undeveloped Odysseus high-grade deposit hosting a total mineral resource of 7.3-million tons at 2.4% nickel, containing 174 000 t nickel. 

    Included in the transaction is significant on-site infrastructure and material, such as a 450 000 t/y concentrator, a semi-autogenous mill, which could be used at any of Western Areas’ potential development projects, including mill expansion scenarios at Forrestania and a large accommodation village, which would support an early start-up. 

    Lougher further pointed out that Western Areas’ balance sheet was in a strong position and, once debt-free from July this year, together with ongoing cash flow generation, the company expected to be able to support dividends for shareholders, while maintaining capacity to fund a ramp-up of exploration activity and drive organic capital improvement projects.
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    Rush for the exit as tin exports from Indonesia surge in May/June

    Image Source: PeriodictableThe preliminary data released by the Indonesian Trade Ministry shows that Tin exports from the country surged higher during the month of May this year. The exports during the month totaled 6,263 tonnes, rising sharply by 23% from 5,071 tonnes exported during April. The above data is based on the figures reported by surveying companies as per pre-shipment checks carried out by them.

    The tin sales by Indonesia continue to run well above the export cap of 4,000 tpm set by Bangka-Belitung Governor Rustam Effendi. The most recent data suggests that sales during the first 16 days of June have already crossed 4,760 tonnes. The exports during the last two days have skyrocketed to 1,600 tonnes. According to industry experts, the sudden surge in exports is on the back of fears that the administration may further limit the export quota. Stricter control measures are expected to be announced soon, they added.

    The tin smelters are being forced to push their sales in order to raise cash towards Ramadan bonus payments to workers. Also, smelters must settle all their royalty payments as mining activities need to attain “clean and clear” status starting this August. The new rules may result in closure of smelters that fail to comply with the regulations. This is expected to lower production levels, which in turn may lead to lower export volumes.

    Meantime, tin prices which had fallen nearly 15% in 2014, have fallen by almost 24% year-to-date in 2015. Indonesia-the key producer of tin, has been implementing various restrictions on tin shipments out of the country in an attempt to reduce the glut situation. Further curbs on exports look inevitable.
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    Finland to inject more funds into troubled nickel mine

    The Finnish government plans to inject a further 112 million euros ($126 million) into restructuring troubled nickel mine Talvivaara after a potential buyer failed to arrange financing, a minister said on Wednesday.

    Talvivaara’s listed parent company is going through debt restructuring while its key subsidiary, which owns the mining assets, last year applied for bankruptcy protection following a drop in nickel prices, repeated production disruptions and environmental damage.

    The government funding to create a new company around the mine follows a previously promised 97 million euros.

    It said it was continuing negotiations with British investment firm Audley Capital Advisors, which in March signed a conditional agreement to buy the key assets of the mine, as well as other parties.

    “To secure binding financing has so far proved very difficult due to many reasons, including the mining sector’s tough market situation,” Minister of Economic Affairs Olli Rehn told a news conference.

    He added that the government was also preparing to close down the mine in the north of the country if a commercially viable solution cannot be found. If that happened, the funding would be used to cover the costs.

    According to the initial plan, a consortium led by Audley was aiming to take a 85 percent stake in the mine while the Finnish government would have taken 15 percent.
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    X2 in the running for Anglo copper mines

    X2 in the running for Anglo copper mines

    All eyes have been on Mick Davis and his $5.6 billion X2 fund to set the ball rolling for private equity in mining. But the ex-Billiton CFO has so far failed to pull the trigger despite the likes of Anglo-American, BHP Billiton and Vale putting assets up for sale.

    Now Reuters reports that X2 is among the firms bidding for two Anglo American copper mines in Chile.

    According to unnamed sources "Mick seems keen on those assets" while Glencore and boutique UK investment firm Audley Capital are also in the running. In the past Chile's state-owned copper giant Codelco was also mentioned as a possible bidder.

    Bids for the Mantos Blancos and Mantoverde copper mines closed last week. The $1 billion number for both has been touted for a long time, but "two mining sources familiar with the mines gave more conservative valuations of around $500 million or less":

    "An industry source said although Glencore was still in the process it was unlikely to make a high enough bid to win the assets."

    "They are both mines towards the end of their life although with some investment Mantoverde's life can be extended," a second industry source said. "I would think a smaller firm like Audley is more likely to get them. Certainly the John MacKenzie [former Anglo copper head] connection is strong."

    Meanwhile a separate report claims that X2 didn't come close to the winning bid for a stake in Barrick Gold's Zaldivar copper mine in Chile once dubbed as the "Andean ATM".

