Mark Latham Commodity Equity Intelligence Service

Friday 24th March 2017
Background Stories on

News and Views:

Attached Files

    Oil and Gas

    Russia, Saudis Move at a Different Pace as Oil Cuts Scrutinised

    Russia, Saudis Move at a Different Pace as Oil Cuts Scrutinised

    Russia and Saudi Arabia head to this weekend’s OPEC committee meeting as the tortoise and hare of a global deal to cut oil supply, with Moscow sticking to a slow and steady pace despite Riyadh’s cajoling.

    OPEC’s de-facto leader Saudi Arabia publicly prodded the Kremlin to speed up and implement its full 300,000 barrel-a-day production cut by the end of this month, but Energy Minister Alexander Novak reiterated it won’t reach the target before April -- four months into the agreement. While this pace has offset the impact of deeper-than-expected cuts by other OPEC members, the need to show unity means Russia is unlikely to get called out for its inertia, said Daniela Corsini, a Milan-based analyst at Intesa Sanpaolo SpA.

    “Confidence in the OPEC/non-OPEC deal is the most important tool to protect crude prices,” Corsini said by email. “Saudi Arabia will not openly criticize poor Russian compliance as it’s not in their interest to scare market participants.”

    The Organization of Petroleum Exporting Countries and its allies are almost three months into the pact to take 1.8 million barrels a day off the market in a bid to eliminate a global surplus after three years of glut.  After a promising start in January, Russian production flatlined the following month and is now just over half way to the reduction Moscow promised. Compliance from the 11 non-OPEC participants -- estimated at just 64 percent in February -- will come under scrutiny at a ministerial meeting in Kuwait City on Sunday.

    The agreement is set to last the six months through June, but several OPEC members are signaling an extension may be necessary. BenchmarkBrent crude dropped below $50 a barrel for the first time since November on Wednesday as swollen U.S. stockpiles and rising shale production offset the impact of the cuts.

    Russian output has fallen 160,000 barrels a day from the October level -- a post-Soviet record -- and will fall another 40,000 barrels by the end of this month, Novak said on March 17. He has maintained since the deal was first struck that the target will be reached no sooner than April.

    The Russian cuts are “slower than what I’d like,” Saudi Energy Minister Khalid Al-Falih said in an interview with CNBC March 7. “But I think we are patient and we will see where we are in May and take it from there.”

    Targeting Growth

    The structure of the Russian oil industry makes it harder for the country to deliver on a supply pledge, according to Chris Weafer, a Moscow-based senior partner at Macro Advisory.

    “Unlike OPEC, where you have only one national oil company, the Russia industry is fragmented and, therefore, its collective actions are unpredictable,” he said.

    Even as Russia reduces output, producers are preparing for growth, according to Ildar Davletshin, an oil and gas analyst at Renaissance Capital. “Capex guidance is up for most companies so no one is cutting spending,” he said.

    Extending Deal

    Companies are achieving lower volumes by slowing down electric submersible pumps, closing more wells for workovers, and fracking less. They likely plan to make up for missed production volumes in the second half, Davletshin said.

    Those plans may have to be abandoned if the supply deal is extended. OPEC meets on May 25 to decide whether to continue. Al-Falih has said the group would prolong the deal if oil stockpiles remain high, and other members including Iraq have expressed their support for an extension.

    Russia hasn’t ruled out such a move, Interfax news agency reported Wednesday, citing Vladimir Voronkov, the country’s envoy to international agencies in Vienna. A final decision will depend on Saudi Arabia, it said.

    “I don’t have serious reasons to think Russia will abandon the deal, as long as they benefit from higher and stable prices,” Intesa’s Corsini said.

    Attached Files
    Back to Top

    Saudi Arabia sees crude supply stable around 10 million bpd: sources

    Saudi Arabia expects its crude oil supply to be stable at around 10 million barrels per day in the next few months, fully in line with the country's OPEC quota and regardless of possible fluctuations in monthly production, industry sources said.

    Riyadh has stressed the importance of focusing on its supply rather than output as supply includes crude delivered to the market - domestically and for export - from the wellhead and from storage.

    One Saudi-based source told Reuters production could be lower than supply in March or April.
    Back to Top

    Former Niger Delta militants call on Nigeria to pay stipends or face protests

    Former militant leaders in Nigeria's Niger Delta oil region have urged the government to pay out delayed stipends granted under a 2009 amnesty or face protests, a statement said on Thursday.

    An uneasy peace is currently being kept in Nigeria's oil-producing heartland, which was rocked last year by militant attacks that cut crude production by as much as a third.

    Failure to pay off former militants under the amnesty could jeopardize the relative stability in the region and even result in oil production again being choked off.

    "We are calling for the immediate release of the balance sum of the 2016 supplementary budgetary allocation ... to avert any situation that will warrant beneficiaries of the program going to the streets to protest and barricade roads," the former militants said in a statement.

    The government is now in talks with militants to end the attacks which cut Nigeria's output by 700,000 barrels a day (bpd) for several months last year, reducing total production at that time to about 1.2 million bpd. It has since rebounded.

    Under the amnesty program, each former militant is entitled to 65,000 naira ($213.68) a month plus job training. But last week a special adviser to Nigeria's president said the program was facing a cash crunch.

    Authorities had originally cut the budget for cash payments to militants to end corruption. They later resumed payments to keep pipeline attacks from crippling vital oil revenues.

    Two months of stipends were paid out in January, but the amnesty office said foreign schools fees and other allowances had not been sent by the federal government yet.

    The damage from attacks on Nigeria's oil industry has exacerbated a downturn in Africa's largest economy, which slipped into recession in 2016 for the first time in 25 years, largely due to low oil prices.

    Crude oil sales make up around two thirds of government revenue.
    Back to Top

    Top Asian LNG buyers form alliance to push for flexible contracts

    Three of Asia's top buyers of liquefied natural gas (LNG) have agreed to work together to secure more flexible contracts when buying the commodity.

    Korea Gas Corp (KOGAS) said in a statement on Thursday that it had signed a memorandum of understanding in mid-March with Japan's JERA and China National Offshore Oil Corp (CNOOC) to exchange information and "cooperate in the joint procurement of LNG".

    The alliance, which has been touted for the last year or so, comes as LNG buyers around the world push to move away from contracts that restrict them from reselling or swapping excess cargoes.

    "Through this MOU deal, Korean, Chinese and Japanese LNG buyers are expected to play an active role in the LNG market," Lee Seung-hoon, KOGAS chief executive officer, said in the statement. KOGAS is the world's No.2 LNG buyer.

    South Korea, Japan and China accounted for over half of global LNG trade in 2015, according to the BP Statistical Review of World Energy.

    Lee said in a recent interview with Reuters that the company would look for flexible LNG contracts.

