Mark Latham Commodity Equity Intelligence Service

Wednesday 17th August 2016
Background Stories on www.commodityintelligence.com

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    Macro

    China approved $8.95 billion of fixed asset investment projects in July: NDRC


    China's top economic planner last month approved 18 fixed asset investment projects valued at 59.4 billion yuan ($8.95 billion) in total, according to a statement issued by the National Development and Reform Commission at a briefing in Beijing on Tuesday.

    http://www.reuters.com/article/us-china-economy-infrastructure-idUSKCN10R05F
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    China to increase imports of "urgently needed" products - cabinet


    China will increase imports of urgently needed key products, the cabinet said on Tuesday, and encourage financial institutions to increase credit support to appropriate companies.

    It did not specify what products were urgently needed.

    The government will also provide subsidies to low-income families when the monthly consumer price index (CPI) reaches 3.5 percent year on year, or food CPI reaches 6 percent, the State Council said in a statement.

    Authorities will also conduct inspections to ensure annual capacity reduction targets of steel and coal are met, it said.

    http://www.reuters.com/article/china-economy-cabinet-idUSB9N16F00X
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    China's electricity consumption picks up in July


    China's electricity use rose 8.2 percent year on year in July, official data showed Tuesday.

    In July alone, electricity consumption totaled 552.3 billion kilowatt hours, according to data from the National Development and Reform Commission.

    Electricity consumption totaled 3.3 trillion kilowatt hours in the first seven months, up 3.6 percent year on year, the commission said.

    Electricity use in the service sector and agricultural sector rose 10.2 percent and 6.4 percent, respectively, in the January-June period, while the industrial sector saw an increase of 1.6 percent.

    Meanwhile, the average use time for hydraulic power production equipment increased in the first seven months, while that for coal-fired power production equipment dropped, official data showed.

    http://news.xinhuanet.com/english/2016-08/16/c_135604187.htm
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    Indonesia's proposed 2017 budget welcomed as pragmatic, realistic


    Indonesian President Joko Widodo presented a proposed 2017 budget that lifts spending a little while looking realistic about revenue and seeking to contain the country's fiscal deficit.

    Economists said the budget proposal given parliament on Tuesday is more realistic than the previous two Widodo presented after his 2014 election.

    Tax targets in the earlier budgets were highly ambitious, and in 2015, there was a revenue shortfall of nearly $20 billion.

    In the 2017 proposal, Widodo aims to balance the desire to give the sluggish economy some stimulus while not spending far more money than the government has.

    "The budget is a largely pragmatic one, with realistic macroeconomic expectations and more grounded revenue and expenditure assumptions," said Wellian Wiranto of OCBC in Singapore.

    The proposal was unveiled three weeks after well-respected World Bank managing director Sri Mulyani Indrawati returned home as finance minister, a post she held for some years under Widodo's predecessor.

    The budget "looks to have Sri Mulyani's fingerprints all over it, and probably carries the spirit of being better to over-deliver than to over-promise," Wiranto said.

    Only days after returning, Indrawati cut $10 billion from the 2016 budget to ensure the fiscal deficit does not breach the 3 percent of gross domestic product (GDP) legal limit.

    Even with those cuts, the deficit is likely to be 2.5 percent this year. The 2017 plan sees a deficit of 2.41 percent and assumes the economy will grow 5.3 percent.

    SIZABLE CHALLENGES

    Indonesia's growth pace slowed every year from 2011 through 2015, reaching 4.8 percent last year. Hopes to get back above 5 percent this year were buoyed by stronger-than-expected annual growth of 5.18 percent in the second quarter, but officials said that reflected better crops.

    Widodo, who said Indonesia still faces "sizable" challenges, called for 2017 spending of 2,070.5 trillion rupiah ($158.2 billion), about 5.5 percent higher than what the government expects to spend this year.

    The 2017 revenue target is 1,737.6 trillion rupiah. In the original 2016 budget proposal, the target was 1,822.5 trillion rupiah, and Indrawati now expects 2016 revenue of only 1,567.2 trillion rupiah.

    The 2017 target takes account of a tax amnesty programme to end in March. Widodo said on Tuesday that after the amnesty, the government will implement a "tax law enforcement" programme. Historically, few Indonesians pay tax, and few pay what they should.

    Yustinus Prastowo, an analyst at Center for Indonesia Taxation Analysis, called the 2017 tax target "proof that Sri Mulyani doesn't want to be too ambitious because we don't know whether this amnesty would be successful."

    Indrawati said big 2017 allocations would be for the public works ministry and security.

    Widodo told parliament "Fiscal policy will be directed toward supporting people's purchasing power, and improving the investment climate and competitiveness of our industry."

    http://www.reuters.com/article/indonesia-politics-economy-idUSL3N1AX2VR
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    BHP’s mini-Macondo


    Andrew Mackenzie does not want to get his life back. The reserved chief executive headlined 2016 results with BHP Billiton’s efforts to rehabilitate a Brazilian district devastated by a dam burst last year. It was his ice breaker for BHP’s City presentation and in media calls on a day when the world’s largest miner unveiled a record $6.4bn loss. For all we know, the reserved Scot will broach the subject at the family dinner table tonight, too.

    The contrast is with Tony Hayward. He was forced to step down as chief executive of BP after he said he would “like his life back” at the height of US public fury over the Gulf of Mexico oil spill in 2010. The corollaries of the physical dangers posed to workers and locals by extractive industries are career setbacks for executives and financial peril for investors.

    The read-across between the Gulf spill and the collapse of a tailings dam at the Samarco copper mine in Brazil is an alarming one for Mr Mackenzie. Oiled pelicans and redundant shrimpers ultimately forced BP to set aside $61.6bn. Federal prosecutors in Brazil have made the same connection, filing a $44bn lawsuit based on BP’s clean-up costs.

    The cases are very different. BP had ultimate oversight of the Macondo well operated by Transocean. BHP splits responsibility for the Samarco mine with Brazilian giant Vale, via a joint venture company. Macondo spilled into open sea and went on spilling. The Samarco disaster devastated communities and choked a river with mud, but was over fast, leaving no toxic residues.

    A harsher comparison is between 11 lives lost off the coast of the world’s wealthiest nation and 19 fatalities in the backwoods of one of its poorest. It is this comparison in the minds of the Brazilian public that makes Samarco so perilous for BHP.

    The bulk of the miner’s $9.7bn in write-offs in the year to June was for US shale assets, some of the value of which may eventually be written back. However, the $2.4bn cost of Samarco looks like no more than an opening shot. Half of the amount covered asset writedowns. The remaining $1.2bn is for a rescinded federal settlement originally signed off by Dilma Rousseff, the Brazilian president facing parliamentary impeachment.