    "There were seven bids higher than that of X2," a London-based banking source with knowledge of the matter told Mining Weekly. "They couldn't make the numbers work."
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    Congo says Ivanhoe Mines' Kamoa deal should be suspended

    Democratic Republic of Congo said on Tuesday that Ivanhoe Mines' sale of a stake in the Kamoa copper mine to China's Zijin Mining should be suspended until concerns raised by the government can be resolved.

    Vancouver-based Ivanhoe announced last month that it would sell a 49.5 percent stake in Ivanhoe subsidiary Kamoa Holding Ltd to China's Zijin Mining Group Co Ltd for $412 million.

    Kamoa Holding Ltd currently owns 95 percent of the project in Congo's Katanga province.

    In a statement released on Tuesday, the government, which holds a 5 percent stake in the Kamoa project, said Ivanhoe had promised it an additional 15 percent stake and expressed concern that the sale to Zijin would dilute its new shares.

    "That last transaction should be suspended until the completion of the talks that the government has undertaken," mines minister Martin Kabwelulu and portfolio minister Louise Munga Mesozi said in a statement.

    The government also vowed to reevaluate the Kamoa mine's legal status in Congo.
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    Indonesia seeks legal route for bauxite miners to resume exports

    Indonesia's government is discussing legal avenues to allow a resumption of bauxite exports to help kickstart stalled smelter projects, top officials said, as Southeast Asia's largest economy tries to promote infrastructure development.

    Indonesia imposed restrictions on exports of unprocessed metal ores in early 2014 in an effort force firms to develop smelters that would add value to the country's resources and create jobs.

    However, many firms including bauxite miners said building smelters was unfeasible in the absence of supporting infrastructure and export revenue, and the country's revenue from mining has plummeted.

    Indonesia's bauxite exports fell to 2.1 million tonnes in calendar 2014 from 55.6 million in 2013, when they were worth $1.3 billion to the country's economy.

    "We are discussing this to see if there's a possibility of us providing a slight relaxation," Sofyan Djalil told reporters on Tuesday, adding that the government was looking into allowing exports by firms that have set aside a smelter development guarantee fund in an escrow account.

    "It will be very restricted, very tight. Free riders won't be allowed," Djalil said, adding that no relaxation would be given to nickel miners building smelters.

    According to Mining Minister Sudirman Said, any relaxation of the existing bauxite export rules needs first to ensure it doesn't contradict the country's law on mining, and would likely be covered in a new ministerial decree.
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    Metminco gives Los Calatos mineral resource update

    Metminco said following the new detailed geological modelling of the Los Calatos Porphyry Complex, an updated Mineral Resource Estimate has been completed, which has identified a new higher grade copper development opportunity.


    - Total mineral resource of 352 million tonnes at 0.76% Cu and 318 ppm Mo at a 0.5% Cu cut-off, which comprises all resource categories.

    - Potential for a higher grade, lower tonnage, copper mine at Los Calatos targeting: 126 million tonnes at 1.03% Cu and 351 ppm Mo (using a 0.75% Cu cut-off) located entirely within the modelled breccia units; Mining and milling rate of 6 million tonnes p.a.; 50,000 tonnes of copper metal production p.a.

    - Mining study by Runge Pincock Minarco (RPM) to determine new mine associated economics scheduled for completion mid-July 2015
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    Japan's spot aluminium premium slips below $100/mt for first time in 6 years

    Japanese spot aluminium premiums slipped below $100/mt plus London Metal Exchange cash, CIF Japan, Monday for the first time in six years, five months after hitting an all-time high of $425/mt plus LME cash CIF Japan.

    Platts assessed spot premiums of primary aluminium imported into Japan at $90-$100/mt plus LME cash, CIF, main Japanese ports Monday, June 15, down from $90-$120/mt last Friday and the lowest since being assessed at a premium of $110-$120/mt on June 8, 2009.

    The premium hit an all-time high of $425/mt on January 20.
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    First Quantum is mining’s ideal takeover target, Bernstein says

    First Quantum Minerals is the ideal takeover target for mining giants like BHP Billiton and Rio Tinto seeking to grow through acquisitions instead of building projects from scratch, Sanford C. Bernstein & Co. said.

    “Several miners will be looking to acquire a copper producer, ideally offering strong growth,” Bernstein analyst Paul Gait said. “First Quantum looks like the ideal target. It’s a base metals copper pure-play, generating 70 percent of its revenue from copper and about 20 percent from nickel.”