    JERA is joint venture between Chubu Electric Power and Tokyo Electric Power.
    Back to Top

    Eni strikes oil offshore Mexico

    Italian oil company Eni has informed it has “successfully drilled” the Amoca-2 well in the shallow waters of Campeche Bay, offshore Mexico, confirming the presence of oil in multiple reservoirs.

    Amoca-2 is the first well drilled by an international oil major in Mexico since the 2013 Energy Reform. It is located in the Contractual Area 1, 200 km west of Ciudad del Carmen, in the Campeche Bay, in 25 meters of water.

    The well reached a total depth of approximately 3,500 meters, encountering approximately 110 meters of net oil pay from several good quality Pliocene reservoir sandstones, of which 65 meters were discovered in a deeper, previously undrilled horizon. The well confirmed the presence of 18° API oil in the shallower formations, while the newly discovered deeper sandstones contain high quality light oil. Reserves are still being assessed, but the well indicates a meaningful upside to the original estimates.

    “This important discovery comes in a country where Eni has not yet operated and confirms our exploration capabilities, building upon our strong exploration track-record, and is another confirmation of the validity of our “Dual Exploration Model” approach.

    Focusing on conventional exploration with high initial stakes and operatorship, we manage to fast-track exploration activities, monetize exploration successes early and receive competitive development opportunities, therefore maximizing value generation for our shareholders,” Eni CEO Claudio Descalzi said.

    The Area 1 drilling campaign will continue with a new well in the Amoca area (Amoca-3) followed by the Miztón-2 and Tecoalli-2 delineation wells, to be drilled in 2017 to appraise existing discoveries as well as targeting new undrilled pools.

    Eni holds a 100% stake in the Area 1 Production Sharing Agreement and is already evaluating options for a fast track phased development of the fields.

    Attached Files
    Back to Top

    Argentina's Tecpetrol to invest $2.3 billion in Vaca Muerta: union leader

    Argentina's Tecpetrol, part of the Techint Group, said on Thursday it would invest $2.3 billion in the Vaca Muerta shale fields through 2019, the largest announcement in the formation in years.

    Tecpetrol said in a statement the investment was made possibly due to measures from President Mauricio Macri's government, including a deal with labor unions earlier this year and a definition of price supports this month.

    Tecpetrol will aim to produce an average 14 million cubic meters (494 cubic feet) of shale gas per day by 2019 said Guillermo Pereyra, a union leader and senator who participated in a Thursday meeting where executives communicated the plan to Macri.

    That is half the amount of gas Argentina currently imports, Pereyra said, and will help Macri's government reach its goal of energy self efficiency. An energy deficit is a major contributor to Argentina's fiscal deficit.

    About the size of Belgium, the Vaca Muerta formation is one of the largest shale reserves in the world but it has been mostly unexplored due to high production costs and lack of labor flexibility.

    The investment would eventually result in 1,000 new jobs, Pereyra and Tecpetrol said.

    "We are going to arrive in September with five or six drilling teams, each one with about 100 people, this is very important," Pereyra said in a telephone interview.

    Macri's government in January announced an agreement with oil companies and unions to lower labor costs and stimulate investments, which until now have been slow to arrive.

    YPF said it reached a preliminary deal with Royal Dutch Shell Plc last month to develop oil and gas assets in Vaca Muerta involving a $300 million investment from Shell.

    Earlier this month the government said it would gradually lower the price it guarantees for gas drilled from new wells, currently $7.50 per million British thermal units of gas, to encourage investment sooner rather than later.

    Vaca Muerta contains 308 trillion cubic feet of shale gas and 16.2 billion barrels of shale oil, according to the U.S. Energy Information Administration.

    Tecpetrol has been carrying out a pilot project in the Fortin de Piedra area and will now move on to the development phase, Pereyra said.

    The company said it planned to drill 150 wells in the next three years, with $1.6 billion of the investment going toward the wells and $700 million to be used for treatment and gas transport installations,
    Back to Top

    China Feb gasoline imports plunge

    Strong exports of refined fuel products reflected persistence excess in the domestic market as China's refiners maintain a record pace of crude oil buying and high rates of operation.

    China became a net exporter of fuel products in late 2016. Gasoline imports last month slumped to just 7,245 tonnes, tumbling 94 percent from the same period last year, leaving net exports at 1.05 million tonnes.

    Diesel imports in February dropped 52 percent from a year ago to 50,000 tonnes, while liquefied natural gas imports rose 29 percent year on year to 2.37 million tonnes, the customs data showed.

    Meanwhile diesel exports jumped 67 percent compared with February 2016 to 1.32 million tonnes, climbing from 965,000 tonnes in January.

    Attached Files
    Back to Top

    China's CNOOC reports worst result since at least 2011, forecasts output rise

    China's offshore oil and gas producer CNOOC Ltd reported its worst annual result since at least 2011, with revenue from its core oil and gas business tumbling 17 percent last year, but it expects to raise output 2017 as oil prices rebound.

    CNOOC reported a net profit of 637 million yuan ($92.5 million) in 2016, down nearly 97 percent from 20.2 billion yuan in profit in 2015.

    Total revenue from oil and gas fell to 121 billion yuan from 147 billion yuan in 2015.

    "CNOOC managed to eke out a tiny profit thanks to cost efficiencies and the oil price rebound during 4Q," said analyst Gordon Kwan of Nomura Research.

    The pooring showing for last year came as CNOOC slashed upstream investment, reduced production and saw a drop in both crude oil and natural gas prices.

    The state-owned firm reported a realized oil price of $41.40 a barrel in 2016, 19 percent lower than 2015. Natural gas prices fell 14.6 percent from a year earlier.

    Total production of oil and gas fell 3.8 percent year on year to 476.9 million barrels of oil equivalent, the first drop since 2012.

    "CNOOC must confront difficult challenges to kick-start production growth and replenish reserves, probably at the expense of higher capex and perhaps lower dividend payout ahead," Kwan said.

    CNOOC said it would start up operations on five new projects in 2017 and plans to increase reserves and production through drilling and acquisitions.

    "In 2017, our strategies in exploration will focus on the continued search for large and medium-sized oil and gas fields," the company said in a statement.

    CNOOC recommended a final 2016 dividend of 23 Hong Kong cents (3 U.S. cents) a share. The dividend for 2015 was 25 Hong Kong cents.
    Back to Top

    Saudi exports to U.S. to fall by 300,000 barrels per day in March - official

    Saudi exports to U.S. to fall by 300,000 barrels per day in March - official

    Saudi Arabia's crude exports to the United States in March will fall by around 300,000 barrels per day from February, in line with OPEC's agreement to reduce supply, a Saudi energy ministry official said on Thursday.

    The United States imported about 1.3 million bpd from OPEC's top exporter in February, according to U.S. Energy Information Administration data.