    The eventual cost depends on Brazilian courts, which are no more predictable than the US or UK kind. But Mr Mackenzie knows that bill is also sensitive to any behaviour suggesting it is merely a cost of business for BHP. BP will also have taught him the foolishness of allowing local claimants to seek compensation without proof of damages. Samarco will feature in his thoughts and opening remarks for some time to come.
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    Maduro says Venezuela signs $4.5 billion in deals that include Canadian and U.S. miners


    Venezuela's President Nicolas Maduro speaks during a meeting with ministers at Miraflores Palace in Caracas, Venezuela August 12, 2016. Miraflores Palace/Handout via REUTERS

    President Nicolas Maduro said on Tuesday that Venezuela had struck $4.5 billion in mining deals with foreign and domestic companies, part of plan to lift the OPEC nation's economy out of a deep recession causing food shortages and social unrest.

    Maduro said the deals were with Canadian, South African, U.S. and Venezuelan companies, but did not specify whether contracts had been signed or just initial agreements.

    The socialist leader, whose popularity hit a nine-month low in a survey published this week, said he expected $20 billion in mining investment contracts to be signed in coming days and that 60 percent of the income Venezuela received would be spent on social projects.

    Maduro hit back at critics from the left who accuse him of riding roughshod over environmental rules and indigenous rights in the Orinoco mineral belt in Venezuela's south in his rush to shore up his government's precarious finances.

    Venezuela has rich veins of gold and exotic minerals like cobalt, but the reserves have mostly been extracted until now by wildcat miners because of a long history of failed ventures and government intervention in the industry.

    Venezuela recently settled a long-standing dispute with Canadian miner Gold Reserve over the country's giant Las Cristinas and Las Brisas concessions.

    http://www.reuters.com/article/us-venezuela-mining-idUSKCN10R2N7
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    Oil and Gas

    China data: Crude stocks rise by 525,000 b/d in July, half the build on year


    China's crude oil stocks rose by 525,000 b/d in July, half the build seen in the same month of last year due to lower crude supply and higher throughput, although the country is still on its way to raise its stockpiles, calculations by S&P Global Platts based on latest official data showed.

    The stock increase was 8.5% faster than the 484,000 b/d registered in the previous month, and within the range of a relatively stable build level as June, which fell significantly from a sharp build-up of over 1 million b/d each in the months of May, April and March.

    China does not release official data on stocks. Platts calculates China's net crude stock draw or build for the month by subtracting refinery throughput from the country's crude supply.

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

    Crude supply in July stood at 11.24 million b/d, which was the lowest level since December and also 2.1% lower than that in last July, due to a slowdown in crude oil imports as well as lower domestic crude oil output.

    Crude oil imports fell to a six-month low of 7.35 million b/d as independent refiners' buying cooled from the wave started in December last year.

    Meanwhile, domestic crude oil output hit the lowest level of 3.95 million b/d since October 2011, when was recorded at 3.91 million b/d. Chinese producers have decided to cut domestic production in 2016 to reduce cost amid low crude prices.

    At the same time, crude oil throughput saw a 2.5% year-on-year increase, but fell 2.7% from June.

    Looking forward, China is expected to continue building crude stocks, given that throughput would stay at the July level or lower because of weak oil products demand in August.

    Moreover, the country is continuing to fill its strategic petroleum reserves, including new sites in northeastern China's Jinzhou (18.9 million barrels) and southern China's Yangpu (9.69 million barrels).

    Analysts also expect the new Huizhou storage in southern China and Zhoushan Phase II in eastern China, each 31.45 million barrels in capacity, to start taking in crude oil next year.

    Over January-July, the country's crude stocks grew by an average 778,000 b/d, equivalent to 165.80 million barrels over the period.

    This was 80% higher than the 432,000 b/d, or 91.67 million-barrel build seen in the same period last year. China had built 186 million barrels of crude stocks over 2015, averaging 510,000 b/d.

    http://www.platts.com/latest-news/oil/singapore/china-data-crude-stocks-rise-by-525000-bd-in-27648644
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    China to become world's 2nd largest shale gas producer by 2040, EIA


    China is expected to produce over 20 billion cubic feet of shale gas per day (bcf/d) by 2040, becoming the world's second largest producer after the United States, said the U.S. Energy Information Administration (EIA) on August 15.

    The production will account for more than 40% of the country's total natural gas production by 2040, the EIA predicted.

    In the past five years, China drilled more than 600 shale gas wells and produced 0.5 bcf/d of shale gas as of 2015, said the EIA in its International Energy Outlook 2016 and Annual Energy Outlook 2016.

    The U.S. shale gas production will stay in the first place as it is projected to more than double from 37 bcf/d in 2015 to 79 bcf/d by 2040, accounting for 70% of total U.S. natural gas production, said the EIA.

    Canada is now the world's second largest shale gas producer, producing 4.1 bcf/d in 2015. Its shale gas production is projected to continue increasing and will reach less than 10 bcf/d, accounting for almost 30% of its total natural gas production by 2040.

    Shale gas will also become the major drive of the world's natural gas growth in the next 24 years, said the EIA.

    The world's shale gas production by 2040 is expected to quadruple the level in 2015 and reach 168 bcf/d, accounting for 30% of world natural gas production. The world's natural gas production is expected to increase by about 62% during the same period of time.

    http://old.en.sxcoal.com/0/151450/DataShow.html
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    Venezuela Oil Exports Seen Falling as Economic Woes Worsen


    The long decline in Venezuela’s oil production is becoming a supply risk for international markets, according to a report by Columbia University’s Center on Global Energy Policy.

    Exports from the holder of the world’s largest crude reserves fell more than 300,000 barrels a day in June, compared with the 2015 average, according to the report written by Luisa Palacios, a senior managing director at Medley Global Advisors LLC. While Venezuela’s output has been declining all year, the impact is only now being felt on international markets because previous losses were offset by slumping domestic oil demand amid anunprecedented economic recession.

    “Venezuela will represent a growing supply risk for oil markets in 2017,” the report said. “While on average crude oil exports in the first half do not yet show an important decline from the same period a year ago, the latest data point to a deteriorating trend.”

    Venezuela has been hit hard by the two-year slump in crude prices. Its economy is expected to shrink 10 percent this year, the largest contraction in more than a decade, while consumer prices rise more than 700 percent, according to the International Monetary Fund. The nation’s output dropped to a 13-year low in July as international oil services companies scaled back their activities after state-run Petroleos de Venezuela SA fell more than $1 billion behind in debt repayments.

    Falling Consumption

    Venezuela’s crude production in July dropped to 2.15 million barrels a day, compared with an average 2.4 million last year, the International Energy Agency said on Aug. 11.

    As the nation’s economy contracted, domestic demand for oil dropped by more than 100,000 barrels a day last year compared with 2014, the Columbia University report said, citing data from the Ministry of Oil and Mining. While it’s possible that Venezuela’s domestic consumption will keep falling, there are signs the lower production is now affecting exports, it said.

    Venezuela’s strategy of focusing on the expansion of oil production in a region called the Orinoco belt is also bringing in fewer dollars. The heavy crude is less desirable to refiners and typically sells for less than lighter grades of oil that are easier to process into fuels such as gasoline.

    The Venezuelan crude basket, based on an average of all crudes handled by the state oil company, widened its discount to West Texas Intermediate, the U.S. benchmark, to about $9 a barrel on Aug. 12, compared with about $1 a year earlier.