    Miners will focus on buying existing copper mines to boost production as the current price below $6,000 makes building new projects uneconomic, Gait said in a note. BHP and Rio are among the most likely buyers as they diversify from iron ore, he said. Glencore Plc may also be interested so it can benefit from synergies in the Central African copper belt, he said.

    First Quantum, a Vancouver-based miner of copper in Zambia and nickel in Australia and Finland, plans to triple annual copper-output capacity to more than 1.3 million metric tons in five years after completing its Cobre project in Panama by 2018.

    This month it raised about C$1.4 billion ($1.1 billion) to speed growth in its copper projects as a supply deficit looms.
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    China's magnesium output expected to grow 10% annually through 2020

    China's magnesium output is expected to grow at least 10% annually to 1.3 million mt by the end of 2020, the Magnesium Industry Association of Shaanxi said Friday.

    The report estimates this year's output at 800,000 mt. China produced 700,000 mt/year of magnesium during the 12th Five-Year Plan period (2011-2015), it said.

    The rising output was attributed to countries' push to reduce emissions through light-weight engineering, which will increase demand for magnesium and magnesium alloy products.

    China aims to to have 600,000-700,000 mt of processed magnesium production by end-2020, with at least 10 producers having deep-processed magnesium alloy output capacity of more than 20,000 mt/year, the association said.

    The country also aims to have more than six magnesium smelters with output capacity of 50,000-100,000 mt/year.

    The report said China's push for energy efficient and alternative energy vehicles would increase applications for magnesium alloy components.
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    Zinc's infinitely stretchable deficit deadline

    All mining activities at the giant Century zinc mine in Australia will have ceased by the end of this month.

    News that will be greeted with relief by believers in the zinc deficit story, who have had to watch Century's operator MMG push back the fateful closure date many times in the past.

    Century has become totemic of zinc's bull narrative of looming shortfall as some of the world's biggest mines come to the end of their natural lives without obvious like-for-like replacements.

    Mining activities may be stopping at Century this month but the mill will continue operating into the third quarter, processing stockpiled ore.

    This was expected. Largely unexpected was MMG's announcement in April it will then mill another 450,000 tonnes of ore from trial mining activities at the nearby Dugald River project.

    That ore grades 13.3 percent zinc, implying almost another 60,000 tonnes of contained metal. It will take between four and six weeks to process that ore, meaning the Century mill might still be producing concentrates into the fourth quarter of this year.

    That tonnage windfall is not included in MMG's 2015 production guidance of 320,000-370,000 tonnes for Century, because Century is now, er, closed.

    It's only a small deferral in the grand scheme of things but just as the Century closure is totemic of the zinc bull story, so the latest push-back is symptomatic of that story's curiously elastic narrative.

    So too is MMG's development work at Dugald River. The mine was originally due to ramp up as Century wound down but the company delayed the start date after encountering more complex ore than anticipated.

    Worth noting, therefore, is the fact that MMG hasn't given up on Dugald River. Pre-mining activities are continuing and the company is working on a new mining plan, which would extend mine life but with lower annual output.

    Well, at least the Lisheen mine in Ireland is going to close pretty much on schedule in the coming months.

    But operator Vedanta Resources has sprung its own surprise on the zinc market, Its Skorpion mine in Namibia was scheduled to close next year but a new mining plan will push that deadline back a couple of years to the company's 2019 financial year (April 2018 to March 2019). Oh, and milling operations will continue into financial 2020 using stockpiled ore.

    Skorpion is only a medium-sized producer with capacity of around 150,000 tonnes per year and it is highly unusual in producing zinc metal rather than zinc in concentrates.

    It will not therefore offset the loss of Lisheen, which until the last year or so was producing around 175,000 tonnes of contained zinc per year.

    That task will fall to Vedanta's new Gamsberg mine, an extension of its existing Black Mountain operations in South Africa. First ore from Gamsberg is expected in 2018 with anticipated long-term production at a rate of 250,000 tonnes per year.

    It is proof that producers of any commodity will work to renew their portfolios, particularly when the consensus view is that they will be bringing new capacity on stream in an environment of supply deficit.

    And unsurprisingly, the prospect of zinc raw materials deficit and associated higher prices is incentivising others as well.

    Take, for example, Energia Minerals, the Australian-listed junior, which is rehabilitating the long-forgotten Gorno mine in northern Italy, precisely to reap the expected zinc bonanza.

    Zinc bulls will be unfazed. The numbers, they point out, still point to a shortfall of zinc, albeit one that keeps edging back from imminent to pending.

    Stocks of concentrates accumulated over the last few years will initially cushion the market against any evolving shortfall of mined material.