    "Exports may fluctuate week on week, but on average in March exports will be down," the official said, responding to a Reuters request to comment on the EIA data. Saudi exports are then expected to remain around March's level for the next few months, the official said.

    The official noted that export data showed higher Saudi oil exports in January and February, but these shipments were the result of cargo loaded in November and December.

    Saudi Arabia has made the largest cut in production after the agreement reached last year by both the Organization of the Petroleum Exporting Countries and non-OPEC producers to reduce output by 1.8 million bpd.

    Oil prices have been in a downtrend for two weeks on concerns that OPEC cuts so far have not dented record U.S. crude inventories. U.S. crude has declined nearly 10 percent since March 7 as speculators reduced big bets that oil would keep rising. It settled on $47.70 on Thursday.

    Crude stocks in the United States, the world's largest oil consumer, were a record 533 million barrels last week, the EIA said. In the week ended March 17, U.S. imports from Saudi Arabia unexpectedly rose by more than 200,000 bpd to 1.28 million bpd, after a sharp decline the prior week.

    The official said lower Saudi exports to the U.S. is likely to affect stockpiling in the U.S.

    "This is mainly because there is a refinery maintenance in the U.S. The cuts in exports will help the crude stockpiling in the U.S. to go down," the official said.

    Gasoline stocks are falling, but remain seasonally high.

    The official also said he believed other Gulf oil exporters will follow suit and their crude exports will be lower in March and will continue to decline. Imports from Iraq and Kuwait dropped sharply for the week to March 10 but then rebounded in the most recent week of data.
    Back to Top

    All drill, no frack: U.S. shale leaves thousands of wells unfinished

    U.S. shale producers are drilling at the highest rate in 18 months but have left a record number of wells unfinished in the largest oilfield in the country – a sign that output may not rise as swiftly as drilling activity would indicate.

    Rising U.S. shale output has rattled OPEC's most influential exporter Saudi Arabia and pushed oil prices to a near four-month low on Wednesday. U.S. production gains are frustrating Saudi-led attempts by the world's top oil exporters to cut supply, drain record-high inventories and lift prices.

    Investors watch data on the number of rigs deployed in North American oil and gas fields as a leading indicator for output. But the rising rig count and frenetic drilling activity in the Permian Basin in West Texas is not all about pumping oil. [RIG/U]

    During the 2014-2016 downturn in global oil prices, the number of wells left incomplete grew as companies shut down rigs, laid off workers and retreated from the fields. When prices picked up, operators were expected to pump the oil from those incomplete wells before spending money on drilling new ones.

    Instead, the number of incomplete wells has risen. A record 1,764 wells were left unfinished in the Permian in February, according to U.S. government data going back to December 2013. In February alone, 395 wells were drilled and only 300 completed. That was the highest drilling rate in the Permian in two years.

    The surprise surge in unfinished wells indicates that investors, traders and oil market players may need to reinterpret rig count data.

    "You would now be looking at the number of wells drilled and the uncompleted wells and not necessarily the rig count," said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas.

    Reuters interviews with more than a dozen well completion service providers, oil and gas lawyers and industry experts show that some operators are drilling because their leases require them to do so within a specified time limit to keep their leases. But they may not be required to actually pump the oil immediately after they have drilled the hole.

    To complete a well, shale producers stuff the hole with sand, water and chemicals at high pressure until the rock fractures and releases the oil contained in its pores.

    There is typically a lag of a few months between drilling and completion in government data, so some of the increase in unfinished wells can be explained by rising activity.

    Some leases do require firms to produce a minimum volume of oil. On those leases, many firms will frack one well and leave others incomplete. That allows them to meet their contracts with land holders but gives them flexibility to come back and pump the oil later.


    The value of land in the Permian has rocketed as oil prices recovered to around $50 a barrel, so oil firms are now scrambling to do the required drilling to keep leases they had left dormant.

    "During the period where we had the downturn in price, there were a lot of leases that were in danger of being lost ... they had to drill a well to maintain it," said Michael Stoltz, an attorney who represents energy firms in Texas for Stubbeman, McRae, Sealy, Laughlin & Browder Inc.

    A new lease could cost the operator as much as five times more than a few years ago, said Joe Dancy, an oil and gas lawyer, who helps negotiations on such deals. Drilling costs are also on the rise, adding to the rush by producers trying to stay ahead of price inflation.

    Fracking is more expensive than drilling and is time consuming. As much as 70 percent of well completion costs are tied to fracking, while 30 percent is for drilling, experts say.

    Fracking crews are in short supply, which is another reason that oil firms have delayed completion.

    As activity has picked up in the Permian, the labor market has tightened. Many oil workers found jobs elsewhere during the downturn, so rebuilding the workforce is taking time.

    "There were a number of completions that were originally scheduled in first quarter and you've seen those slide to Q2 and that's really being driven by ... access to service crews and things like that," said Tom Stoelk, the CFO and interim CEO of Northern Oil & Gas Inc (NOG.A), a producer focused on the Williston Basin in North Dakota and Montana.


    The number of incomplete wells could complicate OPEC's attempt to balance markets, as they could be completed relatively quickly if the oil price rises.

    Saudi Arabia is targeting a $60 per barrel price, and that could trigger those well completions and bring a new wave of supply to the market.

    If all the incomplete wells in the Permian pump instantaneously, output from the field could jump as much as 300,000 barrels per day (bpd), according to consultancy Wood Mackenzie.

    In February, the field accounted for about 2.1 million bpd, or about 23 percent of total U.S. crude output of about 9 million bpd, according to U.S. government data.


    Landowners lease their land to energy companies for an upfront lump sum or signing bonus and subsequent royalty payments.

    A standard lease lasts three years, with an option to extend for another two years, said sources who work with companies on such agreements.

    Leases vary greatly. Some require drilling but no production, others require production, and some require a well every six months. None of them require firms to complete all the wells they drill.

    Continental Resources Inc (CLR.N), which has about 185 such drilled but uncompleted wells (DUCs) in the Bakken in North Dakota, says that innovation during the downturn meant it could now complete those wells more cost efficiently.

    "We're glad we saved all those wells," CEO Harold Hamm said at an industry conference this month.
    Back to Top

    ICE to start trading first U.S. LNG futures contract

    Intercontinental Exchange (ICE) will begin trading a first-ever U.S. LNG futures contract in a response to the growing U.S. LNG export volumes.

    The ICE LNG futures contract will be cash settled against the Platts LNG Gulf Coast Marker (GCM) price assessment and it will use Platts-derived U.S. GCM LNG forward curves for daily settlement purposes. The curves will have an initial tenor of 48 months.