    Blending the heavy oil with higher-priced light crudes purchased from other exporters can make it more marketable, but is a costly option for a country that’s on the brink of debt default, the report said. Should credit concerns prevent Venezuela from importing the light oil it needs, net exports could fall by another 300,000 barrels a day, the Columbia report said.

    “The continuation of this strategy will significantly eat into the government’s oil rent, and thus its ability to export its way out of this crisis,” the report said.

    Venezuela’s is renewing efforts to get the Organization of Petroleum Exporting Countries and nations outside the group to cooperate. Oil minister Eulogio del Pino met his Iranian counterpart in Tehran Sunday, although the Persian Gulf nation hasn’t decided if it will attend a meeting of producers to discuss stabilizing prices on the sidelines of an energy forum in Algiers next month.

    “Venezuela was already having economic problems when the oil price was at $100 per barrel,” so a price recovery is unlikely to solve its predicament, according to Columbia’s report.

    http://www.bloomberg.com/news/articles/2016-08-16/venezuela-oil-exports-seen-falling-as-economic-woes-worsen

    Attached Files
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    Nigeria Oil Losses Reach 900,000 Bbld Due to Militant Attacks


    Nigeria’s losses in daily oil production due to militant attacks have hit 900,000 barrels, said Petroleum Minister Ibe Kachikwu, speaking to CNN. He added that the federal government is in talks with the militant groups responsible for this cut in production in the Niger Delta, saying that over the next couple of months, the negotiating parties will hopefully reach an agreement that will put an end to the attacks.

    “We are producing some 1.5 million barrels per day and would need on average 900,000 barrels per day to catch up on what we have lost. If we can achieve peace, this will be feasible,” Kachikwu said.

    This, however, would go counter to what other OPEC members are planning, or rather hoping, to do at the next informal meeting of the cartel in Algeria next month. The minister expressed doubt as to the success of such a plan, citing the meeting in Doha earlier this year, initiated by Russia, which was ready to put a cap on oil production in a bid to prop up prices, and the participants’ failure to agree on such a cap.

    Attacks on production and transportation infrastructure in the Niger Delta have taken their toll on Nigeria, which used to be Africa’s biggest exporter of crude. The groups responsible for the attacks insist that local communities are being deprived of their fair share of oil revenues, left to live in poverty and pollution.

    Last week, a former federal minister, Femi Fani-Kayode tweetedthat Nigeria’s President Muhammadu Buhari was basically fed up with the attacks and was ready to split the country if oil was struck in the North.

    “My prayer for Nigeria is that oil is found in commercial quantities in the core north. I am glad that @MBuhari is looking for it desperately. If he finds it he and the north will be the first to call for a break up of the country. If he fails to find it they will continue to be the greatest obstacle to the restructuring of our nation and they will continue to provide the greatest opposition to the peaceful division of our country. Why? Because without southern oil the north is nothing,” the former aviation minister wrote.

    http://oilprice.com/Latest-Energy-News/World-News/Nigeria-Oil-Losses-Reach-900000-Bpd-Due-to-Militant-Attacks.html
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    Cairn Energy raises resource estimate for Senegal oilfields


    Oil exploration company Cairn Energy Plc raised its best estimate of reserves at its oilfields off the coast of Senegal by almost a third on Tuesday, following successful appraisal of the SNE-4 test well earlier this year.

    The company said its 2C resource estimate, or its best estimate of contingent resources, for its Senegal wells had increased to 473 million barrels from its earlier forecast of 385 million barrels in May.

    Cairn Energy also said that independently verified estimates of reserves in its Senegal fields were more than 2.7 billion barrels, with further exploration potential of about 500 million barrels in the region.

    http://www.reuters.com/article/cairn-energy-outlook-idUSL3N1AX2D5
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    Wood Group still hostage to depressed oil price


    Wood Group PLC shares were steady in early trade after good and bad news statements cancelled each other out.

    The ‘good’ first and the landing of a US$700mln a field services contract with Tengizchevroil in Kazakhstan.

    This was tempered by the interim results, which revealed the company is still hostage to the depressed oil price.

    As a major supplier to the industry its unsurprising its revenues (down 17% at US$2.6bn) and its earnings (off 26% at US$166mln) have taken a battering.

    Against this backdrop, and with debts of US$351mln, some will be a little surprise Wood Group managed to hike the dividend 10% to 10.8 cents per share.

    The payment is perhaps echoes a sense of cautious optimism detected in the comments of chief executive Robin Watson.

    “Looking further ahead, we see early indications of modest recovery in some areas and believe our customer relationships, geographic footprint, strong financial footing and relentless focus on delivering value through our asset life cycle services and specialist technical solutions, position us well,” he told investors.

    http://www.proactiveinvestors.co.uk/companies/news/129365/wood-group-still-hostage-to-depressed-oil-price-129365.html
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    Qatar DFC shortage a boon for Asian condensate suppliers: traders


    The impending startup of Qatar Petroleum's new condensate-fed refinery has led to a sharp reduction of deodorized field condensate supply in the spot market, providing a much-needed boost to Asian ultra-light crude suppliers looking to clear October cargoes, market participants said Tuesday.

    Lofty premiums paid for Qatar's Low Sulfur Condensate for loading in October caught some Asian end-users by surprise and the price outlook for both Asia and Middle East ultra-light crudes took a positive turn due to the shortage of DFC cargoes.

    Latest market talk in Asia indicated that Qatar International Petroleum Marketing Co., or Tasweeq, has recently sold two 500,000-barrel cargoes of LSC in pre-tender deals to South Korean end-users at premiums in the range of $1.50-$1.70/b to Platts front-month Dubai crude oil assessments, sharply higher than the $1.10/b premium received for September-loading LSC last month.

    S&P Global Platts assessed LSC at a premium of $1.40/b Tuesday, the highest level since posting a $1.45/b premium on June 29.

    With Tasweeq's sell tender closing late afternoon is Asia Tuesday, trade sources said very little was heard on any pre-tender deals for DFC for loading in October, a possible indication that the vast majority of October DFC supply could have been set aside for the new Laffan Refinery 2.

    "There's no DFC being offered, but I expect to see one done [via tender]," said a Singapore-based condensate trader.

    Qatar Petroleum in its latest annual report said Laffan Refinery 2, or LR2, was expected to be fully operational in the third quarter. Industry sources this week expected this to occur in late September.

    The new facility will be able to process an additional 146,000 b/d, raising Laffan Refinery's total processing capacity to 292,000 b/d, the state-run petroleum company said in the annual report.

    Regional ultra-light crude traders said the number of DFC cargoes in the spot market could drop to as low as one or two per month if the LR2 condensate refinery runs at 50% or more of its capacity early in the startup phase.

    "We are witnessing a severe lack of DFC supply in the market this month. Normally Tasweeq and some term lifters would sell five cargoes at least [in pre-tender deals] but there's hardly any available this time around," said a North Asian crude trader.