    That makes the kinks in zinc's deficit deadline important in terms of attempting to forecast when shortfall, if it ever finally materialises, translates into price reaction, both in the concentrates and the refined metal parts of the market.

    And the kinks in the zinc story just keep on multiplying.
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    Steel, Iron Ore and Coal

    Slide in China steel snuffs iron ore rally, revives glut worries

    A slump in Chinese demand for steel has poured cold water on a rally in iron ore this month, with prices for the raw material likely to drop over the rest of the year, traders and analysts said.

    Iron ore surged 40 percent from a decade-low in just over two months as dwindling stocks at China's ports suggested tighter supply in a market that had been hit hard by plentiful ore.

    But China's appetite for steel has been shrinking as its economy slows and is now taking a further hit as construction eases over the summer, forcing mills to cut production. January-May output fell nearly 2 percent from the year before as consumption dropped 5 percent, based on government and industry data.

    Prices will also be pressured by indications that iron ore shipments are starting to pick up again, after speculation that some miners and traders had been holding back supply to bolster prices.

    "We believe current iron ore prices are too high and the rally should turn out to be self-defeating as necessary supply cuts are unlikely to happen, keeping the market in surplus," said Carsten Menke, analyst at Julius Baer in Zurich.

    After hitting a near five-month high of $65.40 a tonne <.IO62-CNI=SI> in early June, iron ore lost 6 percent this week after Shanghai rebar steel futures slid to the lowest since their 2009 launch.

    Menke said iron ore could fall below $40 per tonne in a worst case scenario if China's construction sector weakens and the overall economy slows further.

    A decline in stocks of imported iron ore at China's ports to the lowest since 2013 fueled the sharp price recovery amid speculation miners were delaying shipments and traders holding off on offering cargoes.

    China's domestic iron ore output dropped 11 percent in the first five months of 2015 as tumbling prices forced high-cost producers out of the market.

    "There is no logic in holding back supply in the hope prices might go up," Andrew Harding, iron ore chief at Rio Tinto , said on the No. 2 producer's website.
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    Nucor forecasts dip in profit as imports hit steel prices

    Nucor Corp, the No. 1 U.S. steelmaker by market capitalization, forecast a fall in quarterly profit as cheaper steel imports continue to weigh on average selling prices of the metal.

    The dollar's strength over the past few quarters has left U.S. steelmakers reeling as cheaper imports from China, the biggest producer of the metal, flood the U.S. market, hurting prices.

    Imports accounted for about 32 percent of the finished steel market in the first five months of 2015, compared with about 26 percent in the same period last year, Nucor said on Thursday.

    Demand for Nucor's products from energy markets has also fallen as weak oil prices prompt oil producers to ease back on drilling and idle rigs.

    The company forecast a profit of 20-25 cents per share for the second quarter ending July 4, well below the average analysts estimate of a profit of 31 cents, according to Thomson Reuters I/B/E/S.

    It earned 46 cents per share in the same period a year ago.
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    China steel exports said to be sold at a loss as backlash grows

    Some Chinese steelmakers are selling their output abroad at a loss, according to traders and a producer, as a group of global industry bodies urged governments to take action over rising shipments from China.

    Chinese mills had sold steel overseas at a loss of up to 200 yuan ($32) a tonne and cut the export price of hot-rolled coil by 5 percent to $340-$350 a tonne, free-on-board basis, this week compared to last week, according to traders and a producer in Hebei, China's top steel producing province.

    These mills were also selling at a loss to the domestic market, they said.

    "The domestic market is too weak to consume high output and our prices are competitive, so some mills are still keen to step up exports, hoping to ease high inventories and maintain market share," said a senior official at a privately owned mill in Hebei.

    China exports around 10 percent of its annual steel output from hundreds of steelmakers and it was unclear the quantity of steel the traders and official were referring to.

    China's steel exports rose 28 percent to 43.5 million tonnes in January-May, even as domestic crude steel output fell nearly 2 percent. In 2014, exports jumped 51 percent to a record 93.78 million tonnes.

    Eight steel associations from Asia, the Americas and Europe said in a joint statement this week all regions were "suffering from a dramatic increase in unfair steel imports that is fueled by massive global overcapacity."

    "Looming over it all is China, whose massive and increasing overcapacity in an era of slowing growth has already destabilized the global steel market and trade flows," the statement said.
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    VTB says Mechel agrees to debt restructuring terms

    Russian steel and coal producer Mechel has agreed to the terms for restructuring its debt with VTB, the country's second-largest bank said on Thursday.

    Separately larger rival Sberbank said it had found two prospective buyers for its share of Mechel's debt.