    Speaking of the U.S. LNG futures contract, J.C. Kneale, vice president, North American power and natural gas markets, ICE, said, “by providing the marketplace with a U.S. Gulf Coast LNG futures contract, along with the prospect of future additional products, domestic and international market participants now have a risk management solution that lays the foundation for a more effective means of hedging their spot and forward exposure, which will be particularly useful as the global LNG market continues to evolve and grow.”

    According to S&P Global Platts, the increased exports of U.S. LNG has positioned the United States to play a new primary role in the global natural gas and LNG markets.

    LNG exports are becoming an increasingly important market driver in the U.S. natural gas markets, with a new focus toward LNG values at the U.S. Gulf Coast, the country’s heaviest concentration of liquefaction plants and largest storage hub for export-bound natural gas.

    Kwhame Gittens, manager, commodity risk solutions (Americas), S&P Global Platts, said, “additionally, the optionality, transparency and freedom of a U.S. LNG cargo are nearly unparalleled in global markets, offering real opportunities for participation in this emerging spot market by financial markets, traders and other interested stakeholders.”

    Shelley Kerr, global director of LNG and regional director of generating fuels & electric power, Europe, Middle East and Africa (EMEA), S&P Global Platts added that the over the past couple of years there has been an exponential growth in Asia-based LNG swaps.

    “Counterparties are demanding that the new flexible supply from the U.S. is underpinned by both price transparency and the means to hedge,” Kerr said, adding that in any such evolution, transparency will be crucial to the development of the LNG market and that the U.S. Gulf Coast is “become a key anchor for LNG prices.”

    According to the latest S&P Global Platts research, natural gas producers, plagued by low domestic prices in recent years, are eager to sell into the international marketplace through LNG. The natural gas infrastructure that intersects the United States, Mexico and Canada is the world’s largest and most integrated natural gas market and by 2020, the Americas region is expected to be the world’s third largest producer of LNG, behind Australia and Qatar.
    Back to Top

    Shell reluctant to part with California refinery amid asset sale

    Royal Dutch Shell is in talks with several potential buyers for its refinery outside of San Francisco, but the Anglo-Dutch oil giant is reluctant to part with its last asset in California, three people familiar with the process say.

    The company is in the midst of a massive asset sale, shedding properties from Thailand to the North Sea to pay down debt following its $54 billion purchase of smaller British rival BG Group last year.

    Shell, Europe's largest oil company, has sold around $15 billion of assets over the past year as part of a planned $30 billion in asset sales to trim debt incurred from the transaction.

    Bidders for Shell's 158,000 barrel-per-day Martinez refinery, located 30 miles (48 km) northeast of San Francisco, include PBF Energy (PBF.N) and NTR Partners III LLC.

    Still, sources familiar with the issue say the company wants to sell for a higher price, with one saying the plant could be valued at about $900 million.

    Shell, which barred potential buyers from hiring advisors during a first round of the auction, has since allowed third parties to review materials related to a sale, according to one person familiar with the negotiations.

    Shell declined to comment. PBF referenced its quarterly calls with analysts, where it has said it considers all refining and logistics assets that come on the market, but declined to comment on interest in the specific plant. NTR did not respond to requests for comment.

    Shell retained Lazard last year to advise on the overall asset sale program. In the fall, Shell retained Deutsche Bank to find a buyer for the Martinez facility.


    Over the past 15 years, Shell has sold refineries in Bakersfield and Wilmington, California. Selling the Martinez plant would mark its exit from the state.

    While state-specific emissions regulations and fuel standards make it more expensive to operate a refinery in California, the plant still drew interest because of its location and ability to process local crude.

    Among the bidders, PBF bought a refinery in Torrance, California last year, while privately held NTR Partners has bid on other California plants.

    California's environmental regulations and pipeline connections make the state an island, with few sources for gasoline imports.

    As a result, when one plant in California is shuttered, margins at other refineries in the state surge.

    Most operators in the state own more than one plant. PBF, one of the only California refiners with a single operation, would consider buying a second to hedge against disruptions at its troubled Torrance refinery, Jeff Dill, PBF's president for West Coast operations said last month.

    The Martinez refinery, which has been operating since 1915, processes crude into gasoline, jet fuel, diesel and other refined products and has a coker unit for processing heavy crude.

    The potential sale would include a pipeline that brings crude produced in California's San Joaquin Valley to the refinery.
    Back to Top

    State Dept to approve Keystone pipeline permit: Politico

    State Dept to approve Keystone pipeline permit: Politico

    The U.S. State Department will approve by Monday the permit needed to proceed with construction of the Canada-to-United States Keystone XL oil pipeline, a project blocked by former President Barack Obama, according to Politico.

    The approval of the permit would mark the beginning of process that could be lengthy and complicated by approvals needed by state regulators and legal challenges.

    But President Donald Trump, a Republican, supports Keystone and days after he took office in January ordered its construction. That could mean that project, first proposed in 2008, will eventually be completed.

    The State Department's undersecretary for political affairs, Tom Shannon, will approve the cross-border permit for TransCanada Corp's pipeline on or before Monday, the report said.

    Monday is end of the 60-day timeline that Trump ordered in January when he issued an executive order for the construction of Keystone and the Dakota Access pipelines.

    The Keystone pipeline would bring more than 800,000 barrels-per-day of heavy crude from Canada's oil sands to U.S. refineries and ports along the Gulf of Mexico, via an existing pipeline network in Nebraska.

    Obama had rejected the pipeline saying it would do nothing to reduce fuel prices for U.S. motorists and would contribute emissions linked to global warming.

    TransCanada resubmitted its permit application after Trump's executive order. Spokesman Terry Cunha said the company was working closely with the State Department.

    "Monday is the deadline, so that's what we're working towards," Cunha said.

    A State Department official said there was no decision to announce on Keystone. A White House official did not immediately comment.

    Conservatives said they supported quick approval. Nick Loris, an energy and environment researcher at the Heritage Foundation, said approval would "reestablish some certainty and sanity to a permitting process that was hijacked by political pandering."

    Environmental group Greenpeace had pushed for Secretary of State Rex Tillerson to recuse himself from a decision on Keystone, as Exxon Mobil Corp, the company Tillerson recently headed, could profit from the pipeline. Tillerson did recuse himself.

    "We will resist these projects with our allies across the country and across borders, and we will continue to build the future the world wants to see," Diana Best, a Greenpeace climate campaign specialist said.

    A stretch of Keystone XL also awaits approval from Nebraska regulators. Transcanada has to file its pipeline route plans with the state's Public Service Commission, which is required to hold public hearings on the proposal.

    Attached Files
    Back to Top

    Kinder Morgan announces 430-mile, Permian gas pipeline

    Houston’s Kinder Morgan said Wednesday it plans to build a 430-mile natural gas pipeline from West Texas’ Permian Basin to the Corpus Christi region.