    "When you assume LR2 running at maximum capacity of around 146,000 b/d, that would roughly equate to about 9 DFC cargoes... the market impact would be quite substantial if you consider this," the North Asian trader added.

    Construction of LR2 began in April 2014, and the shareholders in the second refinery are QP (84%), Total (10%), Idemitsu (2%), Cosmo (2%), Mitsui (1%) and Marubeni (1%).

    The refinery, with a nameplate capacity of 146,000 b/d, will have the capacity to produce 60,000 b/d of naphtha, 53,000 b/d of jet fuel, 24,000 b/d of gasoil and 9,000 b/d of LPG.

    CONDENSATE PRICE DIFFERENTIALS SEEN SUPPORTED

    Market participants said despite the tepid light distillate product margins of late, suppliers of both sweet and sour condensates around the region would likely adjust their selling ideas higher in a bid to take full advantage of the sharp decline in DFC supply.

    "Many had initially anticipated another month of bear market due to the sliding naphtha cracks and the unsold August and September overhang... but I guess the tide could turn," said another Singapore-based crude trader. Last market talk in Australia indicated that Woodside Petroleum could have sold a 650,000-barrel cargo of North West Shelf condensate for loading over October 11-15 to a South Korean buyer at a discount of around $2/b to Platts Dated Brent crude assessments.

    It was said to have sold a NWS cargo for loading in September 2-6 at a discount of around $2.30/b in the previous trading cycle.

    "I think the splitters might pay more if they are really worried about the DFC supply," said another North Asian crude trader.

    However, many traders continued to adopt a cautious stance as tepid naphtha crack values and ample condensate supply from Southeast Asia and Oceania could put a cap on any upside in cash differentials for regional ultra-light crudes.

    Latest Platts data showed the second-month naphtha to Dubai swap crack fell below the minus $4/b mark to minus $4.07/b Monday, the lowest level in more than 15 months. The spread was last wider on May 8, 2015, at minus $4.20/b.

    The crack value has averaged minus $2.37/b to date this month, compared with minus $1.60/b in July and minus $0.77/b in June.

    The last time the average monthly naphtha crack was lower was in July 2015 at minus $2.75/b.

    http://www.platts.com/latest-news/oil/singapore/qatar-dfc-shortage-a-boon-for-asian-condensate-27647927
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    Ecopetrol Group Announces its improved Results


    - In the second quarter of 2016 the Corporate Group reported net income of COP $787 billion, 117% higher than in the first quarter of 2016. For the first half of the year our net income totaled COPS$1,150 billion.

    - With the receipt of Rubiales and Cusiana fields, Ecopetrol achieves a new landmark as a world-class operator with more than 500 thousand barrels per day.

    - We accomplished our target: the startup of the 34 units of Cartagena Refinery. Now moving forward to the stabilization phase.

    In the view of Ecopetrol S.A.'s CEO, Juan Carlos Echeverry G.:

    "April marked my first year leading Ecopetrol. A year characterized by a sharp drop in oil prices, challenging the oil and gas industry. We also witnessed a strong El Niño weather phenomenon, the closure of the border with Venezuela and attacks on transport infrastructure.

    The renewal of the management team, the adjustment and austerity measures, as well as the focus on profitable production and the preservation of both cash flow and leverage metrics have enabled Ecopetrol to navigate the price scenario and present positive operating and financial results in the second quarter of 2016.

    Net income attributable to Ecopetrol shareholders reached COP$787 billion, 117% higher as compared to the first quarter of 2016, thanks to a 34% recovery in Brent crude price, a decrease in our operational costs and structural savings efforts. Our EBITDA margin remained solid at around 39%.

    In the second quarter of 2016 the Company reported savings of COP$392 billion pesos, for a cumulative COP$813 billion pesos for the first semester. The savings target for 2016 is COP$1.6 trillion pesos.

    We raised COP$725 billion from the divestment of part of our stake in Interconexión Eléctrica S.A. E.S.P.(ISA) and Empresa de Energía de Bogotá S.A. E.S.P. (EEB). Further, we launched "Ronda Campos 2016", an initiative to offer our interest in 20 minor oil fields located in Catatumbo, Middle and Upper Magdalena Valley, Llanos and Putumayo regions.

    Ecopetrol received Rubiales and Cusiana fields and now operates more than 500 thousand barrels per day. The Rubiales field gave us 53 thousand barrels per day of additional production, partially offsetting the impact of lower investments in other assets and the temporary suspension of some fields.

    The Company successfully completed the startup process of the 34 units that comprise the Cartagena Refinery.

    In the last sixteen months we have comprehensively renewed our management team, attracting people with broad experience and an important record in major international oil and gas companies.

    It is the case of the Chief Operating Officer, Chief Financial Officer, Chief Transformation Officer; as well as the Vice-presidents of Refining, Social and Environmental Sustainability, Legal Affairs, and most regional Vice Presidents; additionally, new people will soon arrive to lead in Procurement and in Transportation. Finally, two vice-presidencies were created: Engineering and Projects, and Compliance.

    The transformation plan has 500 ongoing tasks. These initiatives have already begun to materialize in Ecopetrol's results. For example, the dilution cost reduction initiative, which is part of the efficiency front, has reduced Ecopetrol's diluent purchases by almost 14 thousand barrels per day. The cumulative savings in 2015 and the first half of 2016 amounted to COP$726 billion pesos. This initiative is crucial for viable production projects in heavy crudes that represent 57% of the Corporate Group's oil production.

    The Company's priority has been the protection of the cash flow. In the second quarter of 2016 the cash balance was strengthened with resources from divestments and the international loan with the Export Development Canada (EDC) for US$300 million as well as the reopening of the international bond due to 2023 for US$500 million, a clear sign of the capital markets' confidence. With these resources Ecopetrol has fulfilled close to 85% of its financing needs for 2016. Moreover, Standard and Poor's and Fitch Ratings reaffirmed the BBB investment grade rating for Ecopetrol.

    The Company's 2017-2020 business plan is being reviewed in line with our forecasted price scenarios and our efficiency gains achieved, these gains could be even greater in the future. We hope to present our updated medium-term goals no later than October of this year.

    Ecopetrol continues its transformation in order to position itself as a competitive player, strengthening its exploration and production portfolio to capture opportunities arising from a fundamental recovery in oil prices, and increasing structurally efficiency in Refining and Transport to ensure financial sustainability and creation of value for its shareholders."

    http://www.prnewswire.com/news-releases/ecopetrol-group-announces-its-results-for-the-second-quarter-and-first-half-of-2016-300313892.html
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    Goliat boosts Norway output to five year high


    Norway’s oil production hit a five-year high last month, fuelled largely by output from Eni’s Goliat field in the Barents Sea.

    http://www.upstreamonline.com/live/1441461/goliat-boosts-norway-output?utm_source=twitterfeed&utm_medium=twitter
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    API: Drop in US Crude Oil Stocks, But Surprise Gasoline Build


    U.S. crude oil inventories are down just over 1 million barrels for the week ended 12 August, according to the weekly American Petroleum Institute (API) report, but U.S. gasoline inventories are up over 2 million barrels in the biggest increase in six months.