    Controlled by businessman Igor Zyuzin, Mechel has been in discussions for months with its main lenders, including VTB, Sberbank and Gazprombank, over a restructuring of debts which at the end of last year were estimated to total $7 billion.

    The troubled group, which employs 72,000 people, borrowed heavily before Russia's economic downturn, deepened by Western sanctions over the Ukraine crisis and the fall in oil prices.

    VTB's first deputy chairman, Yuri Soloviev, told reporters on the sidelines of the annual St Petersburg International Economic Forum on Thursday that Mechel was slowly repaying its debts.

    "Yes, they have agreed but not signed (the agreement), but we will sign. They are paying off the interest but not all of it yet. They still have time before July 1," he told reporters.

    "The future of Mechel will be solved in a quieter way with the other creditors ... it is not a major restructuring - it is a way out of the conflict."

    Mechel declined to comment. Sixty-eight percent of the debt is held by the three state-controlled banks, Sberbank, VTB and Gazprombank.

    Maxim Poletayev, a first deputy chairman of Sberbank's executive board, said on Thursday his bank was also now in discussions over selling Mechel's debt with two different parties.

    "We have outlined our positions," he said. "But we aren't stopping the other process. We have four suits on bankruptcy and if before the end of July they don't pay their main debt to us there will be another."

    "There won't be any discount (if Sberbank sells the debt)," Poletayev said at the same forum in St Petersburg.

    Separately, Kremlin aide Andrei Belousov said there was still no consensus on Mechel's debt restructuring.
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    Australia quarterly coking coal contract with Japan falls 15%

    September-quarter coking coal price contracts between Australian coal miners and Japanese steel producers were settled at $93/t for premium grades, down 15% from the June quarter, according to two people familiar with the negotiations.

     The lower settlement price covers about 20-million tonnes of Australian-mined coal for the quarter, and influences coking coal spot prices globally.

    It falls at the low end of spot sales priced at $92-$95 by BHP Billiton for delivery in July, and compares with $109.50 in the previous quarter. 

    "It has been done at $93/t, that is the settlement," Marian Hookham, senior manager for consultancy IHS Coal in Australia told Reuters. "I hoped the recent bounce up in met (coking) spot prices might see a slightly higher settlement but no luck. 

    It will make life tough for the US exporters," a second person closely observing the negotiations said, speaking on condition of anonymity. Hookham said the price decline could lead to more mines shutting. "We anticipate closures in the United States to speed up if this price is finalised," she said. "For Australia, there is some insulation from the exchange rate, but certainly some sectors in the industry will be producing at a loss." 

    The Australian dollar has eased against the US dollar over the past nine months, benefiting Australian-based miners. BHP, in partnership with Mitsubishi Corp, operates the world biggest coking coal export business from Australia. US-based Peabody Energy this month said it was cutting 1.5-million tonnes of annual coal production from its North Goonyella mine in Australia. 

    Last year, Vale, Sumitomo and Glencore each idled mines in Australia. Quarterly benchmark coking coal traded as high as $330/t in mid-2011 after bad weather took much of Australia's supply off the market.
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    China, Australia ink FTA removing import tariffs on met coal; date to be fixed

    China and Australia Wednesday inked a bilateral free trade agreement that will remove the existing 3-6% import tariffs on metallurgical coal, Australia's Department of Foreign Affairs and Trade said.

    This follows the signing of a memorandum of understanding between the two countries last year.

    The implementation of the FTA will not be immediate as it now needs to pass through domestic legal and parliamentary processes in both China and Australia, including a review by Australia's Joint Standing Committee on Treaties and the Senate Foreign Affairs, Defence and Trade References Committee, DFAT said in an email response to queries.

    Such domestic processes typically take "a few months," an industry source said.

    The implementation of the FTA will immediately cut the import tariffs on coking coal from the current 3% to zero and phase out those on PCI from the current 6% to zero over three years; to 4% in the first year, 2% in the second and zero in the third, based on the indicative schedule provided by DFAT.

    China imposed a 3-6% tariff on imported metallurgical coal in October 2014, a move which many Chinese participants felt to be a protective measure by the state to prevent the collapse of the sluggish domestic industry.
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    China coking coal market outlook stable in the short run

    China’s domestic coking coal market is likely to be stable in the short run, due to increased restocking demand from coke and steel plants, though the steel market remains bearish.

    Most producers reported smooth sales recently amid increased restocking demand from end users; few of them even noted tightness in supply for some coking coal grades.