    The project is designed to capitalize off of increasing Permian oil and gas production to carry more gas to the Texas Gulf Coast, where it can be consumed locally, refined and exported, or shipped to Mexico. The 42-inch pipeline, which could be completed in late 2019, would specifically trek from Waha, Texas to Agua Dulce, which is just west of Corpus Christi.

    Although everyone in the Permian is drilling for oil, most of the wells drilled also produce associated natural gas liquids. That extra gas is why producers don’t need to drill specifically for gas in West Texas.

    The project costs are not being revealed. The proposed Gulf Coast Express Pipeline Project can tap into Kinder Morgan’s existing Permian-area pipeline network, as well as Dallas-based Energy Transfer Partners’ new Trans-Pecos Pipeline, which will ship gas from West Texas to Mexico.

    The growing petrochemical sectors in the Houston and Corpus Christi areas are consuming more natural gas for feedstock, while new Gulf Coast liquefied natural gas projects need gas to convert into LNG for exporting. Also, Mexico increasingly relies on Texas shale gas for electricity generation.

    Kinder Morgan already is expanding existing pipeline from Texas and Arizona into Mexico. Likewise, Energy Transfer, as well as Canadian pipeline giants Enbridge and TransCanada are all building new gas pipelines into Mexico.

    Kinder Morgan said it is seeking customers to secure contracts for the pipeline’s use from now through April 20.
    Back to Top

    As Trump targets energy rules, oil companies downplay their impact

    President Donald Trump’s White House has said his plans to slash environmental regulations will trigger a new energy boom and help the United States drill its way to independence from foreign oil.

    But the top U.S. oil and gas companies have been telling their shareholders that regulations have little impact on their business, according to a Reuters review of U.S. securities filings from the top producers.

    In annual reports to the U.S. Securities and Exchange Commission, 13 of the 15 biggest U.S. oil and gas producers said that compliance with current regulations is not impacting their operations or their financial condition.

    The other two made no comment about whether their businesses were materially affected by regulation, but reported spending on compliance with environmental regulations at less than 3 percent of revenue.

    The dissonance raises questions about whether Trump’s war on regulation can increase domestic oil and gas output, as he has promised, or boost profits and share prices of oil and gas companies, as some investors have hoped.

    According to the SEC, a publicly traded company must deem a matter "material" and report it to the agency if there is a substantial likelihood that a reasonable investor would consider it important.

    "Materiality is a fairly low bar," said Cary Coglianese, a law professor at the University of Pennsylvania who runs the university’s research program on regulation. "Despite exaggerated claims, regulatory costs are usually a very small portion of many companies’ cost of doing business."

    The oil majors’ annual filings come after the industry and its political allies have spent years criticizing the Obama administration for policies aimed at reducing fossil-fuel consumption, curtailing drilling on federal lands and subsidizing renewable energy.

    Trump promised during the campaign that a rollback of the Democratic administration’s policies would help free the nation from reliance on imported oil.

    "Under my presidency, we will accomplish complete American energy independence," said Trump, describing regulation as a "self-inflicted wound."

    Missing from Trump's grand Navy plan: skilled workers to build the fleet
    Special Report: Russian elite invested nearly $100 million in Trump buildings, records show

    The Trump administration is now preparing an executive order - dubbed the "Energy Independence" executive order - to roll back Obama-era regulations, which could be signed as early as this month, according to administration officials.

    U.S. presidents have aimed to reduce U.S. dependence on foreign oil since the Arab oil embargo of the 1970s, which triggered soaring prices. But the United States still imports about 7.9 million barrels of crude oil a day - almost enough meet total oil demand in Japan and India combined.


    "We haven’t seen 3 percent growth in the economy for eight years, and I think part of the reason is that we’ve had a heavy dose of regulation," Chevron Corp. CEO John Watson said at CERAWeek, a global energy conference in Houston this month.

    Continental Resources CEO, Harold Hamm, who advised Trump on energy issues during his campaign for the White House, told the Republican National Convention in Cleveland in July that stripping regulation could allow the country to double its production of oil and gas, triggering a new "American energy renaissance."

    Yet Continental's annual report, filed last month with the SEC, says environmental regulation - after eight years under the Obama administration - does not have a "material adverse effect on our operations to any greater degree than other similarly situated competitors."

    Continental's competitors who reported actual spending on environmental compliance told investors that such expenses amount to a small percentage of operating revenues.

    Fourteen of the 15 companies whose filings were reviewed by Reuters declined to comment on their statements to investors or the impact of regulation on their profits.

    A spokesman for ConocoPhillips acknowledged that regulatory compliance has not had a material adverse impact on the company's liquidity or financial position. But red tape can be an unwelcome burden nonetheless.

    "Changing, excessive, overlapping, duplicative and potentially conflicting regulations increase costs, cause potential delays and negatively impact investment decisions, with great cost to consumers of energy," the spokesman, Daren Beaudo, said in a written statement.

    The American Petroleum Institute - which represents the U.S. oil and gas industry - also declined to comment.

    Last month, before the U.S. Senate Commerce, Science and Transportation Committee, API President Jack Gerard said that the oil and gas industry has surged forward despite onerous regulations under the Obama administration.

    "Technological innovations and industry leadership have propelled the oil and gas industry forward despite the unprecedented onslaught of 145 new and pending federal regulatory actions targeting our industry."

    Though the industry saw a staunch opponent in Obama, oil and gas production soared more than 50 percent during his presidency. That was mainly because of high oil prices and improved hydraulic fracturing, a drilling technology that has allowed producers to access new reserves in previously tough-to -reach shale formations.

    The rush of production ultimately contributed to a global glut that dropped crude oil prices CLc1 from a high of over $100 a barrel in early 2014 to a low of nearly $25 by 2016. Current prices hover near $50 a barrel.


    Four of the 15 companies reviewed by Reuters reported that spending on environmental matters - including new equipment or facilities, as well as fines and compliance staffing - amounted to a small fraction of revenues.

    Exxon Mobil reported spending $4.9 billion worldwide in 2016, or about 2.24 percent of gross revenue. Occidental Petroleum, a much smaller company, reported spending $285 million, or about 2.82 percent of revenue. Neither addressed whether the spending was "material" in their filings.

    Two other companies, ConocoPhillips and Chevron, also broke out their environmental spending while reporting that regulation had no material impact on their business. Conoco spent $627 million in 2016, or about 2.57 percent of gross revenue, while Chevron spent $2.1 billion, or 1.91 percent of gross revenue.

    The other 11 companies did not break out spending, but all of them told the SEC that environmental regulation did not have a material impact on their business.

    In one typical statement, EOG Resources (EOG.N), one of the biggest U.S. producers, told investors in a report filed last month: "Compliance with environmental laws and regulations increases EOG's overall cost of business, but has not had, to date, a material adverse effect on EOG's operations, financial condition or results of operations."