    Cushing crude inventories were down 680,000 barrels.

    Earlier today, crude oil rallied to a one-month high, but slid back down following the release of the API data. West Texas Intermediate (WTI) for September delivery closed at US$46.58 on the New York Mercantile Exchange, but was down to US$46.41 in electronic trading at the time of writing.

    Analysts expectations, as carried by S&P Global Platts, were for a 200,000-barrel drawdown on U.S. crude oil inventories, with the API figures coming at roughly half that. But for gas, the API figures were unexpected. Analysts were tapping a 1.8-million-barrel drop in gasoline inventories, while the API is showing a nearly 2.2-million-barrel increase. Distillates were also up significantly over the week, with the API data showing a 2.4-million-barrel build.

    This should contribute to further market volatility, though Zero Hedge notes that oil is primarily tracking the dollar right now and not paying as much attention to its own fundamentals.

    More attention will be on the official inventory data coming tomorrow at 10:30am (EST) from the Energy Information Administration (EIA), which could contradict API data, as has been a recent trend.

    Last week, the API reported the opposite—the biggest crude oil inventory build in three months, and a draw on gasoline stocks. That API report had crude inventories up 2.09 million barrels, and gasoline stockpiles down 3.9 million barrels, with distillates at a 1.5-million barrel draw.

    The EIA last week reported a 1.1-million-barrel rise in commercial crude oil inventories for the week to August 5, with the total reaching 523.6 million barrels. The week before that also saw a 1.4-million-barrel build.

    The API data should be good news for oil prices, but the surprise gasoline and distillates build skews the picture.

    http://oilprice.com/Latest-Energy-News/World-News/API-Drop-in-US-Crude-Oil-Stocks-But-Surprise-Gasoline-Build.html

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    Concho Resources announces Midland Basin acquisition


    Concho Resources Inc. today announced it has reached a definitive agreement to acquire approximately 40,000 net acres in the core of the Midland Basin from Reliance Energy, a privately held, Midland-based energy company, for $1.625 billion. The privately negotiated acquisition is consistent with Concho's opportunistic and disciplined portfolio management strategy as it expands its core Midland Basin position to more than 150,000 net acres and production of 30 thousand barrels of oil equivalent per day (MBoepd).

    Acquisition Highlights

    Adds approximately 40,000 net acres with an average 99% working interest to Concho's core Midland Basin position
    Includes approximately 10 MBoepd (67% oil) of current production
    Enhances the Company's drilling inventory with more than 530 long-lateral drilling locations targeting the Middle Spraberry, Lower Spraberry and Wolfcamp B
    Provides expansive development upside across multiple zones

    Tim Leach, Chairman, Chief Executive Officer and President, commented, 'This transaction demonstrates Concho's commitment to the Midland Basin as a core operating area and highlights our continued efforts to consolidate complementary leasehold. In line with the objectives of our southern Delaware Basin acquisition in the first quarter of 2016, these assets not only build scale, but more importantly high-grade our inventory with additional long-lateral locations that compete with the best projects in the Permian Basin. As we continue to enhance our ability to efficiently allocate capital across our four key assets in the Permian Basin, we are uniquely positioned to deliver attractive returns today and build shareholder value over the long term.'

    The acquisition includes 10 MBoepd from 326 vertical wells and 44 horizontal wells, only one of which was completed in 2016. The present value of this stable production base at current NYMEX strip pricing is approximately $0.5 billion, with the remaining $1.1 billion of the purchase price attributable to 40,000 undeveloped acres.

    Estimated proved reserves attributable to the acquisition total approximately 43 million Boe. Proved developed reserves represent approximately 69% of the total proved reserves. The estimate of proved reserves is based on the Company's internal estimates as of June 30, 2016, and utilizes the Securities and Exchange Commission's reserve recognition standards and pricing assumptions based on the trailing 12-month average first-day-of-the-month prices of $39.63 per Bbl of oil and $2.24 per MMBtu of natural gas.

    The acquired acreage is located in Andrews, Martin and Ector counties in Texas with minimal leasehold obligations. The acquisition adds more than 530 long-lateral drilling locations to the Company's inventory. Due to the contiguous nature of the acquired assets, two-thirds of these locations are two-mile laterals, and the remaining locations are 1.5-mile laterals. The engineered locations are based on eight locations per zone in the Middle Spraberry, Lower Spraberry or Wolfcamp B, with two to three of these zones targeted per drilling spacing unit. The Company believes there is substantial development upside from applying optimal drilling and completion methods, testing closer well spacing and delineating other zones.

    Consideration in the transaction includes approximately $1.1 billion of cash and 3.96 million shares of Concho's common stock valued at approximately $0.5 billion and issuable pursuant to a stock payment option that the Company intends to exercise. The Company intends to fund the cash portion of the acquisition through proceeds from a potential equity market transaction, subject to market conditions and other factors. The acquisition is expected to close in October 2016, and is subject to customary closing conditions.

    http://www.oilvoice.com/n/Concho-Resources-announces-Midland-Basin-acquisition/dd73c988a849.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Halcon’s Market Cap Falls Below $50M, NYSE Threatens to De-List


    The New York Stock Exchange (NYSE) has certain minimum standards if a company wants to continue trading stocks on the exchange:

    The company’s stock price must be trading for at least $1 per share, and the company’s market capitalization must be at least $50 million. Market cap is pretty easy to calculate: it’s the number of outstanding shares times the per-share price. If you have 50 million shares of stock and the price is trading for $1/share, you’re there. You meet the NYSE’s requirements.

    Various companies with operations in the Marcellus/Utica have fallen short and have been warned by the NYSE that unless they get their act together, they would be de-listed. Some turned it around (see Eclipse Resources Dodges a Bullet – Stock Won’t Get De-Listed), and some didn’t (seeMagnum Hunter De-Listed from NYSE; Still Shopping Eureka Hunter).

    Halcon Resources, a driller with 140,000 Utica acres it doesn’t bother to drill on, was warned in June by the NYSE that their share price, trading under $1/share, is too low. In July Halcon filed for bankruptcy. The NYSE has just issued another warning to Halcon: the company’s market capitalization has now fallen below $50 million…

    http://marcellusdrilling.com/2016/08/halcons-market-cap-falls-below-50m-nyse-threatens-to-de-list/
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    EIA August DPR: Utica Production Up, Marcellus Down


    Yesterday MDN’s favourite government agency, the U.S. Energy Information Administration (EIA), issued our favourite monthly report–the Drilling Productivity Report (DPR).

    The DPR is the EIA’s best guess, based on expert data crunchers, as to how much each of the U.S.’s seven major shale plays will produce for both oil and natural gas in the coming month.

    The EIA projects natural gas production cumulatively across all shale plays will once again fall in September–the seventh consecutive month it will have fallen.

    However, as was the case in last month’s report, the Utica stands alone and against the trend by showing an increase in production month over month. Last month the EIA predicted the Utica would increase production by 5 million cubic feet per day, or MMcf/d.