    One Taiyuan-based miner, who recently put mine into production, said almost all the local mines were in suspension, with only two mines operating. He is now offering primary coking coal with 0.4-0.45% sulphur at 630 yuan/t, ex-washplant basis.

    One Hebei-based coking plant source still intended to press down coking coal prices to reduce cost and change the current loss-making dilemma. The delivered price of Shanxi’s primary coking coal with 1.0% sulphur was 680-700 yuan/t with VAT, according to the source.

    One Shandong-based buyer said the ex-washplant price of locally-produced washed gas coal with 0.6% sulphur was 470-475 yuan/t with VAT, up 5 yuan/t from May.

    He said the delivered price of Shanxi primary coking coal with 1.3% sulphur was 610 yuan/t with VAT, and anticipated further price rise in late June, due to tight supply in some Shanxi mines.

    Large miners were prudent in adjusting prices. China’s largest metallurgical coal producer -- Shanxi Coking Coal Group, continued to set prices separately with each buyer at varied extents of discount, due to still high stocks.

    One Linfen-based miner said the price of his raw coking coal was adjusted up by 10 yuan/t or so, with the ex-washplant price presently at 390-400 yuan/t, VAT included. This has been accepted by downstream washing plants and coking plants.
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    Outlook for new steel orders weakens in China- Platts

    The outlook for new steel orders in China over June deteriorated from May, according to a survey by global commodity information provider Platts.

    Platts China Steel Sentiment Index showed a headline reading of 42.2 out of a possible 100 points in June. The June index tumbled 26 points from May’s 68.2, falling below the 50 threshold after three consecutive months of strong expectations for new steel orders.

    A CSSI reading above 50 indicates an increase, and a reading below 50 indicates a decrease.

    Mr Paul Bartholomew Platts analyst on steel and steel raw materials said “Market sentiment is extremely pessimistic at the moment due to continued weak demand from domestic end-user segments, such as manufacturing and property construction. This is expected to put downward pressure on flat steel prices, such as hot rolled coil, over the next month despite slightly higher iron ore input costs.”

    The outlook for new domestic steel orders dropped 27 points from the previous month to 43.2, while export order expectations softened further by 14 points to 43.9. The outlook for crude steel production in June also entered negative growth territory, dropping 7.6 points to 44.4.
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    Polish miner JSW considers share issue to avoid crunch

    Polish coal miner JSW is considering a share issue, among other options, to rescue it from a liquidity crisis caused by record low coal prices, the Chief Executive Edward Szlek said.

    JSW, the European Union's biggest coking coal producer, ran into trouble at the end of 2014 when its cash reserves were depleted by high costs and low prices and it had to put a planned eurobond issue on hold because of weak demand.

    "A share issue is one of the conventional instruments which a company looking for capital could use. We are considering this as one of the solutions. We are focusing on the talks with the financial sector to find the best solution for our company," Szlek said in an emailed reply to Reuters questions.

    He said JSW now had more than 500 million zlotys ($136 million) of cash, but said coal prices were unlikely to rebound soon.

    "We are aware that either we will go for radical actions or we will face losing liquidity. We are determined not to let that happen," Szlek said.

    This year, the state-run company was also hit by a strike, which translated into a loss of about 100 million zlotys in the first quarter.

    To prevent a collapse, JSW's management has cut costs and is working on obtaining new loans.

    Szlek also said he was optimistic about the result of JSW's talks with debt holders to postpone their put options on bonds the company issued last year.

    In 2014, JSW issued zloty- and dollar-denominated bonds worth about $388 million. The debt holders have the right to demand their buy-out in July.

    "We have good relations with our debt holders. Also our savings programme and efficient actions to secure liquidity were well received. I am optimistic about the result of the talks, although they are extremely difficult."

    JSW, which plans to focus on extracting coking coal used in steel production, rather than on thermal coal used in power generation, is also considering merging its Krupinski coal mine with its Pniowek coking coal mine.

    Coking coal makes up 70 percent of JSW's output. The rest is thermal coal, which commands a lower price due to oversupply.

    Last month, local media reported that JSW was considering a gradual shutdown of Krupinski, which produces mostly thermal coal and employs about 2,800 people.

    "We are considering a few options for Krupinski. The most likely one will consist of merging it with Pniowek mine in order to optimize the product range," Szlek said.
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    China Shenhua May coal output up 5.2pct on mth

    China Shenhua Energy Co., Ltd, the listed subsidiary of state-owned coal giant Shenhua Group, produced 24.2 million tonnes of commercial coal in May, up 5.2% from April, the company said on June 16.

    Industry insiders attributed to the increase mainly to increased restocking demand from utilities ahead of the peak power consumption in summer, after the giant further cut prices in late April to cope with flatness in the domestic market.