    Devon Energy Corp (DVN.N), Anadarko Petroleum Corp (APC.N), Pioneer Natural Resources Co (PXD.N), Apache Corp (APA.N), and other large U.S.-focused oil and gas drillers used similar wording.


    Still, Obama's exit - and Trump's win over Democratic presidential candidate Hillary Clinton in November - has been enough to brighten the outlook of some big investors.

    "I believe the absence of a negative is a positive," John Dowd, who manages several energy funds at Fidelity Investments, wrote in his 2017 energy outlook. "The market has been concerned with the sustainability of fracking, and particularly to what extent it might have been regulated into obscurity by a different election outcome."
    Back to Top

    Alternative Energy

    Smog-hit Beijing plans 'green necklace' to block pollution

    Beijing and the surrounding province of Hebei will plant trees, establish green belts and make use of rivers and wetlands to create a "green necklace" to protect China's smog-hit capital from pollution, the Hebei government said on Thursday.

    Beijing's reputation as a major world city has been tarnished by regular outbreaks of hazardous smog, especially during the winter, and poorly regulated heavy industry in neighboring Hebei has been identified as one of the major culprits.

    The Hebei government said in a notice published on its website ( that it would raise forest coverage, expand ecological space and use the river systems, mountains, wetlands and farms to establish new green belts around Beijing.

    Policymakers are also trying to tackle the problem of overdevelopment and overpopulation in fast-growing Beijing itself, known as "big city syndrome", and the new cross-regional plan will aim to restrict urban development on the capital's borders.

    The plan, which also set out new unified public service and transportation rules for Beijing and surrounding border areas, is part of the government's long-term "Jing-Jin-Ji" program to integrate Beijing, Hebei and the port city of Tianjin.

    The development of separate "fortress economies" in the region was blamed for widening income disparities and causing a "race to the bottom" when it came to environmental law enforcement.

    Beijing, home to 22 million people, is trying to curb population growth and relocate industries and other "non-capital functions" to Hebei in the coming years as part of its efforts to curb pollution and congestion.

    The city has also promised to curtail coal consumption and decommissioned its last coal-fired power plant earlier this month.
    Back to Top

    Precious Metals

    Franco-Nevada reports rising revenues as it looks to diversify

    Canadian gold royalties and streaming firm Franco-Nevada Corp has recorded a 37.6% increase in revenue for 2016, boosted by record ounces delivered and soaring sales.

    The company, which derives income from 107 producing royalties and streams, achieved a 30.9% increased in gold-equivalent ounces (GEOs) delivered to 471 509 oz in 2016. Revenue rose to $610.2-million, derived from the sale of 464 383 GEOs.

    Removing one-off items, the company saw headline earnings grow 84.9% to $164.4-million, or $0.94 a share, surprising analysts who had predicted on average full-year earnings a share of $0.89.

    Franco-Nevada said while it strives to generate 80% of revenue from precious metals over a long-term horizon which includes gold, platinum group metals and silver, it will not preclude itself from diverging from the long-term target based on opportunities available. With 93.7% of revenue earned from precious metals in 2016, the company said it has the flexibility to consider diversification opportunities outside of the precious metals space and increase its exposure to other commodities.

    The company, meanwhile, increased its guidance for GEO output to between 470 000 oz and 500 000 oz in 2017, with oil and gas asset income is set to rise to between $35-million and $45-million, up from $30.1-million in 2016.

    Franco-Nevada expects its existing portfolio to generate between 515 000 oz to 540 000 GEOs by 2021. Oil and gasrevenues at the same $50/bl West Texas Intermediate oil price assumption are expected to range between $55-million and $65-million.
    Back to Top

    Base Metals

    Indonesia prepares to takeover Freeport.

    The government has started consolidating state mining companies to take over the majority stakes in gold and copper miner PT Freeport Indonesia by 2019, while waiting for the House of Representatives’ approval for a holding company for state-owned mining firms.

    The State-Owned Enterprise (SOE) Ministry’s deputy of mining, strategic industries and media, Fajar Harry Sampurno, said that the ministry had sent a letter informing the Finance Ministry and the Energy and Mineral Resources Ministry of the interest to take over the subsidiary of American mining giant Freeport McMoRan.

    “We have stated our readiness, but still have to wait for the final decision,” Fajar said on Wednesday in Jakarta. “But if we are appointed to take over the shares, we must be ready. That’s why we have started consolidating all of the mining companies under the planned holding company.”

    The government plans to form holding companies for various sectors including mining, financial services and construction, with the aim of boosting the value, debt leverage and efficiency of all state enterprises.

    State-owned aluminum maker PT Indonesia Asahan Aluminum (Inalum) has been projected to be the holding company for mining companies. The House is now deliberating Government Regulation (PP) No. 72/2016 on procedures for state capital injections into SOEs as the legal umbrella for the holding company.

    “There needs to be an understanding with all lawmakers first [to realize the PP],” said the SOE Ministry’s deputy for company restructuring and development, Aloysius Kiik Ro. (ags)

    Back to Top

    Zambia copper shake down, ahem, 'tax audit'.

    ZAMBIA Revenue Authority (ZRA) will soon undertake forensic audits of large mining companies to establish whether or not they have been complying with the various tax legislations administered by the authority.

    Recently, Financial Intelligence Centre (FIC) assistant director Clement Kapalu disclosed that Zambia is losing US$3 billion annually due to illicit financial flows mainly perpetrated in the minerals sub-sector, where tax evasion malpractices such as transfer pricing, over and under-invoicing and trade mispricing is rampant.

    In trying to correct these flaws, ZRA is seeking the services of an auditing or investigation firm to undertake a forensic audit on a number of large mining companies.

    According to a request for expression of interest, ZRA intends to engage a company to perform audits of identified mining companies to establish their tax compliance status.

    “This audit will focus on value added tax (VAT) and will also aim to identify any other areas of non-compliance with legislation, fraud, tax evasion and avoidance schemes perpetrated by the mining companies to, on the one hand, minimise their tax obligations and maximise their profits on the other.

    “The firm will be required to produce a comprehensive report outlining the issues observed and recommend ways in which ZRA should conduct future audits,” it stated.

    It stated that the audit will cover the last five accounting periods of the identified mines and will cover most areas such as sales, production, finance, distribution, human resources, as well as import and export operations.

    “The investigation will focus on establishing the completeness, accuracy and authenticity of the corporation tax, income tax and VAT returns submitted by the mining companies in relation to the underlying data and information from their business operations,” it stated.

    Back to Top

    Escondida workers to end strike as they opt for old contract

    The strike at Escondida, the world's largest copper mine, will end after workers decided to invoke a legal provision that allows them to extend their old contract, the union said on Thursday.