    This month’s report shows the Utica is expected to increase production by an average of 9 MMcf/d.

    Also of note, last month Marcellus production was projected to drop by 26 MMcf/d, while this month the production drop is projected to be 33 MMcf/d. That is, the rate of production decline in the Marcellus is accelerating.

    http://marcellusdrilling.com/2016/08/eia-august-dpr-utica-production-up-marcellus-down/
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    In appeal of US fracking ruling, arguments center on precedent


    A recent judge's decision that overturned Obama administration rules on hydraulic fracturing on federal and Indian lands ignores more than a century of regulatory precedent, an attorney appealing that decision said Monday.

    "The decision ignores decades of case law," said Mike Freeman, a Colorado-based attorney with Earthjustice. "We respectfully think that the judge got it flat wrong."

    On Friday, Earthjustice, along with the Sierra Club, filed opening briefs with the 10th US Circuit Court of Appeals in an appeal case that may ultimately determine whether the federal government can regulate fracking.

    The US Department of the Interior also filed briefs arguing that a century of legal precedent and federal regulations allow the agency's Bureau of Land Management to regulate fracking.

    "BLM has the authority to oversee resource extraction on federal and Indian leases, including well-stimulation activities, to protect natural resources and the environment," Interior wrote. "BLM and its predecessors have been doing so for nearly 100 years, and modern hydraulic fracturing operations simply are a new version of historically regulated well stimulation techniques."

    In March 2015, BLM finalized new rules that included new chemical disclosure, well construction, and fluid disposal requirements for fracking operations on federal and Indian land. Production on those lands currently accounts for about 5% of total US oil supply, according to the US Energy Information Administration.

    Industry groups, including the Western Energy Alliance, and states, including North Dakota and Wyoming, successfully sued to have the rules overturned.

    In June, US District Court of Wyoming Judge Scott Skavdahl ruled that Interior's fracking rule was "in excess of its statutory authority and contrary to law."

    In his decision, Skavdahl wrote that his decision did not deal with whether fracking is "good or bad for the environment," just whether Interior had authority to regulate the practice.

    Freeman with Earthjustice called Skavdahl's ruling a "legal error," and claimed that BLM was simply updating its regulations for the first time in roughly 30 years.

    "These aren't radical requests," Freeman said. "Most of the requirements are industry best management practices."

    Freeman said that answers from petitioners in the case to the briefs filed last week, including responses from the states and industry groups fighting the rules from taking place, are due by September 16. Replies to those answers are due October 7 and, Freeman said, he expects oral arguments in the case will begin before the end of the year.

    The appeal could be decided in early 2017.

    http://www.platts.com/latest-news/oil/washington/in-appeal-of-us-fracking-ruling-arguments-center-21253330?hootpostid=e543a179a923a7ea608f0539d71c4477
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    Alternative Energy

    Britain backs expansion of world’s largest wind farm


    Britain on Tuesday approved plans to expand an offshore wind farm project that could ultimately have more than 600 turbines spread across an area of the North Sea more than twice the size of London.

    The Hornsea Two windfarm project, to be built by DONG Energy, is part of Britain's push to invest in new electricity generation capacity needed to overcome a squeeze on power supplies in the next decade.

    All but one of Britain's existing nuclear plants, which produce around a fifth of the country's electricity, are set to close by 2030 as they come to the end of their operational lifespans. And the government plans to close coal-fired plants by 2025 as a part of its efforts to meet climate targets.

    Plans for a new 18 billion pound nuclear power plant, Hinkley C, are currently under review amid spiraling costs and concerns over Chinese investment in the project.

    If built, Hornsea Two, some 89 kilometers off the coast of Yorkshire, will have 300 turbines and is expected to generate around 1.8 gigawatts (GW) of electricity, enough to power up to 1.6 million homes, DONG Energy said in a statement.

    The Danish company has already secured planning permission for the adjacent 1.2 GW Hornsea One development. Earlier this year, DONG Energy made a final decision to go ahead with this project, which it said could begin generating electricity in 2020 and would be the world's largest offshore wind farm.

    "We have already invested 6 billion pounds ($7.79 billion) in the UK, and Hornsea Project Two provides us with another exciting development opportunity in offshore wind," Brent Cheshire, DONG Energy's UK Chairman said.

    The two sites together, at 3 GW, would also have a similar capacity to the Hinkley C nuclear project, which, if it goes ahead would be built by French company EDF with financial backing from a Chinese state-owned company.

    The government said its next round of renewable funding will focus on offshore wind and has said around 10 GW of capacity could be installed by the end of the decade.

    "The UK's offshore wind industry has grown at an extraordinary rate over the last few years, and is a fundamental part of our plans to build a clean, affordable, secure energy system," Business and Energy Secretary Greg Clark said.

    Wind power (onshore and offshore) made up around 11 percent of Britain's electricity production in 2015, up from 9.5 percent the year before.

    DONG, which floated on the on the Copenhagen stock exchange earlier this year valued at $15 billion, also has plans for Hornsea Three. If all three Hornsea windfarms were to be built they could produce as much as 4 GW of electricity, DONG said in a promotional video on its website.

    http://www.reuters.com/article/us-dong-energy-windfarm-approval-idUSKCN10R100
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    Agriculture

    Long-term study links neonicotinoids to wild bee declines


    Wild bees that forage from oilseed rape crops treated with insecticides known as neonicotinoids are more likely to undergo long-term population declines than bees that forage from other sources, according to the findings of an 18-year study.

    The new research covered 62 species of bee found in the wild in Britain and found a link between their shrinking populations and the use of neonicotinoid pesticides.

    Neonicotinoids are used worldwide in a range of crops and have been shown in lab-based studies to be harmful to certain species of bee - notably commercial honeybees and bumblebees.

    The European Union limited use of the chemicals - made and sold by various companies including Bayer CropScience and Syngenta - two years ago, after research pointed to risks for bees, which are crucial for pollinating crops.

    Neonicotinoids were initially licensed for use as a pesticide in Britain in 2002. By 2011, the proportion of UK oilseed rape seeds treated with them was 83 percent, according to the researchers leading this latest study.

    Going back to data from 1994 up to 2011, the scientists analyzed how large-scale applications of neonicotinoids to oilseed rape crops influenced bee population changes.

    The results, published in the journal Nature Communications, found that bees foraging on treated oilseed rape were three times more likely to experience population declines than bees foraging from other crops or wild plants.

    Giving details at a briefing in London, Ben Woodcock, who co-led the study, said the average decline in population across all 62 species was 7.0 percent, but the average decline among 34 species that forage on oilseed rape was higher, at 10 percent.

    Five of the 62 species studied declined by 20 percent or more, he said, and the worst affected declined by 30 percent.

    Woodcock, an ecological entomologist at the Natural Environmental Research Council Center for Ecology and Hydrology, said the findings showed the extent of the impact.