    Shenhua further cut prices of some of its thermal coal products by 10-15 yuan/t, lowering FOB price for 5,200 kcal/kg NAR coal by 15 yuan/t to 390 yuan/t ($63.7/t) and for 4,800 kcal/kg NAR product by 10 yuan/t to 354 yuan/t, effective April 28.

    However, tight supply in low-CV coal prompted the group to adjust up FOB price for 4,300 Kcal/kg NAR product by 10 yuan/t to 315 yuan/t from May 10.

    Still, the May output was 4.0% below the year-ago year on year -- the ninth consecutive year-on-year decline, indicating a prolonged slackness in China’s oversupplied domestic coal sector.

    Over January-May, Shenhua produced a total 116.5 million tonnes of coal, down 9.9% year on year; while total sales during the same period dropped 24.7% on year to 140.6 million tonnes.

    China Shenhua’s coal sales fell 3.7% on year but rose 17.3% on month to 36.6 million tonnes in May, also the ninth successive year-on-year drop, reflecting improved coal sales after persisting price cuts since December last year.

    In May, China Shenhua sold 21.2 million tonnes of coal via northern Chinese ports, up 10.4% on year and up 7.6% on month. Of this, coal shipped from Shenhua’s exclusive-use Huanghua port stood at 11.9 million tonnes or 56.1% of the total, up 4.4% on year and up 36.8% on month.

    Over January-May, the company sold 74.7 million tonnes of coal via northern Chinese ports, down 21% year on year. Of this, coal shipped from Huanghua port stood at 37.6 million tonnes or 50.3% of the total, down 29.1% year on year.

    Attached Files
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    Shaanxi caps 2015 energy consumption at 8.5 mln T

    Coal-rich Shaanxi province aims to control energy consumption within 8.5 million tonnes of coal equivalent this year, the provincial government said in a pollutants emission reduction plan on June 9.

    The province would prohibit sales of coal with above 16% ash or over 1% sulfur, mainly for residential purpose, in Xi’an, Baoji, Xianyang, Tongchuan and Weinan, the plan said.
    In these five areas, coal-fired boilers with a steam supply capacity below 20 T/h would be eliminated, while in other areas of Shaanxi those boilers below 10 T/h would be phased out.
    The province would complete the reconstruction on 18 coal-fired thermal power units of 7.63 GW to achieve ultra-low emission in main districts, including the Weihe Thermal Power Plant, Datang Baqiao Thermal Power Plant, etc.
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    QHD stocks rebound on weak demand

    Coal stocks at Qinhuangdao port, the benchmark for China’s domestic market, climbed to 6.45 million tonnes on June 15, as shipping activities shrunk amid weak downstream demand.

    That was 0.16% higher than a week ago and increasing 5.88% from the recent lowest level of 6.09 million tonnes on May 31, showed data from Qinhuangdao Port Group.

    Meanwhile, coal stockpiles at Caofeidian stood at 3.63 million on June 15, down 7.6% from a week ago; while stocks at SDIC Jingtang port rose 13.0% from the previous week to 1.3 million tonnes.

    Data showed that daily inbound coal railings to Qinhuangdao port averaged 67,429 tonnes during the week ended June 15, down 4.5% on week; while the daily outbound shipment from the port was 67, 286 tonnes during the same period, edging up 0.2% on week.

    Demand from downstream utilities shrunk, as industrial activities remained sluggish and hydropower output increased with high rainfalls amid relatively low temperature.

    Coal stocks at power plants under the six coastal utilities stood at 12.84 million tonnes on June 15, up 5.33% from a week ago; daily use for the week averaged 0.58 million tonnes, up 3.5% from the previous week. That was enough to cover 22.3 days of consumption, up from 21.7 days a week ago.
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    Arrium cuts capex, sales volumes to combat low iron-ore prices

    ASX-listed Arrium Mining and Materials on Monday announced a significant reduction in capital expenditure (capex), as well as the potential divestment of assets to combat the falling iron-ore prices. 

    The company said that despite the redesign of its South Australian hematite operations, which included the mothballing of the Southern Iron mining operation, and subsequent work to decrease operating costs, it had to do more to make the operations viable. 

    The redesign of the mining business left Arrium with about nine-million tonnes a year to export from its Middleback Ranges operation, at a targeted cash cost of A$57/t delivered into China. Arrium would reduce planned capex by A$70-million from its previous 2016 financial year targets, with further reductions of about A$140-million planned between 2016 and 2019. While the miner was targeting sales of between nine-million and ten-million tonnes in the 2016 financial year, the capex reduction was expected to result in sales volumes of between six-million and eight-million tonnes between 2017 and 2019. 