    The workers said they would present their decision to the government on Friday and return to work on Saturday at Escondida, which is operated by BHP Billiton.

    The so-called Article 369 will allow workers to revert to their previous contract for 18 months, after which both sides must again try to reach a new agreement.

    The workers will be able to enjoy current benefits and working conditions, which the company wants to change, and hold the next talks under the umbrella of an upcoming labor reform that strengthens their hand. But they would also lose out on a bonus typically paid when the contract is signed and on any pay raise.

    A swift restart in output at Escondida, which produced about 5 percent of the world's copper last year, would probably weigh on copper prices and provide some relief to the Chilean economy after a strike that has lasted 43 days.

    But the use of Article 369 would be "complex" for the company, mine President Marcelo Castillo said earlier on Thursday.

    "Having collective talks in 18 months ... would require us to revise our plan, our operating model, our structure in order to allow us to make our mining business viable," he said.

    Attached Files
    Back to Top

    Philippines allows suspended miners to ship out nickel ore after clampdown

    The Philippines' environment ministry has allowed eight suspended nickel ore miners to ship out stockpiles of mined ore, sources told Reuters, temporarily boosting supply from the world's top exporter of the raw metal after a major crackdown.

    More than half of all mines in the Philippines have been ordered to permanently shut to protect watersheds in an eight-month campaign led by Environment and Natural Resources Secretary Regina Lopez.

    Allowing the halted mines to sell their stocked nickel ore is aimed at limiting the potential build up of silt in nearby waters, an official with knowledge of the order said, rather than the government toning down its campaign.

    The volume of nickel ore stocks from the mines may well exceed 1 million tonnes, or about a month's worth of consumption by top buyer China, said the official, who declined to be named because he is not authorized to discuss the matter publicly. The total would likely be less than 5 million tonnes, he added.

    Daniel Hynes, commodity strategist at ANZ Bank, said he did not expect the temporary boost in Philippine supply to be a big drag on nickel prices.

    "It certainly doesn't remove the long-term issues around security of supply and the closures of other operations," Hynes said.

    Still, three-month nickel on the London Metal Exchange CMNI3 fell 1 percent to $9,935 a tonne by 0600 GMT, the biggest decliner among base metals on Friday. Nickel has lost more than 9 percent this month, following a 10 percent spike in February when Lopez ordered the mine closures.


    In a memorandum issued on March 6, a copy of which was reviewed by Reuters, Lopez allowed the eight suspended nickel miners to remove their stockpiles from all mining areas.

    The order also required the mines to put 2 million pesos ($39,730) per hectare of disturbed land into a trust fund "to further mitigate the adverse impacts of the mining operations to the environment and to the affected communities."

    Environment Undersecretary Philip Camara confirmed the memorandum is valid, a spokeswoman for the ministry said.

    The eight miners, including Hinatuan Mining Corp - a unit of top nickel ore producer Nickel Asia Corp (NIKL.PS) - were among 10 suspended for environmental breaches during a July-August audit of the nation's 41 mines.

    Lopez last month ordered 23 mines closed for good, including six of the eight suspended nickel producers. Many of these mines have appealed to President Rodrigo Duterte and continue to operate while waiting for Duterte's final ruling.

    The suspended miners had asked Lopez's permission to remove the mined ore and were granted it, the first official said.

    "It's an issue of environmental hazard. If we don't allow it then it will just be a hazard so it needs to be removed," the official said. Another official with the environment ministry confirmed the mines can ship out the ore.

    Two of the suspended mines are owned by construction-to-power firm DMCI Holdings Inc (DMC.PS), which was planning to restart the mines this month while it awaits the outcome of an appeal, in a test of rules around the crackdown.

    Hendrik Martin, manager at DMCI's nickel mine in Zambales province, said the company had received the order from the environment agency and would likely sell its 200,000-tonne stockpile to China.

    DMCI Mining Corp President Cesar Simbulan separately said stockpiles at its Berong Nickel Corp in Palawan province stand at around 1 million tonnes. Hauling of the stocks from the Zambales and Palawan mines to the ports had yet to start, he added.

    Nearly all of the Philippines' nickel ore is sold to China where it is used to produce stainless steel. Philippine shipments reached 30.5 million tonnes last year, or 95 percent of China's total imports of the raw material.

    Attached Files
    Back to Top

    Chinese aluminium giant Chalco's net profit more than doubles in 2016

    Chinese aluminium giant Chalco's net profit more than doubles in 2016

    Aluminum Corporation of China Ltd's (Chalco) net profit more than doubled in 2016, marking a second straight year of profitability thanks to recovering non-ferrous metal prices and cuts in production costs.

    The state-owned aluminium producer, one of the biggest in the world, made a net profit of 402.5 million yuan ($58.5 million) in 2016, up from a revised 148.6 million yuan a year earlier, it said in a filing to the Shanghai stock exchange.

    "The increase in profit was mainly due to power reforms and stronger operations, which helped lower production costs of alumina and electrolytic aluminium products by about 12 percent and 17 percent respectively," Chalco said on Thursday.

    Alumina is the key raw material for producing aluminium.

    In 2016, aluminium prices rose by more than 10 percent, with gains continuing so far this year due to global capacity cuts and infrastructure projects in China, the world's top producer and consumer of the metal.

    Earlier this year, Yunnan Aluminium Co Ltd said it expected its 2016 net profit to rise about 315 percent, while Shandong Nanshan Aluminium Co Ltd forecast a rise of about 217 percent for the same period.

    As the overall market improves, Chalco said on Thursday it planned to invest up to 700 million yuan in a light alloy joint venture project with a total investment of 3.9 billion yuan in Guizhou province.

    Chalco's announcement came after Hong Kong and China's markets closed on Thursday. Its Hong Kong shares ended 1.3 percent higher while its Shanghai stock closed 1.04 percent up, outpacing the broader markets.

    Attached Files
    Back to Top

    China to add 6.65 mil mt/year new alumina capacity in 2017: Antaike

    China is expected to add 6.65 million mt/year of new alumina capacity in 2017, chiefly in North China, Central China and Northwest China, in addition to the 79.25 million mt/year built national alumina capacity as of end-2016, state-run metals consultancy firm Beijing Antaike has forecast in its aluminum sector report on Thursday.

    Shandong Province in North China is expected to add 2 million mt/year new alumina capacity and Henan Province in Central China is to add 1 million mt/year new alumina capacity in 2017, the Antaike report showed.

    Shanxi Province and Inner Mongolia Autonomous Region, both in Northwest China, are forecast to add new alumina capacity of 2.6 million mt/year and 500,000 mt/year, respectively, in 2017, the agency figures showed.