    "Prior to this, people had an idea that something might be happening, but no-one had an idea of the scale," he told reporters. "(Our results show that) it's long-term, it's large scale, and it's many more species than we knew about before."

    Woodcock's team said this should add to the body of evidence being considered in a review of neonicotinoid risks to bees being carried out by the European Food Standards Authority, expected to be completed by January 2017.

    Christopher Connolly, a neurobiologist and bee expert at the University of Dundee, who was not directly involved in this research, said: "The evidence against neonicotinoids now exists in key bee brain cells involved in learning and memory, in whole bees, entire colonies and now at the level of whole populations of wild bees."

    http://www.reuters.com/article/us-science-bees-neonicotinoids-idUSKCN10R1M5
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    BHP may mothball $2.6 billion Jansen potash project if prices remain weak

    BHP may mothball $2.6 billion Jansen potash project if prices remain weak

    World’s largest miner BHP Billiton, the company behind the massive $2.6 billion (CAD $3.4 billion) Jansen potash project in Canada’s Saskatchewan province, may place it in the back burner if prices for the fertilizer ingredient don’t pick up by the end of the decade.

    The company, which posted Tuesday its worst-ever annual loss, had already cut $130 million from the planned $330 million capital expenditure to develop and study the feasibility of the Jansen project in the current financial year. And while BHP continues looking for a partner to finally take the venture off the ground, it now admits that the ongoing slump in potash prices may make it mothball the project.

    "That might be more palatable to our shareholders than going ahead with a project that's not economically attractive," chief executive officer Andrew Mackenzie told The Telegraph.

    If potash prices don’t pick up by the end of the decade, BHP would be prepared to mothball the project.

    While the Melbourne-based firm is sinking shafts and installing some infrastructure, it has not fully committed itself to the project, nor received board approval for the mine, which is expected to begin operations sometime “in the decade beyond 2020.”

    “Part of what we’re doing is developing a feasibility study for ultimate approval by the board, and if we weren’t serious about potash, we wouldn’t be doing that work,” BHP Billiton Canada’s head of corporate affairs told The Saskatoon StarPhoenix in March.

    The mine is now 60% complete and "shaft excavation is progressing," according to BHP’s results for the year ended in June 2016. A year ago, the project was 46% along and when the work is completed – at the current pace towards the end of 2019 – Jansen would still be nowhere near a producing mine.

    When and if it finally moves into production, Jansen would be a game-changer in the potash industry, as it is expected to generate 8 million tonnes of crop nutrient a year, which would amount to nearly 15% of the world's total.

    To put that figure in perspective, the Mosaic Company’s (NYSE:MOS) Esterhazy mine is forecast to generate around 6.3 million tonnes per year after the completion of an ongoing expansion. In comparison, most of the province's potash operations, which are among the world's largest, have an output of 3 to 4 million tonnes per year.

    Prices for the fertilizer ingredient are not encouraging. It began its decline four years ago as weak crop prices and currency declines pinched demand. They have also suffered from increased competition following the breakup in 2013 of a Russian-Belarusian marketing cartel that previously helped limit supply.

    In recent months, potash collapse has picked up speed, putting additional pressure on producers, whose profits have been hit by falling prices, largely due to weak currencies in countries such as Brazil and low grain prices.

    http://www.mining.com/bhp-still-looking-partner-2-6-billion-jansen-potash-mine/
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    Base Metals

    Citigroup sees no ‘significant wave’ of copper supply looming


    The world is not about to be swamped by copper, according to Citigroup Inc. Growth in supply will fall significantly short of demand through 2020, tempering the bearish sentiment that’s made copper the worst-performing metal this year.

    Global copper mine supply will be one-million metric tons a year higher by the end of the decade, Citigroup analysts including David Wilson said in an e-mailed note Tuesday. That’s less than the 1.6-million tons of demand growth that Citigroup predicts. The metal used in wires and cables has risen only 1.6% this year, much less than its peers on the London Metal Exchange, as mine supply increased in the first half.

    The supply-driven bearish sentiment in the copper market is “likely to be temporary in nature,” the analysts wrote. “We do not believe such growth represents a significant wave of supply.”

    The view contrasts with Barclays Plc, which argued last month that copper will come under pressure as supply outweighs demand every year through 2020. Goldman Sachs Group Inc. sees a “supply storm” brewing with about one-million tons of incremental supply through the first quarter of next year. For Citigroup, mine output won’t grow quickly enough through 2020 after years of spending cuts, constrained project funding and a decline in ore grades.

    Rising supply in the first half has been driven mostly by the ramp-up of mines in Peru, Citigroup said, but growth there is poised to slow and will peak by 2019. On a global basis, “without already agreed funding, copper projects are, in our view, unlikely to reach production this decade given the current low price levels and capital constrainedenvironment,” the analysts wrote.

    Copper has fared poorly this year by comparison with zinc and nickel, which have risen 41% and 18% respectively.

    http://www.miningweekly.com/article/citigroup-sees-no-significant-wave-of-copper-supply-looming-2016-08-16
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    Chile energy prices seen falling after massive auction


    The cost of energy in Chile is likely to fall in the next decade, as an auction aimed at providing around a third of the copper exporter's energy needs had attracted bids priced more competitively than forecast, the energy minister said.

    The winners will be announced on Wednesday of the auction to supply a total of 12,430 gigawatts per hour annually for 20 years from 2021 and 2022, divided into five blocks.

    But the offers ensured that energy prices would be "well below" $60 per megawatt-hour (MWH), less than half the cost of two and a half years ago, Chile's Energy Minister Maximo Pacheco told Reuters on Tuesday, after the envelopes of the bids were opened.

    Share prices in Chilean energy companies fell on fears of an impact to profits. Enersis Chile, the local arm of Italy's Enel, fell 3.6 percent, while Colbun and AES Gener were both down around 3 percent.

    The massive auction - the biggest in the country's history - has attracted 84 bids from home and abroad, including European firms Gas Natural, Ibereolica, Acciona Energia , AustrianSolar, wpd and Solairedirect.

    Demand for energy has risen rapidly in Chile, which has among the highest power prices in Latin America and an energy-intensive mining industry that produces around a third of the world's copper, much of it from remote desert areas.

    It has practically no hydrocarbons of its own, but ample potential for renewable energy. Solar energy generation in particular has expanded quickly in recent years, and many of the bids were from solar and wind power firms.

    "We are very happy with the result price-wise, but also the fact that we are going to have cheaper and cleaner energy," said Pacheco.

    Analysts had agreed that tariffs would probably fall as a result of the auction, pointing to likely aggressive offers from the large number of renewables firms participating.

    "This will be one of the most competitive auctions in Chile's history, with bidders presenting offers almost seven times higher than the amount being auctioned," said ratings agency Fitch.

    But the market had expected values closer to $80 per MWH.

    Chilean state energy firm ENAP, which runs the country's two major oil refineries and which the government wants to expand, took part in the auction, but local newspaper Pulso reported that it bid $72.90, likely too high to be successful.

    http://www.reuters.com/article/chile-energy-idUSL1N1AX1HJ

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    Zinc deficit looms, prices up, but output restarts unlikely


     Zinc's sharp rally and looming market deficit has fed speculation that major producers such as Glencore may reverse output cuts, but analysts caution that is unlikely to happen soon.

    Only when stocks of concentrate and metal sink to levels where higher prices can be sustained will large producers look at restarting capacity, they say.

    Benchmark zinc on the London Metal Exchange has climbed nearly 60 percent from January's multi-year lows to around $2,300 a tonne, its highest since May 2015.

    Many zinc mines have been shut or mothballed over the past couple of years, but prices did not really take off until this year when deficit expectations intensified with the closure of the Century mine in Australia and Lisheen in Ireland.

    Glencore's decision last year to slash 500,000 tonnes of annual zinc production set the ball rolling. Its zinc output in the first half of this year fell 31 percent to 506,500 tonnes from the same period last year.

    "We don't think Glencore will reactivate in response to prices," said Graham Deller, analyst at CRU. "They will wait until the concentrate market runs out of spare material."

    John Meyer, analyst at SP Angel agrees: "Glencore will allow the market to keep rising until stocks fall and it can restart zinc production at sustainably higher prices".

    Glencore declined to comment.

    Analysts estimate about 750,000 tonnes of annual zinc output outside China has been mothballed over the last two years. Of the 600,000 which could be restarted, about 400,000 belongs to Glencore, they say.

    Of the remaining 200,000, analysts say the largest chunk is owned by Nyrstar, which has its mining business up for sale, and while higher zinc prices might make that process easier, the chances of restarts are low.

    Nyrstar declined to comment on the possibility of restarts.

    Chinese output and idled capacity is difficult to estimate, analysts say.

    "Higher-cost Chinese zinc mines often restarted capacity when prices moved towards $2,300/t in the past," Bank of America Merrill Lynch analyst Michael Widmer said in a note, adding that "zinc's rally was driven by a confluence of factors."

    Factors include steady global demand, estimated at around 14.5 million tonnes this year, for the metal used to galvanise steel and forecasts for market deficits, which a recent Reuters poll estimated at 221,000 tonnes this year.

    Falling stocks in LME approved warehouses, which at 457,900 tonnes are down 25 percent since September, are another reason.

    Key to market psychology has been the concentrate market, which has tightened to the extent that treatment charges, fees paid by miners to smelters to process raw material into metal have tumbled towards $100 a tonne from above $200 in April 2015.

    "(Lower treatment charges provide) imminent headwinds for those smelters, many of which are Chinese, that purchase ore on the spot market and not through contracts," Widmer said.

    Shortages of ore have meant top consumer China has had to source more metal overseas. Its imports rose more than 47.8 percent to 291,892 tonnes in the six months to June from a year ago.

    http://www.reuters.com/article/metals-zinc-glencore-idUSL8N1AW3K7
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    China shuts all lead, zinc mines in Hunan's Huayuan in effort to clean up mining sector


    China has shut all lead and zinc mines in Xiangxi Tujia and Miao Autonomous prefecture, located in Hunan province's Huayuan county, as part of the government's overall efforts to clean up the lead and zinc mining sector, the prefecture government said in a report on its website Tuesday. Hunan is main lead and zinc mining zone in China.

    Since August 15, the government has halted power supply to all lead and zinc mines in the county -- with all mines now having suspended operations -- in response to the State Administration of Work Safety's, or SAWS, request to clean up the local mining sector.

    The mining reform, which will last until June 2017, aims to prevent mining accidents and ensure safety in mining, the prefecture government said.

    Mines which have exhausted their resources will be asked to withdraw from the market, while those which have mineable industrial resources in place, but are seen to be fraught with danger, will have their reserves assessed, and asked to take preventive safety measures, the report said.

    Mines are only allowed to resume operations following government approval, and the issuance of licenses by SAWS, it said.

    The county has a total of 26 zinc and lead mines, with proven lead and zinc resources estimated at 6.5 million mt, figures from Ministry of Land and Resources showed.

    China is forecast to have a mined zinc deficit of 390,000 mt in 2016, widening from a deficit of 9,000 mt a year ago, state-owned Chinese metals consultancy Beijing Antaike said in its zinc sector report issued in end-June.

    The report attributed the widening deficit to continuous decline in domestic mined zinc supply this year, because of lower operation rates at some mining zones in China.

    China's national mined zinc output is forecast to grow just 3.5% year on year to 4.4 million mt this year, while its net zinc concentrate import volume this year is estimated at 900,000 mt, down 40% from 1.496 million mt last year, according to Antaike.

    http://www.platts.com/latest-news/metals/hongkong/china-shuts-all-lead-zinc-mines-in-hunans-huayuan-27647926
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    Major tailings dam burst reported in China


    According to the AZ China blog a major tailings dam failure at an aluminum refinery in Luoyang, Henan Province over the weekend caused a mud slide that partially destroyed a nearby town.

    "According to local newspaper reports, the dam wall suddenly broke and silt mixed with stones from the mountainside rushed down, and the village was totally submerged.  This village is home to around 300 villagers and they were transferred in an emergency evacuation.  No one was killed or injured.

    "The villagers are living in a primary school in Xinan County temporarily.  Sadly, the red mud buried many farm and domestic animals because it was too late to save them.  It has been reported that the dam held about 2 million cubic meters of red mud and was about 1.5 km in length."

    Aluminum Insider reported that the Xiangjiang Wanji Aluminum refinery which has a 1.4 million tonne per year capacity was shut down and villagers evacuated ahead of the dam burst. Authorities have been cracking down on the industry recently, forcing refineries to tackle pollution and shutting down a number of bauxite mines in the province.

    http://www.mining.com/major-tailings-burst-reported-in-china/

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    Steel, Iron Ore and Coal

    China's new thermal power installed capacity falls to 19% of total in June


    China's newly-added installed capacity of thermal power stood at 2.86 GW in June, accounting for only 19% of the total increase of power installed capacity, which was reported to have soared to 14.97 GW in the month, showed data from the National Energy Administration (NEA).

    The decline of new thermal power installed capacity actually started from May this year, with the new thermal power capacity standing at only 2.33 GW or 35.8% of the total.

    The unsatisfactory result in June was also a main factor propelling the share of newly-added thermal power capacity of the total sliding from over 60% to 47.6% over January-June.

    In the first half of the year, China's newly-added power installed capacity totaled 56.99 GW, while thermal power capacity was only 27.11 GW, data showed.

    China Electricity Council (CEC) expected China's installed capacity of power generation to increase 120 GW to 1.64 TW this year, with that of non-fossil energies reaching 600 GW or 36.5% of the total installed capacity by end-2016.

    Of the expectant newly-added capacity for the whole year, the installed capacity of non-fossil energies will be 70 GW or so, while that of thermal power will be some 50 GW.

    The decline of coal-fired power capacity increasingly turns out to be an inevitable trend. However, is a milestone for China to transform its energy mix to a cleaner and more sustainable one.

    http://old.en.sxcoal.com/0/151508/DataShow.html
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