    However, Arrium pointed out that the business would retain the flexibility to increase capex  and sales volumes, should the iron-ore market indicate a value return. Meanwhile, Arrium has warned of a potential impairment charge of some A$320-million for the year ended June, primarily relating to the impact of the lower iron-ore prices. 

    Arrium MD and CEO Andrew Roberts said that the company was also undertaking a strategic review of its entire business, in the low iron-ore price environment, following a detailed assessment of the company’s balance sheet and its portfolio. The review included an assessment of options to achieve an appropriate structure and level of debt, and would include the potential divestment of “significant assets or businesses”, 

    Roberts said. “Our mining consumables business is continuing to perform strongly and we are seeing significant improvements of steel. However, despite the benefits from restructuring mining and stronger earnings in our mining consumables and steel businesses, the extent of the deterioration in iron-ore prices means we have had to adjust our expectations around the timing and rate of debt reduction.” 

    Roberts said that the review would consider a range of options to deliver the best outcome for shareholders. In February this year, Arrium sold its wire rope business to a Belgium-based firm for A$90-million.
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    China's Baoshan cuts steel prices for July as demand weakens

    China's Baoshan Iron & Steel will cut main steel product prices for July bookings, the company said on Friday, as sluggish economic growth hit demand for the industrial material.

    The company will cut hot-rolled coil and cold-rolled coil prices by 80 yuan a tonne. Baosteel's pricing policy is expected to set the tone for the sector which has suffered from chronic overcapacity and tepid demand.
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    Ukraine's Mariupol steel plants in critical state after gas cut-off

    Two of Ukraine's largest steel plants are in a critical situation and may have to cut production, owner Metinvest said on Friday, after fighting in the separatist east severed gas supplies to the port city of Mariupol and two other towns.

    Mariupol, a southeastern government-controlled city on the Sea of Azov, lies close to the frontline with rebel territories. Metinvest's Ilyich and Azov Steel plants employ 10 percent of Mariupol's population.

    The interior ministry accused rebels on Friday of shelling the pipeline, causing damage which gas transport monopoly Ukrtransgaz said had left three towns, including Mariupol, without gas supplies for up to two days.

    "The situation (at the plants) critical. They are considering switching the blast furnaces to low run and limiting their steelmaking and rolling processes," Metinvest said in a statement.

    Prime Minister Arseny Yatseniuk said Russia-backed had deliberately targeted the pipeline in a bid to destabilise Mariupol.

    "They're doing this on purpose to sow panic in Mariupol, to shut down the factories so that people don't get wages. It's part of the Russian plan," he said in a government meeting.

    Rebel officials denied responsibility for the attack on the pipeline around 100 km north of Mariupol. "The area indicated by Ukrainian authorities is beyond the reach of our mortars," separatist news service DAN quoted them as saying.

    The industrial hub has been under threat from rebel attacks for months despite a ceasefire deal. Control of the city would help the rebels form a corridor to the Crimea peninsula which Russia annexed from Ukraine last year.

    Production has fallen significantly at the plants since fighting erupted last April but they have kept working despite severe supply disruptions.

    Output at Ilyich, which is producing around half as much steel as before the conflict, was 1.1 million tonnes in the first four months of 2015, while Azov Steel produced 590,000 tonnes in the first quarter.

    Overall, steel production in Ukraine was down by 28 percent to 9.247 million tonnes in the first five months of 2015 compared with the same period last year, producers' union Metalurgprom said this month.
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    Indonesian coal miners have less room for cost cutting

    The Jakarta Post reported that Indonesian coal mining companies are facing pressure on their operations as current low commodity prices and several changes in government policies have left them little room for cost-cutting programs.

    When coal prices started to decline, mining companies said they would reduce costs partly by lowering the stripping ratio - the ratio of the volume of waste material that must be removed to get the coal - so that they could maintain their profits and continue operations.

    However, as prices keep declining, cutting costs no longer seems a viable option.

    Based on a survey conducted by Coaltrans Asia for its 21st conference, most of the respondents said that Indonesian coal producers now only had very limited room to reduce costs before they reached a final option: closing their operations.

    The respondents argued that coal mining contractors or service providers still had a margin to keep them in operation.

    Mr Edwin Tsang, director and chief marketing officer of PT Adaro Indonesia, one of the country’s major coal producers, said during a session at the Coaltrans Asia conference, said that “Maybe slightly. I think there is a limit [to which] it can be done.”
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