    China is also expected to add an extra 5.7 million mt/year new alumina output capacity in 2018, with 2 million mt/year in Shandong, 1.8 million mt/year in Shanxi, 300,000 mt/year in Chongqing City in Sichuan Province, and 1.6 million mt/year in Guizhou Province in Southwest China, according to Antaike.

    Meanwhile, the agency has forecast China's national alumina demand in 2018 to hit 75.16 million mt, up 5.5% year from the estimated demand of 71.24 million mt in 2017. The growing alumina demand forecast is due to the rising refined aluminum output in China.

    China's national refined aluminum output in 2016 hit 32.65 million mt, up 6% year on year, with compound output growth rate of 9.2% in the 2014-2016 period, figures from Antaike showed.

    The Beijing agency has forecast China's net alumina imports in 2018 to hit 4 million mt, up 11% from an estimated 3.6 million mt imports in 2017.

    China's national alumina output in 2018 is expected to be 72.5 million mt, up 6.9% from an estimated 67.8 million mt output in 2017.

    The agency has forecast China's alumina supply in 2018 to be 76.5 million mt, up 7% from estimated 71.4 million mt in 2017.

    The country's alumina surplus in 2018 is expected to be 1.34 million mt, widening from an estimated surplus of 160,000 mt for 2017, the Antaike figures showed.

    Due to surging raw material costs, Chinese domestic alumina production costs (excluding tax) as of end-2016 averaged Yuan 2,060/mt ($299/mt), up 8.9% year on year, but stable from end-2014, the agency figures showed.

    Attached Files
    Back to Top

    Steel, Iron Ore and Coal

    Shanxi Coking 2016 net profit up 105pct on year

    Shanxi Coking Co., Ltd, one major coking firm in Shanxi, saw its net profit soar 105.33% year on year to 44 million yuan ($6.4 million) in 2016, showed its annual report released late March 20.

    The company's operation revenue gained 19.97% from the year prior to 4.04 billion yuan last year.

    Improved performance resulted mainly from a price rally last year, with coke sales price averaging 849.78 yuan/t throughout the year, up 239.05 yuan/t year on year, according to the annual report.

    Shanxi Coking planned to produce 3 million tonnes of coke and realise operation revenue of 6 billion yuan this year, the company said.
    Back to Top

    China's six major coastal power cos report continuous stocks declines

    Coal stocks at China's six major coastal power companies were on the decline, showed data from industry portal

    On March 21, their coal stockpiles stood at 9.51 million tonnes, sliding 4.88% from 10 million tonnes on March 10 and 15% lower than a month earlier, which were enough to cover only 15 days of use, down from 17 days on March 1.

    However, their average daily coal consumption did not sharply plunge, signaling robust restocking demand from utilities in peak season for coal-fired power generation.

    The uptrend in coal-fired power market was mainly attributed to a supply shortage of hydropower. Data showed that hydropower output stood at 122.9 TWh in the first two months of this year, down 4.7% year on year.

    The output of hydropower has been falling since September last year, except for a year-on-year increase of 3.3% recorded in November.

    Coal transfer ports accordingly increased stocks to meet demand from downstream sector. On March 20, coal stocks at Tianjin port, a major coal transfer port in northern China, reached 3.18 million tonnes, hitting a 18-month high.

    The uptick in thermal coal market is expected to remain in the short term, bolstered mainly by decreased coal inventories at power plants and contracted hydropower supply before rainy days.

    Attached Files
    Back to Top

    China's coal resources may converge to competitive firms, China Coal Energy

    With the enforcement of surplus coal capacity cuts and reform and upgrading at coal firms, China's coal resources are expected to converge to competitive firms, said China Coal Energy Co., Ltd in its 2016 annual report released late March 22.

    The industry concentration and professionalization will be gradually enhanced, and industrial structure is expected to develop to medium and high levels, according to the report.

    The company is committed to using its advantages and participating in coal resource integration. Its operator China National Coal Group will successively take over coal businesses and assets of state-owned enterprises, in order to facilitate synergetic development of coal, power and chemical operations.

    China Coal Energy produced 80.99 million tonnes of commercial coal in 2016. Of this, 71.27 million tonnes were thermal coal, down 17.7% year on year; 9.72 million tonnes were coking coal, up 9.7% from a year ago.

    Its coal sales stood at 132 million tonnes last year, dropping 3.9% from the preceding year, with self-produced coal sales down 17.3% year on year to 80.67 million tonnes. The company plans to produce and sell 80 million tonnes of self-produced coal this year.

    Last year, sales cost of its self-produced commercial coal stood at 161.94 yuan/t ($23.5/t), sliding 2.7% year on year.

    During the period, China Coal Energy realized net profit of 2.03 billion yuan, compared with a loss of 2.52 billion yuan in 2015.
    Back to Top

    Fortescue Metals to pay down a further $1 bln in debt

    Fortescue Metals Group Ltd , the world's No.4 iron ore miner, will pay down $1 billion in a term loan on March 30, it said on Friday, as it looks to continue its cost-cutting drive.

    The repayment will save it about $38 million in interest costs and reduce its debt burden to $3.6 billion, with about a quarter of that due in 2019.

    The rapid reduction in debt paves the way for the company to step up payouts to shareholders, with analysts forecasting a dividend of 37 cents a share for the year to June 2017, more than double last year's level, according to Thomson Reuters I/B/E/S.

    "We will continue to prioritise free cash flow for debt reduction, investment in our core iron ore business and returns to shareholders," Chief Executive Officer Nev Power said in a statement.
    Back to Top

    China Jan-Feb steel output up 5.82% YoY

    China's crude steel output totaled 128.77 million tonnes over January to February, increasing 5.82% from the previous year, showed data from the China Iron and Steel Association (CISA).

    The daily crude steel output amounted to 2.18 million tonnes during the same period, the CISA said.

    CISA members produced 50.34 million tonnes of crude steel in February, up 6.16% from the year-ago level. Their daily output of crude steel reached 1.80 million tonnes, climbing 6.94% from the year-ago level, the CISA said.

    Total crude steel output of CISA members witnessed a year-on-year increase of 7.51% to 102.45 million tonnes in the first two months of 2017, with daily output at 1.74 million tonnes.
    Back to Top

    Nippon Steel plans to raise product prices by 5,000 yen/T in Apr-Sept

    Nippon Steel & Sumitomo Metal Corp plans to raise prices of its steel products by about 5,000 yen per tonne in the April-September half to reflect rising costs of materials and distribution, its president said on Friday.

    "We have asked our customers to raise our products prices by about 20,000 yen per tonne this financial year due to higher prices of coking coal and other costs," Kosei Shindo, president of Japan's biggest steelmaker, told a news conference.

    "But we will need to ask for an additional hike by about 5,000 yen per tonne in the first half of the next financial year as prices of iron ore and other raw materials including zinc as well as metal scrap are climbing," he said.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP